Global Medical REIT(US:GMRE)2022-11-04 20:00PART I FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents Global Medical REIT Inc.'s unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2022, detailing financial position, performance, and cash flows Condensed Consolidated Balance Sheets Total assets increased to $1.41 billion as of September 30, 2022, driven by real estate investments, with corresponding increases in liabilities and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Investment in real estate, net | $1,300,237 | $1,199,748 | | Cash and cash equivalents | $3,199 | $7,213 | | Derivative asset | $36,926 | $1,236 | | Total assets | $1,406,749 | $1,263,485 | | Liabilities & Equity | | | | Credit Facility, net | $634,898 | $514,567 | | Notes payable, net | $57,918 | $57,162 | | Total liabilities | $742,165 | $625,908 | | Total equity | $664,584 | $637,577 | | Total liabilities and equity | $1,406,749 | $1,263,485 | Condensed Consolidated Statements of Operations Total revenue increased to $35.4 million in Q3 2022 and $101.0 million for the nine months, with net income significantly boosted by a $6.8 million property sale gain Statement of Operations Summary (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $35,406 | $29,983 | $100,977 | $85,593 | | Total expenses | $32,130 | $24,615 | $89,582 | $72,738 | | Gain on sale of investment property | $6,753 | $— | $6,753 | $— | | Net income | $10,029 | $5,368 | $18,148 | $12,855 | | Net income attributable to common stockholders | $8,057 | $3,689 | $12,952 | $7,997 | | EPS – basic and diluted | $0.12 | $0.06 | $0.20 | $0.13 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $58.2 million for the nine months ended September 30, 2022, while investing and financing cash flows saw changes due to acquisitions and equity offerings Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,233 | $51,684 | | Net cash used in investing activities | ($135,842) | ($166,740) | | Net cash provided by financing activities | $78,445 | $116,172 | | Net increase in cash | $836 | $1,116 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes detail accounting policies, property portfolio changes including 14 acquisitions, debt structure with an amended $900 million credit facility, equity, and lease accounting - The company is a Maryland corporation primarily acquiring and leasing purpose-built healthcare facilities. As of September 30, 2022, the Company was the 93.97% limited partner of the Operating Partnership31 - During the nine months ended September 30, 2022, the company completed 14 acquisitions, all accounted for as asset acquisitions. Gross investment in real estate from these additions totaled $155.4 million5455 - The company has an amended and restated $900 million unsecured syndicated credit facility, consisting of $500 million in term loans and a $400 million revolver. As of September 30, 2022, the net outstanding balance was $634.9 million6569 - The company utilizes interest rate swaps to hedge its interest rate risk on its Term Loans. As of September 30, 2022, the fair value of these swaps was a derivative asset of $36.9 million8490 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, strategic objectives, and market trends, highlighting revenue growth from acquisitions, increased expenses, liquidity, capital resources, and non-GAAP measures Overview and Strategy The company operates as an internally managed REIT, focusing on acquiring and leasing healthcare facilities in secondary markets, while emphasizing its commitment to ESG principles - The business strategy is to invest in healthcare properties operated by profitable physician groups or healthcare systems, aiming for reliable dividends and stock price appreciation154 - Investment focus is on medical office buildings in secondary markets and suburbs, which are believed to be overlooked by larger REITs but offer similar tenant credit profiles160 - The Board of Directors leads the company's ESG efforts through a standing ESG committee, overseeing strategy, policies, and stakeholder communications on ESG matters157 Executive Summary and Recent Developments Key developments include 14 acquisitions totaling $148.9 million, a property sale generating a $6.8 million gain, and a tenant's Chapter 11 filing with expected rent collection - Completed 14 acquisitions for an aggregate purchase price of $148.9 million during the first nine months of 2022168 - Sold a medical office building in Germantown, TN in July 2022, receiving $17.9 million in gross proceeds and recognizing a gain of approximately $6.8 million169 - On October 3, 2022, tenant Pipeline Health System, LLC filed for Chapter 11 bankruptcy. The company believes it is probable that it will collect all rent payments due under its lease174175 Consolidated Results of Operations Q3 2022 revenue increased to $35.4 million due to acquisitions, but income before property sale gain decreased due to higher expenses, with net income boosted by a $6.8 million gain Q3 2022 vs Q3 2021 Results (in thousands) | Account | Q3 2022 | Q3 2021 | $ Change | | :--- | :--- | :--- | :--- | | Total revenue | $35,406 | $29,983 | $5,423 | | Total expenses | $32,130 | $24,615 | $7,515 | | Income before gain from sale | $3,276 | $5,368 | ($2,092) | | Gain on sale of investment property | $6,753 | $— | $6,753 | | Net income | $10,029 | $5,368 | $4,661 | Nine Months 2022 vs 2021 Results (in thousands) | Account | Nine Months 2022 | Nine Months 2021 | $ Change | | :--- | :--- | :--- | :--- | | Total revenue | $100,977 | $85,593 | $15,384 | | Total expenses | $89,582 | $72,738 | $16,844 | | Income before gain from sale | $11,395 | $12,855 | ($1,460) | | Gain on sale of investment property | $6,753 | $— | $6,753 | | Net income | $18,148 | $12,855 | $5,293 | - The increase in interest expense for Q3 2022 was due to higher average borrowings and increased interest rates, with the weighted average rate rising to 3.65% from 3.04% in Q3 2021187188 Liquidity and Capital Resources Liquidity is sourced from operations, debt, and equity, with $243.8 million unutilized credit facility capacity as of November 1, 2022, and interest rate swaps used to manage risk - Short-term liquidity requirements include interest and principal payments, G&A expenses, property operating expenses, acquisitions, distributions, and capital improvements209216 - As of November 1, 2022, the company had $243.8 million of unutilized borrowing capacity under its Credit Facility215 - The company uses interest rate swaps to fix the SOFR component on its Term Loans. Total fixed debt was $558.4 million at a weighted average interest rate of 3.75% and a weighted average maturity of 4.0 years as of September 30, 2022220222 Non-GAAP Financial Measures The company uses non-GAAP measures like FFO and AFFO to evaluate performance, with Q3 2022 FFO per share at $0.23 and AFFO per share at $0.25 FFO and AFFO Reconciliation (per share and unit) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | FFO per share and unit | $0.23 | $0.23 | $0.70 | $0.67 | | AFFO per share and unit | $0.25 | $0.24 | $0.74 | $0.71 | EBITDAre and Adjusted EBITDAre (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | EBITDAre | $24,654 | $22,140 | $70,191 | $61,964 | | Adjusted EBITDAre | $26,026 | $23,572 | $74,783 | $66,996 | Quantitative and Qualitative Disclosures About Market Risk The primary market risk is interest rate risk from variable-rate debt, with $144.7 million unhedged as of September 30, 2022, mitigated by derivative instruments - The primary market risk exposure is interest rate risk from debt used to acquire facilities, particularly borrowings under the Credit Facility237238 - As of September 30, 2022, the company had $144.7 million of unhedged variable-rate debt. A 200 basis point increase in SOFR would decrease annual cash flow by approximately $2.9 million239 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective243245 - No material changes were made to internal control over financial reporting during the third quarter of 2022247 PART II OTHER INFORMATION Legal Proceedings The company is not currently involved in any material litigation nor aware of any threatened litigation that would materially affect its financial condition - The company is not presently subject to any material litigation or aware of any material threatened litigation249 Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021, were reported - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021, were reported during the nine months ended September 30, 2022250 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None251 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, credit agreement amendments, and Sarbanes-Oxley certifications - Key exhibits filed include an amendment to the Second Amended and Restated Credit Agreement and certifications from the CEO and CFO pursuant to Sarbanes-Oxley Sections 302 and 906256