Community Healthcare Trust Incorporated Q2 FY2025 earnings call

• Dave introduced the team, noting Tim Meyer's departure and Mark Kearns joining as Senior Vice President of Asset Management.
• Geriatric behavioral hospital tenant: signed letter of intent for sale of operations, notes and interest fully reserved, rent recognized on cash basis; received $260,000 in Q2 compared to $165,000 prior quarter.
• Occupancy decreased slightly to 90.7%, but leasing activity good; 3 properties under redevelopment, one commencing lease on July 1 with AFFO expected later in 2025 and into 2026.
• Acquired an inpatient rehabilitation facility for $26.5 million with lease expiring 2040 and 9.4% annual return; signed agreements for 6 properties worth $146 million, expected return 9.1%-9.75%, closing one in Q4, others in 2026-2027.
• No shares issued under ATM, small disposition in Q2 generating $600,000 proceeds; raised dividend to $0.4725 per common share, annualized to $1.89.
• Bill discussed financial impacts: $1.7 million interest receivable reversal, $8.7 million credit loss reserve on geriatric tenant notes, $5.9 million severance charge, interest expense increase due to borrowings.

Total revenue for the second quarter of 2025 was $29.1 million. Excluding the $1.7 million reversal of interest receivable from the geriatric behavioral hospital tenant, total revenues would have been approximately $30.7 million. FFO on a diluted common share basis was $0.23 in the second quarter, but reduced by onetime items. Adjusted funds from operations (AFFO) totaled $13.6 million, or $0.50 per diluted common share, also reduced by onetime items. Property operating expenses decreased to $5.6 million, general and administrative expense was $10.6 million (excluding $5.9 million severance and transition charges), interest expense increased to $6.6 million.

• Plan to use capital recycling for upcoming acquisitions; expect sufficient capital from asset sales and revolver capacity to fund near-term acquisitions.
• Aim to close one property in the fourth quarter of 2025 and the remaining 5 properties throughout 2026 and 2027.
• Dividend raised to $0.4725 per common share, annualizing to $1.89 per share.

• Uncertainty regarding the closure of the transaction for the geriatric behavioral hospital tenant.
• Risks associated with executing capital recycling efforts to fund acquisitions without over-leveraging the balance sheet.

Q: Rob Stevenson asked about the acquisition funding from the pipeline and the geriatric facilities.

A: Dave confirmed the acquisition was from the pipeline, focused on capital recycling for upcoming acquisitions, and mentioned other interested buyers for the geriatric facilities in case the current deal falls through.

Q: Connor Mitchell inquired about transaction environment, funding, geriatric tenant notes, etc.

A: Bill discussed leverage comfort and covenant levels, Dave talked about remaining notes (approx $4.1 million), tenants in good standing, and focus on capital recycling for acquisitions.

Q: Michael Lewis asked about new operator, lease terms, acquisition funding, disposition cap rates, occupancy.

A: Dave spoke about the qualified new operator, ongoing lease term negotiation, acquisition funding via capital recycling, disposition cap rates between 7.5%-8%, and expectation to increase occupancy by 100 basis points or more in 2026 with focus on portfolio performance.