Community Healthcare Trust ((CHCT)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Community Healthcare Trust (CHCT) painted a mixed picture of the company’s current standing and future prospects. While the company demonstrated positive growth in revenue and acquisitions, challenges such as issues with a significant tenant and rising expenses were highlighted. The sentiment was balanced by positive moves like a dividend increase and a successful property sale, although concerns about flat occupancy and lease terms, along with minor decreases in Funds From Operations (FFO), tempered the optimism.
Revenue Growth
The company reported a modest increase in total revenue, climbing from $29.3 million in Q1 2024 to $30.1 million in Q1 2025, marking a 2.5% annual growth. This steady rise in revenue signals a positive trajectory in the company’s financial health, despite other challenges.
New Acquisitions
Community Healthcare Trust made strategic moves by acquiring a behavioral residential treatment facility for approximately $9.7 million, anticipating a return of 9.5%. Additionally, the company has agreements for seven more properties, expected to yield returns between 9.1% and 9.75%, indicating a robust expansion strategy.
Dividend Increase
In a show of financial strength, the company declared a dividend increase to $0.47 per common share, resulting in an annualized dividend of $1.88 per share. This move continues their streak of quarterly dividend increases since their IPO, reflecting confidence in sustained profitability.
Successful Property Sale
CHCT successfully sold a building in Ohio, netting approximately $600,000 and realizing a gain on the property sale. This transaction underscores the company’s ability to capitalize on its real estate assets effectively.
Geriatric Psychiatric Hospital Operator Challenges
The earnings call highlighted challenges with a tenant operating geriatric psychiatric hospitals across six properties. The tenant is exploring strategic alternatives, including potential sales, creating uncertainty regarding future rent and interest payments nearing $6 million annually.
Flat Occupancy and Lease Term
Occupancy rates and the weighted average remaining lease term remained unchanged at 90.9% and 6.7 years, respectively. This stagnation suggests that the company has not made significant strides in improving these metrics over the past quarter.
Increased Operating Expenses
The company faced increased property operating expenses, rising by approximately $600,000 quarter-over-quarter to $6.1 million. This increase was primarily due to higher seasonal utility and snowplow expenses, impacting overall profitability.
FFO and AFFO Marginal Changes
Funds From Operations (FFO) saw a slight decrease of $77,000 quarter-over-quarter, holding at $12.7 million. Meanwhile, Adjusted Funds From Operations (AFFO) increased by $100,000 but remained constant on a diluted common share basis at $0.55, indicating stable but unremarkable financial performance.
Forward-Looking Guidance
Looking ahead, Community Healthcare Trust provided guidance that suggests stability and continued growth. The company plans to maintain occupancy rates at 90.9% with a weighted average lease term of 6.7 years. They are set to invest approximately $169.5 million in acquiring seven new properties, projecting returns between 9.1% and 9.75%. This strategic expansion is expected to bolster revenue, which has already seen a 2.5% year-over-year increase.
In conclusion, Community Healthcare Trust’s earnings call reflected a balanced sentiment, with positive revenue growth and strategic acquisitions countered by tenant challenges and increased expenses. The company’s commitment to increasing dividends and successful property sales highlights its resilience and strategic foresight, even as it navigates operational hurdles.