Community Healthcare Trust Incorporated

Welcome to Community Health Care's Trust's 2025 Fourth Quarter Earnings Release Conference Call. On the call today, the company will discuss its 2025 Fourth Quarter financial results. It will also discuss progress made in various aspects of its business. Following the remarks, the phone lines will be opened for a question and answer session. The company's earnings release was distributed last evening and has also been posted on its website, www.chct.reit. 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, February 18, 2026, and may contain forward-looking statements that involve risks and uncertainty. Actual results may differ materially from those set forth in such statements, For 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 purpose. An archive of the call will be made available on the company's investor relations website for approximately 30 days and is 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, sir.

Great. Thanks so much, Nick. Good morning, everybody, and thank you for joining us today for our 2025 Fourth Quarter Conference Call. On the call with me today is Bill Monroe, our Chief Financial Officer. Leanne Stack, our chief accounting officer, and Mark Kearns, our senior vice president of asset management. Our earnings announcement and supplemental data report were released last night and furnished on form 8K, along with our annual report on form 10K. In addition, an updated investor presentation was posted to our website last night. During the fourth quarter, the geriatric behavioral hospital operator, a tenant in six of the company's properties, paid rent of $200,000, consistent with last quarter. On July 17, 2025, this tenant signed a letter of intent for the sale of the operations of all six of its hospitals to an experienced behavioral healthcare operator and is under exclusivity with that buyer. Among other terms and conditions of the sale, the buyer would sign new or amended leases for the six geriatric hospitals owned by CHCT. We continue to maintain frequent, productive communication with the buyer's team to advance the closing process. The buyer is finalizing legal and business due diligence, and while the transaction is progressing, we can't provide specific timing or certainty that it will close. We will share more information as we move through the process. As it relates to our core business, we had a busy fourth quarter from an operations perspective and capital recycling perspective and continue to be selective from an acquisition standpoint. Our occupancy increased from 90.1 to 90.6% during the quarter, and our leasing team is very busy with renewals and new leasing activity. Our weighted average lease term increased from 6.7 to 7 years. We have three properties that are undergoing redevelopment or significant renovations with long-term tenants in place when the renovations or redevelopment are complete. We expect the largest of these projects to be completed in the second quarter of 2026, with rent expected to commence in the third quarter after the tenant obtains the appropriate provider license. As previously disclosed, during the fourth quarter, we sold an inpatient rehab facility at an approximate 7.9% cap rate. resulting in a gain on the sale of approximately $11.5 million, with net proceeds reinvested through a 1031 like-kind exchange into a new inpatient rehab facility for a purchase price of $28.5 million. We entered into a new lease with a lease expiration in 2040 and an anticipated annual return of approximately 9.3%. I will note an additional benefit of the transaction was the reduction of our largest tenant concentration, further enhancing our overall portfolio diversification. For the year, we acquired three properties with a total of 113,000 square feet for an aggregate purchase price of $64.5 million, which were 100% leased with leases running through 2040 and anticipated annual returns of 9.3 to 9.5%. As it relates to other capital recycling activity, we had two additional dispositions close in the fourth quarter and one disposition close in the first quarter, resulting in net proceeds of approximately $7.7 million. We have other properties both in market and under review as part of our capital recycling program, and when appropriate, we would anticipate using a similar 1031 like-kind exchange to accretively reinvest proceeds to fund our pipeline. Also, we have signed definitive purchase and sale agreements for five properties to be acquired after completion and occupancy for an aggregate expected investment of $122.5 million. The expected return on these investments should range from 9.1 to 9.75%. We expect to close on one of these properties in the first quarter, with two properties expected to close in the second half of 2026, and the remaining two closing in the second half of 2027. We did not issue any shares under our ATM last quarter. However, we anticipate having sufficient capital from selected asset sales coupled with our revolver capacity to fund near-term acquisitions. Going forward, we will evaluate the best uses of our capital, all while maintaining modest leverage levels. To finish up, we declared our dividend for the fourth quarter and raised it to 47.75 cents per common share. This equates to an annualized dividend of $1.91 per share, and we are proud to have raised our dividend every quarter since our IPO. That takes care of the items I wanted to cover, so I will hand things off to Bill to discuss the numbers. Thank you, Dave. I will now provide more details on our fourth quarter financial performance. I am pleased to report total revenue grew from $29.3 million in the fourth quarter of 2024 to $30.9 million in the fourth quarter of 2025, representing 5.6% annual growth over the same period last year. On a quarter-over-quarter basis, the capital recycling and asset disposition progress in the fourth quarter that Dave discussed led to relatively flat quarterly performance across many line items on our income statement, as I will review. The $30.9 million of fourth quarter total revenue was a slight decrease of $140,000 quarter over quarter versus the $31.1 million in the third quarter of 2025 impacted by the capital recycling and asset disposition activity. Moving to expenses, property operating expense increased by less than $100,000 quarter over quarter to $6 million for the fourth quarter of 2025. Total general and administrative expense was $4.8 million in the fourth quarter of 2025, which was nearly flat both quarter over quarter from the $4.7 million in the third quarter of 2025 and year over year from the $4.8 million in the fourth quarter of 2024. Interest expense decreased slightly by approximately $100,000 quarter over quarter to $7 million in the fourth quarter of 2025, due primarily to recent FOMC interest rate cuts and the resulting lower floating rates on our revolving credit facility. Moving to funds from operations, FFO in the fourth quarter of 2025 was $13.3 million, a 4.6% increase year over year compared to the $12.7 million of FFO in the fourth quarter of 2024. On a diluted common share basis, FFO increased from 48 cents in the fourth quarter of 2024 to 49 cents in the fourth quarter of 2025, although this was one cent less quarter over quarter from the 50 cents of FFO in the third quarter of 2025 as a result of the net impacts to revenue and expenses described earlier. Adjusted funds from operations, or ASFO, which adjusts for straight-line rent and stock-based compensation, totaled $14.9 million in the fourth quarter of 2025, a 2.1% increase year over year compared to the 14.6 million of the AFFO in the fourth quarter of 2024. AFFO on a diluted common share basis was 55 cents in the fourth quarter of 2025, even with the 55 cents of the AFFO in the fourth quarter of 2024 although this was one cent less quarter over quarter from the 56 cents of ASFO in the third quarter of 2025, again, as a result of the net impacts to revenue and expenses described earlier. And finally, while it did not impact FFO or ASFO, we did have net gains on sale of $12.1 million from the capital recycling and asset disposition activity during the fourth quarter of 2025 that increased net income. That concludes our prepared remarks. Nick, we are now ready to begin the question and answer session.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. And the first question will come from Connor Mitchell with Piper Sandler. Please go ahead.