Business Context and Reporting Period
This Form 8-K Current Report is filed by Global Medical REIT Inc. (not Chiron Real Estate Inc.) on July 6, 2017, covering events occurring on June 30, 2017, and July 5, 2017. The company is an emerging growth company focused on acquiring medical real estate assets.
Key Financial Metrics and Transactions
- Austin Facility Acquisition (Pending): Entered into a purchase agreement for a 59,258 sq. ft. inpatient rehabilitation facility and 1.27 acres of land in Austin, Texas, for an aggregate price of $40,650,000.
- Carrus Facility Acquisition (Closed): Closed on June 30, 2017, for the Carrus Specialty Hospital and Carrus Rehabilitation Hospital in Sherman, Texas, for an aggregate price of $26,000,000.
- Debt and Liquidity: In connection with the Carrus acquisition, the Operating Partnership incurred approximately $27.1 million in additional indebtedness under its revolving credit facility. As of June 30, 2017, the outstanding balance on this facility was approximately $144.5 million.
- Lease Terms:
- Austin: Initial annual rent of approximately $2.9 million with 3.0% annual increases; 80% of payments guaranteed by Kindred Healthcare.
- Carrus: 20-year lease with initial rent calculated at 8.8% of the purchase price plus capitalized closing expenses, subject to 2.5% annual escalations after the second year.
Material Changes and Unusual Items
The filing reports two significant asset acquisitions. The Carrus transaction represents a completed disposition of assets by the seller and acquisition by the Company, resulting in immediate debt utilization. The Austin transaction represents a material definitive agreement that is not yet closed. The filing does not provide comparative revenue, profit, or margin data for the period, as this is a transactional report rather than a periodic financial statement.
Guidance, Risks, and Contingencies
- Closing Conditions (Austin): The Austin acquisition is subject to due diligence. The Company may terminate the agreement without penalty on or before August 14, 2017. If not terminated by this date, the earnest money deposit becomes non-refundable, increasing from $300,000 to a total of $600,000.
- Uncertainty: Management states that while completion of the Austin acquisition is probable, there is no assurance it will close.
- Financial Statements: Required financial statements for the acquired businesses and pro forma financial information will be filed by amendment within 71 days of this report.
Investor Verification Checklist
- Verify the final closing status of the Austin Facility acquisition after the August 14, 2017, due diligence deadline.
- Confirm the total outstanding debt balance and interest rate terms of the revolving credit facility following the $27.1 million drawdown.
- Review the upcoming 71-day amendment for pro forma financial information to assess the impact of these acquisitions on earnings per share and funds from operations.
- Validate the creditworthiness of the guarantors for the Carrus Lease (Carrus Healthcare, LLC, THP, and Carrus Rehab).