Community Healthcare Trust Incorporated

Welcome to Community Healthcare Trust's 2026 first quarter earnings release conference call. On the call today, the company will discuss its 2026 first 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, May 6th, 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 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 a 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 Dupuy, CEO of Community Healthcare Trust.

Great. Thank you very much. Good morning, everyone. And thank you for joining us today for the 2026 First 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 quarterly report on Form 10Q. In addition, an updated investor presentation was posted to our website last night. During the first quarter, the Geriatric Behavioral Hospital Operator, a tenant in six of the company's properties, paid rent of approximately $300,000, an increase of $100,000 over the last quarter. On July 17th, 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. 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. We continue to maintain frequent, productive communication with the buyer's team to advance the closing process. While the transaction is progressing, we can't provide specific timing or certainty that it will close. However, we remain committed to providing further updates as the process moves forward. We had a busy first quarter from both an operations and a capital recycling perspective and continue to be selective from an acquisition standpoint. Our occupancy decreased from 90.6% to 89.8% during the quarter due to lease terminations. However, our leasing team is very busy with renewals and new leasing activity, and we expect leased occupancy to grow next quarter. Our weighted average lease term increased slightly from 7 to 7.1 years, and our asset management team continues to do a great job serving our tenants while focusing on property operating costs. We have three properties that are undergoing redevelopment for significant renovations with long-term tenants in place once the redevelopment or renovations are complete. The largest of these projects, a behavioral health care facility, received its certificate of occupancy in March. Due to healthcare licensure requirements, we expect this property to commence its lease and contribute NOI during the third quarter of 2026. During the first quarter, we acquired an inpatient rehabilitation facility after completion of construction for a purchase price of $28.5 million. We entered into a new lease with a lease expiration in 2044 and anticipated annual return of approximately 9.3%. We also have signed definitive purchase and sale agreements for four properties to be acquired after completion and occupancy for an aggregate expected investment of $99 million. The expected return on these investments should range from 9.1 to 9.75%. We expect to close on two of these properties in the second half of 2026 and the remaining two in the second half of 2027. In February, we sold one building in Fort Myers, Florida and received net proceeds of approximately $5.2 million, resulting in a small loss on the property sale. We also received net proceeds of approximately $700,000 from the disposition of a property at the end of 2025. We did not issue any shares under our ATM last quarter. However, we continue to evaluate capital recycling opportunities and we would anticipate having sufficient capital from selected asset sales, coupled with our revolver availability, to fund near-term acquisitions. Going forward, we will evaluate the best uses of our capital, all while maintaining modest leverage levels. To wrap up, we declared our first quarter dividend and raised it to 48 cents per common share. This equates to an annualized dividend of $1.92 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 first quarter financial performance. I'm pleased to report total revenue grew from $30.1 million in the first quarter of 2025 to $31.5 million in the first quarter of 2026, representing 4.8% annual growth over the same period last year. On a quarter-over-quarter basis, total revenue grew 1.9%, primarily from higher rental income from our recent acquisitions and higher property operating expense recoveries, partially offset by recent capital recycling dispositions and net leasing activity. Moving to expenses, property operating expenses increased by approximately $360,000 quarter over quarter to $6.4 million for the first quarter of 2026. This increase was a result of seasonally higher snowplow and utility expense at several properties that we typically see in January and February in particular. Total general and administrative expense was $5.1 million in the first quarter of 2026. which was approximately $330,000 higher quarter over quarter, primarily as a result of higher non-cash amortization of deferred compensation and our typical first quarter adjustments due to the timing of annual employee salary increases, employer HSA and 401k contributions, and employer tax payments. On a year-over-year basis, G&A did not increase from the same $5.1 million in the first quarter of 2025. Interest expense decreased by $160,000 quarter over quarter to $6.8 million in the first quarter of 2026 due to two less days in the first quarter and slightly lower floating rates on our revolving credit facility. I'll note that we expect our second quarter interest expense to be higher, however, based on an additional day in the second quarter full quarter of our current revolver balance, which includes net borrowings from our inpatient rehabilitation facility acquisition in February, and the expiration in late March of $75 million of interest rate hedges. Moving to funds from operations, FFO in the first quarter of 2026 was $13.4 million, a 5.8% increase year over year compared to the $12.7 million of FFO in the first quarter of 2025. On a diluted common share basis, FFO increased two cents year over year from 47 cents in the first quarter of 2025 to 49 cents in the first quarter of 2026 and remained the same quarter over quarter from the 49 cents of FFO in the fourth quarter of 2025. Adjusted funds from operation for AFFO, which adjusts for straight line rents and stock-based compensation, totaled $15.4 million in the first quarter of 2026, a 4.1% increase year-over-year compared to the $14.7 million of AFFO in the first quarter of 2025. AFFO on a diluted common share basis was 56 cents in the first quarter of 2026, which was one cent higher both year-over-year and quarter-over-quarter from the 55 cents of AFFO in the first quarter first quarter of 2025 and the fourth quarter of 2025, respectively. That concludes our prepared remarks. Dorwin, we are now ready to begin the question and answer session.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone 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 two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.