Business context and reporting period
The filing is a quarterly report for the three months ended March 31, 2022, filed May 6, 2022. The filing identifies the registrant as Global Medical REIT Inc. (NYSE: GMRE), not Chiron Real Estate Inc.; verify the issuer against the intended filing. GMRE acquires healthcare properties and leases them primarily to healthcare systems and physician groups. Unless noted, amounts below are in millions of dollars.
Financial results and condition
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Total revenue | $31.9 | $27.3 |
| Net income | $4.3 | $3.3 |
| Net income attributable to common stockholders | $2.7; $0.04 per share | $1.8; $0.03 per share |
| Operating cash flow | $16.4 | $15.3 |
| FFO / AFFO per share and unit | $0.23 / $0.24 | $0.23 / $0.24 |
| Common dividend per share | $0.21 | $0.205 |
| Net debt | $586.0 | $571.7 at Dec. 31, 2021 |
| Cash and restricted cash | $8.2 | $12.8 at Dec. 31, 2021 |
| Total assets / total equity | $1,285.5 / $652.6 | $1,263.5 / $637.6 at Dec. 31, 2021 |
Net income margin was approximately 13.4%, compared with 12.1% in Q1 2021, calculated as net income divided by revenue. Total revenue rose 16.5%; net income rose 29.0%. Rental revenue was $31.9 million, including $4.0 million of net lease expense recoveries. GMRE reported weighted-average debt interest of 2.91% at quarter-end and $4.8 million of interest expense for the quarter.
Operating cash flow exceeded dividends paid to common, OP Unit and LTIP Unit holders and preferred holders combined ($16.0 million); however, investing outflows of $26.6 million drove cash and restricted cash down by $4.6 million during the quarter. The balance-sheet cash component alone was $1.9 million. The filing reports $171 million of unused revolver capacity as of May 2, 2022.
Material changes versus the prior comparable period
- Revenue increased $4.5 million, primarily from properties acquired after March 31, 2021 and a full quarter of rent from acquisitions completed in Q1 2021.
- Operating expenses increased $1.7 million, mainly reflecting higher recoverable property expenses and costs from gross-lease properties. Depreciation and amortization also rose with portfolio growth.
- Interest expense declined $0.2 million, which management attributed primarily to lower interest rates during the quarter.
- Common shares outstanding grew: weighted-average common shares rose to 65.3 million from 52.7 million. Despite higher common-stockholder earnings, FFO and AFFO per share and unit were unchanged year over year.
- GMRE acquired four facilities during the quarter for an aggregate contractual purchase price of approximately $24 million. At March 31, the portfolio comprised 109 facilities and 4.4 million leasable square feet.
Outlook, risks and unusual items
- No quantified earnings or acquisition guidance is provided. Management expects to meet liquidity needs through operating cash flow, debt and equity financing, property dispositions and other transactions.
- Management cited inflation, rising interest rates, competition for acquisitions, healthcare labor shortages, COVID-19 uncertainty, tenant reimbursement pressures and tenant rent-collection or renewal risks. Management said COVID-19 had not materially affected liquidity or operating and financial performance to date, but future effects were uncertain.
- At March 31, $186.7 million of revolver borrowings were unhedged. The filing estimates a 100-basis-point LIBOR increase would reduce annual cash flow by about $1.9 million, and a 200-basis-point increase by about $3.7 million. Interest-rate swaps hedge the $350 million term loan; LIBOR’s planned cessation and the transition to replacement benchmarks could affect hedging and borrowing costs.
- The $750 million credit facility carries financial covenants; management believed the company was in compliance as of May 2. The company reported $586.0 million of net debt at quarter-end.
- A Belpre, Ohio medical office building was under agreement to sell for approximately $44.6 million, versus a $29 million net book value. Closing was expected no earlier than September 2022, remained subject to contingencies and was not assured; proceeds were intended for reinvestment.
- The $77.6 million liquidation preference of Series A preferred stock becomes redeemable by the company beginning in September 2022. Redemption is optional, but could be a material liquidity use if exercised.
- Four additional acquisitions totaling $29.9 million closed from April 1 through May 2, 2022; four more, totaling approximately $52.6 million, were under contract as of May 2. The company also reported $1.9 million of gross common-stock proceeds under its new ATM program during that post-quarter period.
- Management reported no material litigation, no known material environmental liability, no material risk-factor changes during the quarter, and effective disclosure controls.
Important facts for investors to verify
- Confirm that Global Medical REIT Inc. (GMRE), rather than the company named in the request metadata, is the intended issuer.
- Review tenant credit quality, rent collections and the composition and collectability of tenant receivables, including $3.5 million of tenant reimbursements receivable.
- Assess the company’s unhedged floating-rate exposure, LIBOR-to-SOFR transition and compliance with credit-facility covenants.
- Evaluate liquidity needs alongside the preferred-stock redemption option, dividends, capital-improvement commitments of approximately $27.9 million and acquisition plans.
- Confirm whether the Belpre sale closes on expected terms and whether contracted and post-quarter acquisitions close as planned.
- Consider that FFO and AFFO are non-GAAP measures; reconcile them to GAAP results and assess dividend coverage, which the filing reports as $0.24 AFFO per share and unit versus a $0.21 common dividend per share.