ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Disclosure Regarding Forward-Looking Statements
This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believes”, “expects”, “may”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates” or other similar words or expressions, including the negative thereof. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Because forward-looking statements relate to future events, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. Thus, the Company’s actual results and financial condition may differ materially from those indicated in such forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, changes in the real estate industry in general, interest rates or the general economy, adverse developments related to the healthcare industry, the degree and nature of the Company’s competition, the ability to consummate acquisitions under contract and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the Company’s other filings with the Securities and Exchange Commission from time to time. Readers are therefore cautioned not to place undue reliance on the forward-looking statements contained herein which speak only as of the date hereof. The Company intends these forward-looking statements to speak only as of the time of this report and the Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law.
The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and cash. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Condensed Consolidated Financial Statements and accompanying notes.
Overview
References such as "we," "us," "our," and "the Company" mean Community Healthcare Trust Incorporated, a Maryland corporation, and its consolidated subsidiaries.
We were organized in the State of Maryland on March 28, 2014. We are a self-administered, self-managed healthcare real estate investment trust, or REIT, that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers in our target submarkets.
Trends and Matters Impacting Operating Results
Management monitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.
Real estate acquisitions
During the third quarter of 2019, the Company acquired three real estate properties totaling approximately 130,000 square feet for an aggregate purchase price of approximately $52.6 million and cash consideration of approximately $52.2 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations through 2034.
During the second quarter of 2019, the Company acquired three real estate properties totaling approximately 110,000 square feet for an aggregate purchase price of approximately $31.9 million and cash consideration of approximately $30.7 million. Upon acquisition, the properties were approximately 97.1% leased in the aggregate with lease expirations through 2034.
During the first quarter of 2019, the Company acquired two real estate properties totaling approximately 83,000 square feet for an aggregate purchase price and cash consideration of approximately $32.7 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations in 2029.
See Note 4 to the Condensed Consolidated Financial Statements for more details on these acquisitions.
4th Quarter 2019 Acquisitions
Subsequent to September 30, 2019, the Company acquired seven real estate properties, including one that was previously under construction, totaling approximately 114,000 square feet for a purchase price of approximately $34.8 million and cash consideration of approximately $34.4 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expiration through 2034. The Company funded the acquisitions with cash from operations, net proceeds from the ATM Program, and proceeds from the Company's Revolving Credit Facility.
Acquisition Pipeline
The Company has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $68.0 million. The Company's expected aggregate returns on these investments range from approximately 9.5% to 11.0%. The Company expects to close these properties through 2020; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings.
Leased square footage
As of September 30, 2019, our real estate portfolio was approximately 89.3% leased. During the first nine months of 2019, we had expiring or terminated leases related to approximately 134,000 square feet, and we leased or renewed leases relating to approximately 170,000 square feet.
Highland Transition Update
A new operator is currently managing Highland Hospital pursuant to a management agreement and is in the process of preparing for transfer of licenses and other assets.
Highland Hospital will likely be the subject of a pre-packaged bankruptcy, with an anticipated sale to the new operator, to expedite and facilitate the transfer of licenses.
The Company has received and anticipates continuing to receive monthly payments of approximately $0.3 million.
The Company's lease with the new operator will become effective upon the transfer of the licenses to the new operator.
The Company does not anticipate any material adverse long-term effect to its cash flows or net income related to the transition or subsequent leasing of this facility.
The Company cannot provide assurance as to the timing or whether, this transaction will actually close.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that are reasonably likely to have a material effect on the Company's consolidated financial condition, results of operations or liquidity.
Inflation
We believe inflation will have a minimal impact on the operating performance of our properties. Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation. These provisions include clauses that enable us to receive payment of increased rent pursuant to escalation clauses which generally increase rental rates during the terms of the leases. These escalation clauses often provide for fixed rent increases or indexed escalations (based upon the Consumer Price Index or other measures). However, some of these contractual rent increases may be less than the actual rate of inflation. Generally, our lease agreements require the tenant to pay property operating expenses, including maintenance costs, real estate taxes and insurance. This requirement reduces our exposure to increases in these costs and property operating expenses resulting from inflation.
Seasonality
We do not expect our business to be subject to material seasonal fluctuations.
New Accounting Pronouncements
See Note 1 to the Company’s Condensed Consolidated Financial Statements accompanying this report for information on new accounting standards not yet adopted.
Results of Operations
The Company's results of operations for the three and nine months ended September 30, 2019 compared to the same periods in 2018 have most significantly been impacted by its real estate acquisitions. As of September 30, 2019 and 2018, the Company had investments in real estate properties totaling approximately $566.3 million and $424.2 million, respectively.
Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018
The table below shows our results of operations for the three months ended September 30, 2019 compared to the same period in 2018 and the effect of changes in those results from period to period on our net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Increase (Decrease) to
Net Income
|
(dollars in thousands)
|
2019
|
|
2018
|
|
$
|
%
|
REVENUES
|
|
|
|
|
|
|
Rental income
|
$
|
15,718
|
|
|
$
|
11,858
|
|
|
$
|
3,860
|
|
32.6
|
%
|
Other operating interest
|
541
|
|
|
679
|
|
|
(138
|
)
|
(20.3
|
)%
|
|
16,259
|
|
|
12,537
|
|
|
3,722
|
|
29.7
|
%
|
EXPENSES
|
|
|
|
|
|
|
Property operating
|
3,327
|
|
|
2,627
|
|
|
(700
|
)
|
(26.6
|
)%
|
General and administrative
|
2,041
|
|
|
1,395
|
|
|
(646
|
)
|
(46.3
|
)%
|
Depreciation and amortization
|
5,774
|
|
|
4,925
|
|
|
(849
|
)
|
(17.2
|
)%
|
|
11,142
|
|
|
8,947
|
|
|
(2,195
|
)
|
(24.5
|
)%
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS
|
5,117
|
|
|
3,590
|
|
|
1,527
|
|
42.5
|
%
|
Interest expense
|
(2,483
|
)
|
|
(1,643
|
)
|
|
(840
|
)
|
(51.1
|
)%
|
Other income
|
13
|
|
|
52
|
|
|
(39
|
)
|
(75.0
|
)%
|
INCOME FROM CONTINUING OPERATIONS
|
2,647
|
|
|
1,999
|
|
|
648
|
|
32.4
|
%
|
NET INCOME
|
$
|
2,647
|
|
|
$
|
1,999
|
|
|
$
|
648
|
|
32.4
|
%
|
Revenues
Revenues increased approximately $3.7 million, or 29.7%, for the three months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate.
Expenses
Property operating expenses increased approximately $0.7 million, or 26.6%, for the three months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate of approximately $0.5 million, as well as an increase in overall expenses on our existing portfolio of approximately $0.2 million.
General and administrative expenses increased approximately $0.6 million, or 46.3%, for the three months ended September 30, 2019 compared to the same period in 2018 due mainly to compensation-related expenses and occupancy costs related to to the addition of employees, including the amortization of non-vested restricted common shares issued under our 2014 Incentive Plan.
Depreciation and amortization expense increased approximately $0.8 million, or 17.2%, for the three months ended September 30, 2019 compared to the same period in 2018. Acquisitions accounted for an increase of approximately $1.3 million, offset by a decrease of approximately $0.5 million in amortization due to fully depreciated real estate lease intangibles which generally have a shorter depreciable life than a building.
Interest expense
Interest expense increased approximately $0.8 million, or 51.1%, for the three months ended September 30, 2019 compared to the same period in 2018 due mainly to additional Term Loan borrowings under its Credit Facility in the first quarters of 2018 and 2019, as well as a higher weighted average debt balance and a higher weighted average interest rate on the Revolving Credit Facility in the third quarter of 2019 compared to the same period in 2018.
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
The table below shows our results of operations for the nine months ended September 30, 2019 compared to the same period in 2018 and the effect of changes in those results from period to period on our net income.
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|
|
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|
Nine Months Ended September 30,
|
|
Increase (Decrease) to
Net Income
|
(dollars in thousands)
|
2019
|
|
2018
|
|
$
|
%
|
REVENUES
|
|
|
|
|
|
|
Rental income
|
$
|
41,977
|
|
|
$
|
34,743
|
|
|
$
|
7,234
|
|
20.8
|
%
|
Other operating interest
|
2,039
|
|
|
1,625
|
|
|
414
|
|
25.5
|
%
|
|
44,016
|
|
|
36,368
|
|
|
7,648
|
|
21.0
|
%
|
EXPENSES
|
|
|
|
|
|
|
Property operating
|
9,395
|
|
|
7,497
|
|
|
(1,898
|
)
|
(25.3
|
)%
|
General and administrative
|
5,602
|
|
|
4,092
|
|
|
(1,510
|
)
|
(36.9
|
)%
|
Depreciation and amortization
|
16,319
|
|
|
14,471
|
|
|
(1,848
|
)
|
(12.8
|
)%
|
|
31,316
|
|
|
26,060
|
|
|
(5,256
|
)
|
(20.2
|
)%
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS
|
12,700
|
|
|
10,308
|
|
|
2,392
|
|
23.2
|
%
|
Interest expense
|
(6,788
|
)
|
|
(4,482
|
)
|
|
(2,306
|
)
|
51.5
|
%
|
Other income
|
251
|
|
|
462
|
|
|
(211
|
)
|
(45.7
|
)%
|
INCOME FROM CONTINUING OPERATIONS
|
6,163
|
|
|
6,288
|
|
|
(125
|
)
|
(2.0
|
)%
|
NET INCOME
|
$
|
6,163
|
|
|
$
|
6,288
|
|
|
$
|
(125
|
)
|
(2.0
|
)%
|
Revenues
Revenues increased approximately $7.6 million, or 21.0%, for the nine months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate. Due to the original structuring of an acquisition in April 2019, the Company recorded interest income of approximately $0.4 million, included in other operating interest, rather than rental income, which was recorded for the second quarter of 2019.
Expenses
Property operating expenses increased approximately $1.9 million, or 25.3%, for the nine months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate of approximately $1.2 million, as well as an increase in overall expenses on our existing portfolio of approximately $0.7 million.
General and administrative expenses increased approximately $1.5 million, or 36.9%, for the nine months ended September 30, 2019 compared to the same period in 2018. Compensation-related expenses and occupancy costs related to our employees, including the amortization of non-vested restricted common shares issued under our 2014 Incentive Plan, and expenses related to the addition of employees increased approximately $1.2 million. Further, state and federal income taxes and franchise taxes increased approximately $0.4 million.
Depreciation and amortization expense increased approximately $1.8 million, or 12.8%, for the nine months ended September 30, 2019 compared to the same period in 2018. Acquisitions accounted for an increase of approximately $2.9 million, offset by a decrease of approximately $1.6 million in amortization due to fully depreciated real estate
lease intangibles which generally have a shorter depreciable life than a building. Also, land, building and tenant improvements accounted for an increase of approximately $0.4 million.
Interest expense
Interest expense increased approximately $2.3 million, or 51.5%, for the nine months ended September 30, 2019 compared to the same period in 2018 due mainly to additional Term Loan borrowings under its Credit Facility in the first quarters of 2018 and 2019, as well as a higher weighted average debt balance and a higher weighted average interest rate on the Revolving Credit Facility in the first nine months of 2019 compared to the same period in 2018. The Company also assumed a mortgage relating to one of its real estate acquisitions in the fourth quarter of 2018 resulting in mortgage note interest of approximately $0.2 million for the nine months ended September 30, 2019.
Funds from Operations
Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to net income (calculated in accordance with GAAP), excluding gains or losses from the sale of certain real estate assets and gains or losses from change in control, plus depreciation and amortization related to real estate, plus impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and after adjustments for unconsolidated partnerships and joint ventures, as well as other items discussed in NAREIT's Funds From Operations White Paper - 2018 Restatement.
Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO and FFO per share to be supplemental measures of a REIT’s performance because they provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO and FFO per share can facilitate comparisons of operating performance between periods. The Company reports FFO and FFO per share because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share is consistently reported, discussed, and compared by research analysts in their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share. However, FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income attributable to common stockholders as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.
The table below reconciles FFO to net income for the three and nine months ended September 30, 2019 and 2018, respectively.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(Dollars in thousands, excepts per share amounts)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income
|
$
|
2,647
|
|
|
$
|
1,999
|
|
|
$
|
6,163
|
|
|
$
|
6,288
|
|
Real estate depreciation and amortization
|
5,812
|
|
|
4,918
|
|
|
16,434
|
|
|
14,453
|
|
Total adjustments
|
5,812
|
|
|
4,918
|
|
|
16,434
|
|
|
14,453
|
|
Funds from Operations
|
$
|
8,459
|
|
|
$
|
6,917
|
|
|
$
|
22,597
|
|
|
$
|
20,741
|
|
Funds from Operations per Common Share-Basic
|
$
|
0.45
|
|
|
$
|
0.39
|
|
|
$
|
1.23
|
|
|
$
|
1.17
|
|
Funds from Operations per Common Share-Diluted
|
$
|
0.44
|
|
|
$
|
0.39
|
|
|
$
|
1.20
|
|
|
$
|
1.16
|
|
Weighted Average Common Shares Outstanding-Basic
|
18,832,902
|
|
|
17,669,681
|
|
|
18,347,630
|
|
|
17,695,688
|
|
Weighted Average Common Shares Outstanding-Diluted (1)
|
19,315,354
|
|
|
17,947,568
|
|
|
18,769,670
|
|
|
17,839,014
|
|
(1) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share.
Liquidity and Capital Resources
The Company monitors its liquidity and capital resources and relies on several key indicators in its assessment of capital markets for financing acquisitions and other operating activities as needed, including the following:
|
|
•
|
Leverage ratios and financial covenants included in our Credit Facility;
|
|
|
•
|
Dividend payout percentage; and
|
|
|
•
|
Interest rates, underlying treasury rates, debt market spreads and equity markets.
|
The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.
Sources and Uses of Cash
The Company derives most of its revenues from its real estate property and notes portfolio, collecting rental income, operating expense reimbursements and interest based on contractual arrangements with its tenants and borrowers. These sources of revenue represent our primary source of liquidity to fund our dividends, general and administrative expenses, property operating expenses, interest expense on our Credit Facility and other expenses incurred related to managing our existing portfolio and investing in additional properties. To the extent additional resources are needed, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets or through proceeds from our Credit Facility.
The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.
The Company's Credit Facility, as amended on March 29, 2019, provides for a $150.0 million Revolving Credit Facility and $175.0 million in Term Loans, as well as an accordion feature which allows borrowings up to a total of $525.0 million, including the ability to add and fund additional term loans. Note 5 to the Condensed Consolidated Financial Statements provides more details on the Company's Credit Facility and the amendment on March 29, 2019. At September 30, 2019, the Company had borrowed $175.0 million in Term Loans and had borrowing capacity remaining under the Revolving Credit Facility of approximately $113.8 million. At September 30, 2019,
our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 36.6%.
The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial maintenance covenants. Also, the Company’s current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods. The Company was in compliance with its financial covenants under its Credit Facility as of September 30, 2019.
4th Quarter 2019 Acquisitions
Subsequent to September 30, 2019, the Company acquired seven real estate properties, including one that was previously under construction, totaling approximately 114,000 square feet for a purchase price of approximately $34.8 million and cash consideration of approximately $34.4 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expiration through 2034. The Company funded the acquisitions with cash from operations, net proceeds from the ATM Program, and proceeds from the Company's Revolving Credit Facility.
Acquisition Pipeline
The Company has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $68.0 million. The Company's expected aggregate returns on these investments is approximately 9.5% to 11.0%. The Company expects to close these properties through 2020; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings.
Other Contractual Obligations
The Company has tenant improvement allowances included in certain leases with its tenants totaling approximately $4.7 million that it could be obligated to fund or reimburse the tenants for if the tenants completed such improvements.
The Company has also entered into contracts regarding certain capital expenditures totaling approximately $1.7 million. Reimbursement of these expenses by our tenants will be determined by each tenant's lease.
Universal Shelf S-3 Registration Statement
On September 20, 2019, the Company filed with the SEC a Post-Effective Amendment No. 1 to Form S- 3 (File No. 333-213614), or the Registration Statement, which Post-Effective Amendment was declared effective by the SEC on September 24, 2019, to amend the Registration Statement to deregister any securities registered pursuant to the Registration Statement and not otherwise sold thereunder.
ATM Program
During the first nine months of 2019, the Company issued, through its ATM Program, 1,321,362 shares of common stock at an average gross sales price of $39.88 per share and received proceeds of approximately $51.6 million, as discussed in more detail in Note 7 to the Condensed Consolidated Financial Statements. The proceeds were used for additional acquisitions, to repay outstanding balances under the Company's Credit Facility and for general corporate purposes.
Operating Activities
Cash flows provided by operating activities for the nine months ended September 30, 2019 and 2018 were approximately $23.2 million and $17.9 million, respectively. Cash flows provided by operating activities were generally provided by contractual rents, net of expenses, on our real estate property portfolio.
Investing Activities
Cash flows used in investing activities for the nine months ended September 30, 2019 and 2018 were approximately $118.3 million and $38.0 million, respectively. During the nine months ended September 30, 2019, the Company invested in eight properties for an aggregate cash consideration of approximately $115.6 million. During the nine months ended September 30, 2018, the Company invested in eight properties for an aggregate cash consideration of approximately $26.8 million and $4.5 million fair value of real estate received in foreclosure. In addition, the Company acquired or funded $7.0 million of certain promissory notes during the nine months ended September 30, 2018.
Financing Activities
Cash flows provided by financing activities for the nine months ended September 30, 2019 and 2018 were approximately $94.7 million and $19.0 million, respectively. During the nine months ended September 30, 2019, the Company amended its Credit Facility which provided an additional $75.0 million Term Loan. The proceeds from the Term Loan were used to pay down the outstanding balance under the Company's Revolving Credit Facility. The Company also sold shares under its ATM Program and received proceeds of approximately $51.6 million, and paid dividends totaling $23.5 million. Dividends paid for the nine months ended September 30, 2019 exceeded cash flows from operations by approximately $0.3 million, which amount was funded from proceeds under the Company's Revolving Credit Facility. During the nine months ended September 30, 2018, the Company borrowed $40.0 million under its Term Loans, which was used to repay outstanding amounts on its Revolving Credit Facility, had net repayments on its Revolving Credit Facility of $6.0 million, received net proceeds under its at-the-market equity offering program of approximately $7.1 million, and paid dividends totaling $21.9 million. Dividends paid for the nine months ended September 30, 2018 exceeded cash flows from operations by approximately $3.9 million, which amount was funded from proceeds under the Company's Revolving Credit Facility.
Security Deposits
As of September 30, 2019, the Company held approximately $3.0 million in security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon the security deposits if there are any defaults under the leases.
Dividends
The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT.
On October 31, 2019, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.4150 per share. The dividend is payable on November 29, 2019 to stockholders of record on November 15, 2019. This rate equates to an annualized dividend of $1.66 per share.
The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments.