false--12-31Q220202020-06-3000016315690.410.81750.420.83750.010.014500000004500000002141057822726141P5YP7YP7Y200000us-gaap:OtherLiabilities200000us-gaap:OtherAssetsus-gaap:OtherAssets0.010.0150000000500000000000
0001631569 2020-01-01 2020-06-30 0001631569 2020-07-31 0001631569
2020-06-30 0001631569 2019-12-31 0001631569 2020-04-01 2020-06-30
0001631569 2019-01-01 2019-06-30 0001631569 2019-04-01 2019-06-30
0001631569 us-gaap:CommonStockMember 2019-06-30 0001631569
us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001631569
us-gaap:CommonStockMember 2018-12-31 0001631569
us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001631569
us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001631569
us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01
2019-06-30 0001631569 us-gaap:AdditionalPaidInCapitalMember
2019-04-01 2019-06-30 0001631569 chct:CumulativeDividendsMember
2019-04-01 2019-06-30 0001631569
chct:CumulativeNetIncomeDeficitMember 2019-04-01 2019-06-30
0001631569 2019-06-30 0001631569
chct:CumulativeNetIncomeDeficitMember 2019-03-31 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01
2019-06-30 0001631569 chct:CumulativeNetIncomeDeficitMember
2019-06-30 0001631569 chct:CumulativeDividendsMember 2019-03-31
0001631569 us-gaap:CommonStockMember 2019-03-31 0001631569
chct:CumulativeDividendsMember 2018-12-31 0001631569
chct:CumulativeDividendsMember 2019-01-01 2019-06-30 0001631569
us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30
0001631569 us-gaap:AdditionalPaidInCapitalMember 2018-12-31
0001631569 us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-03-31 0001631569 2019-03-31 0001631569
chct:CumulativeDividendsMember 2019-06-30 0001631569
chct:CumulativeNetIncomeDeficitMember 2019-01-01 2019-06-30
0001631569 us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-12-31 0001631569 chct:CumulativeNetIncomeDeficitMember
2018-12-31 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30
0001631569 2018-12-31 0001631569 2020-03-31 0001631569
us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31
0001631569 us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-12-31 0001631569 us-gaap:AdditionalPaidInCapitalMember
2020-01-01 2020-06-30 0001631569 chct:CumulativeDividendsMember
2020-04-01 2020-06-30 0001631569 us-gaap:CommonStockMember
2020-03-31 0001631569 chct:CumulativeDividendsMember 2020-03-31
0001631569 us-gaap:CommonStockMember 2020-01-01 2020-06-30
0001631569 chct:CumulativeDividendsMember 2019-12-31 0001631569
us-gaap:CommonStockMember 2020-06-30 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30
0001631569 chct:CumulativeNetIncomeDeficitMember 2019-12-31
0001631569 us-gaap:CommonStockMember 2019-12-31 0001631569
us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30
0001631569 chct:CumulativeDividendsMember 2020-06-30 0001631569
us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01
2020-06-30 0001631569
us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01
2020-06-30 0001631569 us-gaap:CommonStockMember 2020-04-01
2020-06-30 0001631569 chct:CumulativeNetIncomeDeficitMember
2020-01-01 2020-06-30 0001631569
us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001631569
chct:CumulativeNetIncomeDeficitMember 2020-04-01 2020-06-30
0001631569 chct:CumulativeDividendsMember 2020-01-01 2020-06-30
0001631569 chct:CumulativeNetIncomeDeficitMember 2020-06-30
0001631569 chct:CumulativeNetIncomeDeficitMember 2020-03-31
0001631569 us-gaap:SubsequentEventMember chct:COVID19Member
2020-07-31 0001631569 us-gaap:OtherLiabilitiesMember 2019-12-31
0001631569 us-gaap:OtherLiabilitiesMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member 2020-01-01
2020-03-31 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member 2020-04-01
2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member 2020-01-01
2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member 2020-06-30
0001631569 chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:OakLawnILMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:RamonaCaliforniaMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:ColumbusINMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:CueroTexasMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesIn2020Member 2020-01-01 2020-06-30
0001631569 chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:SanAntonioTexasPropertyOneMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:RamonaCaliforniaMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:DecaturAlabamaMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:GermantownTNMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:SanAntonioTexasPropertyTwoMember 2020-01-01 2020-06-30
0001631569 chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:ColumbusINMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:WestlakeOHMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:GardendaleALMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:PrattvilleALMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:CueroTexasMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:GardendaleALMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:SanAntonioTexasPropertyTwoMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:GermantownTNMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:GreensburgPAMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:RogersArkansasMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:OakLawnILMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:RogersArkansasMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:SanAntonioTexasPropertyOneMember 2020-01-01 2020-06-30
0001631569 chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:WestlakeOHMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:NicevilleFLMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesIn2020Member 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:NicevilleFLMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:PrattvilleALMember 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring1stQuarter2020Member
chct:DecaturAlabamaMember 2020-01-01 2020-06-30 0001631569
chct:AcquisitionOfPropertiesDuring2ndQuarter2020Member
chct:GreensburgPAMember 2020-06-30 0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
2020-01-01 2020-06-30 0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
us-gaap:LandAndLandImprovementsMember 2020-01-01 2020-06-30
0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
us-gaap:AboveMarketLeasesMember 2020-06-30 0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
2020-06-30 0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
us-gaap:BuildingAndBuildingImprovementsMember 2020-01-01 2020-06-30
0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
us-gaap:LeasesAcquiredInPlaceMember 2020-06-30 0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
us-gaap:AboveMarketLeasesMember 2020-01-01 2020-06-30 0001631569
chct:SeriesofIndividuallyImmaterialAssetAcquisitionsMember
us-gaap:LeasesAcquiredInPlaceMember 2020-01-01 2020-06-30
0001631569 chct:ColumbusINMember 2020-06-30 0001631569
srt:MaximumMember us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember
us-gaap:LondonInterbankOfferedRateLIBORMember 2019-03-29 2019-03-29
0001631569 us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember 2019-03-29 2019-03-29 0001631569
chct:RevolvingCreditFacilityUnusedBorrowingCapacityRate1Member
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember 2019-03-29 2019-03-29 0001631569
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 0001631569
us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember 2020-06-30 0001631569 srt:MinimumMember
us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember us-gaap:BaseRateMember 2019-03-29
2019-03-29 0001631569
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2020-06-30 0001631569 chct:A1TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 0001631569 srt:MinimumMember
us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember
us-gaap:LondonInterbankOfferedRateLIBORMember 2019-03-29 2019-03-29
0001631569 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember us-gaap:BaseRateMember 2019-03-29
2019-03-29 0001631569 chct:A3TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 0001631569
chct:RevolvingCreditFacilityUnusedBorrowingCapacityRate2Member
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember 2019-03-29 2019-03-29 0001631569
us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember 2019-03-29 0001631569
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 2019-03-29 0001631569
srt:MaximumMember chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember us-gaap:BaseRateMember 2019-03-29 2019-03-29
0001631569 srt:MinimumMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember
2019-03-29 2019-03-29 0001631569 chct:A2TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 0001631569 srt:MaximumMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember
2019-03-29 2019-03-29 0001631569
chct:CreditFacilityAccordionFeatureMember
chct:ThirdAmendedAndRestatedCreditFacilityMember 2019-03-29
0001631569 srt:MinimumMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember us-gaap:BaseRateMember 2019-03-29 2019-03-29
0001631569 chct:A2TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-12-31 0001631569 chct:A1TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-12-31 0001631569 chct:A3TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-12-31 0001631569 us-gaap:MortgagesMember
2019-12-31 0001631569 chct:A3TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2020-06-30 0001631569
us-gaap:RevolvingCreditFacilityMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
us-gaap:LineOfCreditMember 2019-12-31 0001631569
us-gaap:MortgagesMember 2020-06-30 0001631569 chct:A2TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2020-06-30 0001631569 chct:A1TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2020-06-30 0001631569 chct:A2TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 2019-03-29 0001631569
chct:A1TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 2019-03-29 0001631569
chct:A3TermLoanMember
chct:ThirdAmendedAndRestatedCreditFacilityMember
chct:TermLoanMember 2019-03-29 2019-03-29 0001631569
us-gaap:OtherLiabilitiesMember us-gaap:InterestRateSwapMember
us-gaap:CashFlowHedgingMember
us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001631569
us-gaap:OtherAssetsMember us-gaap:InterestRateSwapMember
us-gaap:CashFlowHedgingMember
us-gaap:DesignatedAsHedgingInstrumentMember 2019-12-31 0001631569
us-gaap:OtherAssetsMember us-gaap:InterestRateSwapMember
us-gaap:CashFlowHedgingMember
us-gaap:DesignatedAsHedgingInstrumentMember 2020-06-30 0001631569
us-gaap:OtherLiabilitiesMember us-gaap:InterestRateSwapMember
us-gaap:CashFlowHedgingMember
us-gaap:DesignatedAsHedgingInstrumentMember 2020-06-30 0001631569
us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember
us-gaap:InterestExpenseMember 2020-01-01 2020-06-30 0001631569
us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember
us-gaap:InterestExpenseMember 2019-04-01 2019-06-30 0001631569
us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember
2019-04-01 2019-06-30 0001631569 us-gaap:InterestRateContractMember
us-gaap:CashFlowHedgingMember us-gaap:InterestExpenseMember
2019-01-01 2019-06-30 0001631569 us-gaap:InterestRateContractMember
us-gaap:CashFlowHedgingMember 2019-01-01 2019-06-30 0001631569
us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember
2020-04-01 2020-06-30 0001631569 us-gaap:InterestRateContractMember
us-gaap:CashFlowHedgingMember us-gaap:InterestExpenseMember
2020-04-01 2020-06-30 0001631569 us-gaap:InterestRateContractMember
us-gaap:CashFlowHedgingMember 2020-01-01 2020-06-30 0001631569
us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember
us-gaap:DesignatedAsHedgingInstrumentMember 2020-06-30 0001631569
us-gaap:InterestRateContractMember us-gaap:CashFlowHedgingMember
2020-06-30 0001631569 us-gaap:CommonStockMember
chct:AtTheMarketOfferingProgramMember 2020-06-30 0001631569
us-gaap:CommonStockMember chct:AtTheMarketOfferingProgramMember
2019-11-05 2019-11-05 0001631569 2019-01-01 2019-12-31 0001631569
us-gaap:CommonStockMember chct:AtTheMarketOfferingProgramMember
2020-04-01 2020-06-30 0001631569 us-gaap:CommonStockMember
chct:AtTheMarketOfferingProgramMember 2020-01-01 2020-06-30
0001631569 us-gaap:RestrictedStockMember
chct:A2014IncentivePlanMember 2019-01-01 2019-06-30 0001631569
us-gaap:RestrictedStockMember chct:A2014IncentivePlanMember
2020-03-31 0001631569
chct:RestrictedCommonStockStockinLieuofCompensationMember
chct:A2014IncentivePlanMember 2019-04-01 2019-06-30 0001631569
us-gaap:RestrictedStockMember chct:A2014IncentivePlanMember
2020-01-01 2020-06-30 0001631569 us-gaap:RestrictedStockMember
chct:A2014IncentivePlanMember 2019-06-30 0001631569
chct:RestrictedCommonStockStockAwardsMember
chct:A2014IncentivePlanMember 2019-04-01 2019-06-30 0001631569
us-gaap:RestrictedStockMember chct:A2014IncentivePlanMember
2019-04-01 2019-06-30 0001631569
chct:RestrictedCommonStockStockAwardsMember
chct:A2014IncentivePlanMember 2020-04-01 2020-06-30 0001631569
us-gaap:RestrictedStockMember chct:A2014IncentivePlanMember
2018-12-31 0001631569 us-gaap:RestrictedStockMember
chct:A2014IncentivePlanMember 2020-04-01 2020-06-30 0001631569
chct:RestrictedCommonStockStockinLieuofCompensationMember
chct:A2014IncentivePlanMember 2020-04-01 2020-06-30 0001631569
chct:RestrictedCommonStockStockinLieuofCompensationMember
chct:A2014IncentivePlanMember 2019-01-01 2019-06-30 0001631569
us-gaap:RestrictedStockMember chct:A2014IncentivePlanMember
2019-03-31 0001631569 us-gaap:RestrictedStockMember
chct:A2014IncentivePlanMember 2020-06-30 0001631569
us-gaap:RestrictedStockMember chct:A2014IncentivePlanMember
2019-12-31 0001631569 chct:RestrictedCommonStockStockAwardsMember
chct:A2014IncentivePlanMember 2019-01-01 2019-06-30 0001631569
chct:RestrictedCommonStockStockAwardsMember
chct:A2014IncentivePlanMember 2020-01-01 2020-06-30 0001631569
chct:RestrictedCommonStockStockinLieuofCompensationMember
chct:A2014IncentivePlanMember 2020-01-01 2020-06-30 0001631569
us-gaap:VariableInterestEntityPrimaryBeneficiaryMember
chct:NoteReceivable1Member 2020-06-30 0001631569
us-gaap:VariableInterestEntityPrimaryBeneficiaryMember
chct:NoteReceivable2Member 2020-06-30 0001631569
us-gaap:NotesReceivableMember us-gaap:RevolvingCreditFacilityMember
2020-06-30 0001631569 chct:InpatientRehabilitationHospitalMember
2020-01-01 2020-06-30 0001631569 us-gaap:NotesReceivableMember
chct:NoteReceivable1Member 2020-01-01 2020-06-30 0001631569
chct:LongTermAcuteCareFacilityMember 2020-01-01 2020-06-30
0001631569 chct:HighlandHospitalMember
us-gaap:NotesReceivableMember
chct:DebtorInPossessionFinancingMember 2020-06-30 0001631569
chct:HighlandHospitalMember us-gaap:NotesReceivableMember
chct:DebtorInPossessionFinancingMember 2020-01-01 2020-03-31
0001631569 us-gaap:NotesReceivableMember chct:NoteReceivable1Member
2020-06-30 0001631569 chct:HighlandHospitalMember
us-gaap:NotesReceivableMember
chct:DebtorInPossessionFinancingMember 2020-01-01 2020-06-30
0001631569 chct:HighlandHospitalMember
us-gaap:NotesReceivableMember
chct:DebtorInPossessionFinancingMember 2020-03-31 0001631569
us-gaap:InterestRateSwapMember
us-gaap:CarryingReportedAmountFairValueDisclosureMember 2020-06-30
0001631569 us-gaap:FairValueInputsLevel2Member
us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-06-30
0001631569 us-gaap:CarryingReportedAmountFairValueDisclosureMember
2020-06-30 0001631569
us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-31
0001631569 us-gaap:FairValueInputsLevel2Member
us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-31
0001631569 us-gaap:InterestRateSwapMember
us-gaap:FairValueInputsLevel2Member
us-gaap:EstimateOfFairValueFairValueDisclosureMember 2020-06-30
0001631569 us-gaap:InterestRateSwapMember
us-gaap:FairValueInputsLevel2Member
us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-12-31
0001631569 us-gaap:InterestRateSwapMember
us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-12-31
0001631569 chct:HighlandHospitalMember
us-gaap:SubsequentEventMember 2020-07-01 0001631569
chct:HighlandHospitalMember chct:DebtorInPossessionFinancingMember
us-gaap:SubsequentEventMember 2020-07-01 0001631569
us-gaap:SubsequentEventMember 2020-08-03 2020-08-03 0001631569
chct:HighlandHospitalMember us-gaap:NotesReceivableMember
us-gaap:SubsequentEventMember 2020-07-01 utreg:sqft xbrli:shares
chct:state iso4217:USD xbrli:pure chct:option iso4217:USD
xbrli:shares chct:hospital chct:derivative_instrument chct:tenant
chct:real_estate_property
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
|
|
|
|
(Mark One)
|
|
|
|
☒
|
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,
2020
|
|
OR
|
|
☐
|
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
|
Commission
file number: 001-37401
Community
Healthcare Trust Incorporated
(Exact Name of
Registrant as Specified in Its Charter)
|
|
|
|
|
Maryland
|
|
46-5212033
|
|
(State or Other
Jurisdiction of Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
3326 Aspen Grove
Drive
Suite 150
Franklin,
Tennessee
37067
(Address of
Principal Executive Offices) (Zip Code)
(615) 771-3052
(Registrant’s
Telephone Number, Including Area Code)
Not
Applicable
(Former Name,
Former Address and Former Fiscal Year, if Changed Since Last
Report)
Securities
registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
|
|
|
Title
of each Class
|
Trading
Symbol
|
Name
of each exchange on which registered
|
|
|
|
Common stock, $0.01 par
value per share
|
CHCT
|
New York Stock
Exchange
|
|
Indicate by check
mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
☒
No
☐
Indicate by check
mark whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period
that the registrant was required to submit such
files). Yes
☒
No
☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
|
|
|
|
|
|
|
|
|
|
|
|
Large accelerated
Filer
|
☒
|
Accelerated
Filer
|
☐
|
Emerging-growth
company
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting
company
|
☐
|
If an emerging
growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section13(a) of the Exchange Act. ☐
Indicate by check
mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes
☐ No
☒
The Registrant
had 22,726,373
shares of Common
Stock, $0.01 par value per share, outstanding as of
July 31,
2020.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
FORM
10-Q
June 30,
2020
TABLE OF
CONTENTS
PART I.
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
COMMUNITY
HEALTHCARE TRUST INCORPORATED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
|
ASSETS
|
|
|
|
|
Real estate
properties
|
|
|
|
|
Land and land
improvements
|
$
|
78,999
|
|
|
$
|
68,129
|
|
|
Buildings,
improvements, and lease intangibles
|
585,454
|
|
|
534,503
|
|
|
Personal
property
|
234
|
|
|
220
|
|
|
Total real estate
properties
|
664,687
|
|
|
602,852
|
|
|
Less accumulated
depreciation
|
(89,698
|
)
|
|
(77,523
|
)
|
|
Total real estate
properties, net
|
574,989
|
|
|
525,329
|
|
|
Cash and cash
equivalents
|
4,896
|
|
|
1,730
|
|
|
Restricted
cash
|
351
|
|
|
293
|
|
|
Other assets,
net
|
32,068
|
|
|
35,179
|
|
|
Total
assets
|
$
|
612,304
|
|
|
$
|
562,531
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Liabilities
|
|
|
|
|
Debt,
net
|
$
|
197,309
|
|
|
$
|
194,243
|
|
|
Accounts payable
and accrued liabilities
|
5,497
|
|
|
3,606
|
|
|
Other
liabilities
|
22,395
|
|
|
11,271
|
|
|
Total
liabilities
|
225,201
|
|
|
209,120
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
Preferred stock,
$0.01 par value; 50,000,000 shares authorized; none issued and
outstanding
|
—
|
|
|
—
|
|
|
Common stock,
$0.01 par value; 450,000,000 shares authorized; 22,726,141 and
21,410,578 shares issued and outstanding at June 30, 2020 and
December 31, 2019, respectively
|
227
|
|
|
214
|
|
|
Additional paid-in
capital
|
500,477
|
|
|
447,916
|
|
|
Cumulative net
income
|
26,180
|
|
|
17,554
|
|
|
Accumulated other
comprehensive loss
|
(13,969
|
)
|
|
(4,808
|
)
|
|
Cumulative
dividends
|
(125,812
|
)
|
|
(107,465
|
)
|
|
Total
stockholders’ equity
|
387,103
|
|
|
353,411
|
|
|
Total
liabilities and stockholders' equity
|
$
|
612,304
|
|
|
$
|
562,531
|
|
See accompanying
notes to the condensed consolidated financial
statements.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
FOR THE
THREE AND SIX MONTHS ENDED JUNE 30,
2020 AND
2019
(Unaudited; Dollars in thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
REVENUES
|
|
|
|
|
|
|
|
|
Rental
income
|
$
|
17,830
|
|
|
$
|
13,361
|
|
|
$
|
35,258
|
|
|
$
|
26,259
|
|
|
Other operating
interest
|
450
|
|
|
955
|
|
|
958
|
|
|
1,498
|
|
|
|
18,280
|
|
|
14,316
|
|
|
36,216
|
|
|
27,757
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Property
operating
|
3,223
|
|
|
2,993
|
|
|
6,566
|
|
|
6,068
|
|
|
General and
administrative
|
1,919
|
|
|
1,776
|
|
|
4,111
|
|
|
3,561
|
|
|
Depreciation and
amortization
|
6,119
|
|
|
5,299
|
|
|
12,178
|
|
|
10,545
|
|
|
|
11,261
|
|
|
10,068
|
|
|
22,855
|
|
|
20,174
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Loss on sale of
real estate
|
(313
|
)
|
|
—
|
|
|
(313
|
)
|
|
—
|
|
|
Interest
expense
|
(2,183
|
)
|
|
(2,251
|
)
|
|
(4,432
|
)
|
|
(4,305
|
)
|
|
Interest and other
income, net
|
3
|
|
|
69
|
|
|
10
|
|
|
238
|
|
|
|
(2,493
|
)
|
|
(2,182
|
)
|
|
(4,735
|
)
|
|
(4,067
|
)
|
|
NET
INCOME
|
$
|
4,526
|
|
|
$
|
2,066
|
|
|
$
|
8,626
|
|
|
$
|
3,516
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
Net income per
common share – Basic
|
$
|
0.19
|
|
|
$
|
0.09
|
|
|
$
|
0.37
|
|
|
$
|
0.16
|
|
|
Net income per
common share – Diluted
|
$
|
0.19
|
|
|
$
|
0.09
|
|
|
$
|
0.37
|
|
|
$
|
0.16
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING-BASIC
|
21,263,575
|
|
|
18,245,668
|
|
|
20,999,097
|
|
|
18,100,973
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING-DILUTED
|
21,263,575
|
|
|
18,245,668
|
|
|
20,999,097
|
|
|
18,100,973
|
|
See accompanying
notes to the condensed consolidated financial
statements.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE
THREE AND SIX MONTHS ENDED JUNE 30,
2020 AND
2019
(Unaudited; Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME
|
$
|
4,526
|
|
|
$
|
2,066
|
|
|
$
|
8,626
|
|
|
$
|
3,516
|
|
|
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
Decrease in fair
value of cash flow hedges
|
(1,317
|
)
|
|
(4,032
|
)
|
|
(10,193
|
)
|
|
(5,245
|
)
|
|
|
|
Reclassification
for amounts recognized as interest expense
|
774
|
|
|
(95
|
)
|
|
1,032
|
|
|
(157
|
)
|
|
|
Total other
comprehensive loss
|
(543
|
)
|
|
(4,127
|
)
|
|
(9,161
|
)
|
|
(5,402
|
)
|
|
COMPREHENSIVE
INCOME (LOSS)
|
$
|
3,983
|
|
|
$
|
(2,061
|
)
|
|
$
|
(535
|
)
|
|
$
|
(1,886
|
)
|
See accompanying
notes to the condensed consolidated financial
statements.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE
THREE AND SIX MONTHS ENDED JUNE 30,
2020
(Unaudited; Dollars in thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional
Paid in Capital
|
|
Cumulative
Net
Income
|
|
Accumulated
Other Comprehensive (Loss) Income
|
|
Cumulative
Dividends
|
|
Total
Stockholders' Equity
|
|
|
Shares
|
Amount
|
|
Shares
|
Amount
|
|
|
Balance at
March 31, 2020
|
—
|
|
$
|
—
|
|
|
22,125,269
|
|
$
|
221
|
|
|
$
|
475,824
|
|
|
$
|
21,654
|
|
|
$
|
(13,426
|
)
|
|
$
|
(116,498
|
)
|
|
$
|
367,775
|
|
|
Issuance of common stock, net
of issuance costs
|
—
|
|
—
|
|
|
578,759
|
|
6
|
|
|
23,584
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23,590
|
|
|
Stock-based
compensation
|
—
|
|
—
|
|
|
22,113
|
|
—
|
|
|
1,069
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,069
|
|
|
Unrecognized loss on cash flow
hedges
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,317
|
)
|
|
—
|
|
|
(1,317
|
)
|
|
Reclassification adjustment
for losses included in net income (interest expense)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
774
|
|
|
—
|
|
|
774
|
|
|
Net income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
4,526
|
|
|
—
|
|
|
—
|
|
|
4,526
|
|
|
Dividends to common
stockholders ($0.42 per share)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,314
|
)
|
|
(9,314
|
)
|
|
Balance at
June 30, 2020
|
—
|
|
$
|
—
|
|
|
22,726,141
|
|
$
|
227
|
|
|
$
|
500,477
|
|
|
$
|
26,180
|
|
|
$
|
(13,969
|
)
|
|
$
|
(125,812
|
)
|
|
$
|
387,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2019
|
—
|
|
$
|
—
|
|
|
21,410,578
|
|
$
|
214
|
|
|
$
|
447,916
|
|
|
$
|
17,554
|
|
|
$
|
(4,808
|
)
|
|
$
|
(107,465
|
)
|
|
$
|
353,411
|
|
|
Issuance of common stock, net
of issuance costs
|
—
|
|
—
|
|
|
1,189,545
|
|
12
|
|
|
50,480
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,492
|
|
|
Stock-based
compensation
|
—
|
|
—
|
|
|
126,018
|
|
1
|
|
|
2,081
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,082
|
|
|
Unrecognized loss on cash flow
hedges
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,193
|
)
|
|
—
|
|
|
(10,193
|
)
|
|
Reclassification adjustment
for losses included in net income (interest expense)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,032
|
|
|
—
|
|
|
1,032
|
|
|
Net income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
8,626
|
|
|
—
|
|
|
—
|
|
|
8,626
|
|
|
Dividends to common
stockholders ($0.8375 per share)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,347
|
)
|
|
(18,347
|
)
|
|
Balance at
June 30, 2020
|
—
|
|
$
|
—
|
|
|
22,726,141
|
|
$
|
227
|
|
|
$
|
500,477
|
|
|
$
|
26,180
|
|
|
$
|
(13,969
|
)
|
|
$
|
(125,812
|
)
|
|
$
|
387,103
|
|
See accompanying
notes to the condensed consolidated financial
statements.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE
THREE AND SIX MONTHS ENDED
JUNE 30, 2019
(Unaudited; Dollars in thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional
Paid in Capital
|
|
Cumulative
Net
Income
|
|
Accumulated
Other Comprehensive (Loss) Income
|
|
Cumulative
Dividends
|
|
Total
Stockholders' Equity
|
|
|
Shares
|
Amount
|
|
Shares
|
Amount
|
|
|
Balance at
March 31, 2019
|
—
|
|
—
|
|
|
18,862,792
|
|
$
|
189
|
|
|
$
|
342,654
|
|
|
$
|
10,628
|
|
|
$
|
(642
|
)
|
|
$
|
(83,146
|
)
|
|
$
|
269,683
|
|
|
Issuance of common stock, net
of issuance costs
|
—
|
|
—
|
|
|
497,453
|
|
5
|
|
|
18,363
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,368
|
|
|
Stock-based
compensation
|
—
|
|
—
|
|
|
40,999
|
|
—
|
|
|
896
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
896
|
|
|
Unrecognized loss on cash flow
hedges
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,032
|
)
|
|
—
|
|
|
(4,032
|
)
|
|
Reclassification adjustment
for losses included in net income (interest expense)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|
—
|
|
|
(95
|
)
|
|
Net income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
2,066
|
|
|
—
|
|
|
—
|
|
|
2,066
|
|
|
Dividends to common
stockholders ($0.41 per share)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,766
|
)
|
|
(7,766
|
)
|
|
Balance at
June 30, 2019
|
—
|
|
$
|
—
|
|
|
19,401,244
|
|
$
|
194
|
|
|
$
|
361,913
|
|
|
$
|
12,694
|
|
|
$
|
(4,769
|
)
|
|
$
|
(90,912
|
)
|
|
$
|
279,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2018
|
—
|
|
$
|
—
|
|
|
18,634,502
|
|
$
|
186
|
|
|
$
|
337,180
|
|
|
$
|
9,178
|
|
|
$
|
633
|
|
|
$
|
(75,518
|
)
|
|
$
|
271,659
|
|
|
Issuance of common stock, net
of issuance costs
|
—
|
|
—
|
|
|
641,053
|
|
7
|
|
|
22,985
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,992
|
|
|
Stock-based
compensation
|
—
|
|
—
|
|
|
125,689
|
|
1
|
|
|
1,748
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,749
|
|
|
Unrecognized loss on cash flow
hedges
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,245
|
)
|
|
—
|
|
|
(5,245
|
)
|
|
Reclassification adjustment
for losses included in net income (interest expense)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(157
|
)
|
|
—
|
|
|
(157
|
)
|
|
Net income
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
3,516
|
|
|
—
|
|
|
—
|
|
|
3,516
|
|
|
Dividends to common
stockholders ($0.8175 per share)
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,394
|
)
|
|
(15,394
|
)
|
|
Balance at
June 30, 2019
|
—
|
|
$
|
—
|
|
|
19,401,244
|
|
$
|
194
|
|
|
$
|
361,913
|
|
|
$
|
12,694
|
|
|
$
|
(4,769
|
)
|
|
$
|
(90,912
|
)
|
|
$
|
279,120
|
|
See accompanying
notes to the condensed consolidated financial
statements.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
|
2020
|
|
2019
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
Net
income
|
$
|
8,626
|
|
|
$
|
3,516
|
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
12,178
|
|
|
10,545
|
|
|
Other
amortization
|
(224
|
)
|
|
294
|
|
|
Stock-based
compensation
|
2,082
|
|
|
1,749
|
|
|
Straight-line rent
receivable
|
(1,604
|
)
|
|
(749
|
)
|
|
Loss on sale of
real estate
|
313
|
|
|
—
|
|
|
Deferred income
tax expense
|
20
|
|
|
27
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
Other
assets
|
(119
|
)
|
|
(1,087
|
)
|
|
Accounts payable
and accrued liabilities
|
1,089
|
|
|
114
|
|
|
Other
liabilities
|
1,386
|
|
|
(26
|
)
|
|
Net cash provided
by operating activities
|
23,747
|
|
|
14,383
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
Acquisitions of
real estate
|
(57,890
|
)
|
|
(63,449
|
)
|
|
Proceeds
from sale of real estate
|
248
|
|
|
—
|
|
|
Acquisition
of note receivable
|
(1,750
|
)
|
|
—
|
|
|
Proceeds from the
repayment of notes receivable
|
6,910
|
|
|
320
|
|
|
Capital
expenditures on existing real estate properties
|
(3,081
|
)
|
|
(1,654
|
)
|
|
Net cash used in
investing activities
|
(55,563
|
)
|
|
(64,783
|
)
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
Net borrowings
(repayments) on revolving credit facility
|
3,000
|
|
|
(24,000
|
)
|
|
Term loan
borrowings
|
—
|
|
|
75,000
|
|
|
Mortgage note
repayments
|
(53
|
)
|
|
(52
|
)
|
|
Dividends
paid
|
(18,347
|
)
|
|
(15,394
|
)
|
|
Proceeds from
issuance of common stock
|
50,579
|
|
|
23,172
|
|
|
Equity issuance
costs
|
(139
|
)
|
|
(180
|
)
|
|
Debt issuance
costs
|
—
|
|
|
(1,273
|
)
|
|
Net cash provided
by financing activities
|
35,040
|
|
|
57,273
|
|
|
Increase in cash
and cash equivalents and restricted cash
|
3,224
|
|
|
6,873
|
|
|
Cash and cash
equivalents and restricted cash, beginning of period
|
2,023
|
|
|
2,392
|
|
|
Cash and cash
equivalents and restricted cash, end of period
|
$
|
5,247
|
|
|
$
|
9,265
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
Interest
paid
|
$
|
3,110
|
|
|
$
|
2,781
|
|
|
Invoices accrued
for construction, tenant improvement and other capitalized
costs
|
$
|
707
|
|
|
$
|
29
|
|
|
Reclassification
between accounts and notes receivable
|
$
|
—
|
|
|
$
|
45
|
|
|
Reclassification
of registration statement costs incurred in prior year to equity
issuance costs
|
$
|
95
|
|
|
$
|
187
|
|
|
Decrease in fair
value of cash flow hedges
|
$
|
(10,193
|
)
|
|
$
|
(5,245
|
)
|
|
Income taxes
paid
|
$
|
31
|
|
|
$
|
—
|
|
See accompanying
notes to the condensed consolidated financial
statements.
COMMUNITY
HEALTHCARE TRUST INCORPORATED
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30,
2020
(Unaudited)
Note 1.
Summary of Significant Accounting Policies
Business
Overview
Community
Healthcare Trust Incorporated (the ‘‘Company’’, ‘‘we’’, ‘‘our’’)
was organized in the State of Maryland on March 28, 2014. The
Company is a fully-integrated healthcare real estate company that
owns and acquires real estate properties that are leased to
hospitals, doctors, healthcare systems or other healthcare service
providers. As of June 30,
2020, the
Company had investments of approximately $664.7
million in 131
real estate
properties, located in 33
states, totaling
approximately 2.8
million square feet in the aggregate.
Any references to square footage or occupancy percentages, and any
amounts derived from these values in these notes to the condensed
consolidated financial statements, are outside the scope of our
independent registered public accounting firm's
review.
Basis of
Presentation
The Condensed
Consolidated Financial Statements have been prepared in accordance
with accounting principles generally accepted in the United States
of America (“GAAP”) for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. They do
not include all of the information and footnotes required by GAAP
for complete financial statements. This interim financial
information should be read in conjunction with the consolidated
financial statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31,
2019.
Management believes that all adjustments of a normal, recurring
nature considered necessary for a fair presentation have been
included. This interim financial information does not necessarily
represent or indicate what the operating results will be for the
year ending December 31,
2020. All
material intercompany accounts and transactions have been
eliminated.
A novel strain of
coronavirus (SARS-CoV-2) was first identified in late 2019, and
subsequently declared a global pandemic by the World Health
Organization ("COVID-19"). The Company considered the impact
of the COVID-19 on the assumptions and estimates used for
the three
and six months ended
June 30,
2020. The full extent of the
future impacts of COVID-19 on the Company's operations is
uncertain. A prolonged outbreak could have a material adverse
impact on the financial results and business operations of the
Company.
During the second quarter of
2020, the Company has provided lease concessions to certain tenants
in response to the impact of COVID-19, in the form of rent
deferrals. The Company has made an election to account for
such lease concessions consistent with how those concessions would
be accounted for under the current leasing guidance if enforceable
rights and obligations for those concessions had already existed in
the leases. This election is available for concessions related to
the effects of the COVID-19 pandemic that do not result in a
substantial increase in our rights as lessor, including concessions
that result in the total payments required by the modified lease
being substantially the same as or less than total payments
required by the original lease.
All of the Company’s
concessions to date provide for a deferral of payments with no
substantive changes to the consideration in the original lease.
These deferrals affect the timing, but not the amount, of the lease
payments. The Company is accounting for these deferrals as if no
changes to the lease were made. Under this accounting, the Company
increases its lease receivable as tenant payments accrue and
continues to recognize rental income. As of July 31, 2020, the
Company has entered into, or anticipates entering into, deferral
agreements with up to approximately 20
tenants
representing less than one
percent of our annualized rent.
Pursuant to these agreements, the tenants are generally required to
repay the deferred amounts in equal monthly installments during the
third and fourth quarters of 2020.
Notes to Condensed
Consolidated Financial Statements - Continued
Use of
Estimates in the Condensed Consolidated Financial
Statements
Preparation of
the Condensed Consolidated Financial Statements in accordance with
GAAP requires management to make estimates and assumptions that
affect amounts reported in the Condensed Consolidated Financial
Statements and accompanying notes. Actual results may materially
differ from those estimates.
Cash, Cash
Equivalents and Restricted Cash
Cash and cash
equivalents includes short-term investments with original
maturities of three months or less when purchased. Restricted cash
consists of amounts held by the lender of our mortgage note payable
to provide for future real estate tax, insurance expenditures and
tenant improvements related to one property. The carrying amount
approximates fair value due to the short term maturity of these
investments. The following table provides a reconciliation of cash
and cash equivalents and restricted cash:
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 30,
|
|
(Dollars in thousands)
|
2020
|
|
2019
|
|
Cash and cash
equivalents
|
$
|
4,896
|
|
|
$
|
9,031
|
|
|
Restricted cash
|
351
|
|
|
234
|
|
|
Cash, cash equivalents and
restricted cash
|
$
|
5,247
|
|
|
$
|
9,265
|
|
Income
Taxes
The Company has
elected to be taxed as a real estate investment trust ("REIT"), as
defined under the Internal Revenue Code of 1986, as amended (the
"Code"). The Company and one subsidiary have also elected for that
subsidiary to be treated as a taxable REIT subsidiary ("TRS"),
which is subject to federal and state income taxes. No provision
has been made for federal income taxes for the REIT; however, the
Company has recorded income tax expense or benefit for the TRS to
the extent applicable. The Company also evaluates the realizability
of its deferred tax assets and will record valuation allowances if
it is determined that more likely than not the asset will not be
recovered. The Company intends at all times to qualify as a REIT
under the Code. The Company must distribute at least 90% per annum
of its REIT taxable income to its stockholders (which is computed
without regard to the dividends paid deduction or net capital gain
and which does not necessarily equal net income as calculated in
accordance with generally accepted accounting principles) and meet
other requirements to continue to qualify as a REIT.
On March 27,
2020, the Coronavirus Aid, Relief, and Economic Security Act (the
"CARES" Act) was enacted into law and was immediately effective.
The CARES Act includes several tax provisions that allow for the
carryback of net operating losses, provides relief from the taxable
income limitation on the use of net operating losses carried
forward, increases the business interest limitation from 30% to
50%, makes technical corrections to tax depreciation methods for
qualified improvement property, and provides payroll tax credits
and for the deferral of employer social security payments. The
Company does not believe that there have been or will be material
impacts to its income taxes related to the CARES Act. The Company
will continue to evaluate the tax impact of the CARES Act and any
guidance provided by the U.S. Treasury and Internal Revenue
Service.
New
Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Financial
Instruments-Credit Losses
In June 2016, the
Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") No. 2016-13, Measurement
of Credit Losses on Financial Instruments, which changes the
impairment model for most financial assets and certain other
instruments. For trade and other receivables, held-to-maturity debt
securities, loans and other instruments, companies are required to
use a new current expected credit loss ("CECL") model that
generally results in the earlier recognition of allowances for
losses. For available-for-sale debt securities with unrealized
losses, companies are required to measure credit losses in a manner
similar to prior guidance, except that the losses are recognized as
allowances rather than as reductions in the amortized cost of the
securities. In November 2018, the FASB amended the ASU to clarify
that receivables arising from leases would not be within the scope
of
Notes to Condensed
Consolidated Financial Statements - Continued
the ASU but
rather would be accounted for under the leasing standard. Companies
have to disclose significantly more information, including
information they use to track credit quality by year of origination
for most financing receivables. Companies must apply the standard’s
provisions as a cumulative-effect adjustment to retained earnings
as of the beginning of the first reporting period in which the
guidance is adopted. The Company adopted ASU No. 2016-13 on January
1, 2020. The Company did not record an adjustment upon adoption as
the impact was determined to be immaterial. However, this standard
could impact the Company's financial statements and results of
operations in future periods.
Recently Issued Accounting Pronouncements
Reference
Rate Reform
In March 2020,
the FASB issued ASU 2020-04, Reference
Rate Reform (Topic 848). ASU 2020-04
contains practical expedients for reference rate reform related
activities that impact debt, leases, derivatives and other
contracts. The guidance in ASU 2020-04 is optional and may be
elected over time as reference rate reform activities occur. During
the first quarter of 2020, the Company elected to apply the hedge
accounting expedients related to probability and the assessments of
effectiveness for future LIBOR-indexed cash flows to assume that
the index upon which future hedged transactions will be based
matches the index on the corresponding derivatives. Application of
these expedients preserves the presentation of derivatives
consistent with past presentation. The Company continues to
evaluate the impact of the guidance and may apply other elections
as applicable as additional changes in the market
occur.
Note 2. Real
Estate Leases
The Company’s
properties are generally leased pursuant to non-cancelable,
fixed-term operating leases with expiration dates through
2035. The Company’s leases
generally require the lessee to pay minimum rent, with fixed rent
renewal terms or increases based on a Consumer Price Index and may
also include additional rent, which may include taxes (including
property taxes), insurance, maintenance and other operating costs
associated with the leased property.
Some leases
provide the lessee, during the term of the lease, with an option or
right of first refusal to purchase the leased property. Some leases
also allow the lessee to renew or extend their lease term or in
some cases terminate their lease, based on conditions provided in
the lease.
Future minimum
lease payments under the non-cancelable operating leases due the
Company for the years ending December 31, as of June 30,
2020, are
as follows (in thousands):
|
|
|
|
|
|
2020
(six months ending December 31)
|
$
|
30,417
|
|
|
2021
|
58,659
|
|
|
2022
|
55,024
|
|
|
2023
|
49,996
|
|
|
2024
|
46,867
|
|
|
2025 and
thereafter
|
299,485
|
|
|
|
$
|
540,448
|
|
Straight-line
rental income
Rental income is
recognized as earned over the life of the lease agreement on a
straight-line basis when collection of rental payments over the
term of the lease is probable. Straight-line rent included in
rental income was approximately $0.7
million and $0.4
million, respectively, for the three
months ended June 30, 2020
and
2019. Straight-line rent included
in rental income was approximately $1.6
million and $0.7
million, respectively, for the six
months ended June 30, 2020
and
2019.
Notes to Condensed
Consolidated Financial Statements - Continued
Deferred
revenue
Income received
but not yet earned is deferred until such time it is earned.
Deferred revenue, included in other liabilities on the Condensed
Consolidated Balance Sheet, was approximately $2.1
million and $2.0
million, respectively, at
June 30,
2020 and
December 31, 2019.
Security
Deposits
As of
June 30,
2020 and December 31,
2019, the
Company held approximately $4.1
million and $3.5
million, respectively, 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.
Note 3. Real
Estate Acquisitions and Dispositions
2020 Real Estate Acquisitions
During the second
quarter of 2020, the Company acquired
seven
real estate
properties and a land parcel adjacent to one of our existing
properties to be used for additional parking. Upon acquisition, the
real estate properties were 100%
leased in the
aggregate with lease expirations through 2035. Amounts reflected in
revenues and net income for these properties for the three months ended
June 30, 2020 were approximately
$0.1
million and four
thousand dollars, respectively, and
transaction costs totaling approximately $0.4
million were capitalized relating to
these property acquisitions.
During the first
quarter of 2020, the Company acquired
six
real estate
properties. Upon acquisition, the properties were
98.2%
leased in the
aggregate with lease expirations through 2035. Amounts reflected in
revenues and net income for these properties for the six months ended June
30, 2020 were approximately
$1.4
million and $0.8
million, respectively, and
transaction costs totaling approximately $0.2
million were capitalized relating to
these property acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
Property
Type (1)
|
Date
Acquired
|
Purchase
Price
|
Cash
Consideration
|
Real
Estate
|
Other
(2)
|
Square
Footage
|
|
|
|
|
(000's)
|
(000's)
|
(000's)
|
(000's)
|
|
|
San Antonio, TX
|
MOB
|
01/27/20
|
$
|
4,003
|
|
$
|
4,022
|
|
$
|
4,036
|
|
$
|
(14
|
)
|
13,500
|
|
|
San Antonio, TX
|
MOB
|
01/27/20
|
1,931
|
|
1,955
|
|
1,961
|
|
(6
|
)
|
6,500
|
|
|
Decatur, AL
|
MOB
|
02/18/20
|
5,784
|
|
5,792
|
|
5,777
|
|
15
|
|
35,943
|
|
|
Ramona, CA
|
SC
|
03/13/20
|
4,100
|
|
4,124
|
|
4,143
|
|
(19
|
)
|
11,300
|
|
|
Cuero, TX
|
SC
|
03/18/20
|
2,153
|
|
2,174
|
|
2,207
|
|
(33
|
)
|
15,515
|
|
|
Rogers, AR
|
IRF
|
03/27/20
|
19,000
|
|
18,317
|
|
19,042
|
|
(725
|
)
|
38,817
|
|
|
Oak Lawn, IL
(land)
|
MOB
|
04/20/20
|
400
|
|
403
|
|
421
|
|
(18
|
)
|
—
|
|
|
Germantown, TN
|
SC
|
04/29/20
|
3,900
|
|
3,949
|
|
3,949
|
|
—
|
|
10,600
|
|
|
Westlake, OH
|
SC
|
06/05/20
|
2,443
|
|
2,456
|
|
2,487
|
|
(31
|
)
|
15,057
|
|
|
Columbus, IN
(3)
|
SC
|
06/05/20
|
1,813
|
|
1,828
|
|
1,787
|
|
41
|
|
13,969
|
|
|
Niceville, FL
|
MOB
|
06/15/20
|
2,294
|
|
2,340
|
|
2,344
|
|
(4
|
)
|
10,250
|
|
|
Greensburg, PA
|
MOB
|
06/16/20
|
3,389
|
|
3,484
|
|
3,497
|
|
(13
|
)
|
15,650
|
|
|
Gardendale, AL
|
MOB
|
06/24/20
|
2,948
|
|
2,935
|
|
2,878
|
|
57
|
|
12,956
|
|
|
Prattville, AL
|
MOB
|
06/24/20
|
4,091
|
|
4,111
|
|
4,078
|
|
33
|
|
13,319
|
|
|
|
|
|
$
|
58,249
|
|
$
|
57,890
|
|
$
|
58,607
|
|
$
|
(717
|
)
|
213,376
|
|
|
|
|
|
|
|
|
|
|
|
(1)
MOB - Medical
Office Building; SC - Specialty Center; IRF - Inpatient
Rehabilitation Facility
|
|
(2) Includes,
but is not limited to, above- and below-market lease intangibles,
liabilities assumed, and security deposits.
|
|
(3) The
Company assumed a ground lease in connection with this acquisition
that is classified as an operating lease. The present value of
future lease payments and the right-of-use asset, each totaling
approximately $0.2 million, are included in other liabilities and
other assets, respectively, on the Company's Condensed Consolidated
Balance Sheets.
|
Notes to Condensed
Consolidated Financial Statements - Continued
The following
table summarizes the relative fair values of the assets acquired
and liabilities assumed in the property acquisitions for the
six
months
ended June 30,
2020.
|
|
|
|
|
|
|
|
|
|
|
|
Relative
Fair
Value
|
Estimated
Useful
Life
|
|
|
|
|
(in
thousands)
|
(in
years)
|
|
Land and land
improvements
|
$
|
11,323
|
|
8.5
|
|
Building and building
improvements
|
41,709
|
|
30.2
|
|
Intangibles:
|
|
|
|
|
At-market lease
intangibles
|
5,575
|
|
5.4
|
|
|
Above-market lease
intangibles
|
292
|
|
4.8
|
|
|
Below-market lease
intangibles
|
(111
|
)
|
3.1
|
|
|
|
Total intangibles
|
5,756
|
|
|
|
Accounts receivable and other
assets assumed
|
247
|
|
|
|
Accounts payable, accrued
liabilities and other liabilities assumed
|
(807
|
)
|
|
|
Prorated rent, interest and
operating expense reimbursement amounts collected
|
(338
|
)
|
|
|
|
Total cash
consideration
|
$
|
57,890
|
|
|
2020 Real Estate Disposition
During the second
quarter of 2020, the Company sold a land
parcel related to one of its properties for approximately
$0.3
million and recognized a loss on sale
of approximately $0.3
million.
Note 4.
Debt, net
The table below
details the Company's debt as of June 30, 2020
and
December 31,
2019.
|
|
|
|
|
|
|
|
|
|
|
Balance as
of
|
|
|
(Dollars in thousands)
|
June 30,
2020
|
December 31,
2019
|
Maturity
Dates
|
|
|
|
|
|
|
Revolving Credit
Facility
|
$
|
18,000
|
|
$
|
15,000
|
|
3/23
|
|
A-1 Term Loan,
net
|
49,871
|
|
49,833
|
|
3/22
|
|
A-2 Term Loan,
net
|
49,801
|
|
49,775
|
|
3/24
|
|
A-3 Term Loan,
net
|
74,479
|
|
74,433
|
|
3/26
|
|
Mortgage Note Payable,
net
|
5,158
|
|
5,202
|
|
5/24
|
|
|
$
|
197,309
|
|
$
|
194,243
|
|
|
The Company's
second amended and restated credit facility (the "Credit Facility")
is by and among Community Healthcare OP, LP, the Company, and a
syndicate of lenders with Truist Bank (formerly SunTrust Bank)
serving as Administrative Agent. The Company’s material
subsidiaries are guarantors of the obligations under the Credit
Facility.
The Credit
Facility, as amended, provides for a $150.0
million Revolving Credit Facility
and $175.0
million in term loans (the "Term
Loans"). The Credit Facility, through the accordion feature, allows
borrowings up to a total of $525.0
million including the ability to add
and fund additional term loans. The Revolving Credit Facility
matures on March 29, 2023
and
includes one
12-month
option to extend the maturity date of the Revolving Credit
Facility, subject to the satisfaction of certain conditions. The
Term Loans include a five-year term loan facility in
the aggregate principal amount of $50.0
million (the "A-1 Term Loan"), which
matures on March 29,
2022,
a seven-year
Notes to Condensed
Consolidated Financial Statements - Continued
term loan
facility in the aggregate principal amount of $50.0
million (the "A-2 Term Loan"), which
matures on March 29,
2024, and
a seven-year, term loan facility in
the aggregate principal amount of $75.0
million (the "A-3 Term Loan"), which
matures on March 29,
2026.
Amounts
outstanding under the Revolving Credit Facility, as amended, bear
annual interest at a floating rate that is based, at the Company’s
option, on either: (i) LIBOR plus 1.25%
to
1.90%
or (ii) a base
rate plus 0.25%
to
0.90%
in each case,
depending upon the Company’s leverage ratio. In addition, the
Company is obligated to pay an annual fee equal to
0.25%
of the amount of
the unused portion of the Revolving Credit Facility if amounts
borrowed are greater than 33.3%
of the borrowing
capacity under the Revolving Credit Facility and
0.35%
of the unused
portion of the Revolving Credit Facility if amounts borrowed are
less than or equal to 33.3%
of the borrowing
capacity under the Revolving Credit Facility. The Company
had $18.0
million outstanding under the
Revolving Credit Facility with a 2.06%
weighted average
interest rate at June 30,
2020, and
a borrowing capacity remaining of approximately $132.0
million at June 30,
2020.
Amounts
outstanding under the Term Loans, as amended, bear annual interest
at a floating rate that is based, at the Company’s option, on
either: (i) LIBOR plus 1.25%
to
2.30%
or (ii) a base
rate plus 0.25%
to
1.30%,
in each case, depending upon the Company’s leverage ratio. In
addition, the Company is obligated to pay an annual fee equal
to 0.35%
of the amount of
the unused portion of the Term Loans. The Company has entered into
interest rate swaps to fix the interest rates on the Term Loans.
See Note 5 for more details on the interest rate swaps. At
June 30,
2020, the
Company had drawn the full $175.0
million under the Term Loans which
had a fixed weighted average interest rate under the swaps of
approximately 4.569%.
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. The Company was in compliance with its
financial covenants under its Credit Facility as of
June 30,
2020.
Note 5.
Derivative Financial Instruments
Risk
Management Objective of Using Derivatives
The Company may
use derivative financial instruments, including interest rate
swaps, caps, options, floors and other interest rate derivative
contracts, to hedge all or a portion of the interest rate risk
associated with its borrowings. The principal objective of such
arrangements is to minimize the risks and/or costs associated with
the Company’s operating and financial structure as well as to hedge
specific anticipated transactions. The Company does not intend to
utilize derivatives for speculative or other purposes other than
interest rate risk management. The use of derivative financial
instruments carries certain risks, including the risk that the
counterparties to these contractual arrangements are not able to
perform under the agreements. To mitigate this risk, the Company
only enters into derivative financial instruments with
counterparties with high credit ratings and with major financial
institutions with which the Company and its affiliates may also
have other financial relationships. The Company does not anticipate
that any of the counterparties will fail to meet their
obligations.
Cash Flow
Hedges of Interest Rate Risk
The Company’s
objectives in using interest rate derivatives are to add stability
to interest expense and to manage its exposure to interest rate
movements. To accomplish these objectives, the Company primarily
uses interest rate swaps as part of its interest rate risk
management strategy. Interest rate swaps designated as cash flow
hedges involve the receipt of variable-rate amounts from a
counterparty in exchange for the Company making fixed-rate payments
over the life of the agreements without exchange of the underlying
notional amount. Interest rate caps designated as cash flow hedges
involve the receipt of variable-rate amounts if interest rates rise
above the cap strike rate on the contract.
As of
June 30,
2020, the
Company had seven
outstanding
interest rate derivatives that were designated as cash flow hedges
of interest rate risk for notional amounts totaling
$175.0
million. The table below presents
the fair value of
Notes to Condensed
Consolidated Financial Statements - Continued
the Company’s
derivative financial instruments as well as their classification on
the Condensed Consolidated Balance Sheets as of June 30, 2020
and
December 31,
2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Derivatives Fair Value at
|
|
Liability
Derivatives Fair Value at
|
|
|
June 30,
2020
|
December 31,
2019
|
Balance Sheet
Classification
|
|
June 30,
2020
|
December 31,
2019
|
Balance Sheet
Classification
|
|
Interest rate
swaps
|
$
|
—
|
|
$
|
—
|
|
Other assets
|
|
$
|
13,969
|
|
$
|
4,808
|
|
Other Liabilities
|
The changes in
the fair value of derivatives designated and that qualify as cash
flow hedges are recorded in accumulated other comprehensive loss
("AOCI") and are subsequently reclassified to interest expense in
the period that the hedged forecasted transaction affects
earnings.
Amounts reported
in AOCI related to derivatives will be reclassified to interest
expense as interest payments are made on the Company’s Term Loans.
During the next twelve months, the Company estimates that an
additional $3.7
million will be reclassified from
AOCI as an increase to interest expense.
The table below
details the location in the financial statements of the gain or
loss recognized on interest rate derivatives designated as cash
flow hedges for the three and six
months
ended June 30, 2020
and
2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Dollars in thousands)
|
2020
|
2019
|
|
2020
|
2019
|
|
Amount of unrealized loss
recognized in OCI on derivative
|
$
|
(1,317
|
)
|
$
|
(4,032
|
)
|
|
$
|
(10,193
|
)
|
$
|
(5,245
|
)
|
|
Amount of loss (gain)
reclassified from AOCI into interest expense
|
$
|
774
|
|
$
|
(95
|
)
|
|
$
|
1,032
|
|
$
|
(157
|
)
|
|
Total interest expense
presented in the Condensed Consolidated Statements of Income in
which the effects of the cash flow hedges are recorded
|
$
|
2,183
|
|
$
|
2,251
|
|
|
$
|
4,432
|
|
$
|
4,305
|
|
Credit-risk-related
Contingent Features
As of
June 30,
2020, the
fair value of derivatives in a net liability position including
accrued interest but excluding any adjustment for nonperformance
risk related to these agreements was $14.5
million. As of June 30,
2020, the
Company has not posted any collateral related to these agreements
and was not in breach of any agreement provisions. If the Company
had breached any of these provisions, it could have been required
to settle its obligations under the agreements at their aggregate
termination value of approximately $14.5
million at June 30,
2020.
Note 6.
Stockholders’ Equity
Common
Stock
The following
table provides a reconciliation of the beginning and ending common
stock balances for the six months ended
June 30,
2020 and
for the year ended December 31, 2019:
|
|
|
|
|
|
|
|
Six Months
Ended
June 30, 2020
|
Year
Ended
December 31,
2019
|
|
Balance, beginning of
period
|
21,410,578
|
|
18,634,502
|
|
|
Issuance of common
stock
|
1,189,545
|
|
2,554,247
|
|
|
Restricted
stock-based awards
|
126,018
|
|
221,829
|
|
|
Balance, end of
period
|
22,726,141
|
|
21,410,578
|
|
ATM
Program
On November 5, 2019, the
Company entered into an Amended and Restated Sales Agency Agreement
("Amended and Restated Sales Agreement") for its at-the-market
offering program ("ATM Program") with Sandler O’Neill &
Partners, L.P., Evercore Group L.L.C., SunTrust Robinson Humphrey,
Inc., BB&T Capital Markets, a division of
Notes to Condensed
Consolidated Financial Statements - Continued
BB&T Securities, LLC,
Fifth Third Securities, Inc. and Janney Montgomery Scott LLC, as
sales agents (collectively, the “Agents”), under which the Company
may issue and sell shares of its common stock, having an aggregate
gross sales price of up to $360.0
million. The shares of common stock
may be sold from time to time through or to one or more of the
Agents, as may be determined by the Company in its sole discretion,
subject to the terms and conditions of the agreement and applicable
law.
The Company's activity under
the ATM Program for the three and six months ended
June 30,
2020 is
detailed in the table below. As of June 30,
2020, the
Company had approximately $251.6
million remaining that may be issued
under the ATM Program.
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30, 2020
|
|
Six Months
Ended
June 30, 2020
|
|
Shares issued
|
578,759
|
|
|
1,189,545
|
|
|
Net proceeds received
(in
millions)
|
$
|
23.7
|
|
|
$
|
50.6
|
|
|
Average gross sales price per
share
|
$
|
41.70
|
|
|
$
|
43.39
|
|
Note 7. Net
Income Per Common Share
The following
table sets forth the computation of basic and diluted net income
per common share for the three and six
months ended June
30, 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Dollars in thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net income
|
$
|
4,526
|
|
|
$
|
2,066
|
|
|
$
|
8,626
|
|
|
$
|
3,516
|
|
|
Participating
securities' share in earnings
|
(432
|
)
|
|
(351
|
)
|
|
(855
|
)
|
|
(652
|
)
|
|
Net income, less participating
securities' share in earnings
|
$
|
4,094
|
|
|
$
|
1,715
|
|
|
$
|
7,771
|
|
|
$
|
2,864
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average Common Shares
outstanding
|
|
|
|
|
|
|
|
|
Weighted average
Common Shares outstanding
|
22,285,565
|
|
|
19,055,110
|
|
|
22,008,998
|
|
|
18,896,274
|
|
|
Unvested
restricted shares
|
(1,021,990
|
)
|
|
(809,442
|
)
|
|
(1,009,901
|
)
|
|
(795,301
|
)
|
|
Weighted average
Common Shares outstanding–Basic
|
21,263,575
|
|
|
18,245,668
|
|
|
20,999,097
|
|
|
18,100,973
|
|
|
Dilutive potential
common shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Weighted average
Common Shares outstanding –Diluted
|
21,263,575
|
|
|
18,245,668
|
|
|
20,999,097
|
|
|
18,100,973
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net
Income per Common Share
|
$
|
0.19
|
|
|
$
|
0.09
|
|
|
$
|
0.37
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net
Income per Common Share
|
$
|
0.19
|
|
|
$
|
0.09
|
|
|
$
|
0.37
|
|
|
$
|
0.16
|
|
Note 8.
Incentive Plan
A summary of the
activity under the Company's 2014 Incentive Plan, as amended, for
the three
and six months ended
June 30,
2020 and 2019 is included in the table
below, as well as compensation expense recognized from the
amortization of the value of shares over the applicable vesting
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Dollars in thousands)
|
2020
|
2019
|
|
2020
|
2019
|
|
Stock-based awards, beginning
of period
|
1,013,797
|
|
794,177
|
|
|
909,892
|
|
709,487
|
|
|
|
Stock in lieu of
compensation
|
5,510
|
|
15,004
|
|
|
55,755
|
|
57,529
|
|
|
|
Stock awards
|
16,603
|
|
25,995
|
|
|
70,263
|
|
68,160
|
|
|
|
Total stock
granted
|
22,113
|
|
40,999
|
|
|
126,018
|
|
125,689
|
|
|
|
Vested shares
|
(15,910
|
)
|
(21,424
|
)
|
|
(15,910
|
)
|
(21,424
|
)
|
|
Stock-based awards, end of
period
|
1,020,000
|
|
813,752
|
|
|
1,020,000
|
|
813,752
|
|
|
Amortization
expense
|
$
|
1,070
|
|
$
|
899
|
|
|
$
|
2,090
|
|
$
|
1,752
|
|
Note 9.
Other Assets, net
Other assets, net
on the Company's Condensed Consolidated Balance Sheets as of
June 30,
2020 and December 31, 2019
are detailed in
the table below.
|
|
|
|
|
|
|
|
|
|
Balance as
of
|
|
(Dollars in
thousands)
|
June 30,
2020
|
December 31,
2019
|
|
Notes receivable
|
$
|
18,340
|
|
$
|
23,500
|
|
|
Lease and interest
receivables
|
2,821
|
|
3,021
|
|
|
Straight-line rent
receivables
|
6,885
|
|
5,267
|
|
|
Prepaid assets
|
602
|
|
488
|
|
|
Deferred financing costs,
net
|
586
|
|
693
|
|
|
Leasing commissions,
net
|
980
|
|
875
|
|
|
Deferred tax
asset
|
575
|
|
595
|
|
|
Above-market intangible
assets, net
|
414
|
|
144
|
|
|
Right-of-use leased
asset
|
385
|
|
139
|
|
|
Other
|
480
|
|
457
|
|
|
|
$
|
32,068
|
|
$
|
35,179
|
|
The Company's
notes receivable at June 30, 2020 included:
|
|
|
•
|
a loan with a
borrower totaling $17.8
million which is secured by all
assets and ownership interests in the operations of
seven
long-term acute
care hospitals and one
inpatient
rehabilitation hospital owned by the borrower. The note matures on
December 31, 2025 and bear interest at 9%
per annum. The
Company also has a $3.0
million revolving credit facility
with the borrower that they can draw on which matures on January 1,
2026.
|
|
|
|
•
|
a
$2.5
million loan, acquired by the Company
for $1.75
million, to help facilitate the
bankruptcy filing of a borrower. The Company subsequently received
a payment of $1.2
million on the note and had a
carrying balance of $0.6
million at June 30, 2020 which is
secured by all assets and personal property of the borrower. The
note is due on demand and bears interest at 10%
per
annum.
|
The Company
identified the borrowers of these notes as variable interest
entities ("VIEs"), but management determined that the Company was
not the primary beneficiary of the VIEs because we lack either
directly or through related parties any material impact in the
activities that impact the borrowers' economic performance. We are
not obligated to provide support beyond our stated commitment to
the borrowers, and accordingly our maximum exposure to loss as a
result of this relationship is limited to the amount of our
outstanding notes receivable. The VIEs that we have identified
at June 30, 2020
are summarized in
the table below.
|
|
|
|
|
|
|
|
|
Classification
|
Carrying
Amount
(in
millions)
|
Maximum
Exposure to Loss
(in
millions)
|
|
Note receivable
|
$
|
17.8
|
|
$
|
17.8
|
|
|
Note receivable
|
$
|
0.6
|
|
$
|
0.6
|
|
Note 10.
Fair Value of Financial Instruments
The following methods and
assumptions were used to estimate the fair value of each class of
financial instruments for which it is practical to estimate the
fair value.
Cash and
cash equivalents and restricted cash - The carrying amount
approximates the fair value.
Notes
receivable - The fair value is estimated
using cash flow analyses, based on an assumed market rate of
interest or at a rate consistent with the rates on notes carried by
the Company and are classified as level 2 in the
hierarchy.
Borrowings
under our Credit Facility - The carrying amount
approximates the fair value because the borrowings are based on
variable market interest rates.
Derivative
financial instruments - The fair value is estimated
using discounted cash flow techniques. These techniques incorporate
primarily level 2 inputs. The market inputs are utilized in the
discounted cash flow calculation considering the instrument’s term,
notional amount, discount rate and credit risk. Significant inputs
to the derivative valuation model for interest rate swaps are
observable in active markets and are classified as level 2 in the
hierarchy.
Mortgage
note payable - The fair value is estimated
using cash flow analyses which are based on an assumed market rate
of interest or at a rate consistent with the rates on mortgage
notes assumed by the Company and are classified as level 2 in the
hierarchy.
The table below
details the fair values and carrying values for our notes
receivable, interest rate swaps, and mortgage note payable
at June 30, 2020
and
December 31,
2019,
using level 2 inputs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
|
December 31,
2019
|
|
(Dollars in
thousands)
|
Carrying
Value
|
Fair
Value
|
|
Carrying
Value
|
Fair
Value
|
|
Notes receivable
|
$
|
18,340
|
|
$
|
17,940
|
|
|
$
|
23,500
|
|
$
|
23,399
|
|
|
Interest rate swap
liability
|
$
|
13,969
|
|
$
|
13,969
|
|
|
$
|
4,808
|
|
$
|
4,808
|
|
|
Mortgage note
payable
|
$
|
5,235
|
|
$
|
5,524
|
|
|
$
|
5,288
|
|
$
|
5,351
|
|
Note 11.
Subsequent Events
Dividend
Declared
On
August 3,
2020, the
Company’s Board of Directors declared a quarterly common stock
dividend in the amount of $0.4225
per share. The
dividend is payable on August 28, 2020
to stockholders
of record on August 17,
2020.
Notes to Condensed
Consolidated Financial Statements - Continued
Highland
Update
On July 1, 2020,
the bankruptcy sale of Highland Hospital was completed and the
operator who had been managing the facility acquired its operations
and entered into a lease with the Company.
The Company
provided debtor in possession financing (the “DIP”) to facilitate
the sale and, as of the closing of the sale, had an
approximately $1.2
million net payable. In
addition, the Company continued to have a net investment of
$550,000
in a separate
note (the “Note”), secured by all assets of Highland
Hospital.
As of the date of
this filing, the DIP and the Note have been combined into a single
net receivable balance of approximately $1.4
million.
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, effects on global and national markets
as well as businesses resulting from the COVID-19 pandemic, 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, 2019, in Item 1A of this Quarterly Report on Form
10-Q, 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.
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.
COVID-19
pandemic
Many healthcare
providers have been impacted by the COVID-19 pandemic. Some of them
were unable to see patients for a period of time; others have seen
a reduced number of elective procedures and/or patient visits;
while others have experienced limited impact, or have even seen
improved cash flows from either increases in census or from
government funding.
As of July 31,
2020, the Company has entered into, or anticipates entering into,
deferral agreements with up to approximately 20 tenants
representing less than one percent of our annualized rent. Pursuant
to these agreements, the tenants are generally required to repay
the deferred amounts in equal monthly installments during the third
and fourth quarters of 2020.
Real estate
acquisitions
During the first
six months of 2020, the Company acquired
13
real estate
properties totaling approximately 213,000 square feet and acquired a
land parcel adjacent to one of our existing properties to be used
for additional parking for an aggregate purchase price of
approximately $58.2 million
and cash
consideration of approximately $57.9
million.
Upon acquisition, the properties were 99.0% leased in the aggregate with
lease expirations through 2035. See Note 3 to the Condensed
Consolidated Financial Statements for more details on these
acquisitions.
Acquisition
Pipeline
The Company
has two properties under definitive
purchase agreements for an aggregate expected purchase price of
approximately $2.6 million
and expected
aggregate returns of approximately 9.3%. The Company expects to
close on these properties in the third quarter of 2020; however,
the Company cannot provide assurance as to the timing of when, or
whether, these transactions will actually close.
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 on one of these properties in the fourth quarter and the
other two through the middle of 2021; however, the Company cannot
provide assurance as to the timing of when, or whether, these
transactions will actually close.
Leased
square footage
As of
June 30,
2020, our
real estate portfolio was approximately 89.5% leased. During the
first six months of 2020, we had expiring or
terminated leases related to approximately 74,000 square feet, and
we leased or renewed leases relating to approximately 107,000
square feet.
Highland
Update
On July 1, 2020,
the bankruptcy sale of Highland Hospital was completed and the
operator who had been managing the facility acquired its operations
and entered into a lease with the Company.
The Company
provided debtor in possession financing (the “DIP”) to facilitate
the sale and, as of the closing of the sale, had an
approximately $1.2 million
net
payable. In addition, the Company continued to have a net
investment of $550,000 in a separate note (the
“Note”), secured by all assets of Highland Hospital.
As of the date of
this filing, the DIP and the Note have been combined into a single
net receivable balance of approximately $1.4
million.
The Company
expects this receivable to be repaid in the next few months, as
well as other amounts previously owed to the Company. However, the
Company cannot provide assurance as to the timing or whether the
receivable and other amounts will be received.
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 recently
adopted and not yet adopted.
Results of
Operations
The Company's
results of operations for the three and six
months
ended June 30, 2020
compared to the
same period in 2019 have most significantly been
impacted by its real estate acquisitions. As of June 30, 2020
and
2019, the Company had investments
in real estate properties totaling approximately
$664.7
million and $511.6
million,
respectively.
Three Months Ended
June 30, 2020
Compared to Three Months Ended
June 30, 2019
The table below
shows our results of operations for the three months ended
June 30,
2020 compared to the same period
in 2019 and the effect of changes in
those results from period to period on our net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended June 30,
|
|
Increase
(decrease) to
Net
income
|
|
(dollars in thousands)
|
2020
|
|
2019
|
|
$
|
%
|
|
REVENUES
|
|
|
|
|
|
|
|
Rental
income
|
$
|
17,830
|
|
|
$
|
13,361
|
|
|
$
|
4,469
|
|
33.4
|
%
|
|
Other operating
interest
|
450
|
|
|
955
|
|
|
(505
|
)
|
(52.9
|
)%
|
|
|
18,280
|
|
|
14,316
|
|
|
3,964
|
|
27.7
|
%
|
|
EXPENSES
|
|
|
|
|
|
|
|
Property
operating
|
3,223
|
|
|
2,993
|
|
|
(230
|
)
|
(7.7
|
)%
|
|
General and
administrative
|
1,919
|
|
|
1,776
|
|
|
(143
|
)
|
(8.1
|
)%
|
|
Depreciation and
amortization
|
6,119
|
|
|
5,299
|
|
|
(820
|
)
|
(15.5
|
)%
|
|
|
11,261
|
|
|
10,068
|
|
|
(1,193
|
)
|
(11.8
|
)%
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Loss on sale of
real estate
|
(313
|
)
|
|
—
|
|
|
(313
|
)
|
n/m
|
|
|
Interest
expense
|
(2,183
|
)
|
|
(2,251
|
)
|
|
68
|
|
3.0
|
%
|
|
Other
income
|
3
|
|
|
69
|
|
|
(66
|
)
|
(95.7
|
)%
|
|
|
(2,493
|
)
|
|
(2,182
|
)
|
|
(311
|
)
|
(14.3
|
)%
|
|
NET
INCOME
|
$
|
4,526
|
|
|
$
|
2,066
|
|
|
$
|
2,460
|
|
119.1
|
%
|
n/m - not
meaningful
Revenues
Revenues
increased approximately $4.0
million,
or 27.7%, for the three months ended
June 30, 2020 compared to the same period
in 2019 mainly due to acquisitions of
real estate, offset partially by reduced interest income from
repayments on certain notes receivable.
Expenses
Property
operating expenses increased approximately $0.2
million,
or 7.7%, for the three months ended
June 30, 2020 compared to the same period
in 2019 mainly due to acquisitions of
real estate.
General and
administrative expenses increased approximately $0.1
million,
or 8.1%, for the three months ended
June 30, 2020 compared to the same period
in 2019 due mainly to
compensation-related expenses related to the addition of employees,
including the non-cash amortization of non-vested restricted common
shares, of approximately $0.4 million. These increases were offset
partially by a reduction in professional fees, including the
reduction in and reimbursement of legal fees related to the
Highland Hospital bankruptcy, of approximately $0.2 million and a
reduction in state income and other taxes of approximately $0.1
million.
Depreciation and
amortization expense increased approximately $0.8
million,
or 15.5%, for the three months ended
June 30, 2020 compared to the same period
in 2019. Acquisitions accounted for
an increase of approximately $1.3 million, offset by a decrease of
approximately $0.5 million in amortization due to fully amortized
real estate lease intangibles which generally have a shorter
depreciable life than a building.
Loss on
sale of real estate
During the second
quarter of 2020, the Company sold a land
parcel related to one of its properties for approximately
$0.3
million and recognized a loss on sale
of approximately $0.3
million.
Interest
expense
Interest expense
decreased approximately $0.1
million,
or 3.0%, for the three months ended
June 30, 2020 compared to the same period
in 2019 due mainly to a lower
weighted average interest rate on the Revolving Credit Facility in
the second quarter of 2020, offset partially by a higher weighted
average debt balance in the second quarter of 2020 compared to the
same period in 2019.
Six Months Ended
June 30, 2020
Compared to Six Months Ended
June 30, 2019
The table below
shows our results of operations for the six months ended
June 30,
2020 compared to the same period
in 2019 and the effect of changes in
those results from period to period on our net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended June 30,
|
|
Increase
(decrease) to
Net
income
|
|
(dollars in thousands)
|
2020
|
|
2019
|
|
$
|
%
|
|
REVENUES
|
|
|
|
|
|
|
|
Rental
income
|
$
|
35,258
|
|
|
$
|
26,259
|
|
|
$
|
8,999
|
|
34.3
|
%
|
|
Other operating
interest
|
958
|
|
|
1,498
|
|
|
(540
|
)
|
(36.0
|
)%
|
|
|
36,216
|
|
|
27,757
|
|
|
8,459
|
|
30.5
|
%
|
|
EXPENSES
|
|
|
|
|
|
|
|
Property
operating
|
6,566
|
|
|
6,068
|
|
|
(498
|
)
|
(8.2
|
)%
|
|
General and
administrative
|
4,111
|
|
|
3,561
|
|
|
(550
|
)
|
(15.4
|
)%
|
|
Depreciation and
amortization
|
12,178
|
|
|
10,545
|
|
|
(1,633
|
)
|
(15.5
|
)%
|
|
|
22,855
|
|
|
20,174
|
|
|
(2,681
|
)
|
(13.3
|
)%
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Loss on sale of
real estate
|
(313
|
)
|
|
—
|
|
|
(313
|
)
|
n/m
|
|
|
Interest
expense
|
(4,432
|
)
|
|
(4,305
|
)
|
|
(127
|
)
|
(3.0
|
)%
|
|
Other
income
|
10
|
|
|
238
|
|
|
(228
|
)
|
(95.8
|
)%
|
|
|
(4,735
|
)
|
|
(4,067
|
)
|
|
(668
|
)
|
(16.4
|
)%
|
|
NET
INCOME
|
$
|
8,626
|
|
|
$
|
3,516
|
|
|
$
|
5,110
|
|
145.3
|
%
|
n/m - not
meaningful
Revenues
Revenues
increased approximately $8.5
million,
or 30.5%, for the six months ended June
30, 2020 compared to the same period
in 2019 mainly due to acquisitions of
real estate, offset partially by reduced interest income from
repayments on certain notes receivable.
Expenses
Property
operating expenses increased approximately $0.5
million,
or 8.2%, for the six months ended June
30, 2020 compared to the same period
in 2019 mainly due to acquisitions of
real estate.
General and
administrative expenses increased approximately $0.6
million,
or 15.4%, for the six months ended June
30, 2020 compared to the same period
in 2019 due mainly to
compensation-related expenses and occupancy costs related to the
addition of employees, including the non-cash amortization of
non-vested restricted common shares, of approximately $0.9 million.
These increases were offset partially by a reduction in
professional fees, including the reduction in and reimbursement of
legal fees related to the Highland Hospital bankruptcy, of
approximately $0.1 million and a reduction in state income and
other taxes of approximately $0.2 million.
Depreciation and
amortization expense increased approximately $1.6
million,
or 15.5%, for the six months ended June
30, 2020 compared to the same period
in 2019. Acquisitions accounted for
an increase of approximately $2.5 million, offset by a decrease of
approximately $1.0 million in amortization due to fully amortized
real estate lease intangibles which generally have a shorter
depreciable life than a building.
Loss on
sale of real estate
During the second
quarter of 2020, the Company sold a land
parcel related to one of its properties for approximately
$0.3
million and recognized a loss on sale
of approximately $0.3
million.
Interest
expense
Interest expense
increased approximately $0.1
million,
or 3.0%, for the six months ended June
30, 2020 compared to the same period
in 2019 due mainly to a higher
weighted average debt balance in the first six months of 2020
compared to the same period in 2019, offset partially by a lower
weighted average interest rate on the Revolving Credit Facility in
the first six months of 2020 compared to the same period in
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 (computed in accordance with GAAP),
excluding gains (or losses) from sales of property and impairments
of real estate, plus depreciation and amortization related to real
estate properties, and after adjustments for unconsolidated
partnerships and joint ventures. NAREIT also provides REITs with an
option to exclude gains, losses and impairments of assets that are
incidental to the main business of the REIT from the calculation of
FFO.
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, gains or losses from sales of real
estate, impairment of real estate, and gains, losses and impairment
of incidental assets, 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 net income to FFO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Dollars in thousands, excepts per share amounts)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Net income
|
$
|
4,526
|
|
|
$
|
2,066
|
|
|
$
|
8,626
|
|
|
$
|
3,516
|
|
|
Real estate
depreciation and amortization
|
6,168
|
|
|
5,340
|
|
|
12,277
|
|
|
10,622
|
|
|
Loss on sale of
real estate
|
313
|
|
|
—
|
|
|
313
|
|
|
—
|
|
|
Total
adjustments
|
6,481
|
|
|
5,340
|
|
|
12,590
|
|
|
10,622
|
|
|
Funds from
Operations
|
$
|
11,007
|
|
|
$
|
7,406
|
|
|
$
|
21,216
|
|
|
$
|
14,138
|
|
|
Funds from Operations per
Common Share-Basic
|
$
|
0.52
|
|
|
$
|
0.41
|
|
|
$
|
1.01
|
|
|
$
|
0.78
|
|
|
Funds from Operations per
Common Share-Diluted
|
$
|
0.51
|
|
|
$
|
0.40
|
|
|
$
|
0.98
|
|
|
$
|
0.76
|
|
|
Weighted Average Common Shares
Outstanding-Basic
|
21,263,575
|
|
|
18,245,668
|
|
|
20,999,097
|
|
|
18,100,973
|
|
|
Weighted Average Common Shares
Outstanding-Diluted (1)
|
21,749,994
|
|
|
18,684,916
|
|
|
21,557,798
|
|
|
18,530,138
|
|
___________________
(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 properties. Our
rental income represents 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.
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, 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 4
to the Condensed Consolidated Financial Statements provides more
details on the Company's Credit Facility. At June 30,
2020, the
Company had borrowed $175.0 million
in Term Loans and
had borrowing capacity remaining under the Revolving Credit
Facility of approximately $132.0
million.
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.
At June 30,
2020, our
debt to total capitalization ratio (debt plus stockholders' equity
plus accumulated depreciation) was approximately
29.3%.
The Company was in compliance with its financial covenants under
its Credit Facility as of June 30,
2020.
Acquisition
Pipeline
The Company
has two properties under definitive
purchase agreements for an aggregate expected purchase price of
approximately $2.6 million
and expected
aggregate returns of approximately 9.3%. The Company expects to
close on these properties in the third quarter of 2020; however,
the Company cannot provide assurance as to the timing of when, or
whether, these transactions will actually close.
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 on one of these properties in the fourth quarter and the
other two through the middle of 2021; 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
Subject to
Company approval, we may fund or reimburse tenants for tenant
improvements, which are allowed for in certain leases, of up to
approximately $3.2 million as of June 30,
2020.
The Company has
also entered into contracts regarding certain capital expenditures
totaling approximately $1.5 million as of June 30,
2020.
Reimbursement of these expenditures by our tenants will be
determined by each tenant's lease.
The Company has
ground lease obligations relating to two properties, with total
obligations of approximately $0.6 million with maturities through
2054.
Automatic
Shelf Registration Statement
On November 5,
2019, the Company filed an automatic shelf registration statement
on Form S-3 with the SEC. The registration statement is for an
indeterminate number of securities and is effective for three
years. Under this registration statement, the Company has the
capacity to offer and sell from time to time various types of
securities, including common stock, preferred stock, depository
shares, rights, debt securities, warrants and units.
Operating
Activities
Cash flows
provided by operating activities for the six months ended
June 30,
2020 and 2019 were approximately
$23.7
million and $14.4
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 six months ended
June 30,
2020 and 2019 were approximately
$55.6
million and $64.8
million,
respectively. During the six months ended
June 30,
2020, the
Company invested in 13 properties for an aggregate
cash consideration of approximately $57.9 million
and acquired a
$2.5 million note for $1.8
million.
Also, during the six months ended
June 30,
2020, the
Company received payments on its notes receivable totaling
$6.9
million and funded capital
expenditures on its existing portfolio totaling
approximately $3.1
million.
During the
six
months
ended June 30,
2019, the
Company invested in five properties for an aggregate cash
consideration of approximately $63.4
million,
received payments on its notes receivable totaling
$0.3
million,
and funded capital expenditures on its existing portfolio totaling
approximately $1.7
million.
Financing
Activities
Cash flows
provided by financing activities for the six months ended
June 30,
2020 and 2019 were approximately
$35.0
million and $57.3
million,
respectively. During the six months ended
June 30,
2020, the
Company borrowed $3.0 million
under its Credit
Facility, sold shares under its ATM Program and received proceeds
of approximately $50.6
million,
and paid dividends totaling $18.3
million.
During the
six
months
ended June 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, contributing
to the net $24.0 million
repayment on the
Revolving Credit Facility. The Company also sold shares under its
ATM Program and received proceeds of approximately
$23.2
million,
and paid dividends totaling $15.4
million.
Security
Deposits
As of
June 30,
2020, the
Company held approximately $4.1 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
August 3,
2020, the
Company’s Board of Directors declared a quarterly common stock
dividend in the amount of $0.4225 per share. The dividend is
payable on August 28, 2020
to stockholders
of record on August 17,
2020. This
rate equates to an annualized dividend of $1.69 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.
ITEM 3.
Quantitative and Qualitative Disclosures about Market
Risk
Our future
income, cash flows and fair values relevant to financial
instruments are dependent upon prevailing market interest rates.
Market risk refers to the risk of loss from adverse changes in
market prices and interest rates. We may use certain derivative
financial instruments to manage, or hedge, interest rate risks
related to our borrowings. We will not use derivatives for trading
or speculative purposes and only enter into contracts with major
financial institutions based upon their credit rating and other
factors. An interest rate swap is a contractual agreement entered
into by two counterparties under which each agrees to make periodic
payments to the other for an agreed period of time based on a
notional amount of principal. Under the most common form of
interest rate swap, known from our perspective as a
floating-to-fixed interest rate swap, a series of floating, or
variable, rate payments on a notional amount of principal is
exchanged for a series of fixed interest rate payments on such
notional amount. During the six months ended
June 30,
2020,
there were no material changes in the quantitative and qualitative
disclosures about market risks presented in the Company’s Annual
Report on Form 10-K for the year ended December 31,
2019.
ITEM 4.
Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
The Company’s
management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, has evaluated the
effectiveness of the Company’s disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
as of the end of the period covered by this report. Based on this
evaluation, Company’s management has concluded that, as of the end
of such period, the Company’s disclosure controls and procedures
were effective in recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by the
Company in the reports it files or submits under the Exchange
Act.
Changes In
Internal Control Over Financial Reporting
There were no
changes in our system of internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the quarter ended June 30, 2020
that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II.
OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The Company may,
from time to time, be involved in litigation arising in the
ordinary course of business or which may be expected to be covered
by insurance. The Company is not aware of any pending or threatened
litigation that, if resolved against the Company, would have a
material adverse effect on the Company’s consolidated financial
position, results of operations or cash flows.
ITEM
1A. RISK FACTORS
In addition to
the other information set forth in this Quarterly Report on Form
10-Q, an investor should consider the risk factors included in its
Annual Report on Form 10-K for the year ended December 31,
2019, its
Quarterly Report on Form 10-Q for the three months ended March 31,
2020, and other reports that may be filed by the
Company.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. MINE SAFETY DISCLOSURES
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
The exhibits
required by Item 601 of Regulation S-X which are filed with this
report are listed in the Exhibit Index and are hereby incorporated
in by reference.
EXHIBIT
INDEX
|
|
|
|
|
|
Exhibit
Number
|
Description
|
|
3.1
|
|
|
3.2
|
|
|
31.1 *
|
|
|
31.2 *
|
|
|
32.1 **
|
|
|
101.INS
|
XBRL Instance
Document
|
|
101.SCH
|
XBRL Taxonomy Extension
Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension
Calculation Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension
Labels Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension
Definition Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension
Presentation Linkbase Document
|
|
|
|
|
|
|
(1)
|
Filed as Exhibit
3.1 to Amendment No. 2 to the Registration Statement on Form S-11
of the Company filed with the Securities and Exchange Commission on
May 6, 2015 (Registration No. 333-203210) and incorporated herein by
reference.
|