Community Healthcare Trust Incorporated (NYSE: CHCT) — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing; it does not provide standalone fourth-quarter results. The company is a healthcare REIT that owns and leases properties to healthcare providers.
Business and portfolio
At year-end, CHCT held approximately $738.8 million of investments across 141 properties in 33 states, totaling about 3.1 million square feet. The portfolio was 88.8% leased, with an 8.1-year weighted-average remaining lease term. Medical office buildings were the largest property category by annualized rent (30.4%). No tenant represented more than 10% of revenue; Illinois, Texas, and Ohio together generated 37.9% of revenue.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $75.7 million | $60.8 million | +24.4% |
| Net income | $19.1 million | $8.4 million | +127.8% |
| Diluted earnings per share | $0.80 | $0.37 | — |
| FFO | $45.0 million | $32.1 million | +40.3% |
| Diluted FFO per share | $2.03 | $1.67 | — |
| Cash from operations | $48.4 million | $32.4 million | — |
Revenue growth was primarily driven by acquisitions made in 2019 and 2020. GAAP net margin was approximately 25.2%, compared with 13.8% in 2019. Interest expense declined to $8.6 million from $9.3 million, while property operating costs, general and administrative costs, and depreciation increased. FFO is a non-GAAP REIT measure and should not be treated as cash flow or liquidity.
Year-end cash and cash equivalents were $2.5 million ($2.9 million including restricted cash). Net debt on the balance sheet was $212.4 million, including $208.0 million outstanding on the credit facility and a mortgage note. The company reported a 28.5% debt-to-total-capitalization ratio and compliance with credit-facility covenants. The $150 million revolver had $117 million of capacity remaining; term loans totaled $175 million and had a fixed weighted-average rate of about 3.88% under swaps. The $33 million revolver balance carried a weighted-average rate of about 1.55%.
Material changes and capital allocation
- CHCT acquired 23 properties and two land parcels in 2020 for approximately $126.8 million in cash; acquired properties were 99.5% leased at purchase.
- Operating cash flow increased by about $16.0 million year over year. Investing cash outflow was $125.1 million, and financing cash inflow was $77.6 million.
- The company issued 2.21 million shares through its ATM program in 2020, receiving approximately $98.0 million net. About $140.2 million remained available under the program at year-end.
- Cash dividends were $1.685 per share in 2020, up from $1.645 in 2019. The board declared a $0.4275 quarterly dividend in February 2021.
- After year-end, the company acquired four properties for approximately $17.8 million. It also reported two properties under definitive agreements after completion and occupancy, with an expected aggregate purchase price of $42.0 million and estimated returns of 9.1%, plus another property under agreement for $4.4 million; closings were not assured.
Outlook, risks, and unusual items
The filing gives no formal earnings or FFO guidance. Management expects to pursue acquisitions, generally targeting healthcare properties in off-market or lightly marketed transactions, and expects liquidity needs to be met through cash, operating cash flow, credit-facility borrowings, and debt or equity issuance. These expectations are subject to market and transaction conditions.
- COVID-19 affected tenant patient volumes and elective procedures unevenly. CHCT entered rent-deferral agreements with 18 tenants, representing less than 1% of annualized rent; less than $100,000 remained due at year-end.
- Lease expirations represent 5.2% of annualized lease revenue in 2021 and 6.9% in 2022. Re-leasing specialized healthcare space, particularly in smaller markets, may take time or require expense.
- Key risks include tenant financial distress or non-renewals, healthcare reimbursement and regulatory changes, geographic concentration, acquisition competition, capital-market access, variable interest rates, and maintaining REIT qualification. The company also identified uncertainty in the transition away from LIBOR.
- Interest-rate swaps had a year-end liability of $11.8 million; the company estimated approximately $3.7 million would be reclassified from accumulated other comprehensive loss as additional interest expense over the next 12 months.
- The company recorded no long-lived asset impairment in 2020 and reported no litigation expected to have a material adverse effect. The auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether occupancy, tenant rent collections, and remaining COVID-related deferrals remain stable, and how tenant credit quality is changing.
- Actual completion, occupancy, financing, and returns for the announced acquisition pipeline and subsequent acquisitions.
- Lease renewals and re-leasing outcomes for the 2021–2022 expirations, including any purchase-option exercises.
- Debt maturities, revolver availability, covenant headroom, variable-rate exposure, and the LIBOR replacement terms.
- Future share issuance under the ATM program and its effect on per-share FFO and dividend coverage; compare distributions with operating cash flow as well as FFO.
- Progress on geographic and property-type diversification, and the continuing exposure to Illinois, Texas, and Ohio.