Business Overview and History Global Medical REIT Inc. (GMRE) is a Maryland-based real estate investment trust (REIT) that acquires and leases healthcare facilities to physician groups, regional, and national healthcare systems. With a focus on outpatient medical properties, GMRE has established a diversified portfolio of assets that position it well to capitalize on the evolving healthcare landscape.
Global Medical REIT Inc. was founded in 2016 as a Maryland corporation and internally managed real estate investment trust. The company holds its facilities and conducts its operations through a Delaware limited partnership subsidiary, Global Medical REIT L.P. In its early years, GMRE focused on acquiring off-campus medical outpatient buildings and other decentralized components of the healthcare delivery system, primarily in secondary markets and suburbs of primary markets. The company believed these types of facilities were often overlooked by larger REITs and other healthcare investors but contained tenant credit profiles similar to larger, more expensive facilities in primary markets.
Over time, GMRE has expanded its portfolio to include some multi-tenant properties with gross lease or modified gross lease structures, in addition to its focus on single-tenant, triple-net leased properties. As of September 30, 2024, the company’s portfolio consisted of gross investments in real estate of $1.4 billion, including 4.8 million total leasable square feet across 187 buildings leased to 275 tenants.
GMRE’s portfolio is geographically diverse, with properties located across 31 states. The company’s assets consist primarily of off-campus medical office buildings, ambulatory surgery centers, and other outpatient healthcare facilities. This focus aligns with broader industry trends, as healthcare delivery increasingly shifts away from centralized hospital campuses to more decentralized, community-based settings.
GMRE’s tenants include a mix of physician groups, regional health systems, and national operators. The company’s top 10 tenants account for 48.2% of annualized base rent, providing a stable revenue stream. The weighted average lease term across the portfolio is 5.6 years, with a 96.1% occupancy rate as of September 30, 2024.
Financial Performance and Capital Structure For the nine months ended September 30, 2024, GMRE reported total revenue of $103.6 million, a decrease of 4.1% compared to the same period in 2023. This decline was primarily attributable to the impact of property dispositions completed during 2023 and 2024. Net income for the nine-month period was $3.8 million, down from $21.2 million in the prior-year period, largely due to lower gains on property sales.
GMRE’s balance sheet remains well-capitalized, with $634 million in total gross debt as of September 30, 2024. The company’s leverage ratio, as measured by net debt to gross assets, was 44.1% at the end of the third quarter. Approximately 81% of GMRE’s debt is fixed-rate, providing stability amid rising interest rates.
For the most recent fiscal year 2023, GMRE reported revenue of $140.93 million, net income of $20.61 million, operating cash flow of $68.44 million, and free cash flow of $58.39 million. In the third quarter of 2024, the company’s revenue was $34.175 million, net income was $3.246 million, operating cash flow was $16.302 million, and free cash flow was $21.508 million. Year-over-year, revenue decreased by 3.5% in Q3 2024 compared to Q3 2023, primarily due to changes in the portfolio including lower occupancy in 2024 and the impact of tenants being placed on cash basis accounting.
GMRE’s net income attributable to common shareholders for Q3 2024 was $1.8 million or $0.03 per share, compared to $3.1 million or $0.05 per share in Q3 2023. The company’s FFO attributable to common shareholders and non-controlling interest in Q3 2024 was $0.19 per share and unit, down $0.03 from the prior quarter. AFFO attributable to common shareholders and non-controlling interest in Q3 2024 was $0.22 per share and unit, down $0.01 from the prior year quarter.
Liquidity In terms of liquidity, GMRE had $221 million in available borrowing capacity under its revolving credit facility as of November 5, 2024. The company has been actively managing its capital structure, raising $12 million through its at-the-market equity offering program during the third quarter of 2024.
As of November 5, 2024, GMRE had $7.79 million in cash and restricted cash. The company’s debt-to-equity ratio stood at 1.16x as of September 30, 2024. GMRE’s current ratio and quick ratio were both 0.021, indicating a tight liquidity position.
Acquisition and Disposition Activity GMRE has maintained a disciplined approach to growth, selectively acquiring properties that align with its investment criteria. In the first nine months of 2024, the company completed the acquisition of a 15-property portfolio for $80.3 million, expanding its presence in the outpatient medical sector.
Subsequent to the third quarter, GMRE announced a $69.6 million acquisition of a five-property portfolio, which it expects to close in two tranches during the first half of 2025. These transactions reflect GMRE’s ability to source and execute on accretive investment opportunities, even in a challenging market environment.
GMRE currently has a $70 million portfolio of five medical outpatient facilities under contract to purchase at a 9% cap rate. The company anticipates closing on this acquisition in two tranches during the first half of 2025. The five properties are 94% occupied, have an aggregate of approximately 487,000 leasable square feet, and an aggregate in-place NOI of approximately $6.3 million. GMRE is purchasing these properties at $143 per square foot, well below replacement cost. Approximately 60% and 82% of the on-campus and off-campus properties, respectively, are leased to investment-grade tenants.
Concurrent with its acquisition activity, GMRE has also been actively recycling capital through select property dispositions. During the third quarter of 2024, the company completed the sale of two medical facilities for a combined $12.1 million, generating an aggregate gain of $1.8 million. During the nine months ended September 30, 2024, GMRE completed three property dispositions that generated aggregate gross proceeds of $20.2 million, resulting in a net loss of $1.6 million.
Operational Highlights and Tenant Diversification GMRE’s portfolio continues to demonstrate operational stability, with a 96.1% occupancy rate as of September 30, 2024. The company’s weighted average lease term of 5.6 years provides visibility into future cash flows.
One notable highlight during the third quarter was GMRE’s successful re-leasing of its Beaumont, Texas facility. After the previous tenant, Steward Health Care, filed for bankruptcy, GMRE secured a new 15-year triple-net lease with an affiliate of CHRISTUS Health. This transaction underscores GMRE’s ability to actively manage its portfolio and maintain high occupancy levels.
GMRE’s tenant base is well-diversified, with its top 10 tenants accounting for 48.2% of annualized base rent. This diversification helps mitigate risk, as no single tenant represents more than 10% of the company’s rental revenue.
Outlook and Strategic Priorities Looking ahead, GMRE remains focused on accretive growth through targeted acquisitions, disciplined capital allocation, and active portfolio management. The company’s pipeline of potential acquisitions, along with its access to capital through equity and debt markets, position it to continue expanding its footprint in the healthcare real estate sector.
At the same time, GMRE is committed to maintaining a strong balance sheet and prudent financial management. The company’s leverage ratio of 44.1% as of September 30, 2024, falls within its target range of 40% to 45%, providing flexibility to pursue growth opportunities while managing risk.
GMRE’s strategic priorities include: 1. Continued acquisition of high-quality, off-campus medical properties in secondary and suburban markets 2. Active management of its existing portfolio to drive occupancy and rental rate growth 3. Diversification of its tenant base and healthcare service offerings 4. Prudent capital allocation and balance sheet optimization
The healthcare real estate sector has seen steady growth, driven by favorable demographic trends like an aging population and a continued shift towards outpatient care. GMRE has targeted this sector with a CAGR in revenue of approximately 10% over the past 3 years.
Conclusion Global Medical REIT Inc. has established itself as a diversified healthcare-focused REIT, capitalizing on the industry’s evolving landscape. With a track record of disciplined growth, a well-positioned portfolio, and a strong balance sheet, GMRE is well-equipped to navigate the challenges and opportunities in the current market environment. The company’s strategic focus on accretive acquisitions, active portfolio management, and financial discipline positions it for continued success in the years ahead. While facing some headwinds in terms of occupancy and tenant composition, GMRE’s targeted approach to healthcare real estate investment and its pipeline of acquisitions suggest potential for future growth and value creation for shareholders.
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