Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Community Healthcare Trust Inc reported a 7.9% annual growth in total revenue, rising from $27.2 million in Q1 2023 to $29.3 million in Q1 2024.
- Occupancy rates increased from 91.1% to 92.3% during the quarter, indicating strong property demand and effective asset management.
- The company successfully acquired four properties with a high aggregate lease rate of 98.6% and anticipated returns between 9.3% to 9.75%.
- Community Healthcare Trust Inc declared a dividend of $0.46 per common share for the first quarter, continuing its history of quarterly dividend increases since IPO.
- The company has definitive purchase and sale agreements for seven properties with an expected investment of $169.5 million, projecting returns ranging from 9.1% to 9.75%.
Negative Points
- General and administrative expenses increased by $826,000 quarter over quarter to $4.6 million, driven by changes in executive compensation plans.
- Adjusted funds from operations (AFFO) decreased by 2.2% from $16.1 million in Q4 2023 to $15.7 million in Q1 2024.
- The company experienced a decrease in funds from operations (FFO), declining from $14.9 million in Q4 2023 to $14 million in Q1 2024.
- Interest expenses slightly increased by $43,000 quarter over quarter to $5.1 million, adding to the financial costs.
- There was a noted drag on financial performance due to vacant assets, particularly impacting the expense lines with increased property operating expenses.
Q & A Highlights
Q: Are there any acquisitions we should be modeling for the remainder of the second quarter and third quarter, or is there going to be a gap in the pipeline until you close the outlined deal in the fourth quarter?
A: (David Dupuy, CEO) We've seen fewer opportunities in the first quarter, impacting the near-term pipeline. Market sentiment is changing, and we're hopeful to build the pipeline for the third and fourth quarters beyond the inpatient rehab facility expected to close in the fourth quarter.
Q: Can you discuss the current plan for the Genesis Care Vacon assets mentioned in the press release?
A: (David Dupuy, CEO) One of the Genesis Care Vacon assets is under a letter of intent (LOI) for re-leasing, and we are working on a draft lease. The other is planned for sale, which will help recycle capital and reduce drag from these assets.
Q: How significant was the drag from the Vacon assets on the expense line in the first quarter?
A: (William Monroe, CFO) The Vacon assets, specifically the Genesis Care properties, had about $1 million of total annualized rents, which is a drag. We're addressing this by re-leasing one property and selling another.
Q: What are the expectations for G&A expenses going forward, especially with the changes to the executive compensation plan?
A: (William Monroe, CFO) G&A expenses will remain higher due to non-cash compensation and amortization from the new compensation plan. Starting in the third quarter, we will also accrue for 50% of executive bonuses to be paid in cash, impacting AFFO by about $0.01 per quarter.
Q: What's the plan regarding raising debt to potentially clear the line of credit, and is there any timing for raising new debt?
A: (William Monroe, CFO) We aim to keep our debt to total capitalization at modest levels and may term out the revolver borrowings into a new term loan as we approach maturities in March 2026. We're evaluating debt markets and expect to act closer to being a year out from these maturities.
Q: Can you provide some qualitative comments on the new tenants for the five assets where Genesis leases were assigned or assumed?
A: (William Monroe, CFO) The new tenants include a large oncology provider, a large hospital system, and local oncology practices. We have received adequate assurance from GenesisCare on these assignments and feel good about these new relationships.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
