Chiron Real Estate Inc. 2026 Q2 Earnings Call

Good morning, everyone, welcome to Chiron Real Estate Inc.'s second quarter 2026 earnings conference call. My name is Jamie Barber, I am Chiron's General Counsel. On the call today are Mark Decker Jr., Chief Executive Officer, Matthew Whitlock, Chief Investment Officer, Bobby Zeiller, Chief Development Officer and Head of Seniors Housing, Danica Holley, Chief Administrative Officer, Bob Keran, Chief Financial Officer, Aaron Roseth, Chief Operating Officer. Statements or comments made on this conference call may be forward-looking statements. Forward-looking statements may include, are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties. The company's actual results may differ significantly from those projected or suggested from any forward-looking statements due to a variety of factors which are discussed in detail in our SEC filings.

Additionally, on this call, the company may refer to certain non-GAAP financial measures. 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 filings with the SEC. Additional information may be found on the investor relations page of the company's website at www.chironre.com. I would now like to turn the call over to Mark.

Thank you, Jamie, good morning, everyone. I feel like a kid in a candy store this morning sitting around the table with all this talent, I'm even more excited that we share the same simple vision: to deliver value at the intersection of care, capital, and real estate. I want to start by welcoming Tami Cumings, Aaron Roseth, Matthew Whitlock, and Bobby Zeiller. I'd like to thank Bob, Danica, Jamie, and the rest of our team for a tremendously productive five months. I also want to recognize and thank Alfonso Leon, who stepped down earlier this week as Chief Investment Officer. When we laid out our priorities earlier this year, we said we would focus on active capital allocation, portfolio repositioning, and building the capabilities necessary to support our next phase of growth. Over the last several months, we've made meaningful progress on each of these objectives.

Before discussing the transformation that's underway, it's important to recognize that our existing portfolio continues to perform well. During the quarter, same-store NOI increased 1.7% on a normalized basis, which is in line with our expectations and the same-store guidance we issued at the beginning of the year. The strategic actions we're taking today are not a response to operational challenges. It's about capital allocation. Outpatient medical can be an excellent investment, but as we've discussed, there are better total returns available within healthcare real estate. With that in mind, I'd like to discuss what we're doing to position Chiron for the future. The common thread across everything we're doing is straightforward. We're reallocating resources towards opportunities that we expect to create a more durable and relevant real estate platform that can compound stronger long-term returns. Let's review our recent progress.

We closed on the $100 million Maewyn investment contemporaneously with the closing of our first two seniors communities, The Landing, a stabilized continuum of care community in Alexandria, Virginia, and The Riviera, a sister community across the courtyard from The Landing, which opened this March and is in lease up. Together, this forms a community of 292 luxury homes. We completed the sale of seven inpatient rehab facilities to a newly formed joint venture in June at an exit cap rate of 7.3%. This generated approximately $200 million of gross proceeds, and we retained a small equity interest in the venture. The combination of these transactions leaves us well-positioned on the balance sheet side with no maturities until 2028 and less than 40% leverage.

While I know we all prefer debt to EBITDA, given the nature of our lease-up communities, we're going to refer principally to our covenant metrics for a time. The team has maintained momentum on asset sales, and I'm pleased to announce that we're under contract to sell our Beaumont, Texas, surgical hospital for a price of $49 million, representing an exit cap rate of 5.9%. Proceeds from these sales will be directed towards assets offering a higher return on capital. The most immediate use will be to complete the previously announced acquisition of The Pinnacle, a marquee luxury community that we put under contract in the second quarter. The Pinnacle welcomed its first residence in June, and we couldn't be more pleased with the early momentum at the community.

We remain active in evaluating further dispositions from our outpatient medical platform, or our outpatient medical portfolio, excuse me, including through individual sales or larger portfolio transactions. See no shortage of opportunities to redeploy these proceeds in a way that will drive our long-term return on capital higher and deliver value to our shareholders. While there's been a lot of transactional activity, the biggest story is our leadership team. Executing on a transition of this magnitude and then building the business we envision requires specialized expertise, and we've spent considerable time strengthening the organization accordingly. Over the past several weeks, we've welcomed Tami Cumings, Aaron Roseth, Matthew Whitlock, and Bobby Zeiller into leadership roles at Chiron. Together, they bring more than 100 years of experience sourcing, developing, operating, and managing senior housing communities.

Most importantly, these additions are highly complementary. This is an operational business, and to be a good partner, we need a strong operator's eyes. With Tami Cumings, our new SVP of Seniors Housing, we've added decades of operating experience to ensure that our communities are managed in a best-in-class fashion. To be a great partner with operators and deliver a consistent experience for our team in the street, we need an organization that remains curious and focused on constant improvement. Aaron Roseth, who led a best-in-class architecture firm with industry-leading profitability, is skilled at both running large gray matter organizations and building deep client relationships. Together with Danica, who's in many ways the heart and soul of our company, we are seeking to become the best partner we can.

Matthew joins us as Chief Investment Officer with three decades of senior housing, thought leadership, and experience on all sides of the business. He will be the tip of the spear as we seek to deploy capital wisely. Bobby is Chiron's Chief Development Officer and Head of Seniors. Bobby literally built the bedrock communities that we purchased from Silverstone, which he led. In addition to constructing communities, he has a great way with people, and ultimately, I think his superpower is working with operators with a focus on empathy and respect as well as accountability, and most importantly, an eye to what sustains a great customer experience for our residents. Together, these leaders expand our ability to identify opportunities, underwrite risk, support operators, work as an effective team, and maximize performance across the portfolio. We believe Chiron now has the leadership platform necessary to deliver on our vision.

Finally, I'd like to address valuation. We continue to believe the market's not fully recognizing the value embedded within our legacy outpatient medical portfolio. Our belief is supported by a growing body of public and private market transaction activity that demonstrates the robust institutional demand for outpatient medical real estate at cap rates that compare favorably to the implied valuation of our MOB portfolio. We've highlighted this on page 14 of our most recent investor presentation. We can't control where the market values our shares in the near term. What we can control is disciplined execution. We believe that it's prudent to lean into this pricing dislocation and sell assets, which we believe will offer meaningful upside that's not currently reflected in our stock price and allow us to reallocate capital into higher-returning assets. Taken together, we believe the company is better positioned today than it was six months ago.

We have enhanced our leadership capabilities, made meaningful progress on our portfolio transition, and established a clear roadmap for continued execution. With that, I'll turn the call over to Bob to provide additional details on our financial and operating results for the quarter.

Thanks, Mark. Regarding our second quarter results, GAAP-redefined FFO per share and unit was $0.88, and our Core FFO was $1.4 per share and unit. Driven by the timing of our investment and disposition activity, net debt to adjusted EBITDAre was 6.0 times for the quarter, compared to 6.6 in the first quarter. Our same-store cash NOI increased 0.8% on a year-over-year basis. This increase was consistent with our expectations and was adversely impacted by a one-time non-recurring revenue recovery recognized in the prior year period related to a single tenant. Excluding this asset, same-store cash NOI growth would have been 1.7%. Our cash G&A for the second quarter was $3.8 million. It's down slightly from the first quarter of this year.

Looking ahead, while we expect that the changes in senior management will increase our G&A costs in the short term, we believe that as we reposition the investment portfolio, our costs will be in line with the size of our portfolio. Regarding our equity capital, we're pleased to have issued the $100 million of Series C convertible perpetual preferred in the quarter. The sale of our seven inpatient rehab facilities at an aggregate value of $217 million demonstrates our ability to recycle capital at an attractive rate. We ended the quarter with $259 million in unutilized borrowing capacity under our credit facility and our leverage ratio of just under 40%. Mark, would you like to provide any closing remarks?