Community Healthcare Trust Incorporated Q3 FY2025 earnings call

Key Points

• Geriatric behavioral hospital tenant paid ~$200k rent in Q3; signed LOI for sale of 6 hospitals, buyer in due diligence.
• Occupancy decreased to 90.1% from 90.7% in Q3, but leasing activity expected to increase occupancy by 50-100 bps by year-end; weighted average lease term increased to 6.7 years.
• Acquisitions: Acquired 1 inpatient rehab facility for $26.5M, entered new lease expiring in 2040 with ~9.4% expected return; signed 6 property purchase agreements for ~$146M, expected returns 9.1%-9.75%, closing one in Q4, others in 2026-2027.
• Capital recycling: One disposition in Q3 ($700k proceeds, small loss); two more dispositions expected in Q4 ($6.1M net proceeds); sale of inpatient rehab hospital in Q4 expected to gain ~$11.5M, funded via 1031 exchange.
• Dividend: Raised to $0.475 per common share, annualized $1.90, raised every quarter since IPO.

Total revenue grew from $29.6 million in Q3 2024 to $31.1 million in Q3 2025, a 4.9% annual growth. Property operating expenses were $5.9 million in Q3 2025, up ~$300k quarter-over-quarter but down ~$50k year-over-year. Total general and administrative expense was $4.7 million in Q3 2025, flat quarter-over-quarter excluding severance, and down ~$300k year-over-year. Interest expense was $7.1 million in Q3 2025, up ~$500k quarter-over-quarter. Funds from operations: FFO in Q3 2025 was $13.5 million, a 5.7% increase year-over-year. Adjusted funds from operations (AFFO) was $15.1 million, a 3.1% increase year-over-year.

Forward-Looking Statements

• Leasing activity: Expect leased occupancy to increase 50-100 basis points by year-end.
• Acquisitions: Anticipate closing one property in Q4, with remaining 5 properties closing in 2026-2027.
• Interest expense: Benefit from FOMC rate cut in September, full benefit in Q4; further rate cuts expected to reduce interest expense further.

Risks

• Uncertainty around the geriatric behavioral hospital tenant transaction closing.
• Impact of interest rate changes on interest expense.
• Dependence on successful capital recycling and acquisitions to fund growth.

Q: On acquisition pipeline and funding.

A: David states they are highly selective, using capital recycling to fund acquisitions without meaningfully increasing leverage, and see attractive opportunities in the 9%-10% cap rate range.

Q: Funding via asset sales and leverage.

A: Bill clarifies proceeds from the upcoming $11.5M gain sale will fully fund the next acquisition with no incremental debt.

Q: Behavioral health tenant deal timing and Plan B.

A: Dave says the deal is likely to close in Q1, and they are actively pursuing multiple plans simultaneously in case of a deal fall-through.

Q: Back rents and new leases.

A: David states they expect a similar ~$200k in Q4 and are focused on new leases with the buyer of the geriatric hospitals, but don't place high likelihood on collecting back rent/interest.

Q: Redevelopment properties impact.

A: David says the 3 redevelopment properties will contribute additional rent starting after mid-2026, with one significant one likely commencing lease after mid-2026.

Q: Asset disposal criteria.

A: David mentions evaluating assets based on tenant concentration, weighted average lease term, size profile, and markets when identifying disposal candidates.

Q: 1031 exchanges and buyer interest.

A: William states the 1031 exchange is to defer capital gains, and they are looking at a wide set of potential buyers to maximize proceeds from asset sales.