Community Healthcare Trust Inc (CHCT)
SIC breadcrumb: Finance, Insurance, And Real Estate > Holding And Other Investment Offices > SIC 6798 Real Estate Investment Trusts
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1631569. Latest filing source: 0001631569-26-000012.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 121,195,000 | USD | 2025 | 2026-02-17 |
| Net income | 5,102,000 | USD | 2025 | 2026-02-17 |
| Assets | 990,757,000 | USD | 2025 | 2026-02-17 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-17. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001631569.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 25,197,000 | 37,276,000 | 48,557,000 | 60,849,000 | 75,684,000 | 90,579,000 | 97,679,000 | 112,845,000 | 115,786,000 | 121,195,000 | |
| Net income | 2,721,000 | 3,510,000 | 4,403,000 | 8,376,000 | 19,077,000 | 22,492,000 | 22,019,000 | 7,714,000 | -3,181,000 | 5,102,000 | |
| Diluted EPS | 0.24 | 0.19 | 0.19 | 0.37 | 0.80 | 0.87 | 0.81 | 0.20 | -0.23 | 0.08 | |
| Operating cash flow | 14,929,000 | 22,127,000 | 24,441,000 | 32,362,000 | 48,370,000 | 56,348,000 | 60,280,000 | 61,383,000 | 58,881,000 | 56,430,000 | |
| Dividends paid | 17,783,000 | 24,432,000 | 29,375,000 | 31,947,000 | 38,034,000 | 42,406,000 | 44,485,000 | 48,059,000 | 51,698,000 | 53,669,000 | |
| Assets | 142,803,000 | 385,766,000 | 426,570,000 | 562,531,000 | 668,402,000 | 754,233,000 | 876,425,000 | 945,412,000 | 992,563,000 | 990,757,000 | |
| Liabilities | 20,533,000 | 102,392,000 | 154,911,000 | 209,120,000 | 238,486,000 | 292,121,000 | 379,611,000 | 432,156,000 | 516,598,000 | 561,370,000 | |
| Stockholders' equity | 194,007,000 | 283,374,000 | 271,659,000 | 353,411,000 | 429,916,000 | 462,112,000 | 496,814,000 | 513,256,000 | 475,965,000 | 429,387,000 | |
| Cash and cash equivalents | 2,018,000 | 2,130,000 | 2,007,000 | 1,730,000 | 2,483,000 | 2,351,000 | 11,233,000 | 3,491,000 | 4,384,000 | 3,340,000 |
Ratios
| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | 10.80% | 9.42% | 9.07% | 13.77% | 25.21% | 24.83% | 22.54% | 6.84% | -2.75% | 4.21% | |
| Return on equity | 1.40% | 1.24% | 1.62% | 2.37% | 4.44% | 4.87% | 4.43% | 1.50% | -0.67% | 1.19% | |
| Return on assets | 0.91% | 1.03% | 1.49% | 2.85% | 2.98% | 2.51% | 0.82% | -0.32% | 0.51% | ||
| Liabilities / equity | 0.36 | 0.57 | 0.59 | 0.55 | 0.63 | 0.76 | 0.84 | 1.09 | 1.31 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001631569.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q2 | 2022-06-30 | 0.21 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | 0.21 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | -0.32 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 27,810,000 | 6,577,000 | 0.24 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 28,735,000 | 3,492,000 | 0.11 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 29,124,000 | 4,567,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 29,333,000 | 3,665,000 | 0.11 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 27,516,000 | -10,427,000 | -0.42 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 29,639,000 | 1,749,000 | 0.04 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 29,298,000 | 1,832,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 30,078,000 | 1,591,000 | 0.03 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 29,085,000 | -12,557,000 | -0.50 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 31,086,000 | 1,640,000 | 0.03 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 30,946,000 | 14,428,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 31,524,000 | 2,548,000 | 0.07 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001631569-26-000026.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Disclosure Regarding Forward-Looking Statements
This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believes”, “expects”, “may”, "will', “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates” or other similar words or expressions, including the negative thereof. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Because forward-looking statements relate to future events, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. Thus, the Company’s actual results and financial condition may differ materially from those indicated in such forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, changes in the real estate industry in general, interest rates or the general economy, adverse developments related to the healthcare industry, changes in governmental regulations, the degree and nature of the Company’s competition, the ability to consummate acquisitions under contract, catastrophic or extreme weather and other natural events and the physical effects of climate change, the occurrence of cyber incidents, effects on global and national markets as well as businesses resulting from increased inflation, changes in interest rates, supply chain disruptions, labor conditions, prolonged government shutdown or budgetary reductions or impasses, tariffs and global trade tensions, and/or conflicts in Ukraine and the Middle East, and other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, and the Company’s other filings with the Securities and Exchange Commission from time to time. Readers are therefore cautioned not to place undue reliance on the forward-looking statements contained herein which speak only as of the date hereof. The Company intends these forward-looking statements to speak only as of the time of this report and 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.
The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and cash. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Condensed Consolidated Financial Statements and accompanying notes.
Overview
References such as "we," "us," "our," and "the Company" mean Community Healthcare Trust Incorporated, a Maryland corporation, and its consolidated subsidiaries.
We were organized in the State of Maryland on March 28, 2014. We are a self-administered, self-managed healthcare real estate investment trust, or REIT, that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers.
Trends and Matters Impacting Operating Results
Management monitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.
22
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Asset Acquisitions
During the first three months of 2026, the Company acquired one inpatient rehabilitation facility totaling approximately 37,000 square feet for an aggregate purchase price and cash consideration of approximately $28.5 million. The property was 100.0% leased with a lease expiration in 2044. The acquisition was funded with net proceeds from the Company's Revolving Credit Facility and from asset sales. See Note 4 – Real Estate Acquisition, Disposition, and Asset Held for Sale to the Condensed Consolidated Financial Statements for more details on this acquisition.
Acquisition Pipeline
The Company has four properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $99.0 million. The Company anticipates closing on these properties throughout 2026 and 2027; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company expects to fund these acquisitions with cash from operations, with net proceeds from equity or debt issuances, with the Company's Revolving Credit Facility, or from asset sales.
Asset Dispositions
During the first quarter of 2026, the Company disposed of a building in Florida, classified as an asset held for sale, received net proceeds of approximately $5.2 million, and recognized an immaterial loss on the sale. The Company also received net cash proceeds of approximately $0.7 million for a property disposed of during the fourth quarter of 2025.
Leased Square Footage
As of March 31, 2026, our real estate portfolio was approximately 89.8% leased. During the first three months of 2026, we had expiring or terminated leases related to approximately 176,000 square feet, and we leased or renewed leases relating to approximately 136,000 square feet.
Purchase Option Provisions
Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property. The purchase option provisions generally allow the lessee to purchase the leased property at fair value or at an amount greater than the Company's gross investment in the leased property at the time of the purchase. At March 31, 2026, the Company had an aggregate gross investment of approximately $42.0 million in 13 real estate properties with purchase options exercisable at March 31, 2026 that had not been exercised.
Interest Expense
On March 29, 2026, the Company's interest rate swaps that had fixed the interest rate on $75.0 million of its Revolving Credit Facility balance matured. The Company has not entered into new interest rate swaps to fix the interest rate on the $75.0 million, and it will be under a floating rate. The floating rate for the Revolving Credit Facility at March 31, 2026 was approximately 5.3%. See Note 5 – Debt, net and Note 6 – Derivative Financial Instruments for more details on the Company's debt and interest rate swaps.
Inflation
Inflation has significantly increased during the past several years and a prolonged period of high and persistent inflation could cause an increase in our expenses, capital expenditures, and cost of our variable-rate borrowings which could have a material impact on our financial position or results of operations. Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in 2022 and 2023, however, the Federal Reserve lowered interest rates in 2024 and 2025, and may provide additional rate changes during 2026. Higher interest rates may adversely impact real estate asset values and increase our interest expense on our variable-rate borrowings under our revolving credit facility.
23
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Results of Operations
The Company's results of operations for the three months ended March 31, 2026 compared to the same period in 2025 were impacted by real estate acquisitions and dispositions, and interest expense, as well as other items discussed in more detail below.
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Revenues
Rental income increased approximately $1.5 million, or 5.2%, for the three months ended March 31, 2026 compared to the same period in 2025 due mainly to the following:
•Acquisitions of properties during 2025 and 2026 resulted in an increase in rental income of approximately $2.1 million in 2026 compared to 2025;
•Rental income related to the geriatric behavioral hospital tenant resulted in an increase in revenues of approximately $0.2 million for the three months ended March 31, 2026 as compared to the same period in 2025; offset partially by
•Dispositions of properties during 2025 and 2026 resulted in a decrease in rental income of approximately $0.6 million in 2026 compared to 2025;
•In the second quarter of 2025, the Company extended a lease with a tenant upon its expiration which converted it from an operating lease to a sales-type lease, resulting in a decrease in rental revenue of approximately $0.1 million for the three months ended March 31, 2026 compared to the same period in 2025; and
•The remaining $0.1 million decrease resulted from net leasing activities.
Other operating interest decreased approximately $0.1 million for the three months ended March 31, 2026 compared to the same period in 2025 due mainly to a loan maturity in 2025.
Expenses
Property operating expenses increased approximately $0.3 million, or 4.5%, for the three months ended March 31, 2026 compared to the same period in 2025 due mainly to the following:
•Property tax expense resulted in an increase of approximately $0.2 million;
•Utilities expenses increased approximately $0.1 million;
•Landscaping expenses, including snow plow expenses increased approximately $0.1 million; and
•A reduction of expenses totaling approximately $0.1 million due to properties sold during 2026 and 2025.
Depreciation and amortization expense decreased by approximately $0.3 million, or 2.6%, for the three months ended March 31, 2026 compared to the same period in 2025 impacted by the following:
•Fully amortized real estate lease intangibles which generally have a shorter depreciable life than a building resulted in a decrease of approximately $0.6 million;
•Depreciation and amortization on real estate sold during 2026 and 2025 resulted in a decrease of approximately $0.3 million; offset partially by
•Depreciation and amortization on real estate acquired during 2026 and 2025 resulted in an increase of approximately $0.4 million; and
24
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
•Depreciation on tenant and other capital improvements resulted in an increase of approximately $0.2 million.
Interest expense
Interest expense increased approximately $0.4 million, or 7.0%, for the three months ended March 31, 2026 compared to the same period in 2025 due mainly to an increase i
[Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and liquidity. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Consolidated Financial Statements and accompanying notes.
Overview
We were organized in the State of Maryland in March 2014 and began operations upon the completion of our initial public offering in May 2015. We are a self-administered, self-managed healthcare REIT that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers.
Trends and Matters Impacting Operating Results
Management monitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.
Real estate acquisitions
During the year ended December 31, 2025, the Company acquired three real estate properties for an aggregate purchase price of approximately $64.5 million. Upon acquisition, the properties, totaling approximately 113,000 square feet, were 100.0% leased in the aggregate with lease expirations through 2040.
Real estate dispositions and Assets Held for Sale
During the year ended December 31, 2025, the Company disposed of five properties. The Company received net proceeds of approximately $32.9 million, including $0.7 million where cash was received subsequent to December 31, 2025, and recognized a net gain on sales, net of losses and impairments, totaling approximately $11.6 million.
Additionally, during the second quarter of 2025, the Company amended an operating lease on a property that resulted in a sales-type lease. As such, the Company reclassified the net book value of the real estate totaling $3.7 million to a net lease investment in other assets on the Condensed Consolidated Balance Sheet and recognized a gain on sale totaling approximately $1.3 million (see Sales-type leases in Note 3 – Real Estate Leases in the Consolidated Financial Statements for more details).
The Company has one property with a carrying balance of $5.3 million classified as held for sale at December 31, 2025. During the year ended December 31, 2025, the Company recorded impairment charges of $1.1 million on this property. See Note 4 – Real Estate Acquisitions, Dispositions, and Assets Held for Sale in the Consolidated Financial Statements for more details.
Acquisition pipeline
The Company has five properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $122.5 million. The Company's expected returns on these investments are approximately 9.1% to 9.75%. The Company anticipates closing on one of these properties in the first quarter of 2026 with the remainder throughout 2026 and 2027; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
Leased square footage
As of December 31, 2025, our real estate portfolio was approximately 90.6% leased, excluding the real estate asset held for sale. During the year ended December 31, 2025, we had expiring or terminated leases related to approximately 712,000 square feet, and we leased or renewed leases related to approximately 683,000 square feet.
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Purchase Option Provisions
Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property. The purchase option provisions generally allow the lessee to purchase the leased property at fair value or at an amount greater than the Company's gross investment in the leased property at the time of the purchase. The Company had an aggregate gross investment of approximately $42.0 million in 13 real estate properties as of December 31, 2025 that were subject to exercisable purchase options.
Lease Expirations
Approximately 6.1% to 9.0% of our leases (based on annualized rent) will expire in each of the next 5 years. Management expects that many of the tenants will renew their leases, but in cases where they do not renew, the Company believes it will generally be able to re-lease the space to existing or new tenants without significant loss of rental income. See "Properties" in Item 2 for a schedule of the Company's lease expirations.
Inflation
Inflation has significantly increased during the past several years and a prolonged period of high and persistent inflation could cause an increase in our expenses, capital expenditures, and cost of our variable-rate borrowings which could have a material impact on our financial position or results of operations. Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in 2022 and 2023, however, the Federal Reserve lowered interest rates in 2024 and 2025, and may provide additional rate changes during 2026. Higher interest rates may adversely impact real estate asset values and increase our interest expense on our variable-rate borrowings under our revolving credit facility.
Credit Loss on Loans and Interest Receivables
During the second quarter of 2025, the Company recorded reserves, fully reserving its notes and interest with a geriatric inpatient behavioral hospital tenant, totaling approximately $8.7 million on its notes and approximately $1.7 million of interest receivables. See Note 1 – Summary of Significant Accounting Policies and Note 10 – Other Assets, net to the Condensed Consolidated Financial Statements for more details on these reserves.
Accelerated Amortization of Restricted Stock and Restricted Stock Units
The Company's former Executive Vice President, Asset Management was terminated effective May 31, 2025. In accordance with his employment agreement, his unvested restricted shares totaling 198,015 shares vested and his unvested restricted stock units totaling 18,275 units vested at target upon termination. As such, upon termination and vesting of these shares, the Company accelerated the unamortized remaining balance of his deferred compensation at May 31, 2025 and recognized $4.6 million of amortization expense. Also, the Company recognized severance and transition expense totaling approximately $1.3 million.
Interest Expense
At December 31, 2025, the Company had fixed the $275.0 million outstanding under the Term Loans and $75.0 million of its Revolving Credit Facility which had an aggregate fixed weighted average interest rate under the swaps of approximately 4.7% and 3.8%, respectively. These swaps that fix the interest rates on the Revolving Credit Facility mature in March 2026. If the Company does not enter into new interest rate swaps, the interest on this $75.0 million will be under a floating rate. The floating rate for the unhedged portion of the Revolving Credit Facility at December 31, 2025 was approximately 5.4%. See Note 5 – Debt, net and Note 6 – Derivative Financial Instruments for more details on the Company's debt and interest rate swaps.
54
Results of Operations
The Company's consolidated results of operations for 2025 compared to 2024 were significantly impacted by acquisitions, including depreciation and amortization on our real estate portfolio, asset dispositions, leasing activities, collectibility of lease payments, notes receivable and related interest, interest expense, and general and administrative expenses, including severance and the accelerated amortization of stock-based compensation upon the termination our former Executive Vice President, Asset Management in 2025.
Year Ended December 31, 2025 Compared to December 31, 2024
Revenues
Rental income increased approximately $6.8 million, or 5.9%, for the year ended December 31, 2025 compared to the same period in 2024 due mainly to the following:
•Income on properties acquired during 2025 and 2024 increased rental income by approximately $5.4 million;
•Rental income related to tenants on cash basis increased by approximately $0.9 million for the twelve months ended December 31, 2025 as compared to the same period in 2024, mainly due to the non-cash write-off of straight-line rent in 2024 for the geriatric inpatient behavioral hospital tenant accrued prior to 2024; partially offset by
•Properties sold during 2025 and 2024 resulted in a decrease in rental income of approximately $1.1 million, including $0.4 million related to a lease that was converted from an operating lease to a sales-type lease in 2025;
•A net decrease in the allowance for doubtful accounts for 2025 compared to 2024 totaling approximately $0.2 million; and
•The remaining $1.8 million net increase resulted from annual rent increases, net leasing activities, including the rent commencement of leases previously under construction and various other items.
Other operating interest decreased approximately $1.4 million, or 112.8%, for the year ended December 31, 2025 compared to the same period in 2024 due mainly to the following:
•A reduction in interest totaling $1.5 million due to reserving interest on notes in 2025 with a geriatric behavioral hospital borrower/tenant in six properties, net of cash collections differences in 2025 compared to 2024 for that borrower/tenant;
•A reduction in interest totaling $0.3 million due to amortizing payments on notes receivable; offset partially by
•An increase in interest of approximately $0.4 million from interest on a new note entered into during 2024, as well as interest on a financing and sales-type leases.
Expenses
Property operating expenses increased approximately $0.8 million, or 3.5%, for the year ended December 31, 2025 compared to the same period in 2024 due mainly to the following:
•Property operating expenses on properties acquired during 2025 and 2024 resulted in an increase of approximately $0.4 million;
•Utilities expenses (on a same store basis) increased approximately $0.3 million;
55
•Landscaping expenses, including snow plow expenses, (on a same store basis) increased approximately $0.2 million; and
•Property insurance expenses (on a same store basis) increased approximately $0.1 million; offset partially by
•A reduction of expenses totaling approximately $0.2 million due to properties sold during 2025 and 2024.
General and administrative expenses increased approximately $6.0 million, or 31.7%, for the year ended December 31, 2025 compared to the same period in 2024 due mainly to the following:
•On May 31, 2025, the Company terminated its former Executive Vice President of Asset Management. Upon termination, unvested shares of restricted stock and restricted stock units vested in accordance with the terms of his employment agreement, and the Company accelerated the unamortized remaining balance of deferred compensation and recognized approximately $4.6 million of non-cash amortization expense. Additionally, the Company recognized approximately $1.3 million of severance and transition-related expenses; and
•Compensation expense increased approximately $0.5 million for the twelve months ended December 31, 2025 compared to the same period in 2024, partially related to a $0.3 million increase to non-cash amortization of stock-based compensation; offset partially by
•A decrease in professional fees of $0.3 million for the twelve months ended December 31, 2025 compared to the same period in 2024.
Depreciation and amortization expense increased approximately $0.8 million, or 1.8%, for the year ended December 31, 2025 compared to the same period in 2024 due mainly to the following:
•Depreciation and amortization related to properties acquired during 2025 and 2024 accounted for an increase of approximately $1.8 million;
•Tenant improvements and other capital expenditures resulted in an increase of approximately $2.0 million; partially offset by
•Properties that were sold or classified as held for sale during 2024 and 2025 resulted in a decrease of approximately $0.4 million;
•Fully amortized land and building improvements resulted in a decrease of approximately $0.7 million; and
•Real estate intangible assets acquired prior to 2024 that became fully depreciated resulted in a decrease of approximately $1.9 million;
Gains on the sales of depreciable real estate assets, net of losses and impairments
Gains on the sales of depreciable real estate assets, net of losses and impairments increased by approximately $11.9 million for the year ended December 31, 2025 compared to the same period in 2024. This increase was due mainly to the following:
•During 2025, the Company sold five properties and recognized a net gain on sale, net of losses, totaling approximately $11.6 million;
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•During 2025, the Company amended a lease with a tenant and converted it from an operating lease to a sales-type lease. The Company recognized a gain on sale of the real estate totaling approximately $1.3 million;
•As of December 31, 2025, the Company had a property classified as held for sale and recorded impairments on the property during 2025 at the lower of its net book value and fair value less estimated cost to sell of approximately $1.1 million; and
•During 2024, the Company sold two properties and a land parcel and recognized losses, net of gains, totaling approximately $0.1 million.
Interest expense
Interest expense increased approximately $3.3 million, or 13.8%, for the year ended December 31, 2025 compared to the same period in 2024. Contractual interest due under the Credit Facility increased $3.4 million due to: (i) a pricing grid increase on hedged debt in the fourth quarter of 2024 due to increased leverage ratio, and (ii) a higher weighted average balance on the Revolving Credit Facility in 2025 compared to 2024. See Note 5 – Debt, net to the Consolidated Financial Statements. Also, a mortgage note payable on a property was repaid during 2024, which results in a decrease to interest expense of $0.1 million in 2025 compared to 2024.
Credit loss reserve
Credit loss reserves totaling $8.7 million and $11.0 million, respectively, were recorded during 2025 and 2024, related to notes receivable with a geriatric inpatient behavioral hospital borrower/tenant, fully reserving these notes in 2025. See Note 10 – Other Assets, net in the Consolidated Financial Statements for more details on these notes and the credit loss reserves.
Interest and other income
Interest and other income decreased approximately $0.5 million for the year ended December 31, 2025 compared to the same period in 2024. Interest and other income for 2024 included an undistributed allowance for tenant improvements totaling $0.3 million for a lease that expired and $0.2 million of earnest money on a terminated contract for a property held for sale.
Year Ended December 31, 2024 Compared to December 31, 2023
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in our 2024 Annual Report on Form 10-K for a comparison of the year ended December 31, 2024 compared to December 31, 2023, which is incorporated by reference.
Liquidity and Capital Resources
The Company monitors its liquidity and capital resources and relies on several key indicators in its assessment of capital markets for financing acquisitions and other operating activities as needed, including the following:
•leverage ratios and financial covenants included in our Credit Facility;
•dividend payout percentage; and
•interest rates, underlying treasury rates, debt market spreads and equity markets.
The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.
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Sources and Uses of Cash
The Company derives most of its revenues from its real estate properties, collecting rental income and operating expense reimbursements based on contractual arrangements with its tenants. These sources of revenue represent our primary source of liquidity to fund our dividends, general and administrative expenses, property operating expenses, interest expense on our Credit Facility and other expenses incurred related to managing our existing portfolio and investing in additional properties. To the extent additional resources are needed, the Company will fund its investment activity generally with net proceeds from equity or debt issuances, including our at-the-market equity offering program, either in the public or private markets, from our Credit Facility, or from asset sales.
The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.
Operating Activities
Cash flows provided by operating activities for the years ended December 31, 2025, 2024 and 2023 were approximately $56.4 million, $58.9 million, and $61.4 million, respectively. Cash flows provided by operating activities for the years ended December 31, 2025, 2024 and 2023 were generally provided by contractual rents and interest on notes receivables, net of property operating expenses not reimbursed by the tenants, general and administrative expenses, and interest expense.
Investing Activities
Cash flows used in investing activities for the years ended December 31, 2025, 2024 and 2023 were approximately $47.7 million, $92.7 million, and $113.7 million, respectively.
•During 2025, the Company invested in three real estate properties for cash consideration of approximately $64.6 million, and received net proceeds of approximately $32.2 million in the aggregate during 2025 for the sale of four properties, which excludes net proceeds of approximately $0.7 million received subsequent to December 31, 2025 for a fifth property sold in 2025. During 2024, the Company invested in nine real estate properties for an aggregate cash consideration of approximately $72.4 million, and sold two properties and a land parcel, for net proceeds of approximately $2.3 million. During 2023, the Company invested in 19 real estate properties and a land parcel for an aggregate cash consideration of approximately $98.9 million.
•During 2024 and 2023, the Company funded notes receivable of approximately $3.1 million, and $2.0 million, respectively, and received payments on notes receivable in 2025, 2024 and 2023 of approximately $5.2 million, $5.1 million, and $3.9 million, respectively.
•The Company funded capital expenditures, including tenant improvements, during 2025, 2024 and 2023 totaling approximately $20.5 million, $24.6 million, and $19.0 million, respectively.
•During 2023, the Company received insurance proceeds from a casualty loss of approximately $2.3 million.
Financing Activities
Cash flows used in financing activities for the year ended December 31, 2025 were $9.8 million and cash flows provided by financing activities for the years ended December 31, 2024 and 2023 were approximately $33.5 million and $44.9 million, respectively.
•During 2025, 2024 and 2023, the Company borrowed, on a net basis, $46.0 million, $162.0 million, and $50.0 million, respectively, on its Revolving Credit Facility.
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•During 2024, the Company amended its Credit Facility to increase its Revolver limit and extend maturity, repaid $75.0 million in Term Loans under its Credit Facility, and incurred $3.4 million in additional debt issuance costs.
•During 2025, 2024 and 2023, the Company paid dividends totaling approximately $53.7 million, $51.7 million and $48.1 million, respectively.
•During 2024 and 2023, the Company completed equity offerings under its at-the-market program, resulting in net proceeds, net of underwriters' discount and offering costs, of approximately $7.3 million and $44.0 million, respectively.
•During 2024 and 2023, the Company had mortgage note repayments totaling approximately $4.8 million and $0.1 million, respectively.
•During 2025, 2024 and 2023, the Company withheld shares and paid taxes totaling approximately $1.8 million, $0.8 million, and $1.0 million upon the vesting of stock-based awards for certain employees.
Universal Shelf Registration Statement
On February 19, 2025, the Company filed a new non-automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission which became effective on March 14, 2025. The registration statement is for $500.0 million of securities and is effective for three years. Under this registration statement, the Company has the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock, depository shares, rights, debt securities, warrants and units.
ATM Program
Under the ATM Program, the Company may issue and sell shares of its common stock, having an aggregate gross sales price of up to $300.0 million, exclusive of shares of common stock sold under its prior agreements with our Agents. The shares of common stock may be sold from time to time through or to one or more of the Agents, as may be determined by the Company in its sole discretion, subject to the terms and conditions of the third amended and restated sales agency agreement and applicable law. In addition, the Company may enter into one or more forward sales agreements under the ATM Program. As of December 31, 2025, the Company had $300.0 million remaining that may be issued under the ATM Program. See Note 7 – Stockholders' Equity to the Consolidated Financial Statements for more detail on the ATM Program.
Security Deposits
As of December 31, 2025, the Company held approximately $2.6 million in security deposits, included in other liabilities, on the Consolidated Balance Sheet, for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon the security deposits if there are any defaults under the leases.
Credit Facility
The Company's third amended and restated credit agreement, as amended (the "Credit Facility") provides for a $400.0 million revolving credit facility (the "Revolving Credit Facility") and $275.0 million in term loans (the "Term Loans"), as well as an accordion feature which allows borrowings up to a total of $875.0 million, including the ability to add and fund additional term loans. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans and the portion of the Revolver balance that was used to repay a Term Loan. Note 5 – Debt, net and Note 6 – Derivative Financial Instruments to the Consolidated Financial Statements provide more detail on the Company's debt and interest rate swaps. At December 31, 2025, the Company had borrowing capacity remaining under the Revolving Credit Facility of approximately $142.0 million.
The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial
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maintenance covenants. The Company was in compliance with its financial covenants under its Credit Facility as of December 31, 2025.
Ground Leases
At December 31, 2025, the Company was obligated, as the lessee, under four non-prepaid ground leases accounted for as operating leases with expiration dates through 2076, including renewal options, and two non-prepaid ground leases accounted for as a financing lease with an expiration date through 2109, including renewal options. Any rental increases related to the Company's ground leases are generally either stated or based on the Consumer Price Index. At December 31, 2025, the Company's aggregate obligation under these ground leases was approximately $8.5 million. See Note 3 – Real Estate Leases to the Consolidated Financial Statements.
Acquisition Pipeline
The Company has five properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $122.5 million. The Company's expected returns on these investments are approximately 9.1% to 9.75%. The Company anticipates closing on one of these properties in the first quarter of 2026 with the remainder throughout 2026 and 2027; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.
The Company anticipates funding these investments with cash from operations, from net proceeds from equity or debt issuances, from our Credit Facility, or from asset sales.
Asset Disposition
On February 12, 2026, the Company sold the property classified as an asset held for sale at December 31, 2025 and received net proceeds of approximately $5.2 million.
Tenant Improvements and Capital Improvements
The Company may provide tenant improvement allowances in new or renewal leases for the purpose of refurbishing or renovating tenant space. The Company may also assume tenant improvement obligations included in leases acquired in its real estate acquisitions. As of December 31, 2025, the Company had approximately $28.8 million in commitments for tenant improvements. Three of these projects, with remaining obligations totaling approximately $8.0 million as of December 31, 2025, represent redevelopment projects of the buildings into different healthcare uses backed by long term leases.
The Company has entered into contracts with various vendors for various capital improvement projects related to its portfolio. As of December 31, 2025, the Company had approximately $2.0 million in commitments for capital improvement projects; three of these projects totaling approximately $0.9 million, represent redevelopment projects of the buildings into different healthcare uses backed by long-term leases.
The Company anticipates funding these investments with cash from operations, or with net proceeds from equity or debt issuances, from our Credit Facility, or from asset sales.
Notes Receivable
The Company has one revolving credit facility with a tenant with an unfunded commitment remaining totaling approximately $5.8 million at December 31, 2025. See Note 10 – Other Assets, net to the Consolidated Financial Statements.
Dividends
The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT. The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments.
During 2025, 2024 and 2023, the Company paid cash dividends in the amounts of $1.885 per share, $1.845 per share and $1.805 per share, respectively.
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On February 12, 2026, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.4775 per share. The dividend is payable on March 4, 2026 to stockholders of record on February 23, 2026.
Non-GAAP Financial Measures and Key Performance Indicators
Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. The Company reports non-GAAP financial measures because these measures are observed by management to also be among the most predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these non-GAAP financial measures. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of those measures to the most directly comparable GAAP financial measure.
The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Consolidated Financial Statements and other financial data included elsewhere in this Annual Report on Form 10-K.
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")
FFO is an operating performance measure adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to net income (calculated in accordance with GAAP), excluding gains or losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, plus depreciation and amortization related to real estate properties, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT also provides REITs with an option to exclude gains, losses and impairments of assets that are incidental to the main business of the REIT from the calculation of FFO.
In addition to FFO, the Company presents AFFO and AFFO per share. The Company defines AFFO as FFO, excluding certain expenses related to closing costs of properties acquired accounted for as business combinations and mortgages funded, excluding straight-line rent and the amortization of stock-based compensation, and including or excluding other non-cash items from time to time. AFFO presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definition.
Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO, AFFO, FFO per share and AFFO per share provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, impairments and gains or losses from sales of real estate, losses and impairment of
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incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO, AFFO, FFO per share and AFFO per share can facilitate comparisons of operating performance between periods.
The table below reconciles net income to FFO and AFFO for the years ended December 31, 2025, 2024, and 2023.
Year Ended December 31,
(Amounts in thousands, except per share amounts)
2025
2024
2023
Net income (loss)
$
5,102
$
(3,181)
$
7,714
Depreciation and amortization
43,909
43,277
40,103
Credit loss reserve (1)
8,672
11,000
—
(Gains) on the sales of depreciable real estate assets, net of losses and impairments
(11,803)
121
102
Total adjustments
40,778
54,398
40,205
FFO
$
45,880
$
51,217
$
47,919
Straight-line rent
(3,721)
(1,942)
(3,052)
Stock-based compensation
10,305
9,987
8,166
Accelerated amortization of stock-based compensation (2)
4,591
—
11,799
Severance and transition-related expenses (2)
1,311
—
—
Net gain from insurance recovery on casualty loss
—
—
(706)
AFFO
$
58,366
$
59,262
$
64,126
FFO per diluted common share
$
1.69
$
1.91
$
1.86
AFFO per diluted common share
$
2.15
$
2.21
$
2.49
Weighted Average Common Shares Outstanding-Diluted (3)
27,117
26,843
25,752
____________________________
(1) During 2025 and 2024, the Company recorded credit loss reserves on its notes receivable with a geriatric inpatient behavioral hospital borrower/tenant totaling approximately $8.7 million and $11.0 million, respectively, where collectibility was not reasonably assured. The Company's notes receivable are considered incidental to the Company's main business, as such, the reserves are added back to FFO.
(2) During 2025, the Company recorded severance and transition-related charges totaling approximately $5.9 million, including non-cash accelerated amortization of stock-based compensation of approximately $4.6 million. Also, non-cash accelerated amortization of stock-based compensation totaling $11.8 million was recorded in 2023 upon the passing of the Company's former CEO.
(3) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share.
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Net Operating Income ("NOI")
NOI is a key performance indicator. NOI is defined as net income or loss, computed in accordance with GAAP, generated from our total portfolio of properties and other investments before general and administrative expenses, depreciation and amortization expense, gains or losses on the sale of real estate properties or other investments, interest expense, deferred income tax expense, and interest and other income, net. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. The Company's use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing NOI.
The table below reconciles net income to NOI for the years ended December 31, 2025, 2024, and 2023.
Year Ended December 31,
(In thousands)
2025
2024
2023
Net income (loss)
$
5,102
$
(3,181)
$
7,714
General and administrative (1)
19,193
19,058
15,539
Severance and transition related expenses
1,311
—
—
Accelerated amortization of stock-based compensation
4,591
—
11,799
Depreciation and amortization
43,538
42,778
39,693
Credit loss reserve
8,672
11,000
—
(Gains) on the sales of depreciable real estate assets, net of losses and impairments
(11,803)
121
102
Interest expense
26,978
23,706
17,792
Deferred income taxes
23
—
306
Interest and other income, net
(34)
(530)
(813)
NOI
$
97,571
$
92,952
$
92,132
____________________________
(1) General and administrative expenses for 2025 and 2023 exclude accelerated amortization of stock-based compensation and severance and transition related expenses, which are shown separately in the table.
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EBITDAre and Adjusted EBITDAre
The Company uses the NAREIT definition of EBITDAre which is net income plus interest expense, income tax expense, and depreciation and amortization, plus losses or minus gains on the disposition of depreciable property, including losses/gains on change of control, plus impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate, plus or minus adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates and consolidated affiliates with non-controlling interest. The Company also presents Adjusted EBITDAre which is EBITDAre before non-cash items, such as stock-based compensation expense and other such items.
We consider EBITDAre and Adjusted EBITDAre important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt.
The table below reconciles net income to EBITDAre and Adjusted EBITDAre for the years ended December 31, 2025, 2024, and 2023.
Year Ended December 31,
(In thousands)
2025
2024
2023
Net income (loss)
$
5,102
$
(3,181)
$
7,714
Interest expense
26,978
23,706
17,792
Depreciation and amortization
43,538
42,778
39,693
Deferred income tax expense
23
—
306
(Gains) on the sales of depreciable real estate assets, net of losses and impairments
(11,803)
121
102
EBITDAre
$
63,838
$
63,424
$
65,607
Non-cash stock-based compensation expense (1)
10,305
9,987
8,166
Credit loss reserve
8,672
11,000
—
Accelerated amortization of stock-based compensation
4,591
—
11,799
Net gain from insurance recovery on casualty loss
—
—
(706)
Adjusted EBITDAre
$
87,406
$
84,411
$
84,866
____________________________
(1) General and administrative expenses for 2025 and 2023 exclude accelerated amortization of stock-based compensation which are shown separately in the table.
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Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in conformity with GAAP and the rules and regulations of the SEC. In preparing the Consolidated Financial Statements, management is required to exercise judgment and make assumptions and estimates that may impact the carrying value of assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Set forth below is a summary of our accounting policies and estimates that we believe are critical to the preparation of our Consolidated Financial Statements. Our accounting policies are more fully discussed in Note 1 – Summary of Significant Accounting Policies to the Consolidated Financial Statements.
Principles of Consolidation
Our Consolidated Financial Statements may include the accounts of the Company, its wholly owned subsidiaries, joint ventures, partnerships and variable interest entities, or VIEs, where the Company controls the operating activities. All material intercompany accounts, transactions, and balances have been eliminated.
Management must make judgments regarding the Company's level of influence or control over an entity and whether or not the Company is the primary beneficiary of a variable interest entity. Consideration of various factors include, but is not limited to, the Company's ability to direct the activities that most significantly impact the entity's governing body, the size and seniority of the Company's investment, the Company's ability and the rights of other investors to participate in policy making decisions, the Company's ability to replace the manager and/or liquidate the entity. Management's ability to correctly assess its influence or control over an entity when determining the primary beneficiary of a VIE affects the presentation of these entities in the Company's Consolidated Financial Statements. If it is determined that the Company is the primary beneficiary of a VIE, the Company's Consolidated Financial Statements would consolidate the VIE rather than the Company's pro rata results of its variable interest in the VIE. The Company would depend on the VIE to provide timely financial information and would rely on the interest control of the VIE to provide accurate financial information. Untimely or inaccurate financial information provided to the Company or deficiencies in the VIE's internal controls over financial reporting could impact the Company's Consolidated Financial Statements and its internal control over financial reporting.
Accounting for Acquisitions of Real Estate Properties
Real estate property acquisitions are accounted for as a business combination or an asset acquisition. An acquisition accounted for as a business combination is recorded at fair value and related closing costs are expensed as incurred. An acquisition accounted for as an asset acquisition is recorded at its purchase price, inclusive of acquisition costs, which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date of acquisition. The Company expects that substantially all of its acquisitions will be accounted for as asset acquisitions.
The acquisition date fair values of the tangible and intangible assets and acquired liabilities are estimated based on information obtained from multiple sources as a result of pre-acquisition due diligence, tax records, and other sources, including third-party valuations. Based on these estimates, we recognize the acquired assets and liabilities based on their estimated fair values. We expense transaction costs associated with business combinations in the period incurred. The fair value of tangible property assets acquired considers the value of the property as if vacant and determined by a combination of comparable sales, replacement cost, income valuation approach and other relevant data. The determination of fair value involves the use of significant judgment and estimation. We value land based on various inputs, which may include internal analysis of recently acquired properties, existing comparable properties within our portfolio, or third party appraisals or valuations based on comparable sales.
In recognizing identified intangible assets and liabilities of an acquired property, the value of above- or below-market leases is estimated based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. In the case of a below-market lease, we also evaluate any renewal options associated with that lease to determine if the intangible should include those periods. The capitalized above-market or below-market lease
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intangibles are amortized as a reduction from or an addition to rental income over the estimated remaining term of the respective leases.
In determining the value of in-place leases and tenant relationships, we consider current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, we include real estate taxes, insurance, other property operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute similar leases, including leasing commissions. The values assigned to in-place leases and tenant relationships are amortized over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all unamortized costs related to that lease are written off.
Long-lived Asset Impairments
The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived assets, including real estate properties, whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable. Indicators of impairment may include significant under-performance of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a significant portion of leases in a property; or significant negative economic trends or negative industry trends for the Company or its operators. In addition, the Company’s review for possible impairment may include those assets subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes.
In addition, the Company assesses whether there were other indicators, including property operating performance, occupancy, changes in holding periods, and other market conditions, that would suggest that the value of the Company's investment may have been impaired.
If management determines that the carrying value of the Company’s assets may not be fully recoverable based on the existence of any of the factors above, or others, management would measure and record an impairment charge based on the estimated fair value of the property or the estimated fair value less costs to sell the property.
Revenue Recognition
The primary source of revenue for the Company is generated through its leasing arrangements with its tenants which is accounted for under Accounting Standards Codification Topic 842 ("ASC Topic 842"), or through notes with its borrowers which is covered under ASC 310. The Company's rental income and interest income are recognized based on contractual arrangements with its tenants and borrowers. From the inception of a lease, if collection of substantially all of the lease payments is probable for a tenant, then rental income is recognized as earned over the life of the lease agreement on a straight-line basis. Management's judgment is necessary if or when it determines that collection of substantially all of a lessee’s payments is not probable, upon which time, the Company will revert to recognizing such lease payments on a cash basis and will reverse any recorded receivables related to that lease. In the event that management subsequently determines collection of substantially all of that lease’s receivable is probable, management will reinstate and record all such receivables for the lease in accordance with the lease.
Allowance for Credit Losses
Credit losses on financial instruments are measured using an expected credit loss ("CECL") model in evaluating the collectability of notes receivable and other financial instruments. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future economic conditions in addition to information about past events and current conditions. Under the CECL model, the Company estimates credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument and is required to record a credit loss expense (or reversal) in each reporting period.
The Company evaluates factors such as its historical credit loss experience with the borrower or similar financial assets, current economic conditions, current and expected future financial condition of the borrower, as well as payment history of the borrower, along with other relevant factors for each borrower or similar instruments. If a sale of the borrower's collateral, such as the underlying business or real estate, is expected to repay amounts due to the Company, the Company will also evaluate the value of the underlying collateral in measuring any expected credit
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loss which may include, but is not limited to, the borrower's current or projected operating cash flows and financial performance, the borrower's ability to refinance the loan, market liquidity and/or other circumstances that could impact the borrower's ability to satisfy its obligations under its notes with the Company.
Use of Estimates in the Consolidated Financial Statements
Preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates.
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