Global Medical REIT Amends Its Credit Facility
- Oct 07, 2019
Global Medical REIT Inc. of Bethesda, Md., has amended its previous credit facility to exercise the remaining $75 million accordion feature, which increased total capacity to $500 million, and create a new $150 million accordion feature. Also, it reallocated $50 million from the credit facility’s revolver component to its term loan component and added Wells Fargo Bank as a lender.
In addition, it also revised the restricted payments financial covenant by deferring implementation of the 95 percent adjusted funds from operations payout limitation from this quarter to the fourth quarter of 2020 and provided a mechanism for determining an alternative benchmark rate to LIBOR. On execution of this amendment, the credit facility consisted of a $200 million capacity revolver, a $300 million term loan and a $150 million accordion.
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Separately, GMRE entered into interest rate swaps, with an aggregate notional amount of $130 million and each with a maturity date of Aug. 7, 2024, that effectively fixed the LIBOR component on the term loan balance on a weighted-average basis at 1.21 percent. Combined with previous interest rate swaps, these effectively fixed the LIBOR component of the term loan balance on a weighted-average basis at 2.17 percent.
In a prepared statement, Jeffrey Busch, GMRE’s CEO, chairman & president, said the additional capacity helps the company close its acquisitions on a timely basis.
GMRE has indeed been a steady player in terms of health-care acquisitions, with several major deals over the last two year. In 2017, it acquired two specialty hospitals in northeastern Texas for $26 million and a rehabilitation hospital in Austin, Texas, for $41 million. In 2018, it purchased a $64 million medical office portfolio in southeastern Ohio, and this year, it bought four inpatient rehabilitation facilities for a total of $94 million. The properties are in Las Vegas, Oklahoma City, Surprise, Ariz., and Mishawaka, Ind.
The balance between inpatient and outpatient care has been shifting toward the latter for at least 20 years, a 2019 health-care real estate report from JLL notes. The research references “new real estate strategies that include moving to outpatient and urgent care centers or smaller-scale micro-hospitals and health-system sponsored wellness centers.”
Along the way, medical office building fundamentals have only strengthened. MOB rents hit a record high in the first quarter, as occupancy has stayed closely around 92 percent for several years, according to the report.
As other CRE asset classes continue to offer low yields, the JLL report states, “Medical office has consistently offered a 2 percent spread or greater in cap rate over similar benchmarks for the last five years, making it a desirable prospect given its consistent performance over the long term.”