Chiron Real Estate Inc. (XRN, GMRE, XRN-PA, XRN-PB Q4 FY2023 earnings call

• Portfolio performance: At end of Q4 2023, occupancy 96.5%, weighted average lease term 5.8 years, rent coverage ratio 4.2x.
• Dispositions in 2023: Completed three dispositions at 6.3% cap rate, gross proceeds $80.5M, used proceeds to pay down variable rate debt.
• 2024 outlook: Near-term acquisition pipeline $95M-$110M of medical properties, improved acquisition market vs 2023, strategy to maintain/lower portfolio leverage.
• Financial results: Q4 2023 total revenues $33M (down due to dispositions and rent reserves), total expenses $31.5M (down due to lower interest and operating expenses), net loss $840,000. Defeased a CMBS loan, resulting in loss on extinguishment of debt of $868,000.

At the end of the fourth quarter, Global Medical REIT's portfolio had an occupancy of 96.5% with a weighted average lease term of 5.8 years and a rent coverage ratio of 4.2x. For the fourth quarter of 2023, net loss attributable to common shareholders was $840,000 or $0.01 per share. FFO was $0.19 per share and unit, down $0.03 from the prior year quarter. AFFO was $0.23 per share and unit, down $0.01 from the prior year quarter. In 2023, the company completed three dispositions at a weighted average cap rate of 6.3% generating $80.5 million of gross proceeds, using net proceeds to pay down variable rate debt, resulting in a leverage ratio of 43.6% at year-end. The portfolio at year-end 2023 had gross investments in real estate of $1.4 billion, 96.5% occupancy, 5.8 years weighted average lease term, and 4.2x rent coverage.

• Near-term acquisitions: Targeting second half 2024 for closing $95M-$110M of medical properties meeting investment criteria.
• G&A expenses: Expect 2024 quarterly G&A expenses in range of $4.4M-$4.6M.
• Occupancy: 2024 occupancy expected to range between 95% and 96.5%.
• Capital expenditures: Projected $10M-$11M for building/site improvements and $2M-$3M for tenant improvements in 2024.

• Market conditions: Impact on acquisitions and debt due to sustained higher interest rates.
• Lease expirations: Challenges in retaining tenants and leasing up expired space.
• Operational: Uncertainties related to property management and cash flow from tenants.

Q: Austin Wurschmidt asked about accretive investment opportunities, financing, and OP units.

A: Jeffery Busch mentioned optimistic plan with potential rate lowering, using equity/debt for accretive deals, aiming to lower leverage below 40%. Alfonzo Leon said OP units are idiosyncratic and hard to predict.

Q: Robert Stevenson asked about revenue and expense decrease, watch list, and debt financing for acquisitions.

A: Robert Kiernan said revenue decrease due to dispositions and rent reserves, no other tenants on watch list. Alfonzo Leon said using credit facility as competitive advantage to find accretive deals.

Q: Bryan Maher asked about CMBS defeasance, CapEx, and acquisition timing.

A: Robert Kiernan explained CMBS defeasance to free up cash and reduce debt. CapEx $10M-$11M for building/site improvements and $2M-$3M for tenant improvements. Alfonzo Leon said acquisitions back half loaded, nothing in 1Q and 2Q, more in Q4.

Q: Alec Feygin asked about investment pipeline yields, leasing efforts, and demand for expired space.

A: Alfonzo Leon said targeting ~8% yields, tracking similar retention rates to 2023 for 2024 expirations, actively working to lease expired space.