On Wednesday, KeyBanc maintained a Sector Weight rating on Global Medical REIT (NYSE:GMRE) shares, following the company's announcement of successfully re-leasing the majority of space previously occupied by Steward Health Care. The new lease agreement with CHRISTUS Health covers most of the $3.1 million annual base rent (ABR) that Steward was responsible for before its bankruptcy in May 2024.
The re-leasing to CHRISTUS Health involves a property in Beaumont, TX, and is expected to generate $2.9 million in ABR, which is slightly more than what Steward contributed. The terms of the lease are considered favorable, with minimal capital investment required for the facility and initial cash rent set higher than Steward's contractual amount. The lease also includes higher, fixed annual escalators.
This new development is seen as reducing the risk to Global Medical REIT's earnings estimate for 2025, as well as the consensus estimate. The company's proactive approach to managing its lease expiration schedule and filling vacant spaces has been noted. Additionally, the company is actively looking for external growth opportunities.
Despite these positive steps, Global Medical REIT is said to be limited in its ability to grow earnings and invest capital due to its current cost of capital. The company is exploring various financing options, such as capital recycling and the issuance of operating partnership (OP) units, which could be accretive to earnings while maintaining leverage within its target range of 40-45%. As of the second quarter of 2024, the company's debt to gross asset value ratio was reported at 43.8%.
In conclusion, KeyBanc has reiterated its Sector Weight rating for Global Medical REIT, reflecting the company's recent lease agreement and ongoing strategic initiatives.
In other recent news, Global Medical REIT Inc . disclosed its second quarter 2024 earnings, reporting a net loss of $3.1 million. This is in contrast to the net income of $11.8 million registered in the same quarter last year. Despite the loss, the company has maintained a high portfolio occupancy rate of 96.2%, with an average lease term of 5.8 years. The net loss was primarily due to the sale of a medical facility. However, the firm remains optimistic about future prospects, including the acquisition market and lease renewals.
The company also entered a purchase agreement for a 15-property outpatient medical real estate portfolio. Operating expenses remained steady, while G&A expenses saw a slight increase due to non-cash LTIP compensation. Despite the bankruptcy of Steward Health Care, which led to some uncertainty regarding future rent payments, the company is optimistic about re-leasing the space. These are among the recent developments for Global Medical REIT Inc.
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