• Portfolio Occupancy: 96.4% with a weighted average lease term of 5.6 years.
• Net Income: $1.4 million or $0.02 per share for Q4 2024.
• FFO: $0.15 per share and unit, down $0.04 from prior year quarter.
• AFFO: $0.22 per share and unit, down $0.01 from prior year quarter.
• Total Revenue: $35.2 million for Q4 2024, a 6.7% increase from prior year.
• Total Expenses: $36.3 million for Q4 2024, up from $31.5 million in prior year quarter.
• G&A Expenses: $7.7 million for Q4 2024, primarily due to $3.2 million in CEO succession plan costs.
• Property Dispositions: Generated $40.5 million in gross proceeds with a $5.8 million gain.
• Gross Investment in Real Estate: $1.5 billion at the end of Q4 2024.
• Debt: $651 million total gross debt with a weighted average interest rate of 3.75%.
• 2025 AFFO Guidance: $0.89 to $0.93 per share and unit.

• Warning! GuruFocus has detected 9 Warning Signs with GMRE.

Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Global Medical REIT Inc (NYSE:GMRE) reported a high portfolio occupancy rate of 96.4% at the end of the fourth quarter.
• The company completed significant acquisitions, including a 15-property portfolio for $80.3 million and a five-property portfolio for $69.6 million, enhancing its asset base.
• GMRE successfully closed a joint venture with Heitman, maintaining a 12.5% ownership stake, which allows for strategic growth and capital access.
• The company achieved a net income attributable to common shareholders of $1.4 million in Q4 2024, a positive turnaround from a net loss in the same quarter of the previous year.
• GMRE's strategic asset recycling program generated $40.5 million in gross proceeds from property sales, resulting in a gain of $5.8 million, demonstrating effective portfolio management.

Negative Points

• Funds from operations (FFO) per share decreased to $0.15 in Q4 2024 from $0.19 in the prior year, primarily due to $3.2 million in severance-related costs.
• Adjusted funds from operations (AFFO) per share also saw a slight decline to $0.22 from $0.23 in the previous year.
• The company faced increased total expenses in Q4 2024, rising to $36.3 million from $31.5 million in the prior year, partly due to CEO succession plan costs.
• Prospect Medical Group, a tenant, filed for Chapter 11 bankruptcy, posing a risk to GMRE's revenue stream, as it represented 0.8% of total annualized base rent.
• GMRE's leverage ratio stood at 44.8%, with a weighted average interest rate of 3.75%, indicating a significant level of debt that could impact financial flexibility.

Q & A Highlights

Q: Can you provide details about the new joint venture with Heitman, including target size, leverage, and asset types? A: Alfonzo Leon, Chief Investment Officer, explained that the joint venture with Heitman is part of a core-plus fund targeting strong cash-on-cash returns. The fund initially has $50 million of equity available, with plans to grow. The JV targets assets with cap rates in the low 7% range, focusing on single-tenant properties. Jeff Busch, CEO, added that the JV allows GMRE to build a core portfolio with an option to buy back assets later.

Q: What prompted the CEO transition, and what criteria is the Board considering for a new CEO? A: Jeffrey Busch, CEO, stated that at 67, he wants to reduce his workload. The Board seeks a CEO with capital markets experience, a strong track record, and expertise in real estate and medical sectors. The transition aims to bring fresh perspectives while maintaining strategic continuity.

Q: How are you managing the financial impact of tenants like Prospect Medical Group and Steward Health Care? A: Robert Kiernan, CFO, noted that Prospect Medical Group's bankruptcy affects less than 1% of GMRE's total annual base rent (ABR). The company is monitoring the situation but expects some leases to be accepted. Steward's exposure is limited to a few smaller facilities, with ongoing management.

Q: Could you elaborate on the assets seeded into the Heitman joint venture and their cap rates? A: Alfonzo Leon, CIO, mentioned that the JV was seeded with two single-tenant assets: a property in High Point, North Carolina, and a gastro property in Texas, sold at a low 7% cap rate.

Q: What are your plans for funding future acquisitions, and how do you view asset sales? A: Jeffrey Busch, CEO, indicated that funding options include ATM offerings and asset sales. The focus is on improving portfolio quality by selling less strategic assets and acquiring high-quality properties, as demonstrated by recent acquisitions with strong cap rates.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.