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spk04: 2022 was $2.2 million or three cents per share compared to $2.6 million or four cents per share in the second quarter of 2021. FFO in the second quarter was up 16% to $16.4 million and our FFO is up 17% to $17.6 million compared to the second quarter of 2021. On a per share basis, Our FFO was $0.24 per share and unit in the second quarter compared to $0.22 per share and unit in the second quarter of 2021. And the AFFO was $0.25 per share and unit up from $0.23 per share and unit in the prior year second quarter. Moving on to the balance sheet, as of June 30, 2022, our gross investment in real estate was approximately $1.4 billion, which is up $184 million from a year earlier. Relative to equity, in the second quarter, we generated gross proceeds of $1.9 million through ATM issuances at an average price of $16.24 per share. As Jeff mentioned, on Monday, we amended our credit facility to add a new $150 million delayed draw term loan component with a maturity of February 1st, 2028, extend the maturity of the revolver component to August of 2026, with two six-month company-controlled extension options, and lastly, convert all LIBOR-based loans under the facility to SOFR-based loans. This amendment enhances our liquidity and financial flexibility, and I'd like to thank our bank group for their continued support. In connection with this amendment, on Tuesday, we entered into $150 million of forward starting interest rate swaps that commence in October 2022 and mature in January 2028 that will fix the SOFR component on the new term loan through January 2028 at 2.54%. At our current leverage and including the 10 basis points spread adjustment that's associated with our conversion to SOFR-based loans, our interest rate on the new term loan will be 4.13%. At June 30th, 2022, we had approximately $660 million of gross debt. Our leverage ratio is 46.2%, and our weighted average interest rate was 3.14%. The current unutilized borrowing capacity under the credit facility is $273 million, consisting of $123 million of revolver capacity and a new $150 million delayed draw term loan. Additionally, the pro forma weighted average remaining term of our debt assuming the new term loan is drawn, is now 4.3 years. Overall, we continue to believe we are well positioned to execute on our acquisition and overall business strategy and look forward to sharing our progress with you through the balance of the year. This concludes our prepared remarks. Operator, please open the call for questions.
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Austin Werschmitt with KeyBank. Please proceed with your question.
spk06: Thanks, and good morning, everyone. Good morning, Austin. You and the team seem, you know, fairly confident in your ability to hit the acquisition goals for the year, but presumably that the leverage ratio is going to migrate towards sort of that upper threshold of your target. So I guess I'm just curious how willing are you to primarily debt fund future acquisitions and push up, you know, on that high end of the leverage range?
spk04: Yeah, I'll, I'll, I'll start this, um, Austin. So we, um, and we still have a target, you know, leverage of, you know, 40 to 45%, but with, uh, you know, with the market conditions that we're in now, we're comfortable kind of, kind of moving above that, above that target or being above that target and, and just, you know, being patient and opportunistic about our, uh, our, our acquisitions. And we're, we're largely in the same place we've been for the last few months in this, uh, in this type of market. and evaluating our options for moving forward. We can temporarily run leverage a little bit higher. We have the ability to sell assets to the extent we see really good opportunities on the acquisition side to make changes in the portfolio and just really take things as opportunities present themselves. So we're comfortable kind of in this type of an environment being a little bit higher, But longer term, certainly we're looking to be at lower leverage points.
spk06: Understood. And are you guys currently marketing any assets today to sort of manage, you know, be able to match fund, I guess, any future potential activities if the capital markets environment sort of, you know, remain less favorable?
spk03: Yeah. We always have... groups wanting to buy some of our assets. It's been an interesting part. I guess we have a lot of assets now. And we always have groups that are interested in our assets. And, you know, some assets, you know, if we're not as favorable as we were in the future, there's other groups that may want to buy it. So we do look at that. We do look at that. We sold one last quarter for partly that reason.
spk06: Are you currently kind of remarketing the Belpre Ohio asset that was terminated?
spk03: No, no. That's a great asset. We only did it as sort of a favor to them. We love the cap rate that we have right now. The cap rate is, you know, our return is tremendous on that, and it's very strategic for them. I actually personally expect them to come back. at some point because that is part of their cancer center and they want to do more things with that building and it's easier for them to own. So I do expect them to come back. But, you know, really we did it as a favor to them more than as a profit. Understood.
spk06: Thanks for the time.
spk00: Thank you. Our next question comes from the line of Connor. with Barenberg. Please proceed with your question.
spk07: Good morning out there. Thank you for having me on the call. Good morning, Conor. Just in a similar line, the question was Austin just asked. So I'm curious on these interest rate swaps, that only applies to the term loan portion of the debt stack, correct?
spk04: Yes, Conor. So, you know, with the, if you think about where we were at kind of at June 30th, we talked about our capacity today. If you look at kind of on a pro forma basis, you know, we would have about a little bit more than 80% of our debt would be fixed and the remainder would be on the revolver and floating.
spk07: Okay. And just so we're clear, on future acquisitions, you can use the delayed draw portion of this fixed term loan to finance these acquisitions, right?
spk04: Right. Of course. We would plan to, you know, to draw on the term loan at some point in the third quarter. And then we'll be, again, with those forward starting swaps, we'll be fixed on that element of our debt from there through its maturity at the end of January, February 1st, 2028. Okay.
spk07: And then in terms of the revolver balance, I mean, I think it's sitting at about $260 million. And then in consideration of the forward rate curve, I mean, is there anything you seek to do here to bring that balance down?
spk04: Well, I mean, so the term loan will bring it down. So the term loan will bring that down straight away, and that's the primary thing. So the other lever that you have is raising more equity. But, again, from a debt perspective, we'll be at a little bit more than 80% fixed currently. Okay.
spk07: Okay. All right. Just need to put those pieces together. Thank you for the time.
spk00: Yeah. Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, it's star 1 on your telephone keypad. Our next question comes from the line of Aaron Hecht with JMP Securities. Please proceed with your question.
spk08: Hey, guys. Thanks for having me. Hi, Aaron. Hi. Piggybacking on the new delayed draw term loan questions, Are there any covenants related with that that are restrictive as you get towards certain leverage thresholds?
spk04: No, Aaron. So the delay draw term loan was just done, you know, right, you know, as an amendment to our existing credit facility. There were no changes to really any significant, you know, covenant changes to the credit facility in connection with this. no changes to our uh to our credit spreads you know in connection with this so it was really just a again an add-on and uh just an expansion of the of the credit facility and it sounds like you're going to move a full balance over to the term loan the i think it was 150 million you just take that off the
spk08: credit facility the revolver and put it on the term loan and that creates more capacity on the facility that how that'll work exactly okay uh in terms of the mob that you guys sold in tennessee what was the cap rate you got on that the i mean i'll start here the the germantown sale was
spk04: was driven primarily Aaron, but this was a, uh, a tenant in a facility that the lease was expiring in 2024. And the, uh, the, uh, the tenant was actively looking to, uh, at other opportunities to, uh, for, for their, for their facility. And they had actually purchased land that was not very far from the, from this facility we're looking to build. And so when we got into discussions with them, uh, during the, uh, late in the second quarter. there was an opportunity for us to sell this at a good return for us. So that was the primary strategy on the sale. It was a solid cap rate for us as a property. And from a sale cap rate, I think it was a pretty – it was an eight-type cap on the sale, but it was – the strategy there was more to really from a – potential issue from a vacancy perspective. And it was really a win-win situation for us and the tenant in this case.
spk08: And then last one, there's the asset that... Sorry about that.
spk05: I was just going to add that going in, the cap rate was in the high nines.
spk08: Last one, there was the asset that you guys just purchased that had some upside through uh leasing activity i think the rate the cap rate was three point six point three percent what kind of yield enhancement are you expecting as you occupy that space and are these tight are you gonna look for more of these types of deals going forward yeah i'll answer that uh we look to get about one percent more when we buy value upside
spk03: And these types of deals seem to be out there now. I'm not, we're not doing them again at 6.3. This was an earlier deal that we did. So we're not doing those again, but you know, we're moving as a strategy, we're moving our cap rates up, you know, to 7.5 and above, but the properties that we do look for, sometimes there's really super quality properties. like we got one in the Fairfax one, one of the top markets right by a hospital that just needed some improvements and some new marketing and possibly the ability of, you know, a stronger, you know, MLB focused management as opposed to where they were. And we are looking at those assets and we are finding really quality assets, but we still need to be, you know, as the future goes, we need to be, let's say, buy something in the low sevens and be able to bring it up to an eight in a strategy, a future strategy type of situation. It is one of the asset groups that we're finding really quality properties that are just, others don't want to buy vacancy. So therefore, even though it's a quality product and it's at a good rate, they don't want to put vacancy on their books. We're figuring we'll have it temporarily. We have a pretty good occupancy rate And so if we could take some vacancy and then we fill it back up, we'll get back up to where we want to be with occupancy.
spk08: Thanks for that detail. All for me.
spk00: Thank you. Our next question comes from the line of Dave Rogers with Baird. Please proceed with your question.
spk02: Hi, this is Daniel Hogan here with Dave Rogers. I know you talked briefly about the leasing of vacant space in the place that you recently acquired. Have you seen any changes in the leasing velocity in those markets and with those acquired assets?
spk03: Yeah, absolutely. It's very interesting what's happening is we're seeing better rates come in than we expected. I personally expect, because I've been in this business a long time, given inflation and giving everything else, our type of assets will increase. start getting better rates, but there's also a lot of activity going on around these. The property that we got, the owner wasn't very good relationship with brokers in the market. He wouldn't pay them on certain things and there was like a whole, so we basically came in there, we did the market, say we're doing the lobby, People complained about that and we're starting to get, you know, occupancy up. It's really a great opportunity for us. We won't do a lot of these because you really have to put a lot of time in, but it's worth the extra point given this market.
spk02: Great. Thanks. And then to follow up, just is there any change in the types of assets you're acquiring or pursuing or just still looking for any valuable opportunities?
spk03: We look for MLBs primarily, and then we buy similar to what we've been buying of part. But the one main element that we have out there is quality assets. Quality assets and better risk-adjusted returns where we're able to buy now in the mid-7s or with value-add, we get into the high 7s or possibly 8. So same strategy, we just moved up our numbers to reflect the cost of capital. We've always wanted to be very accretive, and we feel very comfortable about being accretive right now. Great.
spk02: Thank you for your time.
spk00: Thank you. Our next question is a follow-up question from the line of Connor Zversky. Please proceed with your question.
spk07: Thanks for having me back. I'm just looking at page six of the presentation, considering the different portfolio segments. I'm curious, like, are you seeing a different degree of cap rate movement for any particular asset class, whether it's MOBs or IRFs?
spk05: Alfonso? Yes. So specifically between MOBs and IRFs, There's been more price discoveries on MOBs than there has been on IRFs. I would expect there to be a similar change, but there just hasn't really been too much that's been tested in the market thus far. If you think about it, it's only been since May that the market really started changing. Rehab hospitals don't come to market very frequently, and they usually come in waves. And there will be periods where there really isn't a lot of any rehab hospitals to look at for potentially even months. So there's been a couple, but it's more on the development side, which that I've seen not existing up and running rehab hospitals thus far. And pricing on development is going to be driven by different factors. So as of yet, as of right now, it's hard to say.
spk07: Okay. And then apologies if I missed this earlier, but some value-add opportunities were mentioned. Are these opportunities something that GMRE would look to fund and maybe lock in the yield on the development portion of the equation?
spk03: That's possible. That's possible. We're looking for higher yield and keeping a low risk profile and so therefore we do look at things like that. The value adds are very interesting to us, but you want to do a few, make sure they work as opposed to do a lot and maybe have difficulty. I mean, we're pretty confident and we're feeling good about Fairfax. The activity right away came in and, you know, but I want to make, I'm being very cautious with this also on the value.
spk07: Got it. Understood. And last one for me, I promise. Just considering consensus NAV estimates right around $15 a share. where the share price is right now. I mean, is it buyback under consideration? Assuming that you could sell off maybe non-core assets to fund it and not bring leverage up. But just wondering what the thought is there.
spk03: It's not really because it goes totally against our strategy. We need to grow. So we need to grow for two different reasons. One, the bigger size we get. we get an advantage in our multiple. Our multiple sort of compresses to what other multiples are, especially when we sort historically when we went over a billion dollars and then we sort when we went under a billion dollars. Some could hold us and some can't hold us at that level. So we need to keep going. We need first goal is to get back over a billion dollars. The other goal is to get into the bonding market and we're not terribly far away. So, you know, if we can continue to do our, you know, growth of $200 million a year, that will be nice. So, it doesn't really look like we're going to do a buyback.
spk07: Okay. Understood. That's all from me. Thank you for the time.
spk00: Thank you. Our next question is another follow-up question from the line of Austin Werschmitt. Please proceed with your question.
spk06: Great. Thanks, guys. I was just curious if you could speak to sort of the leasing backlog as it relates to, you know, more of the same store assets and specifically the three, you know, Melbourne, I think Westland and Derby, where you talked about, you know, potentially releasing those later this year or early next.
spk04: Yeah, sure. Sure, Austin. So, you know, with respect to Melbourne, there's been some reasonable progress there where we've got, it's about a, you know, a 70,000 square foot building and there's 58,000 square feet of occupancy there. And we've got good visibility, you know, into, you know, into, you know, getting that up toward like 40%, 40 to 50% occupancy right now. But some of those won't really come into the kind of fourth quarter of this year and into early next year. But we've had good, you know, there's good visibility into the property and and expect to get more traction as the year progresses with the idea that it would become much more stabilized in 2023. With respect to the Derby asset, again, it's still a work in progress. There's nothing new to report on that. And with respect to Westland, that's as much a tenant dispute as it is. anything else. And we're really just working through the court system with that. And really, it's a $4 million building with, again, the annual rent there is in that $400,000 annual range. And it's just been a dispute with the tenant that we're working through the courts on.
spk06: and uh you know nothing new to report at this point i think we're kind of again we're making progress but as with a lot of things when you're when you're dealing with uh on the legal side of it it's uh it can be it can move slowly and then and then just one clarification on the toledo deal does the 7.1 cap rate does that include the lease up um to stabilization and and what sort of the timeline you expect to uh to achieve that stabilized yield
spk04: Well, I'll start. I mean, you know, the cap rates that there is what's in place today.
spk05: Yeah. And, you know, in terms of the lease up, I mean, it's, it's, I mean, what we're finding are properties that are, that are not owned by institutional investors that are, where they're having a constraint in terms of how much TIs they're able to give tenants. And that's the case in Toledo. So, you know, we're, We're pretty optimistic that with coming in with an institutional owner and mindset and capital for TI improvements that the property will lease up in line with where it should be given the quality of the assets.
spk06: Got it. And then just last one, Bob, could you give us the latest thoughts on the preferreds that are redeemable here later this quarter?
spk04: Yeah, so, you know, currently there's no plans to redeem the preferred. I mean, we are, you know, the optionality moves to us starting next month, which is a positive. But, you know, with the current environment, you know, that's not something that we're thinking about here in the near term.
spk06: Thanks. Appreciate the time. Thank you.
spk00: Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for closing comments.
spk03: Yes, I'd like to thank everybody and look forward to talking to you at the end of the next quarter. Have a good summer.
spk00: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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