Chiron Real Estate Inc. (XRN, GMRE, XRN-PA, XRN-PB Q4 FY2024 earnings call

• Portfolio Performance: Occupancy at 96.4%, weighted average lease term 5.6 years, rent coverage ratio 4.5 times.
• Acquisition Activity: Entered into purchase agreements for 15-property and 5-property medical real estate portfolios, with the 15-property portfolio acquired at an 8% cap rate and the 5-property portfolio at a 9% cap rate. Subsequent to year-end, completed acquisition of first tranche of the 5-property portfolio.
• Disposition Activity: Completed sale of 4 medical facilities, with $35.2 million of gross proceeds from sale of two properties to joint venture with Heitman, maintaining 12.5% ownership and serving as managing member.
• CEO Succession: Jeffrey Busch announced succession plan, confident in board's ability to select successor to lead the company.

At the end of the fourth quarter, portfolio occupancy was 96.4% with a weighted average lease term of 5.6 years and a portfolio average rent coverage ratio of 4.5 times. For the fourth quarter, net income attributable to common shareholders was $1.4 million, or $0.02 per share. FFO attributable to common stockholders and non-controlling interest was $0.15 per share and unit, down $0.04 from the prior year quarter. AFFO attributable to common stockholders and non-controlling interests was $0.22 per share and unit, down $0.01 from the prior year quarter. In acquisition activity, the company entered into purchase agreements for multiple property portfolios, with cap rates ranging from 8% to 9%. In disposition activity, the company completed the sale of 4 medical facilities generating aggregate gross proceeds of $40.5 million, resulting in an aggregate gain of $5.8 million.

Global Medical REIT expects AFFO per share unit in the range of $0.89 to $0.93 for 2025. The guidance assumes no additional acquisition or disposition activity other than what has been completed or announced, and excludes one-time expenses related to the CEO succession plan.

• Tenant Risk: Prospect Medical Group filed for Chapter 11 bankruptcy, with $2.4 million of outstanding lease payments related to three facilities, potentially leading to vacancy if leases are rejected.
• Market Risk: Uncertainty around lease renewals, with an estimated 70% to 80% retention rate on expiring leases, and potential impact of tenant bankruptcies on portfolio occupancy.

Q: Could you talk a little bit about the new Heitman joint venture with regards to target size, leverage, the types of assets the venture will be targeting?

A: The JV with Heitman is a core plus fund looking for strong cash-on-cash returns, targeting deals in low seven to low eight cap rates range, bias towards single-tenant assets. The fund has available equity and aims to grow. No current discussions about selling more Global Medical REIT assets into the JV but option exists.

Q: Just curious on the CEO's transition in. Why stepping down and what criteria is the board looking for for a new CEO?

A: Jeffrey Busch is stepping down at 67 and wanting to do less. Board is looking for someone with capital markets experience, good track record, and understanding of medical and real estate. New CEO should have experience running a company, capital markets, and medical/real estate.

Q: Could you share some additional details about the nature of the assets that you seeded the joint venture with Heitman? What was the cap rate on that sale under the joint venture?

A: The assets seeded were single-tenant assets with a low seven cap rate, including a property in High Point, North Carolina and a property in Texas.

Q: When we look at the $110 million of ABR that you disclosed in your supplement, does that include the rent of prospects which was on a cash basis, and then the replacement tenant for Stewart?

A: The ABR does not include the cash basis rent from Prospect's East Orange facility. The two Vernon properties for Prospect are in the ABR number, and the Beaumont facility rent is not in the 12/31 ABR number as it wasn't applicable at year-end.