Global Medical REIT Announces Lease with CHRISTUS Health at its Facility in Beaumont, Texas

Rhea-AI Summary

Global Medical REIT Inc. (NYSE: GMRE) has announced a new 15-year, triple-net lease with CHRISTUS Health for its healthcare facility in Beaumont, Texas. This development follows the Chapter 11 bankruptcy filing of the previous tenant, Steward Health Care, on May 6, 2024. Steward has requested its lease be rejected by September 15, 2024, pending court approval.

CHRISTUS plans to use the facility for services including robotic surgery, orthopedic care, and emergency services. GMRE's CEO, Jeffrey M. Busch, expressed excitement about the new partnership, highlighting the facility's quality and marketability. Paul Generale, EVP and Chief Strategy Officer of CHRISTUS, stated that the Beaumont facility will be important in expanding healthcare services in Southeast Texas.

Positive

• Secured a new 15-year, triple-net lease with CHRISTUS Health
• Quick re-leasing of the property after previous tenant's bankruptcy
• Maintained facility occupancy and potential revenue stream
• Demonstrated ability to attract high-quality tenants

Negative

• Previous tenant Steward Health Care filed for Chapter 11 bankruptcy
• Potential gap in lease income between Steward's rejection and CHRISTUS's occupancy
• Uncertainty around the final court order for lease rejection

Insights

Financial Analyst

This lease agreement with CHRISTUS Health is a positive development for Global Medical REIT (GMRE). The 15-year, triple-net lease provides long-term stability and predictable cash flow, which is important for REITs. The quick re-leasing of the Beaumont facility after Steward Health Care's bankruptcy demonstrates GMRE's ability to mitigate risks and maintain portfolio occupancy. This swift transition minimizes potential revenue loss and showcases the marketability of GMRE's assets. The partnership with CHRISTUS, a reputable healthcare provider, could enhance GMRE's tenant quality profile. Investors should view this as a testament to GMRE's management efficiency and the underlying strength of their real estate portfolio in the healthcare sector.

Healthcare Real Estate Expert

The new lease with CHRISTUS Health underscores the resilience of well-located healthcare real estate. The Beaumont facility's ability to attract a quality tenant like CHRISTUS, despite the previous tenant's bankruptcy, highlights its strategic importance in the local healthcare market. The 15-year commitment from CHRISTUS suggests confidence in the facility's long-term viability. The triple-net lease structure is favorable for GMRE, as it typically shifts property expenses to the tenant, potentially improving the REIT's operating margins. CHRISTUS's planned use of the facility for advanced services like robotic surgery indicates potential for high-value medical activities, which could support stable or increasing property values over time. This transaction reinforces the thesis that quality medical real estate can withstand tenant turnover and maintain its value proposition in the healthcare delivery ecosystem.

Legal Expert

The lease transition from Steward Health Care to CHRISTUS Health amid Steward's bankruptcy proceedings demonstrates effective legal maneuvering by GMRE. The pending court order to reject Steward's lease as of September 15, 2024, allows for a smooth transition to the new tenant. This timing suggests GMRE has adeptly navigated the bankruptcy process to minimize disruption. The new triple-net lease with CHRISTUS likely includes robust legal protections for GMRE, learning from the Steward situation. Investors should note that while this outcome is positive, it highlights the importance of tenant financial health in REIT investments. The swift re-leasing may indicate that GMRE had contingency plans in place, showcasing proactive risk management. This event underscores the value of strong legal teams in managing real estate portfolios, especially in sectors vulnerable to tenant financial distress.

CHRISTUS Health Lease is a triple-net lease with a term of 15 years

Former tenant, Steward Health Care, formally requested that its lease be rejected as of September 15, 2024, as part of its Chapter 11 bankruptcy proceedings

BETHESDA, Md.--(BUSINESS WIRE)-- Global Medical REIT Inc. (NYSE: GMRE) (the “Company” or “GMRE”), a net-lease medical real estate investment trust (REIT) that acquires healthcare facilities and leases those facilities to physician groups and regional and national healthcare systems, today announced that it has entered into a new, 15-year, triple-net lease with an affiliate of CHRISTUS Health (“CHRISTUS”) at its healthcare facility in Beaumont, Texas (the “Beaumont Facility”). CHRISTUS will utilize the Beaumont Facility for, among other services, robotic surgery, orthopedic care and emergency services. The Beaumont Facility was previously tenanted by Steward Health Care (“Steward”), which filed for Chapter 11 bankruptcy on May 6, 2024. Steward has formally requested that its lease with us at the Beaumont Facility be rejected by the bankruptcy court as of September 15, 2024, and a final order rejecting such lease is pending with the court.

Jeffrey M. Busch, Chairman, Chief Executive Officer and President stated, “We are excited to begin a new relationship with CHRISTUS at our Beaumont, Texas facility. We believe the facility is a high-quality, marketable facility, and this has been verified by our new, long-term, triple-net lease with CHRISTUS. The situation at our Beaumont facility demonstrates the importance of underwriting both tenant and building. I’m very pleased with how quickly our team was able to re-lease the property to a high-quality tenant, delivering an excellent outcome in this difficult situation.”

Paul Generale, Executive Vice President and Chief Strategy Officer of CHRISTUS stated, “We look forward to our partnership with GMRE and believe the Beaumont facility will be an essential component as we expand quality health care services to the residents of Southeast Texas.”

About CHRISTUS Health

CHRISTUS Health (S&P: A+; Fitch A+) is an international faith-based, not-for-profit health care system based in Irving, Texas, with more than 60 hospitals in Texas, Louisiana, New Mexico, Chile, Colombia and Mexico. CHRISTUS Health is made up of 51,000 Associates providing compassionate and individualized care at more than 600 centers, including community hospitals, clinics, long-term care facilities and health ministries.

About the Lease

The lease is a triple-net lease that will cover the entire Beaumont Facility, which is a two-story medical facility consisting of 84,674 leasable square feet, located at 6025 Metropolitan Drive, Beaumont, Texas 77706. The lease term is 15 years with three, seven-year renewal options. Annual base rent for the first lease year equals $2.9 million with 2.5% annual rent increases thereafter. Rent payments will commence three months after the delivery date of the facility, and we expect to deliver the facility to CHRISTUS during the fourth quarter of 2024.

FORWARD-LOOKING STATEMENTS

Certain statements contained herein may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and it is the Company’s intent that any such statements be protected by the safe harbor created thereby. These forward-looking statements are identified by their use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "plan," "predict," "project," "will," "continue" and other similar terms and phrases, including references to assumptions and forecasts of future results. Except for historical information, the statements set forth herein including, but not limited to, any statements regarding leases, lease rejection and lease rejection timing, lease commencement dates, tenants and other lease terms are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although the Company believes that the expectations, estimates and assumptions reflected in its forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of the Company’s forward-looking statements. Additional information concerning us and our business, including additional factors that could materially and adversely affect our financial results, include, without limitation, the risks described under Part I, Item 1A - Risk Factors, in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, and in our other filings with the SEC. You are cautioned not to place undue reliance on forward-looking statements. The Company does not intend, and undertakes no obligation, to update any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240917036382/en/

Investor Relations:

Stephen Swett

stephen.swett@icrinc.com

203.682.8377

Source: Global Medical REIT Inc.

FAQ

What is the new lease agreement for GMRE's Beaumont, Texas facility?

GMRE has entered into a new 15-year, triple-net lease with CHRISTUS Health for its healthcare facility in Beaumont, Texas.

When did Steward Health Care file for bankruptcy affecting GMRE's Beaumont facility?

Steward Health Care filed for Chapter 11 bankruptcy on May 6, 2024, impacting its lease at GMRE's Beaumont facility.

What services will CHRISTUS Health provide at GMRE's Beaumont facility?

CHRISTUS Health plans to utilize the Beaumont facility for services including robotic surgery, orthopedic care, and emergency services.

When is Steward Health Care requesting its lease with GMRE be rejected?

Steward Health Care has formally requested that its lease be rejected by the bankruptcy court as of September 15, 2024.