CHCT — Community Healthcare Trust Incorporated

Summary of CHCT Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: Increased to $31.5 million, up 4.8% year-over-year and 1.9% quarter-over-quarter.
• Funds from Operations (FFO): Rose to $13.4 million, a 5.8% increase from $12.7 million in Q1 2025. FFO per diluted share remained stable at $0.49.
• Adjusted Funds from Operations (AFFO): Increased to $15.4 million, up 4.1% year-over-year. AFFO per diluted share was $0.56, a $0.01 increase from the previous year and quarter.
• Occupancy Rate: Decreased from 90.6% to 89.8% due to lease terminations.
• Dividend: Increased to $0.48 per share, marking a continuous quarterly increase since the IPO.

2. Strategic Updates and Business Highlights

• The company is in the advanced stages of a transaction involving a behavioral hospital operator, with a letter of intent signed for the sale of operations for six hospitals.
• CHCT acquired an inpatient rehabilitation facility for $28.5 million, with an anticipated annual return of approximately 9.3%.
• The company has signed agreements for four additional properties, with expected investments totaling $99 million and returns ranging from 9.1% to 9.75%.
• Active capital recycling strategy in place, focusing on selling less attractive properties to fund new acquisitions.

3. Forward Guidance and Outlook

• The company anticipates leased occupancy to grow in the next quarter as leasing activity increases.
• Management expects to see AFFO growth in the second half of the year as redevelopment projects come online.
• CHCT is committed to maintaining modest leverage levels while evaluating capital uses, with no plans to raise capital through the ATM.

4. Bad News, Challenges, or Points of Concern

• Occupancy Decline: The decrease in occupancy from 90.6% to 89.8% raises concerns about tenant retention and lease terminations.
• Interest Expense: Although it decreased in Q1, a rise in interest expense is expected in Q2 due to additional borrowings and the expiration of interest rate hedges.
• Market Competition: There are concerns about the competitive landscape, particularly with rising interest rates affecting acquisition opportunities and valuations in the healthcare property sector.

5. Notable Q&A Insights

• CEO David Dupuy indicated that while progress is being made on the hospital transfer, there are still outstanding liabilities to confirm, particularly with Ohio Medicaid.
• In response to questions about acquisition strategies, Dupuy clarified that the company is focusing on capital recycling rather than raising new capital, aiming to prune the portfolio for better quality assets.
• The 9.3% yield on the recent acquisition is a cash yield, with 2% annual escalators consistent across other properties in the pipeline.

Overall, CHCT's Q1 2026 results reflect solid revenue growth and a strategic focus on acquisitions and capital recycling, though challenges in occupancy and rising interest expenses present potential headwinds.