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Community Healthcare Trust (CHCT) Q3 Earnings call transcript Oct 30, 2024

Daily EarningsWednesday, Oct 30, 2024 11:43 pm ET

1min read

CHCT --

Community Healthcare Trust (CHCT) held its third quarter earnings call for 2024, providing an update on the company's financial performance and strategic initiatives. The call was marked by a focus on the company's resilience amidst challenges, including Hurricanes Helene and Milton, and its efforts to expand its portfolio and optimize its operations.

Resilience Amidst Challenges

CHCT reported a decrease in occupancy from 92.6% to 91.3% due to lease terminations and expirations. However, the company has seen good leasing activity in its portfolio, with 5 properties undergoing redevelopment and significant renovations. Despite the impact of the hurricanes, CHCT reported that none of its top 10 tenants are currently on its watch list.

The company's successful refinancing of its revolving credit facility to $400 million, with a 5-year maturity and lower pricing, highlights CHCT's financial strength and the confidence of its bank group in the company's performance.

Strategic Initiatives and Outlook

CHCT has identified opportunities to expand its portfolio, with 4 properties under definitive purchase agreements for an aggregate expected purchase price of $8.8 million and expected returns ranging from 9.29% to 9.5%. The company also expects to close on 7 additional properties for an expected investment of $169.5 million, with expected returns ranging from 9.1% to 9.75%.

Despite the low share price, CHCT is actively evaluating capital recycling opportunities to fund near-term acquisitions. The company's dividend for the third quarter was raised to $0.465 per common share, underscoring its commitment to shareholder returns.

Addressing Tenant Challenges

CHCT is addressing challenges with a geriatric psychiatric hospital tenant, who owes $3.2 million in rent and interest. The company is pursuing multiple parallel paths to resolve the issue, including the possibility of leasing the facilities to other operators. CHCT remains in active dialogue with the operator and its consultants, seeking to begin receiving rent and interest payments as soon as possible.

Financial Performance

CHCT reported total revenue growth of 3.1% from the third quarter of 2023 to the third quarter of 2024, with FFO increasing by $1.2 million from $11.6 million in the second quarter of 2024 to $12.8 million in the third quarter of 2024. The company's dividend remains well covered, with a current payout ratio of only 85%.

In conclusion, CHCT's third quarter earnings call underscored the company's resilience in the face of challenges and its strategic initiatives to expand its portfolio and optimize its operations. The company's focus on financial strength, tenant management, and strategic acquisitions positions it well for future growth.

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