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Community Healthcare Trust Inc (CHCT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 results were impacted by one-time items tied to a troubled geriatric behavioral hospital tenant and executive severance, driving a GAAP net loss of $12.6M (-$0.50 EPS) and FFO per share of $0.23; AFFO per share was $0.50 . Revenue of $29.1M missed S&P Global consensus ($30.3M) mainly due to a $1.7M interest receivable reversal; excluding this item, management indicated revenue would have been ~$30.7M, implying underlying growth .
  • The Board raised the quarterly dividend to $0.4725 (annualized $1.89), continuing the streak of increases since IPO .
  • Strategic update: LOI signed to sell the geriatric psych tenant’s business to a new operator who would sign new leases; CHCT fully reserved notes and interest and is negotiating, though timing is uncertain .
  • Balance sheet and capital: modest leverage with net debt/total capitalization at 41.6%; management prefers capital recycling and revolver over equity ATM given the share price, and did not issue ATM shares in Q2 .
  • Near-term catalysts: closing of pipeline acquisitions (one IRF closed July 9 for $26.5M at ~9.4% return; six properties under definitive agreements totaling ~$146M at 9.1%–9.75% returns), progress on tenant sale, and potential occupancy improvements (+100 bps into 2026) .

What Went Well and What Went Wrong

What Went Well

  • Dividend increased to $0.4725; “We are proud to have raised our dividend every quarter since our IPO” .
  • Underlying revenue growth: CFO noted that excluding the $1.7M interest reversal, revenue would have been ~$30.7M vs $30.1M in Q1 (+2.2% QoQ) .
  • Accretive growth pipeline: Acquired an IRF for $26.5M at ~9.4% return; six additional properties under definitive agreements totaling ~$146M at 9.1%–9.75% returns .

What Went Wrong

  • Reported revenue miss: $29.1M vs S&P Global consensus $30.3M due to the $1.7M interest receivable reversal tied to the geriatric psych tenant (reducing FFO/AFFO $0.06 per share) .
  • One-time severance/stock-based comp: ~$5.9M charges (including ~$4.6M accelerated non-cash comp) reduced FFO/share by ~$0.22 .
  • Continued tenant risk: Full reserve on $8.7M notes receivable and ongoing negotiations; while cash rent/interest received increased ($260K vs $165K QoQ), uncertainty remains until sale closes .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD)$29,298 $30,078 $29,085
GAAP Diluted EPS ($)$0.04 $0.03 $(0.50)
FFO per share ($)$0.48 $0.47 $0.23
AFFO per share ($)$0.55 $0.55 $0.50
Net Income (Loss) Margin %6.3%5.3%(43.2%)
NOI ($000s)$23,813 $23,983 $23,500
Adjusted EBITDAre ($000s)$21,617 $21,596 $20,068
Estimates Comparison (S&P Global)Q4 2024Q1 2025Q2 2025
Revenue Consensus Mean ($USD)$29,848,250*$29,704,750*$30,303,670*
Revenue Actual ($USD)$29,298 $30,078 $29,085
Variance vs Consensus(−1.8%)*+1.3%*(−4.0%)*
EPS Consensus Mean ($)$0.07*$0.07*N/A*
EPS Actual ($)$0.04 $0.03 $(0.50)

Values retrieved from S&P Global.*

Segment/Portfolio Mix (Annualized Rent %):

Property Type% of Annualized Rent
MOB36.3%
IRF19.4%
Acute Inpatient Behavioral13.0%
Specialty Centers10.2%
Physician Clinics8.4%
Behavioral Specialty Facilities6.7%
Surgical Centers & Hospitals3.9%
LTACH2.1%

KPIs and Capitalization:

KPI / CapitalQ4 2024Q1 2025Q2 2025
% Leased90.9% 90.9% 90.7%
WALT (years)6.7 6.7 6.6
Dividend per share (declared in period)$0.4675 $0.4700 $0.4725
Net Debt ($000s)$485,955 $496,016 $500,077
Net Debt / Total Capitalization (%)40.3% 41.0% 41.6%
Revolver Hedged Rate (weighted avg)3.84% 3.84% 3.84%

Drivers and Adjustments:

  • Interest receivable reversal ($1.7M) reduced FFO/AFFO by ~$0.06/share .
  • Credit loss reserve on notes receivable ($8.7M) added back to FFO/AFFO; impacts GAAP only .
  • Severance/transition charges (~$5.9M including ~$4.6M accelerated non-cash comp) reduced FFO/share by ~$0.22 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidance (revenue/EPS/FFO)2025None provided (management does not guide) None provided; focus on pipeline, capital recycling Maintained
Dividend per shareQ2 2025$0.4700 (Q1 dividend) $0.4725 (Q2 dividend); annualized $1.89 Raised
Acquisition closings2H 2025–20277 properties under definitive agreements, $169.5M (Q1) 6 properties, ~$146M expected returns 9.1%–9.75%; anticipate closings 2025–2027 Updated pipeline size/timing
Occupancy outlookInto 202691%–93% range long-term Target +100 bps or more into 2026; requires execution Positive tone
Capital sourcingNear termUse revolver; evaluate capital recycling; avoid ATM at current price Emphasis on capital recycling and revolver; no ATM issuance in Q2 Maintained discipline

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Troubled geriatric behavioral tenantCash basis; small payment expected; exploring sale; tenant owes ~$3.2M rent + ~$2.5M notes annually $165K rent/interest received; pipeline sale evaluation; reserve considerations LOI signed with experienced operator; $260K received; $1.7M interest reversal; $8.7M credit loss reserve fully reserved; negotiate leases Progress toward resolution; financial headwind now
Capital allocation (ATM vs recycling)Revolver upsized to $400M; evaluate recycling; consider buybacks if authorized Prefer recycling + revolver; avoid ATM at low price; board considering buybacks No ATM issuance; plan to fund pipeline via recycling + revolver; maintain modest leverage Consistent discipline
Acquisition pipeline/returns$33M near-term, 6 properties $146M at 9.1%–9.75% returns 7 properties $169.5M at 9.1%–9.75%; 9.5% sale-leaseback 1 IRF acquired for $26.5M at ~9.4%; 6 properties $146M at 9.1%–9.75% Executing with accretive yields
Portfolio occupancy/asset mgmtSlight decline to 90.9%; redevelopment leases to start in Q2 2025 90.9%; redevelopment contributing NOI in Q4 2025 90.7%; new SVP Asset Mgmt; aim +100 bps occupancy into 2026 Targeted improvement
Macro/tariffs/tenant healthStable; monitoring tenant watchlist; macro noise but healthcare insulated Similar stance; tenants performing; watchlist normal (15–20 names) Watchlist consistent; no top-10 tenants on watchlist; tenants paying on remaining notes Stable

Management Commentary

  • “On July 17, 2025, the tenant signed a letter of intent… the buyer would sign new or amended leases for the six geriatric hospitals owned by CHCT” .
  • “Total revenue for Q2 was $29.1M, but excluding the $1.7M reversal, revenues would have been approximately $30.7M… core portfolio achieved 2.2% revenue growth QoQ” .
  • “We did not issue any shares under our ATM last quarter… anticipate sufficient capital from selected asset sales, coupled with our revolver capacity, to fund near-term acquisitions” .
  • “Declared our dividend… raised it to $0.4725 per common share… raised our dividend every quarter since our IPO” .
  • “Any sort of work on the buildings [for new operator] would be relatively minor… we wouldn’t anticipate significant capital required” .

Q&A Highlights

  • Funding strategy: Prefer capital recycling and revolver over ATM; comfortable leverage and covenant cushion; keeping leverage near current levels .
  • Tenant resolution probability and backup plans: Confident current buyer is best; have alternate bidders if deal falls through; limited expected recovery on reserved notes/interest .
  • Disposition vs acquisition yields: Expected dispositions in ~7.5%–8% cap rate range; acquisitions at ~9%+ returns .
  • G&A run-rate: Ex-severance, G&A ~$4.7M in Q2 (down ~$0.4M QoQ due to seasonality) but no formal guidance; focus on normalizing after one-time items .

Estimates Context

  • Revenue: Q2 2025 actual $29.085M vs consensus $30.304M (miss; driven by $1.7M interest receivable reversal); Q1 2025 beat ($30.078M vs $29.705M), Q4 2024 miss ($29.298M vs $29.848M). Values retrieved from S&P Global.*
  • EPS: S&P Global consensus for Q2 2025 EPS was unavailable; Q1 2025 actual $0.03 vs $0.07 consensus (miss), Q4 2024 actual $0.04 vs $0.07 consensus (miss). Values retrieved from S&P Global.*
  • Implication: Street models likely need to adjust for the one-time interest reversal and severance; AFFO run-rate impact from the $1.7M interest reversal was ~$0.06/share (partially transitory); underlying revenue growth remains intact ex-items .

Key Takeaways for Investors

  • Reported numbers reflect transitory headwinds; ex-items, revenue growth continued QoQ and AFFO per share would have been ~$0.56 absent the $0.06 reversal, with FFO ex-severance ~+$0.22/share higher, supporting dividend coverage and medium-term recovery potential .
  • The LOI to transition the troubled tenant to an experienced operator is the key near-term catalyst; deal closure by year-end (management’s hope) could remove uncertainty and restore cash rents (trading upside if de-risked) .
  • Capital discipline remains firm: expect acquisitions funded by recycling + revolver; no ATM issuance at current prices—reduces dilution risk and supports AFFO/share accretion from ~9%+ yields .
  • Occupancy improvement opportunity: new asset management leadership and redevelopment leases should add NOI and potentially +100 bps occupancy into 2026 (portfolio multiple expansion lever) .
  • Dividend growth continues (now $0.4725); coverage compressed by tenant issue but management confident in sustainability as pipeline and resolution progress (income support for yield-focused investors) .
  • Risk-monitoring: fully reserved notes/interest reduce downside surprises; watchlist stable with no other top-10 tenant concerns (portfolio diversification mitigates single-tenant risk) .
  • Near-term trading: Expect sensitivity to updates on tenant sale and evidence of capital recycling transactions; underlying NOI/AFFO trajectory should firm as one-time items roll off and IRF acquisition contributes .
All document-based facts are cited inline. S&P Global estimate values marked with * and described as “Values retrieved from S&P Global.”