Executive Summary / Key Takeaways

• Strategic Pivot Under New Leadership: Global Medical REIT is undergoing a significant strategic reorientation under its new CEO, Mark O. Decker, Jr., focusing on balance sheet optimization, disciplined capital allocation, and enhancing per-share FFO growth. This includes a major refinancing effort for its credit facility and Term Loan A, expected in Q4 2025.
• Dividend Rightsizing for Growth: The recent 29% dividend cut, from $0.21 to $0.15 per share, is a proactive measure to bolster liquidity and generate approximately $17 million annually. This capital is earmarked for strategic investments and organic growth, signaling a shift towards internal funding amidst challenging equity markets.
• Resilient Portfolio & Accretive Acquisitions: GMRE's portfolio, primarily composed of specialized medical office buildings, continues to demonstrate strong occupancy and rent coverage. Recent acquisitions, including a five-property portfolio at a 9% cap rate, highlight the company's ability to source accretive deals at attractive discounts to replacement cost, leveraging its middle-market expertise.
• Operational Agility in Tenant Management: The successful re-tenanting of the Beaumont, Texas facility with CHRISTUS Health and proactive efforts to stabilize the East Orange, New Jersey property post-Prospect Medical bankruptcy underscore GMRE's operational capability to mitigate tenant-specific risks and maintain portfolio quality.
• Competitive Positioning & Outlook: GMRE differentiates itself by targeting overlooked middle-market healthcare facilities, offering superior risk-adjusted returns. While facing refinancing headwinds and broader industry cost pressures, the company's strategic initiatives, including the Heitman joint venture and continued asset recycling, are designed to drive future value and maintain a competitive edge.

A New Chapter: Reimagining Global Medical REIT's Future

Global Medical REIT Inc. (GMRE) operates as a specialized net-lease medical real estate investment trust, focusing on acquiring and leasing healthcare facilities to physician groups and regional and national healthcare systems. Since its operational inception around 2015, GMRE has steadily expanded its portfolio, with revenues growing from $2.06 million in 2015 to $140.93 million in 2023. This growth has been underpinned by a strategy to invest in purpose-built, specialized healthcare properties, often in secondary markets and suburban areas, which are frequently overlooked by larger REITs.

The company's business model is built on triple-net leases, which typically pass property operating expenses, taxes, and insurance costs directly to tenants, ensuring a stable revenue stream. This approach, coupled with a focus on mission-critical facilities, has historically provided robust rent coverage and consistent contractual rent escalations, averaging 2.2% across its portfolio. GMRE's strategic emphasis on profitable physician groups and strong healthcare systems aims to deliver attractive dividends and stock price appreciation to its shareholders.

GMRE's operational approach is further enhanced by its use of specialized software tools. These tools are deployed to identify and measure potential climate risk exposure across its properties, enabling a proactive stance on environmental factors. The software analysis helps summarize climate change-related risks, categorize them by onset potential, and pinpoint opportunities for risk mitigation. This integrated approach allows GMRE to assess energy efficiency and sustainability during investment evaluations and to monitor its portfolio for climate risk factors. Utility and energy audits, performed by third-party engineering consultants during due diligence, provide crucial energy consumption data, which is then used to calculate facilities' carbon emission levels. While not a core product technology, this operational technology provides tangible benefits by informing future mitigation and remediation efforts, reducing long-term operational risks, and potentially enhancing asset value through improved sustainability. For investors, this translates into a more resilient portfolio, better-informed investment decisions, and a commitment to risk management that supports long-term value creation.

Navigating a Dynamic Landscape: Competitive Edge and Strategic Responses

GMRE operates within a competitive healthcare REIT sector, facing rivals such as Healthcare Realty Trust (HR), Medical Properties Trust (MPW), Sabra Health Care REIT (SBRA), and Omega Healthcare Investors (OHI). GMRE differentiates itself through its specialized focus on middle-market medical office buildings and outpatient facilities. This niche allows GMRE to unearth "differentiated investment opportunities" at "wide discounts to replacement cost," often with in-place rents significantly below market rates, providing substantial future rent growth potential.

Compared to Healthcare Realty Trust, which also focuses on medical office buildings, GMRE's more targeted approach to specialized facilities may lead to stronger margins in its core segments, though HR benefits from greater scale and diversification. Against Medical Properties Trust, which concentrates on acute care hospitals, GMRE's emphasis on outpatient facilities aligns well with the ongoing shift in healthcare delivery towards decentralized care, potentially making its assets more resilient to evolving patient preferences. While MPW may offer larger-scale transactions, GMRE's focus on purpose-built medical offices can foster stronger tenant loyalty and adaptability in a rapidly changing healthcare environment.

Sabra Health Care REIT and Omega Healthcare Investors, with their focus on skilled nursing and senior housing, operate in segments with different demographic and regulatory sensitivities. GMRE's medical office portfolio is less directly exposed to the specific regulatory and reimbursement risks prevalent in long-term care, offering a distinct risk profile. GMRE's competitive advantage lies in its proven middle-market expertise, track record, and reputation, which allows it to capitalize on market inefficiencies, especially during periods of increased transaction volume. The company's ability to structure deals, including through OP Units, further enhances its competitive toolkit.

The broader industry trends, such as an aging population and a continuing shift towards outpatient care, are significant tailwinds for GMRE's business model. The nation's 65-and-older population has grown rapidly, increasing demand for services like orthopedics and cardiology, which are provided at GMRE's facilities. Furthermore, the trend of physician group and hospital consolidation is expected to strengthen the credit quality of GMRE's tenants. However, the sector faces challenges from elevated interest rates, healthcare wage inflation, and changes in third-party reimbursement policies, including the One Big Beautiful Bill Act (OBBBA) signed in July 2025, which mandates Medicaid funding cuts. These factors could impact tenant profitability and, by extension, rent payments.

Financial Performance and Strategic Rebalancing

GMRE's financial performance in the first half of 2025 reflects a period of active portfolio management and strategic adjustments. For the three months ended June 30, 2025, total revenue increased by 10.7% to $37.88 million, compared to $34.21 million in the same period of 2024. This growth was primarily driven by acquisitions completed in late 2024 and early 2025. Net income saw a significant turnaround, rising to $0.6 million in Q2 2025 from a net loss of $2.0 million in Q2 2024. For the six months ended June 30, 2025, net income was $4.3 million, a substantial increase from $0.4 million in the prior year period.

However, this period also saw increased expenses. General and administrative (G&A) expenses rose by $1.4 million in Q2 2025, largely due to costs associated with the CEO transition and higher non-cash LTIP compensation. Operating expenses and depreciation also increased, reflecting the expanded portfolio. Interest expense climbed by $1.0 million due to higher average borrowings and a slightly elevated weighted average interest rate of 4.03% in Q2 2025, up from 3.93% in Q2 2024.

The balance sheet reflects these dynamics, with total liabilities increasing to $772.0 million as of June 30, 2025, from $700.6 million at year-end 2024, primarily due to higher net borrowings on the Credit Facility. The company's Debt/Equity ratio (TTM) stands at 1.43, and its leverage ratio was 46.1% as of March 31, 2025, slightly above its target range of 40-45%.

A pivotal financial decision was the reduction of the quarterly common stock dividend from $0.21 to $0.15 per share in May 2025. This "rightsizing" was a direct response to a decrease in dividend coverage on a FAD basis, which fell from 110% in Q1 2025 to 79% in Q2 2025. This move is expected to generate approximately $17 million in annual capital, which the company plans to reinvest into high-conviction opportunities and strengthen its balance sheet. This strategic shift underscores a commitment to long-term financial health and growth over short-term payout maximization.

Outlook and Strategic Imperatives

GMRE's forward outlook is shaped by a clear set of strategic priorities under its new CEO, Mark O. Decker, Jr. The company has reaffirmed its full-year 2025 AFFO guidance in the range of $0.89 to $0.93 per share/unit, excluding one-time CEO transition costs. This guidance assumes no additional acquisition or disposition activity beyond what has been completed or announced, and only normal course revolver activity.

A critical near-term objective is the refinancing of the $350 million Term Loan A, which matures in May 2026, and the Revolver, due in August 2026. Discussions with lenders are active, with completion anticipated in Q4 2025. While refinancing is expected to occur at higher SOFR swap rates, management believes the combined impact of new acquisitions, the full rent commencement from CHRISTUS Health at the Beaumont facility ($2.9 million annual ABR starting March/April 2025), and the anticipated recovery of the East Orange property will lead to "pretty good" year-over-year FAD and FFO in 2026.

Operational targets include achieving total occupancy of over 95% by year-end 2025, with the East Orange facility expected to recover to over 90% occupancy within 24 to 36 months. Capital expenditures for 2025 are projected at $12 million to $14 million, with leasing commissions expected to be lower than the prior year. The company also plans to continue its asset recycling program, targeting $50 million to $100 million in dispositions, with proceeds allocated to debt repayment and new investments.

The formation of the GII Global Medical Holdings LLC joint venture with Heitman in December 2024 is a key strategic initiative. GMRE holds a 12.5% interest and serves as managing member, leveraging its acquisition and asset management platforms to generate ancillary fee income. This partnership aims to acquire core-plus medical office deals in the low 7% to low 8% cap rate range, providing GMRE with a more competitive cost of capital for growth opportunities. The new CEO's vision includes establishing a long debt maturity ladder to transform the unsecured balance sheet into a competitive advantage and conducting a comprehensive portfolio review to optimize asset performance.

Conclusion

Global Medical REIT is at a pivotal juncture, embarking on a strategic reimagining under new leadership to unlock long-term value. The company's core investment thesis rests on its specialized focus within the resilient healthcare real estate sector, particularly in middle-market medical office buildings, where it demonstrates a proven ability to source accretive acquisitions. The recent dividend reduction, while impactful in the short term, is a calculated move to fortify the balance sheet and provide internal capital for disciplined growth, signaling a pragmatic approach to capital allocation in a challenging interest rate environment.

GMRE's operational agility, exemplified by the successful re-tenanting of the Beaumont facility and proactive management of the East Orange property, underscores its capacity to mitigate risks and maintain portfolio quality. The strategic emphasis on leveraging its Heitman joint venture and continuing asset recycling positions the company to pursue growth opportunities efficiently. While the upcoming refinancing of its credit facility at potentially higher rates presents a notable challenge, the anticipated operational improvements and accretive investments are expected to drive future FFO and FAD growth. For investors, GMRE represents an opportunity to participate in a specialized REIT that is actively re-positioning itself for sustainable performance, with a clear roadmap for balance sheet optimization and strategic expansion in its niche market.