Healthcare providers need specialized facilities to serve their patients. While these buildings are crucial to their operations, it isn't essential that healthcare systems and physician groups own this real estate. They can better use that capital on expanding their service offerings.
Because of that, they're increasingly selling their purpose-built facilities to third parties like real estate investment trusts (REITs). One REIT focused on acquiring and owning these specialized healthcare facilities is Global Medical REIT (NYSE: GMRE). Here's a closer look at the company.
Global Medical REIT profile
As the name suggests, Global Medical REIT is a healthcare REIT, though it currently focuses on properties in the U.S. As of the middle of 2021, the REIT owned 157 properties with more than 4 million square feet of leasable space. These properties included:
- Medical office buildings: Medical office buildings, including those with ambulatory surgery centers, imaging, and emergency rooms, comprise 64% of its annualized base rent (ABR).
- Inpatient rehab facilities: These properties supply 19.2% of its ABR.
- Surgical hospitals: These facilities provide 6.8% of its ABR.
- Other: Other buildings such as offices, acute hospitals, long-term acute care hospitals, behavioral hospitals, and freestanding emergency departments supply the final 10% of its ABR.
The REIT net leases these facilities to 126 tenants, primarily national and regional healthcare providers. Its top 10 tenants are:
- Encompass Health: 7.3% of ABR.
- Kindred Health: 6.8% of ABR.
- Marietta Memorial Health System: 5.7% of ABR.
- Oklahoma Center for Orthopedic & Multi-Specialty Surgery (OCOM): 3.8% of ABR.
- Trinity Healthy: 3.4% of ABR.
- TeamHealth: 3.1% of ABR.
- Carrus Hospital: 2.8% of ABR.
- Steward Health: 2.7% of ABR.
- Wake Forest Baptist Health: 2.6% of ABR.
- Pipeline Health: 2.5% of ABR.
The company's top tenants include a mix of publicly traded, privately held, and not-for-profit healthcare system affiliations, surgical operator partnerships, and dominant local physician groups.
Global Medical owns properties across most states. However, it has the highest concentration in Texas (20.2% of its ABR); Florida (10.3% of its ABR); Ohio (6.9% of its ABR); Arizona (6.9% of its ABR); and Pennsylvania (6.3% of its ABR). The company aims to own facilities in regions best positioned to take advantage of aging demographics and the decentralization of healthcare as patients increasingly prefer convenient locations.
Global Medical REIT news
While the pandemic made 2020 a challenging year for the healthcare sector, it didn't have much impact on Global Medical's financial results. Nearly all its tenants met their rent obligations. That allowed the REIT to focus on other things, including internalizing its management to reduce costs, extending four important leases, and growing its portfolio. The company completed 18 acquisitions for $226 million, which helped increase the value of its portfolio to over $1 billion. These new additions enabled Global Medical to grow its AFFO (adjusted funds from operations) per share from $0.75 in 2019 to $0.88 in 2020.
The REIT has continued that success in 2021. Global Medical's revenue had increased 27.2% year over year over the first six months, driven by its acquisition activity. That helped grow its AFFO per share from $0.41 in the first six months of 2020 to $0.47 over that same period in 2021.
Meanwhile, the company continued its acquisition activity in 2021. It completed 11 acquisitions through the end of June for a total purchase price of $113.8 million. It closed two more deals for $26.2 million shortly after the second quarter ended. Finally, it had three more acquisitions under contract when it reported its second-quarter results worth $23.2 million.
Global Medical REIT stock price
Global Medical REIT has done an excellent job creating value for its investors over the years: