Executive Summary

Q2 2025 delivered modest topline growth but earnings compression: revenue rose slightly y/y and q/q to $24.9M while diluted EPS fell to $0.32 (vs. $0.38 y/y; $0.34 q/q) on higher interest expense and lack of the prior-year one-time property tax benefit .
FFO was $11.8M ($0.85/share), down from $12.4M ($0.90/share) y/y and down a penny q/q, reflecting softer net income partially offset by higher depreciation and amortization .
Liquidity remains solid: $354.8M outstanding on the $425M revolver and $70.2M of availability at 6/30/25; maturity in 2028 with two optional six‑month extensions .
Dividend increased by $0.005 to $0.74/share in June, continuing the REIT’s dividend growth cadence; paid June 30, 2025 .
No earnings call transcript or guidance found for Q2; narrative focus stayed on rate sensitivity and tenant operating cost pressures—key drivers of sentiment and estimate risk near term .

What Went Well and What Went Wrong

What Went Well
- Stable rental engine: Total revenues ticked up to $24.9M (+0.5% y/y; +1.3% q/q), with non‑related party lease revenue slightly higher and bonus rent at McAllen Medical Center increasing y/y ($862K vs $758K) .
- Dividend growth continues: Board raised the quarterly dividend to $0.74/share (from $0.735), paid June 30, reinforcing income appeal .
- Ample liquidity runway: $70.2M of revolver availability and 2028 maturity provide balance sheet flexibility amid a high-rate environment .
What Went Wrong
- Earnings pressure: Diluted EPS fell to $0.32 on higher interest expense (+$137K impact y/y) and cycling out a $563K prior-year property tax benefit; FFO/share declined to $0.85 (from $0.90) .
- Margin compression: Net income margin and EBIT margin trended lower vs both Q1 and prior year as rate costs and property-level variances weighed (see margin table) .
- No guidance and limited qualitative detail: The company furnished the press release via 8‑K, but no Q2 call transcript was found; macro/tenant cost risks remain highlighted without quantified outlook .

Financial Results

Revenue, EPS, FFO (oldest → newest)

Metric	Q2 2024	Q4 2024	Q1 2025	Q2 2025
Total Revenues ($M)	24.734	24.642	24.548	24.868
Net Income ($M)	5.276	4.661	4.777	4.492
Diluted EPS ($)	0.38	0.34	0.34	0.32
FFO ($M)	12.385	11.758	11.930	11.794
FFO/Share ($)	0.90	0.85	0.86	0.85
Dividend/Share ($)	0.730	0.735	0.735	0.740

Margins (S&P Global) (oldest → newest)

Metric	Q2 2024	Q1 2025	Q2 2025
EBIT Margin %	39.41%*	37.84%*	36.50%*
Net Income Margin %	21.10%*	19.14%*	17.80%*

Values retrieved from S&P Global.*

Revenue composition (oldest → newest)

Revenue Component ($000s)	Q2 2024	Q1 2025	Q2 2025
Lease revenue – UHS facilities	8,454	8,327	8,381
Lease revenue – Non‑related parties	14,359	14,326	14,573
Other revenue – UHS facilities	220	229	237
Other revenue – Non‑related parties	342	314	327
Interest income on financing leases – UHS	1,359	1,352	1,350
Total Revenues	24,734	24,548	24,868
Bonus rental (McAllen) – included in UHS lease	758	817	862

Liquidity and capital (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Revolver capacity ($M)	425	425	425
Revolver borrowings ($M)	348.9	349.5	354.8
Availability ($M)	76.1	75.5	70.2
Maturity / Extension	2028; 2×6mo options	2028; 2×6mo options	2028; 2×6mo options

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quarterly Dividend/Share	Q2 2025	$0.735 (Q1 2025 actual)	$0.740 (declared Jun 11, 2025; paid Jun 30, 2025)	Raised

No revenue, margin, OpEx, tax, or segment guidance was provided in the Q2 2025 materials reviewed .

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was found in our document catalog for June–August 2025. The thematic analysis below draws from the past three press releases.

Topic	Previous Mentions (Q4 2024, Feb 26)	Previous Mentions (Q1 2025, Apr 28)	Current Period (Q2 2025, Jul 28)	Trend
Interest rates / funding costs	Higher rates increased borrowing costs; 2028 revolver; added 3.2725% swap in Oct-2024	Higher rates continue to elevate borrowing costs	Rates have substantially increased borrowing costs; capital market access remains constrained	Persistent headwind
Tenant labor costs / staffing	Tenant staffing shortages and wage pressure risk highlighted	Same risks reiterated	Continued emphasis on staffing shortages raising tenant costs	Unchanged, elevated risk
Medicaid / regulatory exposure	Medicaid funding and regulatory risk highlighted	Reiterated	Reiterated	Unchanged
Property‑level items	Chicago property taxes reduced in 2024; demolition completed 2023	n/a	Absence of 2024 property tax benefit a y/y headwind	Normalizing
Capital resources	Revolver upsized to $425M, 2028 maturity	$349.5M drawn; $75.5M available	$354.8M drawn; $70.2M available	Slightly tighter availability

Management Commentary

“For the three-month period ended June 30, 2025, net income was $4.5 million, or $.32 per diluted share, as compared to $5.3 million, or $.38 per diluted share, during the second quarter of 2024.”
“Our funds from operations (‘FFO’) were $11.8 million, or $.85 per diluted share, during the second quarter of 2025, as compared to $12.4 million, or $.90 per diluted share, during the second quarter of 2024.”
“As of June 30, 2025, pursuant the terms of our $425 million credit agreement… we had $70.2 million of available borrowing capacity, net of $354.8 million of borrowings.”
Risk framing: Management highlights sustained rate pressure, tenant staffing cost risks, and potential Medicaid/regulatory headwinds as key exogenous factors affecting results and tenant health .

Q&A Highlights

No Q2 2025 earnings call transcript was available in our catalog; the company furnished the press release via an 8‑K but we found no call materials for this period . Accordingly, there were no public Q&A clarifications to supplement the press release.

Estimates Context

S&P Global consensus: We did not find Q2 2025 consensus for EPS or revenue (no values returned; # of estimates unavailable). As a result, a beat/miss vs. consensus cannot be determined for this quarter. Values retrieved from S&P Global.
Reported actuals: Revenue $24.9M and diluted EPS $0.32 for Q2 2025 per company release .

Key Takeaways for Investors

Defensive revenue base, but earnings sensitivity to rates persists: modest revenue growth contrasted with EPS/FFO/share slippage as funding costs rose and a prior-year tax benefit rolled off .
Dividend compounding intact: incremental raise to $0.74 demonstrates confidence in cash flow stability despite margin pressure; income investors likely to view the cadence favorably .
Liquidity and duration buy time: $70.2M of revolver availability and 2028 maturity provide operating flexibility to manage through higher rates and tenant cost pressures .
Margin trajectory bears watching: EBIT and net margins compressed sequentially and y/y; further rate relief or tenant operating normalization would be catalysts for re‑expansion (see margin table).*
Limited disclosure (no call) concentrates focus on hard metrics: without guidance, investors should track quarterly revenue run‑rate, FFO/share, and revolver usage for trend confirmation .
Property-level levers: Bonus rent and mix of UHS vs. third‑party leases remained constructive; watch for leasing progress and disposition updates on legacy assets to aid NOI stability .
Near‑term trading setup: Dividend support and stable revenue can anchor downside, but lack of estimate visibility and margin headwinds may cap upside until rate backdrop eases or tenant cost pressures abate .