Chiron Real Estate Inc. (XRN, GMRE, XRN-PA, XRN-PB Q3 FY2024 earnings call

• Portfolio performance: Occupancy at 96.1%, weighted average lease term 5.6 years, rent coverage ratio 4.6x.
• Acquisition activity: Closed first tranche of 15-property portfolio, under contract to purchase 5 properties for ~$70 million.
• Equity and asset recycling: Issued 1.2 million shares generating $12 million, sold two medical facilities for $12.1 million with a gain of $1.8 million.
• Tenant related: Entered new 15-year triple net lease with CHRISTUS Health at Beaumont facility replacing Steward Healthcare.

At the end of the third quarter, portfolio occupancy was 96.1% with a weighted average lease term of 5.6 years and a portfolio average rent coverage ratio of 4.6x. For the third quarter, net income attributable to common shareholders was $1.8 million or $0.03 per share, compared to $3.1 million or $0.05 per share in the third quarter of 2023. FFO attributable to common shareholders and non-controlling interest in the third quarter was $0.19 per share and unit, down $0.03 from the prior quarter. AFFO attributable to common shareholders and non-controlling interest was $0.22 per share and unit, down $0.01 from the prior year quarter. The company announced the acquisition of a 15-property portfolio of outpatient medical real estate properties for an aggregate purchase price of $80.3 million, with the first tranche closed in the third quarter and the remaining 10 properties acquired subsequent to quarter end. Currently, five property portfolio of medical outpatient facilities are under contract to purchase for just under $70 million. In the third quarter, the company issued 1.2 million shares of common stock generating $12 million and sold two medical facilities for $12.1 million, resulting in an aggregate gain of $1.8 million.

• Currently have 5 property portfolio under contract to purchase for just under $70 million.
• Remain optimistic about the acquisition market and continue to focus on adding quality assets to the portfolio.
• Expect to continue issuing common equity and selling assets to maintain a strong balance sheet.

• Market risks: Impact of Fed rate cuts and mortgage rate changes affecting demand in the acquisition market.
• Tenant risks: Steward Healthcare's bankruptcy and related rent collection issues, including claims in bankruptcy court for unpaid rents.

Q: Austin Wurschmidt asked about attractive source of funding (equity vs dispositions) and asset marketing.

A: Bob Kiernan responded that the company ended the quarter at 44% leverage, and if no sales or equity raises in Q4, would end the year at 46%, and they consider potential sales and equity markets.

Q: Austin Wurschmidt asked about assets being marketed and change in buyer interest/cap rates.

A: Bob Kiernan and Alfonzo Leon discussed mixed market messages with increased optimism before October due to Fed rate cuts, but mortgage rate increases subdued interest recently.

Q: Bryan Maher asked about equity accretiveness, disposition selectivity, and Steward rent collection.

A: Bob Kiernan talked about equity accretiveness at 9.50% and above for 9 cap asset purchases; Alfonzo Leon discussed disposition selectivity based on various factors; Bob Kiernan explained Steward rent collection including collected months and ongoing bankruptcy claims.

Q: Rob Stevenson asked about CHRISTUS rent vs Steward, CapEx for CHRISTUS, and closing of $70 million portfolio.

A: Bob Kiernan said CHRISTUS rent is slightly above Steward's; Bob Kiernan discussed CapEx for CHRISTUS property; Jeff Busch talked about closing the $70 million portfolio in tranches for flexibility and diligence.

Q: Alec Feygin asked about funding the portfolio deal and future acquisitions.

A: Jeff Busch said plan is dispositions and equity, with $12 million raised in Q3 and sales in process.

Q: Robin Haneland asked about CHRISTUS rent vs Steward, dividend sustainability, disposition pool, and 2025 lease expirations.

A: Bob Kiernan said CHRISTUS rent is marginally higher; Jeff Busch talked about maintaining dividend with accretive deals; Bob Kiernan said disposition pool is fluid; Bob Kiernan discussed 2025 lease expirations optimism.

Q: Gaurav Mehta asked about portfolio acquisition cap rate at 9% vs market.

A: Jeff Busch said factors like property profile and relationship contributed to the 9% cap rate