Community Healthcare Trust Incorporated — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The company is a healthcare real estate REIT. At quarter-end it owned 197 properties across 35 states, totaling approximately 4.4 million square feet; occupancy was 92.3% and weighted-average remaining lease term was 6.9 years.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $29.3 million | $27.2 million |
| Net income (loss) | $3.7 million | $(6.9) million |
| Diluted EPS | $0.11 | $(0.32) |
| Operating cash flow | $12.6 million | $12.7 million |
| Investing cash flow | $(38.5) million | $(28.6) million |
| Financing cash flow | $26.2 million | $8.4 million |
| FFO / diluted share | $14.0 million / $0.53 | $2.2 million / $0.09 |
| AFFO / diluted share | $15.7 million / $0.59 | $15.6 million / $0.62 |
| NOI | $23.5 million | $22.3 million |
Rental income rose 8.5% to $28.3 million, primarily reflecting acquisitions; acquisitions added about $2.9 million, partly offset by approximately $0.7 million from expirations and terminations. Net income improved substantially, largely because Q1 2023 included $11.8 million of accelerated stock-compensation expense following the former CEO’s death. AFFO was nearly flat year over year, while AFFO per share declined from $0.62 to $0.59.
Property operating costs increased 18.8% to $5.8 million, and depreciation and amortization increased 13.8% to $10.3 million. Interest expense rose 26.8% to $5.1 million, reflecting higher revolving-credit balances and rates. Net income was approximately 12.5% of revenue in Q1 2024; NOI was approximately 80% of revenue.
Balance sheet, debt and liquidity
- Total assets were $982.7 million; net real estate was $879.6 million.
- Debt, net, was $442.3 million, up from $403.3 million at December 31, 2023. The company reported a 38.0% debt-to-total-capitalization ratio, within its stated 40% financing-policy limit.
- Debt included $89.0 million drawn on a $150 million revolver, $350 million of term loans and a $4.8 million mortgage. Revolver capacity remaining was $61 million. Term-loan rates were fixed through swaps at a weighted average of approximately 4.4%; the revolver’s weighted-average rate was 7.06%.
- Cash and cash equivalents were $3.8 million, plus $1.1 million of restricted cash. Operating cash flow of $12.6 million was below the $12.7 million of dividends paid.
- The company said it expects liquidity needs to be met through cash, operating cash flow and financing sources, while noting that funding availability and terms cannot be assured. It was in compliance with credit-facility financial covenants at quarter-end.
Outlook, developments and risks
- Q1 acquisitions totaled four properties for approximately $34.2 million; they were 98.6% leased at acquisition. After quarter-end, the company acquired a fully leased inpatient rehabilitation facility for approximately $23.5 million, funded with revolver proceeds.
- Seven properties are under definitive purchase agreements, with an expected aggregate price of approximately $169.5 million and expected returns of 9.1%–9.75%. Management anticipates one closing in Q4 2024 and others during 2025–2027, but cautions that timing and completion are uncertain.
- A $4.8 million mortgage balloon payment was due May 1, 2024. Management expected to fund it with free cash flow or revolver borrowings.
- Tenant-improvement commitments were approximately $22.5 million, including $15.8 million for redevelopment projects; capital-improvement commitments were approximately $5.6 million. The company also disclosed $5.1 million of unfunded commitments on notes.
- GenesisCare emerged from bankruptcy in February 2024. Five of the company’s seven leases were assumed or assigned; two remained with GenesisCare U.S. The filing attributes part of the year-over-year rental-income offset to rejected leases.
- Management identifies inflation, higher interest rates, refinancing availability, healthcare-sector developments, capital-market conditions, acquisitions, weather and cyber incidents among risks. No material risk-factor changes were reported. No pending or threatened litigation was identified that management believed would materially affect the company.
- The board declared a $0.46-per-share quarterly dividend after quarter-end, equivalent to $1.84 annualized. The filing provides no formal earnings or dividend guidance beyond the declared dividend and disclosed acquisition expectations.
Most important facts for investors to verify
- Whether the mortgage balloon was repaid or refinanced as expected, and the resulting revolver balance and borrowing capacity.
- Whether occupancy, rent collections and lease renewals remain stable, particularly following GenesisCare’s bankruptcy and lease changes.
- How the $169.5 million acquisition pipeline and post-quarter acquisition will be funded, and whether expected returns are achieved.
- Whether operating cash flow can support dividends and planned capital spending without continued material borrowing or equity issuance.
- Tenant and borrower credit quality, including performance and exposure on notes receivable and unfunded commitments.