Global Medical REIT Inc Stock

Greetings, and welcome to the Chiron Real Estate Fourth Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Jamie Barber. Thank you. You may begin.

Good morning, everyone, and welcome to Chiron Real Estate's Fourth Quarter 2025 Earnings Conference Call. My name is Jamie Barber, and I'm Chiron's General Counsel. On the call today are Mark Decker, Jr., Chief Executive Officer; Bob Kiernan, Chief Financial Officer; Juan de Leon, Chief Investment Officer; and Danica Holley, Chief Operating Officer.

Statements or comments made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions.

These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested from any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings.

Additionally, on this call, the company may refer to certain non-GAAP financial measures. You can find a tabular reconciliation of these non-GAAP financial measures to the most current comparable GAAP numbers in the company's earnings release and in filings with the SEC. Additionally, information may be found on the Investor Relations page of the company's website at www.chironre.com.

I would now like to turn the call over to Mark.

Good morning, everyone. I'm thrilled to welcome each of you to Chiron's inaugural earnings call. This quarter was a busy one with meaningful achievements across all verticals. Bob will discuss our fourth quarter performance in a moment. But before that, I'd like to use my time to summarize what we intend to achieve as an engaged and reinvigorated organization.

Yesterday, we published a full investor presentation outlining how the Chiron team is building for the future. I'll walk us through a subset of those slides this morning, but encourage you to take a moment to review the full deck. We trust that you'll find it to be direct, transparent and thought.

We'll start with a quick mythology note. In Greek lore, our namesake, the venerable centaur Chiron is the father of medicine and the architect of medical education. We like the imagery and believe his legend aligns well with our new mission statement of delivering value at the intersection of care, capital and real estate.

Our team is well positioned to execute on this mission with strong leadership across operations, finance and investments. We have a deep bench of talent beyond the familiar names, and I believe that we can punch above our weight.

Before looking at where we're going as Chiron, it's important to acknowledge what we've done as GMRE. From the date of our IPO, GMRE has meaningfully exceeded the total return profile of our closest MOB peers. That's a good thing, and we intend to keep outperforming.

What's not good is that medical office has been in a bear market for years. This bear market has had more to do with interest rates than asset performance, but we need to be prepared for a world where 4% 10-year treasuries is the new normal and 2% to 3% rent growth may be sub-inflationary.

So we've rewritten our playbook to prioritize earnings growth on top of our stable existing portfolio. We've already made an incredible amount of progress. This progress includes establishing a long-term strategy to guide our decision-making and hold ourselves accountable as well as a comprehensive review of our existing portfolio.

Our findings have informed our decision to reimagine the way we approach asset management, leading to the appointment of Alex Wilburn as Portfolio Manager. Alex is one of our longest tenured team members, most recently serving as a senior investment professional. We're excited for him to apply his capital allocation and market-oriented mind to the portfolio management function and know that he will thrive in his new role.

We also took time to think about how our existing portfolio stacks up against the field, drawing a few conclusions. First, it's important to acknowledge the overall return profile of medical office. Rent growth is incredibly consistent but modest due to our fixed rate escalators and long average lease term. This growth is partially offset by the capital and leasing costs.

We found that our performance is in line with the sector generally. One key difference is entry price. We believe that if you're going to face limited growth, it's important to realize more yield going in.

Second, we believe that the benefit of the health care sector is that you can find great investment opportunities outside of primary markets. When comparing the demographic profile of our assets to that of the United States at large, we found that we're biased towards higher prosperity markets.

Third, the vast majority of our portfolio is owned fee simple, meaning that it's not encumbered by a ground lease. This is critical as outpatient medical owners often operate in an environment where their building tenant is their land lessor. This has the predictable effect of reducing your opportunity when negotiating renewals. When the ground owner is your health care system, they often have the ability to dictate leasing outcomes.

Finally, rising construction costs and undeniable demographic shifts have given us an outstanding opportunity to push rents in the years to come. We think that an improved emphasis on driving portfolio performance, including a more proactive approach to pruning underperforming assets will put us in a great position to capitalize on this opportunity.

Bob and his team have also been working hard in the capital markets to position our balance sheet for offense. I'm proud to share that we now have no debt maturing before 2028, a big change from where we were 6 months ago, and our current maturity schedule is well laddered and manageable.

Looking toward the road ahead, it's our ambition to build an organization that can routinely deliver earnings growth in the upper quartile of the equity REIT universe. Doing that has historically meant growing cash flow by 6% per year. This will be a process requiring active management of the existing portfolio and investing more broadly across the health care sector. We've put a lot of thought towards how we're going to approach each of these considerations.

Importantly, we are still firm believers in the economic and demographic tailwinds benefiting our existing portfolio. That said, we also believe that these same tailwinds benefit other subsets of health care real estate, namely active adult and seniors housing. Our entire team has spent considerable time thinking through whether we should pursue investments in the senior space, concluding that the answer is an enthusiastic yes.

The silver tsunami is just building with the first baby boomers now just entering their 80s. More broadly, the population of Americans aged 70 or older will expand for decades to come. Existing supply is severely constrained and project deliveries are expected to be far short of what is needed to satisfy demand.

Once we knew that we wanted to explore seniors, the next question was how. We believe there's an opportunity to assemble a differentiated portfolio of premium newly built active adult and shop investments in the public markets. There's a lot that went into that decision, but I'll highlight a few components.

The lack of new supply through COVID and the GFC have led to an average age of 24 years for existing senior housing assets. These facilities were designed for a different generation of residents, and we think that newer assets with great operators will have a competitive advantage. This is especially true in the active adult segment where high-end amenities and programming are the defining component of the resident experience.

Second, the cohort of highest income seniors is sizable and growing, providing us with the comfort that demand for premium facilities will prove resilient.

And finally, our lack of incumbency and small size converge an advantage. We can focus solely on the products we want and relatively small transactions move the needle, enabling the potential for stronger growth. It's the early days of the silver tsunami, and there's lots of room on that wave.

Our team has a sound understanding of the space and believe our boutique approach to partnership with operators and developers gives us a broad opportunity as we enter these verticals. Many existing owners, operators and developers of senior housing facilities are middle market in nature. So that decision of who to partner with on their business is a monumental one, and there are many considerations beyond who's willing to pay the most.

This obvious value proposition has allowed us to build an attractive pipeline, each with strong return profile and opportunity to build a larger relationship. For now, we'll be thoughtful in limiting investments to those that we can fund through capital recycling, but we're ready for more when that changes.

Our announced active adult investment in Minneapolis is a great example of the opportunity available to Chiron. We've taken a 49% interest in the development of a new community with an expected delivery of 2027 and a stabilized double-digit unlevered IRR.

This investment was sourced off market through a relationship with an experienced luxury housing developer that we've transacted with in the past and known for a decade. We believe this relationship provides us with future pipeline of great communities.

As mentioned earlier, we're being thoughtful about how we fund these acquisitions, given our current cost of capital. During the quarter, we sold an early vintage medical office for a sales price of $10 million, bearing our team the outsized execution risk and capital required to stabilize a poorly positioned building. We used these proceeds to repurchase stock in a leverage-neutral fashion, which we view to be a sound capital allocation decision.

We'll be very conscious of debt levels as we execute our pipeline and have already identified approximately $250 million of prospective dispositions. These dispositions are likely to focus on assets that we believe will demonstrate the overall quality of our book, including a portfolio of IRF assets and the Beaumont Surgical Hospital. We've begun marketing efforts on each and believe that we will realize proceeds meaningfully above our basis, demonstrating our ability to make sound investments.

Thank you for allowing me to take you through that. Bob, would you please walk us through some of our quarterly highlights?

Thanks, Mark. Our NAREIT-defined FFO per share and unit was $0.97 for the quarter. Core FFO, which we previously referred to as AFFO, was $1.16 per share and unit. Net debt to adjusted EBITDA REIT was 6.2x for the quarter, a reduction of 0.7x from the prior period, which was driven by our recent preferred equity issuance.

Same-store cash NOI, which includes all assets owned by Chiron for at least 15 months, increased 5.4% on a year-over-year basis. Sequential performance was also strong at 2.9%.

I'm pleased to share that Chiron will be transitioning to a monthly dividend with no change to the annual $3 per share rate. We believe that the dividend will provide our shareholders with a more frequent income stream while also reducing frictional costs for the company.

I'm also pleased to share our initial 2026 core FFO guidance range of $4.30 to $4.45 per share and unit. This range includes $0.36 of anticipated headwinds due to the results of our balance sheet fortification efforts throughout the back half of last year. Notably, this guidance does not reflect any speculative acquisition or disposition activity.

Mark, would you like to provide some closing thoughts?

Yes. If you're just joining the call, you need to know that it's been a busy quarter, and we've accomplished a lot, and we're well positioned in the care delivery universe and broadening our aperture to add growth from senior housing to our quality cash flows.

The care universe has undeniable tailwinds that make a nimble player like Chiron well positioned to grow quickly through internal and external cash flows, and we're excited for our future and believe strongly in what we're doing. We wouldn't ask you to endorse a strategy that we ourselves are unwilling to invest in.

And with that, we look forward to seeing some of you at Citi next week. And operator, we're ready to take questions.

[Operator Instructions] Our first question comes from the line of Juan Sanabria with BMO Capital Markets.

Congratulations on laying out the new strategy and thesis. I guess the big question in my mind is just there's obviously a lot of enthusiasm around seniors housing and why do you think Chiron is positioned to execute over and above what some of your peers are doing. And the focus in seniors, is that more assisted independent living? How do you plan to pick the operators, the market focus?

So if you could just give us a little sense of kind of what we should expect going forward in seniors and why Chiron is the platform to outexecute some of your peers?

Sure. Juan, thanks. Listen, it's a big universe out there, and operators have lots of options. I think the way that we'll have to compete is by delivering value, as we've articulated sort of as the main mission. But I mean, there's lots of considerations that go into who the real estate partner is going to be. And I think if I'm on the other side of the table, choice is good. And so we're one more choice. We'll have to win the business just like anyone else on the merits of our value proposition.

And why do we think we can? I mean, we talk about this a lot around the water cooler. I mean there's a version of the universe where we're like the smallest, most relevant company in the space. And then there's the real world where we have an unsecured balance sheet and $100 million of EBITDA and a great team with good gray matter.

And if I was describing that company to just a normal person that say, it sounds like a pretty good business. It is a good business. And it's possible the public market will appreciate that, and we can use that tool to our advantage or not. But either way, we're going to build a great business.

And the focus on seniors would be on what kind of product side, kind of putting active adults to one side, independent assistance of communities, markets, et cetera, what's the focus, I guess, day 1?

I mean we're really focusing on the operator and the real estate, and we're really looking at independent and assisted, some memory care stay away from skilled.

Okay. And then on the disposition side, the $250 million of assets that you're potentially looking to capital recycle, just you kind of put some yield targets for the investments, but how should we think about the yield associated with those potential sales? And if you could talk maybe about the timing of the selling versus buying and how we should think about kind of the cadence of recycling that capital?

Yes. Well, we can't force anything. So everything takes two good willing parties. But we have launched a JV. We like the inpatient rehab facility space. We'd like to express that like of that space by hoping to find a capital partner with us. We have a good track record and a decent sized portfolio in that niche, and we think we can do some interesting things and grow that.

And we'd like to do it with a capital partner. So we're out in the market looking for a joint venture. It's possible someone comes and says, we've got to have this at a price that makes it a full sale, but that's not our objective. And I would imagine that happens in the second or third quarter.

And then on the MOB sale, we are working with a buyer there, and I would expect we'd announce an LOI on that in the next, I don't know, 60 days and probably have that off the books by the third quarter. That asset has been a real strong contributor to our same store. So we kind of hate to see it go, but I mean, we just signed a 15-year lease with an A-rated credit, and it's a really good recycling candidate for that reason.

And then just the last question for me. On the White Rock bankruptcy, I guess, have they paid first quarter rents? Or how should we think about the impact to financials at this point in time?

Yes. They have paid -- they are currently -- current on what they've been paying us. I mean this is a situation where we have a great basis in that property. It's a 14-acre property just east of Dallas, kind of looking at the city and on a reservoir lake. We're in it for about $105.

The operator there purchased that out of a bankruptcy in 2023 and took some pretty tough terms from their counterparty and the bankruptcy is really about trying to free up some of their financial capacity by eliminating some of the seller financing that they took.

So we believe that they have a good chance to do that. We're supportive. We went down and met with them in December. This was on their menu of options, and we're working very hard to be a good collaborative partner. We would like to see them win. And if they can't win, then we'll make sure that we have a good alternative prepared. But it's an evolving situation. We're in close contact with them and monitoring it and doing everything we can to help them be successful.

Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets Inc.

Mark, I was just hoping you could start by discussing when this strategy shift discussions with the executive team and the Board really started to come about.

Sure. We really started in August using a consultant that I've used in the past called [ RCLCO ]. We put together kind of the top 10 folks at the company and our Board, and we did a bit of a 360 evaluation where we had people who don't work here tell us what they thought about the business, and we all considered it.

And we had really a multi-month process where we kind of beat up lots of different ideas and ultimately laid out a strategy for the Board in December, which they're supportive of and helped collaborate in. And so we've really been at it since August and feel great about where we are relative to our plan in that timeline.

Helpful. And then Bob had highlighted there's no real capital recycling that's assumed in guidance. But I guess, how are you just thinking through the near-term earnings impact from executing the strategy of selling some of these legacy [ OEM ] assets and then recycling into that development, which obviously tends to have some downtime from an earnings perspective as well as just being able to compete on the senior side and redeploy that capital at kind of minimizing that spread versus the sales?

Yes. I mean I think the truth is we'd like to get through that period as soon as possible, and we'd like the market to see what we can cook up. So I mean, hopefully, we can get through that sort of valley as fast as we possibly can. But again, we don't get to dictate all the timing.

So in terms of earnings impact, I mean, as you can imagine, as we're trying to delever the business and we're selling assets, there definitely could be, there should be, there will be dilution there. But we're really thinking about it like it's our own money and imagining what the best business looks like.

And frankly, the returns that are available in the housing space are superior to those in outpatient medical. So we're not, by any means, abandoning outpatient medical, but deals are going to compete on return.

And just one more for me. There's some efficiency and other savings that's outlined in the 2026 guidance. Can you discuss what that includes?

And then also as you build out the senior side, I mean, how are you thinking about the asset management side of that business, given as you move along the higher acuity spectrum, the operating intensiveness of that business obviously picks up? So just curious some of the puts and takes from an overhead perspective.

Rob, do you want to?

Yes. I'll start out relative to the outlook and the efficiencies in the 2026 guidance. And the efficiencies are largely items that won't recur in 2026 as much as any 2025 items that won't recur in 2026. As Mark mentioned, the time we spent working through the strategy and some of the other one-off type items like that, that are -- that were in our 2025 numbers, that won't repeat in '26, is the primary driver.

And then to get to your question on sort of building out seniors, I mean, some of that will be a function of how fast we're able to make investments and it could go slower than we want, and we want to be mindful of how we're staffed. And as you know, the road is sort of littered with smart real estate people who didn't appreciate the operating intensity and leverage embedded in running a senior housing operating property.

And we have a lot of respect for that. So I mean, it's really about picking great partners that we have confidence in and can learn from. And look, we're -- we don't have all the answers, and we'll learn and we'll make some mistakes.

I think we'll make more good decisions than bad ones, but it will be a new business line for us. So we have a healthy respect for what that means, and we'll be very focused on mitigating our risk there really through choosing partners that we bet extensively.

Our next question comes from the line of Wes Golladay with Baird.

I just want to build off Austin's last question. Maybe on the investment team, is that team for the senior side all built out now or mostly built out?

No. I mean, right now, we're using our investment team, Alfonzo is on the line here. He's dressed in the senior housing gear right now. But I would imagine we could add to that team as we progress. But we do have some relationships that are -- that reside here already, and we're working on those.

Okay. And then when you look at how you want to approach it, I know it's early innings, but do you have a sense of how many operators you want to work with? Are you going to be more regionally focused? Will you target mainly new, I guess, developments? Would there be any potential for redevelopments? Just trying to get a little bit better sense on how you're approaching it.

Yes. It's a great question. Right now, the operators we're focused with, I would call them kind of regional or single-market operators with good track record and generally speaking, newer assets. So as we said in our prepared remarks, we're focused on newer products. We believe that's a place where we can possibly differentiate.

But right now, it's -- the answer to your question is as few and as good as possible. But obviously, if we can get some size, I mean, it would be great to have a stable of operators that we can share ideas with across and so forth. But that's ambition today.

Our next question comes from the line of Gaurav Mehta with Alliance Global Partners.

I wanted to ask you on the portfolio allocation as you build your [ SHOP ] active adult portfolio, how would the allocation look like between medical office and the housing part?

Yes, that's a great question. I mean some of that will be -- thanks for the question, Gaurav. A lot of that's going to be dictated by the opportunity set. So we don't have like a pie chart in mind that we're going to manage to. We're going to manage to the opportunities and be somewhat opportunistic there.

But active adult, in particular, sort of "modern active adult", which has kind of really only been around for 10 years or so, is a relatively small niche, the hunting grounds in seniors, much larger. But we really like that active space. So we'll see. I mean I wouldn't hazard a guess, to be honest.

Okay. And I guess for the acquisitions, should we expect primarily to be focused on [ SHOP ]? Or would you be open to medical office as well?

I mean, as we said earlier, like everything competes on return. And today, [ SHOP ] is winning that competition.

Okay. And I guess what are cap rates like on [ SHOP ] versus medical office?

I think cap rates are actually pretty similar. It's the character of the forward-looking growth that's much different. So call it, plus or minus 6% on forward going in, but one has 2% to 3% growth and one has 4% to 8% and some really sustainable headwinds -- or excuse me, tailwinds.

Our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just curious on the active adult, I think one of the prior callers had a question with regards to how we should be thinking about your entry there. I mean development historically is a drag until the asset leases up, although I recognize the lease-up is a lot shorter than in seniors housing.

But are you guys getting a preferred return on the capital you're investing to kind of bridge the gap until the asset can start to cash flow? Or just how are you thinking about that segment of the opportunity set with active adult?

Yes. Well, welcome back, Juan. We're glad to have you, and we love the curiosity. Yes. The answer to your specific question on this first opportunity in Minneapolis is no. We are not getting a preferred return. However, that would be our goal in the future. That situation was an interesting one. They were actually -- they were under construction already. So -- and they preferred a 50-50 scheme. So we went with it. It was a relatively low dollar amount.

So did some of this at Centerspace where we had kind of a build core strategy, if you will, where we employed a preferred element, and we would endeavor to do that again here. So I would expect you'd see more of that. And obviously, we'll be mindful of sort of overall sizing of that loan book, if you will, and risk.

And then the medical office, there was a Steward bankruptcy last year and you took some vacancy that was an opportunity as you relet that space. So just curious on the update on kind of the opportunity there, and how much has been backfilled? And how that has contributed or could contribute to growth in the core business today?

Yes. The Steward piece is really resolved. It was really that -- what is now the [ Cruse-Two ] asset, the Beaumont asset that we talked about disposing of, I might one other small lease, but it is not material for any...

Yes, there are 2 other small leases, but nothing to...

And then we have Prospect, which is still going. So that -- our East Orange asset has been affected by that materially. So that's one we're still working out.

Okay...

I'm sorry, Juan, say that again, forgive me.

No, I'm sorry. I was going to ask the Prospect that upside is still to come if you are able to backfill that?

Correct. Yes, that would show up today as negative NOI.

Okay. And then last question for me. Anything on the watch list to call out over and above the White Rock?

No. No. I mean in the past, White Rock would have been the one when people asked us about watch list that was kind of top of mind. And again, we're -- that's a great entrepreneurial group. We're in good touch with them. We believe in their ability to be successful. But there's nothing past them that we're spending a lot of time on right now.

And we have reached the end of the question-and-answer session. I'll now turn the call back over to CEO, Mark Decker, for closing comments.

Thanks very much. Well, thanks, everyone, for your time and attention, and we look forward to talking to you next quarter.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. Have a great day.

Good day, and welcome to the Global Medical REIT Third Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jamie Barber, Global Medical REIT's General Counsel. Please go ahead.

Good morning, everyone, and welcome to Global Medical REIT's Third Quarter 2025 Earnings Conference Call. My name is Jamie Barber, and I'm Global Medical REIT's General Counsel. On the call today are Mark Decker, Jr., Chief Executive Officer; Alfonzo Leon, Chief Investment Officer; Danica Holley, Chief Operating Officer; and Bob Kiernan, Chief Financial Officer.

Statements or comments made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested from any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings.

Additionally, on this call, the company may refer to certain non-GAAP financial measures. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company's earnings release and in filings with the SEC. Additional information may be found on the Investor Relations page of the company's website at www.globalmedicalreit.com.

I would now like to turn the call over to Mark.

Thank you, Jamie. Good morning, everyone, and thank you for joining us today as we share the results of our first full quarter together as a management team. As you review our materials, I hope you'll find growing evidence of our focus on driving shareholder value. We're going to achieve this by delivering internal earnings growth, demonstrating disciplined capital allocation and capital markets acumen and executing on external growth opportunities when they present themselves. The team was highly productive on each of these fronts during the third quarter.

The portfolio performed well, posting 2.7% same-store NOI growth. This is our first quarter reporting on this key metric and an improved focus on property performance will help our asset management team deliver stronger and more consistent results. On the balance sheet, we were able to address our upcoming debt maturities by recasting the revolver to 2029 and extending our $350 million Term Loan A and dividing the term loan into 3 distinct loans while extending our weighted average debt term by 3 years. Thanks again to our lending group and great work by our finance team.

In investments, Alfonzo and team have built a pipeline of highly desirable opportunities, which we will only act upon with a green light from the market. Our current cost of capital dictates that we will remain disciplined, pursuing only our highest conviction ideas and funding those transactions with proceeds from asset recycling, but we hope that will soon change. More broadly, our full team is in the midst of developing a strategic plan to deliver outsized shareholder return in the years ahead. We're excited to share more when we're able to. On the whole, it's been an outstanding first 4 months as a new team. I'm appreciative to everyone for their pedal to the metal efforts. The journey is just beginning, but I'm ecstatic with our progress so far.

Before passing the call to Bob, I'd like to comment on the large outpatient medical transaction recently announced by one of our public sector peers. First, the transaction demonstrates the meaningful institutional demand that exists for health care infrastructure assets, a huge plus for our existing owners. Second, we've been asked by many investors for a read-through on the mark-to-market value of our own real estate, which is a fair question. Answering that question requires agreement on what defines quality. We believe that quality assets are those that deliver cash flows that are predictable, reliable and growing. By that yardstick, we like our portfolio quite a bit.

The GMRE portfolio is 95% leased with over 5 years of remaining WAULT. Our leases have an embedded annual escalator of 2.1%, and this quarter's 2.7% same-store print is repeatable and achieved without any carve-outs for redevelopments or assets that we don't wish to count. We'll let others speak to what that means in terms of cap rate, but any reasonable assumptions would indicate that we trade at a substantial discount to the fair value of our assets.

Bob, can you please run through the numbers?

Thank you, Mark. During the quarter, we delivered funds from operations of $14.5 million or $1 per share in unit. Adjusted funds from operations, which excludes straight-line rent among other noncash and nonrecurring items, was $16.2 million or $1.12 per share in unit. Each of these metrics grew 4% on a per share basis relative to the prior year equivalent. Year-to-date, funds available for distribution, which accounts for CapEx, tenant improvements and leasing commissions, totaled $39.2 million, resulting in a payout ratio of 84% in our current annual dividend rate.

In October, we amended our credit facility to extend the term of our revolver to October 2029 and to extend the term of our $350 million Term Loan A by breaking it up into 3 tranches with maturities ranging from October 2029 to April 2031. The amendment also removed the 10 basis point SOFR credit spread from all of our credit facility borrowings. We are extremely pleased with the execution of the facility amendment, I would like to thank our lending group for their support and confidence. In connection with the credit facility amendment, we entered into forward starting interest rate swaps to hedge the SOFR component of our Term Loan A through its new maturity dates. Based on the current leverage levels, the weighted average fixed rate on these new swaps will result in a weighted average effective interest rate of approximately 4.8%. It's important to note that our previously existing swaps on Term Loan A will remain in effect until the maturity in April of 2026.

As discussed last quarter, we are also looking to expand our sources of debt capital to include longer-term debt providers such as insurance companies. By diversifying our lender and tenor mix, we will improve the quality of our earnings and broaden our access to debt capital. This diversification alongside our extended debt maturities and sound dividend coverage ratio has fortified our balance sheet and marks an important step on our journey toward earning an investment-grade credit rating. Danica?

Thank you, Bob. The third quarter was a productive one for our asset management team, headlined by same-store NOI growth of 2.7% for our portfolio. This performance was supported by positive year-to-date absorption and the successful re-leasing of our 85,000 square foot facility in Beaumont, Texas that was previously leased to Steward Health. Beyond Beaumont, we're seeing positive leasing outcomes across the portfolio as high construction costs have constrained new supply, enhancing our leverage when negotiating lease renewals.

We disposed of 2 assets during the quarter, including 50,000 square foot freestanding health system administrative facility located in Aurora, Illinois. Following this disposition, our portfolio exposure to dedicated health system administrative space is reduced to less than 2% of total ABR. As of quarter end, the GMRE portfolio was 95.2% leased with a remaining term of 5.3 years. We have strong visibility on our near-term leasing pipeline and expect occupancy to trend towards 96% at year-end. CapEx and leasing costs have totaled $9.7 million on a year-to-date basis, putting us in a position to land within our full year guidance range of between $12 million and $14 million. I would now like to turn the call over to Alfonzo to discuss our investments. Alfonzo?

Thank you, Danica. On the investments front, we have remained patient on new acquisitions in light of our cost of capital. Still, the team has been busy underwriting deals to keep an active pulse on the market, evaluating $11.5 billion in prospective transactions so far this year. This deal flow has provided us with a near-term pipeline of almost $500 million in potential deals at first year cash returns that blend to a 7.5% to 8% range. For now, execution on those deals will be limited to those which we can fund via asset recycling, but our team remains ready to pounce on this attractive market opportunity once we receive a green light from the capital markets. Mark?

Thanks, Alfonzo. I've been involved in the outpatient medical sector since 2001 and I don't think the setup for our niche has ever been better. We're poised to benefit from increasing demand for outpatient services, rising construction costs that limit new supply and competitors that are either out of the game or have lots going on internally. GMRE has the right team and skill set to drive FFO and FAD earnings growth, especially if pricing power continues to come our way. That said, we know that we'll need to keep on executing to earn a currency that enables external growth and we're ready and excited to do that work.

Operator, let's open it up for Q&A.

[Operator Instructions] your first question today will come from Wes Golladay with Baird.

I have a question on the -- you talked about the positive leasing momentum. Can you talk about the pipeline of leases that you have signed but will still need to commence rent over the next few quarters? Would you have like an ABR number for that?

I don't know that we have an exact ABR number, but Danica, do you want to speak to that?

Yes. I think in terms of an exact ABR number, I'm not sort of comfortable nailing that exactly down, but I would give you encouragement that the performance of the portfolio will continue to be consistent with what we reported out this quarter and that there's no surprises or any sort of bogeys in there. So I hope you're able to sort of go from that.

Okay. And then when you look at -- you mentioned about maybe sourcing insurance debt. Would you have, I guess, a framework for thinking about timing of when you may pursue that?

Yes, Wes, I mean, honestly, I think it would be to our benefit to have it sooner rather than later. It's just another market and another place where we could get financing and it allows us to go past 5 years. So I mean we have urgency around it but I mean, the trick is it's sort of binary. We're either able to access the market or not and it comes down to the view of our credit. It's our belief and expectation that the counterparty will price us like kind of a BBB- credit. And so if and when we can get that as we work through it, we will. And if we can't, we'll have to do a few things here and there to get ourselves in position for that, including possibly going to the agencies. But we feel like it's within reach to get that done.

And your next question today will come from Juan Sanabria with BMO Capital Markets.

This is Robin Haneland sitting in for Juan. I was curious what drove the occupancy increase during the quarter? And then on top of that, is it the year-end occupancy of 96% that is driving the sequential benefit to FFO in the fourth quarter or something else?

Yes. On the occupancy, I mean, it was mainly just driven by selling the empty facility at Aurora. That's the kind of math of it. And in terms of sequential Q4, it's probably the benefit of CHRISTUS but I don't know, Bob, do you want to chime in?

From an occupancy perspective, Q4 will have lease-up in it. We've got a number of lease-ups that are projected to come in during the fourth quarter. From an earnings perspective, we'll continue -- I think it is CHRISTUS, from a property NOI perspective, again, continuing that into the fourth quarter. This was our first full quarter with that in the numbers and we'll continue on that path.

And then on the acquisition front, how low do you think leverage would have to get for you to look to flip to being a net acquirer? And what scale could you possibly be a net buyer?

Yes. I think, Robin, for how low do we want to leverage, I mean, our overall target leverage, I'd say, in the near term is sub-6x. And ideally, we could be in a spot where we could fund with permanent capital and then put it on our line, take it off with permanent capital and some longer-term debt would be an ideal state. We're not there today. I mean if we had access to capital, I think we could easily put $200 million to $500 million of external growth up per year and that would be mathematically compelling, I think, and as well as just improving the overall quality of the business. But for now, we're going to be kind of -- we're going to get a little bit less levered ideally and then probably be funding from recycling.

On the topic of recycling and deleveraging here, could you maybe just help us understand the quantum of assets you're considering selling? And maybe like any rough expectations on yields would be helpful.

Yes, it really depends on type, but I'd say we have some things that we think would sell in the low 6s and others that we would put probably closer to 7, and we would be seeking to redeploy that kind of plus 100 to 200 basis points, taking the 2 ends of those spectrums.

And your next question today will come from Austin Wurschmidt with KeyBanc Capital Markets.

So Mark or Alfonzo, you highlighted the pipeline of acquisition opportunities as much as $500 million that sort of meet that criteria in the 7.5% to 8% cap rate range. I mean, how big is the disposition pipeline today that you think that you could sort of execute on that, maybe the near-term opportunity of capital recycling at a positive spread?

I think near term, it's probably 50 to 100, and we could probably do more -- I mean it all depends, Austin, because we have to get the sale we like. And so it's a lot of triple net leases that we have to kind of pull off to get the sales and the buys we like. But I mean, everything we have, I think, is salable. It's just a question of trying to manage it all together, the leverage, earnings and so forth. But I'd say we won't get at that $500 million in full without some meaningful change. So my guess is -- my hope would be we get 20% to 40% of that done. Pipelines, as you know, evolve. So if we have something nailed down now, we can't move on unless we have a sale pretty close to wind up.

Fair enough. Are there other assets in that disposition pool that are underleased or the lease yield is meaningfully below where it kind of helps both deleverage as well as allows you to reinvest at a positive spread?

The more likely scenario is, I'd say the underleased ones probably aren't as attractive a sale candidate. So our best sales will be well leased sort of sleep at night type items. And we actually probably will get -- I mean the way our leverage is counted in our facility is actually on a gross book basis. So if we bought something for $1 and we sold it for $1.15 as an example, we'd actually be chipping away a little bit more at our leverage just on the margin. So that would work kind of both ways for us. So yes, I'd say there's a little of that possible but it's more likely the fuller assets, not the opportunistic ones.

Appreciate it. And then maybe the last one. You mentioned the team is in the early stages of developing the strategic plan. But since you teased out the idea, anything you can share for just the central tenants of the plan at kind of a high level?

Yes. I mean, honestly, the central tenants will be unsurprising to you. It will be about capital allocation and balance sheet management and just execution. But yes, I guess I'd rather wait. But I don't think there'll be a huge reveal. We're not going to start getting into the metal stamping business or anything like that or data centers. We'll be focused in kind of what we would call health care infrastructure.

And the next question will come from Rob Stevenson with Janney.

Bob, how much -- so the implied fourth quarter guidance is $1.13 to $1.23, if I'm doing my math right. When you're taking a look at that sort of $0.10 range, you talked about lease-ups benefiting fourth quarter earnings, but is that basically the predominant driver? Or is there some other stuff in there? Because that's like $700,000 plus sequentially just to get you to the midpoint of that.

I think it's a combination of things, Rob, but it's certainly -- I mean, it's some elements of the lease-up activity. It's -- there's a number of moving pieces to it. So it's really hard to flag any in particular. But from a run rate perspective, this -- the run rate that we're on from an AFFO perspective, this quarter, the incremental growth, I think the number is maybe a little bit lower than what you're citing in terms of what we need to get towards that range. But we have a number of opportunities from both rent growth and also from a cost side to fall into that range.

Okay. Because I mean, it looks like from the supplemental that you guys are $3.37 of 9-month AFFO and the guidance is $4.50 to $4.60. So my math is failing me here is that it just seemed like a big jump sequentially even if you got -- because you -- it's not like you're going from 80% occupancy to 95% or some sort of huge jump because you don't have that much vacancy.

The one other piece to keep in mind is interest also. I mean with the curve -- with some of the rate reductions that are there, that does have a pickup for us. The credit facility refinancing, we also pick up -- we no longer are subject to the 10 bps SOFR credit spread adjustment. So that's a piece there as well.

Okay. And then I don't know who's best to answer the question, but you guys talk about the tenant credit watch list today. I mean, even if it's not who's on it, but is that watch list expanding, shrinking? How should we be thinking about that at this point in time given some of the re-tenanting, given a couple of sales, et cetera? And how are you guys thinking about that internally?

I mean I'd say on the whole, Rob, it's shrinking. Our 2 main issues there, we're obviously Steward and Prospect. And I mean, we're always watching what our tenants are doing obviously to the extent we can. But those -- that was a pretty good size event for us. And for the portfolio, we don't have anything brewing that we're aware of at this time.

Okay. And then just last one for me. Mark, how are you and the Board thinking about preferred? Is that to you guys, is that expensive debt? Is that quasi-equity? Is that something with the common here that you could expand either reopening the existing or a new issuance to fund? How are you thinking about that capital stack, assuming that the -- if the common equity stays here for any prolonged period of time?

Yes. Candidly, I'm amazed at where the common is, but I guess we're in a decent company. The REIT market as a whole is pretty challenged. And among them, we are some of the most challenged as it relates to earnings multiples. But Listen, I like preferred. I think it is equity and I will go to my grave arguing that with anyone. It's -- we don't have to pay it back. So I can't understand how it would be debt. And in our capital stack, I think it's possible today that would be attractive equity. So I mean, I'd say it's definitely something we'd consider. And I would say the people who would argue with us that this said don't probably own our stock right now anyway. So...

And the next question will come from Gaurav Mehta with Alliance Global Partners.

I wanted to ask you on your occupancy comments. I think you mentioned 96% by year-end from 95.2% as of this quarter. Does that assume any sale of any vacant property?

No.

Okay. And so when you say 96%, does that mean that the tenants are paying the rent? Or is it like you're signing 96% and tenants will probably start paying the rents later?

Those are all -- Gaurav, thanks for the question. It's really -- those are kind of leases that are underway. We're trading paper. So those are situations where we have a line of sight and have belief that it will get -- the lease will get signed by the end of the year. And by the way, I think we did sell one small building, although it wouldn't meaningfully move occupancy. So I retract my firm no. I think we sold a very small asset actually just yesterday. So...

Understood. And as a follow-up on the G&A for fourth quarter, should we expect that to be in line with where third quarter was?

Gaurav, yes, it's -- from a cash G&A perspective, we're forecasting in that same type of range and similar on the cash.

And your next question today will come from John Massocca with B. Riley.

Maybe thinking about the buyback and kind of where your stock is trading today, as you look at dispositions and kind of capital recycling, how are you kind of thinking about utilizing the buyback, paying down debt or actually buying assets? I mean, kind of where are we today maybe within those 3 options?

Yes. Good question. Look, the stock is really attractive right now. We're trading over a 9% cap on an implied basis and that we can't find a portfolio that we have so much information on for that price. So that's a very attractive option. Obviously, that's permanent capital. It's precious. We have a lot of respect for that and are not trying to shrink it. But if -- but you could say the universe is telling us to sell assets and buy our stock back, and that's certainly under consideration, we'd want to do it.

I think we talked about when we announced the buyback on a leverage-neutral basis. And just -- yes, so I guess I'd say that. So I mean, ideally, we could do a little from each delever, buy some stock back, buy some assets that are accretive, that would be ideal. That's what I'd say we're working on generally.

As we think about and this maybe even be part of the strategic plan, I mean, is there an opportunity set to sell big chunks of assets within the portfolio? Or should we expect kind of disposition activity near term to be kind of granular like it has been in quarters past?

I think it's possible we could do big chunks. I mean it's just about getting a buyer you like. And I'd say the bigger it is, just the more complex it is because it really -- it really affects our corporate math. So -- kind of time that well.

And then longer term, particularly as you're thinking about kind of strategy for GMRE, is there potential to do investments maybe outside of the traditional aperture or traditional focus of MOB? What are your kind of big longer-term thoughts on where you want to focus property level investments?

Yes. I mean I think that's a great question. I think the long term for us, I mean, we're trying to manufacture the best cash flow stream we can. And by that, we mean really FAD and ideally free cash flow generated back to the company to start to fund some internal growth, which we're really able to do for the first time, I think, in the company's history this quarter, albeit a modest amount. And so I think we would look at health care broadly, and we're not, I think, in most people's definition, a pure-play MOB or we're not pure-play medical office already. And I think that's an opportunity.

And so yes, we are exploring that. And I'd say thinking where else in health care, we think we could craft an edge. Where I think our sort of strength as an investment team is, and I think this is real is we have some very thoughtful folks that know the business well and really go deep on underwriting and those are skills that are transferable.

This concludes our question-and-answer session. I would like to turn the conference back over to Mark Decker for any closing remarks.

I'll just pause on to thank everyone for spending time with us this morning. And hopefully, we'll see you this winter. Thanks so much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.