Chiron Real Estate Inc. (XRN, GMRE, XRN-PA, XRN-PB Q1 FY2025 earnings call

• Acquisition: Closed on a 5-property, 487,000 square foot portfolio with an aggregate purchase price of $69.6 million in February and April. The portfolio has an aggregate annualized base rent of $6.3 million (9% cap rate), was approximately 92% leased upon acquisition, and includes on-campus and off-campus medical facilities with various tenant specialties.
• Dispositions: Completed sale of two medical properties for $8.2 million, resulting in a $1.4 million gain, including the Coos Bay, Oregon facility sold for $7.2 million with a $1.3 million gain and a 6.7% cap rate.
• CEO succession: Nominating and Corporate Governance Committee narrowed candidate pool for new CEO to a few final candidates, expecting new CEO in place by June 30, 2025; Jeff Busch transitioning to Chairman.
• Portfolio details: Portfolio had gross investments in real estate of $1.5 billion at end of Q1 2025, 95.6% occupancy, 5.6 years weighted average lease term, 4.4x rent coverage. First quarter 2025 total revenues $34.6 million (down 1.4% from prior year), total expenses $32.2 million. Capital expenditures in Q1 2025 were $2.6 million, projected $12-14 million for full-year 2025.
• Prospect Medical: Prospect filed for Chapter 11 bankruptcy, $250k received from Prospect post-petition, working to lease East Orange facility; Prospect represented 0.8% of total ABR at year-end 2024.
• Lease renewals: 62% of 115,000 square feet of expiring leases renewed in Q1 2025, expect 75% lease retention on square foot basis for full-year 2025.

At the end of the first quarter, portfolio occupancy was 95.6% with a weighted average lease term of 5.6 years and portfolio average rent coverage ratio of 4.4x. For the first quarter, net income attributable to common shareholders was $2.1 million or $0.03 per share. FFO attributable to common shareholders and non-controlling interest in the first quarter was $0.20 per share and unit, down $0.01 from the prior year quarter. AFFO attributable to common stockholders and non-controlling interest was $0.22 per share and unit, down $0.01 from the prior year quarter. Last year, the company entered into a purchase agreement to acquire a five-property portfolio of medical facilities for an aggregate purchase price of $69.6 million at a 9% cap rate. During the first quarter, the first tranche of this acquisition (three properties) was closed for $31.5 million, and subsequent to the quarter end, the remaining two properties were acquired. During the quarter, the company completed the sale of two medical properties, generating aggregate gross proceeds of $8.2 million resulting in an aggregate gain of $1.4 million.

• Reaffirmed full-year 2025 AFFO per share and unit range of $0.89 to $0.93.
• Guidance assumes no additional acquisition or disposition activity other than completed/announced and no additional equity or debt issuances other than normal course revolver activity.
• AFFO guidance excludes one-time expenses related to CEO succession plan.

• Tenant bankruptcies: Impact of Prospect Medical bankruptcy on properties, including East Orange facility lease situation.
• Market and capital risks: Fluctuations in interest rates, acquisition market conditions with bid-ask spread in transactions, potential impact on portfolio valuation.

Q: Austin Wurschmidt asks about the potential timeline and amount of rent that would be collected upon re-leasing the East Orange facility.

A: Jeffrey Busch discusses converting sub tenants, working with a broker, hospital interest, and expects net rent in the mid to high $13 million to $15 million range for the East Orange facility over time.

Q: Wes Golladay asks about the timing of the $250,000 received from Prospect, disposition outlook, and line balance.

A: Jeffrey Busch states $150,000 was in the first quarter and $100,000 will be in the second quarter; Alfonzo Leon mentions disposition discussion ongoing and financing discussions for term loan renewal in third/fourth quarter.

Q: Juan Sanabria asks about the dividend, CapEx, and lease retention.

A: Jeffrey Busch says dividend discussion is held off until CEO succession is resolved; Robert Kiernan discusses CapEx projections and lease retention with volatility in occupancy due to expiring leases and acquisitions/dispositions.

Q: Gaurav Mehta asks about leverage and acquisition pipeline.

A: Jeffrey Busch says leverage target is 40%-45% but willing to go above for opportunities; Robert Kiernan talks about acquisition market uptick, bid-ask spread, and supply of suitable assets for the portfolio.

Q: John Massocca asks about Heitman JV, Stewart assets, and macro policy impact.

A: Jeffrey Busch says actively pursuing opportunities for Heitman JV; Robert Kiernan provides update on Stewart assets in Hermitage, Pennsylvania, and notes portfolio's recession-proof nature with strong tenant performance during pandemic.