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Global Medical REIT Inc.  (NYSE:GMRE)
Q3 2019 Earnings Call
Nov 07, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Thank you for standing by. This is the conference operator. Welcome to the Global Medical REIT Q3 earnings conference call. [Operator instructions] And the conference is being recorded.

[Operator instructions] I'd now like to turn the conference over to Evelyn Infurna of investor relations. Please go ahead.

Evelyn Infurna -- Investor Relations

Thank you, operator. Good morning, everyone, and welcome to Global Medical REIT third-quarter earnings conference call. On the call today, we have Jeff Busch, chief executive officer; Bob Kiernan, chief financial officer; and Alfonzo Leon, chief investment officer. 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 facts and considered forward-looking. The company intends these forward-looking statements to be covered by the safe harbor provision for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is making this statement for purpose of complying with those safe harbor provision. Furthermore, actual results may differ materially from those described in the forward-looking statements and will 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, 2018, 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, the most currently comparable GAAP numbers in the company's earnings release and in its filings with 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.

Jeff Busch -- Chief Executive Officer

Thank you, Evelyn, and welcome to our third-quarter 2019 conference call. Joining me today are Bob Kiernan, our chief financial officer; and Alfonzo Leon, our chief investment officer. I'd like to take just a few minutes to review GMRE's overall strategy and positioning. Bob will then discuss financial results for the third quarter and year to date, followed by Alfonzo update on the company's recent acquisition and market outlook.

And then as always, we look forward to your questions. Over the last three years, we've continued to demonstrate our ability to combine healthcare knowledge with real estate expertise to create a portfolio with durable reoccurring cash flows and strong coverage ratio, which in turn has driven strong results for investors. Our strategy focuses on identifying and acquiring purpose-built medical facilities in secondary market where we believe better risk adjusted returns can be found. These healthcare properties are leased to medical groups with strong profitability and credit profiles on a long-term triple net or absolute net basis, which provides our stockholders with a stable income stream.

Our portfolio of healthcare facilities is well diversified by asset type, geography and tenant base. We structured our business model to take advantage of shifting demographics, consumer preferences and distributed healthcare service delivery trends such as the rise of special team medical facility and outpatient services. Healthcare needs are market agnostic and occur in all metro area given better economics not only for property, fundamentals, but also for established medical team. We prefer to target well established practices and facility in dense mid-tier market or bedroom communities of larger city.

Our team and our board bring both real estate expertise and healthcare expertise to the table helping GMRE understand nuances, regulatory implication and structural factors that provide us with valuable insight into pursuing accretive transaction. We also believe that our focus on MOB transactions below $20 million gives us another advantage as these facilities are not typically on the radar of private equity or larger institutional buyer. Our willingness to structure transactions with OP Units has also been a benefit when pursuing acquisition, providing a level of flexibility that can be very attractive to physician groups that need to address tax planning needs. Our holistic approach to medical real estate business, our deep healthcare community relations and our reputation for execution keeps our pipeline full and active.

Year to date, we are pleased to have closed on 16 property encompassing over a 660,000 square feet where a total purchase price of approximately $240 million at a weighted average cap rate of 7.5%. At the same time, our acquisition pipeline continues to expand. And even as we continue to anticipate growth through our acquisition, we will not sacrifice profitability or quality nearly to meet the sake of growth. We remain committed to our underwriting discipline, which focuses on identifying property with sustainable cash flow to support our dividend and maximize risk adjusted returns over time.

With that, I would like to turn the call over to Bob Kiernan, our CFO, who will provide an overview of our third-quarter financial results.

Bob Kiernan -- Chief Financial Officer

Thank you, Jeff. Last night after the market close GMRE reported financial results for the third quarter and nine months ended September 30, 2019, by our press release and simultaneous posting of our supplemental earnings package through our website. Reflecting the positive impact that the continued growth of our investment portfolio, our total revenue in the third quarter rose approximately 30% to $18.2 million as compared to the third quarter of last year. For the nine months ended September 30 total revenues similarly increased approximately 30% to $50.3 million.

Our same-store portfolio contractual rent increased $241,000 during the third quarter of 2019 or 2.2% compared to the third quarter of 2018. This increase reflects the effective contractual rent increases on our portfolio on a same-store basis. Total expenses for the third quarter of 2019 were $15.9 million, up 30% from the third quarter of 2018, for the nine months of 2019 total expense was $43.5 million, up 29% as compared to the first nine months of 2018. Depreciation and amortization expenses, as well as interest expense remain large components of our total expense for each period as we continued actively acquiring properties.

G&A expenses for the third quarter of 2019 was $1.7 million, up 21%, compared to $1.4 million in the third quarter of 2018. The quarterly increase was primarily due to an increase in non-cash LTIP compensation expense. The LTIP compensation expense was $868,000 for the three months ended September 30, 2019, compared to $741,000 for the same period in 2018. For the nine months ended September 30, 2019, G&A was $4.9 million, up 18%, compared to $4.2 million for the nine months ended September 30, 2018.

The increase for the nine months was also primarily related to increases in stock compensation costs. Reflecting our acquisition activity, depreciation and interest expense were our two largest expense line items from the third quarter, depreciation expense was $5 million in the third quarter of 2019, compared to $3.6 million in the prior-year quarter. Interest expense was $4.5 million in the quarter up 12% from last year. For the nine months ended September 30, depreciation expense was $13.5 million, compared to $10 million in the prior-year period and interest expense was $12.7 million, up 19% from the same period last year.

These increases are directly as a 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 costs for the third quarter of 2019 was 4.21%, compared to 4.23% in the third quarter 2018. Relative to our overall results, debt income attributable to common stockholders for the third quarter of 2019 was $770,000, compared to net income of $286,000 in third quarter of last year. For the nine-month period, our net income increased to $2.2 million up from $632,000 in the prior-year period.

Our FFO and AFFO for the third quarter of 2019 were both $0.19 per share and unit down $0.01 compared to the prior-year quarter. Likewise, for the first nine months of 2019, our FFO and AFFO per share and unit were each $0.54 down $0.02 from the same period a year ago. Both of these per share decreases resulted from the impact of our March equity raise and our higher share count in 2019. Moving on to the balance sheet.

As of September 30, 2019, our gross investment in real estate was $830.4 million, an increase of $183 million or 28% from year-end 2018. Looking at the liability side of our balance sheet, our total debt was $402 million at September 30, 2019, up from $315 million at year end, reflecting the growth of our portfolio. On September 30, we amended and expanded our credit facility, in particular, note that we exercised the remaining $75 million accordion feature and added a new $150 million accordion to the new – to the facility. Our credit facility is now comprised of a $200 million Revolver, $300 million Term Loan, and $150 million accordion.

In terms of our total liquidity, including cash and availability on our revolver, we ended the quarter with the $136 million. Just after the quarter end, we entered into two interest rates swaps with an aggregate notional amount of $130 million, which fix the LIBOR component on corresponding Term Loan borrowings at 1.21%. Factoring in all of our hedges, we have now fix the LIBOR component of the entire balance of the Term Loan at 2.17% on a weighted average basis. With respect to equity issuances, since the end of the second quarter, we raised $18.5 million on our ATM at a weighted average price of $10.93 per share.

Looking ahead to the fourth quarter. Based on the impact of the new interest rate swaps, as well as declining interest rates, we're projecting our average borrowing cost to decrease from 4.21% in the third quarter to approximately 3.95% in Q4. Additionally, based on this decrease coupled with our completed fourth quarter acquisitions, we expect our FFO and AFFO to increase in the per share basis in Q4 2019. With that, I will turn the call over to Alfonzo, who will review the investment landscape and our investment activity.

Alfonzo Leon -- Chief Investment Officer

Thank you, Bob. GMRE has been and remains very active since the beginning of the third quarter as we completed due diligence and closed on $124 million of purpose-built healthcare properties at a weighted average cap rate of 7.6%. Consistent with our acquisition strategy, we were able to acquire these properties at cap rates 100 basis points to 150 basis points above the market average. Portfolio metrics based on just a third quarter have changed on the margin.

Our properties are well-diversified and now number 101 buildings in 27 States. The 2.6 million square foot portfolio is 100% lease at our weighted average per square foot rental rate of $24.87 and weighted average lease term of 8.9 years, and average rent escalations of 2.1% per year. Additionally, the properties have a portfolio wide coverage ratio 4.9 times. In total, we have completed 10 transactions since the end of the second quarter.

These transactions further grow and diversify our portfolio with high quality facility leads to leading healthcare providers. These facilities in healthcare providers include $11.9 million cancer center lease to cCare in San Marcos, California and affluent suburb of San Diego. cCare is the largest full-service private oncology and hematology practice in Southern California. $11 million MOB and surgery center portfolio located one mile from a new $450 million McLaren Hospital and Lansing, Michigan.

The portfolio is anchored by CIMA, a locally dominant multi-specialty group with 50 providers, in partnership with McLaren. The $6.9 million multi-tenant MOB in Bannockburn, Illinois and affluent suburb on the North Shore of Chicago. This building is anchored by Illinois Bone and Joint, one of the largest orthopedic groups in Chicago metro recover 100 physicians in 20 locations. $12.5 million medical facilities lease to Dreyer Clinic and affiliates of Advocate Aurora Health Care on a newly built advocate outpatient campus in Aurora, Illinois.

Aurora Health Care is the 10th largest not-for-profit health system. The $10.5 million multi-tenant MOB anchored by Ascension Health and Trinity Health, both investment-grade system in Livonia, Michigan. Services provided at the property include radiology lab, urgent care, primary care, wellness, OBGYN and physical therapy. The $5.5 million MOB lease to Covenant Surgical Partners in Gilbert, Arizona, a rapidly growing suburb of Phoenix.

Covenant is a leading surgical operator with 59 locations across 19 States. This is our second transaction with them. The $7.8 million medical facilities lease to MedExpress in Morgantown, West Virginia, 10 miles from West Virginia University. MedExpress is the subsidiary of UnitedHealthcare Group with more than 200 urgent care clinics nationwide.

The $33.6 million specialty surgical hospital in Beaumont, Texas, leased to the medical center of Southeast Texas, a subsidiary of Steward Health System, which is one of the largest for-profit health system in the United States. $11.8 million freestanding emergency department in Bastrop, Texas, lease to St. David's HealthCare, which is part of HCA, the nation's leading for-profit health system. This facility is one of the busiest freestanding lease in the office submarket and the $12.9 million surgery center and MOB portfolio lease to the EyeSouth Partners in Panama City, Florida.

EyeSouth has partnerships with 11 ophthalmology practices across four states with a total of 75 providers. This is our second transaction with them. We have had an exceptional year with respect to finding high quality product in volume. It is important to remember that the amount of assets we identify and buy will vary year to year and that we are focused on pursuing acquisitions that are accretive of high quality and meet our strict underwriting standards.

As Jeff mentioned earlier, we have a very full pipeline driven by the depth and quality of our relationships and our reputation for execution. We find ourselves in an enviable position given some of the market trends we see unfolding. Health insurers continue to encourage if not require patients to pursue treatments and surgeries and outpatient facilities as a way of controlling rising healthcare costs. This pressure is driven, driving patient demand out of hospitals and off campus to specialize or stand-alone facilities like those in our portfolio, which in turn could improve the profitability of our facilities.

We see this trend continuing and believe that it will provide us with ample opportunities for investment. We are confident in our strategy and belief that we have build and continue to build a portfolio that will provide durable cash flows for our shareholders. With that, we will be happy to take your question.

Questions & Answers:


Operator

Thank you. [Operator instructions] The first question comes from Drew Babin who is with Baird. Please go ahead, sir.

Drew Babin -- Robert W. Baird and Company -- Analyst

Hey, good morning.

Jeff Busch -- Chief Executive Officer

Good morning, Drew.

Drew Babin -- Robert W. Baird and Company -- Analyst

The Steward Surgical Hospital –- good morning. Can you hear me OK?

Jeff Busch -- Chief Executive Officer

Yes, yes.

Drew Babin -- Robert W. Baird and Company -- Analyst

Yeah, OK. So the Steward Surgical Hospital on in Beaumont, Texas, so can you talk about any factors influencing the competitive environment there. How they might be taking care kind of how that hospital systems supported with in medical office type properties locally and their ability to pay escalating rents over the year. Could you maybe just give a little more color on that specific asset given the size of it?

Alfonzo Leon -- Chief Investment Officer

Sure. So the Beaumont market is shared by three systems, basically have Christus, Baptist and Steward. Steward came into the market when they merged with IASIS, which was just a few years ago. And the way I look at it, this is a market where the health systems generate $100 million of EBITDA of which Christus is 50%, Baptist is 25%, and Steward is 25%.

Steward has two hospitals in that market. They have their Port Arthur Hospital in Port Arthur. And they have their Beaumont Hospital, which is the facility that we acquired. The facility we acquired is newer, then their Port Arthur Hospital is in the better part of town.

When you look at that sub market, Port Arthur is more blue collar, whereas Beaumont has a higher income, better demographic profile. Christus their main campus is actually just a couple of miles from the facility we acquired. The facility we acquired is on a big campus. In our discussions with Steward and with the physicians who are part of that hospital, that are significant to the Steward system, their long-term goal is to actually continue building on that campus and add MOB and add services, and use that campus as their Beaumont footprint to compete with Christus and target sort of more high end, higher revenue service line.

So Steward is very large system with a lot of resources. One of the things that they focused on right away when they came into the market was aligning themselves with large physician practice groups and to help them execute their strategy in that market. So based on our conversations with the local Steward's leadership with the physicians who are prominent in that community and part of the facility, it was pretty clear to us that this facility is important for their execution in that market. There was a press release that actually came out when we were under diligence that – highlights that case.

So we view our facility as a strategically important asset for Steward in that market, which from a healthcare perspective, it's a very healthy market, and one that when you look across Steward's entire network is also one of their more profitable ones. So I'll pause there and let me know if that addresses your question.

Drew Babin -- Robert W. Baird and Company -- Analyst

Yeah, it's great. I appreciate the detail. That makes sense. And then just one more for me and maybe a little more top down.

I guess proceeds from the first quarter equity offering, most of which has kind of been deployed with leverage, but maybe a little more room to kind of increase leverage kind of back to where it was before the deal. I guess how do you quantify the dry powder kind of remaining before new capital is sourced right now? And kind of square that up relative to the deal flow that you're currently looking at. And I guess how do you quantify kind of the dry powder as of today?

Bob Kiernan -- Chief Financial Officer

Yeah, sure, Drew. Yeah, so we ended the quarter at about, we'll call it $135 million of dry powder relative to availability on the credit facility and cash. And so if you think about Q4 purchases at about $60 million to date leaves us with ballpark of $70 million, $75 million in that – $70 million in that range of available capacity. And just kind of stage our acquisitions from that point forward, looking at our capacity thinking of our available alternatives, whether it be ATM or additional credit and just managing through that from a timing perspective.

Drew Babin -- Robert W. Baird and Company -- Analyst

OK. And I guess kind of tying this together, you mentioned earlier that you'd expect FFO and AFFO to increase in the fourth quarter, and given that your long stand below dividend coverage in the third quarter. Should we assume that we'll be pretty close to covering the dividend or covering the dividend once again by year-end with kind of additional benefit coming beyond that with these deals that are currently in the pipeline?

Bob Kiernan -- Chief Financial Officer

Yes, Drew. I mean so if I think about where we've been leverage during the third quarter, it was a call it high 40s on average during the period. And with the acquisitions that we've done already in Q4, we have pushed our leverage up into the low 50s, which is where we need to be in terms of covering the dividend. So feel good about that from an outlook perspective.

Drew Babin -- Robert W. Baird and Company -- Analyst

Great. Appreciate all the color. Thank you.

Operator

The next question comes from Chad Vanacore who is with Stifel. Please go ahead, sir.

Seth Canetto -- Stifel Financial Corp. -- Analyst

Hey, good morning. This is Seth Canetto for Chad. My first question just you guys mentioned earlier that the $20 million and below sweet spot for acquisitions is sort of where you guys have been really successful. And can you just talk about how large the potential pipeline is and have you seen any depression in cap rates? Or how would your focus shifted to one asset class over another?

Alfonzo Leon -- Chief Investment Officer

Yeah, so we – many ways to kind of address that. So the volume of fields that we're seeing it's approximately about 30 a month. And that covers a wide range of types of deals. We work pretty hard to keep a $100 million to $200 million of potential deals in our pipeline at all times.

And it goes up and down depending on when we close things and depending on market conditions. So we've been able to sustain that volume for the past couple of years basically, and don't really see anything right now that leaving to think that that's going to change and they need material way in the near future. It's from a pricing perspective, when you get over $20 million, you started attracting a lot of more well capitalized private equity groups. Especially when you get over 50, it really becomes very, very competitive.

In our sweet spot, which and it shifts every quarter. But right now for me in my opinion, it's somewhere in the range of $7 million to $14 million is sort of our sweet spot for acquisitions where we can get. The quality we're looking for the type of tenants we like, the locations we like and the yield that we – that works for our model. In terms of asset type, where our main focus is to continue looking for as many, many MOBs that fit our profile.

But opportunistically we'll look for impatient opportunities and the lion's share of that of the inpatient facilities that we think make sense our rehab hospitals, and very, very selectively look for other types of assets within inpatient. In terms of when we choose an inpatient or MOB, it's really driven by market. I mean, our perspective is we would rather focus on searching for quality and yield versus adhering to sort of a strict policy about what types of assets we look for at any given quarter, especially given how much the market changes quarter to quarter. And it comes in ways where there's a period of time when for whatever reason there's just a lot of rehab facilities that become available and then there'll be a long stretch where you won't see any.

And that goes for all asset types. Even surgery centers where for a while it, there's is a cluster of surgery centers that become available for purchase and then you'll go for months without seeing a single one. So really kind of our strategy from an acquisition perspective is to respond to the market and look for good deals and good investments in good tenants versus adhering to sort of a strict policy on percentages of types of assets. And our portfolio really reflects sort of what's available in the market and what fits our model.

Seth Canetto -- Stifel Financial Corp. -- Analyst

All right, great. Thanks. That's very helpful. And then when we just look at the way that average cap rate for the portfolio increased sequentially from 7.9%.

I think this year you guys did a acquisition with 7.5% range. So last call you mentioned that sometimes you buy a portfolio for 7.3% and then that increased just 7%, 6% in year or two. Can you just talk about maybe what's driving the overall portfolio cap rate higher?

Alfonzo Leon -- Chief Investment Officer

I mean I think it's continuing to look for deals that are sort of in that mid-7% cap range and benefiting for many increases. And I think that's simplistically the answer.

Seth Canetto -- Stifel Financial Corp. -- Analyst

OK. So we should continue to expect sort of the 2%, 2.5% escalators each year just pumping that higher.

Bob Kiernan -- Chief Financial Officer

Yes. I think on average 2.1% across portfolio at that as of $930.

Seth Canetto -- Stifel Financial Corp. -- Analyst

OK, great. And then the – yeah, you mentioned that coverage has been really strong or the portfolio and continues to be strong, but it looks like coverage ticked up for the earth nail that and the surgical hospitals, but then drops for the MOBs. I mean is there – am I reading too much into that or can you just explain sort of those moves within the bucket? Is that driven by just new acquisitions rolling in or something else?

Alfonzo Leon -- Chief Investment Officer

I mean there's if you look across each one individually, they move up and down for very specific reasons. I think as a trend, I mean our portfolio is probably not large enough for those trends to communicate sort of industry trends. I would say, it hasn't moved in a way that concerns us in any way, if anything, we continue to be encouraged by the metrics that we have at a portfolio level. So I don't think there's really any further commentary than that.

I mean we track it, we stay in touch with our tenants. There's the information that we get from our tenants, but we can't show numerically. Just the conversations and directivity and what they're doing in the market and it's all very positive. But it's healthcare, especially at the facility level is not – it doesn't move in a straight line and there's seasonality and you'll have impacts from adding a physician or losing a physician just moves around quite a bit.

But in the aggregate, we think it's all very positive.

Seth Canetto -- Stifel Financial Corp. -- Analyst

All right, great. That's it for me. Thanks for taking my question.

Alfonzo Leon -- Chief Investment Officer

Thank you.

Operator

The next question comes from Bryan Maher who is with B. Riley. Please go ahead, sir.

Bryan Maher -- B. Riley FBR -- Analyst

Yes, good morning, all. Couple of quick questions.

Alfonzo Leon -- Chief Investment Officer

Hi, Bryan.

Bryan Maher -- B. Riley FBR -- Analyst

We look at the portfolio occupancy of 100% every quarter, while that is in practice, how long do you think you can keep that number at that level? When we look at some of the competitors, not many people can run 100% a very long.

Alfonzo Leon -- Chief Investment Officer

Yes. I mean I think it's can we sustain 100%, how long – that is a good question. I mean we're staying ahead of our renewals, when we acquire properties that have in our occupancies not a 100.000%. We do have about small 0.1% or 0.2% vacancy.

And then those were vacancies that were in place when we acquired, but during our acquisition, just working of memory, there was a couple of suites that we stopped while we were acquiring it. It's something that is very much part of our underwriting, to think about keeping the properties full and what the rent roll looks like and what the lease expiration looks like. So it's definitely top of mind. But can we predict? No.

So far we've been surprised on the upside in terms of renewing spaces and leasing them up. And we – one of our main goals as when we're buying is to try to find properties that will stay as full as possible. But beyond that, I can't – we can't predict when it's – what that occupancy is going to look like. If you look at our lease expiration schedule, we have 0.2% expiring in 2020 and we feel great about that.

And in 2021, we have a couple encompassed facilities in Pennsylvania that are going to – their lease expires and we feel very good about those lease renewals. Very good conversations had this year with encompass about those facilities, but we can't predict.

Bryan Maher -- B. Riley FBR -- Analyst

OK. And then that was some good commentary you gave on, asset size and your sweet spot being in that $7 million to $14 million range. But as you get bigger, inevitably, we see there's a lot with small REIT based grow to be mid-size and then large REIT. And they tend to shift that is a bigger size asset or portfolio transaction.

How do you they managing GMRE to keep in that sweet spot versus kind of getting pulled up to that that bigger level and competing with the private equity buyers in other REIT?

Bob Kiernan -- Chief Financial Officer

Well, we gave a lot of thought to this question as we grow. At this point, right now our goal is to buy as higher quality as possible and to stay into that mid 7% cap. So there's no plan at this time to decrease that strategy going forward at least the next few years. I know others have gone for to buy bulk and I believe sometimes sacrifice either quality or cap.

We won't sacrifice our cap rates, unless the market changes, while we won't say it, but we definitely won't sacrifice quality. So I don't think we're going to be following exactly what the others done before us. Because we see a real potential to grow the AFFO for our investors in the stock share price by continuing to do what we do, because of the spread we have by buying 7.5% and the cost of our capital is substantially coming down with our stock price going up. And also the interest rates that we locked in and the interest rates, even if they stay where they are or go down.

We have such a good spread that we could just add that to the AFFO, increased our stock price and at least for the next few years, that's our strategy.

Bryan Maher -- B. Riley FBR -- Analyst

Great. Thanks. That's all for me.

Operator

The next question comes from Rob Stevenson, who's with Janney. Please go ahead, sir.

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

Good morning, guys. Alfonzo, to ask the asset pricing question, maybe a different way. You guys hit your 2018 deals that sort of blended 8% cap, year to date, you are at a 7.5% cap. I mean, how much is it 50 basis points differential year over year, can you just due to asset pricing because of lower debt costs and the impact of pricing there versus you guys may be looking at doing better deals with higher, with better tenants and/or doing deals in larger markets or anything of that nature? Or is it all just random?

Alfonzo Leon -- Chief Investment Officer

Good question. I mean, I think it's for a number of reasons and not any one reason that kind of rises to the top, honestly. I mean, I think it's all the above almost, and how that shakes that has a portfolio level. I mean, it'd be hard to really quantify how much of an impact from each one.

I guess, part of the question you're asking is, how much has the market changed? And I guess in broad strokes in 2018, when the MOB REITs pulled back a lot, that there was definitely an impact in the market. And then I'd say around summer of this year, there was definitely the impact of the fed cuts that worked its way through the debt markets and worked its way through the private equity groups. And I'd say in the last quarter, what I've noticed is, I guess, you can say it's kind of a – sort of a bifurcated market, where – the really – if you want to call it the core product type that everybody wants. I mean, that stuff is kind of very, very, very competitive, probably the most competitive.

It's been in a while where there is a bit of a frenzy. In the niche we're in, we're still finding enough deals to grow our portfolio that we like. And we feel like the quality of the stuff we're acquiring this year is higher than it has been in the past. So we feel like we're getting a double benefit, but it does mean that, this year we've had the – in a sense works faster and harder to sort of outmaneuver other – our competitors.

And there have been moments when we're chasing something and are surprised with where it ultimately trade. And so what we've done to kind of counteract that is to start really acting more decisively and moving faster toward the deal that we do like and being more assertive and trying to lock it down as fast as we can. So, so far so good, but I feel like the market changes every quarter. And to the surprise, I think it's hard to predict kind of where things are going to be in a couple quarter.

And I think, I view my role is just adapting to market conditions. And taking responding to the market in a way that fits, where we are as a company and with the capacity we have our balance sheet, our strategy and just making it work. But to your question, why has the numbers trended in the way they have. It's hard to address, because I think it's due to many, many factors.

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

OK. Bob, after the October field, how much dry powder do you currently have for incremental acquisitions?

Bob Kiernan -- Chief Financial Officer

So after – so again, just walking through that, I mean, after the – we ended the quarter, it's about $133 million of capacity on the revolver and with the Q4 purchases that pushes the available powder down to about $70-ish million.

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

OK. And then whatever you guys are looking at today, you think that that was the ATM is sufficient enough to be able to do what you want to do in the near-term?

Bob Kiernan -- Chief Financial Officer

It's certainly in the near-term.

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

OK. And then lastly for me, Jeff, how is the board, is that – you guys added another, call it, $120 million some of acquisitions in the last, whatever it is four plus months. So is the – you're getting to the size, what's the latest thoughts from the board in terms of internalization and then also you guys, depending on your equity issuance are covering your dividend on an AFFO basis. What are the metrics that the board's looking at sort of think about doing even incremental, small incremental dividend increases there.

Bob Kiernan -- Chief Financial Officer

Right now, we're coming into a year, where a lot could go very favorably for GMRE. Number one, given where we are size wise, cost of capital, cost of debt, we see a nice AFFO growth. I'd like to see the AFFO and talking on the board. We'd like to see the AFFO growth go for a little bit work – little bit on decreasing our debt.

And at some point with the growth, consider a dividend increase but not for awhile in there.

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

And then the internalization.

Bob Kiernan -- Chief Financial Officer

On the internalization, we're currently add compensable equity as of $930 million or $440 million, at $500 million, it goes to the – to form a special committee within the quarter. They have been brief legally about it. They will then retain the special committee will be appointed, they will retain counsel, they'll retain other groups and then negotiations goes into in fact on internalization. The payout is caught in the numbers.

I mean, we're a little different than others who have gone through this process is that we actually know exactly what it is from the numbers that we did earlier. On good planning, what the payoff to the external manager would be. I see the process should move smoothly in my view.

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

OK. All right. Thanks, guys.

Jeff Busch -- Chief Executive Officer

Thanks, Rob.

Operator

[Operator instructions] The next question comes from Barry Oxford, who's with D.A. Davidson. Please go ahead, sir.

Barry Oxford -- D.A. Davidson -- Analyst

Great. Thanks, guys. Real quick, Alfonso, getting back to the pipeline, you said that the facilities that you look at can move depending upon the market from year to year, quarter to quarter. What are the facility type, if there is one kind of overweighting in the acquisition pipeline.

Alfonzo Leon -- Chief Investment Officer

Simplistically, mostly looking for MOBs, I'd love to get as many surgery centers as I can, but those are hard to find. There are some surgical hospitals that I would love to get, but those sometimes, surprise me with how competitively they get priced. So within MOB, you do have a few different categories. And switching over to tenants, I very much liked a physician groups, especially the mid to large size groups.

I'm surprised sometimes, where pricing comes in for MOB, at least a large MOB groups. They're getting priced almost like they're at least health system. So we're – our groups tend to have eight, 12, 15, 20 doctors, it seems like when you get over 40 or 50, they're getting fully priced. In terms of operators, very selective, especially among the for-profits operators and being very thoughtful about how much exposure we want to have to any one of those.

Health systems, obviously, we'd love to have more health systems, but again, the pricing gets very competitive for a lot of those. And you also with health systems have to be very thoughtful about whether or not, they plan to renew. Health systems are very strategic about their footprint. So you've got to put a lot of thought into what that footprint will look like in five or 10 years.

In terms of rehab hospitals, I mean, we like what we have, very selective with adding more. And again, it surprises me sometimes when we do look at the opportunities that become available. Sometimes, it does get very competitive. So we back off and it's hard to predict.

So I don't know if that answers your question. But mostly MOBs, we'd love to have a lot more surgery centers, but they're hard to get. And then the rest of it is very selective.

Barry Oxford -- D.A. Davidson -- Analyst

That's definitely helpful. And then when you look at the growth of the company and the G&A. You guys have to add some personnel as you go forward or you basically, look, we can continue to go to the portfolio at the basically the personnel head count that we have right now.

Alfonzo Leon -- Chief Investment Officer

We are adding to the property management. If you could see our substantial growth each year, it's an area I want to get ahead of, not behind. So we put on an asset manager, with some really good skills, we're looking at adding a specialty lease administrator to be on the staff and somebody also working hand in hand on the accounting level. That should get us for quite a while pretty good with that.

But I like to – generally my planning, as many of you know, I've done this for 30 years with companies is, I like to be about six months ahead of when you have – when you're going to have in short, also giving the market, it's hard to find people. So we are adding personnel to assist us in the property management to sell, if there is going to be any problems or early warning systems evaluating, where – are they still keeping the coverage ratios. Good property management is the key to a business like ours. A little easier with triple net and absolute net leases, to be honest.

But on the other hand, you got to be very vigilant in that field. So we are adding staff in that area.

Barry Oxford -- D.A. Davidson -- Analyst

Right. That makes sense. Appreciate it, guys.

Jeff Busch -- Chief Executive Officer

Well, thank you, everybody, for joining us. We appreciate your support. Bye.

Operator

[Operator signoff]

Duration: 53 minutes

Call participants:

Evelyn Infurna -- Investor Relations

Jeff Busch -- Chief Executive Officer

Bob Kiernan -- Chief Financial Officer

Alfonzo Leon -- Chief Investment Officer

Drew Babin -- Robert W. Baird and Company -- Analyst

Seth Canetto -- Stifel Financial Corp. -- Analyst

Bryan Maher -- B. Riley FBR -- Analyst

Rob Stevenson -- Janney, Montgomery, Scott -- Analyst

Barry Oxford -- D.A. Davidson -- Analyst

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