Filing summary: Global Medical REIT Inc. — Q1 2016
Entity note: The supplied filing is for Global Medical REIT Inc., not Chiron Real Estate Inc. It is an unaudited Form 10-Q for the three months ended March 31, 2016.
Business context and reporting period
Global Medical REIT acquires healthcare properties and leases them to clinical operators, primarily under triple-net leases. During the quarter it acquired facilities in Plano, Texas; Melbourne, Florida; and Westland, Michigan, bringing its portfolio to seven acquisitions. The company is externally managed by an affiliate of its majority stockholder.
Financial results and position
| Metric | Q1 2016 / March 31, 2016 | Comparable period / prior year-end |
|---|---|---|
| Total revenue | $1.314 million | $462,138 in Q1 2015 |
| Net loss | $1.947 million | $188,547 loss in Q1 2015 |
| Operating cash flow | -$1.116 million | -$139,427 in Q1 2015 |
| Investing cash flow | -$37.573 million | No investing cash flow in Q1 2015 |
| Financing cash flow | $30.012 million | $355,994 in Q1 2015 |
| Cash | $507,281 | $9.184 million at December 31, 2015 |
| Restricted cash | $1.278 million | $447,627 at December 31, 2015 |
| Total assets | $96.097 million | $65.329 million at December 31, 2015 |
| Total liabilities | $83.346 million | $65.467 million at December 31, 2015 |
| Stockholders’ equity | $12.751 million | -$138,608 at December 31, 2015 |
Rental revenue was $1.299 million; other income was $15,081. Total expenses were $3.261 million, including $754,000 in related-party acquisition fees, $888,529 in general and administrative expense, $398,830 in depreciation, and $1.129 million in interest expense. The filing reports a basic and diluted loss per share of $3.11, versus $0.75 in Q1 2015.
Third-party notes payable were $55.792 million gross and $54.489 million net of unamortized debt discount. The company also owed its majority stockholder $25.030 million under an unsecured, 8% convertible debenture due on demand, plus a $421,000 demand note. A related-party demand note of $450,000 was outstanding. Cash and restricted cash totaled about $1.785 million, but restricted funds are not freely available for general liquidity.
Material changes versus the prior comparable period
- Revenue increased by $851,921, principally because the portfolio included more properties than in Q1 2015; the 2016 quarter reflects seven acquisitions versus two properties in the year-earlier quarter.
- The net loss widened by approximately $1.758 million. Acquisition fees, higher general and administrative costs, depreciation, and interest expense increased substantially alongside the portfolio expansion.
- Property acquisitions used $37.946 million. The company entered into a $32.097 million Cantor loan and used proceeds to fund acquisitions and refinance the $9.224 million Plano loan.
- On March 2, the majority stockholder converted $15 million of debenture principal into 1,176,656 shares. Shares outstanding increased to 1,426,656 at March 31 from 250,000 at year-end.
- Cash fell by $8.677 million during the quarter, despite $30.012 million of net financing cash flow, reflecting acquisition spending and other cash uses.
Outlook, risks, and unusual items
- Management said cash on hand, operating cash flow, financing from institutions, and majority-stockholder funding were expected to meet liquidity needs for at least the next 12 months. This is a management expectation, not a guarantee; operating cash flow was negative in the quarter.
- The Cantor loan bears 5.22% interest, has a 2026 maturity, and requires interest-only payments for its first five years, followed by principal and interest. It is cross-defaulted and cross-collateralized across specified properties and requires an aggregate debt-service coverage ratio of 1.35:1.00.
- The company intends to elect REIT status beginning with the 2016 taxable year, but states it cannot assure that it will qualify or remain qualified. It expects to distribute at least 90% of REIT taxable income if qualified.
- Risks highlighted include tenant defaults or non-renewals, tenant/operator competition and financial health, interest-rate and financing risks, acquisition execution and capital-raising needs, real-estate market conditions, and REIT qualification. The portfolio had notable rental concentration: Omaha represented about 34% of Q1 rental revenue, Tennessee 27%, Plano 18%, and Pittsburgh 17%.
- The company paid monthly dividends of $0.0852 per share during the quarter, totaling $164,152. The filing does not establish that future dividends will continue at this level.
- Subsequent events: the company filed an S-11 registration statement on April 1 for a proposed IPO and signed an agreement on April 19 to acquire two Pennsylvania facilities for $9.201 million, with closing expected in June 2016.
- No material litigation was reported, and management stated disclosure controls were effective. No numerical forward guidance was provided.
Important facts for investors to verify
- Confirm the registrant identity: this filing is for Global Medical REIT Inc., not the company named in the request metadata.
- Review the full debt documents and maturity/refinancing exposure, including the Cantor loan covenants, Omaha loan maturity in 2017, and demand obligations to related parties.
- Assess liquidity and cash availability, distinguishing unrestricted cash from restricted reserves and considering continued acquisition spending and negative operating cash flow.
- Examine tenant credit, lease guarantees, rent concentration, and the potential Plano expansion allowance of up to $2.75 million.
- Verify the proposed IPO, subsequent Pennsylvania acquisition, REIT qualification plans, and the capacity to fund dividends and future growth.