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What changed in Global Medical REIT Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Global Medical REIT Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+241 added−253 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in Global Medical REIT Inc.'s 2023 10-K

241 paragraphs added · 253 removed · 199 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

44 edited+11 added−12 removed38 unchanged
Biggest changeSee “Risk Factors— The inability of any of our significant tenants to pay rent to us could have a disproportionate negative affect on our revenues ” and “ Risk Factors— Most of our healthcare facilities are occupied by a single tenant, and we may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases, especially for our healthcare facilities located in smaller markets. ” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leasable Square ​ Annualized Base Rent (ABR) ​ Tenant ​ Feet (LSF) ​ % of LSF ​ (in thousands) (1) ​ % of ABR ​ LifePoint Health (2) ​ 157,151 ​ 3.2 % $ 7,582 ​ 6.6 % Encompass Health Corporation 254,006 5.2 % ​ 7,274 6.4 % Memorial Health System 155,600 3.2 % ​ 5,507 4.8 % Total 566,757 11.6 % $ 20,363 17.8 % (1) Monthly base rent for December 2022, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
Biggest changeSee “Risk Factors— The inability of any of our significant tenants to pay rent to us could have a disproportionate negative affect on our revenues ” and “ Risk Factors— Most of our healthcare facilities are occupied by a single tenant, and we may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases, especially for our healthcare facilities located in smaller markets. ” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leasable Square ​ Annualized Base Rent (ABR) ​ Tenant ​ Feet (LSF) ​ % of LSF ​ (in thousands) (1) ​ % of ABR ​ LifePoint Health ​ 157,151 ​ 3.3 % $ 7,754 ​ 7.0 % Encompass Health Corporation 254,006 5.3 % ​ 7,389 6.7 % Memorial Health System 155,600 3.3 % ​ 5,532 5.0 % Total 566,757 11.9 % $ 20,675 18.7 % (1) Monthly base rent for December 2023, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases). ​ Lease Expirations The following table contains information regarding the lease expiration dates of the leases in our portfolio as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized Base Rent (ABR) ​ Year ​ Number of Leases ​ Leased Square Feet ​ (in thousands) (1) ​ % of ABR ​ 2024 ​ 76 ​ 665,487 ​ $ 14,092 ​ 12.8 % 2025 50 352,536 ​ 7,969 ​ 7.2 % 2026 70 519,350 ​ 10,199 ​ 9.3 % 2027 44 464,583 ​ 11,742 ​ 10.7 % 2028 32 334,543 ​ 8,629 ​ 7.8 % 2029 25 480,994 ​ 11,749 ​ 10.7 % 2030 29 402,520 ​ 10,061 ​ 9.1 % 2031 18 324,127 ​ 7,055 ​ 6.4 % 2032 6 72,284 ​ 2,295 ​ 2.1 % 2033 ​ 17 ​ 162,354 ​ ​ 4,221 ​ 3.8 % Thereafter 29 802,633 ​ 22,218 ​ 20.1 % Total 396 4,581,411 (2) ​ $ 110,230 100.0 % (1) Monthly base rent for December 2023, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
As we continue to grow our portfolio and the competition for single-tenant, triple-net leased properties has intensified, we have added to our portfolio some multi-tenant properties with gross lease or modified gross lease structures. ​ Corporate Sustainability and Social Responsibility ​ Our business values integrate environmental sustainability, social responsibility, and strong governance practices throughout our Company. ​ Our Board of Directors (the “Board”) continues to lead our environmental, social and governance (“ESG”) efforts and our Board has a standing ESG committee.
As we continue to grow our portfolio and the competition for single-tenant, triple-net leased properties has intensified, we have added to our portfolio some multi-tenant properties with gross lease or modified gross lease structures. ​ Corporate Sustainability and Social Responsibility Our business values integrate environmental sustainability, social responsibility, and strong governance practices throughout our Company. ​ Our Board of Directors (the “Board”) continues to lead our environmental, social and governance (“ESG”) efforts through a standing ESG committee.
ITEM 1. BUSINESS ​ Organization Global Medical REIT Inc. (the “Company,” “us,” “we,” or “our”) is a Maryland corporation and internally managed REIT that acquires healthcare facilities and leases those facilities to physician groups and regional and national healthcare systems. The Company’s common stock is listed on the New York Stock Exchange.
ITEM 1. BUSINESS ​ Organization Global Medical REIT Inc. (the “Company,” “us,” “we,” or “our”) is a Maryland corporation and internally managed REIT that owns and acquires healthcare facilities and leases those facilities to physician groups and regional and national healthcare systems. The Company’s common stock is listed on the New York Stock Exchange.
These laws include, without limitation: ● The Federal Anti-Kickback Statute, which prohibits, among other things, the offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of any U.S. federal or state healthcare program patients; 11 Table of Contents ● The Federal Physician Self-Referral Prohibition (commonly called the “Stark Law”), which, subject to specific exceptions, restricts physicians who have financial relationships with healthcare providers from making referrals for designated health services for which payment may be made under Medicare or Medicaid programs to an entity with which the physician, or an immediate family member, has a financial relationship; ● The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including under the Medicare and Medicaid programs; ● The Civil Monetary Penalties Law, which authorizes the Department of Health and Human Services to impose monetary penalties for certain fraudulent acts; and ● State anti-kickback, anti-inducement, anti-referral and insurance fraud laws which may be generally similar to, and potentially more expansive than, the federal laws set forth above.
These laws include, without limitation: ● The Federal Anti-Kickback Statute, which prohibits, among other things, the offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, the referral of any U.S. federal or state healthcare program patients; ● The Federal Physician Self-Referral Prohibition (commonly called the “Stark Law”), which, subject to specific exceptions, restricts physicians who have financial relationships with healthcare providers from making referrals for designated health services for which payment may be made under Medicare or Medicaid programs to an entity with which the physician, or an immediate family member, has a financial relationship; ● The False Claims Act, which prohibits any person from knowingly presenting false or fraudulent claims for payment to the federal government, including under the Medicare and Medicaid programs; ● The Civil Monetary Penalties Law, which authorizes the Department of Health and Human Services to impose monetary penalties for certain fraudulent acts; and ● State anti-kickback, anti-inducement, anti-referral and insurance fraud laws which may be generally similar to, and potentially more expansive than, the federal laws set forth above.
See “Risk Factors— We have significant geographic concentration in a small number of states, including Texas, Florida, Ohio, Oklahoma, Pennsylvania, Arizona, and Illinois.
See “Risk Factors— We have significant geographic concentration in a small number of states, including Texas, Florida, Ohio, Pennsylvania, Arizona, and Illinois.
The increase in the Federal Funds Rate, along with other actions taken by the Fed, had a ripple effect on other benchmark interest rates, including one-month term Standard Overnight Financing Rate (“SOFR”), which is the reference rate for our indebtedness under our Second Amended and Restated Credit Facility (the “Credit Facility”) .
The increase in the Federal Funds Rate, along with other actions taken by the Fed, had a ripple effect on other benchmark interest rates, including one-month term Secured Overnight Financing Rate (“SOFR”), which is the reference rate for our indebtedness under our Second Amended and Restated Credit Facility (the “Credit Facility”) .
(2) Our remaining properties are located in 28 other states, with no state accounting for more than 5% of our ABR. 7 Table of Contents Significant Tenants The following tenants each account for at least 5% of our annualized base rent as of December 31, 2022.
(2) Our remaining properties are located in 28 other states, with no state accounting for more than 5% of our ABR. 7 Table of Contents Significant Tenants The following tenants each account for at least 5% of our annualized base rent as of December 31, 2023.
Geographic Concentration The following table contains information regarding the geographic concentration of our portfolio as of December 31, 2022. Adverse economic or other conditions (including significant weather events) in the states that contain a high concentration of our facilities could adversely affect us.
Geographic Concentration The following table contains information regarding the geographic concentration of our portfolio as of December 31, 2023. Adverse economic or other conditions (including significant weather events) in the states that contain a high concentration of our facilities could adversely affect us.
Healthcare Industry and Healthcare Real Estate Market Opportunity We believe our primary investment strategy takes advantage of current trends in healthcare and healthcare delivery, including an aging population and the decentralization of healthcare, while also providing flexibility to make opportunistic acquisitions and dispositions. Aging U.S.
Healthcare Industry and Healthcare Real Estate Market Opportunity We believe our primary investment strategy takes advantage of current trends in healthcare and healthcare delivery, including an aging population and the decentralization of healthcare, while also providing flexibility to make opportunistic acquisitions and dispositions. 8 Table of Contents Aging U.S.
We have established policies to provide a safe, harassment-free work environment and have fostered a corporate culture based on fair and equal treatment. As a result, we believe our employees are committed to building strong, innovative and long-term relationships with each other and with our tenants. In response to COVID-19, employees at our corporate office are permitted to work remotely.
We have established policies to provide a safe, harassment-free work environment and have fostered a corporate culture based on fair and equal treatment. As a result, we believe our employees are committed to building strong, innovative and long-term relationships with each other and with our tenants. Our employees at our corporate office are permitted to work remotely.
Reports of beneficial ownership filed pursuant to Section 16(a) of the Exchange Act are also available on our website. These reports and other information are also available, free of charge, at www.sec.gov. ​
Reports of beneficial ownership filed pursuant to Section 16(a) of the Exchange Act are also available on our website. These reports and other information are also available, free of charge, at www.sec.gov. ​ 12 Table of Contents
In order to qualify as a REIT, a substantial percentage of our assets must be qualifying real estate assets and a substantial percentage of our income must be rental revenue from real property or interest on mortgage loans.
In order to maintain our qualification as a REIT, a substantial percentage of our assets must be qualifying real estate assets and a substantial percentage of our income must be rental revenue from real property or interest on mortgage loans.
To that end, we are exploring ways to mitigate climate risk, should it be present, in our acquisition strategy, as well as ways to contribute to the reduction of climate impact through proactive asset management that looks for ways to incorporate renewable energy resources and energy utilization reduction.
To that end, we continue to explore ways to mitigate climate risk, should it be present, in our acquisition strategy, as well as ways to contribute to the reduction of climate impact through proactive asset management that looks for ways to incorporate renewable energy resources and energy utilization reduction.
Our wholly owned subsidiary, Global Medical REIT GP LLC, is the sole general partner of our Operating Partnership and, as of December 31, 2022, we owned 93.97% of the outstanding common operating partnership units (“OP Units”) of our Operating Partnership with an aggregate of 6.03% of the Operating Partnership owned by holders of long-term incentive plan units (“LTIP Units”) and third-party limited partners who contributed properties or services to the Operating Partnership in exchange for OP Units.
Our wholly owned subsidiary, Global Medical REIT GP LLC, is the sole general partner of our Operating Partnership and, as of December 31, 2023, we owned 92.91% of the outstanding common operating partnership units (“OP Units”) of our Operating Partnership, with an aggregate of 7.09% of the Operating Partnership owned by holders of long-term incentive plan units (“LTIP Units”) and third-party limited partners who contributed properties or services to the Operating Partnership in exchange for OP Units.
(2) The remaining 173,381 of leasable square feet, or 3.5% of our overall leasable square feet, is vacant. Ground Leases As of December 31, 2022, we had seven buildings located on land that is subject to operating ground leases, representing approximately 3.8% of our total leasable square feet and approximately 4.2% of our December 2022 annualized base rent.
(2) The remaining 167,215 of leasable square feet, or 3.5% of our overall leasable square feet, is vacant. Ground Leases As of December 31, 2023, we had seven buildings located on land that is subject to operating ground leases, representing approximately 3.9% of our total leasable square feet and approximately 4.3% of our December 2023 annualized base rent.
Human Capital Resources Our success is dependent on the success of our employees. As of December 31, 2022, the Company had 29 employees. We support diversity, equality, and inclusion in our workforce. As of December 31, 2022, 34% of our workforce were women and 31% of our workforce was ethnically diverse.
Human Capital Resources Our success is dependent on the success of our employees. As of December 31, 2023, the Company had 26 employees. We support diversity, equality, and inclusion in our workforce. As of December 31, 2023, 46% of our workforce were women and 38% of our workforce was ethnically diverse.
We stand with our communities, tenants, and stockholders in supporting meaningful solutions that address this global challenge and contribute to the sustainability of our business objectives. Impact of Inflation After many years of low inflation, the U.S. inflation rate increased substantially during 2022, with the December 2022 annual inflation rate equaling 6.5%.
We stand with our communities, tenants, and stockholders in supporting meaningful solutions that address this global challenge and contribute to the sustainability of our business objectives. Impact of Increased Interest Rates and Inflation After many years of low inflation, the U.S. inflation rate increased substantially during 2022 and remained elevated during 2023. In response to elevated inflation, the U.S.
Many stories exist about U.S. healthcare workers, especially nurses, experiencing burnout due to the length and severity of the pandemic, and this has caused many nurses and other medical professionals to switch jobs within the medical profession or quit the profession altogether.
Continuing Impact of COVID-19 The COVID-19 epidemic has affected the healthcare industry in many ways. Many stories exist about U.S. healthcare workers, especially nurses, experiencing burnout due to the length and severity of the epidemic, and this has caused many nurses and other medical professionals to switch jobs within the medical profession or quit the profession altogether.
In addition, new laws and regulations, changes in existing laws and regulations or changes in the interpretation of such laws or regulations could negatively affect our financial condition and the financial condition of our tenants. These changes, in some cases, could apply retroactively. The enactment, timing or effect of legislative or regulatory changes cannot be predicted.
In addition, new laws and regulations, changes in existing laws and regulations or changes in the interpretation of such laws or regulations could negatively affect our financial condition and the financial condition of our tenants. These changes, in some cases, could apply retroactively.
(2) Our MOB category includes buildings with special uses such as surgery centers, imaging, labs, urgent care, dialysis, and plasma centers, among others. (3) Other ABR includes healthcare administrative office ($2,681), acute-care hospital ($2,475), long-term acute care hospital ($2,471), behavioral hospital ($1,352), free-standing emergency department ($973) and retail space ($133).
(2) Our MOB category includes buildings with special uses such as surgery centers, imaging, labs, urgent care, dialysis, and plasma centers, among others. (3) Other includes healthcare administrative office ($2,735), acute-care hospital ($2,541), long-term acute care hospital ($2,539), behavioral hospital ($1,372), free-standing emergency department ($992) and retail space ($219).
We believe that we have been organized and have operated in such a manner as to qualify for taxation as a REIT, and we intend to continue to operate in such a manner. However, we cannot provide assurances that we will continue to operate in a manner to remain qualified as a REIT.
We believe that we have been organized and have operated in such a manner as to qualify for taxation as a REIT, and we intend to continue to operate in such a manner.
Summary of Investments by Type The following table contains information about our portfolio by type of property as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leasable Square % of Annualized Base Rent (ABR) ​ Type ​ Feet (LSF) ​ LSF ​ (in thousands) (1) ​ % of ABR ​ Medical Office Building (MOB) (2) ​ 3,670,193 ​ 75.0 % $ 77,570 ​ 67.8 % Inpatient Rehab.
Summary of Investments by Type The following table contains information about our portfolio by type of property as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leasable Square % of Annualized Base Rent (ABR) ​ Type ​ Feet (LSF) ​ LSF ​ (in thousands) (1) ​ % of ABR ​ Medical Office Building (MOB) (2) ​ 3,589,494 ​ 75.6 % $ 75,152 ​ 68.2 % Inpatient Rehab.
If our tenants’ competitors have greater geographic coverage, improved access and convenience to physicians and patients, provide or are perceived to provide higher quality services, recruit physicians to provide competing services at their facilities, expand or improve their services or obtain more favorable managed-care contracts, our tenants may not be able to successfully compete. 10 Table of Contents Government Programs, Laws and Regulations Medicare and Medicaid Programs Sources of revenue for our tenants typically include the Medicare and Medicaid programs.
If our tenants’ competitors have greater geographic coverage, improved access and convenience to physicians and patients, provide or are perceived to provide higher quality services, recruit physicians to provide competing services at their facilities, expand or improve their services or obtain more favorable managed-care contracts, our tenants may not be able to successfully compete.
Many states regulate the construction of healthcare facilities, the expansion of healthcare facilities, the construction or expansion of certain services, including by way of example specific bed types and medical equipment, as well as certain capital expenditures through certificate of need, or CON, laws.
The enactment, timing or effect of legislative or regulatory changes cannot be predicted. 11 Table of Contents Many states regulate the construction of healthcare facilities, the expansion of healthcare facilities, the construction or expansion of certain services, including by way of example specific bed types and medical equipment, as well as certain capital expenditures through certificate of need, or CON, laws.
Failure to comply with these laws and regulations could adversely affect us directly and our tenants’ ability to make rent payments to us. 12 Table of Contents Environmental Regulations Under various U.S. federal, state and local laws, ordinances and regulations, current and prior owners and tenants of real estate may be jointly and severally liable for the costs of investigating, remediating, and monitoring certain hazardous substances or other regulated materials on or in such healthcare facility.
Environmental Regulations Under various U.S. federal, state and local laws, ordinances and regulations, current and prior owners and tenants of real estate may be jointly and severally liable for the costs of investigating, remediating, and monitoring certain hazardous substances or other regulated materials on or in such healthcare facility.
This phenomenon has led to material increases in labor costs for healthcare systems, especially hospital systems, as some employers have had to rely on higher costing contract nursing labor to sustain their businesses. The increase in labor costs, among various other factors, contributed to the rapid increase in inflation during 2022.
This phenomenon has led to material increases in labor costs for healthcare systems, especially hospital systems, as some employers have had to rely on higher cost contract nursing labor to sustain their businesses.
Healthcare providers continue to face increased government pressure to control or reduce healthcare costs and significant reductions in healthcare reimbursement, including reduced reimbursements and changes to payment methodologies under the Affordable Care Act.
Government Programs, Laws and Regulations Medicare and Medicaid Programs Sources of revenue for our tenants typically include the Medicare and Medicaid programs. Healthcare providers continue to face increased government pressure to control or reduce healthcare costs and significant reductions in healthcare reimbursement, including reduced reimbursements and changes to payment methodologies under the Affordable Care Act.
Qualification as a REIT We elected to be taxed as a REIT commencing with our taxable year ended December 31, 2016. Subject to a number of significant exceptions, a corporation that qualifies as a REIT generally is not subject to U.S. federal corporate income taxes on income and gains that it distributes to its stockholders, thereby reducing its corporate-level taxes.
Subject to a number of significant exceptions, a corporation that qualifies as a REIT generally is not subject to U.S. federal income tax on income and gains that it distributes to its stockholders, thereby reducing its corporate-level taxes.
The primary purpose of the ESG committee is to assist the Board in fulfilling our responsibilities to provide oversight and support of our commitment to ESG matters by overseeing: (1) our general ESG strategy and policies as set by our management, (2) communications with our employees, investors, and other stakeholders with respect to ESG matters, (3) developments relating to, and improving our understanding of, ESG matters, (4) our compliance with certain ESG-related legal and regulatory requirements, and (5) coordination with other Board committees on ESG matters of common import. 5 Table of Contents We continue to improve and expand our efforts in the corporate sustainability arena through tenant outreach and data collection to benchmark our portfolio’s energy consumption and efficiency.
The primary purpose of the ESG committee is to assist the Board in fulfilling its responsibilities to provide oversight and support of our commitment to ESG matters by overseeing: (1) our general ESG strategy and policies as set by our management, (2) communications with our employees, investors, and other stakeholders with respect to ESG matters, (3) developments relating to, and improving our understanding of, ESG matters, (4) our compliance with certain ESG-related legal and regulatory requirements, and (5) coordination with our other Board committees on ESG matters of common import. 5 Table of Contents In June 2023, we released our second Corporate Social Responsibility Report, which detailed our progress and areas of focus in the ESG realm.
Competition We compete with many other real estate investors for acquisitions of healthcare properties, including healthcare operators, and real estate investors such as private equity firms and other REITs, some of whom may have greater financial resources and lower costs of capital than we do.
However, we cannot provide assurances that we will continue to operate in a manner to remain qualified as a REIT. 9 Table of Contents Competition We compete with many other real estate investors for acquisitions of healthcare properties, including healthcare operators, and real estate investors such as private equity firms and other REITs, some of whom may have greater financial resources and lower costs of capital than we do.
Facility (IRF) 547,007 11.2 % ​ 20,083 17.5 % Surgical Hospital 174,984 3.6 % ​ 6,731 5.9 % Other (3) 503,451 10.2 % ​ 10,085 8.8 % Total 4,895,635 100.0 % $ 114,469 100.0 % (1) Monthly base rent for December 2022, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
Facility (IRF) 547,007 11.5 % ​ 20,518 18.6 % Surgical Hospital 108,674 2.3 % ​ 4,162 3.8 % Other (3) 503,451 10.6 % ​ 10,398 9.4 % Total 4,748,626 100.0 % $ 110,230 100.0 % (1) Monthly base rent for December 2023, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
The tables below summarize information about our portfolio as of December 31, 2022. Also see “Schedule III – Consolidated Real Estate and Accumulated Depreciation,” for additional information about our properties.
Also see “Schedule III – Consolidated Real Estate and Accumulated Depreciation,” for additional information about our properties.
Economic and other conditions that negatively affect those states and our tenants in those states could have a greater effect on our revenues than if our properties were more geographically diverse .” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leasable Square ​ Annualized Base Rent (ABR) ​ State ​ Feet (LSF) ​ % of LSF ​ (in thousands) (1) ​ % of ABR ​ Texas ​ 727,176 ​ 14.9 % $ 20,174 ​ 17.6 % Florida ​ 561,466 11.5 % ​ 11,796 10.3 % Ohio 416,926 8.5 % ​ 9,454 8.3 % Oklahoma 196,777 4.0 % ​ 7,271 6.4 % Pennsylvania 286,339 5.8 % ​ 7,070 6.2 % Arizona 183,835 3.8 % ​ 6,545 5.7 % Illinois ​ 307,848 ​ 6.3 % ​ 6,539 5.7 % Other (2) 2,215,268 45.2 % ​ 45,620 39.8 % Total 4,895,635 100.0 % $ 114,469 100.0 % (1) Monthly base rent for December 2022, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
Economic and other conditions that negatively affect those states and our tenants in those states could have a greater effect on our revenues than if our properties were more geographically diverse .” ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Leasable Square ​ Annualized Base Rent (ABR) ​ State ​ Feet (LSF) ​ % of LSF ​ (in thousands) (1) ​ % of ABR ​ Texas ​ 727,176 ​ 15.3 % $ 20,577 ​ 18.7 % Florida ​ 553,068 11.6 % ​ 11,631 10.6 % Ohio 418,533 8.8 % ​ 9,466 8.6 % Pennsylvania 286,339 6.0 % ​ 7,180 6.5 % Arizona 183,835 3.9 % ​ 6,759 6.1 % Illinois 308,813 6.5 % ​ 6,665 6.0 % Other (2) 2,270,862 47.9 % ​ 47,952 43.5 % Total 4,748,626 100.0 % $ 110,230 100.0 % (1) Monthly base rent for December 2023, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
Procedures traditionally performed in large, general hospitals, such as certain types of surgeries, are increasingly moving to more conveniently located, specialized facilities driven by advances in clinical science, shifting consumer preferences, limited or inefficient space in existing hospitals and lower costs in the non-hospital environment. 9 Table of Contents Opportunistic Acquisitions Despite the continued shift in the delivery of healthcare services to smaller, more specialized facilities, we believe opportunities exist to acquire larger, acute-care facilities, such as acute-care hospitals and LTACs, with very attractive submarket fundamentals at compelling valuations.
Procedures traditionally performed in large, general hospitals, such as certain types of surgeries, are increasingly moving to more conveniently located, specialized facilities driven by advances in clinical science, shifting consumer preferences, limited or inefficient space in existing hospitals and lower costs in the non-hospital environment.
The ground leases subject these properties to certain restrictions, including restrictions on our ability to re-let such facilities to tenants not affiliated with the ground lessor, rights of first offer and refusal with respect to sales of the facilities and restrictions that limit the types of medical procedures that may be performed at the facilities. 8 Table of Contents Recent Developments Chapter 11 Reorganization Filing of Pipeline Health System, LLC ​ On October 3, 2022, Pipeline Health System, LLC (“Pipeline”), announced that it filed for Chapter 11 bankruptcy protection under the United States Bankruptcy Code.
The ground leases subject these properties to certain restrictions, including restrictions on our ability to re-let such facilities to tenants not affiliated with the ground lessor, rights of first offer and refusal with respect to sales of the facilities and restrictions that limit the types of medical procedures that may be performed at the facilities.
Additionally, although the migration from Medicare fee-for-service, or volume-based, payments to an outcome-based reimbursement model may lower overall healthcare costs, these changes could negatively affect our tenants if they are unable to adapt to a more outcome-oriented healthcare delivery model.
Additionally, although the migration from Medicare fee-for-service, or volume-based, payments to an outcome-based reimbursement model may lower overall healthcare costs, these changes could negatively affect our tenants if they are unable to adapt to a more outcome-oriented healthcare delivery model. 10 Table of Contents The future of the Affordable Care Act is uncertain and any changes to existing laws and regulations, including the Affordable Care Act’s repeal, modification or replacement, could have a long-term financial impact on the delivery of and payment for healthcare.
However, due to the longer-term nature of our leases, we are not able to quickly increase rents to offset fully the effects of increased interest rates and inflation on our interest expense and other costs. Continuing Impact of COVID-19 The COVID-19 pandemic has affected the healthcare industry in many ways.
However, due to the longer-term nature of our leases, we are not able to quickly increase rents to offset fully the effects of increased interest rates and inflation on our interest expense and other costs. Also, we may not be able to renew expiring leases at lease rates that reflect increases in inflation.
We utilize utility and energy audits that are performed by third-party engineering consultants during the due diligence phase of our acquisitions. The energy consumption data that we collect is used to assess our facilities’ carbon emission levels. Capturing and tracking this information may help inform future mitigation and remediation efforts when possible.
We prioritize energy efficiency and sustainability when evaluating investment opportunities and have begun to monitor our portfolio for climate risk factors. We utilize utility and energy audits that are performed by third-party engineering consultants during the due diligence phase of our acquisitions. The energy consumption data that we collect is used to assess our facilities’ carbon emission levels.
We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016. We conduct our business through an umbrella partnership real estate investment trust, or UPREIT, structure in which our properties are owned by wholly owned subsidiaries of our operating partnership, Global Medical REIT L.P. (the “Operating Partnership”).
We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016. We hold our facilities and conduct our operations through a Delaware limited partnership subsidiary, Global Medical REIT L.P. (the “Operating Partnership”).
Dispositions We believe in certain circumstances, dispositions help to strengthen our portfolio and provide cash flow and gains from the sales that can be used for re-investment or to reduce indebtedness. In July 2022, we sold a medical office building located in Germantown, Tennessee receiving gross proceeds of $17.9 million, resulting in a gain of approximately $6.8 million.
Dispositions We believe in certain circumstances dispositions help to strengthen our portfolio and provide cash flow and gains from the sales that can be used for re-investment or to reduce indebtedness. During the year ended December 31, 2023, we completed three dispositions.
Furthermore, the continued spread of the BA.5 variant of COVID-19 (and its subvariants) in the U.S. has prolonged the COVID-19 pandemic, which could continue to disrupt our operations and the operations of our tenants and third-party service providers. 6 Table of Contents Our Properties As of December 31, 2022 we had gross investments of approximately $1.5 billion in real estate properties, consisting of 189 buildings with an aggregate of (i) approximately 4.9 million leasable square feet and (ii) approximately $114.5 million of annualized base rent.
Our Properties As of December 31, 2023, we had gross investments of approximately $1.4 billion in real estate properties, consisting of 185 buildings with an aggregate of (i) approximately 4.7 million leasable square feet and (ii) approximately $110.2 million of annualized base rent. The tables below summarize information about our portfolio as of December 31, 2023.
The future of the Affordable Care Act is uncertain and any changes to existing laws and regulations, including the Affordable Care Act’s repeal, modification or replacement, could have a long-term financial impact on the delivery of and payment for healthcare. Both our tenants and us may be adversely affected by the law or its repeal, modification or replacement.
Both our tenants and us may be adversely affected by the law or its repeal, modification or replacement.
From the beginning of 2022 through February 24, 2023, one-month term SOFR has increased from close to 0% to 4.5%, which, in turn, has led to a significant increase in our interest expense. ​ Additionally, as most of our leases are triple-net leases, we are somewhat insulated from the effects of inflation on our operating expenses.
Such elevated SOFR results in higher interest costs on our floating rate borrowings, which negatively affects our operating profits and contributes to the delay in our ability to grow our investment portfolio. ​ Additionally, as most of our leases are triple-net leases, we are somewhat insulated from the effects of inflation on our operating expenses.
In response to the increase in the inflation rate, the U.S. Federal Reserve (the “Fed”) instituted a number of increases to the Federal Funds Rate throughout the year, with the rate increasing from a target range of 0% to 0.25% at the beginning of 2022 to a current range of 4.50% to 4.75% as of its meeting in February 2023.
Federal Reserve (the “Fed”) increased the target range for the Federal Funds Rate from 0.25% – 0.50% in the first quarter of 2022 to 5.25% – 5.50% as of January 2024.
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We submitted our 2022 GRESB assessment report on July 1, 2022 and received a score of 46, which was higher than our 2021 score. ​ Our commitment to employee engagement remains a high-priority, as we continue to make accommodations for health, safety, and work-life balance.
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The contents of our Corporate Social Responsibility Report are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. ​ Our commitment to employee engagement remains a high-priority, as we continue to make accommodations for health, safety, and work-life balance, including at our headquarters which is LEED platinum certified and includes a fitness center, café and rooftop lounge.
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In 2022, we expanded our partnership with a national charitable organization to provide transportation in Orlando, Florida to healthcare facilities for those in need. We started the project in 2021 in the Phoenix, Arizona metro area with a ride-share provider and a national charitable organization.
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Climate Change Risk We take climate change and the risks associated with climate change seriously, including both physical and transitional risks. We utilize software to help us identify and measure the potential climate risk exposure for our properties. The software analysis summarizes the climate change-related risks, groups them by onset potential and identifies opportunities for risk mitigation.
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The program’s success has allowed us to expand into Orlando, Florida and to potentially more cities in the future. Climate Change ​ We take climate change and the risks associated with climate change seriously. We prioritize energy efficiency and sustainability when evaluating investment opportunities and have begun to monitor our portfolio for climate risk factors.
Added
Capturing and tracking this information may help inform future mitigation and remediation efforts when possible.
Removed
(2) LifePoint Health is formerly known as Kindred Healthcare Inc.
Added
Many market participants had anticipated that the high trajectory of interest rates during 2022 and throughout 2023 would lead to an economic recession towards the end of 2023 that would have caused the Fed to begin lowering the Federal Funds Rate.
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Lease Expirations The following table contains information regarding the lease expiration dates of the leases in our portfolio as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized Base Rent (ABR) ​ Year ​ Number of Leases ​ Leased Square Feet ​ (in thousands) (1) ​ % of ABR ​ 2023 ​ 69 ​ 363,420 ​ $ 7,542 ​ 6.6 % 2024 64 700,146 ​ 15,672 ​ 13.7 % 2025 43 366,727 ​ 8,856 ​ 7.7 % 2026 58 516,094 ​ 11,327 ​ 9.9 % 2027 44 479,579 ​ 12,096 ​ 10.6 % 2028 19 170,950 ​ 4,063 ​ 3.5 % 2029 23 471,026 ​ 11,382 ​ 9.9 % 2030 24 381,492 ​ 9,592 ​ 8.4 % 2031 13 287,889 ​ 6,348 ​ 5.5 % 2032 ​ 7 ​ 80,310 ​ ​ 2,490 ​ 2.2 % Thereafter 36 904,621 ​ 25,101 ​ 22.0 % Total 400 4,722,254 (2) ​ $ 114,469 100.0 % (1) Monthly base rent for December 2022, multiplied by 12 (or base rent net of annualized expenses for properties with gross leases).
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However, certain components of the U.S. economy have outperformed expectations and inflation continues to remain higher than the Fed’s target rate, which has caused the Fed to take a “wait-and-see” approach to monetary policy rather than beginning a process of lowering the Federal Funds Rate.
Removed
At the time of its bankruptcy filing, Pipeline operated seven hospitals in three states, including the White Rock Medical Center in Dallas, Texas, an acute-care hospital owned by the Company where Pipeline is the sole tenant.
Added
During 2023, one-month term SOFR increased from 4.36% to 5.36%.
Removed
According to the filed bankruptcy documents, although Pipeline has experienced the same labor and reimbursement pressures that many acute-care hospitals have been facing since the beginning of the COVID-19 pandemic, the primary reason for the bankruptcy filing relates to Pipeline’s facilities in Chicago, Illinois, and not the White Rock Medical Center.
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This increase in labor costs, among various other factors, contributed to the rapid increase in inflation during 2022, which remained elevated through 2023. 6 Table of Contents Furthermore, the continued spread of variants and subvariants of COVID-19 in the U.S. has prolonged the COVID-19 epidemic, which could continue to disrupt our operations and the operations of our tenants and third-party service providers.
Removed
While in bankruptcy, Pipeline sold its facilities in Chicago, Illinois and on January 13, 2023, the bankruptcy court approved Pipeline’s plan of reorganization (the “Reorganization Plan”). As part of the Reorganization Plan, Pipeline agreed to assume our leases at White Rock Medical Center with certain amendments to facilitate its emergence from bankruptcy and new operating plan.
Added
Opportunistic Acquisitions Despite the continued shift in the delivery of healthcare services to smaller, more specialized facilities, we believe opportunities exist to acquire larger, acute-care facilities, such as acute-care hospitals and LTACs, with very attractive submarket fundamentals at compelling valuations.
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The Reorganization Plan with respect to the Company’s leases with Pipeline was effective as of February 6, 2023. Acquisition Under Contract As of February 24, 2023, we had one acquisition under contract for a purchase price of approximately $6.7 million. We are currently in the due diligence period for our property under contract.
Added
In August 2023, we sold a medical office building located in North Charleston, South Carolina receiving gross proceeds of $10.1 million, resulting in a gain of $2.3 million. In June 2023, we sold a portfolio of four medical office buildings located in Oklahoma City, Oklahoma receiving gross proceeds of $66.0 million, resulting in a gain of $12.8 million.
Removed
If we identify problems with this property or the operator of this property during our due diligence review, we may not close the transaction on a timely basis or we may terminate the purchase agreement and not close the transaction. ​ Properties Under Contract for Sale As of February 24, 2023, we had two properties under contract for sale for aggregate gross sales proceeds of approximately $11.6 million and an aggregate net book value of $8.3 million.
Added
In March 2023, we sold a medical office building located in Jacksonville, Florida receiving gross proceeds of $4.4 million, resulting in a gain of $0.5 million. Qualification as a REIT We elected to be taxed as a REIT commencing with our taxable year ended December 31, 2016.
Removed
The transactions are expected to be completed by March 31, 2023. The buyers are currently in the due diligence periods and the transactions are subject to various closing contingencies. Accordingly, the transactions may not close on a timely basis or the buyers may terminate the purchase agreements and not close the transactions.
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Failure to comply with these laws and regulations could adversely affect us directly and our tenants’ ability to make rent payments to us.
Removed
The resiliency of medical office buildings during the COVID-19 pandemic caused many real estate investors to enter the market in search of reliable returns. This influx of investors has caused medical office building prices and competition to increase significantly, especially for Class A properties in prime locations, but has also caused similar increases in our target markets.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf our leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT, which, in turn, could materially adversely affect our business, financial conditions, results of operations, ability to make distributions to our stockholders and the trading price of our common and preferred stock. 33 Table of Contents If a TRS lessee failed to qualify as a TRS or the facility operators engaged by a TRS lessee did not qualify as “eligible independent contractors,” we would fail to qualify as a REIT and would be subject to higher taxes and have less cash available for distribution to our stockholders.
Biggest changeIf our leases are not respected as true leases for U.S. federal income tax purposes, we would fail to qualify as a REIT, which, in turn, could materially adversely affect our business, financial conditions, results of operations, ability to make distributions to our stockholders and the trading price of our common and preferred stock.
The COVID-19 pandemic has affected the healthcare industry in many ways. Many stories exist about U.S. healthcare workers, especially nurses, experiencing burnout due to the length and severity of the pandemic, and this has caused many nurses and other medical professionals to switch jobs within the medical profession or quit the profession altogether.
COVID-19 has affected the healthcare industry in many ways. Many stories exist about U.S. healthcare workers, especially nurses, experiencing burnout due to the length and severity of the pandemic, and this has caused many nurses and other medical professionals to switch jobs within the medical profession or quit the profession altogether.
If we or a buyer identify problems with the property or the operator during our or their due diligence review, we may or they may terminate the purchase or sale agreement and not close.
If we or a buyer identify problems with the property or the operator during our or their due diligence review, we or they may terminate the purchase or sale agreement and not close.
Although we have structured, and intend to continue to structure, any such sale-leaseback transaction so that the lease will be characterized as a “true lease” for tax purposes, thereby allowing us to be treated as the owner of the healthcare facility for U.S. federal income tax purposes, we cannot assure you that the Internal Revenue Service (the “IRS”) will not challenge such characterization.
Although we have structured, and intend to continue to structure, any such sale-leaseback transaction so that the lease will be characterized as a “true lease” for U.S. federal income tax purposes, thereby allowing us to be treated as the owner of the healthcare facility for U.S. federal income tax purposes, we cannot assure you that the Internal Revenue Service (the “IRS”) will not challenge such characterization.
All of these risks may be greater in smaller markets, where there may be fewer potential replacement tenants, making it more difficult to replace tenants, especially for specialized space. We have significant geographic concentration in a small number of states, including Texas, Florida, Ohio, Oklahoma, Pennsylvania, Arizona, and Illinois.
All these risks may be greater in smaller markets, where there may be fewer potential replacement tenants, making it more difficult to replace tenants, especially for specialized space. We have significant geographic concentration in a small number of states, including Texas, Florida, Ohio, Pennsylvania, Arizona, and Illinois.
Our leases are generally long-term leases with annual rent escalators, however, some of our debt financing is subject to floating interest rates. Recent increases in interest rates have not been matched by an increase in our rent payments, which has exposed us to a funding imbalance.
Our leases are generally medium-to-long-term leases with annual rent escalators, however, some of our debt financing is subject to floating interest rates. Recent increases in interest rates have not been matched by an increase in our rent payments, which has exposed us to a funding imbalance.
The recent increase in interest rates has caused our borrowing costs to materially increase, which has, among other things, increased our cost of capital (which has affected our ability to acquire assets) and decreased our earnings, liquidity, cash available to make distributions to our stockholders and the trading price of our common and preferred stock.
The increase in interest rates has caused our borrowing costs to materially increase, which has, among other things, increased our cost of capital (which has affected our ability to acquire assets) and decreased our earnings, liquidity, cash available to make distributions to our stockholders and the trading price of our common and preferred stock.
These provisions include, among others: ● Redemption rights; ● A requirement that we may not be removed as the general partner of our Operating Partnership without our consent; ● Transfer restrictions on OP Units; 29 Table of Contents ● Our ability, as the sole member of the general partner of our Operating Partnership, in some cases, to amend the partnership agreement and to cause the Operating Partnership to issue units with terms that could delay, defer or prevent a merger or other change of control of us or our Operating Partnership without the consent of the limited partners; and ● The right of the limited partners to consent to direct or indirect transfers of the general partnership interest, including as a result of a merger or a sale of all or substantially all of our assets, in the event that such transfer requires approval by our common stockholders.
These provisions include, among others: ● Redemption rights; ● A requirement that we may not be removed as the general partner of our Operating Partnership without our consent; ● Transfer restrictions on OP Units; 27 Table of Contents ● Our ability, as the sole member of the general partner of our Operating Partnership, in some cases, to amend the partnership agreement and to cause the Operating Partnership to issue units with terms that could delay, defer or prevent a merger or other change of control of us or our Operating Partnership without the consent of the limited partners; and ● The right of the limited partners to consent to direct or indirect transfers of the general partnership interest, including as a result of a merger or a sale of all or substantially all of our assets, in the event that such transfer requires approval by our common stockholders.
Any attempt to own or transfer shares of our beneficial interest in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. 27 Table of Contents Certain provisions of Maryland law could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for shares of our common stock or that our stockholders otherwise believe to be in their best interests.
Any attempt to own or transfer shares of our beneficial interest in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. 25 Table of Contents Certain provisions of Maryland law could inhibit changes of control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for shares of our common stock or that our stockholders otherwise believe to be in their best interests.
Although the Board has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for shares of our common stock or that our stockholders otherwise believe to be in their best interests. 28 Table of Contents We may change our business, investment, and financing strategies without stockholder approval.
Although the Board has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for shares of our common stock or that our stockholders otherwise believe to be in their best interests. 26 Table of Contents We may change our business, investment, and financing strategies without stockholder approval.
Adverse economic or other conditions in our geographic markets, including periods of economic slowdown or recession, industry slowdowns, periods of deflation, relocation of businesses, changing demographics, earthquakes and other natural disasters, fires, terrorist acts, public health crisis, pandemics and epidemics, such as the COVID-19 pandemic, and civil disturbances or acts of war and other man-made disasters which may result in uninsured or underinsured losses, and changes in tax, real estate, zoning and other laws and regulations, may negatively affect our tenants’ businesses and ability to pay rents to us and, therefore, could have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Adverse economic or other conditions in our geographic markets, including periods of economic slowdown or recession, industry slowdowns, periods of deflation, relocation of businesses, changing demographics, earthquakes and other natural disasters, 15 Table of Contents fires, terrorist acts, public health crisis, pandemics and epidemics, such as the COVID-19 pandemic, and civil disturbances or acts of war and other man-made disasters which may result in uninsured or underinsured losses, and changes in tax, real estate, zoning and other laws and regulations, may negatively affect our tenants’ businesses and ability to pay rents to us and, therefore, could have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
The healthcare industry is currently experiencing, among other things: ● Changes in the demand for and methods of delivering healthcare services; ● Competition among healthcare providers; ● Consolidation of large health insurers; ● Regulatory and government reimbursement uncertainty resulting from the Affordable Care Act and other healthcare reform laws; ● Federal court decisions on cases challenging the legality of the Affordable Care Act; ● Federal and state government plans to reduce budget deficits and address debt ceiling limits by lowering healthcare provider Medicare and Medicaid payment rates; ● Changes in third-party reimbursement methods and policies; and 22 Table of Contents ● Increased scrutiny of billing, referral and other practices by U.S. federal and state authorities.
The healthcare industry is currently experiencing, among other things: ● Changes in the demand for and methods of delivering healthcare services; ● Competition among healthcare providers; ● Consolidation of large health insurers; ● Regulatory and government reimbursement uncertainty resulting from the Affordable Care Act and other healthcare reform laws; ● Federal court decisions on cases challenging the legality of the Affordable Care Act; ● Federal and state government plans to reduce budget deficits and address debt ceiling limits by lowering healthcare provider Medicare and Medicaid payment rates; ● Changes in third-party reimbursement methods and policies; and ● Increased scrutiny of billing, referral and other practices by U.S. federal and state authorities.
Certain market conditions that may affect our business are as follows: ● National or regional economic upturns could increase the value of real estate generally, which could make it more difficult for us to acquire new healthcare properties at attractive prices or prevent us from purchasing additional facilities at all; ● National or regional economic downturns could adversely affect our tenants’ businesses, or the businesses located in our tenants’ geographic region, which could adversely affect our tenants’ ability to pay rent and the value of our healthcare properties; ● A decrease in interest rates and financing costs could increase demand for real estate and, thus, the price of real estate.
Certain market conditions that may affect our business are as follows: ● National or regional economic upturns could increase the value of real estate generally, which could make it more difficult for us to acquire new healthcare properties at attractive prices or prevent us from purchasing additional facilities at all; ● National or regional economic downturns could adversely affect our tenants’ businesses, or the businesses located in our tenants’ geographic region, which could adversely affect our tenants’ ability to pay rent and the value of our healthcare properties; 22 Table of Contents ● A decrease in interest rates and financing costs could increase demand for real estate and, thus, the price of real estate.
Conflicts of interest could arise because of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any partner thereof, on the other. Our directors and officers have duties to us under applicable Maryland law in connection with their management of our company.
Conflicts of interest could arise because of our UPREIT structure. Conflicts of interest could arise because of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any partner thereof, on the other. Our directors and officers have duties to us under applicable Maryland law in connection with their management of our company.
To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rents paid to our Operating Partnership by third-party lessees and any TRS lessee that we may form in the future pursuant to the leases of our healthcare facilities will constitute substantially all of our gross income.
To maintain our qualification as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as “rents from real property.” Rents paid to our Operating Partnership by third-party lessees and any TRS lessee that we may form in the future pursuant to the leases of our healthcare facilities will constitute substantially all of our gross income.
If we are held liable under these laws, our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock may be materially adversely affected. 19 Table of Contents The income from certain of our properties is dependent on the ability of our property managers to successfully manage those properties.
If we are held liable under these laws, our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock may be materially adversely affected. The income from certain of our properties is dependent on the ability of our property managers to successfully manage those properties.
If any sale-leaseback transaction is challenged as a partnership for U.S. federal income tax purposes, all of the payments that we receive from the tenant may not be treated as qualifying income for the 75% or 95% gross income tests required for REIT qualification and we may fail to qualify as a REIT as a result.
If any sale-leaseback transaction is challenged as a partnership for U.S. federal income tax purposes, all of the payments that we receive from the tenant may not be treated as qualifying income for the 75% or 95% gross income tests required for REIT qualification and we may fail to maintain our qualification as a REIT as a result.
These actions could materially adversely affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. Certain taxes may limit our ability to dispose of our healthcare facilities. A REIT’s net income from prohibited transactions is subject to a 100% tax.
These actions could materially adversely affect our 29 Table of Contents business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. Certain taxes may limit our ability to dispose of our healthcare facilities. A REIT’s net income from prohibited transactions is subject to a 100% tax.
The Board may not grant an exemption from this restriction to any proposed transferee whose ownership in excess of 9.8% of the value of our outstanding shares would result in our failing to qualify as a REIT. 34 Table of Contents Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The Board may not grant an exemption from this restriction to any proposed transferee whose ownership in excess of 9.8% of the value of our outstanding shares would result in our failing to qualify as a REIT. Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
Nevertheless, we have entered and may in the future enter into tax protection agreements to assist contributors of properties to our Operating Partnership in deferring the recognition of taxable gain because of and after any such contribution. 35 Table of Contents General Risk Factors ​ We are subject to risks related to corporate social responsibility.
Nevertheless, we have entered and may in the future enter into tax protection agreements to assist contributors of properties to our Operating Partnership in deferring the recognition of taxable gain because of and after any such contribution. ​ General Risk Factors ​ We are subject to risks related to corporate social responsibility.
Therefore, any such default could have a material adverse impact on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. Our interest rate hedges may not be successful in mitigating our interest rate risks.
Therefore, any such default could have a material adverse impact on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 19 Table of Contents Our interest rate hedges may not be successful in mitigating our interest rate risks.
Specifically, the Code imposes a disallowance of deductions for business interest expense (even if paid to third parties) in excess of the sum of a taxpayer’s business interest income and 30% of the adjusted taxable income of the business, which is its taxable income computed without regard to business interest income or expense, net operating losses or the pass-through income deduction.
Specifically, the Code imposes a disallowance of deductions for business interest expense (even if paid to third parties) in excess of the sum of a taxpayer’s business 28 Table of Contents interest income and 30% of the adjusted taxable income of the business, which is its taxable income computed without regard to business interest income or expense, net operating losses or the pass-through income deduction.
In order to qualify as a REIT for each taxable year, five or fewer individuals, as defined in the Code, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding shares of capital stock at any time during the last half of a taxable year.
In order to maintain our qualification as a REIT for each taxable year, five or fewer individuals, as defined in the Code, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding shares of capital stock at any time during the last half of a taxable year.
Because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud, effective internal control over financial reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud, effective internal control over financial 24 Table of Contents reporting may not prevent or detect misstatements and can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Our tenants face a wide range of business risks, including economic, competitive, government reimbursement and regulatory risks, any of which could cause our tenants to be unable to pay rent to us. ​ 13 Table of Contents ● We finance a portion of our portfolio with unhedged floating-rate debt from our Credit Facility.
Our tenants face a wide range of business risks, including economic, competitive, government reimbursement and regulatory risks, any of which could cause our tenants to be unable to pay rent to us. ​ ● We finance a portion of our portfolio with unhedged floating-rate debt from our Credit Facility.
In addition to interest rate risk, we are subject to additional risks associated with our Credit Facility generally, including covenant restrictions. ​ ● Our assets are concentrated in healthcare-related facilities, making us more economically vulnerable to specific industry-related risks than if our assets were diversified across different industries. ​ ● The inability of any of our significant tenants to pay rent to us could have a disproportionate negative affect on our business. ​ ● Competition for medical office buildings has increased significantly since the beginning of the COVID-19 pandemic. ​ ● Most of our healthcare facilities are occupied by a single tenant, and we may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases, especially for our healthcare facilities located in smaller markets. ​ ● Our tenants’ businesses have in the past and could again in the future be materially and adversely affected by the effects of the COVID-19 virus, including labor shortages that have resulted from nurses and other medical personnel switching jobs within the medical profession or quitting the medical profession altogether, and other viruses or pandemics could cause similar effects in the future. ​ ● We have significant geographic concentration in a small number of states, including Texas, Florida, Ohio, Oklahoma, Pennsylvania, Arizona, and Illinois.
In addition to interest rate risk, we are subject to additional risks associated with our Credit Facility generally, including covenant restrictions. ​ ● Our assets are concentrated in healthcare-related facilities, making us more economically vulnerable to specific industry-related risks than if our assets were diversified across different industries. ​ ● The inability of any of our significant tenants to pay rent to us could have a disproportionate negative affect on our business. ​ ● Most of our healthcare facilities are occupied by a single tenant, and we may have difficulty finding suitable replacement tenants in the event of a tenant default or non-renewal of our leases, especially for our healthcare facilities located in smaller markets. ​ ● Our tenants’ businesses have in the past and could again in the future be materially and adversely affected by the effects of the COVID-19 virus, including labor shortages that have resulted from nurses and other medical personnel switching jobs within the medical profession or quitting the medical profession altogether, and other viruses or pandemics could cause similar effects in the future. ​ ● We have significant geographic concentration in a small number of states, including Texas, Florida, Ohio, Pennsylvania, Arizona, and Illinois.
The rapid increase in inflation during 2022 led to a rapid increase in market interest rates, which materially increased the interest rate on our floating rate debt. In addition to interest rate risk, we are subject to additional risks associated with our Credit Facility generally, including covenant restrictions.
The rapid increase in inflation during 2022, which remained elevated during 2023, led to a rapid increase in market interest rates, which materially increased the interest rate on our floating rate debt. In addition to interest rate risk, we are subject to additional risks associated with our Credit Facility generally, including covenant restrictions.
We cannot assure you that our distribution policy will not change in the future or that the Board will continue to declare dividends at the same rate as in 2022.
We cannot assure you that our distribution policy will not change in the future or that the Board will continue to declare dividends at the same rate as in 2023.
To qualify as a REIT, we are required, among other things, to distribute each year to our stockholders at least 90% of our taxable income, without regard to the deduction for dividends paid and excluding net capital gain.
To maintain our qualification as a REIT, we are required, among other things, to distribute each year to our stockholders at least 90% of our taxable income, without regard to the deduction for dividends paid and excluding net capital gain.
Climate change may also indirectly affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the risk of flood at our properties.
Climate change may also indirectly affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of energy and increasing the risk of flooding our properties.
As of December 31, 2022, we had 15 interest rate swap agreements with a total notional amount of $500 million that fixed the SOFR component of the interest rate on the $350 million and $150 million term loan components under our Credit Facility (the “Term Loans”).
As of December 31, 2023, we had 13 interest rate swap agreements with a total notional amount of $500 million that fixed the SOFR component of the interest rate on the $350 million and $150 million term loan components under our Credit Facility (the “Term Loans”).
Our healthcare buildings that are subject to ground leases could restrict our use of such healthcare facilities. We have seven buildings located on land that is subject to operating ground leases, representing approximately 4.2% of our December 2022 annualized base rent. These ground leases contain certain restrictions.
Our healthcare buildings that are subject to ground leases could restrict our use of such healthcare facilities. We have seven buildings located on land that is subject to operating ground leases, representing approximately 4.3% of our December 2023 annualized base rent. These ground leases contain certain restrictions.
In some cases, private insurers rely on all or portions of the Medicare payment systems to determine payment rates, which may result in decreased reimbursement from private insurers.
In some cases, private insurers rely on all or portions of the Medicare payment systems to determine 21 Table of Contents payment rates, which may result in decreased reimbursement from private insurers.
Also, the failure of our Operating Partnership or any subsidiary partnerships to qualify as a partnership could cause it to become subject to U.S. federal and state corporate income tax, which, in turn, could materially adversely affect our business, financial condition, results of operations, ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Also, the failure of our Operating Partnership or any subsidiary partnership to qualify as a partnership for U.S. federal income tax purposes could cause it to become subject to U.S. federal and state corporate income 32 Table of Contents tax, which, in turn, could materially adversely affect our business, financial condition, results of operations, ability to make distributions to our stockholders and the trading price of our common and preferred stock.
There can be no assurance, however, that we will be able to comply with the 20% limitation or to avoid application of the 100% excise taxes.
There can be no assurance, however, that we will be able to comply with the 20% limitation or to avoid application of the 100% excise 30 Table of Contents taxes.
The rapid increase in inflation during 2022 led to a rapid increase in market interest rates, which materially increased the interest rate on our floating rate debt.
The rapid increase in inflation during 2022, which remained elevated during 2023, led to a rapid increase in market interest rates, which materially increased the interest rate on our floating rate debt.
As of December 31, 2022, we had $694.1 million of indebtedness outstanding (net of unamortized debt issuance costs). We may also place indebtedness on our healthcare facilities in the future. We run the risk of being unable to refinance such debt (including our Credit Facility debt) when the loans come due or of being unable to refinance on favorable terms.
As of December 31, 2023, we had $611.2 million of indebtedness outstanding (net of unamortized debt issuance costs). We may also place indebtedness on our healthcare facilities in the future. We run the risk of being unable to refinance such debt (including our Credit Facility debt) when the loans come due or of being unable to refinance on favorable terms.
Holders of shares of our common stock will generally not have any voting rights with respect to activities of our Operating Partnership, including issuances of additional OP Units in amounts that do not exceed 20% of our outstanding shares of common stock. As of December 31, 2022, we owned 93.97% of the outstanding OP Units.
Holders of shares of our common stock will generally not have any voting rights with respect to activities of our Operating Partnership, including issuances of additional OP Units in amounts that do not exceed 20% of our outstanding shares of common stock. As of December 31, 2023, we owned 92.91% of the outstanding OP Units.
Our failure to retain key employees and retain highly skilled managerial and operational personnel, especially during a time of rapid growth for our business, could have a material adverse effect on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Our failure to retain key employees and retain highly skilled managerial and operational personnel, could have a material adverse effect on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls as a result of changes to our business or otherwise, or if we experience difficulties in their implementation, our business, results of operations and financial condition, our ability to make distributions to our stockholders and the trading price of our common and preferred stock could be materially adversely impacted and we could fail to meet our reporting obligations. 26 Table of Contents Conflicts of interest could arise because of our UPREIT structure.
If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls as a result of changes to our business or otherwise, or if we experience difficulties in their implementation, our business, results of operations and financial condition, our ability to make distributions to our stockholders and the trading price of our common and preferred stock could be materially adversely impacted and we could fail to meet our reporting obligations.
The rapid increase in inflation during 2022 has led to a dramatic increase in market interest rates as the Fed has implemented a series of interest rate increases to curb the inflation rate.
The rapid increase in inflation during 2022, which remained elevated during 2023, has led to a dramatic increase in market interest rates as the Fed has implemented a series of interest rate increases to curb the inflation rate.
As of December 31, 2022, the annualized base rent from our top three tenants represented approximately 18% of our portfolio-wide annualized base rent, including our LifePoint Health facilities, which comprised approximately 7% of our annualized base rent; our Encompass facilities, which comprised approximately 6% of our annualized base rent; and our Memorial Health facilities, which comprised approximately 5% of our annualized base rent.
As of December 31, 2023, the annualized base rent from our top three tenants represented approximately 19% of our portfolio-wide annualized base rent, including our LifePoint Health facilities, which comprised approximately 7% of our annualized base rent; our Encompass facilities, which comprised approximately 7% of our annualized base rent; and our Memorial Health facilities, which comprised approximately 5% of our annualized base rent.
A security breach or other significant disruption involving our or our tenants’ IT networks and related systems could: ● Disrupt the proper functioning of our or our tenants’ networks and systems and therefore our operations and/or those of our tenants; ● Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, or otherwise valuable information about us, our tenants or our tenants’ patients, which others could use to compete against us or our tenants or which could expose us or our tenants to regulatory action or damage claims by third-parties; ● Result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines; ● Result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; ● Jeopardize the building systems relied upon by our tenants for the efficient use of their leased space; ● Require significant management attention and resources to remedy any damages that result; ● Subject us or our tenants to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements; or 20 Table of Contents ● Damage our and our tenants’ reputations.
Accordingly, we and our tenants may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and it is therefore impossible to entirely mitigate the risk. 18 Table of Contents A security breach or other significant disruption involving our or our tenants’ IT networks and related systems could: ● Disrupt the proper functioning of our or our tenants’ networks and systems and therefore our operations and/or those of our tenants; ● Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, or otherwise valuable information about us, our tenants or our tenants’ patients, which others could use to compete against us or our tenants or which could expose us or our tenants to regulatory action or damage claims by third-parties; ● Result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines; ● Result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; ● Jeopardize the building systems relied upon by our tenants for the efficient use of their leased space; ● Require significant management attention and resources to remedy any damages that result; ● Subject us or our tenants to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements; or ● Damage our and our tenants’ reputations.
If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business or to meet our obligations and commitments as they mature, which, in turn, could materially adversely affect our business, financial conditions, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
If we are unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to expand our business or to meet our obligations and commitments as they mature, which, in turn, could materially adversely affect our business, financial conditions, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 20 Table of Contents Risks Related to the Healthcare Industry Adverse trends in the healthcare industry may negatively affect our tenants’ businesses.
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions.
In addition, if we fail to qualify as a REIT for any taxable year, we will no longer be required to make distributions.
If we were to experience uninsured losses or if any of our insurance carriers were unable to pay insurance claims, we may lose all or a portion of our investment in a property and the revenues associated with such property, which could materially adversely affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
If we were to experience uninsured losses or if any of our insurance carriers were unable to pay insurance claims, we may lose all or a portion of our investment in a property and the revenues associated with such property, which could materially adversely affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 17 Table of Contents We may incur environmental compliance costs and liabilities associated with owning, leasing, developing and operating our healthcare facilities.
The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, including by computer hackers, foreign governments and cyber-terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
Also, remote work arrangements may increase the risk of cybersecurity incidents, data breaches or cyber-attacks. The risk of a security breach or disruption, particularly through cyber-attack or cyber-intrusion, including by computer hackers, foreign governments and cyber-terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
As of December 31, 2022, leases representing 6.6%, 13.7% and 7.7% of our portfolio annualized base rent expire in 2023, 2024 and 2025, respectively. Most of our healthcare facilities are occupied by a single tenant.
As of December 31, 2023, leases representing 12.8%, 7.2% and 9.3% of our portfolio annualized base rent expire in 2024, 2025 and 2026, respectively. Most of our healthcare facilities are occupied by a single tenant.
Because real estate investments are relatively illiquid, our ability to promptly sell one or more of our healthcare facilities in response to changing economic, financial and investment conditions is limited.
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our healthcare facilities. Because real estate investments are relatively illiquid, our ability to promptly sell one or more of our healthcare facilities in response to changing economic, financial and investment conditions is limited.
The ownership attribution rules that apply for purposes of these 35% thresholds are complex. Although we would monitor ownership of our shares of common stock by any facility operators and their owners, there can be no assurance that these ownership levels will not be exceeded. You may be restricted from acquiring or transferring certain amounts of our common stock.
Although we would monitor ownership of our shares of common stock by any facility operators and their owners, there can be no assurance that these ownership levels will not be exceeded. 31 Table of Contents You may be restricted from acquiring or transferring certain amounts of our common stock.
As a result, the One-Month Term SOFR, which serves as the base rate for the Revolver, increased from just over 0% at the start of the year to 4.32% in December 2022 and has continued to increase in 2023 to date.
As a result, the one-month term SOFR, which serves as the base rate for the Revolver, increased from just over 0% at the start of 2022 to 5.36% in December 2023.
As of December 31, 2022, the balance of the revolver component of our Credit Facility (the “Revolver”) was $145.7 million, which represented approximately 21% of our total outstanding indebtedness at December 31, 2022.
As of December 31, 2023, the balance of the revolver component of our Credit Facility (the “Revolver”) was $92.4 million, which represented approximately 15% of our total outstanding indebtedness at December 31, 2023.
This phenomenon has led to material increases in labor costs for healthcare systems, especially hospital systems, as employers have had to rely on contract nursing labor to sustain their businesses. Other viruses or pandemics could cause similar effects in the future.
This phenomenon has led to material increases in labor costs for healthcare systems, especially hospital systems, as employers have had to rely on contract nursing labor to sustain their businesses.
Our revenues are generated by our leases, which are typically medium-to-long-term leases with fixed rental rates, subject to annual rent escalators. The unhedged portion of our Credit Facility debt is subject to SOFR, which has increased substantially since early 2022. The generally fixed nature of revenues and the variable rate of our debt obligations create interest rate risk for us.
Our revenues are generated by our leases, which are typically medium-to-long-term leases with fixed rental rates, subject to annual rent escalators. The unhedged portion of our Credit Facility debt is subject to SOFR, which has increased substantially since early 2022 and continued to rise in 2023.
Any reduction in rental revenues resulting from the inability of our tenants or their associated healthcare delivery systems to compete or due to a reduced need for healthcare facilities generally may have a material adverse effect on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 18 Table of Contents We may incur uninsured losses or losses in excess of our insurance coverage, which may result in us having to absorb all or a portion of such loss.
Any reduction in rental revenues resulting from the inability of our tenants or their associated healthcare delivery systems to compete or due to a reduced need for healthcare facilities generally may have a material adverse effect on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Apart from this ownership interest in our Operating Partnership, we do not have any independent operations. As a result, we rely on distributions from our Operating Partnership to pay any dividends that we might declare on our common and preferred stock. We also rely on distributions from our Operating Partnership to meet our obligations.
As a result, we rely on distributions from our Operating Partnership to pay any dividends that we might declare on our common and preferred stock. We also rely on distributions from our Operating Partnership to meet our obligations.
Thus, compliance with the REIT requirements may hinder our performance. 31 Table of Contents We must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets.
To meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance. We must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets.
Any material changes in the current payment programs or regulatory, economic, environmental or competitive conditions in these states could have an amplified effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock than if our properties were more geographically diverse. 17 Table of Contents We may be unable to successfully enter into definitive purchase or sale agreements for, or close the acquisition or sale of, the properties in our investment pipeline or our portfolio.
Any material changes in the current payment programs or regulatory, economic, environmental or competitive conditions in these states could have an amplified effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock than if our properties were more geographically diverse.
In such an event, we cannot be certain that we would be able to replace the coverage at similar or otherwise favorable terms. We have obtained title insurance policies for each of our properties, typically in an amount equal to its original price. However, these policies may be for amounts less than the current or future values of our properties.
We have obtained title insurance policies for each of our properties, typically in an amount equal to its original price. However, these policies may be for amounts less than the current or future values of our properties.
If we determine that an impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset which could have a material adverse effect on our business, financial condition, results of operations and the trading price of our common and preferred stock.
If we determine that an impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset which could have a material adverse effect on our business, financial condition, results of operations and the trading price of our common and preferred stock. 23 Table of Contents Risks Related to Our Structure We have no direct operations and rely on funds received from our Operating Partnership and its subsidiaries to meet our obligations.
Should the impact of climate change be severe or occur for lengthy periods of time, our business, financial condition, results of operations, or our ability to make distributions to our stockholders and the trading price of our common and preferred stock could be materially adversely impacted. 16 Table of Contents Adverse economic or other conditions in our geographic markets could negatively affect our tenants’ ability to pay rent to us.
Should the impact of climate change be severe or occur for lengthy periods of time, our business, financial condition, results of operations, or our ability to make distributions to our stockholders and the trading price of our common and preferred stock could be materially adversely impacted.
If any of our tenants were unable to pay their rent to us, our revenues and operating cash flows could be materially adversely affected, which in turn could affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 14 Table of Contents Our assets are concentrated in healthcare-related facilities, making us more economically vulnerable to specific industry-related risks than if our assets were diversified across different industries.
If any of our tenants were unable to pay their rent to us, our revenues and operating cash flows could be materially 13 Table of Contents adversely affected, which in turn could affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
If we experience one or more of the risks described above, our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock could be materially adversely affected. 24 Table of Contents Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our healthcare facilities.
If we experience one or more of the risks described above, our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock could be materially adversely affected.
In such an event, we might remain obligated for any mortgage debt or other financial obligation related to the property. Further, if any of our insurance carriers were to become insolvent, we would be forced to replace the existing coverage with another suitable carrier, and any outstanding claims would be at risk for collection.
Further, if any of our insurance carriers were to become insolvent, we would be forced to replace the existing coverage with another suitable carrier, and any outstanding claims would be at risk for collection. In such an event, we cannot be certain that we would be able to replace the coverage at similar or otherwise favorable terms.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which could materially adversely affect our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 32 Table of Contents Our ownership of our TRS is subject to limitations and our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which could materially adversely affect our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could materially, adversely affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 30 Table of Contents Even if we continue to qualify as a REIT, we may face other tax liabilities that could reduce our cash flows and negatively impact our results of operations and financial condition.
As a result of all these factors, our failure to maintain our qualification as a REIT could impair our ability to expand our business and raise capital, and it could materially, adversely affect our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Potential reductions to Medicaid program spending in response to state budgetary pressures could negatively impact the ability of our tenants to successfully operate their businesses, and, consequently, could have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 23 Table of Contents Our tenants may be subject to significant legal actions that could subject them to increased operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to us, and we could also be subject to healthcare industry violations.
Potential reductions to Medicaid program spending in response to state budgetary pressures could negatively impact the ability of our tenants to successfully operate their businesses, and, consequently, could have a material adverse effect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Additionally, the volatility of COVID-19, its variants and its subvariants are unpredictable and there are no assurances that new variants and subvariants will not emerge in the future. 15 Table of Contents The COVID-19 pandemic, or other global pandemic in the future, could disrupt our and our third-party advisors’ businesses.
Additionally, the volatility of COVID-19, its variants and its subvariants are unpredictable and there are no assurances that new variants and subvariants will not emerge in the future. Other viruses or pandemics could also cause similar effects in the future.
Failure to close acquisitions or dispositions under contract could make it more difficult to grow or manage our portfolio, which could materially adversely affect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Failure to close acquisitions or dispositions under contract could make it more difficult to grow or manage our portfolio, which could materially adversely affect on our business, financial condition and results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 16 Table of Contents We may obtain only limited warranties when we purchase a property, which, in turn, would only provide us with limited recourse against the seller if issues arise after our purchase of a property.
If we do not receive enough funds from our Operating Partnership, our ability to make distributions to our stockholders and the trading price of our common and preferred stock may be materially, adversely affected. 25 Table of Contents Subject to certain requirements under Maryland law and REIT requirements, the Board has sole discretion to determine if we will pay distributions and the amount and frequency of such distributions, and past distribution amounts may not be indicative of future distribution amounts.
Subject to certain requirements under Maryland law and REIT requirements, the Board has sole discretion to determine if we will pay distributions and the amount and frequency of such distributions, and past distribution amounts may not be indicative of future distribution amounts.
Any healthcare industry downturn could adversely affect the ability of our tenants to pay us rents and our ability to maintain current rental and occupancy rates. Our tenant mix could become even more concentrated if a significant portion of our tenants’ practice in a particular medical field or are reliant upon a particular healthcare delivery system.
Our tenant mix could become even more concentrated if a significant portion of our tenants’ practice in a particular medical field or are reliant upon a particular healthcare delivery system.
Any of these events could have a material adverse effect on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock. 21 Table of Contents We rely on external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.
We rely on external sources of capital to fund future capital needs, and, if we encounter difficulty in obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet maturing obligations.
We acquire and own healthcare-related facilities. We are subject to risks inherent in concentrating investments in real estate, and specifically healthcare real estate. Any adverse effects that result from these risks could be more pronounced than if we diversified our investments outside of the healthcare industry.
Our assets are concentrated in healthcare-related facilities, making us more economically vulnerable to specific industry-related risks than if our assets were diversified across different industries. We acquire and own healthcare-related facilities. We are subject to risks inherent in concentrating investments in real estate, and specifically healthcare real estate.
The physical effects of climate change could have a material adverse effect on our properties. ​ The physical effects of climate change could have a material adverse effect on our facilities, operations, and business.
Furthermore, dealing with a tenant bankruptcy or other default may divert management’s attention and cause us to incur substantial legal and other costs. The physical effects of climate change could have a material adverse effect on our properties. ​ The physical effects of climate change could have a material adverse effect on our facilities, operations, and business.
Accordingly, we may not have enough insurance coverage against certain types of losses and may experience decreases in the insurance coverage available. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of our investment in a property, as well as the anticipated future revenue from the property.
Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of our investment in a property, as well as the anticipated future revenue from the property. In such an event, we might remain obligated for any mortgage debt or other financial obligation related to the property.
As a result of this geographic concentration, we are particularly exposed to downturns in these states’ economies or other changes in local real estate market conditions.
As of December 31, 2023, approximately 19%, 11%, 9%, 7%, 6%, and 6% of our total annualized base rent was derived from properties located in Texas, Florida, Ohio, Pennsylvania, Arizona, and Illinois , respectively. As a result of this geographic concentration, we are particularly exposed to downturns in these states’ economies or other changes in local real estate market conditions.
Our tenants are generally required (either directly or through a reimbursement arrangement with us) to maintain comprehensive property and casualty insurance covering our properties. However, some types of losses may be uninsurable or too expensive to insure against, such as losses due to windstorms, terrorist acts, earthquakes, and toxic mold, among others.
However, some types of losses may be uninsurable or too expensive to insure against, such as losses due to windstorms, terrorist acts, earthquakes, and toxic mold, among others. Accordingly, we may not have enough insurance coverage against certain types of losses and may experience decreases in the insurance coverage available.
Risks Related to Our Structure We have no direct operations and rely on funds received from our Operating Partnership and its subsidiaries to meet our obligations. We conduct substantially all of our operations through our Operating Partnership. As of December 31, 2022, we owned 93.97% of the outstanding OP Units.
We conduct substantially all of our operations through our Operating Partnership. As of December 31, 2023, we owned 92.91% of the outstanding OP Units. Apart from this ownership interest in our Operating Partnership, we do not have any independent operations.
An increase in competition for our acquisition targets could make it more difficult to grow our business, which could affect our ability to increase our distributions and the trading price of our common and preferred stock.
Any of these events could have a material adverse effect on our business, financial condition, results of operations, our ability to make distributions to our stockholders and the trading price of our common and preferred stock.
Removed
Competition for medical office buildings has increased significantly since the beginning of the COVID-19 pandemic. Medical office buildings were one of the few real estate asset classes that did not experience a significant downturn due to the COVID-19 pandemic.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThere can be no assurance that these matters that arise in the future, individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations in any future period. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 36 Table of Contents PART II
Biggest changeThere can be no assurance that these matters that arise in the future, individually or in the aggregate, will not have a material adverse effect on our financial condition or results of operations in any future period. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is quoted on the New York Stock Exchange under the ticker symbol “GMRE.” The Company declared and paid a dividend of $0.21 per share of common stock with respect to each quarter within the fiscal year ended December 31, 2022 and declared and paid a dividend of $0.205 per share of common stock with respect to each quarter within the fiscal year ended December 31, 2021.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is quoted on the New York Stock Exchange under the ticker symbol “GMRE.” The Company declared and paid a dividend of $0.21 per share of common stock with respect to each quarter within the fiscal years ended December 31, 2023 and 2022.
The MSCI U.S. REIT Index consists of equity REITs that are included in the MSCI US Investable Market 2500 Index, except for specialty equity REITS that do not generate a majority of their revenue and income from real estate rental and leasing operations. We have included the MSCI U.S.
REIT Index consists of equity REITs that are included in the MSCI US Investable Market 2500 Index, except for specialty equity REITS that do not generate a majority of their revenue and income from real estate rental and leasing operations. We have included the MSCI U.S.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. As of December 31, 2022 and 2021, there were 65,518,306 and 64,880,269 outstanding shares of common stock, respectively.
A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. As of December 31, 2023 and 2022, there were 65,564,943 and 65,518,306 outstanding shares of common stock, respectively.
The declaration and payment of quarterly dividends remains subject to the review and approval of the Board, see “Risk Factors — Subject to certain requirements under Maryland law and REIT requirements, the Board has sole discretion to determine if we will pay distributions and the amount and frequency of such distributions, and past distribution amounts may not be indicative of future distribution amounts . ” Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under Section 18, and shall not be deemed to be incorporated by reference into any filing of Global Medical REIT Inc. under the Securities Act or the Exchange Act.
The declaration and payment of quarterly dividends remains subject to the review and approval of the Board, see “Risk Factors — Subject to certain requirements under Maryland law and REIT requirements, the Board has sole discretion to determine if we will pay distributions and the amount and frequency of such distributions, and past distribution amounts may not be indicative of future distribution amounts . ” Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under Section 18, and shall not be deemed to be incorporated by reference into any filing of Global Medical REIT Inc. under the Securities Act or the Exchange Act. 35 Table of Contents The graph below compares the cumulative total return of our common stock, the S&P 500 Index, and the MSCI U.S.
Unregistered Sales of Equity Securities None. ​ Issuer Purchases of Equity Securities None. ​ ITEM 6. [Reserved] ​
Unregistered Sales of Equity Securities None. ​ Issuer Purchases of Equity Securities None. ​ 36 Table of Contents ITEM 6. [Reserved] ​
The graph below compares the cumulative total return of our common stock, the S&P 500 Index, and the MSCI U.S. REIT Index from December 31, 2017 through December 31, 2022. The comparison assumes $100 was invested on December 31, 2017 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, as applicable.
REIT Index from December 31, 2018 through December 31, 2023. The comparison assumes $100 was invested on December 31, 2018 in our common stock and in each of the foregoing indices and assumes reinvestment of dividends, as applicable. The MSCI U.S.
REIT Index because we believe that it is representative of the industry in which we compete and is relevant to an assessment of our performance. ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Global Medical REIT Inc. ​ $ 100.00 ​ $ 119.00 ​ $ 190.37 ​ $ 201.34 ​ $ 288.95 ​ $ 166.49 S&P 500 Index ​ $ 100.00 ​ $ 95.62 ​ $ 125.72 ​ $ 148.85 ​ $ 191.58 ​ $ 156.88 MSCI U.S.
REIT Index because we believe that it is representative of the industry in which we compete and is relevant to an assessment of our performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Global Medical REIT Inc. ​ $ 100.00 ​ $ 159.98 ​ $ 169.20 ​ $ 242.82 ​ $ 139.91 ​ $ 178.95 S&P 500 Index ​ $ 100.00 ​ $ 131.49 ​ $ 155.68 ​ $ 200.37 ​ $ 164.08 ​ $ 207.21 MSCI U.S.
REIT Index ​ $ 100.00 ​ $ 95.43 ​ $ 120.09 ​ $ 110.99 ​ $ 158.79 ​ $ 119.87 ​ As of February 24, 2023, there were 30 record holders, and 65,525,718 shares of common stock issued and outstanding.
REIT Index ​ $ 100.00 ​ $ 125.84 ​ $ 116.31 ​ $ 166.39 ​ $ 125.61 ​ $ 142.87 ​ As of February 26, 2024, there were 32 record holders, and 65,574,549 shares of common stock issued and outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeA reconciliation of FFO and AFFO for the years ended December 31, 2022, 2021, and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 2020 ​ ​ (unaudited, in thousands except per share and unit amounts) Net income (loss) ​ $ 19,996 ​ $ 18,342 ​ $ (2,499) Less: Preferred stock dividends ​ (5,822) ​ (5,822) ​ (5,822) Depreciation and amortization expense ​ ​ 56,611 ​ ​ 46,764 ​ ​ 36,302 Gain on sale of investment property ​ ​ (6,753) ​ ​ (1,069) ​ ​ — FFO ​ $ 64,032 ​ $ 58,215 ​ $ 27,981 Internalization expense - settlement of a preexisting contractual relationship ​ ​ — ​ ​ — ​ ​ 12,094 Internalization expense - other transaction costs ​ ​ — ​ ​ — ​ ​ 1,911 Amortization of above market leases, net ​ 1,027 ​ 520 ​ 504 Straight line deferred rental revenue ​ (4,251) ​ (5,317) ​ (5,680) Stock-based compensation expense ​ 4,681 ​ 5,810 ​ 5,319 Amortization of debt issuance costs and other ​ 2,201 ​ 1,982 ​ 1,450 Preacquisition expense ​ 354 ​ 151 ​ 365 AFFO ​ $ 68,044 ​ $ 61,361 ​ $ 43,944 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders per share – basic and diluted ​ $ 0.20 ​ $ 0.19 ​ $ (0.17) FFO per share and unit ​ $ 0.92 ​ $ 0.90 ​ $ 0.56 AFFO per share and unit ​ $ 0.98 ​ $ 0.95 ​ $ 0.88 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Shares and Units Outstanding – basic and diluted ​ 69,662 ​ 64,548 ​ 49,791 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Shares and Units Outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Common Shares ​ 65,462 ​ 60,640 ​ 46,256 Weighted Average OP Units ​ 1,669 ​ 1,732 ​ 2,172 Weighted Average LTIP Units ​ 2,531 ​ 2,176 ​ 1,363 Weighted Average Shares and Units Outstanding – basic and diluted ​ 69,662 ​ 64,548 ​ 49,791 ​ 49 Table of Contents Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDAre The Company calculates EBITDA re in accordance with standards established by NAREIT and defines EBITDA re as net income or loss computed in accordance with GAAP plus depreciation and amortization, interest expense, gain or loss on the sale of investment properties, and impairment loss, as applicable.
Biggest changeManagement believes that reporting AFFO in addition to FFO is a useful supplemental measure for the investment community to use when evaluating the operating performance of the Company on a comparative basis. 47 Table of Contents A reconciliation of FFO and AFFO for the years ended December 31, 2023, 2022, and 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 ​ ​ (unaudited, in thousands except per share and unit amounts) Net income ​ $ 21,734 ​ $ 19,996 ​ $ 18,342 Less: Preferred stock dividends ​ (5,822) ​ (5,822) ​ (5,822) Depreciation and amortization expense ​ ​ 58,007 ​ ​ 56,611 ​ ​ 46,764 Gain on sale of investment properties ​ ​ (15,560) ​ ​ (6,753) ​ ​ (1,069) FFO ​ $ 58,359 ​ $ 64,032 ​ $ 58,215 Loss on extinguishment of debt ​ ​ 868 ​ ​ — ​ ​ — Amortization of above market leases, net ​ 1,052 ​ 1,027 ​ 520 Straight line deferred rental revenue ​ (2,636) ​ (4,251) ​ (5,317) Stock-based compensation expense ​ 4,242 ​ 4,681 ​ 5,810 Amortization of debt issuance costs and other ​ 2,376 ​ 2,201 ​ 1,982 Preacquisition expense ​ 44 ​ 354 ​ 151 AFFO ​ $ 64,305 ​ $ 68,044 ​ $ 61,361 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to common stockholders per share – basic and diluted ​ $ 0.24 ​ $ 0.20 ​ $ 0.19 FFO per share and unit ​ $ 0.83 ​ $ 0.92 ​ $ 0.90 AFFO per share and unit ​ $ 0.91 ​ $ 0.98 ​ $ 0.95 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Shares and Units Outstanding – basic and diluted ​ 70,378 ​ 69,662 ​ 64,548 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Shares and Units Outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Common Shares ​ 65,550 ​ 65,462 ​ 60,640 Weighted Average OP Units ​ 2,077 ​ 1,669 ​ 1,732 Weighted Average LTIP Units ​ 2,751 ​ 2,531 ​ 2,176 Weighted Average Shares and Units Outstanding – basic and diluted ​ 70,378 ​ 69,662 ​ 64,548 ​ Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre) and Adjusted EBITDAre The Company calculates EBITDA re in accordance with standards established by NAREIT and defines EBITDA re as net income or loss computed in accordance with GAAP plus depreciation and amortization, interest expense, gain or loss on the sale of investment properties, and impairment loss, as applicable.
The Credit Facility is an unsecured facility with a term of (i) four years (beginning on August 1, 2022) for the Revolver (subject to two, six-month extension options), (ii) five years for Term Loan A (beginning on its origination date of May 3, 2021), and (iii) five years and five months for Term Loan B.
The Credit Facility is an unsecured facility with a term of (i) four years (beginning on August 1, 2022) for the Revolver (subject to two, six-month extension options), (ii) five years for Term Loan A (beginning on its origination date of May 3, 2021), and (iii) five years and six months (beginning on August 1, 2022) for Term Loan B.
We are subject to a number of financial covenants under the amended Credit Facility, including, among other things, the following as of the end of each fiscal quarter, (i) a maximum consolidated unsecured leverage ratio of less than 60%, (ii) a maximum consolidated secured leverage ratio of less than 30%, (iii) a maximum consolidated secured recourse leverage ratio of less than 10%, (iv) a minimum fixed charge coverage ratio of 1.50:1.00, (v) a minimum unsecured interest coverage ratio of 1.50:1.00, (vi) a maximum consolidated leverage ratio of less than 60%, and (vii) a minimum net worth of $573 million plus 75% of all net proceeds raised through equity offerings subsequent to March 31, 2022.
We are subject to a number of financial covenants under the Credit Facility, including, among other things, the following as of the end of each fiscal quarter, (i) a maximum consolidated unsecured leverage ratio of less than 60%, (ii) a maximum consolidated secured leverage ratio of less than 30%, (iii) a maximum consolidated secured recourse leverage ratio of less than 10%, (iv) a minimum fixed charge coverage ratio of 1.50:1.00, (v) a minimum unsecured interest coverage ratio of 1.50:1.00, (vi) a maximum consolidated leverage ratio of less than 60%, and (vii) a minimum net worth of $573 million plus 75% of all net proceeds raised through equity offerings subsequent to March 31, 2022.
We use considerable judgement in our estimates of cash flow projections, discount, capitalization and interest rates, fair market lease rates, carrying costs during hypothetical expected lease-up periods, and costs to execute similar leases. ​ While our methodology for purchase price allocations did not change during the year ended December 31, 2022, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition.
We use considerable judgement in our estimates of cash flow projections, discount, capitalization and interest rates, fair market lease rates, carrying costs during hypothetical expected lease-up periods, and costs to execute similar leases. ​ While our methodology for purchase price allocations did not change during the year ended December 31, 2023, the real estate market is fluid and our assumptions are based on information currently available in the market at the time of acquisition.
We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following: ● Investment in Real Estate ● Impairment of Long-Lived Assets ● Revenue Recognition Investment in Real Estate All of our facility acquisitions for the years ended December 31, 2022 and 2021 were accounted for as asset acquisitions because substantially all of the fair value of the gross assets that we acquired were concentrated in a single asset or group of similar identifiable assets.
We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following: ● Investment in Real Estate ● Impairment of Long-Lived Assets ● Revenue Recognition Investment in Real Estate All of our facility acquisitions for the years ended December 31, 2023 and 2022 were accounted for as asset acquisitions because substantially all of the fair value of the gross assets that we acquired were concentrated in a single asset or group of similar identifiable assets.
In the case of the fair value of above-market or below-market lease intangibles, our estimates of the values of these components will affect the amount of rental revenue we record as these values are amortized as a reduction of or an addition to rental income over the estimated remaining term of the respective leases. 42 Table of Contents Impairment of Long-Lived Assets We review our real estate assets on an asset group basis for impairment.
In the case of the fair value of above-market or below-market lease intangibles, our estimates of the values of these components will affect the amount of rental revenue we record as these values are amortized as a reduction of or an addition to rental income over the estimated remaining term of the respective leases. 40 Table of Contents Impairment of Long-Lived Assets We review our real estate assets on an asset group basis for impairment.
Additionally, many employer-based insurance plans continue to increase the percentage of insurance premiums for which covered individuals are responsible, which makes healthcare services more expensive for individuals. We expect these trends will only be exacerbated by the COVID-19 pandemic, as medical expenditures increased significantly during the pandemic.
Additionally, many employer-based insurance plans continue to increase the percentage of insurance premiums for which covered individuals are responsible, which makes healthcare services more expensive for individuals. We expect these trends will only be exacerbated by the COVID-19 epidemic, as medical expenditures increased significantly during the epidemic.
Many stories exist about U.S. healthcare workers, especially nurses, experiencing burnout due to the length and severity of the pandemic, and this has caused many nurses and other medical professionals to switch jobs within the medical profession or quit their professions altogether.
Many stories exist about U.S. healthcare workers, especially nurses, experiencing burnout due to the length and severity of the epidemic, and this has caused many nurses and other medical professionals to switch jobs within the medical profession or quit their professions altogether.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023.
Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.
Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, 46 Table of Contents these measures should be examined in conjunction with net income and cash flows from operations as presented in the Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.
In accordance with the terms of the Company’s existing and proposed leases, capital improvement obligations in the next 12 months are expected to total approximately $10 million.
In accordance with the terms of the Company’s existing and proposed leases, capital improvement obligations in the next 12 months are expected to total approximately $14 million.
The objectives of MD&A are: a. To provide a narrative explanation of our financial statements that enables investors to see the Company from management’s perspective; b. To enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and c.
To provide a narrative explanation of our financial statements that enables investors to see the Company from management’s perspective; b. To enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and c.
As of December 31, 2022, the Company had aggregate capital improvement commitments and obligations to improve, expand, and maintain the Company’s existing facilities of approximately $30 million. Many of these amounts are subject to contingencies that make it difficult to predict when they will be utilized, if at all.
As of December 31, 2023, the Company had aggregate capital improvement commitments and obligations to improve, expand, and maintain the Company’s existing facilities of approximately $18 million. Many of these amounts are subject to contingencies that make it difficult to predict when they will be utilized, if at all.
This phenomenon has led to material increases in labor costs for healthcare systems, especially hospital systems, as some employers have had to rely on higher costing contract nursing labor to sustain their businesses. The increase in labor costs, among various other factors, contributed to the rapid increase in inflation during 2022.
This phenomenon has led to material increases in labor costs for healthcare systems, especially hospital systems, as some employers have had to rely on higher costing contract nursing labor to sustain their businesses. The increase in labor costs, among various other factors, contributed to the rapid increase in inflation during 2022, which remained elevated during 2023.
For the Company these items include recurring acquisition and disposition costs, loss on the extinguishment of debt, recurring straight line deferred rental revenue, recurring stock-based compensation expense, recurring amortization of above and below market leases, recurring amortization of debt issuance costs, recurring lease commissions, management internalization costs, and other items.
For the Company these items include recurring acquisition and disposition costs, loss on the extinguishment of debt, recurring straight line deferred rental revenue, recurring stock-based compensation expense, recurring amortization of above and below market leases, recurring amortization of debt issuance costs, and other items.
Net Income Net income for the year ended December 31, 2022 was $20.0 million compared to $18.3 million for the same period in 2021, an increase of $1.7 million. Assets and Liabilities As of December 31, 2022 and 2021, our principal assets consisted of investments in real estate, net, of $1.3 billion and $1.2 billion, respectively.
Net Income Net income for the year ended December 31, 2023 was $22.8 million compared to $20.0 million for the same period in 2022, an increase of $2.8 million. Assets and Liabilities As of December 31, 2023 and 2022, our principal assets consisted of investments in real estate, net, of $1.2 billion and $1.3 billion, respectively.
We have six interest rate swaps and nine forward-starting interest rate swaps that are used to manage our interest rate risk. A description of these swaps is below: ​ Term Loan A Swaps ​ As of December 31, 2022, six of our interest rate swaps related to Term Loan A.
We have ten interest rate swaps and three forward-starting interest rate swaps that are used to manage our interest rate risk. A description of these swaps is below: ​ Term Loan A Swaps ​ As of December 31, 2023, six of our interest rate swaps related to Term Loan A.
The Company defines Adjusted EBITDA re as EBITDA re plus non-cash stock compensation expense, non-cash intangible amortization related to above and below market leases, preacquisition expense and other normalizing items.
The Company defines Adjusted EBITDA re as EBITDA re plus loss on extinguishment of debt, non-cash stock compensation expense, non-cash intangible amortization related to above and below market leases, preacquisition expense and other normalizing items.
Liquidity and Capital Resources General Our short-term (up to 12 months) liquidity requirements include: ● Interest expense and scheduled principal payments on outstanding indebtedness; ● General and administrative expenses; ● Property operating expenses; ● Property acquisitions; ● Distributions on our common and preferred stockholders and OP Unit and LTIP Unit holders in our Operating Partnership; and ● Capital and tenant improvements.
Liquidity and Capital Resources General Our short-term (up to 12 months) liquidity requirements include: ● Interest expense and scheduled principal payments on outstanding indebtedness; ● General and administrative expenses; ● Property operating expenses; ● Property acquisitions; ● Distributions on our common and preferred stock and OP Units and LTIP Units; and ● Capital and tenant improvements.
Our fixed debt totaled $558.1 million on a gross basis at December 31, 2022, with a weighted average interest rate of 3.75% based on our interest rate swaps and at current leverage. The weighted average maturity of our fixed debt was 3.8 years at December 31, 2022.
Our fixed debt totaled $526.0 million on a gross basis at December 31, 2023, with a weighted average interest rate of 3.31% based on our interest rate swaps and at current leverage. The weighted average maturity of our fixed debt was 2.8 years at December 31, 2023.
In addition, our operating expenses included $4.7 million of non-recoverable property operating expenses from gross leases for the year ended December 31, 2022, compared to $2.3 million for the same period in 2021. ​ Depreciation Expense Depreciation expense for the year ended December 31, 2022 was $40.0 million, compared to $33.8 million for the same period in 2021, an increase of $6.2 million.
In addition, our operating expenses included $5.9 million of non-recoverable property operating expenses from gross leases for the year ended December 31, 2023, compared to $4.7 million for the same period in 2022. ​ Depreciation Expense Depreciation expense for the year ended December 31, 2023 was $41.3 million, compared to $40.0 million for the same period in 2022, an increase of $1.3 million.
Beyond 2023, we are contractually obligated to pay, or have capital commitments for, approximately (i) $788.9 million of principal and interest payments on our outstanding debt, and (ii) $13.0 million in ground and operating lease expenses.
In 2024, we are contractually obligated to pay, or have capital commitments for, approximately (i) $34.8 million of principal and interest payments on our outstanding debt, and (ii) $0.7 million in ground and operating lease expenses.
Debt Financing . ​ Credit Facility. Our Credit Facility consists of (i) the $350 million Term Loan A, (ii) the $150 million Term Loan B, and (iii) the $400 million Revolver. The Credit Facility also contains a $500 million accordion feature. As of February 24, 2023, we had unutilized borrowing capacity under the Credit Facility of $245.0 million.
Our Credit Facility consists of (i) the $350 million Term Loan A, (ii) the $150 million Term Loan B, and (iii) the $400 million Revolver. The Credit Facility also contains a $500 million accordion feature. As of February 26, 2024, we had unutilized borrowing capacity under the Credit Facility of $293.6 million.
According to the American Hospital Association, patients are demanding more outpatient operations. We believe this shift in patient preference from inpatient to outpatient facilities will benefit our tenants as most of our properties consist of outpatient facilities. ​ ● Physician practice group and hospital consolidation .
We believe this shift in patient preference from inpatient to outpatient facilities will benefit our tenants as most of our properties consist of outpatient facilities. ​ ● Physician practice group and hospital consolidation .
The weighted average interest rate of our debt for the year ended December 31, 2022 was 3.43% compared to 3.06% in 2021. Additionally, the weighted average interest rate and term of our debt was 4.20% and 3.93 years, respectively, at December 31, 2022.
The weighted average interest rate of our debt for the year ended December 31, 2023 was 4.12% compared to 3.43% in 2022. Additionally, the weighted average interest rate and term of our debt was 3.83% and 2.9 years, respectively, at December 31, 2023.
Within that increase, $18.7 million in revenue was recognized from net lease expense recoveries during the year ended December 31, 2022, compared to $11.6 million for the same period in 2021. ​ Expenses General and Administrative General and administrative expenses for the year ended December 31, 2022 and 2021 were $16.5 million.
Within that increase, $19.5 million in revenue was recognized from net lease expense recoveries during the year ended December 31, 2023, compared to $18.7 million for the same period in 2022. 42 Table of Contents Expenses General and Administrative General and administrative expenses for the year ended December 31, 2023 were $16.9 million, compared to $16.5 million for the same period in 2022, an increase of $0.4 million.
Interest Expense Interest expense for the year ended December 31, 2022 was $25.2 million, compared to $19.7 million for the same period in 2021, an increase of $5.5 million. This increase was due to higher average borrowings as well as increased interest rates during the year ended December 31, 2022, compared to the same period in 2021.
Interest Expense Interest expense for the year ended December 31, 2023 was $30.9 million, compared to $25.2 million for the same period in 2022, an increase of $ 5.7 million. This increase was due to increased interest rates, partially offset by lower average borrowings during the year ended December 31, 2023, compared to the same period in 2022.
For a discussion of such risk factors, see the section in this Report entitled “Risk Factors.” Objective of MD&A Management’s Discussion and Analysis (“MD&A”) is a narrative explanation of the financial statements and other statistical data that we believe will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations.
Objective of MD&A Management’s Discussion and Analysis (“MD&A”) is a narrative explanation of the financial statements and other statistical data that we believe will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. The objectives of MD&A are: a.
Furthermore, the continued spread of the BA.5 variant of COVID-19 (and its subvariants) in the U.S. has prolonged the COVID-19 pandemic. ​ 41 Table of Contents ● Changes in third party reimbursement methods and policies .
Furthermore, the continued spread of variants and subvariants of COVID-19 in the U.S. has prolonged the COVID-19 epidemic. ​ 39 Table of Contents ● Changes in third party reimbursement methods and policies .
Internal Sources of Liquidity ​ Our primary internal sources of liquidity include cash flow from operations and proceeds from select property dispositions and recapitalization transactions. ​ 46 Table of Contents External Sources of Liquidity ​ Our primary external sources of liquidity include net proceeds received from equity issuances, including the issuance of OP Units in connection with acquisitions of additional properties, and debt financing, including borrowings under our Credit Facility and secured term loans. ​ Equity Issuances ​ In March 2022, the Company and the Operating Partnership entered into a Sales Agreement with certain sales agents, pursuant to which the Company may offer and sell, from time to time, up to $300 million of its common stock.
Internal Sources of Liquidity ​ Our primary internal sources of liquidity include cash flow from operations and proceeds from select property dispositions and recapitalization transactions. ​ External Sources of Liquidity ​ Our primary external sources of liquidity include net proceeds received from equity issuances, including the issuance of OP Units in connection with acquisitions of additional properties, and debt financing, including borrowings under our Credit Facility and secured term loans. ​ Equity Issuances ​ In January 2024, the Company and the Operating Partnership implemented the 2024 ATM Program, pursuant to which we may offer and sell, from time to time, shares of our common stock.
This decrease in stock price and increase in interest rates has significantly increased the Company’s cost of capital, which, in turn, has significantly reduced its ability to acquire assets that meet the Company’s investment requirements. ● Continuation of the COVID-19 pandemic . The COVID-19 pandemic has affected the healthcare industry in many ways.
A continued low stock price and elevated interest rates have caused the Company’s cost of capital to remain elevated, which, in turn, has significantly reduced the ability to acquire assets that meet the Company’s investment requirements. ​ ● Continuation of the COVID-19 epidemic . The COVID-19 epidemic has affected the healthcare industry in many ways.
As of December 31, 2022, management believed it complied with all of the financial and non-financial covenants contained in the Credit Facility. Other Fixed Debt. We also have $58.1 million in gross notes payable as of December 31, 2022. This debt is comprised of four instruments. Hedging Instruments.
As of December 31, 2023, management believed it complied with all of the financial and non-financial covenants contained in the Credit Facility. Other Fixed Debt. We have $26.0 million in gross notes payable as of December 31, 2023, which is comprised of three instruments. 45 Table of Contents Hedging Instruments.
Finally, from August 2024 to April 2026 the SOFR component of Term Loan A will be fixed at 1.36%. ​ 47 Table of Contents Term Loan B Swaps ​ On August 2, 2022, we entered into four forward starting interest rate swaps related to Term Loan B with a notional value of $150 million that, beginning on October 1, 2022, fix the SOFR component on Term Loan B through January 2028 at 2.54%. ​ Total Fixed Debt .
From August 2024 to April 2026 the SOFR component of Term Loan A will be fixed at 1.36%. ​ Term Loan B Swaps ​ As of December 31, 2023, four of our interest rate swaps related to Term Loan B with a combined notional value of $150 million that fix the SOFR component on Term Loan B through January 2028 at 2.54%. ​ Total Fixed Debt .
A reduction in non-cash LTIP compensation expense, which was $4.7 million for the year ended December 31, 2022, compared to $5.8 million for the same period in 2021, was offset by an increase in cash compensation costs and general corporate expenses. 44 Table of Contents Operating Expenses Operating expenses for the year ended December 31, 2022 were $25.2 million, compared with $15.5 million for the same period in 2021, an increase of $9.7 million.
The increase resulted from an increase in cash compensation costs and general corporate expenses, partially offset by a reduction in non-cash LTIP compensation expense, which was $4.2 million for the year ended December 31, 2023, compared to $4.7 million for the same period in 2022.
Income Before Gain on Sale of Investment Property Income before gain on sale of investment property for the year ended December 31, 2022 was $13.2 million, compared to $17.3 million for the same period in 2021, a decrease of $4.1 million.
Income Before Gain on Sale of Investment Properties and Loss on Extinguishment of Debt Income before gain on sale of investment properties and loss on extinguishment of debt for the year ended December 31, 2023 was $8.1 million, compared to $13.2 million for the same period in 2022, a decrease of $5.1 million.
The increase results primarily from $18.7 million of recoverable property operating expenses incurred during the year ended December 31, 2022, compared to $11.6 million for the same period in 2021.
Operating Expenses Operating expenses for the year ended December 31, 2023 were $28.1 million, compared with $25.2 million for the same period in 2022, an increase of $2.9 million. The increase results primarily from $19.5 million of recoverable property operating expenses incurred during the year ended December 31, 2023, compared to $18.7 million for the same period in 2022.
We believe the trend towards physician group consolidation will serve to strengthen the credit quality of our tenants if our tenants merge or are consolidated with larger health systems. We believe the following trends may negatively impact our results of operations: ● Increased interest rate and inflation environment and cost of capital .
We believe the trend towards physician group consolidation will serve to strengthen the credit quality of our tenants if our tenants merge or are consolidated with larger health systems. We believe the following trends may negatively impact our results of operations: ● Fed’s “wait-and-see” approach could cause interest rates to remain elevated for longer than previously expected.
The Company considers FFO and AFFO to be important supplemental measures of its operating performance and believes FFO is frequently used by securities analysts, investors, and other interested parties in the evaluation of REITs, many of which present FFO when reporting their results. 48 Table of Contents In accordance with the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition, FFO means net income or loss computed in accordance with GAAP before noncontrolling interests of holders of OP Units and LTIP Units, excluding gains (or losses) from sales of property and extraordinary items, less preferred stock dividends, plus real estate-related depreciation and amortization (excluding amortization of debt issuance costs and the amortization of above and below market leases), and after adjustments for unconsolidated partnerships and joint ventures.
In accordance with the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition, FFO means net income or loss computed in accordance with GAAP before noncontrolling interests of holders of OP Units and LTIP Units, excluding gains (or losses) from sales of property and extraordinary items, less preferred stock dividends, plus real estate-related depreciation and amortization (excluding amortization of debt issuance costs and the amortization of above and below market leases), and after adjustments for unconsolidated partnerships and joint ventures.
If management’s assumptions regarding the collectability of lease related receivables prove incorrect, we could experience decreases in rental revenue, including decreases in excess of any amounts initially recognized. ​ 43 Table of Contents Consolidated Results of Operations The major factors that resulted in variances in our results of operations for each revenue and expense category for the year ended December 31, 2022 compared to the year ended December 31, 2021, were the increase in the size of our property portfolio and related increases in rental revenue and operating expenses, as well as depreciation and amortization expenses.
If management’s assumptions regarding the collectability of lease-related receivables prove incorrect, we could experience decreases in rental revenue, including decreases in excess of any amounts initially recognized. ​ 41 Table of Contents Consolidated Results of Operations The major factors that resulted in variances in our results of operations for each revenue and expense category for the year ended December 31, 2023 compared to the year ended December 31, 2022, were higher interest rates, significantly lower acquisition activity, increased disposition activity, and the recognition of a reserve related to one tenant.
In 2023, we are contractually obligated to pay, or have capital commitments for, approximately (i) $30.5 million of principal and interest payments on our outstanding debt, and (ii) $0.2 million in ground and operating lease expenses. In addition, our preferred stock became redeemable by us in September 2022.
Beyond 2024, we are contractually obligated to pay, or have capital commitments for, approximately (i) $655.5 million of principal and interest payments on our outstanding debt, and (ii) $12.7 million in ground and operating lease expenses.
We finance our acquisitions with a mixture of debt and equity primarily from our cash from operations, borrowings off our Credit Facility, and stock issuances. 2022 Executive Summary The following tables summarize the material changes in our business and operations during the years presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Rental revenue ​ $ 137,167 ​ $ 115,804 Depreciation and amortization expense ​ $ 56,723 ​ $ 46,875 Interest expense ​ $ 25,230 ​ $ 19,696 General and administrative expense ​ $ 16,545 ​ $ 16,453 Gain on sale of investment property ​ $ 6,753 ​ $ 1,069 ​ ​ ​ ​ ​ ​ ​ Net income attributable to common stockholders per share ​ $ 0.20 ​ $ 0.19 FFO per share and unit (1) ​ $ 0.92 ​ $ 0.90 AFFO per share and unit (1) ​ $ 0.98 ​ $ 0.95 Dividends per share of common stock ​ $ 0.84 ​ $ 0.82 ​ ​ ​ ​ ​ ​ ​ Weighted average common stock outstanding ​ 65,462 ​ 60,640 Weighted average OP Units outstanding ​ 1,669 ​ 1,732 Weighted average LTIP Units outstanding ​ 2,531 ​ 2,176 Total weighted average shares and units outstanding ​ 69,662 ​ 64,548 (1) See “—Non-GAAP Financial Measures,” for a description of our non-GAAP financial measures and a reconciliation of our non-GAAP financial measures. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ December 31, ​ December 31, ​ 2022 2021 ​ ​ (dollars in thousands) Investment in real estate, gross ​ $ 1,484,177 ​ $ 1,343,003 ​ Total debt, net ​ $ 694,119 ​ $ 571,729 ​ Weighted average interest rate ​ 4.20 % 2.87 % Total equity (including noncontrolling interest) ​ $ 649,065 ​ $ 637,577 ​ Net leasable square feet ​ 4,895,635 ​ 4,343,467 ​ Our Properties Completed Acquisitions During the year ended December 31, 2022, we completed 14 acquisitions encompassing an aggregate of 583,253 leasable square feet for an aggregate contractual purchase price of $148.9 million with annualized base rent of $11.0 million.
We finance our acquisitions with a mixture of debt and equity primarily from our cash from operations, borrowings under our Second Amended and Restated Credit Facility (the “Credit Facility”), and stock issuances. 37 Table of Contents 2023 Executive Summary The following tables summarize the primary changes in our business and operations during the years presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 ​ ​ (in thousands, except per share and unit amounts) Rental revenue ​ $ 140,934 ​ $ 137,167 Depreciation and amortization expense ​ $ 58,135 ​ $ 56,723 Interest expense ​ $ 30,893 ​ $ 25,230 General and administrative expense ​ $ 16,853 ​ $ 16,545 Gain on sale of investment properties ​ $ 15,560 ​ $ 6,753 ​ ​ ​ ​ ​ ​ ​ Net income attributable to common stockholders per share ​ $ 0.23 ​ $ 0.20 FFO per share and unit (1) ​ $ 0.83 ​ $ 0.92 AFFO per share and unit (1) ​ $ 0.91 ​ $ 0.98 Dividends per share of common stock ​ $ 0.84 ​ $ 0.84 ​ ​ ​ ​ ​ ​ ​ Weighted average common stock outstanding ​ 65,550 ​ 65,462 Weighted average OP Units outstanding ​ 2,077 ​ 1,669 Weighted average LTIP Units outstanding ​ 2,751 ​ 2,531 Total weighted average shares and units outstanding ​ 70,378 ​ 69,662 (1) See “—Non-GAAP Financial Measures,” for a description of our non-GAAP financial measures and a reconciliation of our non-GAAP financial measures. ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ December 31, ​ December 31, ​ 2023 2022 ​ ​ (dollars in thousands) Investment in real estate, gross ​ $ 1,426,969 ​ $ 1,484,177 ​ Total debt, net ​ $ 611,232 ​ $ 694,119 ​ Weighted average interest rate ​ 3.83 % 4.20 % Total equity (including noncontrolling interest) ​ $ 605,814 ​ $ 649,065 ​ Net leasable square feet ​ 4,748,626 ​ 4,895,635 ​ Our Properties Completed Acquisitions During the year ended December 31, 2023 we completed one acquisition encompassing 18,698 leasable square feet for a contractual purchase price of $6.7 million with annualized base rent of $0.5 million.
Our wholly owned subsidiary, Global Medical REIT GP LLC, is the sole general partner of our Operating Partnership and, as of December 31, 2022, we owned 93.97% of the outstanding common operating partnership units (“OP Units”) of our Operating Partnership, with an aggregate of 6.03% of the Operating Partnership owned by holders of long-term incentive plan units (“LTIP Units”) and third-party limited partners who contributed properties or services to the Operating Partnership in exchange for OP Units. 38 Table of Contents Our revenues are derived from the rental and operating expense reimbursement payments we receive from our tenants, and most of our leases are medium to long-term triple net leases with contractual rent escalation provisions.
Our wholly owned subsidiary, Global Medical REIT GP LLC, is the sole general partner of our Operating Partnership and, as of December 31, 2023, we owned 92.91% of the outstanding common operating partnership units (“OP Units”) of our Operating Partnership, with an aggregate of 7.09% of the Operating Partnership owned by holders of long-term incentive plan units (“LTIP Units”) and third-party limited partners who contributed properties or services to the Operating Partnership in exchange for OP Units.
The 65-and-older population grew by over a third during the past decade, and by 3.2% from 2018 to 2019. We believe this segment of the U.S. population will utilize many of the services provided at our healthcare facilities such as orthopedics, cardiac, gastroenterology and rehabilitation. ​ ● A continuing shift towards outpatient care .
We believe this segment of the U.S. population will utilize many of the services provided at our healthcare facilities such as orthopedics, cardiac, gastroenterology and rehabilitation. ​ ● A continuing shift towards outpatient care . According to the American Hospital Association, patients are demanding more outpatient operations.
Our long-term (beyond 12 months) liquidity requirements consist primarily of funds necessary to pay for acquisitions, capital and tenant improvements at our properties, scheduled debt maturities, general and administrative expenses, operating expenses, and distributions.
In addition, if we decide to redeem our preferred stock, we would have to pay the liquidation preference of $77.6 million plus accrued dividends, fees and expenses. 44 Table of Contents Our long-term (beyond 12 months) liquidity requirements consist primarily of funds necessary to pay for acquisitions, capital and tenant improvements at our properties, scheduled debt maturities, general and administrative expenses, operating expenses, and distributions.
The decrease during the 2022 period was primarily the result of less real estate investment activity compared to the same period in 2021, partially offset by larger net proceeds received from the sale of an investment property during 2022. ​ Net cash provided by financing activities for the year ended December 31, 2022 was $62.4 million, compared with $127.7 million for the same period in 2021.
During the 2023 year less funds were used to complete property acquisitions and we received more net proceeds from the sale of investment properties. ​ Net cash used in financing activities for the year ended December 31, 2023 was $143.8 million, compared to net cash provided by financing activities with $62.4 million for the same period in 2022.
(the “Company,” “us,” “we,” or “our”) is an internally managed REIT that acquires healthcare facilities and leases those facilities to physician groups and regional and national healthcare systems. We conduct our business through an umbrella partnership REIT, or UPREIT, structure in which our properties are owned by wholly owned subsidiaries of our operating partnership, Global Medical REIT L.P.
(the “Company,” “us,” “we,” or “our”) is a Maryland corporation and internally managed REIT that owns and acquires healthcare facilities and leases those facilities to physician groups and regional and national healthcare systems. We hold our facilities and conduct our operations through a Delaware limited partnership subsidiary, Global Medical REIT L.P. (the “Operating Partnership”).
Our liquid assets consisted primarily of cash and cash equivalents and restricted cash of $14.5 million and $12.8 million, as of December 31, 2022 and 2021, respectively. 45 Table of Contents The increase in our cash and cash equivalents and restricted cash balances to $14.5 million as of December 31, 2022, compared to $12.8 million as of December 31, 2021, was primarily due to borrowings on our Credit Facility, larger net proceeds received from the sale of an investment property during 2022, and net proceeds received from ATM equity issuances, partially offset by funds used to acquire real estate and pay dividends to our common and preferred stockholders and OP Unit and LTIP Unit holders of our Operating Partnership. ​ The increase in our total liabilities to $744.2 million as of December 31, 2022 compared to $625.9 million as of December 31, 2021, was primarily the result of higher net borrowings outstanding, partially offset by a decrease in the derivative liability balance.
The decrease in our cash and cash equivalents and restricted cash balances to $6.7 million as of December 31, 2023, compared to $14.5 million as of December 31, 2022, was primarily due to net repayments on our Credit Facility primarily using funds from our property dispositions, funds used to pay dividends to our common and preferred stockholders and holders of OP Units and LTIP Units, a payment for the defeasance of a CMBS loan, and funds used for capital expenditures on existing real estate investments, partially offset by net proceeds received from the sale of investment properties and net cash provided by operating activities. ​ The decrease in our total liabilities to $662.0 million as of December 31, 2023 compared to $744.2 million as of December 31, 2022, was primarily the result of lower net borrowings outstanding.
The notional value of these swaps is $350 million, with $150 million of the swaps maturing in August 2023 and the remaining $200 million maturing in August 2024. In addition, we have five forward starting interest rate swaps that will be effective on the maturity dates of Term Loan A’s existing interest rate swaps.
In addition, we have three forward starting interest rate swaps with a combined notional value of $200 million, each with a maturity date of April 2026, that will become effective on the August 2024 maturity date of the existing swaps.
The increase resulted primarily from depreciation expense incurred on the facilities we acquired during 2022, as well as from the recognition of a full year of depreciation expense in 2022 from acquisitions that were completed during 2021.
The increase resulted primarily from the recognition of a full year of amortization expense in 2023 from acquisitions that were completed during 2022, partially offset by the impact of property dispositions.
For a discussion related to our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, refer to Part II, Item 7.
Our total investments in real estate, net of accumulated depreciation and amortization, was $1.2 billion and $1.3 billion as of December 31, 2023 and 2022, respectively. For a discussion related to our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ 2022 2021 $ Change ​ ​ (in thousands) ​ ​ ​ Revenue ​ ​ ​ Rental revenue ​ $ 137,167 ​ $ 115,804 ​ $ 21,363 Other income ​ 116 ​ 132 ​ (16) Total revenue ​ 137,283 ​ 115,936 ​ 21,347 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenses ​ ​ ​ ​ ​ ​ ​ ​ General and administrative ​ 16,545 ​ 16,453 ​ 92 Operating expenses ​ 25,188 ​ 15,488 ​ 9,700 Depreciation expense ​ 40,008 ​ 33,825 ​ 6,183 Amortization expense ​ 16,715 ​ 13,050 ​ 3,665 Interest expense ​ 25,230 ​ 19,696 ​ 5,534 Preacquisition expense ​ 354 ​ 151 ​ 203 Total expenses ​ 124,040 ​ 98,663 ​ 25,377 Income before gain from sale of investment property ​ ​ 13,243 ​ ​ 17,273 ​ ​ (4,030) Gain on sale of investment property ​ ​ 6,753 ​ ​ 1,069 ​ ​ 5,684 Net income ​ $ 19,996 ​ $ 18,342 ​ $ 1,654 ​ Revenue Total Revenue Total revenue for the year ended December 31, 2022 was $137.3 million, compared to $115.9 million for the same period in 2021, an increase of $21.4 million.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ 2023 2022 $ Change ​ ​ (in thousands) ​ ​ ​ Revenue ​ ​ ​ ​ Rental revenue ​ $ 140,934 ​ $ 137,167 ​ $ 3,767 Other income ​ 115 ​ 116 ​ (1) Total revenue ​ 141,049 ​ 137,283 ​ 3,766 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenses ​ ​ ​ ​ ​ ​ ​ ​ General and administrative ​ 16,853 ​ 16,545 ​ 308 Operating expenses ​ 28,082 ​ 25,188 ​ 2,894 Depreciation expense ​ 41,266 ​ 40,008 ​ 1,258 Amortization expense ​ 16,869 ​ 16,715 ​ 154 Interest expense ​ 30,893 ​ 25,230 ​ 5,663 Preacquisition expense ​ 44 ​ 354 ​ (310) Total expenses ​ 134,007 ​ 124,040 ​ 9,967 Income before gain from sale of investment properties and loss on extinguishment of debt ​ ​ 7,042 ​ ​ 13,243 ​ ​ (6,201) Gain on sale of investment properties ​ ​ 15,560 ​ ​ 6,753 ​ ​ 8,807 Loss on extinguishment of debt ​ ​ (868) ​ ​ — ​ ​ (868) Net income ​ $ 21,734 ​ $ 19,996 ​ $ 1,738 ​ Revenue Total Revenue Total revenue for the year ended December 31, 2023 was $141.0 million, compared to $137.3 million for the same period in 2022, an increase of $3.7 million.
These forward starting swaps each have a maturity date of April 2026. Currently, the Term Loan A swaps fix the SOFR component of Term Loan A at a rate of 1.80% through August 2023. Subsequently, from August 2023 to August 2024 the SOFR component of Term Loan A will be fixed at 1.50%.
Currently, the Term Loan A swaps fix the SOFR component of Term Loan A at a rate of 1.50% through August 2024.
The increase during the 2022 period was primarily due to increases in depreciation and amortization expenses, partially offset by a larger gain from the sale of an investment property during 2022 and a decrease in non-cash LTIP compensation expense compared to the same period in 2021. ​ Net cash used in investing activities for the year ended December 31, 2022 was $137.3 million, compared with $194.7 million for the same period in 2021.
The decrease during the 2023 year was primarily due to lower income before gain on sale of investment properties. ​ Net cash provided by investing activities for the year ended December 31, 2023 was $67.6 million, compared to net cash used in investing activities of $137.3 million for the same period in 2022.
A reconciliation of net income (loss) to EBITDA re and Adjusted EBITDA re for the years ended December 31, 2022, 2021, and 2020 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) $ 19,996 ​ $ 18,342 ​ $ (2,499) Interest expense 25,230 ​ 19,696 ​ 18,680 Depreciation and amortization expense ​ 56,723 ​ ​ 46,875 ​ ​ 36,353 Gain on sale of investment property ​ (6,753) ​ ​ (1,069) ​ ​ — EBITDA re $ 95,196 ​ $ 83,844 ​ $ 52,534 Stock-based compensation expense ​ 4,681 ​ ​ 5,810 ​ ​ 5,319 Internalization expense - settlement of a preexisting contractual relationship ​ — ​ ​ — ​ ​ 12,094 Internalization expense - other transaction costs ​ — ​ ​ — ​ ​ 1,911 Amortization of above market leases, net 1,027 ​ 520 ​ 504 Preacquisition expense 354 ​ 151 ​ 365 Adjusted EBITDA re $ 101,258 ​ $ 90,325 ​ $ 72,727 ​
Management considers EBITDA re and Adjusted EBITDA re important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt. 48 Table of Contents A reconciliation of net income to EBITDA re and Adjusted EBITDA re for the years ended December 31, 2023, 2022, and 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 ​ (unaudited and in thousands) Net income $ 21,734 ​ $ 19,996 ​ $ 18,342 Interest expense 30,893 ​ 25,230 ​ 19,696 Depreciation and amortization expense ​ 58,135 ​ ​ 56,723 ​ ​ 46,875 Gain on sale of investment properties ​ (15,560) ​ ​ (6,753) ​ ​ (1,069) EBITDA re $ 95,202 ​ $ 95,196 ​ $ 83,844 Loss on extinguishment of debt ​ 868 ​ ​ — ​ ​ — Stock-based compensation expense 4,242 ​ 4,681 ​ 5,810 Amortization of above market leases, net 1,052 ​ 1,027 ​ 520 Preacquisition expense 44 ​ 354 ​ 151 Adjusted EBITDA re $ 101,408 ​ $ 101,258 ​ $ 90,325 ​
Weighted average interest rates on the Company’s fixed debt are expected to decrease to approximately 3.67% in 2023, 3.50% in 2024, and 3.43% in 2025, based on the Company’s current leverage. ​ Cash Flow Information Net cash provided by operating activities for the year ended December 31, 2022 was $76.5 million, compared with $69.0 million for the same period in 2021.
Due to our forward starting interest rate swaps related to Team Loan A, the weighted average interest rate on fixed debt outstanding as of December 31, 2023 is expected to improve over the next two years. ​ Cash Flow Information Net cash provided by operating activities for the year ended December 31, 2023 was $67.6 million, compared to $76.5 million for the same period in 2022.
Trends Which May Influence Our Results of Operations We believe the following trends may positively impact our results of operations: ● An aging population . According to the 2020 U.S. Census, the nation’s 65-and-older population has grown rapidly since 2010, driven by the aging of Baby Boomers born between 1946 and 1964.
Census, the nation’s 65-and-older population has grown rapidly since 2010, driven by the aging of Baby Boomers born between 1946 and 1964. The 65-and-older population grew by over a third during the past decade, and by 3.2% from 2018 to 2019.
Amortization Expense Amortization expense for the year ended December 31, 2022 was $16.7 million, compared to $13.1 million for the same period in 2021, an increase of $3.6 million.
The increase resulted primarily from the recognition of a full year of depreciation expense in 2023 from acquisitions that were completed during 2022, partially offset by the impact of property dispositions. Amortization Expense Amortization expense for the year ended December 31, 2023 was $16.9 million, compared to $16.7 million for the same period in 2022, an increase of $0.2 million.
For additional information related to our interest rate swaps, see the “Liquidity and Capital Resources – Debt Financing – Hedging Instruments” section herein. During the year ended December 31, 2022, we borrowed $138.6 million under our Credit Facility and repaid $15.5 million, for a net amount borrowed of $123.1 million.
Debt Activity During the year ended December 31, 2023, we borrowed $83.1 million under our Credit Facility and repaid $136.4 million, for a net amount repaid of $53.3 million.
The decrease during the 2022 period was primarily due to less proceeds received from equity offerings, partially offset by net borrowings on our Credit Facility in 2022 compared to net repayments in 2021. Non-GAAP Financial Measures Management considers certain non-GAAP financial measures to be useful supplemental measures of the Company's operating performance.
During the 2023 year we completed no common equity offerings and therefore did not receive any equity offering proceeds, we made net repayments on our Credit Facility, and we made a payment for the defeasance of a CMBS loan. Non-GAAP Financial Measures Management considers certain non-GAAP financial measures to be useful supplemental measures of the Company's operating performance.
The increase was primarily the result of rental revenue earned from the facilities we acquired during 2022, as well as from the recognition of a full year of rental revenue in 2022 from acquisitions that were completed during 2021.
The increase primarily resulted from the recognition of a full year of rental revenue in 2023 from acquisitions that were completed during 2022, partially offset by the impact of property dispositions and the recognition of reserves for $0.9 of rent and the write-off of $0.2 million of deferred rent.
We completed 14 acquisitions during the year ended December 31, 2022.
Regarding acquisitions, we completed one acquisition for a contractual purchase price of $6.7 million during the year ended December 31, 2023 compared to 14 completed acquisitions for an aggregate contractual purchase price of $148.9 million during the year ended December 31 2022.
Gain on Sale of Investment Property In July 2022, we sold a medical office building located in Germantown, Tennessee receiving gross proceeds of $17.9 million, resulting in a gain of $6.8 million. In October 2021, we sold a medical office building located in Prescott, Arizona receiving gross proceeds of $5.5 million, resulting in a gain of $1.1 million.
Gain on Sale of Investment Properties During the year ended December 31, 2023, we completed three dispositions. In August 2023, we sold a medical office building located in North Charleston, South Carolina receiving gross proceeds of $10.1 million, resulting in a gain of $2.3 million.
As of December 31, 2022, our portfolio consisted of gross investment in real estate of $1.5 billion, which was comprised of 189 buildings with an aggregate of 4.9 million leasable square feet and $114.5 million of annualized base rent. 39 Table of Contents Completed Property Dispositions ​ In July 2022, we sold a medical office building located in Germantown, Tennessee receiving gross proceeds of $17.9 million, resulting in a gain of approximately $6.8 million.
We funded this acquisition primarily through the issuance of OP Units to the seller. As of December 31, 2023, our portfolio consisted of gross investment in real estate of $1.4 billion, with an aggregate of 4.7 million leasable square feet and an aggregate $110.2 million of annualized base rent.
Removed
Our primary expenses are depreciation, interest, and general and administrative expenses.
Added
For a discussion of such risk factors, see the section in this Report entitled “Risk Factors.” Unless otherwise indicated, all dollar and share amounts in the following discussion are presented in thousands.
Removed
Capital Raising Activity During the year ended December 31, 2022, the Company generated gross proceeds of $10.3 million through at-the-market ("ATM") equity issuances of 0.6 million shares of the Company’s common stock at an average offering price of $17.15 per share. ​ Debt and Hedging Activity On August 1, 2022, we entered into an amendment to the Credit Facility (the “Amendment”), that, among other things, (i) added a new $150 million term loan, which matures on February 1, 2028 (the “Term Loan B”), (ii) extended the maturity date of the Revolver from May 2025 to August 2026, and (iii) transitioned all LIBOR-based loans under the Credit Facility to SOFR-based loans.
Added
Our revenues are derived from the rental and operating expense reimbursement payments we receive from our tenants, and most of our leases are medium to long-term triple net leases with contractual rent escalation provisions. Our primary expenses are depreciation, interest, and general and administrative expenses.
Removed
LIBOR-based interest rates on amounts outstanding under the Credit Facility were transitioned to a SOFR-based interest rate equal to term SOFR plus a related spread adjustment of 10 basis points and a borrowing spread based on the current pricing grid in the Credit Facility.
Added
Completed Property Dispositions ​ During the year ended December 31, 2023, the Company completed three dispositions that generated aggregate gross proceeds of $80.5 million, resulting in an aggregate gain of $15.6 million.
Removed
We may be entitled to a temporary reduction in the interest rate of two basis points provided we meet certain to be agreed upon sustainability goals. ​ We have entered into interest rate swaps to hedge our interest rate risk on the Term Loans through their respective maturities.
Added
As of December 31, 2023, the net outstanding Credit Facility balance was $307.6 million and as of February 26, 2024, we had unutilized borrowing capacity under the Credit Facility of $293.6 million. ​ 38 Table of Contents In December 2023, we completed the defeasance of a CMBS loan by making a total payment of $31.5 million, including transaction costs, that was funded by borrowings on our Revolver.
Removed
As of December 31, 2022, the net outstanding Credit Facility balance was $636.4 million and as of February 24, 2023, we had unutilized borrowing capacity under the Credit Facility of $245.0 million. ​ Recent Developments Chapter 11 Reorganization Filing of Pipeline Health System, LLC On October 3, 2022, Pipeline Health System, LLC (“Pipeline”), announced that it filed for Chapter 11 bankruptcy protection under the United States Bankruptcy Code.
Added
The carrying value of the loan, net of unamortized debt issuance costs, was $30.6 million on the date of the defeasance, resulting in a loss on extinguishment of debt of $0.9 million.
Removed
At the time of its bankruptcy filing, Pipeline operated seven hospitals in three states, including the White Rock Medical Center in Dallas, Texas, an acute-care hospital owned by the Company where Pipeline is the sole tenant.
Added
In connection with the loan defeasance, we subsequently received $8.4 million in escrowed funds held by the CMBS servicer and used those funds to reduce our total debt. ​ Capital Raising Activity In January 2024, the Company and the Operating Partnership implemented a $300 million “at-the-market” equity offering program, pursuant to which we may offer and sell, from time to time, shares of our common stock (the “2024 ATM Program”).
Removed
According to the filed bankruptcy documents, although Pipeline has experienced the same labor and reimbursement pressures that many acute-care hospitals have been facing since the beginning of the COVID-19 pandemic, the primary reason for the bankruptcy filing relates to Pipeline’s facilities in Chicago, Illinois, and not the White Rock Medical Center.
Added
No shares were sold under the 2024 ATM Program from January 2024 through February 26, 2024. Trends Which May Influence Our Results of Operations We believe the following trends may positively impact our results of operations: ● An aging population . According to the 2020 U.S.
Removed
While in bankruptcy, Pipeline sold its facilities in Chicago, Illinois and on January 13, 2023, the bankruptcy court approved Pipeline’s plan of reorganization (the “Reorganization Plan”). As part of the Reorganization Plan, Pipeline agreed to assume our leases at White Rock Medical Center with certain amendments to facilitate its emergence from bankruptcy and new operating plan.
Added
Market reaction to the Fed’s commentary after its January 2024 meeting, where it maintained the target range for the Federal Funds Rate at 5.25% to 5.50%, indicated that the Fed does not plan to cut interest rates until mid-2024 at the earliest, which could result in continued elevated interest rates for the first half of 2024, if not longer.
Removed
The Reorganization Plan with respect to the Company’s leases with Pipeline was effective as of February 6, 2023. Acquisition Under Contract As of February 24, 2023, we had one acquisition under contract for a purchase price of approximately $6.7 million. We are currently in the due diligence period for our property under contract.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed5 unchanged
Biggest changeAssuming no increase in the amount of our variable rate debt, if SOFR were reduced 100 basis points, our cash flow would increase by approximately $1.5 million annually. 50 Table of Contents As of December 31, 2021, our exposure to interest rate risk was not materially different from our exposure as of December 31, 2022.
Biggest changeAssuming no increase in the amount of our variable rate debt, if SOFR were reduced 100 basis points, our cash flow would increase by approximately $0.9 million annually. As of December 31, 2022, our exposure to interest rate risk was not materially different from our exposure as of December 31, 2023.
We will not enter into derivative transactions for speculative purposes. In addition to changes in interest rates, the value of our investments is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants/operators and borrowers, which may affect our ability to refinance our debt if necessary. ​ 51 Table of Contents
We will not enter into derivative transactions for speculative purposes. In addition to changes in interest rates, the value of our investments is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants/operators and borrowers, which may affect our ability to refinance our debt if necessary. ​ 49 Table of Contents
As of December 31, 2022, we had $145.7 million of unhedged borrowings outstanding under the Revolver (before the netting of unamortized debt issuance costs) that bears interest at a variable rate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources” for a detailed discussion of our Credit Facility.
As of December 31, 2023, we had $92.4 million of unhedged borrowings outstanding under the Revolver (before the netting of unamortized debt issuance costs) that bears interest at a variable rate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources” for a detailed discussion of our Credit Facility.
At December 31, 2022, SOFR on our outstanding floating-rate borrowings was 4.32%. Assuming no increase in the amount of our variable interest rate debt, if SOFR increased 100 basis points, our cash flow would decrease by approximately $1.5 million annually.
At December 31, 2023, SOFR on our outstanding floating-rate borrowings was 5.36%. Assuming no increase in the amount of our variable interest rate debt, if SOFR increased 100 basis points, our cash flow would decrease by approximately $0.9 million annually.

Other GMRE 10-K year-over-year comparisons