Community Healthcare Trust Incorporated Q1 FY2026 earnings call

During the first quarter, the Geriatric Behavioral Hospital Operator tenant paid rent of approximately $300,000, an increase of $100,000 over the last quarter. On July 17th, 2025, this tenant signed a letter of intent for the sale of the operations of all six of its hospitals. We continue to maintain frequent communication with the buyer's team. Our occupancy decreased due to lease terminations, but leasing team is active. Our weighted average lease term increased slightly. Three properties are undergoing redevelopment. We acquired an inpatient rehabilitation facility for $28.5 million. Signed definitive purchase and sale agreements for four properties. Sold one building in Fort Myers, Florida and received net proceeds. Declared first quarter dividend and raised it to 48 cents per common share.

Total revenue grew from $30.1 million in the first quarter of 2025 to $31.5 million in the first quarter of 2026, representing 4.8% annual growth. Property operating expenses increased to $6.4 million in the first quarter of 2026. Total general and administrative expense was $5.1 million in the first quarter of 2026. Interest expense decreased to $6.8 million in the first quarter of 2026. FFO in the first quarter of 2026 was $13.4 million, a 5.8% increase year over year. AFFO totaled $15.4 million in the first quarter of 2026, a 4.1% increase year-over-year. Occupancy decreased from 90.6% to 89.8% during the quarter due to lease terminations, but leasing team is busy with renewals and new leasing activity.

Expect our second quarter interest expense to be higher. Anticipate having sufficient capital from selected asset sales, coupled with our revolver availability, to fund near-term acquisitions. Expect to close on two of the four properties in the second half of 2026 and the remaining two in the second half of 2027. Expect AFFO growth in the second half of 2026 as redevelopment projects come online.

Uncertainty regarding the completion of the transaction with the behavioral healthcare operator. Potential impact of market changes on property valuations and acquisition opportunities. Fluctuations in interest rates affecting interest expense.

Q: Dave, you made some promising comments about the assurance hospital transfer. Sounds like things are progressing, sort of getting in late stages. Can you just give a little bit more color?

A: We are feeling like we have definitely made some progress over the last quarter. Some of the roadblocks that we've seen, as you've alluded to, have been related to, you know, getting some confirmation on some outstanding liabilities from a couple of the various governing bodies that pay. So in particular, as it relates to Ohio Medicaid firming up the amount that is owed. But we do feel like we're making good progress. The company is highly engaged. The buyer is highly engaged in the process. And we do feel like we're hopefully going to get final confirmation on timing and everything very shortly.

Q: Obviously senior housing is all the rage these days. uh and mob and i think your traditional property types may not be as in vogue at least you know when you look at the public stock prices when you guys look in the in the market for acquisitions is that the same that you see on the private market or is there or are you basically what i'm asking is your acquisition pipeline is coming down i realize that you're managing that relative to your cost capital but i'm also trying to understand what's going on in valuation land and if there's sort of all the healthcare private capital is heading only to senior housing and your traditional target class remains still very attractive and therefore your decision to pull the pipeline down is more based on just your cost of capital versus, you know, everything is once again getting bid up and therefore there's less product that's of interest to you.

A: It really has to do with the latter, Alex. I mean, we see a number of companies acquisitions. We continue to have investment committee meetings every couple of weeks where we go through opportunities. And yeah, if we were in a different position and weren't doing capital recycling and having to sequence those asset sales in order to acquire new assets because we don't want to raise capital through our ATM, we would definitely see the types of properties and the types of opportunities that we'd like to invest in. And so, you know, what we are doing in terms of focusing on capital recycling is we're using this as an opportunity to do two things. Obviously, we're using this as an opportunity to trim some of the properties that are in less attractive markets. You know, a lot of these facilities that we sold, we sold five properties in 2025. We sold another one in 2026. And so we're using this as an opportunity to really prune the portfolio and improve the portfolio. And so it's not the most fun in terms of selling a property in order to buy properties, but that's what we're going to focus our time and efforts on. And what we expect is in the second half of the year, as some of these redevelopment projects and other things that we've been working on to come online, we would expect, you know, to start posting AFFO growth, and we hope that that's recognized as a positive in the marketplace and puts us in a position to start doing what we have been doing historically as a company, which is not just growing the portfolio performance through leasing, but also growing the portfolio through acquisitions.

Q: If I'm pronouncing that properly, acquisition, that was quoted as about a 9.3% yield, I believe. Is that a gap or a cash yield? And if gap, I'm just trying to understand, perhaps, what are the percentage of annual escalators on that long lease?

A: That is a cash yield, that 9.3% cap rate. And they're 2% escalators, and it would be consistent with what we would anticipate with the other ones that are in the pipeline.