Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Community Healthcare Trust Inc (CHCT, Financial) successfully increased its revolving credit facility from $150 million to $400 million, extended its maturity date by five years, and achieved lower pricing.
- The company reported a 3.1% annual growth in total revenue, increasing from $28.7 million in Q3 2023 to $29.6 million in Q3 2024.
- CHCT declared a dividend for the third quarter and raised it to $0.465 per common share, marking an annualized dividend of $1.86 per share.
- The company acquired one physician clinic for approximately $6.2 million with an expected return of 9.3%, and has four properties under definitive purchase agreements with expected returns ranging from 9.29% to 9.5%.
- CHCT's funds from operations (FFO) increased from $11.6 million in Q2 2024 to $12.8 million in Q3 2024, with FFO per diluted common share rising from $0.43 to $0.48.
Negative Points
- Occupancy decreased from 92.6% to 91.3% during the quarter due to lease terminations and expirations.
- The weighted average remaining lease term decreased slightly from 7.1 years to 6.8 years.
- The company is not yet receiving rent and interest from a geriatric psychiatric hospital operator, a tenant in six properties, representing a base rent of $3.2 million.
- Interest expense increased from $6 million in Q2 2024 to $6.3 million in Q3 2024 due to increased borrowings under the revolving credit facility.
- Despite having access to its ATM, CHCT did not sell equity due to a depressed share price, indicating potential challenges in raising capital through equity markets.
Q & A Highlights
Q: Can you provide more details on the geriatric tenant issue and your confidence in receiving returns from the outstanding loan?
A: David Dupuy, CEO: The consultants have improved hospital staffing and processes, leading to better census. We are exploring multiple paths, including interest from other operators, to resolve the issue. While predicting rent and interest timing is tricky, we expect improvements based on current trends.
Q: Are there any other tenants on the watch list, and what are the outstanding loans to tenants?
A: David Dupuy, CEO: We have 15 to 20 watch list tenants, but none are in our top 10. Outstanding loans include $2.2 million to a behavioral health operator, over $4 million to another operator, and a $2 million loan to an inpatient rehab facility operator.
Q: With the upsized revolver and current stock price, are you considering more development projects?
A: David Dupuy, CEO: We have five ongoing redevelopment projects, expected to generate returns similar to acquisitions. We are also exploring capital recycling opportunities for non-core assets to fund growth without over-leveraging.
Q: What is the status of the $3.2 million geriatric tenant rent and interest payments?
A: David Dupuy, CEO: The $3.2 million is just rent. Including interest, the total is about $6 million annually. We received partial payments in January and February, with the last full payment in 2023.
Q: Can you provide details on the expected impact of the three redevelopment projects coming online in Q1 2025?
A: David Dupuy, CEO: While we haven't disclosed specifics, these projects will provide a meaningful pickup, with an estimated $750,000 plus in annual rent, acting as a tailwind into the first quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
