Community Healthcare Trust Incorporated

Welcome to Community Health Care Trust's 2023 first quarter earnings release conference call. On the call today, the company will discuss its 2023 first quarter financial results. It will also discuss progress made in various aspects of its business. Following the remarks, the phone lines will be open for a question and answer session. The company's earnings release was distributed last evening and has also been posted on its website, The company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today, May 3, 2023, and may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, You should review the company's disclosures regarding forward-looking statements in its earnings release, as well as its risk factors and MD&A in its SEC filings. The company undertakes no obligation to update forward-looking statements, whether as the result of new information, future developments, or otherwise, except as may be required by law. During this call, the company will discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in its earnings release, which is posted on its website. Call participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the company's investor relations website for approximately 30 days and is the property of the company. This call may not be recorded or otherwise reproduced or distributed without the company's prior written permission. Now I would like to turn the call over to Dave Dupuy, CEO of Community Healthcare Trust. Please go ahead.

Great. Thanks, Gary. Good morning, and thank you for joining us today for our 2023 first quarter conference call. On the call with me today is Leanne Stack, our Chief Accounting Officer, and Tim Meyer, our EVP of Asset Management. The CHCT family had an incredibly difficult and emotional quarter with the loss of the company's founder, chairman, and CEO, Tim Wallace. Tim was a great leader, but also a friend and mentor to me and many others. I have received many heartfelt calls, letters, and emails of support from colleagues and friends expressing their sympathy and remembering Tim. His presence and leadership will be missed. but he built a top-notch team that I am now fortunate to lead. I am grateful for the support I have received from our board of directors, employees, and investors, and I look forward to carrying on being mindful of Tim's legacy as the company's new CEO. Our earnings announcement and supplemental data report were released last night and filed with an 8K. Our quarterly report on Form 10Q was filed. Last night, in addition, an updated investor presentation was posted to our website last night. The extraordinary events of the first quarter required everyone on the team to step up and fill the void left by Tim. I am proud of how our executive, accounting, and asset management teams responded to these challenges while still delivering a good service to our tenants and continued growth for our shareholders. We are seeing steady acquisition activity and our acquisition pipeline continues to build. Occupancy was stable at 91.6% and we continue to see good leasing activity. Our weighted average remaining lease term declined slightly from 7.6 to 7.4 years. On another front, one of our clients, Everest Rehabilitation, sold the operations of four of its inpatient rehab hospitals to LifePoint Health in February. And now LifePoint is our new tenant in these four buildings. As part of this transaction, LifePoint can acquire future buildings from Everest upon completion and Medicare licensure. We believe this gives credence to the quality of Everest buildings and operations. The first quarter we acquired seven properties with a total of approximately 162,000 square feet for a purchase price of $23.4 million. The properties were a hundred percent leased with leases running through 2031 and anticipated annual returns of approximately 9.2 to 10.6%. The company has four properties under definitive purchase agreements, for an aggregate expected purchase price of $19.7 million and expected returns of approximately 9.2 to 9.3%. The company is currently performing due diligence and expects to close on these properties in the second quarter. The company signed three additional purchase and sale agreements with Everest this quarter and now assigned agreements for nine properties to be acquired after completion and occupancy for an aggregate expected investment of $214.5 million. The expected return on these investments should range up to 10.25%, and we expect to close on these properties throughout 2023, 2024, and 2025. We continue to have many properties under review and have term sheets out on several properties with indicative returns of 9 to 10%. We anticipate having enough availability on our credit facilities and through our banking relationships to fund our acquisitions, and we expect to continue to opportunistically utilize the ATM to strategically access the equity markets. Also, we declared our dividend for the fourth quarter and raised it to 45 cents per common share. This equates to an annualized dividend of $1.80 per share, and we continue to be proud to say we have raised our dividend every quarter since our IPO. That takes care of the items I wanted to cover, so I'll hand things off to Leigh Ann to discuss the numbers.

Thank you, Dave, and good morning, everyone. I'm pleased to report that total revenue grew from 23.5 million in the first quarter of 22 to 27.2 million in the first quarter of 2023, representing 15.7% growth over the same period last year. Revenue for the fourth quarter of 2022 was 25.3 million, representing 7.2% sequential growth. On a pro forma basis, if all the 2023 first quarter acquisitions had occurred on the first day of the quarter, total revenue would have increased by an additional $383,000 to a pro forma total of $27.6 million in the first quarter. From an expense perspective, property operating expenses increased quarter over quarter from $4.2 million in the fourth quarter of 2022 to 4.9 million in the first quarter of 2023, or 17.3%. The increase in property operating expenses was mainly due to expenses on properties acquired, as well as increases in property taxes and other normal fluctuations occurring from period to period. G&A increased from 4.1 million to 16.2 million sequentially. G&A for the first quarter of 2023 included the non-cash accelerated amortization of Mr. Wallace's unvested shares, totaling 11.8 million. This accelerated amortization, excluding this accelerated amortization, GNA increased .3 million quarter over quarter, or 6.2%. Increases in GNA were driven primarily by increases in compensation from annual salary increases as well as professional fees associated with the passing of Mr. Wallace. Also, interest expense increased from $3.5 million to $4 million, or 15.2% sequentially. This increase was due to the credit facility refinancing in December of 22, in which we added on a net basis $100 million in term loans, as well as increases in interest rates. Funds from operations, or FSO, for the first quarter of 2023 was 2.2 million, which includes the non-cash accelerated amortization of misrepresented shares, totaling 11.8 million, as compared to FSO of 13.5 million in the first quarter of 2022. On a per share basis, FSO was 9 cents per diluted share in the first quarter of 2023, 56 cents per diluted share in the first quarter of 2022. The non-cash amortization of Mr. Wallace's unvested shares, recognized in the first quarter of 2023, reduced FFO per diluted share by 47 cents. Adjusted funds from operations, or ASFO, which adjusts for straight line rent and stock-based compensation, including the accelerated amortization of Mr. Wallace's unvested shares, totaled 15.6 million, compared with 14.8 million in the first quarter of 2022, or 5.2% growth year over year. On a per share basis, AFFO increased from 61 cents per diluted share in the first quarter of 22 to 62 cents per diluted share in the first quarter of 2023, or 1.6% growth. Finally, FFO for the fourth quarter of 2022 was 15.4 million, representing a 1.2% increase on a sequential basis and down on a per share basis by one cent per deleted share. On a pro forma perspective, if all of the first quarter acquisitions occurred on the first day of the first quarter, ASSO would have increased by approximately 214,000 to a pro forma total of 15.8 million, or about a penny per diluted share. That's all I have for the numbers perspective. Operator, we're ready to start the question and answer session.