UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________.

Commission file number: 001-37815

Global Medical REIT Inc.

(Exact name of registrant as specified in its charter)


Maryland		46-4757266
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7373 Wisconsin Avenue, Suite 800 Bethesda, MD		20814
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (202) 524-6851

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol(s):	Name of each exchange on which registered:
Common Stock, par value $0.001 per share	GMRE	NYSE
Series A Preferred Stock, par value $0.001 per share	GMRE PrA	NYSE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes ◻ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	þ	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the registrant’s common stock outstanding at May 1, 2023 was 65,529,718

Table of Contents

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION



Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets – March 31, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2023 and 2022	5
	Condensed Consolidated Statements of Equity – Three Months Ended March 31, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022	7
	Notes to the Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

Signatures		39

-2-

Table of Contents

GLOBAL MEDICAL REIT INC.

Condensed Consolidated Balance Sheets

(unaudited and in thousands, except par values)


	As of
	March 31, 2023		December 31, 2022
Assets
Investment in real estate:
Land	$	167,285	$	168,308
Building		1,077,340		1,079,781
Site improvements		22,024		22,024
Tenant improvements		66,375		65,987
Acquired lease intangible assets		148,249		148,077
		1,481,273		1,484,177
Less: accumulated depreciation and amortization		(213,690)		(198,218)
Investment in real estate, net		1,267,583		1,285,959
Cash and cash equivalents		4,603		4,016
Restricted cash		9,378		10,439
Tenant receivables, net		7,402		8,040
Due from related parties		321		200
Escrow deposits		8,625		7,833
Deferred assets		30,322		29,616
Derivative asset		27,428		34,705
Goodwill		5,903		5,903
Other assets		7,473		6,550
Total assets	$	1,369,038	$	1,393,261

Liabilities and Equity
Liabilities:
Credit Facility, net of unamortized debt issuance costs of $8,704 and $9,253 at March 31, 2023 and December 31, 2022, respectively	$	634,796	$	636,447
Notes payable, net of unamortized debt issuance costs of $413 and $452 at March 31, 2023 and December 31, 2022, respectively		57,367		57,672
Accounts payable and accrued expenses		12,604		13,819
Dividends payable		15,854		15,821
Security deposits		4,688		5,461
Other liabilities		8,226		7,363
Acquired lease intangible liability, net		7,028		7,613
Total liabilities		740,563		744,196
Commitments and Contingencies
Equity:
Preferred stock, $0.001 par value, 10,000 shares authorized; 3,105 issued and outstanding at March 31, 2023 and December 31, 2022, respectively (liquidation preference of $77,625 at March 31, 2023 and December 31, 2022, respectively)		74,959		74,959
Common stock, $0.001 par value, 500,000 shares authorized; 65,530 shares and 65,518 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		66		66
Additional paid-in capital		722,113		721,991
Accumulated deficit		(211,794)		(198,706)
Accumulated other comprehensive income		27,410		34,674
Total Global Medical REIT Inc. stockholders' equity		612,754		632,984
Noncontrolling interest		15,721		16,081
Total equity		628,475		649,065
Total liabilities and equity	$	1,369,038	$	1,393,261

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-3-

Table of Contents

GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Operations

(unaudited and in thousands, except per share amounts)


	Three Months Ended March 31,
	2023		2022

Revenue
Rental revenue	$	36,199	$	31,852
Other income		31		23
Total revenue		36,230		31,875

Expenses
General and administrative		3,804		4,197
Operating expenses		7,536		5,372
Depreciation expense		10,494		9,402
Amortization expense		4,395		3,777
Interest expense		8,271		4,801
Preacquisition expense		42		40
Total expenses		34,542		27,589

Income before gain on sale of investment property		1,688		4,286
Gain on sale of investment property		485		—

Net income	$	2,173	$	4,286
Less: Preferred stock dividends		(1,455)		(1,455)
Less: Net income attributable to noncontrolling interest		(45)		(170)
Net income attributable to common stockholders	$	673	$	2,661

Net income attributable to common stockholders per share – basic and diluted	$	0.01	$	0.04

Weighted average shares outstanding – basic and diluted		65,525		65,302

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-4-

Table of Contents

GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Comprehensive Income

(unaudited and in thousands)


	Three Months Ended March 31,
	2023		2022

Net income	$	2,173	$	4,286
Other comprehensive (loss) income:
(Decrease) increase in fair value of interest rate swap agreements		(7,264)		17,393
Total other comprehensive (loss) income		(7,264)		17,393
Comprehensive (loss) income		(5,091)		21,679
Less: Preferred stock dividends		(1,455)		(1,455)
Less: Comprehensive loss (income) attributable to noncontrolling interest		412		(1,213)
Comprehensive (loss) income attributable to common stockholders	$	(6,134)	$	19,011

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-5-

Table of Contents

GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Equity

(unaudited and in thousands, except per share amounts)

For the Three Months Ended March 31, 2023:


													Global
											Accumulated		Medical
							Additional				Other		REIT Inc.		Non-
	Common Stock			Preferred Stock			Paid-in		Accumulated		Comprehensive		Stockholders’		controlling		Total
	Shares	Amount		Shares	Amount		Capital		Deficit		Income		Equity		Interest		Equity
Balances, December 31, 2022	65,518	$	66	3,105	$	74,959	$	721,991	$	(198,706)	$	34,674	$	632,984	$	16,081	$	649,065
Net income	—		—	—		—		—		2,128		—		2,128		45		2,173
LTIP Units and OP Units redeemed for common stock	12		—	—		—		122		—		—		122		(122)		—
Change in fair value of interest rate swap agreements	—		—	—		—		—		—		(7,264)		(7,264)		—		(7,264)
Stock-based compensation expense	—		—	—		—		—		—		—		—		688		688
Dividends to common stockholders ($0.21 per share)	—		—	—		—		—		(13,761)		—		(13,761)		—		(13,761)
Dividends to preferred stockholders ($0.46875 per share)	—		—	—		—		—		(1,455)		—		(1,455)		—		(1,455)
Dividends to noncontrolling interest	—		—	—		—		—		—		—		—		(971)		(971)
Balances, March 31, 2023	65,530	$	66	3,105	$	74,959	$	722,113	$	(211,794)	$	27,410	$	612,754	$	15,721	$	628,475

For the Three Months Ended March 31, 2022:


													Global
											Accumulated		Medical
							Additional				Other		REIT Inc.		Non-
	Common Stock			Preferred Stock			Paid-in		Accumulated		Comprehensive		Stockholders’		controlling		Total
	Shares	Amount		Shares	Amount		Capital		Deficit		Income (Loss)		Equity		Interest		Equity
Balances, December 31, 2021	64,880	$	65	3,105	$	74,959	$	711,414	$	(157,017)	$	(6,636)	$	622,785	$	14,792	$	637,577
Net income	—		—	—		—		—		4,116		—		4,116		170		4,286
Issuance of shares of common stock, net	480		—	—		—		8,210		—		—		8,210		—		8,210
LTIP Units and OP Units redeemed for common stock	40		—	—		—		682		—		—		682		(682)		—
Change in fair value of interest rate swap agreements	—		—	—		—		—		—		17,393		17,393		—		17,393
Stock-based compensation expense	—		—	—		—		—		—		—		—		1,287		1,287
Dividends to common stockholders ($0.21 per share)	—		—	—		—		—		(13,733)		—		(13,733)		—		(13,733)
Dividends to preferred stockholders ($0.46875 per share)	—		—	—		—		—		(1,455)		—		(1,455)		—		(1,455)
Dividends to noncontrolling interest	—		—	—		—		—		—		—		—		(948)		(948)
Balances, March 31, 2022	65,400	$	65	3,105	$	74,959	$	720,306	$	(168,089)	$	10,757	$	637,998	$	14,619	$	652,617

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-6-

Table of Contents

GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Cash Flows

(unaudited and in thousands)


	Three Months Ended March 31,
	2023		2022
Operating activities
Net income	$	2,173	$	4,286
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		10,494		9,402
Amortization of acquired lease intangible assets		4,373		3,755
Amortization of above market leases, net		291		199
Amortization of debt issuance costs and other		601		515
Stock-based compensation expense		688		1,287
Capitalized preacquisition and other costs charged to expense		15		153
Gain on sale of investment property		(485)		—
Other		—		29
Changes in operating assets and liabilities:
Tenant receivables		638		(407)
Deferred assets		(811)		(1,297)
Other assets and liabilities		(210)		(532)
Accounts payable and accrued expenses		(1,223)		(1,030)
Security deposits		(773)		76
Net cash provided by operating activities		15,771		16,436

Investing activities
Purchase of land, buildings, and other tangible and intangible assets and liabilities		—		(24,468)
Net proceeds from sale of investment property		4,175		—
Escrow deposits for purchase of properties		(153)		(1,284)
Advances made to related parties		(121)		(288)
Capital expenditures on existing real estate investments		(809)		(556)
Net cash provided by (used in) investing activities		3,092		(26,596)

Financing activities
Net proceeds received from common equity offerings		—		8,210
Escrow deposits required by third party lenders		(639)		(456)
Repayment of notes payable		(344)		(282)
Proceeds from Credit Facility		12,600		14,100
Repayment of Credit Facility		(14,800)		—
Dividends paid to common stockholders, and OP Unit and LTIP Unit holders		(14,699)		(14,526)
Dividends paid to preferred stockholders		(1,455)		(1,455)
Net cash (used in) provided by financing activities		(19,337)		5,591
Net decrease in cash and cash equivalents and restricted cash		(474)		(4,569)
Cash and cash equivalents and restricted cash—beginning of period		14,455		12,759
Cash and cash equivalents and restricted cash—end of period	$	13,981	$	8,190

Supplemental cash flow information:
Cash payments for interest	$	8,139	$	4,258

Noncash financing and investing activities:
Accrued dividends payable	$	15,854	$	15,823
Interest rate swap agreements fair value change recognized in other comprehensive loss (income)	$	7,264	$	(17,393)
OP Units and LTIP Units redeemed for common stock	$	122	$	682
Accrued capital expenditures included in accounts payable and accrued expenses	$	778	$	1,841

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-7-

Table of Contents

GLOBAL MEDICAL REIT INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except per share amounts or as otherwise indicated)

Note 1 – Organization

Global Medical REIT Inc. (the “Company”) is a Maryland corporation and internally managed real estate investment trust (“REIT”) that owns and acquires healthcare facilities and leases those facilities to physician groups and regional and national healthcare systems. The Company holds its facilities and conducts its operations through a Delaware limited partnership subsidiary named Global Medical REIT L.P. (the “Operating Partnership”) and a taxable REIT subsidiary (“TRS”). The Company serves as the sole general partner of the Operating Partnership through a wholly owned subsidiary of the Company named Global Medical REIT GP LLC, a Delaware limited liability company. As of March 31, 2023, the Company was the 93.70% limited partner of the Operating Partnership, with an aggregate of 6.30% 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 common limited partnership units (“OP Units”).

Note 2 – Summary of Significant Accounting Policies

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited and include the accounts of the Company, including the Operating Partnership and its wholly owned subsidiaries. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required for annual consolidated financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the accompanying condensed consolidated financial statements do not include all the information and footnotes required by GAAP for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022. In the opinion of management, all adjustments of a normal and recurring nature necessary for a fair presentation of the condensed consolidated financial statements for the interim periods have been made.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company presents the portion of any equity it does not own but controls (and thus consolidates) as noncontrolling interest. Noncontrolling interest in the Company includes the LTIP Units that have been granted to directors, officers and employees of the Company and the OP Units held by third parties. Refer to Note 5 – “Equity” and Note 7 – “Stock-Based Compensation” for additional information regarding the OP Units and LTIP Units.

The Company classifies noncontrolling interest as a component of consolidated equity on its Condensed Consolidated Balance Sheets, separate from the Company’s total equity. The Company’s net income or loss is allocated to noncontrolling interests based on the respective ownership or voting percentage in the Operating Partnership associated with such noncontrolling interests and is removed from consolidated income or loss on the Condensed Consolidated Statements of Operations in order to derive net income or loss attributable to common stockholders. The noncontrolling ownership percentage is calculated by dividing the aggregate number of LTIP Units and OP Units by the total number of units and shares outstanding. Any future issuances of additional LTIP Units or OP Units would change the noncontrolling ownership interest.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Actual results could differ from those estimates.

-8-

Table of Contents

Investment in Real Estate

The Company determines when an acquisition meets the definition of a business or alternatively should be accounted for as an asset acquisition in accordance with Accounting Standard Codification (“ASC”) Topic 805 “Business Combinations” (“ASC Topic 805”), which requires that, when substantially all of the fair value of an acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets, the asset or group of similar identifiable assets does not meet the definition of a business and therefore is required to be accounted for as an asset acquisition. Transaction costs are capitalized for asset acquisitions and expensed as incurred for business combinations.

For asset acquisitions that are “owner occupied” (meaning that the seller either is the tenant or controls the tenant), the purchase price, including capitalized acquisition costs, will be allocated to land and building based on their relative fair values with no value allocated to intangible assets or liabilities. For asset acquisitions where there is a lease in place but that are not “owner occupied,” the Company will allocate the purchase price to tangible assets and any intangible assets acquired or liabilities assumed based on their relative fair values. Fair value is determined based upon the guidance of ASC Topic 820, “Fair Value Measurements and Disclosures,” and generally are determined using Level 2 inputs, such as rent comparables, sales comparables, and broker indications. Although Level 3 inputs are utilized, they are minor in comparison to the Level 2 data used for the primary assumptions. The determination of fair value involves the use of significant judgment and estimates. We make estimates to determine the fair value of the tangible and intangible assets acquired and liabilities assumed using information obtained from multiple sources, including preacquisition due diligence, and we routinely utilize the assistance of a third-party appraiser.

Revenue Recognition

The Company’s operations primarily consist of rental revenue earned from tenants under leasing arrangements which provide for minimum rent and escalations. The leases have been accounted for as operating leases. For operating leases with contingent rental escalators, revenue is recorded based on the contractual cash rental payments due during the period. Revenue from leases with fixed annual rental escalators are recognized on a straight-line basis over the initial lease term, subject to a collectability assessment, with the difference between the contractual rental receipts and the straight-line amounts recorded as a “deferred rent receivable.” Additionally, the Company recognizes as a component of rental revenue “expense recoveries” revenue, which represents revenue recognized related to tenant reimbursement of real estate taxes, insurance, and certain other operating expenses (“tenant reimbursements”). The Company recognizes these reimbursements and related expenses on a gross basis in its Condensed Consolidated Statements of Operations.

Cash and Cash Equivalents and Restricted Cash

The Company considers all demand deposits, cashier’s checks, money market accounts, and certificates of deposit with a maturity of three months or less to be cash equivalents. Amounts included in restricted cash represent (1) certain security deposits received from tenants at the inception of their leases; (2) cash required to be held by a third-party lender as a reserve for debt service; and (3) funds held by the Company related to tenant reimbursements. The following table provides a reconciliation of the Company’s cash and cash equivalents and restricted cash that sums to the total of those amounts at the end of the periods presented on the Company’s accompanying Condensed Consolidated Statements of Cash Flows:


	As of March 31,
	2023		2022
Cash and cash equivalents	$	4,603	$	1,854
Restricted cash		9,378		6,336
Total cash and cash equivalents and restricted cash	$	13,981	$	8,190

Tenant Receivables, Net

The tenant receivable balance as of March 31, 2023 and December 31, 2022 was $7,402 and $8,040, respectively. The balance as of March 31, 2023 consisted of $1,879 in funds owed from the Company’s tenants for rent that the Company had earned but had not yet received, $4,913 of tenant reimbursements, $140 for a loan that was made to one of the Company’s tenants, and $470 of miscellaneous receivables. The balance as of December 31, 2022 consisted of $1,348 in funds owed from the Company’s tenants for rent that the Company had earned but had not yet received, $5,520 of tenant reimbursements, $143 for a loan that was made to one of the Company’s tenants, and $1,029 of miscellaneous receivables.

-9-

Table of Contents

Receivables arising from operating leases are accounted for in accordance with ASC Topic 842 “Leases” (“ASC Topic 842”). The Company assesses the likelihood of losses resulting from tenant defaults, or the inability of tenants to make contractual rent and tenant reimbursements at each reporting date. The Company also monitors the liquidity and creditworthiness of its tenants and operators on a continuous basis. If the likelihood of a tenant paying its lease payments is determined to no longer be probable, all tenant receivables, including deferred rent, are written off against revenue and any future revenue for that tenant is recognized only upon receipt of cash. In addition, as of March 31, 2023 and December 31, 2022, the Company had a portfolio level reserve of $350 on those leases that were probable of collection to ensure that the tenant lease receivables were not overstated.

Escrow Deposits

The escrow balance as of March 31, 2023 and December 31, 2022 was $8,625 and $7,833, respectively. Escrow deposits include funds held in escrow to be used for the acquisition of properties in the future and for the payment of taxes, insurance, and other amounts as stipulated by the Company’s Cantor Loan, as hereinafter defined.

Deferred Assets

The deferred assets balance as of March 31, 2023 and December 31, 2022 was $30,322 and $29,616, respectively. The balance as of March 31, 2023 consisted of $30,125 in deferred rent receivables resulting from the recognition of revenue from leases with fixed annual rental escalations on a straight-line basis and $197 of other deferred costs. The balance as of December 31, 2022 consisted of $29,467 in deferred rent receivables resulting from the recognition of revenue from leases with fixed annual rental escalations on a straight-line basis and $149 of other deferred costs.

Other Assets

The other assets balance as of March 31, 2023 and December 31, 2022 was $7,473 and $6,550, respectively. The balance as of March 31, 2023 consisted of $3,416 for right of use assets, $1,407 in capitalized construction in process costs, $2,411 in prepaid assets, and $239 for net capitalized software costs and miscellaneous assets. The balance as of December 31, 2022 consisted of $3,480 for right of use assets, $1,552 in capitalized construction in process costs, $1,380 in prepaid assets, and $138 for net capitalized software costs and miscellaneous assets. Refer to Note 8 – “Leases” for additional details on right of use assets.

Derivative Instruments - Interest Rate Swaps

As of March 31, 2023 and December 31, 2022, the Company's balance related to interest rate swap derivative instruments that were designated as cash flow hedges of interest rate risk was an asset of $27,428 and $34,705, respectively. In accordance with the Company’s risk management strategy, the purpose of the interest rate swaps is to manage interest rate risk for certain of the Company’s variable-rate debt. The interest rate swaps involve the Company’s receipt of variable-rate amounts from the counterparties in exchange for the Company making fixed-rate payments over the life of the agreements. The Company accounts for derivative instruments in accordance with the provisions of ASC Topic 815, “Derivatives and Hedging.” Refer to Note 4 – “Credit Facility, Notes Payable and Derivative Instruments” for additional details.

Goodwill

As of March 31, 2023 and December 31, 2022, the Company’s goodwill balance was $5,903. Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of businesses acquired. Goodwill has an indefinite life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company’s policy is to perform its annual goodwill impairment evaluation as of the first day of the fourth quarter of its fiscal year. The Company has one reporting unit.

Assets Held for Sale and Sales of Real Estate

The Company classifies a property as held for sale when the following criteria are met: (i) management, having the authority to approve action, commits to a plan to sell the property in its present condition, (ii) the sale of the property is at a price reasonable in relation to its current fair value and (iii) the sale is probable and expected to be completed within one year. At that time, the Company presents the assets and obligations associated with the real estate held for sale separately in its Condensed Consolidated Balance Sheets and ceases recording depreciation and amortization expense related to that asset. Real estate held for sale is reported at the lower of its

-10-

Table of Contents

carrying amount or its estimated fair value less estimated costs to sell. None of the Company’s properties were classified as held for sale as of March 31, 2023 or December 31, 2022.

Upon the disposition of a property, the Company recognizes a gain or loss at a point in time when the Company determines control of the underlying asset has been transferred to the buyer. The Company’s performance obligation is generally satisfied at the closing of the transaction. Any continuing involvement is analyzed as a separate performance obligation in the contract, and a portion of the sales price is allocated to each performance obligation. There is significant judgment applied to estimate the amount of variable consideration, if any, identified within the sales price and assess its probability of occurrence based on current market information, historical transactions, and forecasted information that is reasonably available.

For sales of real estate (or assets classified as held for sale), the Company evaluates whether the disposition is a strategic shift that will have a major effect on the Company’s operations and financial results, and, if so, it will be classified as discontinued operations in the Company’s consolidated financial statements for all periods presented.

Other Liabilities

The other liabilities balance as of March 31, 2023 and December 31, 2022 was $8,226 and $7,363, respectively. The balance as of March 31, 2023 consisted of $2,858 for right of use liabilities and $5,368 of prepaid rent. The balance as of December 31, 2022 consisted of $2,922 for right of use liabilities and $4,441 of prepaid rent. Refer to Note 8 – “Leases” for additional details on right of use liabilities.

Note 3 – Property Portfolio

Summary of Properties Acquired During the Three Months Ended March 31, 2023

During the three months ended March 31, 2023, the Company completed no acquisitions. A rollforward of the gross investment in land, building, improvements, and acquired lease intangible assets as of March 31, 2023 is as follows:


					Site		Tenant		Acquired Lease		Gross Investment in
	Land		Building		Improvements		Improvements		Intangible Assets		Real Estate
Balances as of December 31, 2022	$	168,308	$	1,079,781	$	22,024	$	65,987	$	148,077	$	1,484,177
Capitalized costs⁽¹⁾		—		386		—		388		172		946
Total Additions:		—		386		—		388		172		946
Disposition of Jacksonville – 3/9/2023		(1,023)		(2,827)		—		—		—		(3,850)
Balances as of March 31, 2023	$	167,285	$	1,077,340	$	22,024	$	66,375	$	148,249	$	1,481,273

⁽¹⁾ Represents capital projects that were completed and placed in service during the three months ended March 31, 2023 related to the Company’s existing facilities.

Depreciation expense was $10,494 and $9,402 for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the Company had aggregate capital improvement commitments and obligations to improve, expand, and maintain the Company’s existing facilities of approximately $29,170. Many of these amounts are subject to contingencies that make it difficult to predict when they will be utilized, if at all. In accordance with the terms of the Company’s leases, capital improvement obligations in the next twelve months are expected to total approximately $9,289.

Summary of Properties Acquired During the Year Ended December 31, 2022

During the year ended December 31, 2022 the Company completed 14 acquisitions. For each acquisition, substantially all of the fair value was concentrated in a single identifiable asset or group of similar identifiable assets and, therefore, each acquisition represents an asset acquisition. Accordingly, transaction costs for these acquisitions were capitalized.

-11-

Table of Contents

A rollforward of the gross investment in land, building, improvements, and acquired lease intangible assets as of December 31, 2022 resulting from these acquisitions is as follows:


	Land		Building		Improvements		Improvements		Intangible Assets		Real Estate
Balances as of December 31, 2021	$	152,060	$	985,091	$	19,021	$	58,900	$	127,931	$	1,343,003
Facility Acquired – Date Acquired:
Gainesville – 2/4/22		555		3,899		76		199		575		5,304
Grand Rapids – 2/28/22		1,238		4,976		221		270		595		7,300
Sarasota – 3/29/22		747		3,703		84		331		1,263		6,128
Greenwood – 3/30/22		929		4,332		194		360		426		6,241
Fairbanks – 4/1/22		1,782		12,262		215		753		7,946		22,958
Rocky Point – 4/8/22		613		6,243		223		317		589		7,985
Fairfax – 5/11/22		4,012		13,238		399		310		3,304		21,263
Lee's Summit – 5/19/22		1,349		4,101		83		410		674		6,617
Lexington – 5/27/22		1,760		11,350		289		556		3,036		16,991
Toledo – 7/8/22		2,999		11,366		581		1,247		2,044		18,237
Lake Geneva – 7/26/22		444		4,612		141		230		725		6,152
Glenview – 9/1/22		1,448		6,258		241		279		912		9,138
Canandaigua – 9/16/22		578		11,118		370		489		1,493		14,048
Hermitage – 9/20/22		353		3,891		194		227		674		5,339
Capitalized costs⁽¹⁾		141		1,419		41		1,416		396		3,413
Total Additions: