CHCT

Business Context and Reporting Period

Company: Community Healthcare Trust Inc (CHCT)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: CHCT is a fully-integrated healthcare REIT that acquires and owns real estate properties leased to hospitals, doctors, and healthcare systems. As of December 31, 2025, the portfolio consisted of 198 properties totaling approximately 4.5 million square feet across 36 states, with gross investments of approximately $1.2 billion. The portfolio was 90.6% leased (excluding assets held for sale) with a weighted average remaining lease term of 7.0 years.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Rental income increased by $6.8 million (5.9%) driven primarily by income from properties acquired in 2024 and 2025 ($5.4 million) and annual rent increases.
• Expense Increases: General and administrative expenses rose by $6.0 million (31.7%), largely due to a $4.6 million non-cash accelerated amortization of stock-based compensation and $1.3 million in severance costs following the termination of the former Executive Vice President of Asset Management.
• Asset Activity: The Company acquired three properties for approximately $64.5 million and disposed of five properties, recognizing a net gain of $11.6 million. One property was reclassified to a sales-type lease, generating a $1.3 million gain.
• Credit Losses: The Company recorded an $8.7 million credit loss reserve in 2025 (compared to $11.0 million in 2024) related to notes receivable with a geriatric inpatient behavioral hospital tenant, fully reserving the notes and interest.
• Interest Expense: Increased by $3.3 million (13.8%) due to a pricing grid increase on hedged debt and a higher weighted average balance on the Revolving Credit Facility.

Guidance, Outlook, and Risks

• Acquisition Pipeline: The Company has five properties under definitive purchase agreements with an aggregate expected purchase price of approximately $122.5 million, targeting returns of 9.1% to 9.75%. Closings are anticipated throughout 2026 and 2027.
• Liquidity: The Company maintains a $400.0 million Revolving Credit Facility with approximately $142.0 million of borrowing capacity remaining as of December 31, 2025. It also has a $300.0 million At-The-Market (ATM) equity offering program available.
• Dividend Policy: A quarterly dividend of $0.4775 per share was declared on February 12, 2026, payable March 4, 2026. The Company aims to maintain REIT qualification by distributing at least 90% of taxable income.
• Key Risks:
  • Regulatory Changes: Significant legislative changes in 2025 (e.g., the "One Big Beautiful Bill Act") reduced ACA and Medicaid funding, potentially impacting tenant reimbursement and ability to pay rent.
  • Tenant Concentration: While no single tenant exceeds 10% of annualized rent, the top two tenants (US Healthvest and Lifepoint Health) account for 13.7% combined.
  • Geographic Concentration: Texas and Florida combined represent 26.7% of annualized rent, exposing the Company to local economic downturns.
  • Interest Rate Risk: $183.0 million of debt remains unhedged and subject to variable rates; interest rate swaps on $75.0 million of the revolver mature in March 2026.

Investor Verification Checklist

• Credit Loss Resolution: Verify the status of the geriatric inpatient behavioral hospital tenant and the likelihood of recovery on the fully reserved $8.7 million note.
• Lease Expirations: Review the schedule of 77 leases expiring in 2026 (representing 9.0% of annualized rent) and assess renewal risks.
• Interest Rate Exposure: Confirm the Company's strategy for the $75.0 million revolver swap maturing in March 2026 and potential impact on interest expense.
• Regulatory Impact: Assess the tangible impact of the 2025 healthcare legislation (OBBBA) on the financial stability of major tenants in Texas and Florida.
• Acquisition Execution: Monitor the closing timeline and financing terms for the $122.5 million acquisition pipeline.