Chiron Real Estate said it is advancing the potential sale of its legacy outpatient medical portfolio as it shifts toward seniors housing, though executives cautioned that higher Treasury yields have weakened pricing and declined to provide a timetable for a deal.
On the company’s third-quarter earnings call on November 5, CEO Mark Decker Jr. said Chiron has closed more than $430 million of proprietary seniors housing investments this year. He identified the disposition of the outpatient medical portfolio as the company’s highest priority and said a broker has been engaged.
“We continue to advance that process and are encouraged by the level of interest we’ve received,” Decker said. He declined to discuss potential counterparties, structure, valuation or timing while the process remains ongoing.
Medical property sale and capital plans
Asked about interest-rate volatility, Decker said pricing for medical properties, and likely Chiron’s portfolio specifically, had eroded by approximately 25 to 50 basis points following the move in Treasury yields. He said he hoped to have a meaningful update by the company’s next earnings call but could not predict when a transaction might be completed.
Decker also acknowledged that a large sale followed by reinvestment could temporarily reduce earnings. While selling individual properties to separate buyers might maximize sale proceeds, he said the company sees value in moving more quickly.
“We’re biased towards that,” he said, adding that he did not expect the potential difference in outcomes to be 10%, but rather a couple hundred basis points.
Decker described Chiron’s current capacity for additional acquisitions as “pretty modest,” while referring to roughly $1.25 billion of outpatient medical assets as potential capital for the transition. He said the company has so far been able to match acquisitions and sales and hopes to continue doing so.
Executives also said they intend to operate with lower overall leverage if possible. Decker said the company’s banks have been supportive of its strategy.
Third-quarter results and lease-up
Chief Financial Officer Bob Kiernan reported third-quarter Nareit-defined funds from operations of $0.50 per share and unit, and core FFO of $0.75 per share and unit. Outpatient medical same-store cash net operating income increased 1.6% from a year earlier, which Kiernan said was consistent with the company’s expectations at the start of the year.
Cash general and administrative expenses were $5.3 million, including $1.2 million in severance and transition costs associated with senior leadership changes. Noncash stock compensation included another $800,000 of accelerated vesting related to those changes.
Chiron ended the quarter with $231 million of unused borrowing capacity under its credit facility and a leverage ratio of 41% under the credit agreement. Net debt to adjusted EBITDAre was 7.1 times. Kiernan said that measure will fluctuate in the near term as two seniors housing communities, The Riviera and The Pinnacle, move through lease-up and stabilization.
At The Landing in Alexandria, Virginia, third-quarter occupancy averaged 95.1%, said Bobby Zeiller, chief development officer and head of seniors housing. At the adjacent Riviera independent living community, average occupancy was 25.6%. Zeiller said third-quarter lead generation rose 20% from the prior quarter, while initial prospect tours increased 14%.
Chiron continues to expect The Riviera to generate a yield on cost above 7% during the second half of 2028, Zeiller said. The company completed its acquisition of The Pinnacle, a newly constructed 175-home community in North Bethesda, Maryland, in October. The property ended the third quarter at 31% occupancy, and management expects a stabilized yield on cost above 7% in 2029.
Zeiller cautioned against drawing conclusions from individual months of lease-up, which he described as a nonlinear process. He said Chiron uses incentives and concessions to build occupancy and aims to reduce them as occupancy grows.
Seniors housing investment strategy
Chief Investment Officer Matthew Whitlock said Chiron is targeting modern, private-pay communities in markets that can support pricing power and long-term occupancy. The company prefers properties offering a continuum of care, allowing residents to move from independent living to additional services as their needs change.
Whitlock said Chiron sees about 10 investment opportunities a month and would likely be interested in roughly 10% of them. He described the market as favoring sellers, although transaction activity has slowed somewhat, and said the company is in active discussions about off-market opportunities ranging from individual properties to multiple portfolios.
Over time, Whitlock said, he would prefer a relatively small number of operating partners with geographic expertise. As an illustration, he said he hoped that if Chiron had 50 or 60 buildings in a couple of years, it might work with five operators rather than a different operator for each property.
About Global Medical REIT (NYSE:XRN)
Global Medical REIT, Inc is a real estate investment trust focused on owning and operating healthcare facilities in the United States. The company primarily invests in medical office buildings and other outpatient healthcare properties that are leased to physician groups, regional and national healthcare systems, and other healthcare providers.
Its portfolio is generally supported by long-term, often triple-net leases, under which tenants typically pay property taxes, insurance, and maintenance expenses in addition to rent.
