Community Healthcare Trust Q1 Earnings Call Highlights

Key Points

• Revenue and profitability improved in the first quarter, with total revenue rising 4.8% year over year to $31.5 million and FFO/AFFO also increasing. AFFO per diluted share came in at $0.56, up from both a year ago and the prior quarter.
• Occupancy slipped modestly to 89.8% due to lease terminations, but management expects leased occupancy to rebound next quarter as renewals and new leasing progress. The company also continues to work through a tenant transition involving six behavioral health hospitals, though timing for a closing remains uncertain.
• Capital recycling and redevelopment remain central to strategy, with CHCT buying a $28.5 million rehabilitation facility, planning roughly $99 million of additional post-completion acquisitions, and selling lower-priority assets. The company also raised its quarterly dividend to $0.48 per share and said it has increased the payout every quarter since its IPO.

Community Healthcare Trust NYSE: CHCT reported higher first-quarter revenue and funds from operations while management said it is continuing to focus on capital recycling, selective acquisitions and resolving an ongoing tenant transition involving six behavioral health hospitals.

On the company’s 2026 first-quarter earnings call, Chief Executive Officer Dave Dupuy said a geriatric behavioral hospital operator that leases six Community Healthcare Trust properties paid about $300,000 in rent during the quarter, up $100,000 from the prior quarter. Dupuy said the tenant signed a letter of intent on July 17, 2025, to sell the operations of all six hospitals to an experienced behavioral healthcare operator and remains under exclusivity with that buyer.

“The buyer is finalizing legal and business due diligence and has entered the drafting phase of the definitive purchase documents, including new leases on the six hospitals owned by the company,” Dupuy said. He added that the company remains in “frequent, productive communication” with the buyer’s team, but said Community Healthcare Trust could not provide specific timing or certainty that the transaction will close.

Revenue and AFFO Increase

Chief Financial Officer Bill Monroe said total revenue rose to $31.5 million in the first quarter of 2026 from $30.1 million in the year-earlier period, a 4.8% increase. On a sequential basis, revenue grew 1.9%, driven primarily by higher rental income from recent acquisitions and higher property operating expense recoveries, partially offset by recent asset sales and net leasing activity.

Property operating expenses increased by about $360,000 from the prior quarter to $6.4 million. Monroe attributed the increase to seasonally higher snowplow and utility expenses at several properties, particularly in January and February.

General and administrative expense totaled $5.1 million, up about $330,000 sequentially. Monroe said the increase reflected higher non-cash amortization of deferred compensation and typical first-quarter timing items, including annual employee salary increases, employer HSA and 401(k) contributions, and employer tax payments. G&A expense was unchanged from the first quarter of 2025.

Interest expense declined by $160,000 sequentially to $6.8 million, due to two fewer days in the quarter and slightly lower floating rates on the company’s revolving credit facility. Monroe said second-quarter interest expense is expected to be higher because of an additional day in the quarter, a full quarter of the current revolver balance and the late-March expiration of $75 million of interest rate hedges.

Funds from operations totaled $13.4 million, up 5.8% from $12.7 million in the first quarter of 2025. On a diluted common share basis, FFO was $0.49, up from $0.47 a year earlier and flat with the fourth quarter of 2025. Adjusted funds from operations totaled $15.4 million, up 4.1% from $14.7 million a year earlier. AFFO per diluted common share was $0.56, up $0.01 both year over year and sequentially.

Occupancy Slips as Redevelopment Projects Advance

Dupuy said occupancy decreased to 89.8% from 90.6% during the quarter because of lease terminations. However, he said the leasing team is active on renewals and new leasing and that the company expects leased occupancy to grow in the next quarter.

The company’s weighted average lease term increased slightly to 7.1 years from 7.0 years. Dupuy said the asset management team continues to focus on tenant service and property operating costs.

Community Healthcare Trust has three properties undergoing redevelopment or significant renovation, with long-term tenants expected to be in place once the projects are complete. The largest project, a behavioral healthcare facility, received its certificate of occupancy in March. Due to healthcare licensure requirements, Dupuy said the property is expected to begin its lease and contribute net operating income during the third quarter of 2026.

Acquisitions, Asset Sales and Capital Strategy

During the first quarter, Community Healthcare Trust acquired an inpatient rehabilitation facility after completion of construction for $28.5 million. The company entered into a new lease that expires in 2044, with an anticipated annual return of about 9.3%.

In the question-and-answer session, Dupuy said the 9.3% yield is a cash yield and that the lease includes 2% escalators. He said those escalators are consistent with what the company anticipates for the other properties in its acquisition pipeline.

The company has signed definitive purchase and sale agreements for four properties to be acquired after completion and occupancy, representing an aggregate expected investment of $99 million. Expected returns on those investments range from 9.1% to 9.75%. Community Healthcare Trust expects to close on two of the properties in the second half of 2026 and the other two in the second half of 2027.

Dupuy said the company sold one building in Fort Myers, Florida, in February, generating net proceeds of about $5.2 million and recording a small loss on the sale. It also received about $700,000 in net proceeds from a property disposition at the end of 2025. The company did not issue shares under its at-the-market equity program during the quarter.

Asked by Piper Sandler analyst Alexander Goldfarb about acquisition conditions, Dupuy said the company continues to see opportunities in its target property types. He said the pace of acquisitions is being shaped more by Community Healthcare Trust’s cost of capital and its decision to fund growth through asset sales and revolver availability, rather than by a lack of available properties.

“We’re using this as an opportunity to really prune the portfolio and improve the portfolio,” Dupuy said, referring to the company’s capital recycling efforts. He said the company sold five properties in 2025 and one in 2026, with a focus on trimming properties in less attractive markets.

Dividend Raised Again

Community Healthcare Trust declared a first-quarter dividend of $0.48 per common share, or $1.92 per share annualized. Dupuy said the company has raised its dividend every quarter since its initial public offering.

Looking ahead, Dupuy said management expects some redevelopment projects and other initiatives to come online in the second half of the year, which he said could help the company begin posting AFFO growth while continuing to pursue portfolio growth through leasing and acquisitions.

About Community Healthcare Trust NYSE: CHCT

Community Healthcare Trust Incorporated NYSE: CHCT is a real estate investment trust that specializes in owning and leasing healthcare-related properties. The company's portfolio is focused primarily on senior housing and care facilities, including skilled nursing centers, assisted living communities, memory care units, independent living apartments and continuing care retirement communities. Through long‐term, triple‐net leases, Community Healthcare Trust seeks stable, predictable cash flows by partnering with experienced operators that manage day-to-day resident care and property operations.

As of the latest reporting, Community Healthcare Trust's holdings span multiple regions across the United States, with properties located in both urban and suburban markets.

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