TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

~~Class~~		~~Outstanding November 3, 2017~~
~~Common Stock, $0.001 par value per share~~ Item 1.	Financial Statements (Unaudited)	~~21,630,675~~

~~TABLE OF CONTENTS~~

~~PART I FINANCIAL INFORMATION~~

~~Item 1.~~	~~Financial Statements~~	3
	Condensed Consolidated Balance Sheets – ~~September 30, 2017 (unaudited)~~June 30,2020 and December 31, ~~2016~~2019	3
	Condensed Consolidated Statements of Operations ~~(unaudited)~~ – Three and ~~Nine~~Six Months Ended ~~September 30, 2017~~June 30,2020 and ~~2016~~2019	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and Six Months Ended June 30,2020 and 2019	5
	Condensed Consolidated Statements of Equity – Three and Six Months Ended June 30,2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows ~~(unaudited)~~ – ~~Nine~~Six Months Ended ~~September 30, 2017~~June 30,2020 and ~~2016~~2019	5 8
	Notes to the Unaudited Condensed Consolidated Financial Statements	6 9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23 33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34 48

Item 4.	Controls and Procedures	34 48

PART II OTHER INFORMATION

Item 1.	Legal Proceedings	34 49

Item 1A.	Risk Factors	34 49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35 51

Item 3.	Defaults Upon Senior Securities	35 51

Item 4.	Mine Safety Disclosures	35 51

Item 5.	Other Information	35 51

Item 6.	Exhibits	36 52

Signatures		37

~~Exhibit Index~~		38 53

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Table of Contents

~~Item 1.Financial Statements~~

GLOBAL MEDICAL REIT INC.

Condensed Consolidated Balance Sheets

(unaudited and in thousands, except par values)

As of

September 30,
2017
December 31, 2016
Assets (unaudited)
Investment in real estate:
   Land $ 36,839,127 $ 17,785,001
   Building 349,041,480 179,253,398
   Site improvements 3,992,974 1,465,273
   Tenant improvements 5,095,651 1,186,014
   Acquired lease intangible assets 27,308,632 7,187,041
422,277,864 206,876,727
   Less: accumulated depreciation and amortization (10,142,823 ) (3,366,680 )
Investment in real estate, net 412,135,041 203,510,047
Cash 6,776,501 19,671,131
Restricted cash 2,040,026 941,344
Tenant receivables 616,741 212,435
Escrow deposits 1,297,665 1,212,177
Deferred assets 2,923,494 704,537
Deferred financing costs, net 2,977,981 927,085
Other assets 160,214 140,374
Total assets $ 428,927,663 $ 227,319,130

Liabilities and Stockholders’ Equity
Liabilities:
Revolving credit facility $ 126,100,000 $ 27,700,000
Notes payable, net of unamortized discount of $963,184 and $1,061,602 at
September 30, 2017 and December 31, 2016, respectively 38,511,716 38,413,298
Notes payable to related parties - 421,000
Accounts payable and accrued expenses 2,433,549 573,997
Dividends payable 4,767,037 3,604,037
Security deposits and other 2,206,145 719,592
Due to related parties, net 802,286 580,911
Acquired lease intangible liability, net 1,080,123 277,917
   Total liabilities 175,900,856 72,290,752
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 3,105,000 and no shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively (liquidation preference of $77,625,000 and $0, respectively) 74,959,003 -
Common stock, $0.001 par value, 500,000,000 shares authorized; 21,630,675 and 17,605,675 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 21,631 17,606
Additional paid-in capital 207,268,720 171,997,396
Accumulated deficit (29,914,472 ) (16,986,624 )
     Total Global Medical REIT Inc. stockholders' equity 252,334,882 155,028,378
Noncontrolling interest 691,925 -
    Total equity 253,026,807 155,028,378
Total liabilities and stockholders' equity $ 428,927,663 $ 227,319,130


	As of
	June 30, 2020		December 31, 2019

Assets
Investment in real estate:
Land	$	104,316	$	95,381
Building		755,807		693,533
Site improvements		11,593		9,912
Tenant improvements		41,891		33,909
Acquired lease intangible assets		83,269		72,794
		996,876		905,529
Less: accumulated depreciation and amortization		(73,979)		(56,503)
Investment in real estate, net		922,897		849,026
Cash and cash equivalents		8,392		2,765
Restricted cash		4,945		4,420
Tenant receivables		5,888		4,957
Due from related parties		124		50
Escrow deposits		3,301		3,417
Deferred assets		17,433		14,512
Derivative asset		-		2,194
Other assets		3,587		3,593
Total assets	$	966,567	$	884,934

Liabilities and Equity
Liabilities:
Credit Facility, net of unamortized debt issuance costs of $3,350 and $3,832 at June 30,2020 and December 31, 2019, respectively	$	415,850	$	347,518
Notes payable, net of unamortized debt issuance costs of $668 and $667 at June 30,2020 and December 31, 2019, respectively		50,610		38,650
Accounts payable and accrued expenses		8,836		5,069
Dividends payable		11,281		11,091
Security deposits and other		5,814		6,351
Due to related party		1,957		1,648
Derivative liability		21,495		8,685
Other liability		2,417		2,405
Acquired lease intangible liability, net		5,598		3,164
Total liabilities		523,858		424,581
Commitments and Contingencies
Equity:
Preferred stock, $0.001 par value, 10,000 shares authorized; 3,105 issued and outstanding at June 30, 2020 and December 31, 2019, respectively (liquidation preference of $77,625 at June 30, 2020 and December 31, 2019, respectively)		74,959		74,959
Common stock, $0.001 par value, 500,000 shares authorized; 46,252 shares and 43,806 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		46		44
Additional paid-in capital		462,607		433,330
Accumulated deficit		(88,037)		(71,389)
Accumulated other comprehensive loss		(21,654)		(6,674)
Total Global Medical REIT Inc. stockholders’ equity		427,921		430,270
Noncontrolling interest		14,788		30,083
Total equity		442,709		460,353
Total liabilities and equity	$	966,567	$	884,934

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

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GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Operations

~~(unaudited)~~(unaudited and in thousands, except per share amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016

Revenue
Rental revenue $ 7,921,913 $ 1,932,425 $ 19,217,710 $ 4,994,172
Expense recoveries 443,816 - 1,141,455 -
Other income 23,134 70,225 111,502 93,196
   Total revenue 8,388,863 2,002,650 20,470,667 5,087,368

Expenses
Acquisition fees 651,645 - 2,130,187 -
Acquisition fees – related party - - - 754,000
General and administrative 989,526 1,720,651 4,418,115 2,962,730
Operating expenses 464,514 1,025 1,234,247 15,685
Management fees – related party 803,804 627,147 2,059,325 807,147
Depreciation expense 2,175,668 585,449 5,372,308 1,528,281
Amortization expense 523,487 - 1,326,395 -
Interest expense 2,174,683 1,051,204 5,265,262 3,443,113
   Total expenses 7,783,327 3,985,476 21,805,839 9,510,956

   Net income (loss) $ 605,536 $ (1,982,826 ) $ (1,335,172 ) $ (4,423,588 )
      Less: Preferred stock dividends (258,750 ) - (258,750 ) -
        Less: Net loss attributable to noncontrolling interest 34,482 - 34,482 -
     Net income (loss) attributable to common stockholders $ 381,268 $ (1,982,826 ) $ (1,559,440 ) $ (4,423,588 )

Net income (loss) attributable to common stockholders per share – basic and diluted $ 0.02 $ (0.11 ) $ (0.08 ) $ (0.68 )

Weighted average shares outstanding – basic and diluted 21,522,251 17,371,743 18,938,367 6,514,230


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

Revenue
Rental revenue	$	22,036	$	16,835	$	43,569	$	31,976
Other income		19		45		135		104
Total revenue		22,055		16,880		43,704		32,080

Expenses
General and administrative		1,643		1,640		3,482		3,246
Operating expenses		2,336		1,143		4,639		2,466
Management fees – related party		2,021		1,584		4,024		2,918
Depreciation expense		6,593		4,608		12,429		8,475
Amortization expense		2,348		1,255		4,269		2,257
Interest expense		4,375		4,132		8,752		8,157
Management internalization expense		920		—		1,424		—
Preacquisition expense		147		56		196		56
Total expenses		20,383		14,418		39,215		27,575

Net income	$	1,672	$	2,462	$	4,489	$	4,505
Less: Preferred stock dividends		(1,455)		(1,455)		(2,911)		(2,911)
Less: Net income attributable to noncontrolling interest		(13)		(103)		(120)		(162)
Net income attributable to common stockholders	$	204	$	904	$	1,458	$	1,432

Net income attributable to common stockholders per share – basic and diluted	$	0.00	$	0.03	$	0.03	$	0.05

Weighted average shares outstanding – basic and diluted		45,404		34,559		44,793		30,990

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

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GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of ~~Cash Flows~~Comprehensive Income (Loss)

(unaudited and in thousands)

Nine Months Ended September 30,
2017 2016
Operating activities (unaudited)
Net loss $ (1,335,172 ) $ (4,423,588 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense 5,372,308 1,528,281
Amortization of deferred financing costs 840,214 215,449
Amortization of acquired lease intangible assets 1,326,395 -
Amortization of above (below) market leases, net 13,970 -
Stock-based compensation expense 1,480,724 830,827
Advisory expense settled in OP Units 77,497 -
Changes in operating assets and liabilities:
Restricted cash (1,144,705 ) (438,189 )
Tenant receivables (404,306 ) (177,369 )
Deferred assets (2,218,957 ) (222,324 )
Other assets (21,890 ) -
Accounts payable and accrued expenses 1,622,426 (267,627 )
Security deposits and other 1,486,553 597,593
Accrued management fees due to related party 183,096 297,147
Net cash provided by (used in) operating activities 7,278,153 (2,059,800 )

Investing activities
Purchase of land, buildings, and other tangible and intangible assets and liabilities (213,535,461 ) (68,690,495 )
Escrow deposits for purchase of properties (60,000 ) 394,310
Loans repayments from (made to) related party 38,428 (39,000 )
Pre-acquisition costs for purchase of properties 51,459 -
Net cash used in investing activities (213,505,574 ) (68,335,185 )

Financing activities
Net proceeds received from preferred stock offering 75,146,720 -
Net proceeds received from common equity offerings 33,794,625 137,358,367
Change in restricted cash 46,023 80,040
Escrow deposits required by third party lenders (25,488 ) (843,636 )
Loans (repaid to) from related party (149 ) 29,986
Repayment of convertible debenture, due to related party - (10,000,000 )
Proceeds from notes payable from acquisitions - 41,320,900
Payments on notes payable from acquisitions - (24,011,168 )
Proceeds from note payable from related party - 450,000
Repayment of note payable from related party (421,000 ) (450,000 )
Proceeds from revolving credit facility, net 98,400,000 -
Payments of deferred financing costs (2,792,692 ) (1,090,079 )
Dividends paid to stockholders (10,815,248 ) (285,703 )
Net cash provided by financing activities 193,332,791 142,558,707
Net (decrease) increase in cash and cash equivalents (12,894,630 ) 72,163,722
Cash and cash equivalents—beginning of period 19,671,131 9,184,270
Cash and cash equivalents—end of period $ 6,776,501 $ 81,347,992
Supplemental cash flow information:
Cash payments for interest $ 3,928,208 $ 3,696,467
Noncash financing and investing activities:
Accrued dividends payable $ 4,767,037 $ 3,592,786
Conversion of convertible debenture due to majority stockholder to common stock $ - $ 30,030,134
Accrued preferred stock offering costs $ 187,717 $ -
Reclassification of common stock offering costs to additional paid-in capital $ 443,499 $ 1,681,259
Reclassification of preferred stock offering costs to preferred stock balance $ 220,809 $ -
Accrued capitalized offering costs $ 49,409 $ -
OP Units issued for noncash transaction $ 1,000,000 $ -


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

Net income	$	1,672	$	2,462	$	4,489	$	4,505
Other comprehensive loss:
Decrease in fair value of interest rate swap agreements		(1,022)		(3,550)		(14,980)		(5,572)
Total other comprehensive loss		(1,022)		(3,550)		(14,980)		(5,572)
Comprehensive income (loss)		650		(1,088)		(10,491)		(1,067)
Less: Preferred stock dividends		(1,455)		(1,455)		(2,911)		(2,911)
Less: Comprehensive loss attributable to noncontrolling interest		50		260		928		402
Comprehensive loss attributable to common stockholders	$	(755)	$	(2,283)	$	(12,474)	$	(3,576)

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

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GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Equity

(unaudited and in thousands)

For the Six Months Ended June 30, 2020:


													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		Loss		Equity		Interest		Equity
Balances, December 31, 2019	43,806	$	44	3,105	$	74,959	$	433,330	$	(71,389)	$	(6,674)	$	430,270	$	30,083	$	460,353
Net income	—		—	—		—		—		4,369		—		4,369		120		4,489
Issuance of shares of common stock, net	1,239		1	—		—		13,803		—		—		13,804		—		13,804
LTIP Units and OP Units redeemed for common stock	1,207		1	—		—		15,474		—		—		15,475		(15,475)		—
Change in fair value of interest rate swap agreements	—		—	—		—		—		—		(14,980)		(14,980)		—		(14,980)
Stock-based compensation expense	—		—	—		—		—		—		—		—		1,819		1,819
Dividends to common stockholders ($0.40 per share)	—		—	—		—		—		(18,106)		—		(18,106)		—		(18,106)
Dividends to preferred stockholders ($0.9375 per share)	—		—	—		—		—		(2,911)		—		(2,911)		—		(2,911)
Dividends to noncontrolling interest	—		—	—		—		—		—		—		—		(1,759)		(1,759)
Balances, June 30, 2020	46,252	$	46	3,105	$	74,959	$	462,607	$	(88,037)	$	(21,654)	$	427,921	$	14,788	$	442,709

For the Three Months Ended June 30, 2020:


													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		Loss		Equity		Interest		Equity
Balances, March 31, 2020	44,278	$	44	3,105	$	74,959	$	440,220	$	(78,990)	$	(20,632)	$	415,601	$	23,189	$	438,790
Net income	—		—	—		—		—		1,659		—		1,659		13		1,672
Issuance of shares of common stock, net	1,239		1	—		—		13,803		—		—		13,804		—		13,804
LTIP Units and OP Units redeemed for common stock	735		1	—		—		8,584		—		—		8,585		(8,585)		—
Change in fair value of interest rate swap agreements	—		—	—		—		—		—		(1,022)		(1,022)		—		(1,022)
Stock-based compensation expense	—		—	—		—		—		—		—		—		897		897
Dividends to common stockholders ($0.20 per share)	—		—	—		—		—		(9,250)		—		(9,250)		—		(9,250)
Dividends to preferred stockholders ($0.46875 per share)	—		—	—		—		—		(1,456)		—		(1,456)		—		(1,456)
Dividends to noncontrolling interest	—		—	—		—		—		—		—		—		(726)		(726)
Balances, June 30, 2020	46,252	$	46	3,105	$	74,959	$	462,607	$	(88,037)	$	(21,654)	$	427,921	$	14,788	$	442,709

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

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GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statement of Equity - Continued

(unaudited and in thousands)

For the Six Months Ended June 30, 2019:


													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		Loss		Equity		Interest		Equity
Balances, December 31, 2018	25,944	$	26	3,105	$	74,959	$	243,038	$	(45,007)	$	(3,721)	$	269,295	$	30,455	$	299,750
Net income	—		—	—		—		—		4,343		—		4,343		162		4,505
Issuance of shares of common stock, net	8,652		9	—		—		79,258		—		—		79,267		—		79,267
LTIP Units and OP Units redeemed for common stock	57		—	—		—		576		—		—		576		(576)		—
Change in fair value of interest rate swap agreements	—		—	—		—		—		—		(5,572)		(5,572)		—		(5,572)
Stock-based compensation expense	—		—	—		—		—		—		—		—		1,625		1,625
Dividends to common stockholders	—		—	—		—		—		(13,822)		—		(13,822)		—		(13,822)
Dividends to preferred stockholders	—		—	—		—		—		(2,911)		—		(2,911)		—		(2,911)
Dividends to noncontrolling interest	—		—	—		—		—		—		—		—		(1,745)		(1,745)
OP Units issued to third parties	—		—	—		—		—		—		—		—		506		506
Balances, June 30, 2019	34,653	$	35	3,105	$	74,959	$	322,872	$	(57,397)	$	(9,293)	$	331,176	$	30,427	$	361,603

For the Three Months Ended June 30, 2019:


													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		Loss		Equity		Interest		Equity
Balances, March 31, 2019	34,555	$	35	3,105	$	74,959	$	322,359	$	(51,390)	$	(5,743)	$	340,220	$	30,342	$	370,562
Net income	—		—	—		—		—		2,359		—		2,359		103		2,462
Issuance of shares of common stock, net	98		—	—		—		513		—		—		513		—		513
LTIP Units and OP Units redeemed for common stock	—		—	—		—		—		—		—		—		—		—
Change in fair value of interest rate swap agreements	—		—	—		—		—		—		(3,550)		(3,550)		—		(3,550)
Stock-based compensation expense	—		—	—		—		—		—		—		—		854		854
Dividends to common stockholders	—		—	—		—		—		(6,911)		—		(6,911)		—		(6,911)
Dividends to preferred stockholders	—		—	—		—		—		(1,455)		—		(1,455)		—		(1,455)
Dividends to noncontrolling interest	—		—	—		—		—		—		—		—		(872)		(872)
Balances, June 30, 2019	34,653	$	35	3,105	$	74,959	$	322,872	$	(57,397)	$	(9,293)	$	331,176	$	30,427	$	361,603

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

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GLOBAL MEDICAL REIT INC.

Condensed Consolidated Statements of Cash Flows

(unaudited and in thousands)


	Six Months Ended June 30,
	2020		2019
Operating activities
Net income	$	4,489	$	4,505
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		12,429		8,475
Amortization of acquired lease intangible assets		4,269		2,257
Amortization of above market leases, net		403		405
Amortization of debt issuance costs and other		634		651
Stock-based compensation expense		1,819		1,625
Capitalized preacquisition costs charged to expense		135		—
Reserve for uncollectible receivables		627		—
Other		46		70
Changes in operating assets and liabilities:
Tenant receivables		(1,558)		(1,030)
Deferred assets		(2,921)		(2,479)
Other assets		117		37
Accounts payable and accrued expenses		3,620		(22)
Security deposits and other		(536)		1,729
Accrued management fees due to related party		295		441
Net cash provided by operating activities		23,868		16,664

Investing activities
Purchase of land, buildings, and other tangible and intangible assets and liabilities		(76,057)		(115,472)
Escrow deposits for purchase of properties		500		(1,622)
Loans to related parties		(61)		(113)
Capital expenditures on existing real estate investments		(341)		(193)
Preacquisition costs		-		(74)
Net cash used in investing activities		(75,959)		(117,474)

Financing activities
Net proceeds received from common equity offerings		13,605		79,651
Escrow deposits required by third party lenders		(385)		(144)
Repayment of notes payable		(113)		(68)
Proceeds from Credit Facility		88,700		103,800
Repayment of Credit Facility		(20,850)		(64,600)
Payment of debt issuance costs		(128)		(422)
Dividends paid to common stockholders, and OP Unit and LTIP Unit holders		(19,675)		(13,467)
Dividends paid to preferred stockholders		(2,911)		(2,911)
Net cash provided by financing activities		58,243		101,839
Net increase in cash and cash equivalents and restricted cash		6,152		1,029
Cash and cash equivalents and restricted cash—beginning of period		7,185		4,843
Cash and cash equivalents and restricted cash—end of period	$	13,337	$	5,872

Supplemental cash flow information:
Cash payments for interest	$	7,916	$	7,521

Noncash financing and investing activities:
Accrued dividends payable	$	11,281	$	9,081
Interest rate swap agreements fair value change recognized in other comprehensive loss	$	14,980	$	5,572
LTIP Units and OP Units redeemed for common stock	$	15,475	$	576
CMBS loan assumed in connection with a facility acquisition	$	12,074	$	—
Accrued common stock offering costs	$	70	$	384
Initial recognition of lease liability related to right of use asset	$	—	$	3,143
OP Units issued for property acquisition	$	—	$	506

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

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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 engaged primarily in the acquisition of ~~licensed, state-of-the-art,~~ purpose-built healthcare facilities and the leasing of ~~these~~those facilities to strong ~~clinical operators~~healthcare systems and physician groups with leading market share. The Company is externally managed and advised by Inter-American Management LLC (the “Advisor”), a Delaware limited liability company and affiliate of the Company. ~~ZH International Holdings Limited (formerly known as Heng Fai Enterprises, Ltd.)~~As discussed in Note 11 - “Subsequent Events,” on July 9, 2020, the Company completed a ~~Hong Kong limited liability company that is engaged in real estate development, investments,~~ management and sales, hospitality management and investments, and REIT management, is an 85% owner of the Advisor and the Company’s Chief Executive Office is a 15% owner of the Advisor. ZH international Holdings Limited owns ZH USA, LLC, a related party and the Company’s former (pre initial public offering) majority stockholder.

internalization transaction.

The Company holds its facilities and conducts its operations through a Delaware limited partnership subsidiary named Global Medical REIT L.P. (the “Operating Partnership”). 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, ~~(the “GP”),~~ a Delaware limited liability ~~company, which owns an approximate 0.01% interest in the Operating Partnership.~~company. As of ~~September~~June 30, ~~2017,~~2020, the Company was the ~~97.64%~~93.81% limited partner of the Operating Partnership, with ~~1.82%~~an aggregate of 6.19% of the Operating Partnership owned by holders of long-term incentive plan units (“~~LTIP”~~LTIP Units”) ~~units~~ and ~~0.53% owned by third party holders of~~third-party limited partners who contributed properties or services to the Operating Partnership ~~Units~~in exchange for common limited partnership units (“OP Units”). The Operating Partnership holds the Company’s healthcare facilities through separate wholly-owned Delaware limited liability company subsidiaries that were formed for each healthcare facility acquisition.

~~The Company elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2016.~~

Note 2 – Summary of Significant Accounting Policies

Basis of presentation

The accompanying condensed consolidated financial statements are unaudited and ~~are~~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 ~~accounting principles~~U.S. generally accepted ~~in the United States of America~~accounting principles (“GAAP”) and the rules and regulations of the ~~United States~~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 of 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 ~~fiscal~~ year ended December 31, ~~2016.~~2019. 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, including the Operating Partnership and its ~~wholly-owned subsidiaries, and the interests in the Operating Partnership held by LTIP unit holders and OP Unit holders.~~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~~Units that have been granted to directors, ~~employees~~officers and affiliates of the Company and the OP Units held by third parties. Refer to Note 5 – ~~“Stockholders’ Equity”~~“Equity” and Note 7 – “Stock-Based Compensation” ~~and~~ for additional information regarding the OP Units and LTIP ~~units.~~

Units.

The Company classifies noncontrolling interest as a component of consolidated equity on its Condensed Consolidated Balance Sheets, separate from the Company’s total ~~stockholders’~~ 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~~Units and OP Units ~~held~~ 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.

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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. All of our acquisitions for the six months ended June 30, 2020 and 2019 have been accounted for as asset acquisitions because substantially all of the fair value of the gross assets the Company acquired were concentrated in a single asset or group of similar identifiable assets.

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 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 “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, i.e., the Company recognizes an equivalent increase in revenue (“expense recoveries”) and expense (“operating expenses”).

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 balance as of September 30, 2017 and December 31, 2016 was $2,040,026 and $941,344, respectively. The restricted cash balance as of September 30, 2017 consisted of $337,242 of cash required by a third-party lender to be held by the Company as a reserve for debt service, $1,619,659 inrepresent (1) certain security deposits received from ~~facility~~ tenants at the inception of their ~~leases,~~leases; (2) cash required to be held by a third-party lender as a reserve for debt service; and ~~$83,125 in~~(3) funds held by the Company ~~from certain~~related to tenant reimbursements. The following table provides a reconciliation of ~~its tenants~~the Company’s cash and cash equivalents and restricted cash that sums to the ~~Company collected to pay specific tenant expenses, such as real estate taxes and insurance,~~total of those amounts at the end of the periods presented on the ~~tenant’s behalf. The restricted cash balance as~~Company’s accompanying Condensed Consolidated Statements of ~~December 31, 2016 consisted~~Cash Flows:


	As of June 30,
	2020		2019
Cash and cash equivalents	$	8,392	$	3,216
Restricted cash		4,945		2,656
Total cash and cash equivalents and restricted cash	$	13,337	$	5,872

Table of $383,265 of cash required by a third party lender to be held by the Company as a reserve for debt service, a security deposit of $319,500, and $238,579 in funds held by the Company from certain of its tenants that the Company collected to pay specific tenant expenses, such as real estate taxes and insurance.Contents

Tenant Receivables

The tenant receivable balance as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 was ~~$616,741~~$5,888 and ~~$212,435,~~$4,957, respectively. The balance as of ~~September~~June 30, ~~2017~~2020 consisted of ~~$113,400~~$2,272 in funds owed from the Company’s tenants for rent that the Company had earned but had not yet received, ~~and $503,341 in funds owed by certain~~$1,221 of loans that were made to two of the Company’s tenants, ~~for amounts the Company collects to pay specific~~$2,371 of tenant ~~expenses, such~~reimbursements, as ~~real estate taxes and insurance, on the tenants’ behalf.~~well as $24 in miscellaneous receivables. The balance as of December 31, ~~2016~~2019 consisted ~~primarily~~ of ~~$50,922~~$1,428 in funds owed from the Company’s tenants for rent that the Company had earned but had not yet received, ~~and $161,513 in funds owed by certain~~$1,062 of loans that were made to two of the Company’s tenants, $2,342 of tenant reimbursements, as well as $125 in miscellaneous receivables.

The Company adopted the provisions of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)” (“ASU 2016-03”) effective January 1, 2020. Receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of these receivables should be accounted for ~~amounts the Company collects to pay specific tenant expenses, such as real estate taxes and insurance,~~in accordance with ASC Topic 842 “Leases” (“ASC Topic 842”). The adoption of ASU 2016-03 did not have a material impact on the ~~tenants’ behalf.~~Company’s condensed consolidated financial statements or related disclosures.

The Company assesses the likelihood of losses resulting from tenant defaults, or the inability of tenants to make contractual rent and tenant recovery payments 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, a portfolio level reserve is established on those leases that are probable of collection to ensure that the tenant lease receivables are not overstated.

Escrow Deposits

The escrow balance as of June 30, 2020 and December 31, 2019 was $3,301 and $3,417, 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 and the Dumfries Loan, as hereinafter defined. ~~The escrow balance as of September 30, 2017 and December 31, 2016 was $1,297,665 and $1,212,177, respectively~~

Deferred Assets

The deferred assets balance as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 was ~~$2,923,494~~$17,433 and ~~$704,537,~~$14,512, respectively. The balance as of ~~September~~June 30, ~~2017~~2020 consisted of ~~$2,776,735~~$17,328 in deferred rent receivables resulting from the recognition of revenue from leases with fixed annual rental escalations on a ~~straight line~~straight-line basis and ~~the balance~~$105 of ~~$146,759 represented~~ other deferred costs. The balance as of December 31, ~~2016 balance of $704,537~~2019 consisted of $14,204 in deferred rent ~~receivables.~~

receivables resulting from the recognition of revenue from leases with fixed annual rental escalations on a straight-line basis and $308 of other deferred costs.

Other Assets

Other assets primarily consists of capitalized costs related to the Company’s property acquisitions. Costs that are incurred prior to the completion of the acquisition of a property are capitalized if all of the following conditions are met: (a) the costs are directly identifiable with the specific property, (b) the costs would be capitalized if the property were already acquired, and (c) acquisition of the property is probable. These costs are included with the value of the acquired property upon completion of the acquisition. The costs are charged to expense when it is probable that the acquisition will not be completed. The other assets balance ~~was $160,214~~ as of ~~September~~June 30, ~~2017, which~~2020 and December 31, 2019 was $3,587 and $3,593, respectively. The balance as of June 30, 2020 consisted of ~~$138,324~~$3,044 for a right of use asset (refer to Note 8 – “Leases” for additional details), $365 in capitalized preacquisition costs, ~~related to property acquisitions~~ and ~~$21,890~~$178 in a prepaid asset. The balance as of December 31, ~~2016 was $140,374,~~2019 consisted of $3,077 for a right of use asset, $223 in capitalized preacquisition costs, and ~~consisted solely of capitalized costs related to property acquisitions.~~

$293 in a prepaid asset.

Security Deposits and Other

The security deposits and other liability balance as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 was ~~$2,206,145~~$5,814 and ~~$719,592,~~$6,351, respectively. The balance as of ~~September~~June 30, ~~2017~~2020 consisted of security deposits of ~~$1,619,679~~$4,533 and a tenant impound liability of ~~$586,466~~$1,281 related to amounts owed for specific tenant expenses, such as real estate taxes and insurance. The balance as of December 31, ~~2016~~2019 consisted of security deposits of ~~$319,500~~$4,968 and a tenant impound liability of ~~$400,092~~$1,383 related to amounts owed for specific tenant expenses, such as real estate taxes and insurance.

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Derivative Instruments - Interest Rate Swaps

~~Net Income (Loss) Attributable~~As of June 30, 2020 and December 31, 2019, the Company’s liability balance related to ~~Common Stockholders Per Share~~

interest rate swap derivative instruments that were designated as cash flow hedges of interest rate risk was $21,495 and $6,491, 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 three counterparties in exchange for the Company making fixed-rate payments over the life of the agreement. The Company ~~uses~~accounts for derivative instruments in accordance with the ~~treasury stock method~~provisions of ASC Topic 815, “Derivatives and Hedging.” Refer to ~~compute diluted net income or loss attributable~~Note 4 – “Credit Facility, Notes Payable and Derivative Instruments” for additional details.

Recent Accounting Pronouncements

Lease Modifications

Due to ~~common stockholders per share. Basic net income or loss per share of common stock is computed by dividing net income or loss attributable to common stockholders~~the business disruptions and challenges severely affecting the global economy caused by the ~~weighted average number~~COVID-19 pandemic, many lessors may be required to provide rent deferrals and other lease concessions to lessees. While the lease modification guidance in ASC Topic 842 addresses routine changes to lease terms resulting from negotiations between the lessee and the lessor, this guidance did not contemplate concessions being so rapidly executed to address the sudden liquidity constraints of ~~shares~~some lessees arising from the COVID-19 pandemic. In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of ~~common stock outstanding~~lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease-by-lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows the Company, if certain criteria have been met, to bypass the lease-by-lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Company has elected to apply such relief and will avail itself of the election to avoid performing a lease-by-lease analysis for the ~~period. Diluted net income~~lease concessions that were (1) granted as relief due to the COVID-19 pandemic and (2) result in the cash flows remaining substantially the same or ~~loss per share of common stock is computed by dividing net income or loss attributable to common stockholders by~~less. The Lease Modification Q&A has no material impact on the sum of the weighted average number of shares of common stock outstanding plus any potential dilutive shares for the period. The Company considered the requirements of the two-class method when computing earnings per share and determined that there would be no difference in its reported results if the two-class method was utilized.

~~- 7 -~~

~~Reclassification~~

~~The Company reclassified the line item “Acquired Lease Intangible Assets, Net” on its Consolidated Balance Sheets~~Company’s condensed consolidated financial statements as of ~~December 31, 2016, to present the gross intangible assets acquired as part of its business combination transactions as a separate line item within the category “Investment in Real Estate”~~ and also reclassified the related accumulated amortization balance on the intangible assets acquired to the line item “Accumulated Depreciation and Amortization.” This reclassification was made to conform to the Company’s presentation of those balances as of September 30, 2017.

~~The Company’s Consolidated Statements of Operations~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020. However, its future impact on the Company is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and ~~2016 includes~~ the ~~expense line item “Operating Expenses” which primarily includes both reimbursable property operating expenses~~elections made by the Company at the time of entering such concessions.

Reference Rate Reform

During the six months ended June 30, 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the six months ended June 30, 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company ~~pays on behalf~~continues to evaluate the impact of ~~certain of its tenants, including real estate taxes~~the guidance and ~~insurance, non-reimbursable property operating expenses, and~~may apply other operating expenses. Reimbursements of tenant operating expenses are recorded on a gross basis (i.e., the Company recognizes an equivalent increase in revenue (expense recoveries) and expense (operating expenses)). Prior to the third quarter of 2017, the Company recorded property operating expenseselections as applicable as additional changes in the “General and Administrative” expense line item. Accordingly for prior periods these expenses have been reclassified from the “General and Administrative” expense line item into the “Operating Expenses” line item within the Company’s Consolidated Statements of Operations.market occur.

Note 3 – Property Portfolio

Summary of Properties Acquired

During the Six Months Ended June 30, 2020

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 the Company completed 165 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.

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Table of Contents

A rollforward of the gross investment in land, building, improvements, and ~~improvements~~acquired lease intangible assets as of ~~September~~June 30, ~~2017,~~2020 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

^{1
Site Tenant Acquired Lease Gross Investment in
Land Building Improvements Improvements Intangible Assets Real Estate
Balances as of December 31, 2019 $ 95,381 $ 693,533 $ 9,912 $ 33,909 $ 72,794 $ 905,529
Facility Acquired – Date Acquired:
High Point – 2/13/20 1,749 20,367 440 869 1,656 25,081
Clinton – 2/27/20 664 6,551 342 1,578 2,484 11,619
West Allis – 3/4/20 974 7,687 137 98 461 9,357
Grand Rapids – 3/20/20 2,947 17,341 470 450 1,582 22,790
Dumfries– 4/27/20 2,597 10,047 289 4,815 4,292 22,040
Capitalized costs⁽¹⁾ 4 281 3 172 — 460
Total Additions^: 8,935 62,274 1,681 7,982 10,475 91,347
Balances as of June 30, 2020 $ 104,316 $ 755,807 $ 11,593 $ 41,891 $ 83,269 $ 996,876}

⁽¹⁾The 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.

Represents capital projects that were completed and placed in service during the six months ended June 30, 2020 related to the Company’s existing facilities.

Depreciation expense was ~~$2,175,668~~$6,593 and ~~$5,372,308~~$12,429 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, respectively, and ~~$585,449~~$4,608 and ~~$1,528,281~~$8,475 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, respectively.

~~- 8 -~~

~~A summary description~~As of June 30, 2020, the Company had aggregate capital improvement commitments and obligations to improve, expand, and maintain the Company’s existing facilities of approximately $19,400. 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 ~~four~~Company’s leases, capital improvement obligations in the next twelve months could total up to approximately $7,300.

The following is a summary of the acquisitions ~~that were~~ completed during the ~~three~~six months ended ~~September~~June 30, ~~2017 is as follows:~~2020.

~~Austin~~High Point 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,~~February 13, 2020, the Company purchased a medical office building located in ~~Germantown, Tennessee~~High Point, North Carolina (the ~~“Germantown~~“High Point Facility”~~) from Brierbrook Partners, LLC (“Brierbrook”~~) for a purchase price of ~~$15.94 million and~~approximately $25.1 million. Upon closing, the Company assumed ~~Brierbrook’s interest, as lessor, in three~~the existing ~~absolute triple-net leases~~lease of the ~~Germantown Facility.~~

~~Accounting Treatment~~

~~The Company accounted for~~High Point Facility with Wake Forest Health Network, LLC, as tenant. At acquisition, the ~~acquisition~~lease had approximately three years remaining in the current term, exclusive of ~~the Germantown Facility as~~ a ~~business combination in accordance with the provisions of ASC Topic 805 - Business Combinations.~~tenant renewal option. The following table presents the ~~preliminary purchase price allocation for~~details of the tangible and intangible assets acquired ~~as part~~and liabilities assumed:


Land and site improvements	$	2,189
Building and tenant improvements		21,236
In-place leases		1,207
Leasing costs		449
Total purchase price	$	25,081

-13-

Table of ~~the acquisition:~~Contents

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~~Clinton Facility

On ~~August 18, 2017,~~February 27, 2020, the Company purchased a medical office building located in ~~Lubbock, Texas~~Clinton, Iowa (the ~~“Lubbock~~“Clinton Facility”) ~~from Cardiac Partners Development, LP,~~ for a purchase price of ~~$8.2 million and entered into a new triple-net~~approximately $11.6 million. Upon closing, the Company assumed the existing lease of the ~~Lubbock~~Clinton Facility with ~~Lubbock Heart Hospital, LLC,~~Mercy Medical Center – Clinton, Inc. d/b/a MercyOne Clinton Medical Center, as tenant.

~~- 9 -~~

~~Accounting Treatment~~

~~The Company accounted for~~ At acquisition, the ~~acquisition~~lease had approximately four years remaining in the initial term, exclusive of ~~the Lubbock Facility as~~ a ~~business combination in accordance with the provisions of ASC Topic 805 - Business Combinations.~~tenant renewal option. The following table presents the ~~preliminary purchase price allocation for~~details of the tangible and intangible assets acquired ~~as part of the acquisition:~~and liabilities assumed:


Land and site improvements	$	1,566,487	$	1,006
Building and tenant improvements		5,725,355		8,129
In-place leases		414,189		2,115
Leasing costs		493,969		369
Total purchase price	$	8,200,000	$	11,619

~~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~~West Allis Facility ~~(Ballville Property)~~

On ~~August 15, 2017,~~March 4, 2020, the Company purchased a medical office building located in ~~Ballville, Ohio~~West Allis, Wisconsin (the ~~“Ballville Property”~~“West Allis Facility”) ~~from NOMS Property, LLC,~~ for a purchase price of ~~$1.3~~approximately$9.1 million. Upon closing, the Company assumed the existing lease of the West Allis Facility with Columbia St. Mary’s Hospital Milwaukee, Inc., d/b/a Ascension Columbia St. Mary’s Hospital Milwaukee, as tenant. At acquisition, the lease had approximately four years remaining in the initial term, exclusive of renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	1,111
Building and tenant improvements		7,785
In-place leases		263
Leasing costs		198
Below-market lease intangibles		(264)
Total purchase price	$	9,093

Grand Rapids Facilities

On March 20, 2020, the Company purchased a four-building medical office building portfolio located in the greater Grand Rapids, Michigan area (the “Grand Rapids Facilities”) for a total purchase price of approximately $22.7 million. Upon closing, the Company assumed 11 existing leases at the Grand Rapids Facilities (the “Grand Rapids Leases”). At acquisition, the Grand Rapids Leases had a weighted-average remaining term of five years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	3,417
Building and tenant improvements		17,791
In-place leases		761
Above-market lease intangibles		685
Leasing costs		136
Below-market lease intangibles		(125)
Total purchase price	$	22,665

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Dumfries Facility

On April 27, 2020, the Company purchased a medical office building located in Dumfries, Virginia (the “Dumfries Facility”) for a total purchase price of approximately $19.6 million. Upon closing, the Company assumed the existing lease at the Dumfries Facility (the “Dumfries Lease”). At acquisition, the Dumfries Lease had approximately nine and a half years left in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	2,886
Building and tenant improvements		14,862
In-place leases		3,255
Leasing costs		1,037
Below-market lease intangibles		(2,419)
Total purchase price	$	19,621

In connection with this acquisition, the Company assumed an existing $12.1 million commercial mortgage-backed securities (“CMBS”) loan with an interest rate of 4.68% and a term of four years.

Summary of Properties Acquired During the Year Ended December 31, 2019

During the year ended December 31, 2019 the Company completed 18 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.

A rollforward of the gross investment in land, building, improvements, and acquired lease intangible assets as of December 31, 2019 resulting from these acquisitions is as follows:


					Site		Tenant		Acquired Lease		Gross Investment in
	Land		Building		Improvements		Improvements		Intangible Assets		Real Estate
Balances as of December 31, 2018	$	63,710	$	518,451	$	6,880	$	15,357	$	43,152	$	647,550
Facility Acquired – Date Acquired:
Zachary – 2/28/19		—		3,336		103		409		835		4,683
Gilbert and Chandler – 3/19/19		4,616		11,643		—		—		—		16,259
Las Vegas – 4/15/19		2,479		15,277		244		2,205		2,297		22,502
Oklahoma Northwest – 4/15/19		2,364		19,501		143		3,044		3,155		28,207
Mishawaka – 4/15/19		1,924		10,084		74		1,798		2,223		16,103
Surprise – 4/15/19		1,738		18,737		228		4,119		3,860		28,682
San Marcos – 7/12/19		2,322		6,934		126		404		2,188		11,974
Lansing – 8/1/19		1,202		7,681		185		667		1,633		11,368
Bannockburn – 8/5/19		763		3,566		132		1,134		1,382		6,977
Aurora – 8/6/19		1,521		7,446		308		603		2,679		12,557
Livonia – 8/14/19		980		7,629		201		442		1,340		10,592
Gilbert – 8/23/19		2,408		2,027		62		362		733		5,592
Morgantown – 9/26/19		883		5,286		373		506		902		7,950
Beaumont – 10/1/19		3,022		24,836		399		1,036		4,446		33,739
Bastrop – 10/25/19		1,975		8,436		64		276		1,314		12,065
Panama City – 10/31/19		1,559		8,682		220		1,036		1,479		12,976
Jacksonville – 11/15/19		1,023		7,846		—		—		—		8,869
Greenwood – 12/17/19		892		4,956		—		—		—		5,848
ASC Topic 842 Reclassification		—		—		—		—		(824)		(824)
Capitalized costs⁽¹⁾		—		1,179		170		511		—		1,860
Total Additions:		31,671		175,082		3,032		18,552		29,642		257,979
Balances as of December 31, 2019	$	95,381	$	693,533	$	9,912	$	33,909	$	72,794	$	905,529

⁽¹⁾	Represents capital projects that were completed and placed in service during the year ended December 31, 2019 related to the Company’s existing facilities.

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Table of Contents

The following is a summary of the acquisitions completed during the year ended December 31, 2019.

Zachary Facility

On February 28, 2019, the Company assumed the following leasehold interests in the real property located in Zachary, Louisiana for a purchase price of approximately $4.6 million: (i) the interest, as ground lessee, in an existing ground lease of the facility, with approximately 46 years remaining in the initial term with no extension options; and (ii) the interest, as landlord, in an existing lease of the facility with LTAC Hospital of Feliciana, LLC, as tenant. At acquisition, the lease had approximately 16 years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	103
Building and tenant improvements		3,745
In-place leases		305
Above-market lease intangibles		117
Leasing costs		413
Below-market lease intangibles		(34)
Total purchase price	$	4,649

Gilbert and Chandler Facilities

On March 19, 2019, the Company purchased the following facilities located in Gilbert, Arizona and Chandler, Arizona for a total purchase price of approximately $16.3 million: (i) two medical office buildings located in Gilbert, Arizona and (ii) two medical office suites located in Chandler, Arizona (collectively, the “Gilbert and Chandler Facilities”). Upon the closing of the acquisition, the Company assumed the seller’s interest, as lessor, in two existing leases and entered into ~~an amendment~~three new leases, as lessor, at the Gilbert and Chandler Facilities. At acquisition, the Gilbert and Chandler leases had a weighted average remaining lease term of 10.5 years, exclusive of tenant renewal options.

IRF Portfolio

On April 15, 2019, the Company purchased four in-patient rehabilitation facilities located in Las Vegas, Nevada; Surprise, Arizona; Oklahoma City, Oklahoma; and Mishawaka, Indiana (collectively, the “IRF Portfolio”) for a total purchase price of approximately $94.6 million. Upon the closing of the ~~existing triple-net master lease dated October 7, 2016 (the “NOMS Lease”), between~~acquisition, the Company assumed the sellers’ interest, as lessor, in four existing leases at the properties (collectively, the “IRF Portfolio Leases”) with (i) Encompass Health (Las Vegas, Nevada facility); (ii) a joint venture between Cobalt Rehabilitation and ~~Northern Ohio Medical Specialists, LLC (“NOMS”~~Tenet Healthcare (the Surprise, Arizona facility); (iii) a joint venture between Mercy Health and Kindred Healthcare (the Oklahoma City, Oklahoma facility); and (iv) St. Joseph’s Health System (the Mishawaka, Indiana facility). At acquisition, the IRF Portfolio leases had a weighted average remaining lease term of approximately 8.3 years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


					Oklahoma
	Las Vegas		Surprise		City		Mishawaka
Land and site improvements	$	2,723	$	1,966	$	2,507	$	1,998
Building and tenant improvements		17,482		22,856		22,545		11,882
In-place leases		1,778		1,845		1,890		1,465
Above-market lease intangibles		—		938		367		236
Leasing costs		519		1,077		898		522
Below-market lease intangibles		(863)		—		—		—
Total purchase price	$	21,639	$	28,682	$	28,207	$	16,103

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San Marcos Facility

On July 12, 2019, the Company purchased a medical office building located in San Marcos, California (the “San Marcos Facility”) for a purchase price of approximately $12.0 million. Upon closing, the Company assumed the existing lease of the San Marcos Facility with California Cancer Associates for Research and Excellence, Inc., as tenant. At acquisition, the lease had eight years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	2,448
Building and tenant improvements		7,338
In-place leases		698
Above-market lease intangibles		1,101
Leasing costs		389
Total purchase price	$	11,974

Lansing Facilities

On August 1, 2019, the Company purchased the following real property and buildings thereon located in Lansing, Michigan for a total purchase price of approximately $11.1 million: (i) 3390 East Jolly Road; (ii) 3955 Patient Care Drive; and (iii) 3400 East Jolly Road (collectively, the “Lansing Facilities”). Upon closing, the Company assumed sellers’ interest, as lessor, in four existing leases and entered into two new leases at the Lansing Facilities (the “Lansing Leases”). At acquisition, the Lansing Leases had a weighted-average remaining term of 8.5 years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	1,387
Building and tenant improvements		8,348
In-place leases		953
Above-market lease intangibles		130
Leasing costs		550
Below-market lease intangibles		(248)
Total purchase price	$	11,120

Bannockburn Facility

On August 5, 2019, the Company purchased an office building located in Bannockburn, Illinois (the “Bannockburn Facility”) for a purchase price of approximately $6.8 million. Upon closing, the Company assumed seller’s interest, as lessor, in 14 existing leases at the Bannockburn Facility (the “Bannockburn Leases”). At acquisition, the Bannockburn Leases had a weighted-average remaining term of 6.3 years, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	895
Building and tenant improvements		4,700
In-place leases		796
Above-market lease intangibles		250
Leasing costs		336
Below-market lease intangibles		(144)
Total purchase price	$	6,833

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Aurora Facility

On August 6, 2019, the Company purchased a medical office building located in Aurora, Illinois (the “Aurora Facility”) for a purchase price of approximately $12.6 million. Upon closing, the Company assumed the existing lease of the Aurora Facility with Dreyer Clinic Inc., as tenant ~~whereby~~(the “Dreyer Lease”). At acquisition, the ~~Ballville Property was added to~~Dreyer Lease had approximately six years remaining in 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~~

initial term, exclusive of tenant renewal options. The following table ~~illustrates~~presents the ~~unaudited pro forma consolidated revenue, net income (loss),~~details of the tangible and ~~income (loss) per share as if the facilities that~~intangible assets acquired and liabilities assumed:


Land and site improvements	$	1,829
Building and tenant improvements		8,049
In-place leases		1,417
Above-market lease intangibles		861
Leasing costs		401
Total purchase price	$	12,557

Livonia Facility

On August 14, 2019, the Company ~~acquired during~~purchased a medical office building located in Livonia, Michigan (the “Livonia Facility”) for a purchase price of approximately $10.4 million. Upon closing, the ~~nine months ended September 30, 2017 that were accounted for as business combinations~~Company assumed 10 existing leases at the Livonia Facility (the ~~Austin, Germantown, Lubbock, Flower Mound, Brockport, OCOM, Clermont and Lewisburg facilities)~~“Livonia Leases”). At acquisition, the Livonia Leases had ~~occurred on January 1, 2016.~~a weighted-average remaining term of 3.2 years, exclusive of tenant renewal options. The following ~~summary~~table presents the details of ~~pro forma financial information~~the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	1,181
Building and tenant improvements		8,071
In-place leases		1,252
Above-market lease intangibles		53
Leasing costs		35
Below-market lease intangibles		(236)
Total purchase price	$	10,356

Gilbert Facility

On August 23, 2019, the Company purchased certain condominium units within two medical office buildings located in Gilbert, Arizona (the “Gilbert Facility”) for a total purchase price of approximately $5.6 million. Upon closing, the Company leased the Gilbert Facility to Covenant Surgical Partners, Inc., a Delaware corporation (the “Covenant Lease”). At acquisition, the Covenant Lease had approximately 10 years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:


Land and site improvements	$	2,470
Building and tenant improvements		2,389
In-place leases		121
Above-market lease intangibles		300
Leasing costs		312
Total purchase price	$	5,592

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Morgantown Facility

On September 26, 2019, the Company purchased a parcel of land and an office building that is being constructed thereon located in Morgantown, West Virginia (the “Morgantown Facility”) for a total purchase price of approximately $8.0 million. Upon closing, the ~~three~~Company assumed the existing lease of the Morgantown Facility with Urgent Care MSO, LLC, as tenant (the “Urgent Care Lease”). At acquisition, the Urgent Care Lease had approximately ten years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and ~~nine months ended September 30, 2017~~intangible assets acquired and ~~2016:~~liabilities assumed:

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


Land and site improvements	$	1,256
Building and tenant improvements		5,792
In-place leases		457
Leasing costs		445
Total purchase price	$	7,950

Beaumont Facility

On October 1, 2019, the Company purchased a medical office building located in Beaumont, Texas (the “Beaumont Facility”) for a total purchase price of approximately $33.7 million. Upon closing, the Company assumed the existing lease of the Beaumont Facility with The Medical Center of Southeast Texas, LP, as tenant (the “Medical Center Lease”). At acquisition, the Medical Center Lease had 10 years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

$
3,421
Building and tenant improvements

25,872
In-place leases

3,304
Leasing costs

1,142
Total purchase price

$
33,739

Bastrop Facility
On October 25, 2019, the Company purchased a medical emergency center located in Bastrop, Texas (the “Bastrop Facility”) for a total purchase price of approximately $12.1 million. Upon closing, the Company assumed the existing lease of the Bastrop Facility with St. David’s Healthcare Partnership, L.P., LLP, as tenant (the “St. David’s Lease”). At acquisition, the St. David’s Lease had approximately five years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

$
2,039
Building and tenant improvements

8,712
In-place leases

990
Leasing costs

324
Total purchase price

$
12,065

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Panama City Facilities
On October 31, 2019, the Company purchased: (i) a medical office building located in Panama City, Florida (the “Panama City Facility”); (ii) a medical office building located in Panama City Beach, Florida (the “PCB Facility”); and (iii) a medical office building located in Chipley, Florida (the “Chipley Facility”) for a total purchase price of approximately $13.0 million. Upon closing, the Company assumed the existing leases with SCP Eye Care Services, LLC, as tenant (the “SCP Leases”), at the Panama City Facility, the PCB Facility and the Chipley Facility. At acquisition, the SCP Leases had approximately 15 years remaining in the initial term, exclusive of tenant renewal options. The following table presents the details of the tangible and intangible assets acquired and liabilities assumed:

Land and site improvements

$
1,779
Building and tenant improvements

9,718
In-place leases

405
Leasing costs

1,074
Total purchase price

$
12,976

Jacksonville Facilities
On November 15, 2019, the Company purchased a condominium unit located in Ponte Vedra, Florida (the “Ponte Vedra Facility”) and a medical office building located in Jacksonville, Florida (the “Riverside Facility”) for a total purchase price of approximately $8.9 million. Upon closing, the Company entered into new leases of the Ponte Vedra Facility and the Riverside Facility to Southeast Orthopedic Specialists, Inc., as tenant, with each lease having an initial term of 15 years, exclusive of tenant renewal options. The following table presents the details of the tangible assets acquired:

Land and site improvements

$
1,023
Building and tenant improvements

7,846
Total purchase price

$
8,869

Greenwood Facility
On December 17, 2019, the Company purchased a medical office building located in Greenwood, Indiana (the “Greenwood Facility”) for a purchase price of approximately $5.8 million. Upon closing, the Company assumed the existing leases of the Greenwood Facility with (i) Indiana Eye Clinic, LLC, as tenant, (ii) Glasshouse Optical, Inc., as tenant, and (iii) The Ambulatory Surgery Center at the Indiana Eye Clinic, LLC, as tenant. At acquisition, each lease had approximately 13 years remaining in the initial terms, exclusive of tenant renewal options. The following table presents the details of the tangible assets acquired:

Land and site improvements

$
892
Building and tenant improvements

4,956
Total purchase price

$
5,848

Intangible Assets and Liabilities

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

	As of September 30, 2017
	Cost		Accumulated Amortization			Net

								As of June 30, 2020
										Accumulated
								Cost		Amortization		Net
Assets
In-place leases	$	14,590,650	$	(1,056,983	)	$	13,533,667	$	47,031	$	(10,847)	$	36,184
Above market ground lease		487,978		(3,972	)		484,006
Above market leases		4,363,022		(73,911	)		4,289,111		12,932		(3,144)		9,788
Leasing costs		7,866,982		(311,734	)		7,555,248		23,306		(4,731)		18,575
	$	27,308,632	$	(1,446,600	)	$	25,862,032

Liabilities
								$	83,269	$	(18,722)	$	64,547
Liability
Below market leases	$	1,145,030	$	(64,907	)	$	1,080,123	$	6,670	$	(1,072)	$	5,598

~~- 10 -~~

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


	As of December 31, 2019
			Accumulated
	Cost		Amortization		Net
Assets
In-place leases	$	39,429	$	(7,851)	$	31,578
Above market leases		12,246		(2,366)		9,880
Leasing costs		21,119		(3,458)		17,661
	$	72,794	$	(13,675)	$	59,119
Liability
Below market leases	$	3,861	$	(697)	$	3,164

As of December 31, 2016
Cost
Accumulated
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.amortization:

Three Months Ended
September 30, 2017 Nine Months Ended
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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Amortization expense related to in-place leases	$	1,663	$	852	$	2,996	$	1,529
Amortization expense related to leasing costs	$	685	$	403	$	1,273	$	728
Decrease in rental revenue related to above market leases	$	403	$	279	$	778	$	552
Increase in rental revenue related to below market leases	$	247	$	89	$	375	$	147

As of ~~September~~June 30, ~~2017,~~2020, scheduled future aggregate net amortization of the acquired lease intangible assets and liabilities for each ~~fiscal~~ year ended December 31 ~~are~~is 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


	Net Decrease		Net Increase
	in Revenue		in Expenses
2020 (six months remaining)	$	(220)	$	4,848
2021		(444)		9,077
2022		(462)		8,654
2023		(496)		7,740
2024		(302)		6,444
Thereafter		(2,266)		17,996
Total	$	(4,190)	$	54,759

As of ~~September~~June 30, ~~2017,~~2020 the weighted average amortization ~~period~~periods for asset lease intangibles and liability lease intangibles were ~~8.12~~5.71 years and ~~8.32~~4.77 years, respectively.

Note 4 ––Credit Facility, Notes Payable ~~Related to Acquisitions~~ and ~~Revolving~~ Derivative Instruments

Credit Facility

The Company, the Operating Partnership, as borrower, and certain of its subsidiaries (such subsidiaries, the “Subsidiary Guarantors”) are parties to a $500 million syndicated credit facility with BMO Harris Bank N.A. (“BMO”), as administrative agent (the “Credit Facility”). The Credit Facility consists of a $300 million term-loan component (the “Term Loan”) and a $200 million revolver component (the “Revolver”). The Credit Facility also contains a $150 million accordion. The term of the Company’s Credit Facility expires in August 2022, subject to a one-year extension option. Amounts outstanding under the Credit Facility bear interest at a floating rate that is based on LIBOR plus a specified margin based on the Company’s leverage.

~~Summary~~The Subsidiary Guarantors and the Company are guarantors of the obligations under the Credit Facility. The amount available to borrow from time to time under the Credit Facility is limited according to a quarterly borrowing base valuation of certain properties owned by the Subsidiary Guarantors.

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The Operating Partnership is subject to a number of financial covenants under its Credit Facility, including, among other things, (i) a maximum consolidated leverage ratio as of the end of each fiscal quarter of less than 0.60:1.00, (ii) a minimum fixed charge coverage ratio of 1.50:1.00, (iii) a minimum net worth of $203.8 million plus 75% of all net proceeds raised through equity offerings subsequent to March 31, 2018 and (iv) a ratio of total secured recourse debt to total asset value of not greater than 0.10:1.00. Additionally, beginning at the end of fourth quarter of 2020, the Company’s distributions to common stockholders will be limited to an amount equal to 95% of its AFFO. As of June 30, 2020, the Company was in compliance with all of the financial and non-financial covenants contained in the Credit Facility.

During the six months ended June 30, 2020, the Company borrowed $88,700 under the Credit Facility and repaid $20,850, for a net amount borrowed of $67,850. During the six months ended June 30, 2019, the Company borrowed $103,800 under the Credit Facility and repaid $64,600 for a net amount borrowed of $39,200. Interest expense incurred on the Credit Facility was $3,476 and $7,061, for the three and six months ended June 30, 2020, respectively, and $3,313 and $6,552 for the three and six months ended June 30, 2019, respectively.

As of June 30, 2020 and December 31, 2019, the Company had the following outstanding borrowings under the Credit Facility:


	June 30, 2020		December 31, 2019
Revolver	$	119,200	$	51,350
Term Loan		300,000		300,000
Less: Unamortized debt issuance costs		(3,350)		(3,832)
Credit Facility, net	$	415,850	$	347,518

Costs incurred related to the Credit Facility, net of accumulated amortization, are netted against the Company’s “Credit Facility, net of unamortized debt issuance costs” balance in the accompanying Condensed Consolidated Balance Sheets. The Company paid $59 and $422 related to modifications to the Credit Facility as well as fees related to adding properties to the borrowing base during the six months ended June 30, 2020 and 2019, respectively. Amortization expense incurred was $272 and $541 for the three and six months ended June 30, 2020, respectively, and $291 and $560 for the three and six months ended June 30, 2019, respectively, and is included in the “Interest Expense” line item in the accompanying Condensed Consolidated Statements of Operations.

In July 2017, the Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced its intention to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee (the “ARRC”), which identified the Secured Overnight Financing Rate (the “SOFR”) as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. The Credit Facility provides that, on or about the LIBOR cessation date (subject to an early opt-in election), LIBOR shall be replaced as a benchmark rate in the Credit Facility with a new benchmark rate to be agreed upon by the Company and BMO, with such adjustments to cause the new benchmark rate to be economically equivalent to LIBOR. The Company is not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets.

The Company has interest rate swap agreements that are indexed to LIBOR and is monitoring and evaluating the related risks. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation with the respective counterparty.

If a contract is not transitioned to an alternative rate and LIBOR is discontinued, the impact on our interest rate swap agreements is likely to vary by agreement. If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected.

While the Company expects LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and potentially magnified.

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Notes Payable, ~~Related to Acquisitions,~~ Net of Debt ~~Discount~~

Issuance Costs

The Company’s notes payable, ~~related to acquisitions,~~ net, includes ~~two~~three loans: (1) the Dumfries Loan, (2) the Cantor Loan, and ~~(2)~~(3) the West Mifflin Note, described in detail below. The following table sets forth the ~~aggregate~~ balances of these loans as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016.~~2019.

September 30, 2017 December 31, 2016
Notes payable related to acquisitions, gross $ 39,474,900 $ 39,474,900
Less: Unamortized debt discount (963,184 ) (1,061,602 )
Notes payable related to acquisitions, net $ 38,511,716 $ 38,413,298


	June 30, 2020		December 31, 2019
Notes payable, gross	$	51,549	$	39,475
Less: Unamortized debt issuance costs		(668)		(667)
Cumulative principal repayments		(271)		(158)
Notes payable, net	$	50,610	$	38,650

~~- 11 -~~

Costs incurred related to securing the Company’s fixed-rate debt instruments have been capitalized as a debt discount, net of accumulated amortization, and are netted against the Company’s Notes Payable balance in the accompanying Consolidated Balance Sheets. Amortization expense incurred related to the debt ~~discount was $32,806~~issuance costs $35 and ~~$98,418~~$68 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, respectively, and ~~$62,604~~$33 and ~~$215,449~~$66 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, respectively, and is included in the “Interest Expense” line item in the accompanying Condensed Consolidated Statements of Operations.

Dumfries Loan

On April 27, 2020, in connection with its acquisition of the Dumfries Facility, the Company, through its wholly-owned subsidiary GMR Dumfries LLC, assumed a CMBS loan with a principal amount of $12,074 (“the Dumfries Loan”). The Dumfries Loan has an annual interest rate of 4.68% and matures on June 1, 2024 with principal and interest payable monthly based on a ten year amortization schedule. The Company, at its option, may prepay the loan, subject to a prepayment premium. The Company made principal payments of $43 during the three and six months ended June 30, 2020. The loan balance as of June 30, 2020 was $12,031. Interest expense incurred on this loan was $46 for the three and six months ended June 30, 2020.

As of June 30, 2020, scheduled principal payments due for each year ended December 31 were as follows:

2020 (six months remaining)

$
132
2021

275
2022

288
2023

302
2024

11,034
Total

$
12,031

Cantor Loan

On March 31, 2016, ~~the Company,~~ through certain of its wholly owned subsidiaries (the “GMR Loan Subsidiaries”), the Company entered into a ~~$32,097,400 portfolio commercial mortgage-backed securities~~$32,097 CMBS loan (the “Cantor Loan”) ~~with Cantor Commercial Real Estate Lending, LP (“CCRE”)~~. The subsidiaries are GMR Melbourne, LLC, GMR Westland, LLC, GMR Memphis, LLC, and GMR Plano, LLC (“GMR Loan Subsidiaries”). The Cantor Loan has cross-default and cross-collateral terms. The Company used the proceeds of the Cantor Loan to acquire the Marina Towers (Melbourne, FL) and the Surgical Institute of Michigan (Westland, MI) properties and to refinance the Star Medical (Plano, TX) assets by paying off the existing principal amount of the loan with East West bank in the amount of $9,223,500.

The Cantor Loan has a maturity date of April 6, 2026 and ~~accrues~~an annual interest atof 5.22%. The ~~first five years of the term require~~Cantor Loan requires interest-only payments through March 31, 2021 and thereafter principal and interest ~~only payments and after that payments will include interest and principal, amortized over~~based on a 30-year amortization schedule. Prepayment can only occur within four months prior to the maturity date, ~~except that after the~~subject to earlier ~~of (a) two years after the loan is placed in a securitized mortgage pool, or (ii) May 6, 2020, the~~defeasance.

The Cantor Loan ~~can be fully and partially defeased upon payment of amounts due under the Cantor Loan and payment of a defeasance amount that~~ is ~~sufficient to purchase U.S. government securities equal to the scheduled payments of principal, interest, fees, and any other amounts due related to a full or partial defeasance under the Cantor Loan.~~

~~The Company is securing the payment of the Cantor Loan with~~secured by the assets ~~including property, facilities, and rents, held by~~of the GMR Loan Subsidiaries and has agreed to guarantee certain customary recourse obligations, including findings of fraud, gross negligence, or breach of environmental covenants by GMR Loan Subsidiaries. The GMR Loan Subsidiaries will besuch subsidiaries are required to maintain a monthly debt service coverage ratio of 1.35:~~1.00 for all of the collateral properties in the aggregate.~~1.00.

~~No principal payments were made on the Cantor Loan during the three and nine months ended September 30, 2017.~~ The note balance as of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016~~2019 was ~~$32,097,400. Interest expense was $428,180 and $1,270,578 for the three and nine months ended September 30, 2017, respectively.~~$32,097. Interest expense incurred on this note was ~~$428,179~~$479 and ~~$851,704~~$902 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, respectively, and $423 and $842 for the three and six months ended June 30, 2019, respectively.

-23-

Table of Contents

As of ~~September~~June 30, ~~2017,~~2020, scheduled principal payments due for each ~~fiscal~~ year ended December 31 ~~are listed below~~were as follows:

2017 $ -
2018 -
2019 -
2020 -
2021 -
Thereafter 32,097,400
Total $ 32,097,400


2020 (six months remaining)	$	—
2021		282
2022		447
2023		471
2024		492
Thereafter		30,405
Total	$	32,097

West Mifflin Note

~~In order to finance a portion of the purchase price for the West Mifflin facility, on~~On September 25, 2015, the Company, ~~(through~~through its ~~wholly owned~~wholly-owned subsidiary GMR Pittsburgh LLC, as ~~borrower)~~borrower, entered into a ~~Term Loan and Security Agreement~~$7,378 term loan with Capital ~~One (the “West Mifflin Note”) to borrow $7,377,500.~~One. The ~~West Mifflin Note~~note bears interest at 3.72% per annum and ~~all unpaid interest and principal is due on~~has a maturity date of September 25, 2020. Interest is paid in arrears and interest payments began on November 1, 2015, and on the first day of each calendar month thereafter. Principal payments begin on November 1, 2018 and on the first day of each calendar month thereafter based on an amortization schedule with the principal balance due on the maturity date. The Company, at its option, may prepay the West Mifflin Note at any time, in whole (but not in part) on at least thirty calendar days but not more than sixty calendar days advance written notice. The West Mifflin ~~Note has an early termination fee of two percent if prepaid prior to September 25, 2018.~~facility serves as collateral for the loan. The ~~West Mifflin Note~~note requires a quarterly fixed charge coverage ratio of at least 1:1, a quarterly minimum debt yield of 0.09:1.00, and annualized Operator EBITDAR (as defined in the note) measured on a quarterly basis of not less than ~~$6,000,000.~~$6,000. The Operator is Associates in Ophthalmology, Ltd. and Associates Surgery Centers, LLC. NoThe Company made principal payments ~~were made~~of $70 during the six months ended June 30, 2020. The note balance as of June 30, 2020 and December 31, 2019 was $7,150 and $7,220, respectively. Interest expense incurred on this note was $67 and $135 for the three and six months ended June 30, 2020, respectively, and $72 and $138 for the three and six months ended June 30, 2019, respectively.

Derivative Instruments - Interest Rate Swaps

As of June 30, 2020, the Company had the following 5 interest rate swaps that are used to manage its interest rate risk and fix the LIBOR component of certain of its floating rate debt:


Counterparty	Notional Amount		Fixed LIBOR Rate		Maturity

BMO	$	100 million	2.88	%	August 2023
BMO		90 million	1.21	%	August 2024
Truist Bank		40 million	1.21	%	August 2024
Truist Bank		40 million	2.93	%	August 2024
Citizens Bank, National Association		30 million	2.93	%	August 2024
Total/Weighted Average	$	300 million	2.17	%

In accordance with the provisions of ASC Topic 815, the Company records the swaps either as an asset or a liability measured at its fair value at each reporting period. When hedge accounting is applied, the change in the fair value of derivatives designated and that qualify as cash flow hedges is (i) recorded in accumulated other comprehensive loss in the equity section of the Company’s Condensed Consolidated Balance Sheets and (ii) subsequently reclassified into earnings as interest expense for the period that the hedged forecasted transactions affect earnings. If specific hedge accounting criteria are not met, changes in the Company’s derivative instruments’ fair value are recognized currently as an adjustment to net income.

The Company’s interest rate swaps are not traded on an exchange. The Company’s interest rate swaps are recorded at fair value based on a variety of observable inputs including contractual terms, interest rate curves, yield curves, measure of volatility, and correlations of such inputs. The Company measures its derivatives at fair value on a recurring basis based on the expected size of future cash flows on a discounted basis and incorporating a measure of non-performance risk. The fair values are based on Level 2 inputs within the framework of ASC Topic 820, “Fair Value Measurement.” The Company considers its own credit risk, as well as the credit risk of its counterparties, when evaluating the fair value of its derivative instruments.

The fair value of the Company’s interest rate swaps was a net liability of $21,495 and $6,491 as of June 30, 2020 and December 31, 2019, respectively. The gross balances are included in the “Derivative Asset’ and “Derivative Liability” line items on the Company’s Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, respectively.

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Table of Contents

The table below details the components of the loss presented on the accompanying Condensed Consolidated Statements of Comprehensive (Loss) Income recognized on the Company’s interest rate swaps designated as cash flow hedges for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

Amount of loss recognized in other comprehensive loss	$	2,298	$	3,752	$	16,765	$	5,956
Amount of loss reclassified from accumulated other comprehensive loss into interest expense		(1,276)		(202)		(1,785)		(384)
Total change in accumulated other comprehensive loss	$	1,022	$	3,550	$	14,980	$	5,572

During the next twelve months, the Company estimates that an additional $6,153 will be reclassified as an increase to interest expense. Additionally, during the three and ~~nine~~six months ~~ended September 30, 2017. The West Mifflin Note balance as of September 30, 2017 and December 31, 2016 was $7,377,500.~~Interest expense incurred on the West Mifflin Note was $70,136 and $208,882 for the three and nine months ended September 30, 2017, respectively, and $70,136 and $209,645 for the three and nine months ended September 30, 2016, respectively.

~~- 12 -~~

~~As of September 30, 2017, scheduled principal payments due for each fiscal year ended December 31 are listed below as follows:~~

2017 $ -
2018 22,044
2019 136,007
2020 7,219,449
Total $ 7,377,500

~~Revolving Credit Facility~~

As of September 30, 2017 and December 31, 2016, the Company had $126,100,000 and $27,700,000 of outstanding borrowings under its revolving credit facility, respectively. As described below, the maximum amount that the Company can borrow under the facility is $250,000,000.

On December 2, 2016, the Company, the Operating Partnership, as borrower, and certain subsidiaries (GMR Asheville LLC, GMR Watertown LLC, GMR Sandusky LLC, GMR East Orange LLC, GMR Omaha LLC, and GMR Reading LLC) (such subsidiaries, the “Subsidiary Guarantors”) of the Operating Partnership entered into a senior revolving credit facility (the “Credit Facility”) with BMO Harris Bank N.A., as Administrative Agent (“BMO”), which initially provided up to $75,000,000 in revolving credit commitments for the Operating Partnership. The initial Credit Facility included an accordion feature that provided the Operating Partnership with additional capacity, subject to the satisfaction of customary terms and conditions, of up to $125,000,000, for a total initial facility size of up to $200,000,000. On March 3, 2017, the Company, the Operating Partnership, as borrower, and the Subsidiary Guarantors of the Operating Partnership entered into an amendment to the Credit Facility with BMO, which increased the commitment amount to $200,000,000 plus an accordion feature that allows for up to an additional $50,000,000 of principal amount subject to certain conditions, for a total facility size of $250,000,000 (the “Revolving Credit Facility”). On September 28, 2017, the Company obtained commitments from certain of its lenders on the Revolving Credit Facility for the entire $50,000,000 accordion. The Subsidiary Guarantors and the Company are guarantors of the obligations under the Revolving Credit Facility. The amount available to borrow from time to time under the Revolving Credit Facility is limited according to a quarterly borrowing base valuation of certain properties owned by the Subsidiary Guarantors. The initial termination date of the Revolving Credit Facility is December 2, 2019, which could be extended for one year in the case that no event of default occurs.

Amounts outstanding under the Revolving Credit Facility bear annual interest at a floating rate that is based, at the Operating Partnership’s option, on (i) adjusted LIBOR plus 2.00% to 3.00% or (ii) a base rate plus 1.00% to 2.00%, in each case, depending upon the Company’s consolidated leverage ratio. In addition, the Operating Partnership is obligated to pay a quarterly fee equal to a rate per annum equal to (x) 0.20% if the average daily unused commitments are less than 50% of the commitments then in effect and (y) 0.30% if the average daily unused commitments are greater than or equal to 50% of the commitments then in effect and determined based on the average daily unused commitments during such previous quarter.

The Operating Partnership is subject to ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales. The Operating Partnership must also maintain (i) a maximum consolidated leverage ratio, commencing with the fiscal quarter ending December 31, 2016 and as of the end of each fiscal quarter thereafter, of less than (y) 0.65:1.00 for each fiscal quarter ending prior to October 1, 2019 and (z) thereafter, 0.60:1.00, (ii) a minimum fixed charge coverage ratio of 1.50:1.00, (iii) a minimum net worth of $119,781,219 plus 75% of all net proceeds raised through subsequent equity offerings and (iv) a ratio of total secured recourse debt to total asset value of not greater than 0.10:1.00.

During the nine months ended September 30, 2017, the Company borrowed $205,400,000 under the Revolving Credit Facility and repaid $107,000,000 using funds primarily from the follow-on common stock offering and the preferred offering for a net amount borrowed of $98,400,000. For the three and nine months ended September 30, 2017, interest incurred on the Revolving Credit Facility was $1,335,730 and $2,945,588, respectively. No interest expense was incurred for the three and nine months ended September 30, 2016 as the Revolving Credit Facility was not in place.

~~- 13 -~~

~~Deferred Financing Costs, Net~~

Costs incurred related to securing the Company’s Revolving Credit Facility have been capitalized as a deferred financing asset, net of accumulated amortization, in the accompanying Consolidated Balance Sheets. A rollforward of the deferred financing cost balance as of September 30, 2017, is as follows:

Balance as of January 1, 2017, net $ 927,085
Additions – Revolving Credit Facility¹ 2,792,692
Deferred financing cost amortization expense (741,796 )
Balance as of September 30, 2017, net $ 2,977,981

¹This amount includes $1,223,359 of costs incurred in connection with the Company’s Revolving Credit Facility that were erroneously expensed and included in the “General and Administrative Expense” line item within the Company’s Consolidated Statement of Operations for the three months ended March 31, 2017. During the six-month period ended June 30, ~~2017,~~2020, the Company ~~corrected this error by removing the $1,223,359 from~~recorded total interest expense ~~and capitalizing it as “Deferred Financing Costs, Net” on the Company’s Consolidated Balance Sheet as of June 30, 2017. See Note 2 – “Summary of Significant Accounting Policies.”~~

Amortization expense incurred related to the Revolving Credit Facility deferred financing costs were $307,831 and $741,796 for the three and nine months ended September 30, 2017, respectively, and is included in ~~the “Interest Expense” line item in the accompanying~~its Condensed Consolidated Statements of ~~Operations. There was no amortization expense incurred on the Revolving Credit Facility during the three~~Operations of $4,375 and ~~nine months ended September 30, 2016, as the Revolving Credit Facility was not in place.~~

$8,752.

Weighted-Average Interest Rate and Term

The ~~Company’s~~ weighted average interest rate and term of ~~its~~the Company’s debt was ~~3.84%~~3.46% and ~~3.43~~3.27 years ~~respectively,~~ at ~~September~~June 30, ~~2017,~~2020, compared to ~~4.29%~~3.90% and ~~6.04~~3.76 years ~~respectively, at~~as of December 31, ~~2016.~~2019.

Note 5 – ~~Stockholders’~~ Equity

Preferred Stock

~~General~~

~~On September 15, 2017, the Company closed on~~The Company’s charter authorizes the issuance of ~~3,105,000~~10,000 shares of ~~its~~preferred stock, par value $0.001 per share. As of June 30, 2020 and December 31, 2019, there were 3,105 shares of Series A Cumulative Redeemable Preferred Stock ~~$0.001 par value per share, with an initial~~(“Series A Preferred Stock”), issued and outstanding. The Series A Preferred Stock has a liquidation preference of $25 per ~~share (“Series A~~ share.

Preferred ~~Stock”), inclusive of 405,000 shares issued~~stock dividend activity for the six months ended June 30, 2020 is summarized in ~~connection with~~ the ~~underwriters’ exercise of their over-allotment option.~~ following table:

Applicable

Quarterly

Dividends

Date Announced

Record Date

Quarter

Payment Date

Dividend

per Share

December 13, 2019

January 15, 2020

Q4 2019

January 31, 2020

$

1,455

$

0.46875

March 4, 2020

April 15, 2020

Q1 2020

April 30, 2020

$

1,455

$

0.46875

June 12, 2020

July 15, 2020

Q2 2020

July 31, 2020

$

1,455

(1)

$

0.46875

⁽¹⁾	Two months of this amount, equal to $970, was accrued at June 30, 2020.

The Company may, at its option, redeem the Series A Preferred Stock for cash in whole or in part, from time to time, at any time on or after September 15, 2022, at a cash redemption price of $25 per share. The Series A Preferred Stock will have no voting rights, except for limited voting rights if the Company fails to pay dividends for six quarterly periods. The issuance resulted in aggregate gross proceeds of $77,625,000. After deducting underwriting discounts and advisory fees of $2,445,188, and expenses paid or to be paid by the Company that were directly attributable to the offering of $220,809 (which are both treated as a reduction of the “Preferred Stock” balance on the accompanying Consolidated Balance Sheets), the Company’s preferred stock balance as of September 30, 2017 was $74,959,003. Net proceeds received from the transaction were $75,146,720, which the Company used primarily to repay borrowings on its Revolving Credit Facility. The Company assessed the characteristicsholders of the Series A Preferred Stock ~~in accordance with the provisions of ASC Topic 480 – “Distinguishing Liabilities from Equity,” and concluded that the Series A Preferred Stock is classified as permanent equity.~~

~~Preferred Stock Dividends~~

~~Holders of the Company’s Series A Preferred Stock will be~~are entitled to receive dividend payments only when, as and if declared by the ~~Board~~Company’s board of ~~Directors of the Company~~directors (the “Board”)~~(or~~ (or a duly authorized committee of the Board). ~~Any such dividends~~Dividends will accrue or be payable in cash from the original issue date, on a cumulative basis, quarterly in arrears on each dividend payment ~~date. Additionally, dividends will be payable~~date at a fixed rate per annum equal to 7.50% of the liquidation preference of ~~$25~~$25.00 per share (equivalent to $1.875 per share on an annual basis). Dividends on the Series A Preferred Stock will be cumulative and will accrue whether or ~~not:~~not (i) funds are legally available for the payment of those dividends, (ii) the Company has earnings or (iii) those dividends are ~~authorized.~~

declared by the Board. The quarterly dividend payment dates on the Series A Preferred Stock are January 31, April 30, July 31 and October 31 of each ~~year, commencing on October 31, 2017. The initial dividend is scheduled to be~~year. During each of the six-month periods ended June 30, 2020 and 2019, the Company paid ~~on October 31, 2017 to holders~~preferred dividends of record as of October 15, 2017, and will be a pro rata dividend from, and including, the original issue date to, and including, October 30, 2017, in the pro rata amount of $0.2396 per share for a total dividend amount of $743,598. Refer to Note 11 – “Subsequent Events” for additional information regarding this dividend payment.

~~- 14 -~~

$2,911.

Common Stock

~~General~~

OnThe Company has 500,000 authorized shares of common stock, $0.001 par value. As of June 30, ~~2017,~~2020 and December 31, 2019, there were 46,252 and 43,806 outstanding shares of common stock, respectively.

-25-

Table of Contents

Common stock dividend activity for the six months ended June 30, 2020 is summarized in the following table:

Applicable

Dividend

Dividends

Date Announced

Record Date

Quarter

Payment Date

Amount⁽¹⁾

per Share

December 13, 2019

December 26, 2019

Q4 2019

January 9, 2020

$

9,541

$

0.20

March 4, 2020

March 25, 2020

Q1 2020

April 9, 2020

$

9,610

$

0.20

June 12, 2020

June 25, 2020

Q2 2020

July 9, 2020

$

9,861

$

0.20

⁽¹⁾	Includes distributions on granted LTIP Units and OP Units.

During the six months ended June 30, 2020 and 2019, the Company closed a public underwritten offering of its common shares and on July 20, 2017 the Company closed on the over-allotment option granted to the underwriters. These transactions resulted in an aggregate of 4,025,000 shares of its common stock being issued at a public offering price of $9 per share, resulting in aggregate gross proceeds of $36,225,000. After deducting underwriting discounts and advisory fees of $1,986,876, and expenses paid by the Company that were directly attributable to the offering of $443,499 (both of which are treated as a reduction of the Company’s additional paid-in capital balance), the Company received net proceeds from the transactions of $33,794,625.

~~Dividends~~

~~Since July 2016, the Company’s Board had declared cash~~total dividends on its common stock, ~~as summarized~~LTIP Units and OP Units in the ~~following table.~~aggregate amount of $19,675 and $13,467, respectively.

Date Announced Record Date Applicable
Quarter Payment Date Dividend Amount¹ Dividends per Share

September 14, 2016 September 27, 2016 Q3 2016 October 11, 2016 $ 3,592,786 $ 0.20
December 14, 2016 December 27, 2016 Q4 2016 January 10, 2017 $ 3,604,037 $ 0.20
March 20, 2017 March 27, 2017 Q1 2017 April 10, 2017 $ 3,603,485 $ 0.20
June 16, 2017 June 27, 2017 Q2 2017 July 10, 2017 $ 3,607,726 $ 0.20
September 8, 2017 September 26, 2017 Q3 2017 October 9, 2017 $ 4,416,164 ² $ 0.20

¹

~~Includes dividends on granted LTIP units and OP Units issued to third parties.~~

²

~~This amount was accrued as of September 30, 2017 and paid on October 9, 2017. For additional details refer to Note 11 – “Subsequent Events.”~~

~~During the nine months ended September~~As of June 30, ~~2017,~~2020 and December 31, 2019, the Company ~~paid total~~had an accrued dividend balance of $450 and $580 for dividends in the amount of $10,815,248, consisting of the dividends declared for the fourth quarter of 2016 through the second quarter of 2017. Additionally, during the nine months ended September 30, 2016, the Company paid total dividends in the amount of $285,703.

In accordance with the terms of the Company’s 2017 Annual Equity Bonus and Long-Term Equity Award Plan as disclosed in Note 7 – “Stock-Based Compensation,” as of September 30, 2017 the Company accrued a dividend of $0.20 per LTIP unit for each of the three quarters of 2017payable on the aggregate annual and long-term LTIP ~~units~~Units that are subject to retroactive receipt of dividends on the amount of ~~LTIPs~~LTIP Units ultimately earned. During the six months ended June 30, 2020, $394 of dividends were accrued and $524 of dividends were paid related to these units. During the six months ended June 30, 2019, $182 of dividends were accrued and $86 of dividends were paid related to these units.

The ~~aggregate~~ amount of the ~~accrual~~dividends paid to the Company’s stockholders is determined by the Board and is dependent on a number of factors, including funds available for payment of dividends, the Company’s financial condition and capital expenditure requirements except that, in accordance with the Company’s organizational documents and Maryland law, the Company may not make dividend distributions that would: (i) cause it to be unable to pay its debts as they become due in the usual course of ~~September 30, 2017 was $92,123.~~

business; (ii) cause its total assets to be less than the sum of its total liabilities plus senior liquidation preferences; or (iii) jeopardize its ability to maintain its qualification as a REIT.

OP Units

During the six months ended June 30, 2020, three OP Unit holders redeemed an aggregate of 1,185 OP Units for shares of the Company’s common stock with an aggregate redemption value of $15,245. During the year ended December 31, 2019, the Company issued an aggregate of 49 OP Units with a value of $506 in connection with a facility acquisition. Additionally, during the year ended December 31, 2019, two OP Unit holders redeemed an aggregate of 51 OP Units for shares of the Company’s common stock with an aggregate redemption value of $519. As of ~~September~~June 30, ~~2017,~~2020 and December 31, 2019, there were ~~117,941~~1,958 and 3,143 OP Units issued and ~~held by third parties~~outstanding, respectively, with an aggregate value of ~~approximately $1,077,497. 109,608 of the~~$12,636 and $27,881, respectively. The OP ~~Units were issued in connection with the acquisition of a facility~~Unit value at issuance and ~~were valued at the measurement date of August 18, 2017 using~~redemption is based on the Company’s closing ~~stock~~share price on ~~that~~the date of ~~$9.14 per share, resulting~~the respective transaction and is included as a component of noncontrolling interest equity in ~~a value~~the Company’s Condensed Consolidated Balance Sheets as of ~~$1,000,000. Additionally, 8,333 OP Units were issued~~June 30, 2020 and December 31, 2019. The Company has sufficient shares of common stock authorized pursuant to ~~a third party advisory agreement. These~~its charter to cover the redemption of outstanding OP Units were valued at the measurement date of August 1, 2017 using the Company’s closing stock price on that date of $9.30 per share resulting in a value of $77,497. The advisory agreement is for the period from June 27, 2017 through December 31, 2017 for a total fee of $250,000 payable in shares of Company common stock, LTIP Units, or OP Units, in three equal installments on August 1, 2017, October 1, 2017, and December 1, 2017. The number of units issued pursuant to the advisory agreement is determined based on the higher of $10 per share or the average closing price per share of the Company’s common stock as reported on the NYSE on the last 10 trading days of the calendar month preceding each payment date.

Units.

Note 6 – Related Party Transactions

~~Initial~~ Management Agreement

~~On November 10, 2014,the Company entered into a management agreement, with an effective date of April 1, 2014, with t~~he Advisor. Under the terms of this initial management agreement, the Advisor was responsible for designing and implementing the Company’s business strategy and administering its business activities and day-to-day operations. For performing these services, the Company was obligated to pay the Advisor a base management fee equal to the greater of (a) 2.0% per annum of the Company’s net asset value (the value of the Company’s assets less the value of the Company’s liabilities), or (b) $30,000 per calendar month. In accordance with the terms of the initial management agreement, during the nine-month period ended September 30, 2016, the Company incurred $807,147 of base management fees and repaid $510,000 of cumulative management fees accrued and outstanding. Additionally, during the nine-month period ended September 30, 2016, the Company incurred $754,000 in acquisition fees that were paid to the Advisor for acquisitions that were completed during that period.

~~- 15 -~~

~~Amended Management Agreement~~

Upon completion of the Company’s initial public offering on July 1, 2016, the Company and the Advisor entered into an amended and restated management agreement (the ~~“Amended Management~~“Management Agreement”). Certain material terms of the ~~Amended~~ Management Agreement are summarized ~~below:~~

~~Term and Termination~~

The Amended Management Agreement has an initial term of three years expiring on the third anniversary of the closing date of the initial public offering but will automatically renew for an unlimited number of successive one-year periods thereafter, unless the agreement is not renewed or is terminated in accordance with its terms. If the Board decides to terminate or not renew the Amended Management Agreement, the Company will generally be required to pay the Advisor a termination fee equal to three times the sum of the average annual base management fee and the average annual incentive compensation with respect to the previous eight fiscal quarters ending on the last day of the fiscal quarter prior to termination. Subsequent to the initial term, the Company may terminate the Amended Management Agreement only under certain circumstances.

~~Base Management Fee~~

The Company pays its Advisor a base management fee in an amount equal to 1.5% of its stockholders’ equity per annum, calculated quarterly for the most recently completed fiscal quarter and payable in quarterly installments in arrears.

For purposes of calculating the base management fee, the Company’s stockholders’ equity means: (a) the sum of (1) the Company stockholders’ equity as of March 31, 2016, (2) the aggregate amount of the conversion price (including interest) for the conversion of the Company’s outstanding convertible debentures into common stock and OP Units upon completion of the initial public offering, and (3) the net proceeds from (or equity value assigned to) all issuances of equity and equity equivalent securities (including common stock, common stock equivalents, preferred stock, LTIP units and OP Units issued by the Company or the Operating Partnership) in the initial public offering, or in any subsequent offering (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance), less (b) any amount that the Company pays to repurchase shares of its common stock or equity securities of the Operating Partnership. Stockholders’ equity also excludes (1) any unrealized gainssection titled “Business — Our Advisor and ~~losses and other non-cash items (including depreciation and amortization) that have impacted stockholders’ equity as reported~~our Management Agreement,” contained in the Company’s ~~financial statements prepared~~Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 9, 2020. As discussed in ~~accordance with GAAP, and (2) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, in each case after discussions between~~Note 11-”Subsequent Events,” on July 9, 2020 , the ~~Advisor and its independent directors and approval~~Company completed a management internalization transaction (the “Internalization”) by ~~a majority~~acquiring all the outstanding shares of capital stock of the ~~Company’s independent directors. As~~parent company of our Advisor for a result, the Company’s stockholders’ equity, for purposes of calculating the base management fee, could be greater or less than the amount of stockholders’ equity shown on its financial statements.

The base management fee of the Advisor shall be calculated within 30 days after the end of each quarter and such calculation shall be promptly delivered to the Company. The Company is obligated to pay the quarterly installment of the base management fee calculated for that quarter in cash within five business days after delivery to the Company of the written statement of the Advisor setting forth the computation of the base management fee for such quarter.

~~Incentive Compensation Fee~~

The Company pays its Advisor an incentive fee with respect to each calendar quarter (or part thereof that the management agreement is in effect) in arrears. The incentive fee is an amount, not less than zero, equal to the difference between (1) the product of (x) 20% and (y) the difference between (i) the Company’s AFFO (as defined below) for the previous 12-month period, and (ii) the product of (A) the weighted average of the issuepurchase price of equity securities issued in the initial public offering and in future offerings and transactions, multiplied by the weighted average number of all shares of common stock outstanding on a fully-diluted basis (including any restricted stock units, any restricted shares of common stock, OP Units, LTIP units, and shares of common stock underlying awards granted under the 2016 Equity Incentive Plan (the “2016 Plan”) or any future plan in the previous 12-month period, and (B) 8%, and (2) the sum of any incentive fee paid to the Advisor with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless AFFO is greater than zero for the four most recently completed calendar quarters, or the number of completed calendar quarters since the closing date of the offering, whichever is less. For purposes of calculating the incentive fee during the first 12 months$17.6 million, after ~~completion of the offering, AFFO will be determined by annualizing the applicable period following completion of the offering.~~

~~- 16 -~~working capital adjustments.

-26-

~~Per the terms~~Table of the Amended Management Agreement, AFFO is calculated by adjusting the Company’s funds from operations, or FFO, by adding back acquisition and disposition costs, stock based compensation expenses, amortization of deferred financing costs and any other non-recurring or non-cash expenses, which are costs that do not relate to the operating performance of the Company’s properties, and subtracting loss on extinguishment of debt, straight line rent adjustment, recurring tenant improvements, recurring leasing commissions and recurring capital expenditures. To date the Company has not incurred or paid an incentive fee.Contents

Management ~~Fee Expense Incurred~~Fees and Accrued Management Fees

The Company’s management fee to the Advisor is calculated in accordance with the terms of the Management Agreement which requires an annual base management fee equal to 1.5% of our stockholders’ equity (as defined in the Management Agreement). For the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, management fees of ~~$803,804~~$2,021 and ~~$2,059,325,~~$4,024, respectively, were incurred and expensed by the ~~Company and during the nine months ended September 30, 2017, the Company paid management fees to the Advisor in the amount of $1,876,229.~~Company. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2019, management fees of ~~$627,147~~$1,584 and ~~$807,147,~~$2,918, respectively, were incurred and expensed by the ~~Company and during the nine months ended September 30, 2016 the Company paid~~Company. Accrued management fees due to the Advisor ~~in the amount~~were $2,021 and $1,727 as of ~~$510,000. As of September~~June 30, ~~2017~~2020 and December 31, ~~2016, accrued~~2019, respectively. No incentive management ~~fees of $803,805 and $620,709, respectively, were due to the Advisor.~~

~~Allocated General and Administrative Expenses~~

~~Effective May 8, 2017,~~fee was incurred by the Company and the Advisor entered into an agreement pursuant to which, for a period of one year commencing on May 8, 2017, the Company has agreed to reimburse the Advisor for $125,000 of the annual salary of the General Counsel and Secretary of the Company, such reimbursement to be paid in arrears in 12 equal monthly installments beginning after the end of the month of May 2017 so long as the General Counsel and Secretary continues to be primarily dedicated to the Company in his capacity as its General Counsel and Secretary. In the future, the Company may receive additional allocations of general and administrative expenses from the Advisor that are either clearly applicable to or were reasonably allocated to the operations of the Company. Other than via the terms of the reimbursement agreement, there were no allocated general and administrative expenses from the Advisor forduring the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 or ~~September 30, 2016.~~2019.

~~Note Payable to Majority Stockholder~~

~~In prior years the Company received funds from its former majority stockholder ZH USA, LLC in the form of a non-interest bearing, due on demand note payable, which is classified as~~“Note payable to related parties” on the accompanying Consolidated Balance Sheets. The Company repaid this loan in full during the nine months ended September 30, 2017 and accordingly the balance of this note was zero and $421,000 as of September 30, 2017 and December 31, 2016, respectively.

~~Due to~~ Related ~~Parties, Net~~

Party Balances

A rollforward of the due ~~(to)~~ from related parties and due to related party balance, net, as of ~~September~~June 30, ~~2017,~~2020 is as follows:

Due to Advisor –Mgmt. Fees Due to Advisor – Other Funds Due (to) from Other Related Party Total Due (To) From Related Parties, Net
Balance as of January 1, 2017 $ (620,709 ) (586 ) 40,384 (580,911 )
Management fee expense incurred¹ (2,059,325 ) - - (2,059,325 )
Management fees paid to Advisor¹ 1,876,229 - - 1,876,229
Loan repaid to Advisor² - 149 - 149
Loan repaid to other related party³ - - (38,428 ) (38,428 )
Balance as of September 30, 2017 $ (803,805 ) (437 ) 1,956 (802,286 )



	Due From
	Related Parties		Due to Related Party,Net
			Other
	Funds for		Mgmt.Fees		Funds due		Due to
	Various		due to		from		Related
	Purposes		Advisor		Advisor		Party, net
Balance as of January 1, 2020	$	50	$	(1,727)		79	$	(1,648)
Management fee expense incurred		—		(4,024)		—		(4,024)
Management fees paid to Advisor		—		3,730		—		3,730
Loans to Advisor		—		—		(15)		(15)
Loan to related parties		74		—		—		—
Balance as of June 30, 2020	$	124	$	(2,021)		64	$	(1,957)

¹

Net amount accrued of $183,096 consists of $2,059,325 in management fee expense incurred, net of $1,876,229 of accrued management fees that were paid to the Advisor. This represents a cash flow operating activity.

²

~~Amount represents the partial repayment of expenses that were previously paid by the Advisor on the Company’s behalf. This represents a cash flow financing activity.~~

³

~~Amount represents the net repayment of previous loans made by the Company to related parties. This represents a cash flow investing activity.~~

~~- 17 -~~

Note 7 – Stock-Based Compensation

2016 Equity Incentive Plan

~~2017 Program – Performance~~The 2016 Equity Incentive Plan, as amended (the “Plan”), is intended to assist the Company and its affiliates in recruiting and retaining employees, members of the Board, executive officers of the Company, and individuals who provide services to the Company and its affiliates.

The Plan is intended to permit the grant of both qualifying and non-qualified options and the grant of stock appreciation rights, restricted stock, unrestricted stock, awards of restricted stock units, performance awards and other equity-based awards (including LTIP Units). Based ~~Awards~~on the grants outstanding as of June 30, 2020, there are 1,070 shares of common stock that remain available to be granted under the Plan. Units subject to awards under the Plan that are forfeited, cancelled, lapsed, settled in cash or otherwise expired (excluding shares withheld to satisfy exercise prices or tax withholding obligations) are available for grant.

Time-Based Grants

On ~~February 28, 2017,~~March 3, 3020, unless otherwise noted, pursuant to the ~~Board approved the recommendations~~recommendation of the Compensation Committee of the Board (the “Compensation Committee”) ~~with respect to~~, the ~~awarding~~Board approved the following LTIP Unit activity:

●

Determined that 169,169 LTIP Units were earned in accordance with the terms of the previously disclosed 2017 long-term performance award agreements. Of these units, 154,903 were approved by the Board on March 3, 2020 and vested 50% on March 3, 2020, the determination date, and 50% vest on March 3, 2021. The remaining 14,266 of these units were approved by the Board on May 12, 2020 and vested 50% on May 12, 2020, the determination date, and 50% vest on May 12, 2021.

●

Determined that 146,938 LTIP Units were earned in accordance with the terms of the previously disclosed 2019 annual award agreements. These units vested 50% on March 3, 2020, the determination date, and 50% vest on March 3, 2021.

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Table of ~~2017~~Contents

●

Granted 42,726 LTIP Units in connection with the 2020 Long-Term Incentive Plan. These grants were valued based on the Company’s closing common stock price on the March 3, 2020 date of grant of $14.34 and vest in equal one-thirdincrements on each of March 3, 2021, March 3, 2022, and March 3, 2023.

A detail of the Company’s outstanding time based LTIP Units as of June 30, 2020 is as follows:


Vested units		805
Unvested units		290
LTIP Units outstanding as of June 30, 2020		1,095

Performance Based Awards

The Board has approved annual performance-based ~~equity incentive award targets in the form of~~ LTIP ~~units (the “Annual~~awards (“Annual Awards”) and long-term performance-based LTIP awards ~~(the “Long-Term~~(“Long-Term Awards”) to the executive officers of the Company and other employees of the ~~Company’s external manager~~Advisor who perform services for the ~~Company (the “2017 Program”). Additionally,~~Company. As described below, the ~~Board approved~~Annual Awards have one-year performance periods and the ~~recommendations of~~Long-Term Awards have three-year performance periods. In addition to meeting specified performance metrics, vesting in both the ~~Compensation Committee with respect to awarding~~ Annual Awards and the Long-Term Awards is subject to ~~two executive officers~~service requirements.

A detail of the ~~Company whose employment commenced on August 23, 2017 and May 8, 2017, respectively. None of the LTIP units awarded~~Company’s Long-Term Awards under the 2017, ~~Program have been earned by the participants as of September 30, 2017.~~

~~The 2017 Program is a part of the Company’s 2016 Plan~~2018 and ~~therefore~~2019 programs, and the Annual Awards and Long-Term Awards were awarded pursuant to the 2016 Plan. The purpose of the 2016 Plan is to attract and retain qualified persons upon whom, in large measure, the Company’s sustained progress, growth and profitability depend, to motivate the participants to achieve long-term company goals and to more closely align the participants’ interests with those of the Company’s other stockholders by providing them with a proprietary interest in the Company’s growth and performance. The Company’s executive officers, employees, employees of its advisor and its affiliates, consultants and non-employee directors are eligible to participate in the 2016 Plan.

~~The LTIP unit award targets~~ under the ~~2017 Program and subsequent activity during the nine months ended September~~2020 program as of June 30, ~~2017,~~2020 is as follows:

Annual Long-Term Total

Awards on February 28, 2017 97,243 147,081 244,324
Awards on August 23, 2017 and May 8, 2017 8,224 17,754 25,978
Total 2017 Program LTIP units awarded as of September 30, 2017 105,467 164,835 270,302
2017 Program LTIP units forfeited (19,338 ) (58,668 ) (78,006 )
Net 2017 Program LTIP awards as of September 30, 2017 86,129 106,167 192,296

As of September 30, 2017, all 192,296 LTIP unit target awards as of September 30, 2017 were to non-employees. The number of target LTIP units comprising each Annual Award was based on the closing price of the Company’s common stock reported on the New York Stock Exchange (“NYSE”) on the dates of grant (August 23, 2017, May 8, 2017, and February 28, 2017) and the number of target LTIP units comprising each Long-Term Award was based on the fair value of the Long-Term Awards as determined by an independent valuation consultant, in each case rounded to the next whole LTIP unit in order to eliminate fractional units.

2017 Long-Term Awards ⁽¹⁾

11
2018 Long-Term Awards
110
2019 Long-Term Awards
82
2020 Annual Awards ⁽²⁾
196
2020 Long-Term Awards ⁽³⁾
70
Total target performance awards as of June 30, 2020
469

(1)	Represents awards that were not earned as of June 30, 2020.

(2)	Approved by the Board on March 17, 2020. The number of target LTIP Units was based on the closing price of the Company’s common stock reported on the New York Stock Exchange (“NYSE”) on that date.

(3)	Approved by the Board on March 3, 2020. The number of target LTIP Units was based on the fair value of the Long-Term Awards as determined by an independent valuation consultant.

Annual Awards. The Annual Awards are subject to the terms and conditions of LTIP Annual Award Agreements (“LTIP Annual Award Agreements”) between the Company and each grantee.

The Compensation Committee and Board established ~~various operating~~ performance goals for ~~calendar~~the year ~~2017,~~ended December 31, 2020, as set forth in Exhibit A to the 2020 LTIP Annual Award Agreements (the “Performance Goals”), that will be used to determine the ~~actual~~ number of LTIP ~~units~~Units earned by each ~~grantee under each LTIP Annual Award Agreement. During the three months ended September~~grantee. As of June 30, ~~2017,~~2020, management ~~made a determination~~estimated that the ~~Annual Award payout trend as of September 30, 2017 was 55%,~~Performance Goals would be met at a 100% level and, accordingly, ~~applied 55% to~~estimated that 100% of the ~~net~~2020 program target Annual Awards ~~as of September 30, 2017 (86,129 units) to estimate the Annual Awards~~were expected to be earned at the end of the performance ~~period (47,371 units).~~period. Cumulative ~~stock based~~stock-based compensation expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 was adjusted to reflect the reduction in the Annual Award target to 55%.~~2020 reflects management’s estimate that 100% of these awards will be earned. As soon as reasonably practicable following the ~~last day~~first anniversary of the ~~2017 fiscal year,~~Annual Awards grant date, the Compensation Committee and Board will determine the extent to which the Company has achieved each of the Performance Goals (expressed as a percentage) and, based on such determination, will calculate the number of LTIP ~~units~~Units that each grantee is entitled to ~~receive under the grantee’s Annual Award based on the performance percentages described in the grantee’s LTIP Annual Award Agreement.~~receive. Each grantee may earn up to 150% of the number of his/her target LTIP ~~units covered by the grantee’s~~Units. Any 2020 Annual ~~Award. Any target~~Award LTIP ~~units~~Units that are not earned will be forfeited and cancelled.

~~The Company expenses~~Vesting. LTIP Units that are earned as of the ~~fair value~~end of ~~all unit awards~~the applicable performance period will be subject to vesting, subject to continued employment through each vesting date, in ~~accordance with~~two installments as follows: 50% of the ~~fair value recognition requirements of ASC Topic 718, Compensation-Stock Compensation, for “employees,” and ASC Topic 505, Equity, for “non-employees.”~~

As the Annual Awards were granted to non-employees, in accordance with the provisions of ASC Topic 505, the Annual Awards utilize the grant date fair value for expense recognition; however, the accounting after the measurement date requires a fair value re-measurement each reporting period until the awards vest. Since these are performance based awards with no market condition, the closing priceearned LTIP Units will become vested on the ~~valuation~~ date in 2021 that the Board approves the number of LTIP Units to be awarded pursuant to the performance components set forth in the 2020 LTIP Annual Award Agreements and ~~revaluation date~~50% of the earned LTIP Units become vested on the one year anniversary of the initial vesting date. Vesting may be accelerated under certain circumstances such as a “change-in-control” transaction or a “qualified termination” event.

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Table of Contents

Distributions. Distributions equal to the dividends declared and paid by the Company will accrue during the applicable performance period on the maximum number of LTIP Units that the grantee could earn and will be ~~used for expense recognition purposes.~~

~~- 18 -~~

paid with respect to all of the earned LTIP Units at the conclusion of the applicable performance period, in cash or by the issuance of additional LTIP Units at the discretion of the Compensation Committee.

Long-Term ~~Awards~~Awards.. The Long-Term Awards are subject to the terms and conditions of their related LTIP Long-Term Award Agreements ~~(“LTIP~~(collectively the “LTIP Long-Term Award Agreements”) between the Company and each grantee. The number of LTIP ~~units~~Units that each grantee is entitled to earn under the LTIP Long-Term Award Agreements will be determined following the conclusion of a three-year performance period based on the Company’s total ~~shareholder~~stockholder return (“TSR”), which is determined based on a combination of appreciation in stock price and dividends paid during the performance ~~period (“TSR”).~~period. Each grantee may earn up to 200% of the number of target LTIP ~~units~~Units covered by the grantee’s Long-Term Award. Any target LTIP ~~units~~Units that are not earned will be forfeited and cancelled. The number of LTIP ~~units~~Units earned under the Long-Term Awards will be determined as soon as reasonably practicable following the end of the applicable three-year performance period based on the Company’s TSR on an absolute basis (as to 75% of the Long-Term Award) and relative to the SNL Healthcare REIT Index (as to 25% of the Long-Term Award).

Vesting. LTIP Units that are earned as of the end of the applicable three-year performance period will be subject to forfeiture restrictions that will lapse (“vesting”), subject to continued employment through each vesting date as follows; 50% of the earned LTIP Units will vest upon the third anniversary of the respective grant dates and the remaining 50% will vest on the fourth anniversary of the respective grant dates. Vesting may be accelerated under certain circumstances such as a “change-in-control” transaction or a “qualified termination” event.

Distributions. Pursuant to the LTIP Long-Term Award Agreements, distributions equal to the dividends declared and paid by the Company will accrue during the applicable performance period on the maximum number of LTIP Units that the grantee could earn and will be paid with respect to all of the earned LTIP Units at the conclusion of the applicable performance period, in cash or by the issuance of additional LTIP Units at the discretion of the Compensation Committee.

Stock-Based Compensation Expense

Under the provisions of ASU 2018-07, the Company’s prospective compensation expense for all unvested LTIP Units, Annual Awards, and Long-Term Awards is recognized using the adoption date fair value of the awards, with no remeasurement required. Compensation expense for future LTIP Unit grants, Annual Awards, and Long-Term Awards is based on the grant date fair value of the units/awards, with no subsequent remeasurement required.

As the Long-Term Awards ~~were granted to non-employees and involved~~involve market-based performance conditions, ~~in accordance with~~ the ~~provisions of ASC Topic 505, the Long-Term Awards utilize~~Company utilizes a Monte Carlo simulation to provide a grant date fair value for expense recognition; however, the accounting after the measurement date requires a fair value re-measurement each reporting period until the awards vest. The fair value re-measurement will be performed by calculating a Monte Carlo produced fair value at the conclusion of each reporting period until vesting.

recognition. The Monte Carlo simulation is a generally accepted statistical technique used, in this instance, to simulate a range of possible future stock prices for the Company and the members of the SNL Healthcare REIT Index (the “Index”) over the Performance ~~Period (February 28, 2017 to February 27, 2020; May 8, 2017 to May 7, 2020; and August 23, 2017 to August 22, 2020, respectively).~~Periods. The purpose of this modeling is to use a probabilistic approach for estimating the fair value of the performance share award for purposes of accounting under ASC Topic 718. ~~ASC Topic 505 does not provide guidance on how to derive a fair value, so the valuation defaults to that described in ASC Topic 718.~~

The assumptions used in the Monte Carlo simulation include beginning average stock price, valuation date stock price, expected volatilities, correlation coefficients, risk-free rate of interest, and expected dividend yield. The beginning average stock price is the beginning average stock price for the Company and each member of the Index for the five trading days leading up to the grant ~~date.~~date of the Long-Term Award. The valuation date stock price is the average closing stock price offor the Company and each member of the ~~peer companies in the~~ Index ~~on the grant date~~ for the ~~grant date fair value, and~~15 trading days leading up to the ~~closing stock price on September 30, 2017 for revaluation.~~valuation date. The expected volatilities are modeled using the historical volatilities for the Company and the members of the Index. The correlation coefficients are calculated using the same data as the historical volatilities. The risk-free rate of interest is taken from the U.S. Treasury website and relates to the expected life of the remaining performance period on valuation or revaluation. Lastly, the dividend yield assumption is 0.0%, which is mathematically equivalent to reinvesting dividends in the issuing entity, which is part of the Company’s award agreement assumptions.

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~~Vesting.~~~~LTIP units that~~Table of Contents

Below are ~~earned as~~details regarding certain of the ~~end of~~assumptions for the applicable performance period will be subject to forfeiture restrictions that will lapse (“vesting”), subject to continued employment through each vesting date, in two installments as follows: 50% of the earned LTIP units will vest upon being earned as of the end of the applicable performance period and the remaining 50% will vest on the first anniversary of the date on which such LTIP units are earned.Long-Term Awards using Monte Carlo simulations:


	2020 Long-Term			2019 Long-Term			2018 Long-Term			2017 Long-Term
	Awards			Awards			Awards			Awards

Fair value	$	13.47		$	10.07		$	8.86		$	8.86
Target awards		70			82			110			96
Volatility		28.75	%		31.7	%		33.8	%		33.8% - 35.4%
Risk-free rate		0.72	%		2.5	%		2.6	%		2.4% - 2.6%
Dividend assumption		reinvested			reinvested			reinvested			reinvested
Expected term in years		3			3			2.7			1.7 – 2.7

~~Distributions.~~Pursuant to both the LTIP Annual Award Agreements and LTIP Long-Term Award Agreements, distributions equal to the dividends declared and paid by the Company will accrue during the applicable performance period on the maximum number of LTIP units that the grantee could earn and will be paid with respect to all of the earned LTIP units at the conclusion of the applicable performance period, in cash or by the issuance of additional LTIP units at the discretion of the Compensation Committee

~~2016 Plan – Time Based Grants (excludes 2017 Program - Performance Based Awards)~~

~~The LTIP units granted under the 2016 Plan (excluding 2017 Program awards) during the nine months ended September 30, 2017, are as follows:~~

~~Total 2016 Plan LTIP units granted as of January 1, 2017~~	~~414,504~~
~~Additional LTIP units granted~~	~~27,179~~
~~Total 2016 Plan LTIP units granted as of September 30, 2017~~	~~441,683~~
~~2016 Plan LTIP units forfeited~~	~~(38,733~~	)
~~Net 2016 Plan LTIP units granted and outstanding as of September 30, 2017~~	~~402,950~~

Of the 27,179 LTIP units that were granted during the nine months ended September 30, 2017, there was a total of 11,204 LTIP units granted to two executives of the Company (employees of the Advisor) on August 23, 2017 and May 8, 2017 and the remaining 15,975 LTIP units were granted to the Company’s independent directors on May 18, 2017.

~~- 19 -~~

Of the 402,950 LTIP units that were granted under the 2016 Plan (net of forfeitures), 60,400 units vested immediately on July 1, 2016 upon completion of the Company’s initial public offering, 68,900 LTIP units vested on December 1, 2016, 13,750 units that were granted to the independent directors vested on July 1, 2017, and an additional 72,488 LTIP units vested immediately as a result of individuals (primarily executives) leaving the Company, resulting in a total of 215,538 vested LTIP units as of September 30, 2017.

The remaining unvested 187,412 LTIP units, net of forfeitures, (the “Service LTIPs”) consists of 171,437 units granted to employees of the Advisor and its affiliates deemed to be non-employees in accordance with ASC Topic 505 and vest over periods of 36 months to 53 months, from the grant date, dependent on the population granted to, as well as 15,975 units granted to the Company’s independent directors on May 18, 2017 (who were treated as employees in accordance with ASC Topic 718), and vest over a period of 12 months from the grant date.

Under the 2016 Plan a total of 1,232,397 shares of common stock are available to be granted or issued in respect of other equity-based awards such as LTIP units. Based on the grants and target awards outstanding as of September 30, 2017, there are 637,151 shares that remain available to be granted or issued under the 2016 Plan as of September 30, 2017. Shares subject to awards under the 2017 Program and the 2016 Plan that are forfeited, cancelled, lapsed, settled in cash or otherwise expired (excluding shares withheld to satisfy exercise prices or tax withholding obligations) are available for grant.

~~Detail of Compensation Expense Recognized For The Three and Nine Months Ended September 30, 2017~~

The Company incurred stock compensation expense of ~~$340,287~~$897 and ~~$1,480,724~~$1,819, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, respectively, and $854 and $1,625, for the three and six months ended June 30, 2019, respectively, related to the grants awarded under the ~~2017 Program and the 2016~~ Plan. Compensation expense is ~~classified as~~included within “General and Administrative” expense in the Company’s ~~accompanying~~Condensed Consolidated Statements of Operations. ~~A detail~~

As of ~~compensation expense recognized during the three and nine months ended September~~June 30, ~~2017, is as follows:~~

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
2016 Plan – Time Based Grants:
    Service LTIPs – non-employee $ 258,033 $ 933,143
    Service LTIPs – employee 56,567 123,967
2017 Program – Performance Based Award Targets:
    Annual Awards – non-employee (22,107 ) 238,835
    Long-Term Awards – non-employee 47,794 184,779
           Total compensation expense $ 340,287 $ 1,480,724

~~Total~~2020, total unamortized compensation expense related to these ~~units~~awards of approximately ~~$1.9~~$4.3 million is expected to be recognized ~~subsequent to September 30, 2017~~ over a weighted average remaining period of ~~1.23~~1.6 years.

Note 8 – ~~Rental Revenue~~Leases

The Company operates as both a lessor and a lessee. As a lessor, the Company is required under ASC Topic 842 to account for leases using an approach that is substantially similar to ASC Topic 840’s guidance for operating leases and other leases such as sales-type leases and direct financing leases. In addition, ASC Topic 842 requires lessors to capitalize and amortize only incremental direct leasing costs. As a lessee, the Company is required under the new standard to apply a dual approach, classifying leases, such as ground leases, as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. This classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. ASC Topic 842 also requires lessees to record a right of use asset and a lease liability for all leases with an initial term of greater than a year regardless of their classification. The Company has also elected the practical expedient not to recognize right of use assets and lease liabilities for leases with a term of a year or less.

Information as Lessor Under ASC Topic 842

To generate positive cash flow, as a lessor, the Company leases its facilities to tenants in exchange for fixed monthly payments that cover rent, property taxes, insurance and certain cost recoveries, primarily common area maintenance (“CAM”). The Company’s leases were determined to be operating leases and have a portfolio average lease years remaining of approximately 10 years. Payments from the Company’s tenants for CAM are considered nonlease components that are separated from lease components and are generally accounted for in accordance with the revenue recognition standard. However, the Company qualified for and elected the practical expedient related to combining the components because the lease component is classified as an operating lease and the timing and pattern of transfer of CAM income, which is not the predominant component, is the same as the lease component, for all asset classes. As such, consideration for CAM is accounted for as part of the overall consideration in the lease. Payments from customers for property taxes and insurance are considered non-components of the lease and therefore no consideration is allocated to them because they do not transfer a good or service to the customer. Fixed contractual payments from the Company’s leases are recognized on a straight-line basis over the terms of the respective leases. This means that, with respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-line rental revenue is commenced when the tenant assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements.

Some of the Company’s leases are subject to annual changes in the Consumer Price Index (“CPI”). Although increases in CPI are not estimated as part of the Company’s measurement of straight-line rental revenue, for leases with base rent increases based on CPI, the amount of rent revenue recognized is adjusted in the period the changes in CPI are measured and effective. Additionally, some of the Company’s leases have extension options.

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Initial direct costs, primarily commissions, related to the leasing of our facilities are capitalized when material as incurred. Capitalized leasing costs are amortized on a straight-line basis over the remaining useful life of the respective leases. All other costs to negotiate or arrange a lease are expensed as incurred.

Lease-related receivables, which include accounts receivable and accrued straight-line rents receivable, are reduced for credit losses, if applicable. To date the Company’s receivables have not had any credit losses. Such amounts would be recognized as a reduction to rental and other revenues. The Company regularly evaluates the collectability of its lease-related receivables. The Company’s evaluation of collectability primarily consists of reviewing past due account balances and considering such factors as the credit quality of our tenant, historical trends of the tenant and changes in tenant payment terms. If the Company’s assumptions regarding the collectability of lease-related receivables prove incorrect, the Company could experience credit losses in excess of what was recognized in rental and other revenues.

The Company recognized $22,036 and $43,569 of rental and other revenues related to operating lease payments for the three and six months ended June 30, 2020, respectively. Of these amounts $1,125 and $2,602 were for variable lease payments related to expense recoveries for the three and six months ended June 30, 2020, respectively. The aggregate annual ~~minimum~~ cash to be received by the Company on the noncancelable operating leases related to its portfolio ~~of medical facilities in effect~~ as of ~~September~~June 30, ~~2017, are~~2020 is as follows for the subsequent years ended December 3131:


2020 (six months remaining)	$	39,302
2021		76,642
2022		75,216
2023		72,568
2024		66,745
Thereafter		373,051
Total	$	703,524

Information as ~~listed below.~~

2017 $ 8,035,103
2018 32,516,357
2019 33,166,395
2020 33,811,627
2021 32,003,983
Thereafter 251,225,055
Total $ 390,758,520
For the three months ended September 30, 2017, the HealthSouth facilities constituted approximately 18% of the Company’s rental revenue, the OCOM facilities constituted approximately 15% of the Company’ rental revenue, the Sherman facility constituted approximately 10% of the Company’s rental revenue, the Great Bend facility constituted approximately 8% of the Company’s rental revenue, the Omaha facility constituted approximately 6% of the Company’s rental revenue, and the Plano facility constituted approximately 5% of the Company’s rental revenue. All other facilities in the Company’s portfolio constituted the remaining 38% of the total rental revenue with no individual facility constituting greater than approximately 4% of total rental revenue.
~~- 20 -~~
For the nine months ended September 30, 2017, the HealthSouth facilities constituted approximately 22% of the Company’s rental revenue, the OCOM facilities constituted approximately 12% of the Company’ rental revenue, the Omaha and Great Bend facilities each constituted approximately 7% of the Company’s rental revenue, the Plano and Tennessee facilities each constituted approximately 6% of the Company’s rental revenue, and the Marina Towers facility constituted approximately 5% of the Company’s rental revenue. All other facilities in the Company’s portfolio constituted the remaining 35% of the total rental revenue with no individual facility constituting greater than approximately 4% of total rental revenue.
For the three months ended September 30, 2016, the Omaha facility constituted approximately 22% of the Company’s rental revenue, the Tennessee facilities constituted approximately 18% of rental revenue, the Plano facility constituted approximately 17% of rental revenue, the West Mifflin facility constituted approximately 11% of rental revenue, the Melbourne facility constituted approximately 15% of rental revenue, and the Reading facility constituted approximately 8% of rental revenue. The Westland and Asheville facilities constituted approximately 6% and 3% of rental revenue, respectively.
For the nine months ended September 30, 2016, the Omaha facility constituted approximately 26% of the Company’s rental revenue, the Tennessee facilities constituted approximately 21% of rental revenue, the Plano facility constituted approximately 17% of rental revenue, the West Mifflin facility constituted approximately 13% of rental revenue, the Melbourne facility constituted approximately 12% of rental revenue, and the Reading facility constituted approximately 3% of rental revenue. The Asheville and Westland facilities each constituted approximately 4% of rental revenue.
~~Note 9 – Omaha and Clermont Land Leases~~

Lessee Under ASC Topic 842

The ~~Omaha facility~~Company has six buildings located on land ~~lease expires in 2033,~~that is subject to ~~future renewal options by~~operating ground leases with a weighted average remaining term of approximately 24 years. Rental payments on these leases are adjusted periodically based on either the ~~Company. Under~~CPI or on a pre-determined schedule. The monthly payments on a pre-determined schedule are recognized on a straight-line basis over the terms of the ~~Omaha land lease, annual rents increase 12.5% every fifth anniversary~~respective leases. Changes in the CPI are not estimated as part of our measurement of straight-line rental expense. The Company used a weighted average discount rate of approximately 4.4%, which was derived, using a portfolio approach, from our assessment of the ~~lease.~~credit quality of the Company and adjusted to reflect secured borrowing, estimated yield curves and long-term spread adjustments over appropriate tenors. Some of the Company’s ground leases contain extension options and, where we determined it was reasonably certain that an extension would occur, they were included in our calculation of the right of use asset and liability. The ~~initial Omaha land~~Company recognized approximately $39 and $81 of ground lease ~~increase occurred~~expense, of which $18 and $34 was paid in ~~April 2017. During~~cash, during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020.

The following table sets forth the ~~Company expensed $18,153~~undiscounted cash flows of our scheduled obligations for future lease payments on operating ground leases at June 30, 2020, and ~~$54,461, respectively, related~~a reconciliation of those cash flows to the ~~Omaha land lease. During the three and nine months ended September~~operating lease liability at June 30, ~~2016, the Company expensed $18,153 and $54,461, respectively, related to this lease.~~2020:


2020 (six months remaining)	$	58
2021		116
2022		116
2023		120
2024		125
Thereafter		4,351
Total		4,886
Discount		(2,469)
Lease liability	$	2,417

On March 1, 2017, the Company acquired an interest, as ground lessee, in the ground lease that covers and affects certain real property located in Clermont, Florida, along with the seller’s right, title and interest arising under the ground lease in and to the medical building located upon the land. The ground lease expense is a pass-through to the tenant so no expense related to this ground lease is recorded on the Company’s Consolidated Statements

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Table of ~~Operations. The Clermont ground lease commenced in 2012 and has an initial term of seventy-five years.~~Contents

Note 9 – Rent Concentration

The ~~aggregate minimum cash payments to be made by the Company on the Omaha land lease and the Clermont land lease in effect~~Company’s facilities with a concentration of rental revenue of 5% or greater for any period presented is as ~~of September 30, 2017, are as follows for the subsequent years ended December 31; as listed below.~~follows:

2017 $ 18,626
2018 78,245
2019 81,987
2020 81,987
2021 81,987
Thereafter 1,883,702
Total $ 2,226,534


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Facility	2020		2019		2020		2019

Encompass	8	%	10	%	8	%	10	%
Belpre	6		8		7		9
OCOM	5		7		5		7
Sherman	4		5		4		5
Austin	4		5		4		5
East Dallas	3		4		3		5
Aggregate of all other facilities	70		61		69		59
Total	100	%	100	%	100	%	100	%

Note 10 -– Commitments and Contingencies

Litigation

The Company is not presently subject to any material litigation nor, to its knowledge, is any material litigation threatened against the Company, which if determined unfavorably to the Company, would have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Environmental Matters

The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its financial position, results of operations, or cash flows. Additionally, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that management believes would require additional disclosure or the recording of a loss contingency.

~~- 21 -~~

Note 11 – Subsequent Events

~~Common Stock Dividend Paid~~

Management Internalization Transaction

On ~~October~~July 9, ~~2017~~2020, the Company ~~paid~~completed the ~~third quarter 2017 dividend that~~Internalization by acquiring all the outstanding shares of capital stock of the parent company of our Advisor for a purchase price of $17.6 million, after working capital adjustments. A special committee of the Board of Directors, consisting solely of independent and disinterested directors (the “Special Committee”), negotiated the terms of the Internalization on behalf of the Company. The Internalization was ~~announced~~unanimously approved by the Special Committee, and, upon recommendation by the Special Committee, by the Company’s independent and disinterested directors.

Closing of Credit Facility Accordion and Related Hedge Transaction

On July 24, 2020, the Company received aggregate commitments of up to $100 million from certain of its lenders pursuant to the accordion feature (the “Accordion”) under its Credit Facility. The Subsidiary Guarantors and the Company are guarantors of the obligations under the Accordion. The amount available to borrow from time to time under the Accordion is limited according to a quarterly borrowing base valuation of certain properties owned by the Subsidiary Guarantors. The remaining terms of the Credit Facility were unchanged. With the closing of the Accordion, the borrowing capacity under the Company’s Credit Facility was increased to $600 million, consisting of a $250 million capacity revolver, a $350 million term loan, and a remaining $50 million accordion.

In connection with the closing of the Accordion, on ~~September 18, 2017 in~~July 27, 2020, the Company entered into an interest rate swap with Wells Fargo Bank, N.A. with a notional amount of ~~$4,416,164.~~$50 million (the term component of the Accordion commitments), a fixed interest rate of 0.158% and a maturity date of August 8, 2023.

~~Preferred Stock Dividend Paid~~

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~~The initial preferred stock dividend was paid on October 31, 2017 to holders~~Table of record as of October 15, 2017, for the pro rata dividend from, and including, the original issue date to, and including, October 30, 2017, in the pro rata amount of $0.2396 per share for a total dividend amount of $743,598.

~~LTIP Award~~

On October 11, 2017 the Board approved the grant of 32,787 LTIP units to the Company’s Chief Executive Officer. The LTIP units were granted under the 2016 Plan and vest over a period of two years, on October 11, 2018 and October 11, 2019.

~~- 22 -~~Contents

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

The following discussion should be read in conjunction with our financial statements included herein, including the notes to those financial statements, included elsewhere in this ~~Report.~~

~~Forward-Looking Statements~~

~~This~~ Quarterly Report on Form 10-Q (this “Report”). Some of the comments we make in this section are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section below entitled “Special Note Regarding Forward-Looking Statements.” Certain risk factors may cause actual results, performance or achievements to differ materially from those expressed or implied by the following discussion. For a discussion of such risk factors, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2019, that was filed with the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) on March 9, 2020 and Item 1A. Risk Factors in this Quarterly Report on Form 10-Q. Unless otherwise indicated, all dollar and share amounts in the following discussion are presented in thousands.

Special Note Regarding Forward-Looking Statements

This Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). In particular, statements pertaining to our trends, liquidity, capital resources, and the healthcare ~~facility performance~~industry and ~~results of operations,~~healthcare real estate opportunity, among others, contain forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology including, but not limited to, “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

·●

the effects of the ongoing novel coronavirus (“COVID-19”) pandemic, which are highly uncertain, cannot be predicted and will depend upon future developments, including the severity of COVID-19, the duration of the outbreak and potential resurgences, the duration of existing or new social distancing and shelter-in-place orders, further mitigation strategies taken by applicable government authorities, the availability of a vaccine, adequate testing and treatments and the prevalence of widespread immunity to COVID-19;

●

defaults on or non-renewal of leases by tenants;

·●

our ability to collect rental revenue, expected rent deferral amounts and expected repayment periods;

●

our ability to satisfy the covenants in our existing and any future debt agreements, including the Credit Facility;

●

decreased rental rates or increased vacancy ~~rates;~~rates, including expected rent levels on acquired properties;

·●

difficulties in identifying healthcare facilities to acquire and completing such acquisitions;

·●

~~general economic conditions;~~

·

adverse economic or real estate conditions or developments, either nationally or in the markets in which our facilities are located;

·●

our failure to generate sufficient cash flows to service our outstanding obligations;

·●

fluctuations in interest rates and increased operating costs;

·●

our failure to effectively hedge our interest rate risk;

●

our ability to satisfy our short and long-term liquidity requirements;

●

our ability to deploy the debt and equity capital we raise;

·●

our ability to raise additional equity and debt capital on terms that are attractive or at all;

·●

our ability to make distributions on shares of our ~~capital~~common and preferred stock;

·●

expectations regarding the timing and/or completion of any acquisition;

●

general volatility of the market price of our common and preferred stock;

·●

~~our lack of a significant operating history;~~

·

changes in our business or our investment or financing strategy;

·●

our dependence upon key personnel whose continued service is not guaranteed;

·●

our ability to identify, hire and retain highly qualified personnel in the future;

·●

the degree and nature of our competition;

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·●

changes in healthcare laws, governmental regulations, tax rates and similar matters;

·●

~~competition for investment opportunities;~~changes in current healthcare and healthcare real estate trends;

·●

changes in expected trends in Medicare, Medicaid and commercial insurance reimbursement trends;

●

competition for investment opportunities;

●

our failure to successfully ~~develop,~~ integrate ~~and operate~~ acquired healthcare ~~facilities and operations;~~facilities;

·●

our expected tenant improvement expenditures;

●

changes in accounting policies generally accepted in the United States of America (“GAAP”);

·●

lack of or insufficient amounts of insurance;

·●

other factors affecting the real estate industry generally;

·●

changes in the tax treatment of our distributions;

●

our failure to qualify and maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes;

·●

our ability to qualify for the safe harbors from the “100% Prohibited Transactions Tax” under the REIT rules with respect to our property dispositions; and

●

limitations imposed on our business and our ability to satisfy complex rules relating to REIT qualification for U.S. federal income tax ~~purposes; and~~purposes.

·

~~changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs.~~

See Item 1A. Risk Factors in ~~Amendment No. 2 of~~ our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 and Item 1A. Risk Factors in this Quarterly Report on Form 10-Q for further discussion of these and other risks, as well as the risks, uncertainties and other factors discussed in this Report and identified in other documents we may file with the ~~United States Securities and Exchange Commission (the “SEC”)~~SEC from time to time. You should carefully consider these risks before making any investment decisions in our company. New risks and uncertainties may also emerge from time to time that could materially and adversely affect us. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes after the date of this Report, except as required by applicable law. You should not place undue reliance on any forward-looking statements that are based on information currently available to us or the third parties making the forward-looking statements.

~~- 23 -~~

Overview

Global Medical REIT Inc. (the “Company,” “us,” “we,” or “our”) is ~~an externally-managed,~~a Maryland corporation engaged primarily in the acquisition of ~~licensed, state-of-the-art,~~ purpose-built healthcare facilities and the leasing of ~~these~~those facilities to strong ~~clinical operators~~healthcare systems and physician groups with leading market share. We

On July 9, 2020, the Company completed ~~our initial public offering (“IPO”) in July~~a management internalization transaction and is now an internally-managed company. See “- Recent Developments - Management Internalization Transaction,” for a description of ~~2016 and, as of September 30, 2017, had 21,630,675 shares of common stock outstanding.~~

As of September 30, 2017, our portfolio consisted of 29 facilities with an aggregate of approximately 1,186,462 net leasable square feet and an average remaining lease term of approximately 9.22 years. We seek to acquire or enter into (primarily through sale/leaseback transactions) triple-net leases, pursuant to which our tenants are responsible for all operating expenses relating to the property, that also contain annual rent escalation provisions. This leasing structure provides us with more predictable cash flow and increasing returns from our properties. The table below summarizes our portfolio as of September 30, 2017:

Facility Location Date Acquired Facility Type Net Leasable Square Feet Lease Years Remaining Annualized $Rent¹ Annualized $ Rent Per Square Foot¹
Omaha Omaha, NE 6/5/2014 LTAC 41,113 4.93 $ 1,762,512 $ 42.87
Asheville Asheville, NC 9/19/2014 ASC 8,840 4.61 237,621 26.88
West Mifflin West Mifflin, PA 9/25/2015 MOB/
ASC 27,193 13.16 783,653 28.82
Tennessee Memphis, TN 12/31/2015 MOB/
ASC 52,266 10.43 1,300,000 24.87
Plano Plano, TX 1/28/2016 Surgical Hospital 24,000 18.50 1,278,000 53.25
Westland Detroit, MI 3/31/2016 ASC 15,018 8.68 389,500 25.94
Melbourne Melbourne, FL 3/31/2016 MOB/
Imaging 75,899 8.68 1,104,675 14.55
Reading Wyomissing, PA 7/20/2016 MOB/
ASC 23,500 8.98 690,045 29.36
East Orange East Orange, NJ 9/29/2016 MOB 60,442 9.17 961,753 15.91
Watertown Watertown, SD 9/30/2016 MOB 46,884 14.17 707,167 15.08
Sandusky Sandusky, OH 10/7/16 – 8/15/17 MOB 55,760 10.26 842,481 15.11
Carson City Carson City, NV 10/31/2016 MOB 20,632 6.26 344,000 16.67
Ellijay Ellijay, GA 12/16/2016 MOB 44,162 8.92 364,224 8.25
HealthSouth Mesa Mesa, AZ 12/20/2016 IRF 51,903 7.26 1,710,617 32.96
HealthSouth Altoona Altoona, PA 12/20/2016 IRF 70,007 3.78 1,671,760 23.88
HealthSouth Mechanicsburg Mechanicsburg. PA 12/20/2016 IRF 78,836 3.78 1,877,298 23.81
Cape Coral Cape Coral, FL 1/10/2017 MOB 25,814 9.51 529,187 20.50
Lewisburg Lewisburg, PA 1/12/2017 MOB/
Imaging 28,480 5.76 542,501 19.05
Las Cruces Las Cruces, NM 2/1/2017 MOB 15,761 11.51 354,623 22.50
Prescott Prescott, AZ 2/9/2017 MOB 12,000 9.09 360,000 30.00
Clermont Clermont. FL 3/1/2017 MOB 18,152 3.58 361,915 19.94
OCOM Oklahoma City, OK 3/31/2017 Surgical Hospital 96,596 8.58 3,535,294 36.60
Great Bend Great Bend, KS 3/31/2017 Hospital 63,978 14.68 2,143,750 33.51
Brockport Brockport, NY 6/27/2017 MOB 29,497 13.23 620,653 21.04
Flower Mound Flower Mound, TX 6/27/2017 ASC 10,062 9.17 288,362 28.66
Sherman Sherman, TX 6/30/2017 IRF/LTAC 69,3522 19.92 2,346,140 33.83
Lubbock Lubbock, TX 8/18/2017 MOB 27,280 12.00 600,160 22.00
Germantown Germantown, TN 8/30/2017 MOB/
ASC 33,777 6.67 1,459,024 43.20
Austin Austin, TX 9/25/2017 Rehab.
Hospital 59,258 9.58 2,884,650 48.68
Total Portfolio/Average 1,186,462 9.22 $ 32,051,565 $ 27.01

¹

Calculated by multiplying (a) monthly rent in place at September 30, 2017, by (b) 12. Accordingly, this methodology produces an annualized figure but does not take into account future contractual rental rate increases.

²

~~Does not include 12,000 square feet of shell space.~~

~~- 24 -~~

Definitions for acronyms used in the “Facility Type” column in the table above are as follows: “LTAC” refers to Long-Term Acute Care; “ASC” refers to Ambulatory Surgical Center; “MOB” refers to Medical Office Building; and “IRF” refers to Inpatient Rehabilitation Facility.

transaction.

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~~wholly owned subsidiaries of our operating partnership, Global Medical REIT L.P. (the “Operating Partnership”). Our ~~wholly-owned~~wholly owned subsidiary, Global Medical REIT GP, LLC, is the sole general partner of our Operating Partnership and, as of ~~September~~June 30, ~~2017,~~2020, we owned ~~approximately 97.64%~~93.81% of the outstanding common operating partnership units (“OP Units”) of our Operating Partnership.

Impact of COVID-19 and Business Outlook

The COVID-19 pandemic did not have a material impact on our results of operations, liquidity and capital resources as of and for the three and six months ended June 30, 2020. While we are still navigating the actual and potential impacts the pandemic will have on our tenants and our business, the sections below summarize management’s view of the potential impacts the COVID-19 pandemic may have on our future results of operations, liquidity and capital resources, and other various company-specific matters.

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The COVID-19 outbreak and the measures taken by governmental authorities to contain its spread have resulted in substantial adverse effects on the U.S. economy, and specifically the healthcare industry. The full impact of COVID-19 on the U.S. economy and our tenants’ businesses and operations remains unknown, as the velocity of this economic slowdown and the subsequent job losses are unique and historical in many ways. While these events have already had a significant impact on the healthcare industry, we cannot reasonably estimate the duration and severity of such impact. However, at the onset of the outbreak, we began working with certain of our tenants that were experiencing significant disruptions in their businesses to help them navigate these uncertain times, including assisting our tenants in applying for government financial relief and, in certain limited circumstances, entering into rent deferral agreements. During the second quarter of 2020, we reduced our rent deferrals to $1.1 million, which represents rent deferred from April through July 2020 that is now expected to be collected primarily over the period from July through December 2020. Because the extent of the impact of COVID-19 on our tenants will depend on future developments, there can be no assurance that our tenants will be able meet the requirements of these agreements, or that these tenants, or other tenants, may not seek additional relief in the future (including tenants that have withdrawn from their initial rent deferral agreements). The extent of the impact of COVID-19 on our liquidity and operational and financial performance will depend on, among other things, the ability of our tenants to resume regular operations, including performing elective procedures, and returning to normal patient volumes.

At the onset of the outbreak, many states banned elective and non-urgent medical procedures. Many states have since lifted these bans; however, the recent resurgence of COVID-19 cases in many states, including many states in which our facilities are located, may cause such states to reinstitute these bans. Given that many of our tenants depend on elective and non-urgent medical procedures as a major source of revenue, a reinstituted ban on these procedures will have a material adverse effect on our tenants’ businesses. In addition, in response to the recent resurgence of the COVID-19 pandemic, local, state and federal agencies have or may reinstitute stay-at-home or shelter-in-place orders, which have resulted, and may in the future result, in many of our tenants experiencing significantly reduced patient volumes and, when such bans and restrictions are lifted, patients may be reluctant to undertake certain medical procedures and our tenants may institute social distancing measures, each of which may cause our tenants to experience decreased patient volumes for an extended period of time. In addition, if additional government funding is not provided under the Coronavirus Aid, Relief, and. Economic Security Act (the “CARES Act") or new legislation, our tenants may not be able to rely on future government assistance programs to withstand the current or another downturn in their businesses.

Although we have been able to acquire or place under contract approximately $147 million of 2020 acquisitions, the COVID-19 pandemic is having a significant negative impact on the real estate market and our current acquisition pipeline. A prolonged period of market disruption could have a material adverse effect on our acquisition growth.

As of July 31, 2020, we had cash balances and available capacity under our Credit Facility of approximately $128 million. We will seek to maximize our liquidity during current market conditions through cash from our operations, credit facility drawdowns and, when possible, managing the timing of property acquisitions. In addition, we believe that we could issue equity to support our liquidity needs.

Our Business Objectives and Investment Strategy

Our principal business objective is to provide attractive, risk-adjusted returns to our stockholders through a combination of (i) reliable dividends and (ii) long-term capital appreciation. Our primary strategies to achieve our business objective are to:

●

construct a property portfolio that consists substantially of medical office buildings (MOBs), specialty hospitals, in-patient rehabilitation facilities (IRFs) and ambulatory surgery centers (ASCs), that are primarily located in secondary markets and are situated to take advantage of the aging of the U.S. population and the decentralization of healthcare;

●

focus on practice types that will be utilized by an aging population and are highly dependent on their purpose-built real estate to deliver core medical procedures, such as cardiovascular treatment, rehabilitation, eye surgery, gastroenterology, oncology treatment and orthopedics;

●

set aside a portion of our property portfolio for opportunistic acquisitions, including (i) certain acute-care hospitals and long-term acute care facilities (LTACs), that we believe provide premium, risk-adjusted returns and (ii) health system corporate office and administrative buildings, which we believe will help us develop relationships with larger health systems;

●

lease our facilities under long-term, triple-net leases with contractual annual rent escalations;

●

lease each facility to medical providers with a track record of successfully managing excellent clinical and profitable practices; and

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●

receive credit protections from our tenants or their affiliates, including personal and corporate guarantees, rent reserves and rent coverage requirements.

Executive Summary

The following table summarizes the material changes in our business and operations during the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019

	(in thousands, except per share amounts)

Rental revenue	$	22,036	$	16,835	$	43,569	$	31,976
Depreciation and amortization expense	$	8,941	$	5,863	$	16,698	$	10,732
Interest expense	$	4,375	$	4,132	$	8,752	$	8,157
General and administrative expense	$	1,643	$	1,640	$	3,482	$	3,246

Net income attributable to common stockholders per share	$	0.00	$	0.03	$	0.03	$	0.05
FFO per share and unit⁽¹⁾	$	0.19	$	0.18	$	0.38	$	0.35
AFFO per share and unit⁽¹⁾	$	0.21	$	0.18	$	0.41	$	0.35
Dividends per share of common stock	$	0.20	$	0.20	$	0.40	$	0.40

Weighted average common stock outstanding		45,404		34,559		44,793		30,990
Weighted average OP Units outstanding		2,023		3,143		2,398		3,144
Weighted average LTIP Units outstanding		1,088		785		978		719
Total weighted average shares and units outstanding		48,515		38,487		48,169		34,853

(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
	June 30,			December 31,
	2020			2019

	(dollars in thousands)
Total investment in real estate, gross	$	996,876		$	905,529
Total debt, net	$	466,460		$	386,168
Weighted average interest rate		3.46	%		3.90	%
Total equity (including noncontrolling interest)	$	442,709		$	460,353
Net rentable square feet		3,222,300			2,780,851

Our Properties

As of June 30, 2020, our portfolio consisted of gross investment in real estate of $996.9 million, which was comprised of 73 facilities with an aggregate of approximately 3.2 million rentable square feet and approximately $77.4 million of annualized base rent.

Capital Raising Activity

During the six months ended June 30, 2020, we generated gross proceeds of $14.2 million through at-the-market ("ATM") equity issuances of 1.2 million shares of our common stock at an average offering price of $11.44 per share.

Debt Activity

During the six months ended June 30, 2020, we borrowed $88.7 million under our Credit Facility and repaid $20.9 million, for a net amount borrowed of $67.8 million. As of June 30, 2020, the net outstanding Credit Facility balance was $415.9 million.

In connection with the acquisition of the Dumfries facility, we assumed a CMBS loan with an outstanding balance of approximately $12.1 million, an interest rate of 4.68% and a remaining term of four years.

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Recent Developments

~~Completed Series A Preferred Stock Offering~~

Management Internalization Transaction

On ~~September 15, 2017,~~July 9, 2020, the Company internalized the functions performed by its Advisor by acquiring Inter-American Group Holdings Inc. (“IAGH”), which is the parent company of the Advisor (the “Internalization”), for an aggregate purchase price of $18.1 million, subject to working capital adjustments.

The Internalization was completed pursuant to a stock purchase agreement, dated as of July 9, 2020 (the “Stock Purchase Agreement”), by and among the Company, Zensun Enterprises Limited (“Zensun”) and Mr. Jeffrey Busch. The Advisor is a wholly-owned subsidiary of IAGH, which was owned by Zensun (85%) and Mr. Busch (15%) (collectively, the “Sellers”).

A special committee (the “Special Committee”) comprised entirely of independent and disinterested members of the Company’s board of directors (the “Board”), after consultation with its independent legal and financial advisors, determined that the Internalization was fair to, and in the best interests of, the Company and the Company’s stockholders and recommended that the Board authorize and approve the Internalization. Upon such recommendation from the Special Committee, the Board authorized and approved the Internalization. Approval by the Company’s stockholders was not required to approve the Internalization.

Pursuant to the Stock Purchase Agreement, the Sellers sold all the outstanding shares of capital stock of IAGH to the Company in exchange for an aggregate of approximately $17.6 million in cash paid at the closing, which reflected the net working capital adjustment. Additionally, Zensun and Mr. Busch pledged an aggregate of $1.8 million of shares of the Company’s common stock and LTIP Units of the Operating Partnership to satisfy future potential indemnification obligations.

Employment Agreements and Severance Plan

On July 9, 2020, a subsidiary of the Company entered into employment agreements with each of Mr. Jeffrey Busch, Mr. Robert Kiernan and Mr. Alfonzo Leon and established a severance plan for other employees.

Closing of Credit Facility Accordion and Related Hedge Transaction

On July 24, 2020, the Company received aggregate commitments of up to $100 million from certain of its lenders pursuant to the accordion feature (the “Accordion”) under its Credit Facility. The remaining terms of the Credit Facility were unchanged. With the closing of the Accordion, the borrowing capacity under the Company’s Credit Facility was increased to $600 million, consisting of a $250 million capacity revolver, a $350 million term loan, and a remaining $50 million accordion.

In connection with the closing of the Accordion, on July 27, 2020, the Company entered into an interest rate swap with Wells Fargo Bank, N.A. with a notional amount of $50 million (the term component of the Accordion), a fixed interest rate of 0.158% and a maturity date of August 8, 2023.

Completed Acquisitions

Since June 30, 2020, we have closed on the ~~public underwritten offering~~following properties:

Rentable

Purchase

Annualized


Square Feet

Price(1)

Base Rent(2)

Capitalization

Property

City

(RSF)

(in thousands)

(in thousands)

Rate(3)

MercyOne Hospital

Centerville, IA

15,748

$
5,000

$
351

7.0
%
Spectrum (Team Health)

Fairfax, VA

73,653

17,625

1,234

7.0
%
Franklin Square Center

Rosedale, MD

96,564

22,500

1,568

7.0
%
Totals/Weighted Average



185,965

$
45,125

$
3,153

7.0
%
(1) Represents contractual purchase price.
(2) June 2020 base rent or month of acquisition base rent multiplied by 12 (or expected NOI for Franklin Square Center).
(3) Capitalization rates are calculated based on current lease terms and do not give effect to future rent escalations.

-37-

Table of 3,105,000 shares of our Series A Cumulative Redeemable Preferred Stock, $0.001 par value per share, with a liquidation preference of $25 per share (the “Series A Preferred Stock”), inclusive of 405,000 shares issued in connection with the underwriters’ exercise of their over-allotment option. The issuance raised aggregate net proceeds of approximately $75 million.Contents

Properties Under Contract

~~Completed Acquisitions~~

~~During the three months ended September 30, 2017, we completed four acquisitions with~~We have two properties under contract for an aggregate purchase price of approximately ~~$66~~$15 million. During the nine months ended September 30, 2017, we completed 16 acquisitions with an aggregate purchase price of approximately $215 million. Our gross investment in real estate balance was $422.3 million and $206.9 million as of September 30, 2017 and December 31, 2016, respectively. A summary description of the facilities acquiredWe are currently in the ~~third quarter~~due diligence period for our properties under contract. If we identify problems with any of ~~2017 is contained in Note 3 – “Property Portfolio,” to~~these properties or the ~~notes to~~operators of any properties during our due diligence review, we may not close the ~~consolidated financial statements.~~transactions on a timely basis or we may terminate the purchase agreements and not close the transactions.

Trends Which May Influence Our Results of Operations

We believe the following trends ~~in the healthcare real estate market positively~~may negatively impact our ~~lease revenues and the ability to make distributions to our shareholders:~~

results of operations:

·●

~~growing~~Decreases in our tenants’ patient volumes and revenues due to the COVID-19 pandemic – In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of coronavirus, a pandemic. This outbreak, which has spread widely throughout the U.S. and nearly all other regions of the world, has prompted federal, state and local governmental authorities in the U.S. to declare states of emergency and institute preventative measures to contain and/or mitigate the public health effects. Many states initially banned elective and non-urgent medical procedures and have since lifted such bans; however, the recent resurgence of COVID-19 cases in many states, including many states in which our facilities are located, may cause such states to reinstitute these bans. Given that many of our tenants depend on elective and non-urgent medical procedures as a major source of revenue, a reinstituted ban on these procedures will have a material adverse effect on our tenants’ businesses. In addition, in response to the recent resurgence of the COVID-19 pandemic, local, state and federal agencies have reinstituted or may reinstitute stay-at-home or shelter-in-place orders, which have resulted, and may in the future result, in many of our tenants experiencing significantly reduced patient volumes and, when such bans and restrictions are lifted, patients may be reluctant to undertake certain medical procedures and our tenants may institute social distancing measures, each of which may cause our tenants to experience decreased patient volumes for an extended period of time.

At the onset of the outbreak, we began working with certain of our tenants that were experiencing significant disruptions in their businesses to help them navigate these uncertain times, including assisting them in applying for government financial relief and, in certain limited circumstances, entering into rent deferral agreements. During the second quarter of 2020, we reduced our rent deferrals to $1.1 million, which represents rent deferred from April through July 2020 that is now expected to be collected primarily over the period from July through December 2020. Because the extent of the impact of COVID-19 on the Company’s tenants will depend on future developments, there can be no assurance that the Company’s tenants will be able meet the requirements of these agreements, or that these tenants, or other tenants, may not seek additional relief in the future (including tenants that have withdrawn from their initial rent deferral agreements).

●

Fewer acquisition opportunities due to the COVID-19 pandemic. Although as of date of this report we have acquired or had under contract approximately $147 million of acquisitions in 2020, the COVID-19 pandemic has altered the market for healthcare ~~expenditures;~~real estate, and we have experienced a dramatic decrease in our investment pipeline, which could affect our future growth prospects.

·●

~~an aging population;~~Lower patient volumes and increased patient credit risks due to the U.S.’s record unemployment levels. The U.S. is currently experiencing historically high unemployment rates. Many unemployed workers have also lost their employer-based health insurance, which is a primary payor for our tenants. The extraordinarily high levels of U.S. unemployment and loss of health insurance may cause people to cancel or delay medical procedures even after the COVID-19 pandemic subsides, and it is unclear when, if ever, these workers will be able to regain employment or private health insurance. An extended period of high unemployment and loss of benefits could materially, adversely affect our tenants’ businesses and thus our ability to collect rent from our tenants.

-38-

Table of Contents

●

Increase in cost and availability of capital due to COVID-19. The COVID-19 pandemic has caused substantial volatility in U.S. and international debt and equity markets and has caused significant decreases in the market prices of equity securities, including our common stock. Given these market movements, if we are able to raise equity capital in the near future, we expect such capital to be raised at a substantially higher cost of capital than existed prior to the COVID-19 pandemic. Additionally, as a result of the uncertainty surrounding the COVID-19 pandemic, many companies have drawn down the entirety of their credit facilities, which has put stress on lenders to conserve capital. Although we believe we have sufficient liquidity to withstand the current expected disruption in the timing of our rental revenues, it is impossible to predict the magnitude and length of the COVID-19 pandemic. If the magnitude and length of the COVID-19 pandemic exceeds our current expectations, we may experience liquidity issues that we may or may not be able to solve through capital raising or borrowing efforts. If we are unable to resolve any potential liquidity issues through capital raising, borrowings, or cash management measures, we may be forced to suspend or reduce our dividends or sell assets in order to meet our liquidity requirements.

·●

~~a continuing shift towards outpatient care;~~

·

~~physician practice group and hospital consolidation;~~

·

~~healthcare industry employment growth;~~

·

~~expected monetization and modernization of healthcare real estate; and~~

·

~~a highly fragmented healthcare real estate market.~~

~~- 25 -~~

~~We believe the following trends in the healthcare real estate market may negatively impact our lease revenues and the ability to make distributions to our shareholders:~~

·

~~changes in demand for and methods of delivering healthcare services;~~

·

~~changes~~Changes in third party reimbursement methods and ~~policies;~~policies. Even prior to the COVID-19 pandemic, the price of healthcare services was increasing, and we believed that third-party payors, such as Medicare and commercial insurance companies, would continue to scrutinize and reduce the types of healthcare services eligible for, and the amounts of, reimbursement under their health insurance plans. Additionally, many employer-based insurance plans were continuing to increase the percentage of insurance premiums for which covered individuals are responsible. We expect these trends will only be exacerbated by the COVID-19 pandemic, as federal and state budgets are likely to be under tremendous stress due to the pandemic and private insurers are likely to incur substantial losses due to COVID-19-related claims and the downturn in the financial and credit markets. If these trends continue, our tenants’ businesses will continue to be negatively affected, which may impact their ability to pay rent to us.

Prior to the COVID-19 pandemic, we believed the following trends may positively impact our results of operations:

●

Growing healthcare expenditures. According to the U.S. Department of Health and Human Services, overall healthcare expenditures are expected to grow at an average rate of 5.5% per year through 2027. We believe the long-term growth in healthcare expenditures will help maintain or increase the value of our healthcare real estate portfolio.

·●

~~increased scrutiny~~An aging population. According to the 2010 U.S. Census, the segment of ~~billing, referral~~the population consisting of people 65 years or older comprise the fastest growing segment of the overall U.S. population. 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 ~~other practices by U.S. federal and state authorities.~~rehabilitation.

●

A continuing shift towards outpatient care. 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 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.

After the COVID-19 pandemic, it is unclear whether the above-listed positive trends will be reinstated or, if so, how such trends may be affected by the long-term effects of the COVID-19 pandemic.

Qualification as a REIT

We elected to be taxed as 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. 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. We believe that we have 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 so as to qualify or remain qualified as a REIT.

-39-

Table of Contents

Critical Accounting ~~Policies~~Policy

~~Refer~~The preparation of financial statements in conformity with GAAP requires us to use judgment in the application of accounting policies, including making estimates and assumptions. We base estimates on the best information available to us at the time, our ~~audited consolidated~~experience and on various other assumptions believed to be reasonable under the circumstances. These estimates affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and ~~notes thereto~~the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions or other matters had been different, it is possible that different accounting would have been applied, resulting in a different presentation of our financial statements. From time to time, we re-evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current estimates and assumptions about matters that are inherently uncertain. Please refer to our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019, filed with the Commission on March 9, 2020, for ~~a discussion of our significant accounting policies, including~~further information regarding the critical accounting policies ~~of: purchase~~that affect our more significant estimates and judgments used in the preparation of ~~real estate, impairment of long lived assets, revenue recognition, fair value of~~our condensed consolidated financial ~~instruments, and stock-based compensation, which are~~statements included in ~~our 2016 Annual Report on Form 10-K, which was filed with the SEC on March 27, 2017. During the nine months ended September 30, 2017, there were no material changes to these policies.~~Part I, Item 1 of this Report.

Consolidated Results of Operations

The major factor that resulted in variances in our results of operations for each revenue and expense category for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020 compared to the ~~three and nine months ended September 30, 2016~~same periods in 2019 was the increase in the size of our property portfolio. Our total investments in real estate, net of accumulated depreciation and amortization, was ~~$412.1~~$922.9 million and ~~$122.3~~$721.7 million as of ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

Three Months Ended ~~September~~June 30, ~~2017~~2020 Compared to Three Months Ended ~~September~~June 30, ~~2016~~2019


									Three Months Ended June 30,
									2020		2019		$ Change
	For the Three Months Ended
	September 30, 2017		September 30, 2016			$ Change
									(in thousands)
Revenue
Rental revenue	$	7,921,913	$	1,932,425		$	5,989,488		$	22,036	$	16,835	$	5,201
Expense recoveries		443,816		-			443,816
Other income		23,134		70,225			(47,091	)		19		45		(26)
Total revenue		8,388,863		2,002,650			6,386,213			22,055		16,880		5,175


Expenses
Acquisition fees		651,645		-			651,645
General and administrative		989,526		1,720,651			(731,125	)		1,643		1,640		3
Operating expenses		464,514		1,025			463,489			2,336		1,143		1,193
Management fees – related party		803,804		627,147			176,657			2,021		1,584		437
Depreciation expense		2,175,668		585,449			1,590,219			6,593		4,608		1,985
Amortization expense		523,487		-			523,487			2,348		1,255		1,093
Interest expense		2,174,683		1,051,204			1,123,479			4,375		4,132		243
Management internalization expense										920		—		920
Preacquisition expense										147		56		91
Total expenses		7,783,327		3,985,476			3,797,851			20,383		14,418		5,965
Net income (loss)	$	605,536	$	(1,982,826	)	$	2,588,362
Net income									$	1,672	$	2,462	$	(790)

Revenue

Total Revenue

Total revenue for the three months ended ~~September~~June 30, ~~2017~~2020 was ~~$8,388,863,~~$22.1 million, compared to ~~$2,002,650~~$16.9 million for the same period in ~~2016,~~2019, an increase of ~~$6,386,213.~~$5.2 million. The increase iswas primarily the result of rental revenue earned from the facilities that we acquired subsequent to ~~September~~June 30, ~~2016,~~2019, as well as from the recognition of a full three months of rental revenue ~~relating to~~in 2020 from acquisitions that ~~occurred~~were completed during the three months ended ~~September~~June 30, ~~2016.~~2019. Additionally, ~~$443,816~~$1.9 million in revenue was recognized from expense recoveries during the three ~~month~~months ended June 30, 2020, compared to $1.1 million for the same period ~~ended September 30, 2017, which~~in 2019. The increase was partially offset by the recognition of reserves for approximately $1 million of rent, including approximately $0.4 million of deferred rent, primarily related to ~~tenant reimbursement~~one tenant.

-40-

Table of ~~real estate taxes, insurance,~~Contents

Expenses

General and ~~certain other operating expenses. We recognize these reimbursements~~Administrative

General and ~~related~~administrative expenses on a gross basis in our Consolidated Statements of Operations (i.e., we recognize an equivalent increase in revenue (expense recoveries) and expense (operating expenses)). We did not recognize any revenue from expense recoveries duringfor both the three ~~month period~~months ended ~~September~~June 30, ~~2016.~~2020 and 2019 were $1.6 million. Included in general and administrative expenses were non-cash LTIP compensation expense of $0.9 million for both the three months ended June 30, 2020 and June 30, 2019.

Operating Expenses

~~- 26 -~~

~~Expenses~~

~~Acquisition Fees~~

~~Acquisition fees to unrelated parties~~Operating expenses for the three months ended ~~September~~June 30, ~~2017~~2020 were ~~$651,645,~~$2.3 million, compared to $1.1 million for the same period in 2019, an increase of $1.2 million. The increase resulted from $1.9 million of reimbursable property operating expenses incurred during the three months ended June 30, 2020, compared to $1.1 million for the same period in 2019, and $0.4 million of expense from properties that include tenants with gross leases.

Management Fee Expense – related party

Management fee expense for the three months ended June 30, 2020 was $2.0 million, compared to $1.6 million for the same period in 2019, an increase of $0.4 million. This fee is calculated based on our stockholders’ equity balance and the increase in 2020 is the result of our larger stockholders’ equity balance as of June 30, 2020, reflecting the impact of our common stock issuances that were completed subsequent to the second quarter of 2019.

Depreciation Expense

Depreciation expense for the three months ended June 30, 2020 was $6.6 million, compared to $4.6 million for the same period in 2019, an increase of $2.0 million. The increase resulted primarily from depreciation expense incurred on the facilities that we acquired subsequent to June 30, 2019, as well as from the recognition of a full three months of depreciation expense in 2020 from acquisitions that were completed during the three months ended June 30, 2019.

Amortization Expense

Amortization expense for the three months ended June 30, 2020 was $2.3 million, compared to $1.3 million for the same period in 2019, an increase of $1.0 million. The increase resulted primarily from amortization expense incurred on intangible assets acquired subsequent June 30, 2019, as well as from the recognition of a full three months of amortization expense in 2020 from intangible assets recorded during the three months ended June 30, 2019.

Interest Expense

Interest expense for the three months ended June 30, 2020 was $4.4 million, compared to $4.1 million for the same period in 2019, an increase of $0.3 million. This increase was primarily due to higher average borrowings during the three months ended June 30, 2020, compared to the same period last year, the proceeds of which were partially used to finance our property acquisition during that time period.

The weighted average interest rate of our debt for the three months ended June 30, 2020 was 3.38%. Additionally, the weighted average interest rate and term of our debt was 3.46% and 3.27 years at June 30, 2020.

Management Internalization Expense

Management internalization expense for the three months ended June 30, 2020 was $0.9 million, compared to zero for the same period in ~~2016. These acquisition fees during~~2019. This expense represents costs associated with the ~~2017~~Internalization.

-41-

Table of Contents

Net Income

Net income for three months ended June 30, 2020 was $1.7 million, compared to $2.5 million for the same period in 2019, a decrease of $0.8 million. The decrease resulted primarily from an increase in rental revenue over the current three-month period ~~were incurred on our~~that was offset by (i) the increase in expenses for that period, (ii) the recognition of $1.0 million of rent reserves and (iii) the recognition of $0.9 million of management internalization expense.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Six Months Ended June 30,

2020

2019

$ Change

(in thousands)

Revenue









Rental revenue

$
43,569

$
31,976

$
11,593
Other income

135

104

31
Total revenue

43,704

32,080

11,624

Expenses






General and administrative

3,482

3,246

236
Operating expenses

4,639

2,466

2,173
Management fees – related party

4,024

2,918

1,106
Depreciation expense

12,429

8,475

3,954
Amortization expense

4,269

2,257

2,012
Interest expense

8,752

8,157

595
Management internalization expense

1,424

—

1,424
Preacquisition expense

196

56

140
Total expenses

39,215

27,575

11,640
Net income

$
4,489

$
4,505

$
(16)

Revenue
Total Revenue
Total revenue for the six months ended June 30, 2020 was $43.7 million, compared to $32.1 million for the same period in 2019, an increase of $11.6 million. The increase is primarily the result of rental revenue earned from the facilities we acquired subsequent to June 30, 2019, as well as from the recognition of a full six months of rental revenue in 2020 from acquisitions that were ~~accounted for as business combinations. No acquisitions were accounted for as business combinations~~completed during the ~~three-month~~six months ended June 30, 2019. Additionally, $3.8 million in revenue was recognized from expense recoveries during the six months ended June 30, 2020, compared to $2.4 million for the same period in ~~2016.~~2019. The increase was partially offset by the recognition of reserves for approximately $1 million of rent, including approximately $0.4 million of deferred rent, primarily related to one tenant.
Expenses
General and Administrative
General and administrative expenses for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020 were ~~$989,526,~~$3.5 million, compared ~~with $1,720,651~~to $3.2 million for the same period in ~~2016, a decrease~~2019, an increase of ~~$731,125. This decrease~~$0.3 million. The increase was primarily related to an increase in non-cash LTIP compensation expense which was $1.8 million for the six months ended June 30, 2020, compared to $1.6 million for the ~~corresponding~~same period in ~~the prior year primarily relates to a decrease in non-cash compensation expense incurred on the LTIP units reflecting the impact~~2019.

-42-

Table of LTIP forfeitures, a decrease in legal expense due to the internalization of many of our legal costs, as well as a decrease in insurance expense recognized reflecting actions taken to reduce property insurance costs.Contents

Operating ~~expenses~~

Expenses

Operating expenses for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020 were ~~$464,514,~~$4.6 million, compared ~~with $1,025~~to $2.5 million for the same period in ~~2016,~~2019, an increase of ~~$463,489. Operating expenses primarily consist of $443,816~~$2.1 million. The increase results from $3.8 million of reimbursable property operating expenses ~~that we paid on behalf of certain of our tenants but also for which we receive reimbursement from~~incurred during the ~~tenant under the applicable lease.~~

~~Management Fees – related party~~

~~Management fees for the three~~six months ended ~~September~~June 30, ~~2017 were $803,804,~~2020, compared ~~with $627,147~~to $2.4 million for the same period in ~~2016,~~2019, and $0.7 million of expense from properties that include tenants with gross leases.

Management Fees Expense - related party

Management fee expense for the six months ended June 30, 2020 was $4.0 million, compared to $2.9 million for the same period in 2019, an increase of ~~$176,657. The~~$1.1 million. This fee is calculated based on our stockholders’ equity balance and the increase in 2020 is the ~~management fee during the current quarter results from a~~result of our larger stockholders’ equity balance ~~due~~during the six months ended June 30, 2020 compared to the prior year, reflecting the impact of our common stock and ~~preferred stock~~OP Unit issuances that were completed ~~during 2017.~~subsequent to June 30, 2019.

Depreciation Expense

Depreciation expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$2,175,668,~~$12.4 million, compared ~~with $585,449~~to $8.5 million for the same period in ~~2016,~~2019, an increase of ~~$1,590,219.~~$3.9 million. The increase results primarily from depreciation expense incurred on the facilities we acquired subsequent to ~~September~~June 30, ~~2016 and~~2019, as well as from the recognition of a full six months of depreciation expense ~~for a full three-month period related to~~in 2020 from acquisitions that were completed during the ~~three~~six months ended ~~September~~June 30, ~~2016.~~ 2019.

Amortization Expense

Amortization expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$523,487,~~$4.3 million, compared to ~~zero~~$2.3 million for the same period in ~~2016. Amortization~~2019, an increase of $2.0 million. The increase results primarily from amortization expense ~~was~~ incurred on ~~the in-place lease and leasing cost~~ intangible assets ~~recognized~~recorded subsequent to June 30, 2019, as well as from ~~our acquisitions that were accounted for as business combinations. No acquisitions were accounted for as business combinations~~the recognition of a full six months of amortization expense in 2020 from intangible assets recorded during the ~~three-month period in 2016.~~six months ended June 30, 2019.

Interest Expense

Interest expense for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$2,174,683,~~$8.8 million, compared ~~with $1,051,204~~to $8.2 million for the same period in ~~2016,~~2019, an increase of ~~$1,123,479.~~$0.6 million. This increase iswas primarily due to higher average borrowings during the ~~current quarter reflecting~~three months ended June 30, 2020, compared to the same period last year, the proceeds of which were used to finance our property acquisitions during that time period.

The weighted average interest ~~incurred on~~rate of our debt for the ~~outstanding borrowings from our revolving credit facility as well as amortization of the deferred financing costs incurred to procure debt, which is recorded as interest expense.~~

six months ended June 30, 2020 was 3.58%. The weighted average interest rate and term of our debt was ~~3.84%~~3.46% and ~~3.43~~3.27 years ~~respectively,~~ at ~~September~~June 30, ~~2017, compared to 4.88% and 8.13 years, respectively, at September 30, 2016.~~2020.

Management Internalization Expense

~~- 27 -~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

For the Nine Months Ended
September 30, 2017 September 30, 2016 $ Change
Revenue
Rental revenue $ 19,217,710 $ 4,994,172 $ 14,223,538
Expense recoveries 1,141,455 - 1,141,455
Other income 111,502 93,196 18,306
    Total revenue 20,470,667 5,087,368 15,383,299

Expenses
Acquisition fees 2,130,187 - 2,130,187
Acquisition fees – related party - 754,000 (754,000 )
General and administrative 4,418,115 2,962,730 1,455,385
Operating expenses 1,234,247 15,685 1,218,562
Management fees – related party 2,059,325 807,147 1,252,178
Depreciation expense 5,372,308 1,528,281 3,844,027
Amortization expense 1,326,395 - 1,326,395
Interest expense 5,265,262 3,443,113 1,822,149
    Total expenses 21,805,839 9,510,956 12,294,883
    Net loss $ (1,335,172 ) $ (4,423,588 ) $ 3,088,416
~~Revenue~~
~~Total Revenue~~
~~Total revenue~~Management internalization expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was $20,470,667, compared to $5,087,368 for the same period in 2016, an increase of $15,383,299. The increase is primarily the result of rental revenue derived from the facilities acquired subsequent to September 30, 2016, as well as from the recognition of a full nine months of rental revenue relating to acquisitions that occurred during the nine months ended September 30, 2016. Additionally, $1,141,455 in revenue was recognized from expense recoveries during the nine-month period ended September 30, 2017, which related to tenant reimbursement of real estate taxes, insurance, and certain other operating expenses that are recognized as expense recovery revenue. We recognize these reimbursements and related expenses on a gross basis in our Consolidated Statements of Operations (i.e., we recognize an equivalent increase in revenue (expense recoveries) and expense (operating expenses)). We did not recognize any revenue from expense recoveries during the nine month period ended September 30, 2016.
~~Expenses~~
~~Acquisition Fees~~
~~Acquisition fees to unrelated parties for the nine months ended September 30, 2017 were $2,130,187,~~$1.4 million, compared to zero for the same period in ~~2016. These acquisition fees during~~2019. This expense represents costs associated with the ~~nine-month period ended September 30, 2017 were primarily related to acquisitions that were accounted~~Internalization Transaction.
Net Income
Net income for ~~as business combinations. As discussed below in~~both the “Acquisition Fees – related party” section, prior to July 1, 2016, the effective date of our amended management agreement (the “Amended Management Agreement”), our acquisition fees were payable to our Advisor.
~~Acquisition Fees – related party~~
~~Related party acquisition fees for the nine~~six months ended ~~September~~June 30, ~~2017 were zero, compared with $754,000 for~~2020 and 2019 was $4.5 million. The lack of change was the ~~same period in 2016. Related party acquisition fees for the nine months ended September 30, 2016 consisted~~result of $350,000, $309,000 and $95,000 that were expensed in connection with the acquisitions of the Plano Facility, the Melbourne Facility, and the Westland Facility, respectively. Pursuant to our original management agreement, the acquisition fees payable to our Advisor were computed at a rate of 2% of the purchase price of the facility and, subsequent to July 1, 2016, our acquisitions were no longer subject to this fee.
~~General and Administrative~~
General and administrative expenses for the nine months ended September 30, 2017 were $4,418,115, compared with $2,962,730 for the same period in 2016, an increase of $1,455,385. The increase primarily results from an increase of $649,897 in non-cash compensation expense incurred related to the LTIP units during the current nine-month period as well as from an increase in ~~costs incurred~~rental revenue during the ~~nine-month period related to Sarbanes-Oxley implementation and public company related costs such as capital market advisory and investor relations.~~
~~- 28 -~~
~~Operating expenses~~
~~Operating~~six months ended June 30, 2020 that was offset by (i) the increase in expenses for ~~the nine months ended September 30, 2017 were $1,234,247, compared with $15,685 for the same~~that period, in 2016, an increase of $1,218,562. Operating expenses primarily consisted of $1,141,455, of reimbursable property operating expenses that we paid on behalf of certain of our tenants but also for which we receive reimbursement from the tenant under the applicable lease.
~~Management Fees – related party~~
Management fees for the nine months ended September 30, 2017 were $2,059,325, compared with $807,147 for the same period in 2016, an increase of $1,252,178. The increase in the management fee during the nine months ended September 30, 2017 was due primarily to the larger stockholders’ equity balance due to common stock and preferred stock issuances during 2017 as well as changes in the fee calculation described below. The nine-month period ended September 30, 2017 management fee was calculated based on the terms of the Amended Management Agreement, which became effective on July 1, 2016 and requires an annual base management fee equal to 1.5% of our stockholders’ equity (as defined in the Amended Management Agreement). The management fee for the same period in 2016 was calculated based upon the~~terms of~~the Amended Management Agreement from July 1, 2016 through September 30, 2016 ($627,147 of expense) and based on the terms of the original management agreement from January 1, 2016 through June 30, 2016 with a fixed fee of $30,000 per month ($180,000 of expense).
~~Depreciation Expense~~
Depreciation expense for the nine months ended September 30, 2017 was $5,372,308, compared with $1,528,281 for the same period in 2016, an increase of $3,844,027. The increase results from depreciation expense incurred on the facilities acquired subsequent to September 30, 2016 and(ii) the recognition of ~~depreciation expense for a full nine-month period related to acquisitions completed during~~$1.0 million of rent reserves and (iii) the ~~nine months ended September 30, 2016.~~recognition of $1.4 million of management internalization expense.
~~Amortization Expense~~
Amortization expense for the nine months ended September 30, 2017 was $1,326,395, compared to zero for the same period in 2016. Amortization expense was incurred on the in-place lease and leasing cost intangible assets recognized from our acquisitions that were accounted for as business combinations. We had no acquisitions that were accounted for as business combinations during the nine-month period ended September 30, 2016.
~~Interest Expense~~
Interest expense for the nine months ended September 30, 2017 was $5,265,262, compared with $3,443,113 for the same period in 2016, an increase of $1,822,149. This increase is due to higher average borrowings during the current nine-month period reflecting interest incurred on the outstanding borrowings from our revolving credit facility as well as amortization of the deferred financing costs incurred to procure debt, which is recorded as interest expense.
~~The weighted average interest rate and term of our debt was 3.84% and 3.43 years, respectively, at September 30, 2017, compared to 4.88% and 8.13 years, respectively, at September 30, 2016.~~
Assets and Liabilities
As of ~~September~~June 30, ~~2017~~2020 and December 31, ~~2016,~~2019, our principal assets consisted of investments in real estate, ~~net; cash~~net, of $922.9 million and ~~acquired lease intangible assets, net. As of September 30, 2017 and December 31, 2016, our~~$849.0 million, respectively. Our liquid assets consisted primarily of cash and cash equivalents and restricted cash of ~~$6.8~~$13.3 million and ~~$19.7~~$7.2 million, as of June 30, 2020 and December 31, 2019, respectively.

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The increase in our investments in real estate, net, to ~~$412.1~~$922.9 million as of ~~September~~June 30, ~~2017,~~2020 compared to ~~$203.5~~$849.0 million as of December 31, ~~2016,~~2019, was ~~primarily~~ the result of the 16five acquisitions that ~~were~~we completed during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

2020.

The ~~decrease~~increase in our cash ~~balance~~and cash equivalents and restricted cash balances to ~~$6.8~~$13.3 million as of ~~September~~June 30, ~~2017,~~2020, compared to ~~$19.7~~$7.2 million as of December 31, ~~2016,~~2019, was primarily due ~~to $213.5 million of cash used for the 16 acquisitions~~less real estate investment activity during the ~~nine-month~~current period, ended September 30, 2017, $10.8 million of dividends paid during the nine-month period ended September 30, 2017, $2.8 million of cash paid for deferred financing costs during the nine-month period ended September 30, 2017 related to the revolving credit facility, and approximately $0.5 million used to repay related party debt. These decreases in cash were partially offset byhigher net borrowings ~~from the revolving credit facility in the amount of $98.4 million, net proceeds received from~~under our ~~common stock offering of $33.8 million, net proceeds received from our preferred stock offering of approximately $75 million,~~Credit Facility, and an increase in cash provided by operating ~~activities of $7.3 million.~~ activities. These cash inflows were partially offset by lower net proceeds from common equity offerings and higher dividends paid to our common and preferred stockholders.

~~- 29 -~~

The increase in our total liabilities to ~~$175.9~~$523.9 million as of ~~September~~June 30, ~~2017~~2020 compared to ~~$72.3~~$424.6 million as of December 31, ~~2016,~~2019, was primarily the result of higher net borrowings outstanding from our Credit Facility during the ~~revolving credit facility~~current period, an increase in ~~the amount of $98.4 million as well as from increases in the security deposit~~our derivative liability ~~balance, the accounts payable and accrued expenses~~ balance, and the ~~acquired lease intangible liability balance.~~assumption of a CMBS loan in connection with the acquisition of the Dumfries facility.

Liquidity and Capital Resources

~~General~~

General

Our short-term liquidity requirements include:

●

Interest expense and scheduled principal payments on outstanding indebtedness, which includes near term (during 2020) debt maturities of $7.2 million;

●

General and administrative expenses;

●

Operating expenses; and

●

Property acquisitions and tenant improvements.

~~interest expense and scheduled principal payments on outstanding indebtedness,~~

~~general and administrative expenses, and~~

~~acquisition expenses.~~

In addition, we ~~will~~ require funds for future distributions expected to be paid to our common and preferred stockholders and OP Unit and LTIP ~~unit~~Unit holders in our Operating Partnership.

As of ~~September 30, 2017,~~July 31, 2020, our Credit Facility consists of a $250 million capacity revolver, a $350 million term loan and a $50 million accordion. The term of our Credit Facility expires in August 2022, subject to a one-year extension option that we control. As of July 31, 2020, we had ~~$6.8 million of~~ cash balances and ~~also had borrowing~~available capacity under our ~~revolving credit facility as described below.~~Credit Facility of approximately $128 million. Our primary sources of cash include rent and reimbursements we collect from our tenants, borrowings under our ~~revolving credit facility,~~Credit Facility, secured term loans and net proceeds received from equity issuances.

~~On June 30, 2017,~~As of July 31, 2020, we closed a public underwritten offering of our common stock and on July 20, 2017 we closed on the over-allotment option granted to the underwriters. These transactions resulted in an aggregate of 4,025,000 shares of its common stock being issued at a public offering price of $9 per share, resulting in aggregate net proceeds ofestimate that approximately ~~$33.8 million. We used the proceeds from this transaction primarily to repay borrowing on our revolving credit facility.~~

On September 15, 2017, we closed on a public underwritten offering of 3,105,000 shares of our Series A Preferred Stock, $0.001 par value per share, with a liquidation preference of $25 per share, inclusive of 405,000 shares issued in connection with the underwriters’ exercise of their over-allotment option. The issuance raised aggregate net proceeds of approximately $75 million. We used the proceeds from this transaction primarily to repay borrowing on our revolving credit facility.

On March 3, 2017, the Company, the Operating Partnership, as borrower, and the subsidiary guarantors of the Operating Partnership amended our revolving credit facility (the “Revolving Credit Facility”) with BMO Harris Bank N.A., as Administrative Agent, which increased the commitment amount to $200 million plus an accordion feature that allows for up to an additional $50$1.1 million of ~~principal amount~~rent that ordinarily would have been collected during the months of April through July 2020, will be deferred and is now expected to be collected primarily over the period from July through December 2020. Assuming this level of rent deferrals, we believe we will be able to satisfy our short-term liquidity requirements through our existing cash and cash equivalents and cash flow from operations. In order to continue acquiring healthcare properties and to fund the Internalization, we will need to continue to have access to debt and equity financing.

We are subject to certain conditions. On September 28, 2017, certain of the Company’s lenders under the Revolving Credit Facility committed to fund all of the $50 million accordion feature. The subsidiary guarantors and the Company are guarantors of the obligations under the Revolving Credit Facility. The amount available to borrow from time to time under the Revolving Credit Facility is limited according to a quarterly borrowing base valuation of certain properties owned by the subsidiary guarantors. Our Operating Partnership is subject to ongoing compliance with a number of ~~customary affirmative and negative~~financial covenants under ~~the Revolving~~our Credit Facility, including, ~~limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales. The Operating Partnership must also maintain~~among other things, (i) a maximum consolidated leverage ratio ~~commencing with the fiscal quarter ending December 31, 2016 and~~ as of the end of each fiscal quarter ~~thereafter,~~ of less than ~~(y) 0.65:1.00 for each fiscal quarter ending prior to October 1, 2019 and (z) thereafter,~~ 0.60:1.00, (ii) a minimum fixed charge coverage ratio of 1.50:1.00, (iii) a minimum net worth of ~~$119,781,219~~$203.8 million plus 75% of all net proceeds raised through ~~subsequent~~ equity offerings subsequent to March 31, 2018 and (iv) a ratio of total secured recourse debt to total asset value of not greater than 0.10:1.00. Additionally, beginning at the end of fourth quarter of 2020, our distributions to common stockholders will be limited to an amount equal to 95% of our AFFO (our AFFO payout ratio). As of ~~September~~June 30, 2020, we were in compliance with all of the financial covenants contained in the Credit Facility.

We have analyzed the effect that our current expected rent deferrals may have on our ability to satisfy the financial covenants under our Credit Facility. Based on our analysis we do not believe these deferrals would have a material impact on our compliance with these financial covenants. However, if the amounts of our rent deferrals exceed our expectations and our tenants default on these rent deferral agreements with us, our ability to satisfy our Credit Facility covenants may be adversely affected.

As of July 31, we have entered into six interest rate swaps with four counterparties to hedge the LIBOR component of our interest rate risk related to the term loan. Together, these swaps fix the LIBOR component of the entire $350 million term loan on a weighted average basis at 1.91%. An aggregate of $200 million of the swaps mature in August 2024 and an additional $150 million matures in August 2023.

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In July 2017, the ~~outstanding Revolving~~FCA that regulates LIBOR announced its intention to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the ARRC which identified the SOFR as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. The Credit Facility ~~balance was $126.1 million.~~

~~On August 25, 2017,~~provides that, on or about the LIBOR cessation date (subject to an early opt-in election), LIBOR shall be replaced as a benchmark rate in the Credit Facility with a new benchmark rate to be agreed upon by the Company and BMO, with such adjustments to cause the Operating Partnership entered into separate Sales Agreements (the “Sales Agreements”) with each of Cantor Fitzgerald & Co. and FBR Capital Markets & Co. (the “Agents”), pursuant to which the Company may issue and sell, from time to time, its common shares having an aggregate offering price of up to $50.0 million, through the Agents (the “ATM Program”). In accordance with the Sales Agreements, the Company may offer and sell its common shares through any of the Agents, from time to time, by any method deemednew benchmark rate to be ~~an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, which includes sales made directly on the New York Stock Exchange~~economically equivalent to LIBOR. We are not able to predict when LIBOR will cease to be available or other existing trading market, sales made to or through a market maker, sales made through negotiated transactions or any other method permitted by law. As of September 30, 2017, we had not made any sales of our common shares through the ATM Program.

~~- 30 -~~

~~We believe we~~when there will be ~~able to satisfy our short-term~~enough liquidity requirements through our existing cash and cash equivalents, cash flow from operating activities, and future equity offerings and borrowings under our Revolving Credit Facility and any other debt instruments we may enter into. However, although we are currently in compliance with our covenants under the Revolving Credit Facility, if we continue to borrow under the Revolving Credit Facility and are unable to raise additional equity capital in the ~~future, we may be unable to utilize our Revolving Credit Facility to finance our short-term liquidity requirements unless we are able to obtain covenant waivers from our lenders.~~

SOFR markets.

Our long-term liquidity needs consist primarily of funds necessary to pay for acquisitions, ~~recurring~~capital and ~~non-recurring capital expenditures,~~tenant improvements at our properties, scheduled debt maturities, general and administrative expenses, operating expenses, management fees, distributions, and ~~dividends.~~the cost of internalization. We expect to satisfy our long-term liquidity needs through cash flow from operations, ~~long-term secured and unsecured borrowings,~~debt financing, sales of additional equity securities, ~~and,~~the issuance of OP Units in connection with acquisitions of additional properties, ~~the issuance of OP Units, and~~ proceeds from select property dispositions and joint venture transactions. ~~We currently do not expect to sell any of our properties to meet our liquidity needs, although we may do so in the future.~~

We intend to invest in additional properties as suitable opportunities arise and adequate sources of financing are available. We currently are evaluating additional potential acquisitions consistent with the normal course of our business. There can be no assurance as to whether or when any portion of these acquisitions will be completed. Our ability to complete acquisitions is subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with sellers and our ability to finance the acquisitions. We may not be successful in identifying and consummating suitable acquisitions, which may impede our growth and negatively affect our results of operations and may result in the use of a significant amount of management resources.

To qualify as a REIT for federal income tax purposes, we are required to distribute annually at least 90% of our REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our REIT taxable income. Subject to the requirements of the Maryland General Corporation Law, we intend to pay quarterly dividends to our stockholders, if and to the extent authorized by our Board.

Cash Flow Information

Net cash provided by operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$7.3~~$23.9 million, compared with ~~net cash used in operating activities of $2.1~~$16.7 million for the ~~corresponding nine months~~same period in ~~2016. This~~2019. The increase ~~in cash flows from operating activities~~during the 2020 period was primarily ~~derived from the increase~~due to increases in depreciation and amortization expenses and stock-based compensation expense, partially offset by increases in the ~~size of our property portfolio at September~~tenant receivables, deferred asset, and accounts payable and accrued expenses balances for the six months ended June 30, ~~2017~~2020 compared to ~~September 30, 2016.~~

the same period in 2019.

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$213.5~~$76.0 million, compared with ~~$68.3~~$117.5 million for the ~~corresponding nine months~~same period in ~~2016. This increase~~2019. The decrease during the 2020 period was primarily the result of ~~increased~~less real estate investment activity in ~~2017, specifically funds used for~~ the ~~16 acquisitions that we completed during~~2020 period compared to the ~~nine-month~~same period ~~ended September 30, 2017. Cash flows used~~ in investing activities are heavily dependent upon the investment in properties and real estate assets. We anticipate cash flows used in investing activities to increase as we acquire additional properties in the future.

2019.

Net cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 was ~~$193.3~~$58.2 million, compared with ~~$142.6~~$101.8 million for the ~~corresponding nine months~~same period in ~~2016. Cash flows provided by financing activities for~~2019. The decrease during the ~~nine months ended September 30, 2017 were derived~~2020 period was primarily ~~from~~due to the fact that the current period had lower net proceeds ~~received~~ from ~~the Revolving Credit Facility, net proceeds received from~~common equity offerings and higher dividends paid to our common ~~stock offering,~~ and ~~net proceeds received from our~~ preferred ~~stock offering,~~stockholders, partially offset by higher net borrowings on the ~~payment of dividends and deferred financing costs.~~Credit Facility.

Common Stock Dividends

~~Since July 2016, our Board had declared cash dividends on our common~~Common stock asdividend activity for the six months ended June 30, 2020 is summarized in the following ~~table.~~table:

Date Announced Record Date Applicable
Quarter Payment Date Dividend Amount¹ Dividends per Share

September 14, 2016 September 27, 2016 Q3 2016 October 11, 2016 $ 3,592,786 $ 0.20
December 14, 2016 December 27, 2016 Q4 2016 January 10, 2017 $ 3,604,037 $ 0.20
March 20, 2017 March 27, 2017 Q1 2017 April 10, 2017 $ 3,603,485 $ 0.20
June 16, 2017 June 27, 2017 Q2 2017 July 10, 2017 $ 3,607,726 $ 0.20
September 8, 2017 September 26, 2017 Q3 2017 October 9, 2017 $ 4,416,164 ² $ 0.20

Date Announced

Record Date

Applicable  Quarter

Payment Date

Dividend Amount⁽¹⁾

Dividends per Share

December 13, 2019

December 26, 2019

Q4 2019

January 9, 2020

$
9,541

$
0.20
March 4, 2020

March 25, 2020

Q1 2020

April 9, 2020

$
9,610

$
0.20
June 12,2020

June 25,2020

Q2 2020

July 9,2020

$
9,861

$
0.20
⁽¹⁾
¹
Includes ~~dividends~~distributions on granted LTIP ~~units~~Units and OP ~~Units issued to third parties.~~Units.
² ~~This amount was accrued as of September 30, 2017 and paid on October 9, 2017. For additional details refer to Note 11 – “Subsequent Events.”~~
~~- 31 -~~
During the ~~nine~~six months ended ~~September~~June 30, ~~2017, we~~2020 and 2019, the Company paid total dividends on its common stock, LTIP Units and OP Units in the aggregate amount of $10,815,248, consisting of the dividends declared for the fourth quarter of 2016 through the second quarter of 2017. Additionally, during the nine months ended September 30, 2016, we paid total dividends in the amount of $285,703.
$19,675 and $13,467, respectively.
The amount of the dividends paid to ~~our~~the Company’s stockholders is determined by ~~our~~the Board and is dependent on a number of factors, including funds available for payment of dividends, ~~our~~the Company’s financial condition and capital expenditure requirements except that, in accordance with ~~our~~the Company’s organizational documents and Maryland law, wethe Company may not make dividend distributions that would: (i) cause usit to be unable to pay ~~our~~its debts as they become due in the usual course of business; (ii) cause ~~our~~its total assets to be less than the sum of ~~our~~its total liabilities plus senior liquidation preferences; or (iii) jeopardize ~~our~~its ability to maintain ~~our~~its qualification as a REIT.

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Table of Contents

Preferred Stock Dividends

The holders of the ~~Company’s~~ Series A Preferred Stock ~~will be~~are entitled to receive dividend payments only when, as and if declared by the Board (or a duly authorized committee of the ~~Board. Any such dividends~~Board). Dividends will accrue or be payable in cash from the original issue date, on a cumulative basis, quarterly in arrears on each dividend payment ~~date. Additionally, the terms specify that dividends will be payable~~date at a fixed rate per annum equal to 7.50% of the liquidation preference of ~~$25~~$25.00 per share (equivalent to $1.875 per share on an annual basis). Dividends on the Series A Preferred Stock will be cumulative and will accrue whether or not (i) funds are legally available for the payment of those dividends, ~~whether or not~~(ii) the Company has earnings ~~and whether~~ or ~~not~~(iii) those dividends are ~~authorized.~~

declared by the Board.

The quarterly dividend payment dates on the Series A Preferred Stock are January 31, April 30, July 31 and October 31 of each ~~year, commencing on October 31, 2017. The initial dividend is scheduled to be~~year. During each of the six-month periods ended June 30, 2020 and 2019, the Company paid ~~on October 31, 2017 to holders~~preferred dividends of record as of October 15, 2017, and will be a pro rata dividend from, and including, the original issue date to, and including, October 30, 2017, in the pro rata amount of $0.2396 per share for a total dividend amount of $743,598. Refer to Note 11 – “Subsequent Events” for additional information regarding this dividend payment.$2,911.

Non-GAAP Financial Measures

Funds from operations (“FFO”)~~, Adjusted~~ and adjusted funds from operations (“AFFO”)~~, and Normalized AFFO~~ are non-GAAP financial measures within the meaning of the rules of the SEC. The Company considers FFO ~~AFFO,~~ and ~~Normalized~~ 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.

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 ~~non-controlling~~noncontrolling interests of holders of ~~operating partnership units,~~OP Units and LTIP Units, excluding gains (or losses) from sales of property and extraordinary items, less preferred stock dividends, plus real ~~estate related~~estate-related depreciation and amortization (excluding amortization of ~~deferred financing costs)~~debt issuance costs and the amortization of above and below market leases), and after adjustments for unconsolidated partnerships and joint ventures. The Company did not ~~incur any gains or losses from the sales of property or~~ record any adjustments for unconsolidated partnerships and joint ventures during the ~~quarters~~three or six months ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016.~~2019. Because FFO excludes real ~~estate related~~estate-related depreciation and amortization (other than amortization of ~~deferred financing costs)~~debt issuance costs and above and below market lease amortization expense), the Company believes that FFO provides a performance measure that, when compared period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from the closest GAAP measurement, net income or loss.

AFFO is a non-GAAP measure used by many investors and analysts to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations. Management calculates AFFO by modifying the NAREIT computation of FFO by adjusting it for certain cash and non-cash items and certain recurring and non-recurring 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 ~~deferred financing~~above and below market leases, recurring amortization of debt issuance costs, ~~recurring capital expenditures,~~ recurring lease commissions, ~~recurring tenant improvements, an advisory fee settled with the issuance of OP Units,~~management internalization costs, and other items.

Management calculates Normalized AFFO, which is also a non-GAAP financial measure, by modifying AFFO by adjusting for non-recurring income and expenses. For the Company these items include the costs of establishing a system of Sarbanes-Oxley compliant internal controls and procedures and the portion of our General Counsel and Secretary’s salary for 2017 that is reimbursable by the Company to the Advisor (such reimbursement obligation expires on May 8, 2018).

Management 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. Management also considers Normalized AFFO to be a useful measure to evaluate the Company’s operating results excluding non-recurring income and expenses. Normalized AFFO can help investors compare the operating performance of the Company between periods or as compared to other companies. The Company’s FFO ~~AFFO,~~ and ~~Normalized~~ AFFO computations may not be comparable to FFO ~~AFFO,~~ and ~~Normalized~~ AFFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, that interpret the NAREIT definition differently than the Company does, or that compute FFO ~~AFFO,~~ and ~~Normalized~~ AFFO in a different manner.

~~- 32 -~~-46-

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A reconciliation of FFO ~~AFFO,~~ and ~~Normalized~~ AFFO for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 is as follows:

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
(unaudited) (unaudited)

Net income (loss) attributable to common stockholders $ 381,268 $ (1,982,826 ) $ (1,559,440 ) $ (4,423,588 )
Depreciation and amortization expense 2,699,155 585,449 6,698,703 1,528,281
Amortization of above market leases 25,016 - 13,970 -
    FFO $ 3,105,439 $ (1,397,377 ) $ 5,153,233 $ (2,895,307 )
Acquisition costs 651,645 - 2,130,187 754,000
Straight line deferred rental revenue (942,877 ) (90,905 ) (2,072,198 ) (222,324 )
Stock-based compensation expense 340,287 830,827 1,480,724 830,827
Amortization of deferred financing costs 340,638 62,604 840,214 215,449
Non-cash advisory fee 119,163 - 119,163 -
    AFFO $ 3,614,295 $ (594,851 ) $ 7,651,323 $ (1,317,355 )
Professional fees and services related to Sarbanes-Oxley implementation 162,657 73,332 403,995 73,332
Compensation expense reimbursement 31,250 - 49,395 -
    Normalized AFFO $ 3,808,202 $ (521,519 ) $ 8,104,713 $ (1,244,023 )

Net income (loss) attributable to common stockholders per share – basic and diluted $ 0.02 $ (0.11 ) $ (0.08 ) $ (0.68 )
FFO per Share $ 0.14 $ (0.08 ) $ 0.27 $ (0.44 )
AFFO per Share $ 0.17 $ (0.03 ) $ 0.40 $ (0.20 )
Normalized AFFO per Share $ 0.18 $ (0.03 ) $ 0.43 $ (0.19 )

Weighted Average Shares Outstanding 21,522,251 17,371,743 18,938,367 6,514,230


Three Months Ended June 30,

Six Months Ended June 30,


2020

2019

2020

2019

(unaudited, in thousands except per share amounts)

Net income

$
1,672

$
2,462

$
4,489

$
4,505
Less: Preferred stock dividends

(1,455)

(1,455)

(2,911)

(2,911)
Depreciation and amortization expense

8,941

5,863

16,698

10,732
FFO

$
9,158

$
6,870

$
18,276

$
12,326
Amortization of above market leases, net

157

191

403

405
Straight line deferred rental revenue

(1,259)

(1,472)

(2,816)

(2,838)
Stock-based compensation expense

897

854

1,819

1,625
Amortization of debt issuance costs and other

319

337

634

650
Management internalization expense

920

—

1,424

—
Preacquisition expense

147

56

196

56
AFFO

$
10,339

$
6,836

$
19,936

$
12,224

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

$
0.00

$
0.03

$
0.03

$
0.05
FFO per share and unit

$
0.19

$
0.18

$
0.38

$
0.35
AFFO per share and unit

$
0.21

$
0.18

$
0.41

$
0.35

Weighted Average Shares and Units Outstanding – basic and diluted

48,515

38,487

48,169

34,853

Weighted Average Shares and Units Outstanding:

Weighted Average Common Shares

45,404

34,559

44,793

30,990
Weighted Average OP Units

2,023

3,143

2,398

3,144
Weighted Average LTIP Units

1,088

785

978

719
Weighted Average Shares and Units Outstanding – basic and diluted

48,515

38,487

48,169

34,853

Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect or change on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.
Inflation
Historically, inflation has had a minimal impact on the operating performance of our healthcare facilities. Many of our triple-net lease agreements contain provisions designed to mitigate the adverse impact of inflation. These provisions include clauses that enable us to receive payment of increased rent pursuant to escalation clauses which generally increase rental rates during the terms of the leases. These escalation clauses often provide for fixed rent increases or indexed escalations (based upon the ~~consumer price index~~CPI or other measures). However, some of these contractual rent increases may be less than the actual rate of inflation. Most of our triple-net lease agreements require the tenant-operator to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance. This requirement reduces our exposure to increases in these costs and operating expenses resulting from inflation.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business and investment objectives, we expect that the primary market risk to which we will be exposed is interest rate risk.
We ~~are~~may be exposed to the effects of interest rate changes primarily as a ~~smaller reporting company as defined by Rule 12b-2~~result of debt used to acquire healthcare facilities, including borrowings under the Credit Facility. The analysis below presents the sensitivity of the ~~Exchange Act~~market value of our financial instruments to selected changes in market interest rates. The range of changes chosen reflects our view of changes which are reasonably possible over a one-year period.
As of June 30, 2020, we had $119.2 million of unhedged borrowings outstanding under the Revolver (before the netting of unamortized debt issuance costs) that bears interest at a variable rate. See the “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 June 30, 2020, LIBOR on our outstanding floating-rate borrowings was 0.21%. Assuming no increase in the amount of our variable interest rate debt, if LIBOR increased 100 basis points, our cash flow would decrease by approximately $1.2 million annually. Assuming no increase in the amount of our variable rate debt, if LIBOR were reduced 100 basis points, our cash flow would increase by approximately $1.2 million annually.
Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. As of June 30, 2020, in total we had entered into five interest rate swaps with three counterparties to hedge the LIBOR component of our interest rate risk related to the Term Loan. Together, these swaps fix the LIBOR component of the entire $300 million Term Loan on a weighted average basis at 2.17%. See Note 4 – “Credit Facility, Notes Payable and Derivative Instruments” for further details on our interest rate swaps. We may enter into additional derivative financial instruments, including interest rate swaps and caps, in order to mitigate our interest rate risk on our future borrowings. We will not ~~required~~enter into derivative transactions for speculative purposes.
In addition to ~~provide~~changes in interest rates, the ~~information required under this Item 3.~~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.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that ~~the~~ information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive ~~officer (our Chief Executive Officer)~~ and ~~principal~~ financial officer ~~(our Chief Financial Officer)~~ as appropriate, to allow timely decisions regarding required disclosures. Our ~~Chief Executive Officer (our “CEO”)~~principal executive officer and ~~Chief Financial Officer (our “CFO”)~~principal financial officer evaluated the effectiveness of ~~our~~ disclosure controls and procedures as of ~~September~~June 30, ~~2017.~~2020 pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our ~~CEO~~principal executive officer and ~~CFO~~principal financial officer concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were ~~effective.~~effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.
~~Even with effective~~Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures ~~and~~or our internal controls ~~over financial reporting, there is no assurance that errors or fraud~~ will ~~not occur in connection with a company’s disclosure or in its financial reporting.~~prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

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Changes in Internal Control over Financial Reporting

As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, the Company concluded that it had a material weakness in its internal controls over financial reporting dueNo changes were made to ~~lack of segregation of duties in multiple areas within the Company. A material weakness is a deficiency, or a combination of deficiencies, in~~our internal control over financial reporting ~~such~~during our most recently completed fiscal quarter that ~~there is a reasonable possibility that a material misstatement of~~have materially affected, or are reasonably likely to materially affect, our ~~annual or interim financial statements will not be prevented or detected in a timely basis.~~

~~Beginning in the first quarter of 2017, the Company began to undertake remedial measures to address the material weakness in its~~ internal controls. To begin the remediation process, the Company engaged an independent consulting firm that specializes in compliance with the Sarbanes Oxley Act to undertake a full review and evaluation of our personnel levels, key processes, and procedures and to complete documentation that can be monitored and independently tested. During the first and second quarters of 2017, each department of the Company conducted a thorough review of its control processes and updated all of its internal controls. In the third quarter of 2017, the Company (i) hired a new Chief Financial Officer who has extensive experience with internal controls over financial reporting (ii) added a new staff member to its accounting team both increasing the capacity of the team and enhancing segregation of duties, and (iii) finalized each department’s control narratives and internal controls, necessary to begin testing internal controls over financial reporting.

PART II OTHER INFORMATION
Item 1. Legal Proceedings
We are not involved in any pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties is subject, which would reasonably be likely to have a material adverse effect on our financial condition or results of operations. From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. There 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 1A. Risk Factors
Risks Related to Our Business
~~During~~Our and our tenants’ businesses have been and may continue to be materially and adversely affected by the ~~nine months ended September 30, 2017, there were no material changes~~ongoing COVID-19 pandemic.
In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of coronavirus, a pandemic. This outbreak, which has spread widely throughout the U.S. and nearly all other regions of the world, has prompted federal, state and local governmental authorities in the U.S. to declare states of emergency and institute preventative measures to contain and/or mitigate the public health effects of COVID-19. These preventative measures, which include quarantines, shelter-in-place orders and similar mandates that substantially restrict daily activities for many individuals, as well as orders calling for the closure and/or curtailment of operations for many businesses, have caused and continue to cause significant disruption to businesses in affected areas, as well as the financial markets both globally and in the U.S.
Effect of the COVID-19 Pandemic on Our Operations
In response to the COVID-19 pandemic and measures taken by applicable governmental authorities, we have been encouraging all of our employees at our corporate office to work remotely until further notice. While we believe these measures are advisable and in the best interests of our employees and communities, such measures, in combination with other factors, have caused disruptions to our normal operations and may continue to do so during the pendency of such measures. Additionally, certain of our service providers have instituted or may institute similar preventative measures, which could result in reductions in the availability, capacity and/or efficiency of the services upon which we depend for our operations. Further, in the event any of our employees, and/or employees of our service providers, contract COVID-19 or are otherwise compelled to self-quarantine, we may experience shortages in labor and services that we require for our operations. Also, remote work arrangements may increase the risk of cybersecurity incidents, data breaches or cyber-attacks, which could have a material adverse effect on our business and results of operations, due to, among other things, the loss of proprietary data, interruptions or delays in the operation of our business and damage to our reputation.

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Effect of COVID-19 Pandemic on Our and Our Tenants’ Businesses.

We and our tenants have been, and may continue to be, materially and adversely affected by the disruptions to U.S. and local economies that result from the COVID-19 pandemic, including due to reduced volumes at our healthcare facilities. Many states banned elective and non-urgent medical procedures during the first few months of the COVID-19 pandemic. Given that many of our tenants depend on elective and non-urgent medical procedures as a major source of revenue, the previous ban had a material adverse effect on our tenants’ businesses, and the previous ban, or a reinstitution of such ban, may continue to affect, many of our tenants’ ability to pay rent to us on a timely basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Impact of COVID-19 and Business Outlook,” for a description of our COVID-19-related rent deferral agreements. A reinstitution of the ban on elective medical procedures will have a material adverse effect on our and our tenants’ businesses and may lead to: (i) increased tenant rent deferrals, (ii) failure by tenants to comply with their current rent deferral agreements with us or (iii) tenant defaults. Also, even though most of these bans have currently been lifted, patients may be reluctant to undertake certain medical procedures and our tenants may institute social distancing measures, each of which may cause our tenants to experience decreased patient volumes for an extended period of time. Even with significant government financing programs available through the CARES Act, our tenants may not be eligible to participate in such programs or there may be insufficient funds available to withstand a prolonged downturn in their businesses.

The U.S. is currently experiencing historically high unemployment rates. Many of these unemployed workers have also lost their employer-based health insurance, which is a primary payor for our tenants. The extraordinarily high levels of U.S. unemployment and loss of health insurance may cause people to cancel or delay medical procedures even after the COVID-19 pandemic subsides, and it is unclear when, if ever, these workers will be able to regain employment or private health insurance. An extended period of high unemployment and loss of benefits could materially, adversely affect our tenants’ businesses and thus our ability to collect rent from our tenants.

Effect of the COVID-19 Pandemic on Our Access to Capital

The COVID-19 pandemic has caused substantial volatility in U.S. and international debt and equity markets and has caused significant decreases in the market prices of equity securities, including our common stock. The possibility of a prolonged recession or economic downturn could result in, among other things, diminished value of our real estate investments, including potential impairments, write downs or dispositions of real estate assets and an inability to access our Credit Facility, service or refinance our existing indebtedness or access the debt and equity capital markets on commercially reasonable terms or at all.

Effect of the COVID-19 Pandemic on our Acquisition Pipeline

The COVID-19 pandemic has altered the market for healthcare real estate, and we have experienced a dramatic decrease in our investment pipeline. Therefore, we may be unable to achieve our acquisitions goals for 2020 or beyond.

The declaration, amount and payment of future cash dividends are subject to uncertainty due to current market conditions.

All dividends will be declared at the discretion of our Board and will depend on our earnings, our financial condition, REIT distribution requirements, and other factors as our Board may deem relevant from time to time. The economic impacts resulting from the COVID-19 pandemic could adversely affect our ability to pay dividends. Our Board is under no obligation or requirement to declare a dividend distribution and will continue to assess our dividend rates on an ongoing basis, as market conditions and our financial position continue to evolve. We cannot assure you that ~~were disclosed~~we will achieve results that will allow us to pay dividends or that the level of dividends will be maintained to increased.

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Ultimately, the overall effects of the COVID-19 pandemic on our and our tenants’ businesses, which are highly uncertain and cannot be predicted, will depend upon future developments, including the severity of COVID-19 and the duration of the outbreak and potential resurgences; the duration of existing or future social distancing and shelter-in-place orders; further mitigation strategies taken by applicable government authorities; the availability of a vaccine, adequate testing and treatments and the prevalence of widespread immunity to COVID-19; the impacts on our tenants’ supply chain; the health of our and our tenants’ employees, service providers; and the reactions of U.S. and global markets and their effects on consumer confidence and spending. Such adverse effects, however, may include lower patient volumes or reduced revenues of our tenants, an increase in rent deferral requests, requests to extend the repayment periods for deferred rent, or a failure by our tenants to pay rent to us, which may materially impact our business, financial condition, results of operation, our ability to pay distributions on our common and preferred stock and the market prices of our common and preferred stock during the third quarter of 2020 and beyond, as well as our ability to satisfy the covenants in our existing and any future debt agreements, including the Credit Facility, and service our outstanding indebtedness. The impact of COVID-19 may also exacerbate other risks discussed in Part I, Item 1A. Risk Factors in ~~Amendment No. 2 to~~ our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019, filed with the Commission on March 9, 2020, any of which could have a material effect on us.

~~- 34 -~~

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

None.

Item 3. Defaults Upon Senior Securities
None.

Item 4. Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.

~~- 35 -~~-51-

Table of Contents

Item 6. Exhibits

(a)Exhibits

~~(a)~~

~~Exhibits~~

~~3.1~~ Exhibit No.		Description

3.1		Articles of ~~Incorporation~~Restatement of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s ~~Quarterly~~ Report on Form 10-Q as filed with the ~~Commission~~SEC on ~~April 22, 2014)~~August 8, 2018).

3.2	Articles of Amendment to Articles of Incorporation filed with the Secretary of State of Maryland (incorporated herein by reference to Annex A to the Company’s Definitive Information Statement on Schedule 14C as filed with the Commission on October 3, 2014).

~~3.3~~	~~Certificate of Correction of Articles of Incorporation~~Third Amended and Restated Bylaws of Global Medical REIT Inc., adopted as of August 13, 2019 (incorporated herein by reference to Exhibit ~~3.3 to the Company’s Registration Statement on Form S-11/A as filed with the Commission on June 15, 2016).~~

~~3.4~~	Certificate of Correction of Articles of Incorporation of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-11/A as filed with the Commission on June 15, 2016).

~~3.5~~	~~Articles Supplementary for the 7.50% Series A Cumulative Redeemable Preferred Stock (incorporated herein by reference to Exhibit 3.1~~3.2 to the Company’s Current Report on Form 8-K as filed with the ~~Commission~~SEC on ~~September~~August 14, ~~2017)~~2019).

4.1		Specimen of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11/A filed with the SEC on June 15, 2016).

4.2		Specimen of 7.50% Series A Cumulative Redeemable Preferred Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the ~~Commission~~SEC on September 14, 2017).

~~10.1~~ 10.1*	Purchase Agreement, effective July 5, 2017, between Norvin Austin Rehab LLC and Global Medical REIT Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on July 6, 2017).

~~10.2~~	Lease Agreement, dated June 30, 2017, between SDB Partners, LLC and GMR Sherman, LLC. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the Commission on July 6, 2017).

~~10.3~~	Separation Agreement and General Release, dated August 20, 2017, between Inter-American Management LLC and David A. Young (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on August 21, 2017).

~~10.4~~	Form of Consulting Agreement, to be dated September 19, 2017, between Inter-American Management LLC and David A. Young (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the Commission on August 21, 2017).

~~10.5~~	~~First~~Third Amendment to Agreement of Limited Partnership of Global Medical REIT L.P. ~~(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on September 14, 2017).~~, dated June 16, 2020.

~~10.6~~ 31.1*	Lease Agreement, dated September 17, 2010, between Prevarian Hospital Partners, LP and CTRH, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on September 29, 2017).

31.1*	Certification of Principal Executive Officer pursuant to ~~18 U.S.C. Section 1350~~Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial and Accounting Officer pursuant to ~~18 U.S.C. Section 1350~~Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1**	~~First Amendment to Purchase and Sale Agreement, effective August 16, 2017, between Norvin Austin Rehab LLC and Global Medical REIT Inc.~~

101.INS *		Inline XBRL Instance Document

101.SCH *		XBRL Taxonomy Schema

101.CAL *		XBRL Taxonomy Calculation Linkbase

101.DEF *		XBRL Taxonomy Definition Linkbase

101.LAB *		XBRL Taxonomy Label Linkbase

101.PRE *		XBRL Taxonomy Presentation Linkbase

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith

* Filed herewith

** Furnished herewith

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GLOBAL MEDICAL REIT INC.

~~Dated: November 9, 2017~~
Date: August 7, 2020
By:
/s/Jeffrey M. Busch

Jeffrey M. Busch

Chief Executive Officer (Principal Executive Officer)

~~Dated: November 9, 2017~~
Date: August 7, 2020
By:
/s/Robert J. Kiernan

Robert J. Kiernan

Chief Financial Officer (Principal Financial and Accounting Officer)

~~- 37 -~~

-53-
~~EXHIBIT INDEX~~
~~3.1~~ ~~Articles of Incorporation of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q as filed with the Commission on April 22, 2014).~~
~~3.2~~ Articles of Amendment to Articles of Incorporation filed with the Secretary of State of Maryland (incorporated herein by reference to Annex A to the Company’s Definitive Information Statement on Schedule 14C as filed with the Commission on October 3, 2014).
~~3.3~~ Certificate of Correction of Articles of Incorporation of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-11/A as filed with the Commission on June 15, 2016).
~~3.4~~ Certificate of Correction of Articles of Incorporation of Global Medical REIT Inc. (incorporated herein by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-11/A as filed with the Commission on June 15, 2016).
~~3.5~~ Articles Supplementary for the 7.50% Series A Cumulative Redeemable Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the Commission on September 14, 2017).
~~4.1~~ Specimen of 7.50% Series A Cumulative Redeemable Preferred Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the Commission on September 14, 2017).
~~10.1~~ Purchase Agreement, effective July 5, 2017, between Norvin Austin Rehab LLC and Global Medical REIT Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on July 6, 2017).
~~10.2~~ Lease Agreement, dated June 30, 2017, between SDB Partners, LLC and GMR Sherman, LLC. (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the Commission on July 6, 2017).
~~10.3~~ Separation Agreement and General Release, dated August 20, 2017, between Inter-American Management LLC and David A. Young (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on August 21, 2017).
~~10.4~~ Form of Consulting Agreement, to be dated September 19, 2017, between Inter-American Management LLC and David A. Young (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the Commission on August 21, 2017).
~~10.5~~ First Amendment to Agreement of Limited Partnership of Global Medical REIT L.P. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on September 14, 2017).
~~10.6~~ Lease Agreement, dated September 17, 2010, between Prevarian Hospital Partners, LP and CTRH, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the Commission on September 29, 2017).
31.1* ~~Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
31.2* ~~Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
32.1** ~~Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
99.1** ~~First Amendment to Purchase and Sale Agreement, effective August 16, 2017, between Norvin Austin Rehab LLC and Global Medical REIT Inc.~~
101.INS * ~~XBRL Instance Document~~
101.SCH * ~~XBRL Taxonomy Schema~~
101.CAL * ~~XBRL Taxonomy Calculation Linkbase~~
101.DEF * ~~XBRL Taxonomy Definition Linkbase~~
101.LAB * ~~XBRL Taxonomy Label Linkbase~~
101.PRE * ~~XBRL Taxonomy Presentation Linkbase~~
* Filed herewith
** Furnished herewith

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

~~4800 Montgomery Lane,~~2 Bethesda Metro Center, Suite ~~450~~440 Bethesda, MD		20814
(Address of principal executive offices)	(Zip Code)


Title of each class:	Trading Symbol:	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


Large accelerated filer	¨ ◻	Accelerated filer	¨ þ
Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	¨ ◻	Smaller reporting company	þ ☑
		Emerging growth company	þ ☐

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

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

	As of
	September 30, 2017			December 31, 2016
Assets		(unaudited)
Investment in real estate:
Land	$	36,839,127		$	17,785,001
Building		349,041,480			179,253,398
Site improvements		3,992,974			1,465,273
Tenant improvements		5,095,651			1,186,014
Acquired lease intangible assets		27,308,632			7,187,041
		422,277,864			206,876,727
Less: accumulated depreciation and amortization		(10,142,823	)		(3,366,680	)
Investment in real estate, net		412,135,041			203,510,047
Cash		6,776,501			19,671,131
Restricted cash		2,040,026			941,344
Tenant receivables		616,741			212,435
Escrow deposits		1,297,665			1,212,177
Deferred assets		2,923,494			704,537
Deferred financing costs, net		2,977,981			927,085
Other assets		160,214			140,374
Total assets	$	428,927,663		$	227,319,130

Liabilities and Stockholders’ Equity
Liabilities:
Revolving credit facility	$	126,100,000		$	27,700,000
Notes payable, net of unamortized discount of $963,184 and $1,061,602 at September 30, 2017 and December 31, 2016, respectively		38,511,716			38,413,298
Notes payable to related parties		-			421,000
Accounts payable and accrued expenses		2,433,549			573,997
Dividends payable		4,767,037			3,604,037
Security deposits and other		2,206,145			719,592
Due to related parties, net		802,286			580,911
Acquired lease intangible liability, net		1,080,123			277,917
Total liabilities		175,900,856			72,290,752
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized; 3,105,000 and no shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively (liquidation preference of $77,625,000 and $0, respectively)		74,959,003			-
Common stock, $0.001 par value, 500,000,000 shares authorized; 21,630,675 and 17,605,675 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		21,631			17,606
Additional paid-in capital		207,268,720			171,997,396
Accumulated deficit		(29,914,472	)		(16,986,624	)
Total Global Medical REIT Inc. stockholders' equity		252,334,882			155,028,378
Noncontrolling interest		691,925			-
Total equity		253,026,807			155,028,378
Total liabilities and stockholders' equity	$	428,927,663		$	227,319,130

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

Revenue
Rental revenue	$	7,921,913		$	1,932,425		$	19,217,710		$	4,994,172
Expense recoveries		443,816			-			1,141,455			-
Other income		23,134			70,225			111,502			93,196
Total revenue		8,388,863			2,002,650			20,470,667			5,087,368

Expenses
Acquisition fees		651,645			-			2,130,187			-
Acquisition fees – related party		-			-			-			754,000
General and administrative		989,526			1,720,651			4,418,115			2,962,730
Operating expenses		464,514			1,025			1,234,247			15,685
Management fees – related party		803,804			627,147			2,059,325			807,147
Depreciation expense		2,175,668			585,449			5,372,308			1,528,281
Amortization expense		523,487			-			1,326,395			-
Interest expense		2,174,683			1,051,204			5,265,262			3,443,113
Total expenses		7,783,327			3,985,476			21,805,839			9,510,956

Net income (loss)	$	605,536		$	(1,982,826	)	$	(1,335,172	)	$	(4,423,588	)
Less: Preferred stock dividends		(258,750	)		-			(258,750	)		-
Less: Net loss attributable to noncontrolling interest		34,482			-			34,482			-
Net income (loss) attributable to common stockholders	$	381,268		$	(1,982,826	)	$	(1,559,440	)	$	(4,423,588	)

Net income (loss) attributable to common stockholders per share – basic and diluted	$	0.02		$	(0.11	)	$	(0.08	)	$	(0.68	)

Weighted average shares outstanding – basic and diluted		21,522,251			17,371,743			18,938,367			6,514,230

	Nine Months Ended September 30,
	2017			2016
Operating activities	(unaudited)
Net loss	$	(1,335,172	)	$	(4,423,588	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense		5,372,308			1,528,281
Amortization of deferred financing costs		840,214			215,449
Amortization of acquired lease intangible assets		1,326,395			-
Amortization of above (below) market leases, net		13,970			-
Stock-based compensation expense		1,480,724			830,827
Advisory expense settled in OP Units		77,497			-
Changes in operating assets and liabilities:
Restricted cash		(1,144,705	)		(438,189	)
Tenant receivables		(404,306	)		(177,369	)
Deferred assets		(2,218,957	)		(222,324	)
Other assets		(21,890	)		-
Accounts payable and accrued expenses		1,622,426			(267,627	)
Security deposits and other		1,486,553			597,593
Accrued management fees due to related party		183,096			297,147
Net cash provided by (used in) operating activities		7,278,153			(2,059,800	)

Investing activities
Purchase of land, buildings, and other tangible and intangible assets and liabilities		(213,535,461	)		(68,690,495	)
Escrow deposits for purchase of properties		(60,000	)		394,310
Loans repayments from (made to) related party		38,428			(39,000	)
Pre-acquisition costs for purchase of properties		51,459			-
Net cash used in investing activities		(213,505,574	)		(68,335,185	)

Financing activities
Net proceeds received from preferred stock offering		75,146,720			-
Net proceeds received from common equity offerings		33,794,625			137,358,367
Change in restricted cash		46,023			80,040
Escrow deposits required by third party lenders		(25,488	)		(843,636	)
Loans (repaid to) from related party		(149	)		29,986
Repayment of convertible debenture, due to related party		-			(10,000,000	)
Proceeds from notes payable from acquisitions		-			41,320,900
Payments on notes payable from acquisitions		-			(24,011,168	)
Proceeds from note payable from related party		-			450,000
Repayment of note payable from related party		(421,000	)		(450,000	)
Proceeds from revolving credit facility, net		98,400,000			-
Payments of deferred financing costs		(2,792,692	)		(1,090,079	)
Dividends paid to stockholders		(10,815,248	)		(285,703	)
Net cash provided by financing activities		193,332,791			142,558,707
Net (decrease) increase in cash and cash equivalents		(12,894,630	)		72,163,722
Cash and cash equivalents—beginning of period		19,671,131			9,184,270
Cash and cash equivalents—end of period	$	6,776,501		$	81,347,992
Supplemental cash flow information:
Cash payments for interest	$	3,928,208		$	3,696,467
Noncash financing and investing activities:
Accrued dividends payable	$	4,767,037		$	3,592,786
Conversion of convertible debenture due to majority stockholder to common stock	$	-		$	30,030,134
Accrued preferred stock offering costs	$	187,717		$	-
Reclassification of common stock offering costs to additional paid-in capital	$	443,499		$	1,681,259
Reclassification of preferred stock offering costs to preferred stock balance	$	220,809		$	-
Accrued capitalized offering costs	$	49,409		$	-
OP Units issued for noncash transaction	$	1,000,000		$	-

	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


					Site		Tenant		Acquired Lease		Gross Investment in
	Land		Building		Improvements		Improvements		Intangible Assets		Real Estate
Balances as of December 31, 2019	$	95,381	$	693,533	$	9,912	$	33,909	$	72,794	$	905,529
Facility Acquired – Date Acquired:
High Point – 2/13/20		1,749		20,367		440		869		1,656		25,081
Clinton – 2/27/20		664		6,551		342		1,578		2,484		11,619
West Allis – 3/4/20		974		7,687		137		98		461		9,357
Grand Rapids – 3/20/20		2,947		17,341		470		450		1,582		22,790
Dumfries– 4/27/20		2,597		10,047		289		4,815		4,292		22,040
Capitalized costs⁽¹⁾		4		281		3		172		—		460
Total Additions^:		8,935		62,274		1,681		7,982		10,475		91,347
Balances as of June 30, 2020	$	104,316	$	755,807	$	11,593	$	41,891	$	83,269	$	996,876

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

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

	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


Land and site improvements	$	3,421
Building and tenant improvements		25,872
In-place leases		3,304
Leasing costs		1,142
Total purchase price	$	33,739


Land and site improvements	$	2,039
Building and tenant improvements		8,712
In-place leases		990
Leasing costs		324
Total purchase price	$	12,065


Land and site improvements	$	1,779
Building and tenant improvements		9,718
In-place leases		405
Leasing costs		1,074
Total purchase price	$	12,976

	As of December 31, 2016
	Cost		Accumulated 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

	Three Months Ended September 30, 2017		Nine Months Ended 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

	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

	September 30, 2017			December 31, 2016
Notes payable related to acquisitions, gross	$	39,474,900		$	39,474,900
Less: Unamortized debt discount		(963,184	)		(1,061,602	)
Notes payable related to acquisitions, net	$	38,511,716		$	38,413,298

Balance as of January 1, 2017, net	$	927,085
Additions – Revolving Credit Facility¹		2,792,692
Deferred financing cost amortization expense		(741,796	)
Balance as of September 30, 2017, net	$	2,977,981

Date Announced	Record Date	Applicable Quarter	Payment Date	Dividend Amount¹			Dividends per Share

September 14, 2016	September 27, 2016	Q3 2016	October 11, 2016	$	3,592,786		$	0.20
December 14, 2016	December 27, 2016	Q4 2016	January 10, 2017	$	3,604,037		$	0.20
March 20, 2017	March 27, 2017	Q1 2017	April 10, 2017	$	3,603,485		$	0.20
June 16, 2017	June 27, 2017	Q2 2017	July 10, 2017	$	3,607,726		$	0.20
September 8, 2017	September 26, 2017	Q3 2017	October 9, 2017	$	4,416,164	²	$	0.20

	Due to Advisor –Mgmt. Fees			Due to Advisor – Other Funds			Due (to) from Other Related Party			Total Due (To) From Related Parties, Net
Balance as of January 1, 2017	$	(620,709	)		(586	)		40,384			(580,911	)
Management fee expense incurred¹		(2,059,325	)		-			-			(2,059,325	)
Management fees paid to Advisor¹		1,876,229			-			-			1,876,229
Loan repaid to Advisor²		-			149			-			149
Loan repaid to other related party³		-			-			(38,428	)		(38,428	)
Balance as of September 30, 2017	$	(803,805	)		(437	)		1,956			(802,286	)

	Annual			Long-Term			Total

Awards on February 28, 2017		97,243			147,081			244,324
Awards on August 23, 2017 and May 8, 2017		8,224			17,754			25,978
Total 2017 Program LTIP units awarded as of September 30, 2017		105,467			164,835			270,302
2017 Program LTIP units forfeited		(19,338	)		(58,668	)		(78,006	)
Net 2017 Program LTIP awards as of September 30, 2017		86,129			106,167			192,296



2017 Long-Term Awards ⁽¹⁾		11
2018 Long-Term Awards		110
2019 Long-Term Awards		82
2020 Annual Awards ⁽²⁾		196
2020 Long-Term Awards ⁽³⁾		70
Total target performance awards as of June 30, 2020		469

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
2016 Plan – Time Based Grants:
Service LTIPs – non-employee	$	258,033		$	933,143
Service LTIPs – employee		56,567			123,967
2017 Program – Performance Based Award Targets:
Annual Awards – non-employee		(22,107	)		238,835
Long-Term Awards – non-employee		47,794			184,779
Total compensation expense	$	340,287		$	1,480,724

2017	$	8,035,103
2018		32,516,357
2019		33,166,395
2020		33,811,627
2021		32,003,983
Thereafter		251,225,055
Total	$	390,758,520

2017	$	18,626
2018		78,245
2019		81,987
2020		81,987
2021		81,987
Thereafter		1,883,702
Total	$	2,226,534

Facility	Location	Date Acquired	Facility Type	Net Leasable Square Feet		Lease Years Remaining		Annualized $Rent¹		Annualized $ Rent Per Square Foot¹
Omaha	Omaha, NE	6/5/2014	LTAC		41,113		4.93	$	1,762,512	$	42.87
Asheville	Asheville, NC	9/19/2014	ASC		8,840		4.61		237,621		26.88
West Mifflin	West Mifflin, PA	9/25/2015	MOB/ ASC		27,193		13.16		783,653		28.82
Tennessee	Memphis, TN	12/31/2015	MOB/ ASC		52,266		10.43		1,300,000		24.87
Plano	Plano, TX	1/28/2016	Surgical Hospital		24,000		18.50		1,278,000		53.25
Westland	Detroit, MI	3/31/2016	ASC		15,018		8.68		389,500		25.94
Melbourne	Melbourne, FL	3/31/2016	MOB/ Imaging		75,899		8.68		1,104,675		14.55
Reading	Wyomissing, PA	7/20/2016	MOB/ ASC		23,500		8.98		690,045		29.36
East Orange	East Orange, NJ	9/29/2016	MOB		60,442		9.17		961,753		15.91
Watertown	Watertown, SD	9/30/2016	MOB		46,884		14.17		707,167		15.08
Sandusky	Sandusky, OH	10/7/16 – 8/15/17	MOB		55,760		10.26		842,481		15.11
Carson City	Carson City, NV	10/31/2016	MOB		20,632		6.26		344,000		16.67
Ellijay	Ellijay, GA	12/16/2016	MOB		44,162		8.92		364,224		8.25
HealthSouth Mesa	Mesa, AZ	12/20/2016	IRF		51,903		7.26		1,710,617		32.96
HealthSouth Altoona	Altoona, PA	12/20/2016	IRF		70,007		3.78		1,671,760		23.88
HealthSouth Mechanicsburg	Mechanicsburg. PA	12/20/2016	IRF		78,836		3.78		1,877,298		23.81
Cape Coral	Cape Coral, FL	1/10/2017	MOB		25,814		9.51		529,187		20.50
Lewisburg	Lewisburg, PA	1/12/2017	MOB/ Imaging		28,480		5.76		542,501		19.05
Las Cruces	Las Cruces, NM	2/1/2017	MOB		15,761		11.51		354,623		22.50
Prescott	Prescott, AZ	2/9/2017	MOB		12,000		9.09		360,000		30.00
Clermont	Clermont. FL	3/1/2017	MOB		18,152		3.58		361,915		19.94
OCOM	Oklahoma City, OK	3/31/2017	Surgical Hospital		96,596		8.58		3,535,294		36.60
Great Bend	Great Bend, KS	3/31/2017	Hospital		63,978		14.68		2,143,750		33.51
Brockport	Brockport, NY	6/27/2017	MOB		29,497		13.23		620,653		21.04
Flower Mound	Flower Mound, TX	6/27/2017	ASC		10,062		9.17		288,362		28.66
Sherman	Sherman, TX	6/30/2017	IRF/LTAC		69,3522		19.92		2,346,140		33.83
Lubbock	Lubbock, TX	8/18/2017	MOB		27,280		12.00		600,160		22.00
Germantown	Germantown, TN	8/30/2017	MOB/ ASC		33,777		6.67		1,459,024		43.20
Austin	Austin, TX	9/25/2017	Rehab. Hospital		59,258		9.58		2,884,650		48.68
Total Portfolio/Average					1,186,462		9.22	$	32,051,565	$	27.01


		Rentable	Purchase		Annualized
		Square Feet	Price(1)		Base Rent(2)		Capitalization
Property	City	(RSF)	(in thousands)		(in thousands)		Rate(3)
MercyOne Hospital	Centerville, IA	15,748	$	5,000	$	351	7.0	%
Spectrum (Team Health)	Fairfax, VA	73,653		17,625		1,234	7.0	%
Franklin Square Center	Rosedale, MD	96,564		22,500		1,568	7.0	%
Totals/Weighted Average		185,965	$	45,125	$	3,153	7.0	%

	For the Nine Months Ended
	September 30, 2017			September 30, 2016			$ Change
Revenue
Rental revenue	$	19,217,710		$	4,994,172		$	14,223,538
Expense recoveries		1,141,455			-			1,141,455
Other income		111,502			93,196			18,306
Total revenue		20,470,667			5,087,368			15,383,299

Expenses
Acquisition fees		2,130,187			-			2,130,187
Acquisition fees – related party		-			754,000			(754,000	)
General and administrative		4,418,115			2,962,730			1,455,385
Operating expenses		1,234,247			15,685			1,218,562
Management fees – related party		2,059,325			807,147			1,252,178
Depreciation expense		5,372,308			1,528,281			3,844,027
Amortization expense		1,326,395			-			1,326,395
Interest expense		5,265,262			3,443,113			1,822,149
Total expenses		21,805,839			9,510,956			12,294,883
Net loss	$	(1,335,172	)	$	(4,423,588	)	$	3,088,416


Date Announced	Record Date	Applicable Quarter	Payment Date	Dividend Amount⁽¹⁾		Dividends per Share

December 13, 2019	December 26, 2019	Q4 2019	January 9, 2020	$	9,541	$	0.20
March 4, 2020	March 25, 2020	Q1 2020	April 9, 2020	$	9,610	$	0.20
June 12,2020	June 25,2020	Q2 2020	July 9,2020	$	9,861	$	0.20


		GLOBAL MEDICAL REIT INC.

~~Dated: November 9, 2017~~ Date: August 7, 2020	By:	/s/Jeffrey M. Busch
		Jeffrey M. Busch
		Chief Executive Officer (Principal Executive Officer)


~~Dated: November 9, 2017~~ Date: August 7, 2020	By:	/s/Robert J. Kiernan
		Robert J. Kiernan
		Chief Financial Officer (Principal Financial and Accounting Officer)