[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Global Medical REIT Inc., including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes on organization, accounting policies, property portfolio, debt, equity, related party transactions, stock-based compensation, leases, and commitments [Condensed Consolidated Balance Sheets](index=4&type=page&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets decreased by approximately $72.5 million from December 31, 2022, to June 30, 2023, primarily due to a reduction in net investment in real estate and cash balances Condensed Consolidated Balance Sheets | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total Assets | $1,320,800 | $1,393,261 | $(72,461) | | Investment in Real Estate, Net | $1,213,260 | $1,285,959 | $(72,699) | | Cash and Cash Equivalents | $2,460 | $4,016 | $(1,556) | | Total Liabilities | $679,408 | $744,196 | $(64,788) | | Credit Facility, Net | $567,988 | $636,447 | $(68,459) | | Total Equity | $641,392 | $649,065 | $(7,673) | [Condensed Consolidated Statements of Operations](index=5&type=page&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three and six months ended June 30, 2023, the company reported significant increases in net income, primarily driven by gains on the sale of investment properties Condensed Consolidated Statements of Operations | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change (3M) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change (6M) | | :-------------------- | :--------------------------- | :--------------------------- | :-------------- | :--------------------------- | :--------------------------- | :-------------- | | Total Revenue | $36,351 | $33,697 | $2,654 | $72,581 | $65,572 | $7,009 | | Total Expenses | $34,960 | $29,863 | $5,097 | $69,502 | $57,453 | $12,049 | | Interest Expense | $8,468 | $5,401 | $3,067 | $16,739 | $10,202 | $6,537 | | Gain on Sale of Inv. Properties | $12,786 | — | $12,786 | $13,271 | — | $13,271 | | Net Income | $14,177 | $3,834 | $10,343 | $16,350 | $8,119 | $8,231 | | Net Income Attributable to Common Stockholders | $11,820 | $2,236 | $9,584 | $12,492 | $4,895 | $7,597 | | EPS (Basic & Diluted) | $0.18 | $0.03 | $0.15 | $0.19 | $0.07 | $0.12 | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=page&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three and six months ended June 30, 2023, saw a significant increase and decrease, respectively, primarily influenced by changes in the fair value of interest rate swap agreements Condensed Consolidated Statements of Comprehensive Income | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change (3M) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change (6M) | | :-------------------- | :--------------------------- | :--------------------------- | :-------------- | :--------------------------- | :--------------------------- | :-------------- | | Net Income | $14,177 | $3,834 | $10,343 | $16,350 | $8,119 | $8,231 | | Increase in fair value of interest rate swap agreements | $8,449 | $5,770 | $2,679 | $1,185 | $23,163 | $(21,978) | | Total Other Comprehensive Income | $8,449 | $5,770 | $2,679 | $1,185 | $23,163 | $(21,978) | | Comprehensive Income | $22,626 | $9,604 | $13,022 | $17,535 | $31,282 | $(13,747) | [Condensed Consolidated Statements of Equity](index=7&type=page&id=Condensed%20Consolidated%20Statements%20of%20Equity) The company's total equity decreased slightly from December 31, 2022, to June 30, 2023, primarily due to common and preferred stock dividends, partially offset by net income and an increase in the fair value of interest rate swap agreements Total Equity | Metric (in thousands) | June 30, 2023 | December 31, 2022 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total Equity | $641,392 | $649,065 | $(7,673) | - During the six months ended June 30, 2023, the company issued **577 OP Units** with a value of **$5,482 thousand** in connection with a facility acquisition[16](index=16&type=chunk)[90](index=90&type=chunk) - Dividends to common stockholders totaled **$27,530 thousand** for the six months ended June 30, 2023, and preferred stockholders received **$2,911 thousand**[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=page&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased for the six months ended June 30, 2023, while investing activities shifted to a significant inflow due to property sales, and financing activities resulted in a substantial net cash outflow Cash Flow Activity | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Net cash provided by operating activities | $33,649 | $39,919 | $(6,270) | | Net cash provided by (used in) investing activities | $65,066 | $(102,394) | $167,460 | | Net cash (used in) provided by financing activities | $(103,385) | $63,916 | $(167,301) | | Net (decrease) increase in cash and restricted cash | $(4,670) | $1,441 | $(6,111) | | Cash and cash equivalents and restricted cash—end of period | $9,785 | $14,200 | $(4,415) | - Net proceeds from the sale of investment properties totaled **$68,403 thousand** for the six months ended June 30, 2023, compared to none in the prior year[22](index=22&type=chunk) - Repayment of Credit Facility was **$94,157 thousand** for the six months ended June 30, 2023, significantly higher than **$5,000 thousand** in the prior year[22](index=22&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=10&type=page&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on the company's organizational structure, significant accounting policies, property transactions, debt instruments, equity structure, related party dealings, stock-based compensation, lease arrangements, and contingent liabilities [Note 1 – Organization](index=10&type=page&id=Note%201%20%E2%80%93%20Organization) Global Medical REIT Inc. operates as an internally managed REIT, owning and acquiring healthcare facilities leased to physician groups and healthcare systems, holding a 92.91% limited partner interest in its Operating Partnership as of June 30, 2023 - Global Medical REIT Inc. is a Maryland corporation and internally managed REIT[23](index=23&type=chunk) - As of June 30, 2023, the Company held a **92.91% limited partner interest** in the Operating Partnership[23](index=23&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=10&type=page&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's accounting principles, including the basis of presentation, consolidation, use of estimates, and specific policies for investment in real estate, revenue recognition, cash, tenant receivables, escrow deposits, deferred assets, other assets, derivative instruments, goodwill, and assets held for sale - All facility acquisitions for the six months ended June 30, 2023 and 2022 were accounted for as asset acquisitions[30](index=30&type=chunk) - The fair value of interest rate swap derivative instruments was an asset of **$35,864 thousand** as of June 30, 2023, up from **$34,705 thousand** at December 31, 2022[41](index=41&type=chunk) Asset Categories | Asset Category (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $2,460 | $4,016 | | Restricted cash | $7,325 | $10,439 | | Tenant receivables, net | $7,381 | $8,040 | | Escrow deposits | $9,725 | $7,833 | | Deferred assets | $26,189 | $29,616 | | Other assets | $12,302 | $6,550 | [Note 3 – Property Portfolio](index=16&type=page&id=Note%203%20%E2%80%93%20Property%20Portfolio) During the first six months of 2023, the company completed one acquisition and two dispositions, including a portfolio of four medical office buildings in Oklahoma City for $66.0 million, resulting in a $12.8 million gain - One acquisition was completed during the six months ended June 30, 2023, for **$5,936 thousand**[50](index=50&type=chunk) - Sold a portfolio of four medical office buildings in Oklahoma City for **$66.0 million**, resulting in a gain of **$12.8 million** in June 2023[51](index=51&type=chunk) - Aggregate capital improvement commitments and obligations were approximately **$29,600 thousand** as of June 30, 2023[53](index=53&type=chunk) [Note 4 – Credit Facility, Notes Payable and Derivative Instruments](index=20&type=page&id=Note%204%20%E2%80%93%20Credit%20Facility%2C%20Notes%20Payable%20and%20Derivative%20Instruments) The company manages its debt through a $900 million unsecured syndicated credit facility and four notes payable, utilizing interest rate swaps to hedge variable-rate debt, fixing the SOFR component of its Term Loans - The Credit Facility consists of **$500 million** in term loans and a **$400 million** revolver, with a **$500 million** accordion feature[58](index=58&type=chunk) Debt Categories | Debt Category (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------------------- | :------------ | :---------------- | | Credit Facility, net | $567,988 | $636,447 | | Notes payable, net | $57,121 | $57,672 | | Total Debt, net | $625,109 | $694,119 | - The company has ten interest rate swaps and five forward starting interest rate swaps to fix the SOFR component of Term Loans A and B through their maturities[74](index=74&type=chunk)[75](index=75&type=chunk) - The weighted average interest rate and term of the company's debt was **4.09%** and **3.4 years** at June 30, 2023[81](index=81&type=chunk) [Note 5 – Equity](index=24&type=page&id=Note%205%20%E2%80%93%20Equity) The company has 3,105 shares of Series A Preferred Stock outstanding with a $25 per share liquidation preference and 65,565 shares of common stock outstanding as of June 30, 2023, with dividends paid quarterly for both preferred and common stock - **3,105 shares** of Series A Cumulative Redeemable Preferred Stock were issued and outstanding as of June 30, 2023, with a liquidation preference of **$25 per share**[82](index=82&type=chunk) - **65,565 shares** of common stock were outstanding as of June 30, 2023[86](index=86&type=chunk) Dividends | Dividend Type (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------- | :--------------------------- | :--------------------------- | | Preferred Stock Dividends | $2,911 | $2,911 | | Common Stock, LTIP, OP Units Dividends | $29,387 | $29,136 | [Note 6 – Related Party Transactions](index=27&type=page&id=Note%206%20%E2%80%93%20Related%20Party%20Transactions) As of June 30, 2023, the company had $391 thousand due from related parties, primarily for reimbursable taxes paid on behalf of LTIP Unit and OP Unit holders Due from Related Parties | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Due from related parties | $391 | $200 | [Note 7 – Stock-Based Compensation](index=27&type=page&id=Note%207%20%E2%80%93%20Stock-Based%20Compensation) The company's 2016 Equity Incentive Plan facilitates grants of LTIP Units, with 2,757 LTIP Units outstanding as of June 30, 2023, and a stock-based compensation expense of $1,835 thousand for the six months ended June 30, 2023 - As of June 30, 2023, there were **843 shares** of common stock remaining available for grant under the 2016 Equity Incentive Plan[94](index=94&type=chunk) LTIP Units Status | LTIP Units Status | Number of Units (in thousands) | | :---------------- | :----------------------------- | | Vested units | 2,151 | | Unvested units | 606 | | Total outstanding | 2,757 | Stock Compensation Expense | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Stock compensation expense | $1,147 | $1,289 | $1,835 | $2,576 | - Total unamortized compensation expense of approximately **$7.2 million** is expected to be recognized over a weighted average remaining period of **1.7 years** as of June 30, 2023[111](index=111&type=chunk) [Note 8 – Leases](index=31&type=page&id=Note%208%20%E2%80%93%20Leases) The company acts as both a lessor and a lessee, recognizing $72,517 thousand in rental revenue from operating leases with a portfolio-average-lease-years remaining of approximately 10 years, and recording a right-of-use asset and liability of $4,634 thousand for its new corporate headquarters lease Rental Revenue | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Rental revenue (operating leases) | $36,317 | $33,679 | $72,517 | $65,530 | | Variable rental revenue | $1,856 | $1,920 | $3,859 | $3,867 | - The company's operating leases as a lessor have a portfolio-average-lease-years remaining of approximately **10 years**[115](index=115&type=chunk) - A right of use asset and liability of **$4,634 thousand** was recorded on May 1, 2023, for the new corporate headquarters lease[122](index=122&type=chunk) - The company's rental revenues were derived from **268 tenants** leasing **186 buildings** during the six months ended June 30, 2023[124](index=124&type=chunk) [Note 9 – Commitments and Contingencies](index=35&type=page&id=Note%209%20%E2%80%93%20Commitments%20and%20Contingencies) The company is not currently subject to any material litigation or environmental liabilities that would significantly impact its financial position, results of operations, or cash flows - The company is not presently subject to any material litigation[125](index=125&type=chunk) - The company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its financial position, results of operations, or cash flows[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, changes in financial condition, and results of operations, covering business strategy, sustainability, impacts of inflation and COVID-19, an executive summary, property transactions, capital and debt activities, and a detailed analysis of consolidated results and non-GAAP financial measures [Special Note Regarding Forward-Looking Statements](index=37&type=page&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements, which involve numerous risks and uncertainties, advising against undue reliance and listing various factors that could cause actual results to differ materially - Forward-looking statements are identified by terms like 'believes,' 'expects,' 'may,' 'will,' 'should,' 'seeks,' 'approximately,' 'intends,' 'plans,' 'estimates,' or 'anticipates'[129](index=129&type=chunk) - Key risk factors include difficulties in identifying and completing acquisitions, tenant defaults, increases in interest rates, macroeconomic factors, and the effects of the COVID-19 pandemic[130](index=130&type=chunk) [Objective of MD&A](index=41&type=page&id=Objective%20of%20MD%26A) The MD&A aims to provide a narrative explanation of the financial statements, enhance overall financial disclosure, and offer insights into the quality and variability of earnings and cash flow to help investors understand past and future performance - The MD&A provides a narrative explanation of financial statements to enhance understanding of financial condition and results of operations[135](index=135&type=chunk) - It aims to provide information about the quality and potential variability of earnings and cash flow[139](index=139&type=chunk) [Overview](index=41&type=page&id=Overview) Global Medical REIT Inc. is an internally managed REIT focused on acquiring and leasing healthcare facilities, primarily through triple net leases, with revenues derived from rental and operating expense reimbursements, and acquisitions financed through a mix of debt and equity - Global Medical REIT Inc. owns and acquires healthcare facilities and leases them to physician groups and healthcare systems[136](index=136&type=chunk) - Revenues are primarily from rental and operating expense reimbursement payments from tenants, mostly under medium to long-term triple net leases[137](index=137&type=chunk) - Acquisitions are financed with a mixture of debt and equity, primarily from cash from operations, Credit Facility borrowings, and stock issuances[137](index=137&type=chunk) [Business Overview and Strategy](index=41&type=page&id=Business%20Overview%20and%20Strategy) The company's strategy is to invest in healthcare properties offering attractive returns, focusing on medical office buildings and decentralized healthcare facilities in secondary markets, while also pursuing opportunistic acquisitions to strengthen tenant relationships and achieve reliable dividends and stock price appreciation - Business strategy is to invest in healthcare properties with attractive returns, operated by profitable physician groups or healthcare systems[138](index=138&type=chunk) - Focuses on medical office buildings and decentralized components of the healthcare delivery system in secondary markets and suburbs[140](index=140&type=chunk) - Also invests opportunistically in acute-care hospitals, LTACs, health system corporate offices, and behavioral/mental health facilities[140](index=140&type=chunk) [Corporate Sustainability and Social Responsibility](index=43&type=page&id=Corporate%20Sustainability%20and%20Social%20Responsibility) The company integrates environmental sustainability, social responsibility, and strong governance practices, led by a standing ESG committee of the Board, with efforts including tenant outreach for energy data, a Corporate Social Responsibility Report, and prioritizing employee engagement and well-being - The Board of Directors leads ESG efforts through a standing ESG committee[144](index=144&type=chunk) - The company released its second Corporate Social Responsibility Report in June 2023, detailing progress in ESG[145](index=145&type=chunk) - Commitment to employee engagement, health, safety, and work-life balance, including LEED platinum certified headquarters[146](index=146&type=chunk) [Climate Change](index=43&type=page&id=Climate%20Change) The company prioritizes energy efficiency and sustainability in investments, monitoring its portfolio for climate risk factors, using utility and energy audits to assess carbon emissions, and exploring mitigation efforts including renewable energy and energy utilization reduction - Prioritizes energy efficiency and sustainability when evaluating investment opportunities and monitors portfolio for climate risk factors[147](index=147&type=chunk) - Utilizes utility and energy audits by third-party engineering consultants during due diligence to assess carbon emission levels[147](index=147&type=chunk) - Explores ways to mitigate climate risk and contribute to reduction of climate impact through proactive asset management, incorporating renewable energy and energy utilization reduction[147](index=147&type=chunk) [Impact of Inflation](index=43&type=page&id=Impact%20of%20Inflation) Rising inflation and Federal Funds Rate increases have significantly elevated the company's interest expense, with one-month term SOFR increasing to 5.32% by August 2, 2023, while long-term leases limit rapid rent increases to offset higher costs - One-month term SOFR increased from near **0%** at the beginning of 2022 to **5.32%** by August 2, 2023, leading to a significant increase in interest expense[148](index=148&type=chunk) - A **100 basis point increase** in term SOFR would increase annual interest expense by approximately **$0.8 million** based on June 30, 2023, floating rate debt[161](index=161&type=chunk) - Longer-term leases limit the ability to quickly increase rents to fully offset increased interest rates and inflation[149](index=149&type=chunk) [Continuing Impact of COVID-19](index=45&type=page&id=Continuing%20Impact%20of%20COVID-19) The COVID-19 pandemic has led to increased labor costs for healthcare systems due to worker burnout and reliance on higher-cost contract labor, with the continued spread of variants prolonging disruptions to operations for the company and its tenants - COVID-19 has led to material increases in labor costs for healthcare systems, especially hospitals, due to worker burnout and reliance on contract nursing labor[150](index=150&type=chunk) - The continued spread of COVID-19 variants could disrupt operations for the company and its tenants[151](index=151&type=chunk) [Executive Summary](index=45&type=page&id=Executive%20Summary) The executive summary highlights key financial and operational changes for the three and six months ended June 30, 2023, showing significantly increased net income per share driven by property sales, while FFO and AFFO per share and unit saw slight decreases, alongside a reduction in gross investment in real estate and total debt Executive Summary - Financial Metrics | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :--------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Rental revenue (in thousands) | $36,317 | $33,679 | $72,517 | $65,530 | | Interest expense (in thousands) | $8,468 | $5,401 | $16,739 | $10,202 | | Gain on sale of investment properties (in thousands) | $12,786 | — | $13,271 | — | | Net income attributable to common stockholders per share | $0.18 | $0.03 | $0.19 | $0.07 | | FFO per share and unit | $0.21 | $0.24 | $0.43 | $0.47 | | AFFO per share and unit | $0.23 | $0.25 | $0.45 | $0.49 | Executive Summary - Balance Sheet and Operational Metrics | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Investment in real estate, gross | $1,431,369 | $1,484,177 | | Total debt, net | $625,109 | $694,119 | | Weighted average interest rate | 4.09 % | 4.20 % | | Net leasable square feet | 4,773,469 | 4,895,635 | [Our Properties](index=45&type=page&id=Our%20Properties) During the first half of 2023, the company acquired one property for $6.7 million and disposed of five medical office buildings across two transactions, generating $70.4 million in gross proceeds and $13.3 million in gains, with the portfolio comprising 186 buildings and 4.8 million leasable square feet as of June 30, 2023 - Completed one acquisition of **18,698 leasable square feet** for **$6.7 million** with annualized base rent of **$0.5 million** during the six months ended June 30, 2023[155](index=155&type=chunk) - Sold a portfolio of four medical office buildings in Oklahoma City for **$66.0 million**, resulting in a gain of **$12.8 million** in June 2023[157](index=157&type=chunk) - Sold a medical office building in Jacksonville, Florida for **$4.4 million**, resulting in a gain of **$0.5 million** in March 2023[157](index=157&type=chunk) - As of June 30, 2023, the portfolio consisted of **186 buildings** with **4.8 million leasable square feet** and **$111.3 million** of annualized base rent[155](index=155&type=chunk) [Capital Raising Activity](index=47&type=page&id=Capital%20Raising%20Activity) The company has an At-The-Market (ATM) Program allowing for the sale of up to $300 million of common stock, but no shares were sold under this program during the six months ended June 30, 2023 - The company has an ATM Program to offer and sell up to **$300 million** of common stock[159](index=159&type=chunk) - No shares were sold under the ATM Program during the six months ended June 30, 2023[159](index=159&type=chunk) [Debt Activity](index=47&type=page&id=Debt%20Activity) During the first half of 2023, the company made net repayments of $69.6 million on its Credit Facility, borrowing $24.6 million and repaying $94.2 million, with a net outstanding Credit Facility balance of $568.0 million and $321.0 million in unutilized borrowing capacity under the Revolver as of August 2, 2023 - Borrowed **$24.6 million** and repaid **$94.2 million** under the Credit Facility, resulting in a net repayment of **$69.6 million** during the six months ended June 30, 2023[160](index=160&type=chunk) - As of June 30, 2023, the net outstanding Credit Facility balance was **$568.0 million**[160](index=160&type=chunk) - Unutilized borrowing capacity under the Revolver was **$321.0 million** as of August 2, 2023[160](index=160&type=chunk) [Trends Which May Influence Our Results of Operations](index=47&type=page&id=Trends%20Which%20May%20Influence%20Our%20Results%20of%20Operations) Positive trends include an aging population, a shift towards outpatient care, and physician practice group/hospital consolidation, while negative trends include increased interest rates and cost of capital, the continuing impact of the COVID-19 pandemic on labor costs, and potential changes in third-party reimbursement methods and policies - Positive trends: aging population, shift towards outpatient care, and physician practice group/hospital consolidation[162](index=162&type=chunk) - Negative trends: increased interest rates and cost of capital, continued COVID-19 impact on labor costs, and changes in third-party reimbursement methods[161](index=161&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk) - A **100 basis point increase** in term SOFR would increase annual interest expense by approximately **$0.8 million**[161](index=161&type=chunk) [Critical Accounting Estimates](index=49&type=page&id=Critical%20Accounting%20Estimates) The preparation of financial statements requires management to use judgment, estimates, and assumptions in applying accounting policies, which affect reported amounts and disclosures, and actual results may differ, leading to adjustments in subsequent periods - Preparation of financial statements requires management to use judgment, estimates, and assumptions[165](index=165&type=chunk) - Estimates affect reported amounts of assets, liabilities, contingent assets/liabilities, revenue, and expenses[165](index=165&type=chunk) [Consolidated Results of Operations](index=49&type=page&id=Consolidated%20Results%20of%20Operations) The company's consolidated results for the three and six months ended June 30, 2023, show increased rental revenue and operating expenses due to recent acquisitions, but also significantly higher interest expenses from rising rates, with net income seeing substantial growth driven by gains from property dispositions - Increases in rental revenue and operating expenses were primarily due to facilities acquired after June 30, 2022, and full recognition of operating results from 2022 acquisitions[166](index=166&type=chunk) - Rising interest rates significantly impacted results, leading to increased interest expense[166](index=166&type=chunk) - Total investment in real estate, net, decreased to **$1.2 billion** as of June 30, 2023, from **$1.3 billion** as of June 30, 2022, due to property dispositions[166](index=166&type=chunk) [Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022](index=51&type=page&id=Three%20Months%20Ended%20June%2030%2C%202023%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202022) For the three months ended June 30, 2023, total revenue increased by $2.7 million, primarily from rental revenue from new acquisitions, while total expenses rose by $5.1 million, largely due to a $3.1 million increase in interest expense, with a significant gain of $12.8 million from property sales leading to a net income increase of $10.4 million Consolidated Results of Operations - Three Months | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | | Total Revenue | $36,351 | $33,697 | $2,654 | | General and administrative | $4,462 | $4,336 | $126 | | Operating expenses | $7,223 | $6,000 | $1,223 | | Depreciation expense | $10,468 | $9,898 | $570 | | Amortization expense | $4,337 | $4,138 | $199 | | Interest expense | $8,468 | $5,401 | $3,067 | | Total expenses | $34,960 | $29,863 | $5,097 | | Gain on sale of investment properties | $12,786 | — | $12,786 | | Net income | $14,177 | $3,834 | $10,343 | - The weighted average interest rate of debt for the three months ended June 30, 2023, was **4.39%**, up from **2.97%** in the prior year[176](index=176&type=chunk) [Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022](index=54&type=page&id=Six%20Months%20Ended%20June%2030%2C%202023%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202022) For the six months ended June 30, 2023, total revenue increased by $7.0 million, driven by rental revenue from recent acquisitions, while total expenses rose by $12.0 million, with interest expense increasing by $6.5 million due to higher borrowings and interest rates, and net income increasing by $8.3 million primarily due to a $13.3 million gain from property sales Consolidated Results of Operations - Six Months | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | | Total Revenue | $72,581 | $65,572 | $7,009 | | General and administrative | $8,266 | $8,534 | $(268) |\ | Operating expenses | $14,759 | $11,372 | $3,387 |\ | Depreciation expense | $20,962 | $19,300 | $1,662 |\ | Amortization expense | $8,732 | $7,915 | $817 |\ | Interest expense | $16,739 | $10,202 | $6,537 |\ | Total expenses | $69,502 | $57,453 | $12,049 |\ | Gain on sale of investment properties | $13,271 | — | $13,271 |\ | Net income | $16,350 | $8,119 | $8,231 | - The weighted average interest rate of debt for the six months ended June 30, 2023, was **4.32%**, up from **2.92%** in the prior year[190](index=190&type=chunk) [Assets and Liabilities](index=56&type=page&id=Assets%20and%20Liabilities) As of June 30, 2023, the company's net investment in real estate decreased to $1.2 billion from $1.3 billion at December 31, 2022, due to property dispositions, while liquid assets also decreased primarily from net Credit Facility repayments and dividend payments, and total liabilities decreased due to lower net borrowings Assets and Liabilities Overview | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Investment in real estate, net | $1,213,260 | $1,285,959 | | Cash and cash equivalents and restricted cash | $9,785 | $14,455 | | Total liabilities | $679,408 | $744,196 | - The decrease in cash and cash equivalents and restricted cash was primarily due to net repayments on the Credit Facility and dividend payments, partially offset by proceeds from property sales and operating activities[195](index=195&type=chunk) - The decrease in total liabilities was primarily due to lower net borrowings outstanding, partially offset by the recognition of a lease liability related to a right of use asset[196](index=196&type=chunk) [Liquidity and Capital Resources](index=58&type=page&id=Liquidity%20and%20Capital%20Resources) The company's short-term liquidity needs include debt payments, operating expenses, and distributions, while long-term needs involve acquisitions and capital improvements, met through cash flow from operations, debt financing (including a $900 million Credit Facility with $321.0 million unutilized capacity as of August 2, 2023), equity issuances, and property dispositions, with interest rate swaps used to manage interest rate risk - Short-term liquidity requirements include interest and principal payments on debt, general and administrative expenses, property operating expenses, property acquisitions, distributions, and capital/tenant improvements[197](index=197&type=chunk)[204](index=204&type=chunk) - Long-term liquidity requirements primarily consist of funds for acquisitions, capital/tenant improvements, and scheduled debt maturities[198](index=198&type=chunk) - Primary external sources of liquidity include equity issuances (including OP Units) and debt financing (Credit Facility and secured term loans)[201](index=201&type=chunk) - As of August 2, 2023, the company had unutilized borrowing capacity under the Revolver of **$321.0 million**[202](index=202&type=chunk) - The company uses interest rate swaps to manage interest rate risk on its Term Loans, with total fixed debt of **$557.5 million** at June 30, 2023, and a weighted average interest rate of **3.75%**[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) [Non-GAAP Financial Measures](index=60&type=page&id=Non-GAAP%20Financial%20Measures) This section discusses the company's use of non-GAAP financial measures, specifically Funds from Operations (FFO), Adjusted Funds from Operations (AFFO), Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre), and Adjusted EBITDAre, which are used by management and analysts to evaluate operating performance and debt servicing ability - Non-GAAP financial measures are used to supplement GAAP measures for evaluating operating performance and liquidity[212](index=212&type=chunk)[215](index=215&type=chunk) - FFO and AFFO are important supplemental measures for evaluating REIT operating performance[216](index=216&type=chunk)[219](index=219&type=chunk) - EBITDAre and Adjusted EBITDAre provide additional information to evaluate core operating results and ability to service debt[221](index=221&type=chunk) [Funds from Operations and Adjusted Funds from Operations](index=62&type=page&id=Funds%20from%20Operations%20and%20Adjusted%20Funds%20from%20Operations) FFO, as defined by NAREIT, adjusts net income for noncontrolling interests, property sales gains/losses, preferred stock dividends, and real estate-related depreciation/amortization, while AFFO further modifies FFO by adjusting for recurring acquisition/disposition costs, deferred rental revenue, stock-based compensation, and debt issuance costs - FFO is net income before noncontrolling interests, excluding gains/losses from property sales and extraordinary items, less preferred stock dividends, plus real estate-related depreciation and amortization[217](index=217&type=chunk) - AFFO modifies FFO by adjusting for items like recurring acquisition/disposition costs, straight-line deferred rental revenue, stock-based compensation, and amortization of debt issuance costs[218](index=218&type=chunk) FFO and AFFO | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $14,177 | $3,834 | $16,350 | $8,119 | | FFO | $14,710 | $16,387 | $29,803 | $32,368 | | AFFO | $15,868 | $17,563 | $31,820 | $34,390 | | FFO per share and unit | $0.21 | $0.24 | $0.43 | $0.47 | | AFFO per share and unit | $0.23 | $0.25 | $0.45 | $0.49 | [Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre and Adjusted EBITDAre)](index=63&type=page&id=Earnings%20Before%20Interest%2C%20Taxes%2C%20Depreciation%20and%20Amortization%20for%20Real%20Estate%20(EBITDAre%20and%20Adjusted%20EBITDAre)) EBITDAre, as per NAREIT standards, is net income adjusted for depreciation, amortization, interest expense, and gains/losses on property sales, while Adjusted EBITDAre further includes non-cash stock compensation, intangible amortization, and preacquisition expenses, with these measures helping evaluate core operating results and debt servicing capacity - EBITDAre is net income plus depreciation and amortization, interest expense, gain or loss on property sales, and impairment loss[221](index=221&type=chunk) - Adjusted EBITDAre adds non-cash stock compensation expense, non-cash intangible amortization related to above and below market leases, and preacquisition expense to EBITDAre[221](index=221&type=chunk) EBITDAre and Adjusted EBITDAre | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $14,177 | $3,834 | $16,350 | $8,119 | | EBITDAre | $24,664 | $23,271 | $49,512 | $45,536 | | Adjusted EBITDAre | $26,100 | $24,965 | $51,969 | $48,756 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from variable-rate debt, with a 100 basis point increase in SOFR decreasing annual cash flow by approximately $0.8 million, mitigated by interest rate swaps, and no engagement in speculative derivative transactions - The primary market risk is interest rate risk, arising from debt used to acquire healthcare facilities, including Credit Facility borrowings[224](index=224&type=chunk)[225](index=225&type=chunk) - As of June 30, 2023, **$76.1 million** of unhedged borrowings under the Revolver bore interest at a variable rate[226](index=226&type=chunk) - A **100 basis point increase** in SOFR would decrease annual cash flow by approximately **$0.8 million**[226](index=226&type=chunk) - The company uses interest rate swaps to limit the impact of interest rate changes and lower borrowing costs, and does not enter into derivative transactions for speculative purposes[227](index=227&type=chunk)[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=64&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2023, the company's principal executive and financial officers concluded that disclosure controls and procedures were effective, with no material changes made to internal control over financial reporting during the most recently completed fiscal quarter - Disclosure controls and procedures were evaluated as effective as of June 30, 2023[231](index=231&type=chunk) - No material changes were made to internal control over financial reporting during the most recently completed fiscal quarter[233](index=233&type=chunk) [PART II OTHER INFORMATION](index=66&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings or litigation, nor is it aware of any threatened proceedings that would have a material adverse effect on its financial condition or results of operations - The company is not presently subject to any material legal proceeding or litigation[235](index=235&type=chunk) - No governmental authority is contemplating any proceeding that would have a material adverse effect on the company's financial condition or results of operations[235](index=235&type=chunk) [Item 1A. Risk Factors](index=66&type=page&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to risk factors were disclosed during the six months ended June 30, 2023[236](index=236&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[237](index=237&type=chunk) [Item 3. Defaults Upon Senior Securities](index=66&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[238](index=238&type=chunk) [Item 4. Mine Safety Disclosures](index=66&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[239](index=239&type=chunk) [Item 5. Other Information](index=66&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None[240](index=240&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including articles of restatement, bylaws, stock certificates, LTIP agreements, officer certifications, and XBRL documents - Includes Articles of Restatement, Fourth Amended and Restated Bylaws, Specimen Common Stock Certificate, Specimen Series A Preferred Stock Certificate, Form of LTIP Agreement (Annual Awards), Officer Certifications, and Inline XBRL documents[242](index=242&type=chunk) [Signatures](index=68&type=section&id=Signatures) The report is duly signed on behalf of Global Medical REIT Inc. by its Chief Executive Officer, Jeffrey M. Busch, and Chief Financial Officer, Robert J. Kiernan, as of August 4, 2023 - The report is signed by Jeffrey M. Busch, Chief Executive Officer, and Robert J. Kiernan, Chief Financial Officer, on August 4, 2023[246](index=246&type=chunk)

Portfolio Composition and Performance - The company's gross investment in real estate totals $1.4 billion[39] - The portfolio consists of 186 buildings[26, 39] - Leased occupancy stands at 97%[26, 39] - Total Annualized Base Rent (ABR) is $111.3 million[26] - The weighted average portfolio cap rate is 7.9%[26, 39] - The weighted average lease term is 5.8 years[26, 39] Financial Highlights - Rental revenue for the quarter ended June 30, 2023, was $36.317 million[32, 83], compared to $33.679 million for the same period in 2022[32, 83], representing a 7.9% increase[25] - Net income attributable to common stockholders was $11.820 million, or $0.18 per diluted share[32, 33, 83], compared to $2.236 million, or $0.03 per diluted share, in the comparable prior year period[32, 33, 83] - Funds From Operations (FFO) was $14.7 million, or $0.21 per share and unit[33], compared to $16.4 million, or $0.24 per share and unit, in the comparable prior year period[33] - Adjusted Funds From Operations (AFFO) was $15.9 million, or $0.23 per share and unit[33], compared to $17.6 million, or $0.25 per share and unit, in the comparable prior year period[33] Debt and Capitalization - Total gross debt is $633.639 million[57, 68] - Fixed-rate debt accounts for 88% of total debt[68, 69] - The weighted average interest rate is 4.09%[57, 68] - Leverage ratio was 44.5% as of June 30, 2023[24, 54, 68]

Financial Data and Key Metrics Changes - The company achieved a 7.9% year-over-year increase in total revenues to $36.4 million, driven primarily by the timing of 2022 acquisitions [14] - Net income attributable to common shareholders for Q2 2023 was $11.8 million or $0.18 per share, compared to $2.2 million or $0.03 per share in Q2 2022 [50][69] - FFO in Q2 was $0.21 per share, down $0.03 from the prior year quarter, and AFFO was $0.23 per share, down $0.02 from the second quarter of last year [51][69] - Interest expense increased to $8.5 million in Q2 2023 from $5.4 million in the comparable quarter of last year, reflecting higher average debt balances and an increase in average borrowing rate from 2.97% to 4.39% [6] Business Line Data and Key Metrics Changes - The portfolio consists of gross investments in real estate of $1.4 billion, with 4.8 million total leasable square feet and 97% occupancy [5] - The company sold a 4-property medical office building (MOB) portfolio in Oklahoma City for gross proceeds of $66 million at a 6.5% cap rate, resulting in a gain of $12.8 million [49][56] - The company acquired 2 medical office buildings in Redding, California for $6.7 million with a 7.6% cap rate [52][55] Market Data and Key Metrics Changes - The transaction market for target medical facilities remains constrained due to higher interest rates and a wide bid-ask spread [55] - Cap rates have continued to drift higher, with current rates for preferred asset types being north of mid-7s [11][59] Company Strategy and Development Direction - The company aims to reduce leverage to a target range of 40% to 45% and is actively engaged in the market for potential acquisitions once cost of capital improves [17][37] - The company is focused on maintaining a diversified portfolio of high-quality medical office properties and is exploring development financing and joint venture opportunities [56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current market challenges and capitalizing on opportunities as they arise [1] - The company is prepared to resume acquisition efforts once market conditions normalize and cost of capital improves [37] - Management noted that the stability of the diversified portfolio and ample liquidity allow for a patient approach in the current market [58] Other Important Information - The company has generated proceeds of $70.4 million from dispositions through June 30, 2023, and closed on the sale of a medical office building in North Charleston for an additional $10.1 million [53] - The weighted average interest rate on debt was 4.09% as of June 30, 2023, with approximately 88% of debt now being fixed rate [63] Q&A Session Summary Question: Is the $90 million sales target still appropriate? - Management confirmed that they would consider exceeding the $90 million threshold if the right opportunities arise [3][10] Question: What are the common themes among the assets being sold? - Management indicated a focus on single-tenant and clean assets, with a preference for higher acuity assets to increase the MOB footprint [4][26] Question: How extensive is the tenant watch list? - The watch list is very limited, with properties performing well and no significant issues expected [72] Question: What is the current acquisition pipeline? - The company is actively looking at deals but is waiting for better pricing before proceeding with acquisitions [20][59] Question: How are lease expirations being managed? - Management noted that there are no significant move-outs expected and that negotiations for lease increases are ongoing [61]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________. Commission file number: 001-37815 Global Medical REIT Inc. (Exact name of registrant as specified in its charter) | Maryland ...

Global Medical REIT Inc. (NYSE:GMRE) Q1 2023 Earnings Conference Call May 4, 2023 9:00 AM ET Company Participants Steve Swett - Investor Relations Jeff Busch - Chief Executive Officer Alfonzo Leon - Chief Investment Officer Bob Kiernan - Chief Financial Officer Conference Call Participants Juan Sanabria - BMO Capital Markets Rob Stevenson - Janney Montgomery Scott Austin Wurschmidt - KeyBanc Capital Markets Operator Greetings, and welcome to Global Medical REIT First Quarter 2023 Earnings Call. At this time ...

6 Common and Preferred Dividends • Net income attributable to common stockholders was $0.7 million, or $0.01 per diluted share, as compared to $2.7 million, or $0.04 per diluted share, in the comparable prior year period. • Funds from Operations ("FFO") of $15.1 million, or $0.22 per share and unit, as compared to $16.0 million, or $0.23 per share and unit, in the comparable prior year period. • Adjusted Funds from Operations ("AFFO") of $16.0 million, or $0.23 per share and unit, as compared to $16.8 milli ...

Global Medical REIT Inc. (NYSE:GMRE) Q4 2022 Earnings Conference Call March 1, 2023 9:00 AM ET Company Participants Steve Swett - Investor Relations, ICR Jeffrey Busch - CEO Alfonzo Leon - CIO Robert Kiernan - CFO Conference Call Participants Austin Wurschmidt - KeyBanc Capital Markets Juan Sanabria - BMO Capital Markets Rob Stevenson - Janney Montgomery Scott Bryan Maher - B. Riley Securities Aaron Hecht - JMP Securities Operator Greetings and welcome to the Global Medical Fourth Quarter 2022 Earnings Call ...

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) GMRE is an internally managed REIT acquiring and leasing healthcare facilities, with a **$1.5 billion** portfolio as of December 31, 2022 [Organization and Business Strategy](index=5&type=section&id=Organization%20and%20Business%20Strategy) GMRE operates as an internally managed UPREIT, investing in healthcare properties, primarily medical office buildings, under triple-net leases - GMRE is an internally managed REIT that acquires and leases healthcare facilities, conducting its business through an UPREIT structure[20](index=20&type=chunk)[21](index=21&type=chunk) - The company's investment strategy targets medical office buildings in secondary markets, facilities serving the aging population, and opportunistic acquisitions such as acute-care hospitals and behavioral health facilities[22](index=22&type=chunk)[25](index=25&type=chunk) - Most properties are leased under single-tenant, triple-net leases, though the portfolio is expanding to include some multi-tenant properties with gross or modified gross lease structures[23](index=23&type=chunk) [Corporate Responsibility and External Factors](index=6&type=section&id=Corporate%20Responsibility%20and%20External%20Factors) The company prioritizes ESG, monitors climate risks, and faces financial impacts from rising interest rates and COVID-19 related labor costs - The Board of Directors leads ESG efforts through a dedicated committee, focusing on strategy, stakeholder communications, and compliance[25](index=25&type=chunk) - Rising inflation in 2022 led the Federal Reserve to increase interest rates, causing the one-month term SOFR (the reference rate for the company's credit facility) to rise from near **0%** to **4.5%**, significantly increasing interest expense[29](index=29&type=chunk) - The COVID-19 pandemic has caused labor shortages and increased labor costs for healthcare systems, particularly hospitals, which could impact tenants' financial stability[31](index=31&type=chunk) [Property Portfolio Overview](index=9&type=section&id=Property%20Portfolio%20Overview) As of December 31, 2022, GMRE's portfolio comprised 189 buildings with **$114.5 million** in annualized base rent, primarily medical office buildings Portfolio Summary by Property Type (as of Dec 31, 2022) | Type | Leasable Square Feet (LSF) | % of LSF | Annualized Base Rent (ABR) (in thousands) | % of ABR | | :--- | :--- | :--- | :--- | :--- | | Medical Office Building (MOB) | 3,670,193 | 75.0% | $77,570 | 67.8% | | Inpatient Rehab. Facility (IRF) | 547,007 | 11.2% | $20,083 | 17.5% | | Surgical Hospital | 174,984 | 3.6% | $6,731 | 5.9% | | Other | 503,451 | 10.2% | $10,085 | 8.8% | | **Total** | **4,895,635** | **100.0%** | **$114,469** | **100.0%** | Geographic Concentration (as of Dec 31, 2022) | State | % of LSF | % of ABR | | :--- | :--- | :--- | | Texas | 14.9% | 17.6% | | Florida | 11.5% | 10.3% | | Ohio | 8.5% | 8.3% | | Oklahoma | 4.0% | 6.4% | | Pennsylvania | 5.8% | 6.2% | | Arizona | 3.8% | 5.7% | | Illinois | 6.3% | 5.7% | | Other (28 states) | 45.2% | 39.8% | Significant Tenants (as of Dec 31, 2022) | Tenant | % of LSF | % of ABR | | :--- | :--- | :--- | | LifePoint Health | 3.2% | 6.6% | | Encompass Health Corporation | 5.2% | 6.4% | Lease Expiration Schedule (% of ABR) | Year | % of ABR | | :--- | :--- | | 2023 | 6.6% | | 2024 | 13.7% | | 2025 | 7.7% | | 2026 | 9.9% | | 2027 | 10.6% | | Thereafter | 41.5% | [Recent Developments and Market Opportunity](index=11&type=section&id=Recent%20Developments%20and%20Market%20Opportunity) A tenant's bankruptcy was resolved, and the company has pending acquisitions and dispositions, driven by an aging population and healthcare decentralization - Tenant Pipeline Health System, LLC filed for Chapter 11 bankruptcy in October 2022 but assumed its lease at the White Rock Medical Center as part of its reorganization plan, effective February 6, 2023[44](index=44&type=chunk) - As of February 24, 2023, the company had one acquisition under contract for ~**$6.7 million** and two properties under contract for sale for ~**$11.6 million**[45](index=45&type=chunk)[46](index=46&type=chunk) - Key market drivers for the company's strategy include the aging U.S. population increasing healthcare demand and the decentralization of healthcare services away from large hospitals to smaller, specialized facilities[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) [Competition and Regulatory Environment](index=12&type=section&id=Competition%20and%20Regulatory%20Environment) GMRE faces intense competition for acquisitions and its tenants operate in a heavily regulated healthcare industry with reimbursement pressures - Competition for medical office buildings has increased significantly since the COVID-19 pandemic, as real estate investors seek reliable returns, driving up prices[55](index=55&type=chunk) - Tenants' revenues are highly dependent on government programs like Medicare and Medicaid, which are subject to ongoing pressure to reduce reimbursement rates[57](index=57&type=chunk)[58](index=58&type=chunk) - Tenants are subject to complex healthcare regulations, including the Affordable Care Act and fraud and abuse laws like the Anti-Kickback Statute and Stark Law, violations of which can result in severe penalties[59](index=59&type=chunk)[62](index=62&type=chunk)[67](index=67&type=chunk) [Human Capital](index=16&type=section&id=Human%20Capital) As of December 31, 2022, GMRE had 29 employees, with **34%** women and **31%** ethnically diverse individuals - As of December 31, 2022, the company had 29 employees, with a workforce composed of **34%** women and **31%** ethnically diverse individuals[70](index=70&type=chunk)[71](index=71&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from tenant financial health, rising interest rates, portfolio concentration, and REIT status compliance [Risks Related to our Business and Healthcare Facilities](index=18&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Healthcare%20Facilities) The company's revenue depends heavily on tenant financial health, with risks from economic downturns, regulatory changes, and geographic concentration - The company is dependent on its tenants for revenue, and their ability to pay rent is subject to a wide range of business, economic, and regulatory risks[77](index=77&type=chunk) - As of December 31, 2022, the top three tenants (LifePoint Health, Encompass, Memorial Health) accounted for approximately **18%** of the portfolio's annualized base rent[79](index=79&type=chunk) - The company has significant geographic concentration, with approximately **18%** of its annualized base rent derived from Texas and **10%** from Florida as of year-end 2022[93](index=93&type=chunk) - Leases representing **6.6%**, **13.7%**, and **7.7%** of the portfolio's annualized base rent are set to expire in 2023, 2024, and 2025, respectively[91](index=91&type=chunk) [Risks Related to our Financings](index=28&type=section&id=Risks%20Related%20to%20our%20Financings) The company is exposed to interest rate risk from floating-rate debt and relies on external capital, with debt agreements containing restrictive financial covenants - The company is exposed to interest rate risk from its unhedged floating-rate debt. The rapid increase in inflation during 2022 led to a material increase in borrowing costs as the One-Month Term SOFR rose from just over **0%** to **4.32%**[107](index=107&type=chunk) - Debt agreements require compliance with financial covenants, such as maintaining specific leverage and coverage ratios. Breaches could lead to default and acceleration of debt[108](index=108&type=chunk) - The company relies on external capital to fund future needs, as REIT distribution requirements limit the ability to retain cash from operations[112](index=112&type=chunk) [Risks Related to the Healthcare Industry](index=30&type=section&id=Risks%20Related%20to%20the%20Healthcare%20Industry) The healthcare industry faces adverse trends, regulatory uncertainty, and reimbursement pressures, which could negatively impact tenants' profitability and ability to pay rent - Adverse trends in the healthcare industry, such as changes in service delivery, provider competition, and regulatory uncertainty, may negatively affect tenants' businesses[114](index=114&type=chunk)[115](index=115&type=chunk) - Reductions in reimbursement from third-party payors, including Medicare and Medicaid, could hinder tenants' ability to make rent payments[119](index=119&type=chunk) - Tenants may be subject to significant legal actions and government investigations, which could expose them to substantial liabilities and affect their ability to pay rent[121](index=121&type=chunk)[122](index=122&type=chunk) [Risks Related to the Real Estate Industry](index=32&type=section&id=Risks%20Related%20to%20the%20Real%20Estate%20Industry) The company is subject to real estate market fluctuations, illiquidity, and potential asset impairment charges, which are beyond its control - Real estate investments are subject to risks and cyclical fluctuations in value and demand, influenced by economic conditions and interest rates, which are beyond the company's control[123](index=123&type=chunk) - The illiquidity of real estate could limit the company's ability to promptly sell properties in response to changing economic or investment conditions[124](index=124&type=chunk) - The company periodically evaluates its assets for impairment, and a determination of impairment would require an adjustment to the net carrying value of the asset, potentially affecting financial results[127](index=127&type=chunk) [Risks Related to Our Structure](index=33&type=section&id=Risks%20Related%20to%20Our%20Structure) GMRE operates through an UPREIT structure with potential conflicts of interest, stock ownership restrictions, and reliance on key personnel - The company conducts all operations through its Operating Partnership and relies on distributions from it to pay dividends and meet obligations[128](index=128&type=chunk) - The company's charter restricts any stockholder from owning more than **9.8%** of any class of its stock to maintain REIT qualification, which may deter changes of control[137](index=137&type=chunk) - The company's success depends significantly on its key personnel, including its CEO, CFO, and CIO, and the failure to retain them could adversely affect the business[151](index=151&type=chunk) [Risks Related to Our Qualification and Operation as a REIT](index=41&type=section&id=Risks%20Related%20to%20Our%20Qualification%20and%20Operation%20as%20a%20REIT) Failure to maintain REIT qualification would result in corporate taxation, requiring annual distribution of at least **90%** of taxable income and adherence to complex asset tests - If the company fails to qualify as a REIT, it would be taxed as a regular corporation, which would substantially reduce funds available for stockholder distributions[152](index=152&type=chunk)[155](index=155&type=chunk) - To maintain REIT status, the company must distribute at least **90%** of its REIT taxable income annually; failure to do so would subject it to corporate income tax[157](index=157&type=chunk) - Compliance with REIT asset tests (e.g., at least **75%** of assets must be qualified real estate assets) may require the company to liquidate otherwise attractive investments[159](index=159&type=chunk)[160](index=160&type=chunk) [Item 1B. Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[180](index=180&type=chunk) [Item 2. Properties](index=50&type=section&id=Item%202.%20Properties) This section incorporates by reference the information provided under "Our Properties" in Item 1 of the report - The information regarding the company's properties is incorporated by reference from Item 1 of this Annual Report[181](index=181&type=chunk) [Item 3. Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) The company states that it is not currently involved in any pending legal proceedings that would have a material adverse effect - The company is not involved in any pending legal proceeding or litigation that would be likely to have a material adverse effect on its financial condition or results of operations[182](index=182&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[183](index=183&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under "GMRE," paid a **$0.21** quarterly dividend in 2022, and outperformed benchmark indices from 2017-2022 - The company's common stock is listed on the New York Stock Exchange under the ticker symbol "GMRE"[186](index=186&type=chunk) Quarterly Dividend Per Share | Fiscal Year | Quarterly Dividend per Share | | :--- | :--- | | 2022 | $0.21 | | 2021 | $0.205 | Cumulative Total Return Performance (2017-2022) | Index | 12/31/17 | 12/31/22 | | :--- | :--- | :--- | | Global Medical REIT Inc. | $100.00 | $166.49 | | S&P 500 Index | $100.00 | $156.88 | | MSCI U.S. REIT Index | $100.00 | $119.87 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=52&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 2022 financial results, including revenue growth, increased interest expense, acquisitions, liquidity, and non-GAAP reconciliations [2022 Executive Summary](index=54&type=section&id=2022%20Executive%20Summary) In 2022, GMRE's rental revenue increased, FFO and AFFO per share grew, and the company expanded its portfolio through acquisitions and a credit facility amendment Key Financial Metrics (Year Ended Dec 31) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Rental revenue | $137,167 | $115,804 | | Interest expense | $25,230 | $19,696 | | Net income per share | $0.20 | $0.19 | | FFO per share and unit | $0.92 | $0.90 | | AFFO per share and unit | $0.98 | $0.95 | - During 2022, the company completed 14 acquisitions for an aggregate purchase price of $148.9 million[201](index=201&type=chunk) - In July 2022, a medical office building was sold for gross proceeds of $17.9 million, resulting in a gain of approximately $6.8 million[202](index=202&type=chunk) - The company amended its Credit Facility, adding a new $150 million term loan (Term Loan B), extending the revolver's maturity to August 2026, and transitioning from LIBOR to SOFR-based loans[204](index=204&type=chunk) [Trends and Critical Accounting Estimates](index=56&type=section&id=Trends%20and%20Critical%20Accounting%20Estimates) Positive trends include aging population and outpatient shift, while negative trends involve high interest rates and inflation, impacting critical accounting estimates - Positive operational trends include an aging population driving healthcare demand and a continuing shift towards outpatient care[210](index=210&type=chunk) - Negative financial trends include the increased interest rate and inflation environment, which has raised the company's cost of capital and reduced its ability to acquire assets[210](index=210&type=chunk) - Critical accounting estimates requiring significant management judgment include the allocation of purchase price for real estate investments, assessing assets for impairment, and determining the collectability of revenue[214](index=214&type=chunk)[217](index=217&type=chunk) [Consolidated Results of Operations](index=61&type=section&id=Consolidated%20Results%20of%20Operations) Total revenue increased by **$21.4 million** in 2022 due to acquisitions, but expenses also rose significantly, leading to a slight increase in net income after a larger gain on sale Comparison of Operations (in thousands) | Item | 2022 | 2021 | $ Change | | :--- | :--- | :--- | :--- | | Total revenue | $137,283 | $115,936 | $21,347 | | Operating expenses | $25,188 | $15,488 | $9,700 | | Depreciation & Amortization | $56,723 | $46,875 | $9,848 | | Interest expense | $25,230 | $19,696 | $5,534 | | Gain on sale of investment property | $6,753 | $1,069 | $5,684 | | **Net income** | **$19,996** | **$18,342** | **$1,654** | - The increase in revenue was primarily the result of rental income from facilities acquired during 2022 and a full year of revenue from 2021 acquisitions[229](index=229&type=chunk) - The increase in interest expense was due to higher average borrowings and increased interest rates during 2022. The weighted average interest rate of debt was 3.43% in 2022 compared to 3.06% in 2021[234](index=234&type=chunk)[235](index=235&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) The company manages liquidity through cash flow, debt financing, and equity issuances, utilizing interest rate swaps to hedge its **$500 million** term loans - Short-term liquidity requirements include interest expense, G&A, operating expenses, acquisitions, and distributions[242](index=242&type=chunk) - The company's Credit Facility consists of a $350M Term Loan A, a $150M Term Loan B, and a $400M Revolver. As of February 24, 2023, there was **$245.0 million** of unutilized borrowing capacity[250](index=250&type=chunk) - The company uses interest rate swaps to hedge interest rate risk on its **$500 million** of term loans, fixing the SOFR component through their respective maturities[205](index=205&type=chunk)[253](index=253&type=chunk) Cash Flow Summary (Year ended Dec 31, in millions) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $76.5 | $69.0 | | Net cash used in investing activities | ($137.3) | ($194.7) | | Net cash provided by financing activities | $62.4 | $127.7 | [Non-GAAP Financial Measures](index=66&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures like FFO, AFFO, and EBITDAre, used by management to evaluate operating performance FFO and AFFO Reconciliation (Year ended Dec 31, in thousands) | Line Item | 2022 | 2021 | | :--- | :--- | :--- | | Net income (loss) | $19,996 | $18,342 | | Less: Preferred stock dividends | (5,822) | (5,822) | | Depreciation and amortization expense | 56,611 | 46,764 | | Gain on sale of investment property | (6,753) | (1,069) | | **FFO** | **$64,032** | **$58,215** | | Adjustments (Straight-line rent, stock comp, etc.) | 4,012 | 3,146 | | **AFFO** | **$68,044** | **$61,361** | FFO and AFFO Per Share/Unit | Metric | 2022 | 2021 | | :--- | :--- | :--- | | FFO per share and unit | $0.92 | $0.90 | | AFFO per share and unit | $0.98 | $0.95 | EBITDAre and Adjusted EBITDAre (Year ended Dec 31, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | EBITDAre | $95,196 | $83,844 | | Adjusted EBITDAre | $101,258 | $90,325 | [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from variable-rate debt, which it mitigates using derivative instruments like interest rate swaps - The primary market risk exposure is interest rate risk from variable-rate debt[268](index=268&type=chunk) - As of December 31, 2022, the company had **$145.7 million** of unhedged variable-rate debt. A **100 basis point (1.0%)** increase in SOFR would decrease annual cash flow by approximately **$1.5 million**[270](index=270&type=chunk) - The company uses derivative financial instruments, including interest rate swaps, to mitigate interest rate risk on future borrowings[272](index=272&type=chunk)[273](index=273&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=72&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements, notes, and the independent auditor's unqualified opinion [Report of Independent Registered Public Accounting Firm](index=73&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on the financial statements and internal controls, identifying real estate acquisition valuation as a critical audit matter - The auditor, Deloitte & Touche LLP, issued an unqualified opinion on the company's financial statements and internal control over financial reporting[279](index=279&type=chunk)[280](index=280&type=chunk) - The acquisition of real estate assets was identified as a Critical Audit Matter due to the significant estimates and high degree of auditor judgment required to evaluate the reasonableness of management's assumptions for purchase price allocation[283](index=283&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk) [Consolidated Financial Statements](index=76&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **$1.39 billion**, total liabilities of **$744.2 million**, and net income of **$20.0 million** for 2022 Consolidated Balance Sheet Highlights (as of Dec 31, 2022, in thousands) | Account | Amount | | :--- | :--- | | Investment in real estate, net | $1,285,959 | | Total assets | $1,393,261 | | Total debt, net | $694,119 | | Total liabilities | $744,196 | | Total equity | $649,065 | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2022, in thousands) | Account | Amount | | :--- | :--- | | Total revenue | $137,283 | | Total expenses | $124,040 | | Net income | $19,996 | | Net income attributable to common stockholders | $13,320 | | Net income per share - basic and diluted | $0.20 | [Notes to Consolidated Financial Statements](index=81&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies for asset acquisitions, debt, equity, and stock-based compensation, including the **$900 million** credit facility and preferred stock terms - All 14 property acquisitions in 2022, totaling approximately **$148.9 million**, were accounted for as asset acquisitions, with transaction costs capitalized[307](index=307&type=chunk)[345](index=345&type=chunk) - The company's debt is primarily composed of a **$900 million** unsecured syndicated credit facility, which includes **$500 million** in term loans and a **$400 million** revolver[357](index=357&type=chunk) - The company has **3.105 million** shares of **7.50%** Series A Cumulative Redeemable Preferred Stock outstanding with a liquidation preference of **$25** per share[381](index=381&type=chunk) - The company grants time-based and performance-based LTIP unit awards to employees and directors. As of Dec 31, 2022, total unamortized compensation expense was approximately **$4.5 million**, to be recognized over a weighted average of **1.4 years**[396](index=396&type=chunk)[413](index=413&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=111&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[427](index=427&type=chunk) [Item 9A. Controls and Procedures](index=111&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls and internal controls over financial reporting were effective as of December 31, 2022 - Based on an evaluation as of December 31, 2022, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[428](index=428&type=chunk) - Management concluded that the company's internal controls over financial reporting were effective as of December 31, 2022[432](index=432&type=chunk) - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022[435](index=435&type=chunk) PART III [Items 10-14](index=114&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10-14 is incorporated by reference from the company's definitive Proxy Statement, to be filed within 120 days after fiscal year-end - Information for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement for its 2023 Annual Meeting of Stockholders[445](index=445&type=chunk)[446](index=446&type=chunk)[447](index=447&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=115&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including detailed real estate portfolio data and corporate governance documents - This section lists all financial statements, schedules, and exhibits filed with the report[452](index=452&type=chunk) - Includes Schedule III - Consolidated Real Estate and Accumulated Depreciation, which details the cost basis, additions, and accumulated depreciation for each property in the portfolio[453](index=453&type=chunk)[454](index=454&type=chunk) [Item 16. Form 10-K Summary](index=122&type=section&id=Item%2016.%20Form%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary - None[463](index=463&type=chunk)

Table of Contents Forward-Looking Statements Blue Sky Vision – Grand Rapids, MI | --- | --- | --- | --- | --- | --- | --- | |-------------------------------------------------|-------|-------|-------|-------|-------------------|------------------| | | | | | | | | | Gross Investment in Real Estate (billions): | $1.5 | | | | | | | Number of Buildings: | 189 | | | | | | | Number of States: | 35 | | | | | | | Weighted Average Portfolio Cap Rate: | 7.8% | | | | | | | % of Health System or Other Affiliated Tenants ...

Financial Data and Key Metrics Changes - The company reported an 18.1% year-over-year increase in total revenue to $35.4 million, primarily driven by acquisition activity [6][18] - Net income attributable to common shareholders for Q3 2022 was $8.1 million or $0.12 per share, compared to $3.7 million or $0.06 per share in Q3 2021 [6][22] - Funds from operations (FFO) for Q3 was $16.2 million or $0.23 per share, consistent with the previous year [23] - Adjusted funds from operations (AFFO) increased to $17.1 million or $0.25 per share, up from $16.4 million or $0.24 per share in Q3 2021 [23] Business Line Data and Key Metrics Changes - The company completed 5 acquisitions in Q3 2022 for a total investment of approximately $51 million, with a weighted average cap rate of 7.1% [8][13] - The portfolio consisted of gross investments in real estate of $1.5 billion, with 4.9 million total leasable square feet and 96.8% occupancy [18][24] - Same-store revenues, excluding cash basis leases, increased by $344,000 or 1.4% compared to Q3 2021 [19] Market Data and Key Metrics Changes - The acquisition environment has slowed significantly due to rising interest rates, impacting the marginal cost of capital for buyers [7][13] - The company noted a widening bid-ask spread in the market, with potential sellers adapting gradually to the new interest rate reality [7] Company Strategy and Development Direction - The company is conducting a strategic review to identify properties for potential sale, focusing on those where value has been added since acquisition [10] - Proceeds from any sales are expected to be used to reduce outstanding debt and increase available capital for future acquisitions when market conditions improve [10] - The company plans to be selective in pursuing incremental acquisitions until cap rates better reflect the higher cost of capital [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning despite challenging market conditions, indicating a belief in the potential for future acquisitions as the market stabilizes [28] - The management team highlighted the importance of maintaining a strong balance sheet and the need to pay dividends while seeking accretive growth opportunities [49] Other Important Information - The company expanded its credit facility with a $150 million term loan and entered into interest rate swaps to fix the interest rate on the new loan [9][25] - As of September 30, 2022, the company had approximately $703 million of gross debt and a leverage ratio of 47.6% [26] Q&A Session Summary Question: What is the long-term debt target in relation to asset sales? - Management indicated a target of 40% to 45% leverage, with potential sales expected to help achieve this goal [31][32] Question: How has the cap rate changed across the portfolio? - Management noted that the market has seen a general increase in cap rates by 75 to 100 basis points across the board [39] Question: What is the status of the pipeline health systems and their rent payments? - Management stated that while a tenant is undergoing bankruptcy, they do not expect the lease to be rejected and anticipate normal payment resumption [41] Question: How does the company view its preferred stock in the capital stack? - Management acknowledged the preferred stock as a consideration for potential repayment but emphasized the need to balance leverage and pricing grid impacts [45] Question: What is the strategy for acquiring assets with lower occupancy? - Management highlighted their strong asset management capabilities, allowing them to lease up properties effectively after acquisition [52]