Greetings. Welcome to Global Medical REIT’s fourth quarter and year-end 2019 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 should require operator assistance during the conference, please press star, zero on your telephone keypad.

Please note this conference is being recorded. I will now turn the conference over to Evelyn Infurna with Investor Relations. Thank you, you may begin..

Thank you Operator. Good morning everyone and welcome to the Global Medical REIT’s fourth quarter and year-end earnings conference call. 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 fact 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 these statements 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 may be affected by a variety of risks and factors that are beyond the company’s control, including without limitation those contained in the company’s 10-K for the year ended December 31, 2019, which we expect to file in the next few days, and its other Securities and Exchange Commission 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 and adjusted funds from operations.

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 filings with the Securities and Exchange Commission. 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 Jeff Busch, Chief Executive Officer of Global Medical REIT..

Thank you Evelyn, and welcome to our fourth quarter 2019 conference call. Joining me today are Bob Kiernan, our Chief Financial Officer, and Alfonzo Leon, our Chief Investment Officer. 2019 was a remarkable year for GMRE.

We invested over $250 million in 18 medical properties, supported our growth with two successful equity offerings, and initiated the internalization review process.

Throughout 2019, we stuck to our core strategy of investing in primarily off-campus medical facilities, including medical office, specialty hospital, inpatient rehabilitation facilities, and ambulatory surgery centers. Importantly, the weighted average cap rate on our 2019 acquisitions was 7.5%.

GMRE’s strategy is at the nexus of important changes in the way healthcare is delivered in the United States. Increasingly, health insurance providers are incentivizing patients and physicians to seek care in off-campus specialized facilities like those owned by GMRE.

Our focus is on secondary markets, which helps to underpin our favorable rent coverage ratio.

For example, while procedures and reimbursements have been priced nationally by insurance providers, rental rates are dictated by the local market, so comparable physician groups may generate similar top lines nationally but realize very different bottom lines depending on the market they operate in.

To ensure that we are making smart decisions regarding operators, our acquisition team performs extensive due diligence to help mitigate risk of our tenants’ credit. We believe our portfolio of healthcare facilities is well diversified by asset type, geography and tenant.

Our ability to combine healthcare knowledge and financial discipline with real estate expertise has helped create a portfolio with durable recurring cash flow and strong coverage ratios. We have a seasoned team both in our management and on our board that brings both real estate expertise and healthcare expertise to the table.

This helps GMRE navigate nuances, regulatory implications, and structural factors that provide us with valuable insights in pursuing accretive transactions. The healthcare properties we acquire are primarily leased to medical groups with strong profitability and credit profiles on a long term triple or absolute net basis.

Overall, we believe our portfolio can continue to provide a stable stream of income and drive strong results for investors. We are pleased with our accomplishments in 2019 and look forward to even more success in 2020. Before turning the call over to Bob, I would like to take a moment to discuss internalization.

On December 17, the company announced the board had formed a special committee of independent directors to evaluate a potential management internalization transaction. Given that internalization is an ongoing process, we are limited as to what we can share at this time.

With that, I turn the call over to Bob Kiernan, our CFO, who will discuss our fourth quarter financial results..

Thank you Jeff. Last night after the market closed, GMRE reported financial results for the fourth quarter and year ended December 31, 2019 via our press release and simultaneous posting of our supplemental earnings package through our website.

Total revenue for the fourth quarter increased 42.3% year-over-year to $20.5 million due to the continued growth of our investment portfolio through our accretive acquisition strategy, as well as same store portfolio contractual rental increases. For the 12 months ended December 31, 2019, total revenue grew 33% to $70.7 million.

Our same store portfolio contractual rent increased $3.3 million during the fourth quarter of 2019 or 2.2% compared to the fourth quarter of 2018. Total expenses for the fourth quarter of 2019 increased 40.9% to $17.7 million year-over-year. For 2019, total expenses were $61.1 million, up 32% as compared to 2018.

Depreciation and amortization expenses as well as interest expense remain large components of our total expenses for each period as we continue to actively acquire properties. G&A expense for the fourth quarter of 2019 was $1.6 million, up 17.5% compared to $1.4 million in the year ago period.

This quarterly increase was primarily due to an increase in non-cash LTIP compensation expense. LTIP compensation expense was $843,000 for the three months ended December 31, 2019 compared to $693,000 for the same period in 2018.

For the year ended December 31, 2019, G&A was $6.5 million, up 18% compared to $5.5 million for the year ended December 31, 2018. In this number, our non-cash LTIP compensation expense increased to $3.3 million for 2019 from $2.7 million in 2018, and our cash G&A expenses increased to $3.2 million from $2.8 million in 2018.

The increase in our cash G&A expenses was primarily a function of our increased size, and for 2020 we expect the increase to be approximately $3.4 million. Depreciation and interest expense continue to be our two largest expense line items in the fourth quarter, driven by our acquisition activity.

Depreciation expense was $5.6 million in the fourth quarter of 2019 compared to $3.7 million in the prior year quarter. Interest expense was approximately $4.8 million in the quarter, up 11% from the year ago period.

For the year ended December 31, 2019, depreciation expense was $19.1 million compared to $13.6 million in the prior year, and interest expense was $17.5 million, up 17% from the same period last year.

These increases are a direct result of our acquisition activity over the past year, and with respect to interest expense higher average borrowings used to finance our acquisitions. Our average borrowing cost for the fourth quarter of 2019 was 3.87% compared to 4.21% in the prior quarter, and 4.48% in the fourth quarter of 2018.

The sequential quarterly decrease in our borrowing cost was largely driven by the impact of the $130 million of interest rate swaps that we entered into in October 2019. Net income attributable to common stockholders for the fourth quarter of 2019 was $1.2 million compared to net income of $7 million in the fourth quarter of 2018.

The reason for the decrease was due to a $7.7 million gain on the sale of an investment property in the fourth quarter of 2018, partially offset by the benefits of accretive acquisition activity in 2019. For the year, our net income was $3.4 million versus $7.7 million in the prior year.

Our FFO and AFFO for the fourth quarter for 2019 were both $0.21 per share and unit, up a penny compared to the prior year quarter. For the full year 2019, our FFO and AFFO per share and unit were each $0.75, down one penny respectively from the same period a year ago.

The year-over-year decline in FFO and AFFO per share and unit are primarily due to an increase in our share count associated with our equity raises in March and December and related reductions in our average leverage.

Moving onto the balance sheet, as of December 31, 2019, our gross investment in real estate was just over $905 million, an increase of $258 million or 40% from year-end 2018.

Turning to the liability side of our balance sheet, our total debt was $386 million as of the end of the year, up from $315 million at the end of 2018, reflecting the growth of our portfolio. We finished the year with total liquidity, including cash and availability on our revolver, of $151.4 million.

In December, we issued 6.9 million shares of common stock at $13 per share, generating gross proceeds of $89.7 million. In addition, during the fourth quarter we raised $7.6 million on our ATM at a weighted average price of $13.04 per share.

Looking ahead to the first quarter, we expect a decrease in our FFO and AFFO on a per-share basis as a result of lower leverage as we pay down our revolver with proceeds from our December equity offering and incrementally higher management fees based on our increased equity base.

Beyond the first quarter and for the full year 2020, our results will be impacted by various factors, including the timing of our acquisition closings, equity capital issuances, and a potential internalization transaction.

While there are uncertainties around the impact of these items in any quarter, we expect that we will cover our quarterly dividend on an AFFO basis in these periods and for the full year. With that, I will now turn the call over to Alfonzo, who will review the investment landscape and our investment activity..

on November 15, we acquired a 12,000 square foot MOB and an 8,000 square foot clinic in Jacksonville, Florida for $8.7 million. The MOB and clinic are 100% leased to Southeast Orthopedics, a group with 50-plus providers. We did a 15-year sale-leaseback with strong rent coverage. The 12,000 square foot MOB is located directly adjacent to St.

Vincent Medical Center Riverside, which is part of Ascension. On December 17, we acquired a 17,000 square foot medical office building and surgery center in Greenwood, Indiana for $5.8 million. The MOB and ASC are 100% leased to Indiana Eye Clinic for 13-plus years with strong rent coverage.

Indiana Eye has been a leading group in Greenwood for 30 years. On February 13, we acquired a 98,000 square foot MOB in High Point, North Carolina for $24.75 million. The MOB contains a multi-specialty clinic, neurology, urgent care, and diagnostics. The MOB is 100% leased to Cornerstone Healthcare, which is fully owned by Wake Forest Baptist Health.

Wake Forest and Atrium Health announced in November 2019 that they are moving forward with a strategic partnership. Cornerstone is a leading ACO that was acquired by Wake Forest in May 2015. On February 27, we acquired a 115,000 square foot MOB in Clinton, Iowa for $11.35 million.

The MOB contains a multi-specialty clinic, surgery centre, nephrology, gastro and diagnostic. The MOB is 100% leased to Mercy Medical Center, a local subsidiary of Trinity Health, which is a large health system with annual operating revenues of $18.3 billion and assets of $26.2 billion.

Mercy acquired Medical Associates, the largest multi-specialty group with 40-plus providers in Clinton in June 2019. Yesterday we acquired a 34,000 square foot MOB in West Allis, Wisconsin for $9 million.

The multi-specialty facility includes 15 exam rooms, procedure rooms, imaging services, a full service lab, rehab services, and two GI and pain surgical suites. The facility is 100% leased to Columbia St. Mary’s Hospital, which is a wholly owned subsidiary of Ascension Health Network.

Ascension Health is the largest not-for-profit health system in the United States. In addition, as of yesterday we had entered into contracts to acquire four properties for approximately $57.3 million. We are currently in the due diligence process for the properties under contract.

If we identify problems with one or more of these properties or the operator of the properties during our due diligence review, we may not close the transaction on a timely basis or at all. We had an exceptional year with respect to finding high quality product and volume.

As we look to 2020, it is important to remember that while we have a strong pipeline of high quality assets, the amount of assets we ultimately close on will vary year to year. Our top priority is to focus on acquiring assets that are accretive, of high quality, and meet out strict underwriting standards.

If we cannot find assets that meet our criteria, we will not pursue transactions just to grow our asset base. With that said, we target full year acquisitions in a range of $180 million to $220 million, which is at the midpoint, similar to the amount we acquired in 2018.

We are confident in our strategy and believe that we have built and continue to build a portfolio that will provide durable cash flows for our shareholders. With that, we will be happy to take your questions..

[Operator instructions] Our first question is from Chad Vanacore from Stifel. Please proceed..

Hey, good morning all..

Good morning..

Could you talk to us a little bit about the process, the timeline of internalization - you know, what discussions you’re having at the board level, and more importantly what are some of the procedural hurdles you might need to overcome?.

Hi Chad, this is Bob. I can address this really only at a high level at this point.

Other than to say that the special committee has been formed and it’s going through its evaluation, we can’t really comment on the process because it is in process, so there is--really as news is disclosable from that process, we will do that, but at this time we can’t really comment on the process..

All right, you can’t give us any kind of landmarks or hurdles or benchmarks that you have to hit?.

No. I mean, I think it’s in the committee’s hands from a process perspective versus the company or management team..

All right, how about something that’s more formulaic? Can you remind us what the management termination fee might be?.

Sure. In terms of the numbers, it’s formulaic in the agreement that the average of the trailing eight quarters, an annual fee at three times, and depending on the actual timing in 2020, it looks like it would be between $18.5 million and $20 million from an overall fee perspective.

I think it’s also noteworthy that we’ll also have legal--the company will, and other professional fees associated with the internalization. We don’t have full visibility into what those numbers will be at this point, but I’m estimating around $1 million, plus or minus on the type of transaction costs that we may incur through this process..

Okay. Then Bob, I think last quarter you had mentioned that you were potentially [indiscernible] pursuing some debt financing options.

Can you give any detail about where you are there?.

Yes, so we’re open to pursuing that. We haven’t really--there’s nothing new to report, Chad, on changing our debt structure at this point. It’s still a work in process on that, so nothing new to report.

We continue to evaluate opportunities to diversify away from the credit facility, and also one of the things we’ll be looking at during the year is likely expansion on the credit facility. .

Okay. Then you just mentioned in the press release about increasingly competitive acquisition environment.

Just wonder, is that a general statement about the broader market or are you seeing more activity in your secondary markets and within the size range that you’re looking at?.

Yes, so that comment was general and specific, so it was both. But it changes a lot. I mean, it goes up and down. Coming into the year, my sense was that it was getting more competitive and there was--you know, I got the sense that within the niche that we’re targeting, there was more competition.

Deals that I thought we could get were getting priced beyond our numbers, where we wanted to price them. But in the last couple weeks, there’s definitely been a change in that sentiment, and I’m actually thinking over the next quarter or two, I’m expecting actually softening.

So it moves around a bit, coming into the year my sense of it, and it’s hard to peg a number and measure it. This is a very subjective metric. Coming in, it was getting competitive, but as I said today, I’m thinking people are probably taking their foot off the gas..

All right, thanks..

Our next question is from Drew Babin with Robert W. Baird & Company. Please proceed..

Hey, good morning all..

Good morning Drew..

A question on the management fee. I think, Bob, you mentioned that just based on your increasing market capital, there’d be higher management fees, assuming if no internalization occurs immediately in the first quarter.

Can you quantify what that jump is in the management fee, just based on the current price of the stock and the increase in market cap?.

Sure. It’s right around $2 million from a quarterly perspective, looking at Q1..

Okay, and then secondly, and another balance sheet question while we’re on it, I know that there’s a matrix for the spread on your credit facility, that with increases in leverage that the spread widens out a little bit.

As you re-lever after the equity issuance, might we see the spread widen out a little bit as a result of that re-leveraging? How do you quantify the trade-off between the two factors there?.

We ended the year in the 40 to 45% range on our pricing grid in the credit facility, and yes, I expect that as we end Q1 we’ll move into the next level on the pricing grid, in the 45 to 50.

We’ll likely be in the low end of that pricing grid, and it does go into our decision making in terms of managing where we are above and below that pricing grid, just to be as efficient as we can from a balance sheet and debt management perspective..

Can you remind us what the spread is in both of the two ranges on the grid that you mentioned, and how much that widens out?.

Yes, it’s a 25 basis point change between the two..

Okay. Lastly for me, Alfonzo, I just wanted to touch on the White Rock acute care hospital. The disclosed coverage ratio on that was obviously pretty low for a hospital, but I know you’ve talked in the past about the transitional elements of this property as it’s managed by Pipeline.

Can you just kind of give an update on the status of operations and the near, intermediate term expected trajectory there?.

Yes, you touched on it exactly. If you recall, this was a property that the JV between [indiscernible] and Pipeline in the first quarter of 2018.

When we did our underwriting, we not just underwrote and got comfortable with Pipeline, but we also underwrote, and this is more importantly, underwrote the hospital, the ER business, the local area, the fundamentals, which is why we felt very comfortable that this was a long term, good investment.

We knew going in that that first year was going to be a transition year, which is why we had them prepay rent for a year, which is also why it was impossible to calculate rent coverage because they prepaid all of it, and it was a transition year. We decided to start reporting that number.

They’re still working on--I would characterize it as they’ve transitioned, they’ve stabilized, and now they’re focused on revenue opportunities.

They’ve worked through on the expense side pretty well, and so right now they’re focusing more on revenue growth opportunities, growing their EBITDA, so I would expect that rent coverage to grow from this point forward. .

Great, appreciate the disclosure there. That’s all for me, thanks..

Our next question is from Barry Oxford with DA Davidson. Please proceed..

Great, thanks guys. I guess this is for Alfonzo.

Alfonzo, not that the cap rate ticked down a little bit in the fourth quarter, just a little bit, nothing alarming clearly, but was that a function of the assets or was that a function of the marketplace getting a little more competitive?.

I would say both. It’s hard to control where opportunities are available in the market. I mean, we’re always scanning and evaluating and discussing with everyone that we can talk to, to try to find deals, and we don’t really control what kind of deals we’re going to have a chance to pursue.

I think if you look across the quarters, it bumps up and down, and it’s hard to really forecast trends based on any one quarter, is the way I’d put it. Yes, I’d leave it there..

Okay.

Then on the off-campus, are you finding that’s a better risk-adjusted return, or are you making more of a conscious decision that, look, this is the way medical is going to be serviced in the future and we need to be there?.

Many things to answer that question. I would start by saying it depends on what campus. Some campuses are fortresses and they’re safe bets that they are going to continue being centers of health for generations, and in every major city there is one of those.

But when it’s that obvious of a place that is going to be around for 100 years or who knows how long, the pricing for that kind of asset is very, very expensive and you’re going to get everyone to bid and you’re going to squeeze every last basis point of enjoyment out of that investment.

When you start getting into--and on the other side of that, you know, you’ve got some campuses that are obviously struggling in areas that are questionable, and whether or not that’s a good investment, you’re really betting on the hospital.

Even though you’re buying an MOB on that campus, at the end of the day what you really have to do is underwrite the hospital, and I would say the investment community has gotten pretty savvy and more often than not, those actually get priced with 100, 200 basis points above where the core on-campus MOBs trade at.

Off-campus, it requires a lot more thought about why the property is where it is, how convenient it is, what the tenancy is, what the use is, what else is built around, and you can’t just make a blanket statement about whether or not off-campus is better or not. I mean, it really, truly is case specific.

You really have to contemplate why and you have to go through a list of questions, and you have to really make an assessment whether it really makes sense from a healthcare delivery perspective. Within the off-campus inventory, there’s a pretty wide spectrum of types of facilities and each one of them has unique inherent pros and cons.

So long way of saying that it depends..

Right. No, I appreciate all that color.

Lastly on the four properties that you have under contract, if they were to close, would we see them closing in March-April, or would it be more like an April-May type of time frame?.

March-April, roughly, yes. .

Okay. It’s a little bit of a big number, so timing is going to matter on that..

Yes. I’d say March-April, and we might have one or two that slips into May. But I would say March-April..

Right, thanks so much..

Our next question is from Bryan Maher with B. Riley FBR. Please proceed..

Good morning guys.

A question I have, and you may or may not have seen our note this morning on community healthcare, but how is it, and maybe this is best for Alfonzo, and I know, Jeff, you talked about this in your prepared comments early on, the difference in assets and locations and what have you, and maybe you can delve into that a little bit deeper.

But how is it--you know, [indiscernible] and buying assets yielding 9 to 11 times--9 to 11 cap rates, and you guys are 7 or 8? I’m not really saying one is better than the other, it just seems when I look at those portfolios, the REITs, other than one’s internal and one’s external and maybe that explains some of the disparity in the multiples, don’t seem all that different except for you assets seem to be a little bit bigger, a little bit more pricey.

But I’m trying to wrap my hands around the disparity in the two portfolios and what people are acquiring, and I know you might not want to talk too much about a competitor’s portfolio and what they’re doing, but can you maybe talk to the different types of assets, and Alfonzo, are you seeing 9 and 11 cap rate properties that you’re just passing on?.

You know, a lot of the stuff that we see that are trading at 9 and 11 don’t fit our portfolio. Having said that, we have one that we bought that is 11 cap, but there’s a story behind that and it starts with it took us 13 months to complete it, and it was a system that was buying the group.

When we were negotiating with them, when we got into the deal they were still in the process of getting acquired, it wasn’t sure that they were going to get acquired, then they got acquired and it took us a long time to close and negotiate.

But that was a situation where we came into this understanding that in essence we’re getting pricing arbitrage because of Stark laws, and the hospital is limited in terms of what they can do and the physicians are in a position where they’re getting negotiating getting acquired, and so it was an opportunity for us to hang around the hoop, and very strategy, patience and very conscientious time management, understanding that this was going to take a long time resulted in a great yield and low--the low replacement cost investment, nice building, great looking surgery center, but it’s very, very selective.

I’ll pause there and I’ll let Jeff also chime in..

Yes, I just want to distinguish between where community health is and where we are. We’re both in the same buying medical real estate. They’re buying the higher caps with higher risk. We’re buying less risk. That’s essentially what the issue is. We tend to pass over those type of deals, but they can work out on a risk portfolio.

We believe that we’re trying to buy low risk but be in secondary markets, and because our medical expertise, our discipline in buying that we turn down many, many deals, will give us that extra risk-adjusted return and we’ll get a benefit on risk adjusted return, and they have a strategy that’s different from ours in higher return, and I don’t know of their risk level.

But essentially, we don’t look at that level of risk that they do..

Yes, it just seems pretty stark when you hear that, and they’re trading at north of 24 times this year’s EBITDA and you guys are trading at just under 17 times.

It seems like a huge gap for one company that’s running a 90% occupancy and one that’s trading nearly 100% occupancy, so trying to wrap our heads around that here, but thank you for the insights..

Our next question is from Rob Stevenson with Janney Montgomery Scott. Please proceed..

Good morning.

Bob, I know that there’s limits to what you can say, but whatever day that the board makes a decision, assuming that they decide to internalize, what is the time frame from there for you guys in terms of completing the internalization? How long does it--you know, mechanically, given all the legal and everything else, is that a three month, is that a six month, is that a couple of weeks? Can you help us understand what time it would take after the board would render a decision, how long that would take?.

Rob, I really don’t know how long it would take. There’s just not a lot of visibility into what the timing of our actual changeover would occur as that process evolves. I think it will be as efficient as it can.

I know the committee is actively working through the process and they’re interested in getting this done as quickly and as efficiently as they can so that the process runs smoothly and we end up with a good transaction for shareholders that gets done in an efficient way. I think that’s really the most I can say..

Okay. So you’ve completed roughly $45 million of acquisitions thus far in 2020, you’ve got another close to $70 million under contract, as Alfonzo said, likely close in March and April.

Once you’ve done that, how much dry powder do you have to complete acquisitions beyond that without raising money, either under the ATM or in a market transaction?.

Sure, so we ended the year with, call it $150 million of capacity on the revolver, so as that winds down, that would limit our sense of finite available capital.

So just work backwards from the $150 million, and then again we’re--as I mentioned earlier, we are looking at alternatives, debt opportunities as well as opportunities within the credit facility to add capacity as the year progresses, and also have access to equity capital. I think it will be a combination of that as the year progresses..

Okay, and then last one from me, Alfonzo, anything abnormal or different about the properties under contract in terms of cap rate or asset type versus what you guys have been doing over the last few quarters?.

Well, no. In terms of profile of property, quality of building, tenant profile, healthcare underwriting - no, very in line. With the one deal in Clinton, Iowa, being a function of hanging around the hoop and realizing an opportunity of working with the physicians and the health system to get an above-standard yield, otherwise no..

Okay.

Anything on your asset type that you guys don’t currently own, that you would own, you know, right deal, right price?.

We’re always in discussions with people with different asset types. Just something that comes top of mind is--what do you call them, micro hospitals? We have been exploring, thus far have not found one that makes sense to me. I think within the industry, there’s a first gen, second gen, and usually first and second gens don’t really make sense.

You’ve got to wait for third gen before people figure out the model, and I think we’re probably getting there. The other one is--you know, behavioral is one that I feel like, whether I like it or not, people have talked to me about behavioral, and more often than not I don’t like what I’m hearing.

I feel like the space, especially the addictions side of the space is one that I don’t feel comfortable in and doesn’t make sense to me, doesn’t pass the--you know, it just doesn’t pass the test in my opinion.

But we are beginning to have discussions, but within the behavioral space, it’s a wide ecosystem and pretty--actually very, very diverse, different types of niches within behavioral which makes it hard to compare apples to apples. But there are some aspects of behavioral that do seem pretty interesting.

Geriatric, pediatric, seem like they make a lot more sense. But today, we really haven’t found a deal that we like, that we’re comfortable with, that we feel are going to be good investments, that are not going to give us headaches during our ownership.

Urgent care centers, I felt like all of a sudden everybody wanted to talk to me about urgent care centers, and that in and of itself was a sign that I probably shouldn’t invest in an urgent care center because the first thing that came to mind was that there was going to be over-supply and it reminded me of freestanding ERs a couple years ago.

I felt like everybody wanted to talk to me about freestanding ERs, and that again was a sign to me that there’s probably over-supply and people are trying to dump, and I stayed away from it. You know, there’s a growing inventory in types of facilities that people can invest in. We’re always exploring and we are opportunistic.

We pride ourselves with being so, so we’re always exploring and we have an open mind, but thus far I wouldn’t say that we’re going to pursue anything in any magnitude at this point..

This is Jeff. I just want to say one area we’re going to stay out of is SNETs [ph]. We see some danger in that right now in the market, so we will be staying out of that. We never went into it and we’re going to stay out of it..

How much of your assets, if any, are in essentially shopping centers and things like that, because it seems like that’s where a lot of those urgent care and veterinary clinics and things of that nature, which don’t have a lot of location premium to them, where it could go into the strip mall down the street standpoint, how much of that stuff do you have, if any?.

You know, the first thing that comes to mind when I think of some of those really retail locations, the parcels are complicated.

Sometimes you’re dealing with facilities that used to be Pizza Huts that are now converted into something else, or abandoned car--you know? The facility itself sometimes is pretty problematic, but once in a while you do come across--there’s a lot of developers in the States that are actually very good at what they do, and they help--they find good lots within--adjacent to malls or within the mall that makes sense and it’s newer facilities.

I have had some discussions with folks that develop relationships with health systems to build urgent care centers. I mean, that makes sense to me, and they’re building very high quality stuff.

What makes even more sense to me, for example, is developers that have formed relationships with insurance companies building urgent care centers, and that makes a ton of sense to me.

So you know, it just really depends, but I think what you were alluding to is more the--especially when you said no premium, no location premium, it’s kind of a random healthcare facility that’s wedged into a mall or a retail strip, and that kind of stuff we don’t like. .

Okay. All right, thanks guys..

As a reminder, it is star, one on your telephone keypad if you would like to ask a question. Our next question is from Gaurav Mehta with National Securities. Please proceed..

Thanks, good morning. Alfonzo, in your prepared remarks, I think you made a comment that you were expecting some softening in the transaction market for the next one or two quarters.

Can you expand upon that a little bit, what you’re seeing in the transaction market in light of economic uncertainty around coronavirus?.

Yes, that’s basically it. It’s too soon to tell, but if--and it really just depends on what measures are taken at the local and state levels to control the spread. I’m already hearing some discussions about conferences that might or might not get cancelled. That’s going to have an impact.

I’m already hearing that on some deals, lenders are hitting the pause button, so that to me signals that if you’re looking for third party financing, it might be challenging. .

And that creates more opportunity for you if you have access to capital and others don’t?.

That’s the way I see it..

All right, that’s all for me. Thank you..

We have reached the end of our question and answer session. I would like to turn the call back over to Jeff Busch for closing remarks..

I’d like to thank everybody for joining us and appreciate your time. Thank you..

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation..