Global Medical REIT Inc. (NYSE:GMRE) Q4 2024 Earnings Call Transcript

Global Medical REIT Inc. (NYSE:GMRE) Q4 2024 Earnings Call Transcript February 28, 2025

Operator: Greetings, and welcome to Global Medical REIT fourth quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Swett, Investor Relations. Thank you. Please go ahead.

Steve Swett: Thank you. Morning, everyone, and welcome to Global Medical REIT’s fourth quarter and full year 2024 earnings conference call. On the call today are Jeffrey Busch, Chief Executive Officer, Alfonzo Leon, Chief Investment Officer, and Robert Kiernan, Chief Financial Officer. Please note the use of forward-looking statements by the company on this conference call. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The company intends these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements, contained in the Private Securities Litigation Reform Act of 1995 and is making this statement for the purpose of complying with those safe harbor provisions.

Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company’s control, including limitations contained in the company’s 10-K for the year ended December 31, 2023, and its other SEC filings. The company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise. Additionally, on this call, the company may refer to certain non-GAAP financial measures such as funds from operations, adjusted funds from operations, EBITDAR, and adjusted EBITDAre. 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 its 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 Jeffrey Busch, Chief Executive Officer of Global Medical REIT.

Jeffrey Busch: Thank you, Steve. Good morning, and thank you for joining our fourth quarter and full year 2024 earnings call. Our high-quality diversified portfolio continues to deliver steady results. 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, compared to a net loss attributable to common stockholders of $800,000, or $0.01 per share in the fourth quarter of 2023. FFO attributable to common stockholders and non-controlling interest in the fourth quarter was $0.15 per share and unit, down $0.04 from the prior year quarter, due primarily to $3.2 million of severance-related costs.

AFFO attributable to common stockholders and non-controlling interests was $0.22 per share and unit, down $0.01 from the prior year quarter. Regarding our acquisition activity during the year, in the spring, we entered into a purchase agreement to acquire a 15-property portfolio of outpatient medical real estate properties for an aggregate purchase price of $80.3 million. During the third quarter, we closed on the first tranche of this acquisition, consisting of five properties for $30.8 million, and during the fourth quarter, we completed the acquisition of the remaining ten properties for $49.5 million. These properties are fully leased under triple net or absolute triple net leases, and the acquisition was completed at a cap rate of 8%. Additionally, in the fourth quarter, we entered into a purchase agreement to acquire a five-property portfolio of medical outpatient facilities for an aggregate purchase price of $69.6 million at a 9% cap rate.

Subsequent to the year-end, we closed on the first tranche of this acquisition, completing the acquisition of three properties for $31.5 million. We expect to complete the acquisition of the remaining two properties during the second quarter of 2025. The transaction market continues to present promising opportunities in our asset class, and we are pleased with the recent addition to strengthen our high-quality portfolio. As we focus on growing our business, we remain committed to maintaining a strong balance sheet through our strategic asset recycling program. During the fourth quarter, we completed the sale of four medical facilities generating aggregate gross proceeds of $40.5 million, resulting in an aggregate gain of $5.8 million. Of these $40.5 million of gross proceeds, $35.2 million were related to the sale of two properties to a joint venture with Heitman, a premier real estate investment firm managing over $48 billion in assets.

In this joint venture, we maintain a 12.5% ownership stake and serve as its managing member, while Heitman holds the remaining 87.5% interest and through its voting interest controls the joint venture. We are excited to partner with Heitman and feel the joint venture allows us to capitalize on our acquisition and asset management platforms, ancillary fees income, and gain a new capital partner. Lastly, in early 2025, we announced my succession plan as CEO. Over the past eight years, I have had the privilege of leading Global Medical REIT through both successes and challenges, working alongside many wonderful partners, associates, industry professionals, and friends in the investment community. This transition creates an opportunity to bring a fresh perspective to our growing strategy.

I have the utmost confidence in our board’s ability to select the successor who will lead our experienced team and leverage our robust infrastructure to create value for our stockholders. I am confident this transition will be seamless, and I am deeply grateful to everybody who has been part of this journey. With that, I turn the call over to Alfonzo Leon to discuss our investment activity and the current market conditions in more detail.

Alfonzo Leon: Thank you, Jeffrey. The transaction market for our target medical facilities that align with our investment criteria continues to show promising momentum. We remain actively engaged with a broad range of physician groups, brokers, and corporate sellers to identify compelling acquisition opportunities that will help us continue growing our portfolio. As Jeffrey mentioned, in the fourth quarter, we closed on a second tranche of our 15-property portfolio announced earlier in the year, acquiring the remaining ten properties encompassing 160,000 leasable square feet. In total, the 15-property portfolio had an aggregate purchase price of $80.3 million with an aggregate of approximately 254,000 leasable square feet and an aggregate annualized base rent of $6.4 million, equating to an 8% cap rate.

Also, during the first quarter, we announced a $69.6 million portfolio of five medical outpatient properties which are under contract to purchase at a 9% cap rate. After year-end, we closed the first tranche of this acquisition, acquiring three properties encompassing roughly 189,000 leasable square feet for an aggregate purchase price of $31.5 million with an aggregate annualized base rent of $2.8 million, with the second tranche expected to close during the second quarter of 2025. As noted last quarter, these buildings feature tenants who have invested significant capital in their own suites with triple net rents averaging $14 to $15 per square foot. These well-maintained mission-critical facilities serve their respective health systems with a comprehensive mix of medical services from primary and urgent care to specialized practices including neuro, cardio, ortho, and cancer, as well as diagnostics, radiology, and laboratory services.

All of the properties operate under ground leases with an average of six years remaining term. Approximately two-thirds of the property square footage is located on campus. Approximately 60% and 82% of the on and off-campus properties, respectively, are leased to investment-grade tenants. The ability to complete these deals in a two-tranche transaction provides us flexibility to fund these transactions prudently. The second tranche remains under contract and is under customary closing conditions. As such, we cannot guarantee that the remainder of this acquisition will close on time or at all. On the disposition front, during the quarter, we closed on the sale of four medical facilities receiving aggregate proceeds of $40.5 million resulting in an aggregate gain of $5.8 million.

Of the $40.5 million of gross proceeds, $35.2 million came from the sale of two medical properties to our joint venture with Heitman. We maintain a 12.5% investment in the joint venture and serve as a managing member, while Heitman maintains an 87.5% investment. We are excited about this partnership and the opportunity that it may provide in the future as Heitman allocates capital to this strategy. For the full year, we completed seven dispositions, including two to the joint venture as just mentioned, that generated aggregate gross proceeds of $60.7 million resulting in an aggregate gain of $4.2 million at a weighted average cap rate of 9%. Looking forward, we remain committed to our prudent investment approach that aligns with our strategy and underwriting standards.

By leveraging our competitive advantage of scale, capital access, and OP unit structuring capabilities, we continue to pursue value-creating opportunities. I’d now like to turn the call over to Robert Kiernan to discuss our financial results.

Robert Kiernan: Thank you, Alfonzo. At the end of the fourth quarter 2024, our portfolio consisted of gross investments in real estate of $1.5 billion and included 4.8 million of total leasable square feet, 96.4% occupancy, 5.6 years of weighted average lease term, 4.5 times rent coverage, with 2.2% weighted average contractual rent escalations. In the fourth quarter of 2024, our total revenues increased by approximately 6.7% compared to the prior year to $35.2 million, primarily due to the impact of acquisitions that closed during 2024. Total expenses for the fourth quarter of 2024 were $36.3 million compared to $31.5 million in the prior year quarter. This increase is due primarily to the impact of one-time costs related to our CEO succession plan included in our G&A expenses.

Our operating expenses for the fourth quarter of 2024 were $7.2 million compared to $6.1 million in the prior year quarter. Regarding the fourth quarter 2024 expenses, $4.7 million related to net leases where the company recognized a comparable amount of expense recovery revenue and $1.2 million related to gross leases. Relative to the increase in expense in 2024, this reflects increased costs from properties acquired in 2024 as well as the impact of tenants placed on cash basis accounting in the fourth quarter of 2023 and the second quarter of 2024. G&A expenses for the fourth quarter of 2024 were $7.7 million compared to $4.2 million in the prior year quarter. The increase primarily resulted from $3.2 million that was expensed in 2024 related to the CEO succession plan.

Looking ahead, we expect our total quarterly G&A expenses in 2025, excluding CEO transition-related costs, to be in the range of $4.5 million to $4.7 million. During the fourth quarter, we completed four property dispositions that generated aggregate gross proceeds of $40.5 million resulting in an aggregate gain of $5.8 million. In addition to these sales, we recognized an impairment loss of $1.7 million in the fourth quarter related to our Derby, Kansas facility. Net income attributable to common stockholders for the fourth quarter of 2024 was $1.4 million or $0.02 per share, compared to a net loss attributable to common stockholders of $800,000 or $0.01 per share in the fourth quarter of 2023. FFO attributable to common stockholders and non-controlling interest in the fourth quarter of 2024 was $11.1 million or $0.15 per share in unit compared to $13.3 million or $0.19 per share in unit in the fourth quarter of 2023.

AFFO attributable to common stockholders and non-controlling interest in the fourth quarter of 2024 was $15.8 million or $0.22 per share in unit, compared to $15.9 million per share in unit in the fourth quarter of 2023. The primary reason for the reduction in FFO was the recognition of $3.2 million in severance and transition-related expenses related to our CEO succession plan. These expenses are included in FFO but excluded from AFFO. Regarding capital expenditures on the portfolio, in 2024, our cash spend was approximately $13 million with approximately 45% related to tenant improvement. Currently, we’re projecting 2025 capital expenditures of approximately $12 million to $14 million. In terms of tenant-related items, on January 11, 2025, Prospect Medical Group filed for Chapter 11 bankruptcy reorganization.

At that time, Prospect had approximately $2.4 million of outstanding lease payments related to three of our healthcare facilities, including $2.2 million related to our facility in East Orange, New Jersey, which has been accounted for on a cash basis since the fourth quarter of 2023. As of year-end 2024, Prospect represented 0.8% of our total ABR. As of today, there has been no announced tenant or court decision on the leases we have with Prospect. If Prospect rejects any of these leases with the company, we will have a general unsecured claim with respect to pre-petition amounts owed under any projected lease. With respect to our 2025 lease expirations, we are pleased with our progress on renewals and based on activity to date, we are currently estimating a 70% to 80% retention rate on the 508,000 square feet that were scheduled to expire as of the end of 2024.

Additionally, as a result of the Prospect bankruptcy, we expect to have approximately 30,000 square feet of increased vacancy once Prospect bankruptcy proceedings are complete. Moving on to the balance sheet. As of December 31, 2024, our gross investment in real estate was $1.5 billion. Additionally, we had $651 million of total gross debt with a weighted average remaining term of 2.0 years, 79% of our total debt is fixed-rate debt. Our leverage ratio was 44.8% and our weighted average interest rate was 3.75%. As of today, pro forma for the acquisitions completed earlier this year, the current unutilized borrowing capacity under the credit facility is $200 million. Relative to equity, we did not issue any shares of common stock under our ATM program during the fourth quarter or to date in the first quarter of this year.

Turning to our full-year 2025 guidance. We expect AFFO per share unit in the range of $0.89 to $0.93. Our 2025 guidance assumes no additional acquisition or disposition activity other than what has been completed or announced. No additional equity or debt issuances other than normal course revolver activity. AFFO guidance excludes one-time expenses related to the CEO succession plan. As we start the year, our stable portfolio positions us well to navigate the current environment, while our liquidity allows us to selectively continue to acquire properties that fit our strategic objectives. We remain confident in our ability to execute our business strategy and look forward to sharing progress with you throughout the year. This concludes our prepared remarks.

Operator, please open the call for questions.

Q&A Session

Operator: Thank you. The floor is now open for questions. A confirmation tone will indicate your line is in the question queue. Today’s first question is coming from Juan Sanabria of BMO Capital Markets. Please go ahead.

Juan Sanabria: Hi. Good morning. I was just hoping you could 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, relative to your own on-balance sheet opportunities, and whether any incremental growth would be externally sought after, new acquisitions, or if we should expect further Global Medical REIT assets to be contributed into the JV.

Alfonzo Leon: Sure. So the JV was set up with Heitman and it’s part of a fund that they have dedicated for medical office. I mean, this fund is basically like a core plus fund that’s looking for strong cash-on-cash returns. You know, their cost of capital is more competitive than ours. I mean, we’re targeting deals in the low seven to low eight cap rates range, looking primarily for strong properties with decent lease terms, a bias towards single-tenant assets. The fund that we’re joint ventured with has available for this strategy. At the time we formed the joint venture, about $50 million of equity that they could contribute. So the goal is to grow this, and it’s a fund that continues raising money. So presumably in the next few years, that fund will have more capital to allocate to this strategy.

But we contributed a couple of assets and this was after long conversations with Heitman in terms of understanding what kind of assets they like, what kind of markets they like. And so we started this joint venture with this seed with the hopes of growing it. There aren’t any discussions currently right now about selling more of our assets into that fund, but that’s obviously an option that we have and was part of our consideration in forming this joint venture. But primarily, the goal is to grow this fund we have together with Heitman.

Jeffrey Busch: This is Jeffrey. I just want to add a little bit about why we did this. We do have an option to buy it at the end. So we could build up a nice core portfolio. And as we grow, this could be added at some point back in a purchase and we’re already managing this asset. And I generally am not that interested in selling our own assets into the fund. I’m looking for outside assets really. You know, we needed to start it off, so we did this. But I’m more interested in outside assets, building a nice portfolio of that, earning the fees on it. So when you come down and let’s say you buy a seven cap, we’re now earning what we need is sort of an eight cap or so because we get fees on this.

Juan Sanabria: Great. And then just curious on the CEO’s transition in. Sorry to hear you’re stepping back from your current role, Jeffrey. But just curious on kind of the background of why stepping down and as part of the search process, is the board contemplating a broader strategic review and kind of what criteria is the board looking for for a new CEO?

Jeffrey Busch: Okay. Couple of reasons. I’m 67 years old and want to do less. I started the company and it’s been a great adventure. And I think we did well in acquiring the asset and doing that. Capital markets is, you know, we can’t help the interest rates, the macro economy is, you know, not as good now, but will improve. My plan is to stay active as chairman of the company. The idea in the new CEO is to bring in somebody who, you know, we’re always interested as a board if there’s a fresh perspective that, you know, something that I’m missing, but we also need the skills in that of having capital markets experience, having a good track record, and, you know, basically understanding, you know, the real estate assets type of thing.

So it’s not to throw out. We feel we’ve been successful, what we bought. Could see that we’re projecting out that, you know, we’ll still have strong, you know, AFFO going forward. Our portfolio is very strong. We improved it last year. But as a, you know, as a new CEO that we’re looking for, we’re looking for somebody, you know, with the experience in, you know, running a company, experience in, you know, capital markets, experience in, you know, the medical and the real estate. So that’s really where we’re coming at.

Juan Sanabria: Was there ever discussion on a broader strategic review as part of the change in the guard?

Jeffrey Busch: Doing broader strategic reviews, and we do this all the time. So I’m looking forward to a new CEO coming in. I will be chairman, and, you know, we will look at this from, you know, is there anything we’re missing? And hopefully, you know, the talent we bring to the table could help us move forward.

Juan Sanabria: Hi, Jeffrey. And then one just last question for me for the two tenants in question, kind of Steward and Prospect. I guess how much rents were in the fourth quarter and could you just remind us again? And you touched a little bit on the prepared remarks. What’s assumed going forward in guidance? Trying to get a sense of the cadence and what might be a temporary dip as a result of some rent payment ceasing or vacancy or what have you.

Robert Kiernan: Okay. Yeah. So on Prospect, you know, we talked, I mean, the largest, you know, single piece is the East Orange piece that we mentioned, and that’s been on a cash basis since the end of 2023. So the other two properties for Prospect are in Vernon, Connecticut, and those properties, you know, the exposure there kind of in I’ll call it the stub, you know, relative to bankruptcy is around $150,000. It runs in that, call it, you know, around $75,000 to $100,000, you know, per month. And again, at this point, you know, we don’t have any visibility into accepting or rejecting the lease per se. But I think in general, there’s a sense that they would accept the Vernon Connecticut leases. These were assets they were looking to sell the operations from, but that transaction did not get done.

But again, it’s not that significant of an exposure. Like I said, it’s, you know, less than 1% of our total ABR at December. On Steward, again, a part of Beaumont exposure, the Steward exposure is, again, is at a couple smaller facilities. And again, those are being, you know, again, being worked through similar to what they were last year.

Juan Sanabria: Great. Thank you.

Operator: Thank you. The next question is coming from Austin Wurschmidt of KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt: Hi. And good morning, everybody. I was wondering if you could share some additional details about the nature of the assets that you seeded the joint venture with Heitman. And I’m sorry if I missed this, but what was the cap rate on that sale under the joint venture?

Alfonzo Leon: Sure. So it was a low seven cap, and it was single-tenant assets. We sold the property we had in High Point, North Carolina, which was the bulk of it, and then we had a Castro property that we had in Texas. Those two properties that we used to seed the transaction.

Austin Wurschmidt: That’s helpful. And then just what are sort of the latest thoughts then since, you know, Jeffrey, you alluded to not wanting to sell additional assets into the joint venture. I guess, what are the latest thoughts on funding the remaining portion of the acquisition? Or have under contract.

Jeffrey Busch: Well, right now, we’re basically looking at either, you know, adjustments. Our stock price seems to be going up, so we could use ATM. You know, it goes back and forth. So ATM’s a possibility. We could sell assets if we like. You know, we do look at our portfolio. We used about the $150 million. This is where I look at. We did $150 million. The first tranches we did at eight something, and the other is nine something. So we’re about 8.5. And we’ve been selling off assets, less assets that we’re less interested in or we don’t think is good for the future in our philosophy of doesn’t fit as well into our portfolio. So we’re trying to improve, and we tremendously did that last year. By selling off the Mishawaka one, and getting the Beaumont released, we actually improved our portfolio tremendously.

So one of the goals is these assets I would put that in the top 10% in quality in our portfolio. So we’re looking to possibly sell some things that are not in the higher percentage in the quality. Just to improve the whole overall quality of our portfolio.

Austin Wurschmidt: And I guess, as you look out at the investment pipeline, are you looking kind of dual track on assets that would both go into the JV, you know, as well as, you know, opportunities that may not fit the core plus quality that the joint venture is looking for? But, you know, these nine cap type opportunities that you’ve sourced, are those still on the table and something you consider doing on balance sheet?

Jeffrey Busch: Absolutely. We also have a little bit of interesting thing in the market that’s happening. Is a bunch of our small ones in communities are being able to be sold because there’s strong markets. And there’s local buyers that’s not nationally, you know, out there and paying pretty good cap rates. So we have been selling some of our properties and we could move it into if we could find qualities around the eight and a half, nine, that step trading one for the other. And making a profit in the process as we did last year.

Alfonzo Leon: Yeah. There’s a lot of owner-user interest in our properties, and we’ve been receiving inbounds, inquiries on properties and offers as well.

Jeffrey Busch: That’s all really.

Austin Wurschmidt: Got it. Is strategy in this sort of down period or slow period where your stock’s not really there and the cost of capital is not there. Is how we can improve the quality of our portfolio. And take a look at assets that we just may not want or not strategic to us in the future.

Jeffrey Busch: Right. Put in strong assets. Because this $100 million portfolio, the two portfolios that we got were very strong assets, high quality.

Austin Wurschmidt: That’s all very helpful. And that’s all for me. And Jeffrey, just wanted to wish you all the best.

Jeffrey Busch: Thank you. I’m still here with the company. I plan to be the chairman for quite a while.

Operator: Thank you. The next question is coming from Gaurav Mehta of Alliance Global Partners. Please go ahead.

Gaurav Mehta: Thank you. Good morning.

Jeffrey Busch: Good morning.

Gaurav Mehta: I just wanted to clarify on your comments around prospects. So for 2025, Prospect revenues are around $150,000 a month. Is that right?

Robert Kiernan: Yeah. About $800,000 of annual. Or 0.8% ABR.

Gaurav Mehta: And so that’s still included in your guidance. Right? You’re not assuming that those reps go away?

Robert Kiernan: Correct.

Gaurav Mehta: Okay. I also wanted to ask you overall for your tenant mix. You know, do you guys maintain a tenant watch list? And are there any other tenants you’re concerned about within your portfolio?

Robert Kiernan: Of course. I mean, we have active management and oversight of all the assets in the portfolio, but there’s nothing material that we would identify or flag, you know, as an item of that nature at this point.

Gaurav Mehta: Okay. I think earlier in the call, you mentioned $12 to $14 million of CapEx expected in 2025. So that’s the recurring CapEx, and it does not include any leasing commissions. Right?

Robert Kiernan: That’s right. And I think with respect to leasing commissions, just to comment on that from if you look back at last year’s leasing commission number, at $5.7 million, I think it’s important to keep in mind that there were two individual leasing commissions. One on the Christus, the new lease in the Beaumont facility as well as the renewal that we did for very long-term leases for Encompass properties. That represented, you know, over 60% of that total, and those were again, one-off type items in last year’s numbers. And as we look at this year, you know, I’d expect that leasing commission number to be, you know, to be a lot lower than that and trend more toward the, you know, $1 to $2 million type range.

Gaurav Mehta: Okay. Thank you. That’s all I had.

Operator: Thank you. The next question is coming from Wesley Golladay of Baird. Please go ahead.

Wesley Golladay: Hey, good morning everyone. Just have a few questions for you. 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?

Robert Kiernan: So it doesn’t include the cash basis. So East Orange, which was on a cash basis, that is, you know, zero from an ABR perspective. The two Vernon properties, you know, are in that ABR number. And then with respect to the Beaumont facility, you know, that since that rent wasn’t applicable at December, that is not in that it’s not in that 12/31 ABR number.

Wesley Golladay: Okay. Do you still have a midyear commencement for that Beaumont tenant? Is that still the game plan of the guidance?

Robert Kiernan: Yes. It’s, you know, at some point in the second quarter.

Wesley Golladay: Okay. And then you talked about the year. Is any of that front half loaded, back half loaded? How should we think about that?

Robert Kiernan: I think from a perspective of expirations, it’s largely ratable. I don’t think of any, you know, the most from a retention perspective, you know, the one thing I would flag, there’s a one lease from that that expires in May that’s about 50,000 square feet. That, you know, we’re again, would look to that as likely could have potentially being in a moving into vacancy. But apart from that, that one individual item, I think, from an occupancy perspective, it and again, very consistent with past years. Relative to, you know, to the trends we’re seeing on our leasing activity. And I did mention with the again, with the prospect facility and the if the East Orange facility, excuse me, you know, is leases rejected, we’ll see new vacancy as it relates to that. That’s currently covered under an overall master lease.

Wesley Golladay: Okay. And then I guess one last one on the acquisitions. When you buy these portfolios, I’m looking at the cap rates, you know, you have some seven, some nine. You had one eleven at a Slippery Rock. Would that be some that you may look to dispose of when, you know, buy the whole portfolio, but maybe get rid of one or two assets, is that how we should think about that?

Alfonzo Leon: So when we priced the portfolio, I mean, we looked at it as a pricing. I mean, there was a lot of context on the seller side that was very specific to that seller that we had to contend with. So the short answer is no. I mean, the allocations do not completely reflect, you know, the value of each building. And so, like, example, that Slippery Rock one is a single tenant. It’s a very nice facility. It’s functioning very well. The hospital system is doing very well in that site. And so, you know, would we consider I mean, it’s a small asset relative to the portfolio. And so when we’re thinking about these positions, I mean, we kind of go through a long list of questions, like, pros and cons as to, like, does it make sense?

And so this one, you know, just based on the characteristics of the property, not one that we would consider selling quickly and the other thing we have to take into consideration also is just all the RE rules and hold periods. So just short answers, not necessarily. No.

Wesley Golladay: Okay. Thank you, everyone.

Operator: Thank you. The next question is coming from Rob Stevenson of Janney Montgomery Scott. Please go ahead.

Rob Stevenson: Good morning, guys. One quick one. On the one quick one on the Heitman JV. Do they have right of first refusal? In other words, you find a great asset and it’s at an eight and a half cap. Does the JV get first right to refusal as to whether or not acquire that before the REIT? Or how does that work?

Alfonzo Leon: No. So whatever we find, I mean, it’s we have the right to pursue on our own, and it’s our option whether we want to pursue with Heitman.

Rob Stevenson: Okay. That’s helpful. And then, Rob, just to add in a little bit, we were really debating doing a JV. But it had to be really separate types of properties. And, basically, we have a group out there that’s seeing all the properties but they’re buying properties that we would not buy. They’re just with our cost of capital.

Rob Stevenson: Okay. And I guess the other question with that would wind up being is that is there an opportunity for you guys to manage other assets, or will it only be management of assets that you put in that you, you know, are a twelve and a half percent owner of?

Alfonzo Leon: I mean, so the question is would we provide management services to third parties?

Rob Stevenson: Well, to Heitman for other assets. That they may wind up having in their other healthcare funds.

Alfonzo Leon: Not been considered. So no. For now, it would be on the assets that we own in the joint venture.

Rob Stevenson: Okay. And then, Bob, the Christus RentRamp that starts in the second quarter, I think you said, is that a full quarter of rent? And when do you get to a full quarter of rent on that lease? And how much ABR is that gonna be once it’s fully implemented?

Robert Kiernan: Okay. So yeah. Working backwards, it’s about $2.9 million, you know, from an overall ABR perspective. And it’s a little bit of a moving target as it relates to when the fully kicks in. And so it could be April. It could be May. You know? It’s somewhere in that zone where it will fully kick in. But there’s a, you know, there’s a chance that we can we could start to do some partial as it evolves over the next, you know, few months, but the full $2.9 million from an annual perspective should be in that, you know, April, May type of time frame.

Rob Stevenson: Okay. And then with the FFO guidance range, what drives you to the higher and lower ends of that range other than acquisition volumes and investment spreads?

Robert Kiernan: You know, we look at that from an overall perspective that the lower end would allow for maybe reduced leverage, you know, maybe a potential, you know, if there’s an unforeseen type of event or change in rates, from a forward curve perspective, you know, things like that. And from an upper end perspective, probably a little bit, you know, leverage staying on the higher side, things of that nature. And, again, maybe just things of that nature that would be on the higher side.

Rob Stevenson: Okay. That’s helpful, guys. Thanks. Appreciate the time this morning.

Operator: Thank you. Ladies and gentlemen, this concludes today’s event. We would like to thank you for your interest and may disconnect your lines or log off the webcast at this time. Enjoy the rest of your day.