Community Healthcare Trust ((CHCT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Community Healthcare Trust’s recent earnings call presented a mixed sentiment, reflecting both positive strides and significant challenges. The company highlighted its consistent dividend increases and strategic acquisitions as positive developments. However, issues with a geriatric behavioral hospital tenant and substantial severance costs posed notable challenges, impacting the quarter’s performance significantly.
Dividend Increase
Community Healthcare Trust announced a dividend increase for the second quarter, raising it to $0.4725 per common share, which equates to an annualized dividend of $1.89 per share. This marks a continued trend of quarterly dividend increases since the company’s IPO, showcasing its commitment to returning value to shareholders.
Acquisition and Investment Plans
The company made strategic acquisitions, including an inpatient rehabilitation facility for $26.5 million, with an anticipated annual return of approximately 9.4%. Additionally, Community Healthcare Trust signed definitive purchase and sale agreements for six properties, expecting an investment of $146 million with returns ranging from 9.1% to 9.75%.
Cost Reduction
In a bid to streamline operations, the company successfully reduced property operating expenses by approximately $500,000 quarter-over-quarter to $5.6 million. General and administrative expenses were also reduced by $400,000, excluding onetime items, demonstrating effective cost management.
Geriatric Behavioral Hospital Tenant Issues
Challenges arose with a geriatric behavioral hospital tenant, unable to pay full rent and interest, leading to a $1.7 million reversal of interest receivables and an $8.7 million credit loss reserve. Consequently, rent is now recognized on a cash basis only, impacting financial stability.
Severance and Transition Costs
The departure of the former Executive Vice President of Asset Management led to a $5.9 million charge for severance and transition-related expenses, adding to the quarter’s financial burdens.
Revenue Impact
Total revenue for the second quarter was reported at $29.1 million, affected by a $1.7 million reversal of interest receivables. Adjusted total revenue would have been $30.7 million, reflecting a 2.2% growth quarter-over-quarter, indicating underlying business resilience despite setbacks.
Forward-Looking Guidance
Looking ahead, Community Healthcare Trust remains focused on strategic growth despite current challenges. The company plans to finalize acquisitions worth $146 million with expected returns between 9.1% and 9.75%. While no acquisitions occurred in the second quarter, a $26.5 million purchase was completed in July. The company continues to prioritize capital recycling and asset sales over issuing new shares, aiming to optimize financial performance.
In summary, Community Healthcare Trust’s earnings call revealed a complex landscape of achievements and obstacles. While the company continues to increase dividends and pursue strategic acquisitions, tenant issues and severance costs present significant hurdles. The forward-looking guidance suggests a cautious yet optimistic approach to overcoming these challenges and achieving sustained growth.