VictoryShares US Small Cap Volatility Wtd ETF

Third-quarter 2010 revenue was $39.3 million. FFOM was $5.3 million, or $0.12 per share/unit; net loss was $1.8 million, or $0.04 per share. Rental revenue was $22.8 million and Design-Build contracts and Development revenue was $15.7 million. SG&A was $6.7 million, including about $2.5 million of corporate G&A. Portfolio occupancy increased 40 basis points to 91.4%, and more than 90% of leases renewed. Cash was $16 million and revolving credit availability was $76.8 million, for total capital availability of approximately $92.8 million. Interest coverage was 1.8x and fixed-charge coverage was 1.5x. Management reiterated full-year 2010 FFOM guidance of $0.47 to $0.51 per share/unit, excluding non-recurring events and impairment charges recognized earlier in the year.

Ray Braun framed the quarter as a transition period and emphasized that he is still assessing the business before making major changes. He highlighted the company’s healthcare REIT positioning, the ERDMAN model as a differentiator, and the opportunity to pursue integrated project delivery. Braun also said the company will evaluate strategic options through year-end and provide more color after the first of the year, including a review of whether to remain pure-play or diversify.

Chuck Handy led with the quarter’s reported figures: $39.3 million of revenue, $5.3 million of FFOM, and a $1.8 million net loss. He noted SG&A of $6.7 million, including roughly $2.5 million of corporate G&A, and said full-year corporate G&A should be about $9 million excluding the $3.1 million one-time pre-tax retirement expense recognized in Q2. He also updated liquidity and debt, citing $16 million of cash, $76.8 million of revolver availability, a $10.3 million Rocky Mount Medical Park refinancing at LIBOR plus 3.5% with 25-year amortization, and coverage ratios of 1.8x interest coverage and 1.5x fixed-charge coverage.

Analysts focused heavily on leverage, the March 2011 credit facility, and whether the company would need to raise equity or preferred capital. Braun said the team is evaluating common equity, perpetual preferred, convertible preferred, convertible debt, and standard debt, and that 50ish percent leverage remains the target. Questions also centered on ERDMAN’s weak profitability and strategic alternatives; Braun said business is likely to ‘bounce along the bottom’ for a couple of quarters, but that management is exploring options such as selling ERDMAN, shutting it down, improving it, or offering services separately. Several analysts pressed on whether the company might diversify beyond medical assets, and Braun said that decision is still under review and will be informed by investor feedback and the strategic assessment.