Global Medical REIT Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Property Portfolio

Property Portfolio

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 3 Property Portfolio

Summary of Properties Acquired

During the nine months ended September 30, 2017, the Company completed 16 acquisitions. A rollforward of the gross investment in land, building and improvements as of September 30, 2017, resulting from these acquisitions is as follows:

	Land		Building		Site & Tenant Improvements		Acquired Lease Intangibles		Gross Investment in Real Estate
Balances as of January 1, 2017	$	17,785,001	$	179,253,398	$	2,651,287	$	7,187,041	$	206,876,727
Facility Acquired Date Acquired:
Cape Coral 1/10/17		353,349		7,016,511		-		-		7,369,860
Lewisburg 1/12/17		471,184		5,819,137		504,726		504,953		7,300,000
Las Cruces 2/1/17		397,148		4,618,258		-		-		5,015,406
Prescott 2/9/17		790,637		3,821,417		-		-		4,612,054
Clermont 3/1/17		-		4,361,028		205,922		867,678		5,434,628
Sandusky 3/10/17		409,204		3,997,607		-		-		4,406,811
Great Bend 3/31/17		836,929		23,800,758		-		-		24,637,687
Oklahoma City 3/31/17		2,086,885		37,713,709		1,876,730		7,822,676		49,500,000
Sandusky 4/21/17		97,804		978,035		-		-		1,075,839
Brockport 6/27/17		412,838		6,885,477		491,427		1,294,763		9,084,505
Flower Mound 6/27/17		580,763		2,922,164		381,859		406,757		4,291,543
Sherman facility 6/30/17		1,600,711		25,011,110		-		-		26,611,821
Sandusky facility 8/15/17		55,734		1,214,999		-		-		1,270,733
Lubbock facility 8/18/17		1,302,651		5,041,964		947,227		908,158		8,200,000
Germantown 8/30/17		2,700,468		8,078,246		656,111		4,505,425		15,940,250
Austin 9/25/17		6,957,821		28,507,662		1,373,336		3,811,181		40,650,000
Total Additions1:		19,054,126		169,788,082		6,437,338		20,121,591		215,401,137
Balances as of September 30, 2017	$	36,839,127	$	349,041,480	$	9,088,625	$	27,308,632	$	422,277,864

¹The Lubbock facility acquisition included approximately $1,000,000 of OP Units issued as part of the total consideration. Additionally, an aggregate of $865,676 of intangible liabilities were acquired from the acquisitions that occurred during the nine months ended September 30, 2017, resulting in total gross investments funded using cash of $213,535,461.

Depreciation expense was $2,175,668 and $5,372,308 for the three and nine months ended September 30, 2017, respectively, and $585,449 and $1,528,281 for the three and nine months ended September 30, 2016, respectively.

A summary description of the four acquisitions that were completed during the three months ended September 30, 2017 is as follows:

Austin Facility

On September 25, 2017, the Company closed on the acquisition of the Central Texas Rehabilitation Hospital (the “Rehab Hospital”) and approximately 1.27 acres of land adjacent to the Rehab Hospital that has been planned to accommodate the development of a long-term, acute care hospital (the “Developable Land,” and together with the Rehab Hospital, the “Austin Facility”), for an aggregate purchase price of $40.65 million. Norvin Austin Rehab LLC (the “Austin Seller”), was the seller of the Austin Facility.

Upon the closing of the acquisition of the Austin Facility, the Company assumed the Austin Seller’s interest, as lessor, in the absolute triple-net lease (the “Austin Facility Lease”) with CTRH, LLC.

Accounting Treatment

The Company accounted for the acquisition of the Austin Facility as a business combination in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 805 - Business Combinations. The following table presents the preliminary purchase price allocation for the assets acquired as part of the acquisition:

Land and site improvements	$	7,222,455
Building and tenant improvements		29,616,364
Above market lease intangible		245,686
In-place leases		1,680,282
Leasing costs		1,885,213
Total purchase price	$	40,650,000

The above allocation is preliminary and subject to revision within the measurement period, not to exceed one year from the date of the acquisition.

Germantown Facility

On August 30, 2017, the Company purchased a medical office building located in Germantown, Tennessee (the “Germantown Facility”) from Brierbrook Partners, LLC (“Brierbrook”) for a purchase price of $15.94 million and assumed Brierbrook’s interest, as lessor, in three existing absolute triple-net leases of the Germantown Facility.

Accounting Treatment

The Company accounted for the acquisition of the Germantown Facility as a business combination in accordance with the provisions of ASC Topic 805 - Business Combinations. The following table presents the preliminary purchase price allocation for the assets acquired as part of the acquisition:

Land and site improvements	$	3,049,683
Building and tenant improvements		8,385,142
Above market lease intangible		3,284,388
In-place leases		586,812
Leasing costs		634,225
Total purchase price	$	15,940,250

The above allocation is preliminary and subject to revision within the measurement period, not to exceed one year from the date of the acquisition.

Lubbock Facility

On August 18, 2017, the Company purchased a medical office building located in Lubbock, Texas (the “Lubbock Facility”) from Cardiac Partners Development, LP, for a purchase price of $8.2 million and entered into a new triple-net lease of the Lubbock Facility with Lubbock Heart Hospital, LLC, as tenant.

Accounting Treatment

The Company accounted for the acquisition of the Lubbock Facility as a business combination in accordance with the provisions of ASC Topic 805 - Business Combinations. The following table presents the preliminary purchase price allocation for the assets acquired as part of the acquisition:

Land and site improvements	$	1,566,487
Building and tenant improvements		5,725,355
In-place leases		414,189
Leasing costs		493,969
Total purchase price	$	8,200,000

The above allocation is preliminary and subject to revision within the measurement period, not to exceed one year from the date of the acquisition.

Sandusky Facility (Ballville Property)

On August 15, 2017, the Company purchased a medical office building located in Ballville, Ohio (the “Ballville Property”) from NOMS Property, LLC, for a purchase price of $1.3 million and entered into an amendment of the existing triple-net master lease dated October 7, 2016 (the “NOMS Lease”), between the Company, as lessor, and Northern Ohio Medical Specialists, LLC (“NOMS”), as tenant, whereby the Ballville Property was added to the NOMS Lease and leased to NOMS.

Unaudited Pro Forma Financial Information for the Three and Nine Months Ended September 30, 2017 and September 30, 2016

The following table illustrates the unaudited pro forma consolidated revenue, net income (loss), and income (loss) per share as if the facilities that the Company acquired during the nine months ended September 30, 2017 that were accounted for as business combinations (the Austin, Germantown, Lubbock, Flower Mound, Brockport, OCOM, Clermont and Lewisburg facilities) had occurred on January 1, 2016. The following summary of pro forma financial information is for the three and nine months ended September 30, 2017 and 2016:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

	(unaudited)				(unaudited)

Revenue	$	9,425,057	$	4,909,852	$	25,736,802	$	13,808,974
Net income (loss)	$	653,952	$	(2,047,241)	$	(1,053,239)	$	(4,616,832)
Net income (loss) attributable to common stockholders	$	428,546	$	(2,047,241)	$	(1,284,133)	$	(4,616,832)
Income (loss) attributable to common stockholders per share basic and diluted	$	0.02	$	(0.12)	$	(0.07)	$	(0.71)
Weighted average shares outstanding basic and diluted		21,522,251		17,371,743		18,938,367		6,514,230

Intangible Assets and Liabilities

The following is a summary of the carrying amount of intangible assets and liabilities as of September 30, 2017:

	As of September 30, 2017
			Accumulated
	Cost		Amortization		Net
Assets
In-place leases	$	14,590,650	$	(1,056,983)	$	13,533,667
Above market ground lease		487,978		(3,972)		484,006
Above market leases		4,363,022		(73,911)		4,289,111
Leasing costs		7,866,982		(311,734)		7,555,248
	$	27,308,632	$	(1,446,600)	$	25,862,032

Liabilities
Below market leases	$	1,145,030	$	(64,907)	$	1,080,123

The following is a summary of the carrying amount of intangible assets and liabilities as of December 31, 2016:

	As of December 31, 2016
			Accumulated
	Cost		Amortization		Net
Assets
In-place leases	$	5,826,556	$	(34,789)	$	5,791,767
Above market leases		74,096		(443)		73,653
Leasing costs		1,286,389		(7,533)		1,278,856
	$	7,187,041	$	(42,765)	$	7,144,276

Liabilities
Below market leases	$	279,354	$	(1,437)	$	277,917

The following is a summary of the acquired lease intangible amortization for the three and nine months ended September 30, 2017. The Company had no intangible assets or liabilities as of September 30, 2016 and therefore no amortization was incurred during the three and nine months ended September 30, 2016.

	Three Months Ended		Nine Months Ended
	September 30, 2017		September 30, 2017
Amortization expense related to in-place leases	$	388,409	$	1,022,194
Amortization expense related to leasing costs	$	135,078	$	304,201
Decrease of rental revenue related to above market ground lease	$	1,702	$	3,972
Decrease of rental revenue related to above market leases	$	55,757	$	73,468
Increase of rental revenue related to below market leases	$	32,443	$	63,470

As of September 30, 2017, scheduled future aggregate net amortization of acquired lease intangible assets and liabilities for each fiscal year ended December 31 are listed below:

	Net Decrease in Revenue		Net Increase in Expenses
2017	$	(113,108)	$	650,590
2018		(452,433)		2,602,359
2019		(452,433)		2,602,359
2020		(452,433)		2,602,359
2021		(455,278)		1,987,746
Thereafter		(1,767,309)		10,643,502
Total	$	(3,692,994)	$	21,088,915

As of September 30, 2017, the weighted average amortization period for asset lease intangibles and liability lease intangibles were 8.12 years and 8.32 years, respectively.