Community Healthcare Trust Incorporated

Welcome to Community Health Care Trust's 2026 Third Quarter Earnings Release Conference Call. On the call today, the company will discuss its 2026 Third 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, November 4th, 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 and its earnings release as well as its risk factors and MNDA and 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 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 permission. Now, I would like to turn the call over to Dave Dupuy, CEO of Community Healthcare Trust. Over to you.

Great. Great. Thank you very much, Sagar. Good morning, and thank you for joining us for Community Healthcare Trust third quarter 2026 conference call. Joining me on the call today are Bill Monroe, our Chief Financial Officer, Leigh Ann Stach, our Chief Accounting Officer, and Mark Kearns, our SVP of Asset Management. Before we begin, I'd like to remind everybody that our earnings release and supplemental data report were released last night and furnished on Form 8-K, along with our quarterly report on Form 10-Q. In addition, an investor presentation was posted to our website last night. I would like to start with updates to our key strategic priorities designed to drive durable growth and elevate the overall quality of the portfolio, which are occupancy improvement, portfolio reinvestment through redevelopment and speculative suites, strategic capital recycling, and accelerated acquisition growth. Starting with occupancy improvement, we continue to see robust leasing activity across the portfolio. occupancy increased from 89.8% in the second quarter to 90.1% in the third quarter. Our leasing pipeline remains strong and the team is executing well as we work toward our target occupancy. Turning to portfolio reinvestment, we continue to advance our redevelopment projects on schedule. As noted last quarter, our behavioral hospital redevelopment in Lafayette, Louisiana commenced its lease early in the third quarter. We have three additional redevelopment projects currently under construction with completion expected late in the fourth quarter or early in the first quarter backed by long-term leases. Following receipt of certificates of occupancy and licensure, these leases are projected to commence late in the first quarter or early in the second quarter of 2027. Regarding our speculative suite program, we currently have one suite under construction one in permitting and three others in the design phase. These suites are strategically positioned in high demand buildings where tenants are actively seeking turnkey ready space. Proactively delivering these spaces allows us to capture prospective healthcare tenants faster, accelerating both occupancy gains and NOI realization. Our strategic capital recycling program remains active As highlighted in our press release, we successfully monetized one property in the third quarter and two additional properties in October, generating total net proceeds of $32.8 million. The largest transaction, an inpatient rehab facility, will result in a $9.1 million gain in the fourth quarter. We are executing this sale through a Section 1031 like-kind exchange, using the NEP proceeds to acquire another high quality inpatient rehab facility expected to close late in the fourth quarter. We currently have more than 30 million of properties actively marketed for disposition. These proceeds will fund our high quality, high yield acquisition pipeline while maintaining our discipline leverage profile. Finally, looking at acquisition growth, We have signed definitive purchase and sale agreements for four properties to be acquired upon completion and occupancy for an aggregate expected purchase price of $99 million. The expected return on these investments should range from 9.1 to 9.75%. We anticipate closing the first of these properties in the fourth quarter, a second in the first quarter of 27, and the remaining two between mid-27 and early 28. As visibility into our disposition pipeline solidifies, we are actively evaluating new acquisition candidates. While we do not have additional properties currently under contract, the market is offering compelling opportunities aligned with our quality and return objectives. We anticipate transaction activity to accelerate through 2027 as our disposition proceeds are realized and our retained capital continues to compound. Next, I'd like to walk through a few key operational updates from the third quarter. The geriatric behavioral hospital operator, which leases six of our properties, paid approximately $540,000 in rent this quarter, $170,000 increase over the second quarter. As previously noted, this tenant has signed a letter of intent with an experienced behavioral healthcare operator to acquire the operations of all six facilities. The prospective buyer is actively working through legal and business due diligence, negotiating definitive purchase agreements with the tenant, and finalizing new long-term leases for the six hospitals with CHCT. While the process has encountered multiple delays, the tenant and prospective buyer continue working collaboratively to resolve outstanding issues. We remain actively engaged with all parties and will provide further updates as appropriate regarding the transaction certainty. Given buyer's extended due diligence timeline alongside the tenant's improved operating performance, we are also proactively engaging with other parties who previously expressed an interest in buying the business. 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 third quarter and kept it steady at 33 cents per common share. This equates to an annualized dividend of $1.32 per share. That takes care of the items I wanted to cover, so I will hand things off to Bill to provide additional details on our financial results for the quarter.

Thank you, Dave. I will now provide more details on our third quarter financial performance, which was strong across the board in the result of early execution wins on our strategic plan announced last quarter. I'm pleased to report total revenue grew from $31.1 million in the third quarter of 2025 to $32.4 million in the third quarter of 2026, representing 4.4% annual growth over the same period last year. This growth was a combination of higher occupancy from leasing activity and acquisitions. When compared to our $31.2 million of total revenue in the second quarter of 2026, we achieved 3.9% total revenue growth quarter over quarter. Moving to expenses, property operating expenses increased by only approximately $100,000 quarter over quarter to $6 million for the third quarter of 2026, which is actually a smaller increase than we typically see during the summer from higher utility costs compared to the milder temperatures in the second quarter. Year over year basis, property operating expenses increased by less than $50,000 or less than 1% which demonstrates the strong cost management results our asset management team has achieved this year. Total general and administrative expense was $4.2 million in the third quarter of 2026 a significant reduction both quarter over quarter of approximately $700,000 and year over year of approximately $470,000. This G&A expense decline is the culmination of a number of actions we have taken, including changes we've previously made to reduce executive compensation and stock-based compensation, as well as fully amortized restricted stock. We expect to continue to see some quarterly fluctuation in G&A with our typical relatively higher Q1 and Q3 levels due to the timing of salary increases, tax and benefit payments, and bonuses, but we believe G&A will consistently be lower year over year for the next few quarters. Interest expense increased by less than $100,000 quarter over quarter to $7.5 million in the third quarter of 2026. We had no incremental borrowings under our revolving credit facility during the third quarter. And in fact, our leverage levels decreased by two tenths of a turn to 5.8 times. But interest expense increased slightly from both the one extra day of interest in the third quarter compared to the second quarter and FOMC decision in mid-September to raise interest rates by 25 basis points. Moving to funds from operations, FFO in the third quarter of 2026 was $15 million. a 10.4% increase year over year compared to the $13.5 million of FFO in the third quarter of 2025. On a diluted common share basis, FFO increased 4 cents from 50 cents in the third quarter of 2025 to 54 cents in the third quarter of 2026. FFO also increased 13.2% quarter over quarter or six cents from the $13.2 million or 48 cents per diluted common share in the second quarter of 2026. These increases are primarily the result of the higher revenues and lower expenses I discussed earlier. Adjusted funds from operations or AFFO, which adjusts for straight line rent and stock based compensation totaled $16 million in the third quarter of 2026. a 6.1% increase year over year compared to the $15.1 million of AFFO in the third quarter of 2025. AFFO on a diluted common share basis was 58 cents in the third quarter of 2026 or two cents higher than the 56 cents of AFFO in the third quarter of 2025. AFFO also increased 4% or 2 cents quarter over quarter from $15.4 million or 56 cents per diluted common share in the second quarter of 2026. That concludes our prepared remarks. Sagar, we are now ready to begin the question and answer session.