Community Healthcare Trust (CHCT) Q2 2024 earnings summary

Executive summary

• Reported a net loss of $10.4 million for Q2 2024, compared to net income of $6.6 million in Q2 2023, primarily due to a significant $11 million credit loss reserve and reversals of rent and interest income from a major geriatric inpatient psychiatric hospital tenant facing operational and financial challenges.

• Portfolio consists of 198 properties across 35 states, leased to 318 tenants, with a market cap of $656.1 million and enterprise value of $1.1 billion as of June 30, 2024.

• Portfolio occupancy increased to 92.6%, and the weighted average remaining lease term rose to 7.1 years.

• Five properties acquired in H1 2024 for $57.7 million, including an inpatient rehabilitation facility for $23.5 million and a medical office building for $6.2 million.

• Achieved 87% total shareholder return since inception and 36 consecutive quarters of dividend growth.

Financial highlights

• Total revenue for Q2 2024 declined by $294,000 year-over-year and by $1.8 million sequentially, primarily due to a $3.2 million reversal of rent and interest from the troubled tenant.

• Net loss for Q2 2024 was $10.4 million; FFO for Q2 2024 was $11.6 million, down from $14 million in Q1 2024; FFO per share declined from $0.53 to $0.43; AFFO for Q2 2024 was $14.3 million, down from $15.7 million in Q1 2024; AFFO per share declined from $0.59 to $0.53.

• Rental income for Q2 2024 was $27.9 million, up 4.3% year-over-year, but offset by a $1.9 million reduction due to a tenant moved to cash basis.

• Interest expense increased 44.6% year-over-year to $6.0 million in Q2 2024 due to higher debt balances and rates.

• Dividend was raised to $0.4625 per share for the quarter, annualized at $1.85, with a payout ratio of 87%.

Outlook and guidance

• Seven properties under definitive purchase agreements with an aggregate expected purchase price of $169.5 million and anticipated returns of 9.1% to 9.75%, with closings expected from Q4 2024 through 2027.

• AFFO per share is expected to remain around $0.53 until tenant performance improves; approximately $750,000–$800,000 of AFFO could be added back on a run-rate basis if out-of-period charges are excluded.

• Management is confident in funding growth through a mix of credit facilities, asset sales, and selective equity issuance.

• Healthcare industry tailwinds, including an aging population and shift to outpatient care, support long-term demand.