CHCT Reports Earnings

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Date

Wednesday, Feb. 18, 2026 at 10 a.m. ET

Call participants

• Chief Financial Officer — William G. Monroe
• Chief Accounting Officer — Leanne Stack
• Senior Vice President of Asset Management — David H. Dupuy

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Takeaways

• Total Revenue -- $30.9 million for the quarter, representing 5.6% annual growth, but a sequential decrease of $140,000 from the prior quarter due to capital recycling and asset dispositions.
• Occupancy -- Increased by 50 basis points in the portfolio for the quarter.
• Weighted Average Lease Term -- Increased from 6.7 years to 7 years during the quarter.
• Property Operating Expense -- Rose by less than $100,000 compared to the previous quarter, totaling $6 million.
• General and Administrative Expense -- Flat at $4.8 million, nearly unchanged quarter over quarter and year over year.
• Interest Expense -- Decreased by approximately $100,000 sequentially to $7 million, attributed to recent FOMC interest rate cuts.
• Funds From Operations (FFO) -- Increased to $13.3 million, up 4.6% year over year; FFO per diluted share was $0.49, up from $0.48 year over year but down $0.01 from the previous quarter.
• Adjusted Funds From Operations (AFFO) -- Totaled $14.9 million, a 2.1% increase year over year; AFFO per diluted share was $0.55, flat year over year but $0.01 lower sequentially.
• Net Gain on Sale of Assets -- $12.1 million in gains recognized during the year from capital recycling and asset dispositions.
• Inpatient Rehab Sale and 1031 Exchange -- Sold an inpatient rehab facility at an approximate 7.9% cap rate for an approximately $11.5 million gain, with $28.5 million of proceeds reinvested in a new facility producing an anticipated annual return of approximately 9.3% and a lease through 2040; this reduced the company’s largest tenant concentration.
• Annual Acquisitions -- Acquired three properties totaling 113,000 square feet for $64.5 million, all 100% leased with anticipated annual returns of 9.3%-9.5% and leases through 2040.
• Additional Dispositions and Capital Recycling -- Closed two property dispositions in the quarter and one in the first quarter, resulting in approximately $7.7 million of net proceeds.
• Forward Acquisition Commitments -- Signed purchase and sale agreements for five properties totaling an expected $122.5 million investment, with anticipated cap rates of 9.1%-9.75% and closings spread from the first quarter through 2027.
• ATM Program -- No shares issued in the quarter under the at-the-market equity program.
• Dividend Declared -- Raised to $0.4775 per common share for the quarter, annualized at $1.91 per share, continuing the record of quarterly increases since the IPO.
• Geriatric Behavioral Hospital Tenant Update -- Tenant paid $200,000 in rent, signed a letter of intent for a sale to a new operator, but the transaction's timing and certainty are not guaranteed; ongoing communication with the prospective buyer continues, with all six hospitals expected to transfer operations together.
• Leasing Pipeline -- Three properties under redevelopment or renovation, with the largest expected to commence rent in the third quarter after licensing is obtained, contributing to future earnings growth.
• Acquisition and Disposition Strategy -- The company aims to sequence purchases and sales to enable 1031 exchanges, targeting acquisitions without increasing leverage and using capital from asset sales and revolver capacity for near-term funding.

Summary

Community Healthcare Trust (NYSE:CHCT) delivered annual revenue growth with disciplined portfolio management, highlighting successful asset recycling and selective acquisitions. Management detailed a $122.5 million forward acquisition pipeline with targeted cap rates of 9.1%-9.75%, while maintaining leverage discipline and avoiding equity issuance through the ATM at current share price levels. The company reported steady operating expenses, incremental gains from disposals, and a consistent dividend increase, while actively managing tenant transitions and enhancing occupancy. No material deterioration in market cap rates was observed, and additional redevelopment projects are slated to provide embedded growth in the second half of the year.

• Management stated the dialysis clinic term sheet pipeline "is on the back burner" and not a near-term programmatic focus, though four clinics remain in the portfolio with a continued operator relationship.
• The company reiterated its focus on supporting longtime client relationships over brokered transactions given current share price and capital market conditions.
• The portfolio is expected to maintain occupancy in the "low nineties" for the next several quarters, with improvement anticipated in the second half of the year due to lease-ups and planned redevelopments.
• William G. Monroe confirmed that AFFO and FFO per share were lower by $0.01 sequentially due to asset disposition timing and related impacts on revenue and expenses.

Industry glossary

• 1031 Like-Kind Exchange: A tax-deferred real estate transaction allowing reinvestment of proceeds from a property sale into another qualifying property, deferring capital gains taxes.
• Cap Rate: A property yield metric calculated as the ratio of net operating income to property value, expressed as a percentage and used for comparing acquisition or sale returns.
• ATM Program: An at-the-market equity offering mechanism allowing a company to sell newly issued shares incrementally into the open market, typically to raise capital opportunistically.
• Client Business: Programmatic real estate acquisition activity driven by ongoing relationships with healthcare clients, as opposed to opportunistic or brokered transactions.

Full Conference Call Transcript

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 William G. Monroe, our Chief Financial Officer, Leanne Stack, our Chief Accounting Officer, and Mark Kearns, our

David H. Dupuy: Senior Vice President of Asset Management. Our earnings announcement and supplemental data report were released last night and furnished on Form 8-Ks along with our annual report on Form 10-Ks. 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 07/17/2025, 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 Community Healthcare Trust Incorporated. 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 cannot 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. We continue to be selective from an acquisition standpoint.

Our occupancy increased from 90.1% to 90% 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 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 $11,500,000, with net proceeds reinvested through a 1031 like-kind exchange into a new inpatient rehab facility for a purchase price of $28,500,000. 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 $64,500,000.

They 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 closed in the fourth quarter and one disposition closed in the first quarter, resulting in net proceeds of approximately $7,700,000. 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, an aggregate expected investment of $122,500,000.

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 2026 and the remaining two closing in 2027. We did not issue any shares under our ATM 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 $0.4775 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.

William G. Monroe: Thank you, Dave.

William G. Monroe: I will now provide more details on our fourth quarter financial performance. I am pleased to report total revenue grew from $29,300,000 in 2024 to $30,900,000 in 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 $30,900,000 of fourth quarter total revenue was a slight decrease of $140,000 quarter over quarter versus the $31,100,000 in 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 $6,000,000 for 2025. Total general and administrative expense was $4,800,000 in 2025, which was nearly flat both quarter over quarter from the $4,700,000 in 2025 and year over year from the $4,800,000 in 2024. Interest expense decreased slightly by approximately $100,000 quarter over quarter to $7,000,000 in 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 2025 was $13,300,000, a 4.6% increase year over year compared to the $12,700,000 of FFO in 2024.

On a diluted common share basis, FFO increased from $0.48 in 2024 to $0.49 in 2025, although this was $0.01 less quarter over quarter from the $0.50 of FFO in 2025 as a result of the net impacts to revenue and expenses described earlier. Adjusted funds from operations, or AFFO, which adjusts for straight-line rent and stock-based compensation, totaled $14,900,000 in 2025, a 2.1% increase year over year compared to the $14,600,000 of AFFO in 2024.

AFFO on a diluted common share basis was $0.55 in 2025, even with the $0.55 of AFFO in 2024, although this was $0.01 less quarter over quarter from the $0.56 of AFFO in 2025, again as a result of the net impacts to revenue and expenses described earlier.

William G. Monroe: And finally,

William G. Monroe: while it did not impact FFO or AFFO, we did have net gains on sale of $12,100,000 from the capital recycling and asset disposition activity during 2025 that increased net income. That concludes our prepared remarks. Nick, we are now ready to begin the question-and-answer session.

Operator: 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.

William G. Monroe: And the first question

Operator: Will come from Connor Mitchell with Piper Sandler. Please go ahead. Hey. Good morning. Thanks for taking my question.

Connor Mitchell: I guess just focusing first on the geriatric behavioral hospital operator that signed the transaction last summer. I just want to get a I know you cannot speak too much about the timing or some details, but try to get a little better understanding. Is the transaction on your part essentially supposed to all take place at one time, or is there any chance that the new operator that would come in and sign leases on the property could do it on a property-by-property timeline, or even a state-by-state timeline, instead of all at once?

David H. Dupuy: Hey, Connor. Thanks for the question.

Connor Mitchell: Yeah. As it relates to the transaction itself,

David H. Dupuy: you know, there was not as much progress as we would have hoped being made in the fourth quarter. And I think a lot of that is the buyer had to confirm various liabilities and was dependent on the government to get through some of those issues. I think we are seeing significantly more activity in this first quarter as far as the progress made from a due diligence standpoint and site visits and really working on getting the documentation squared away. What I would say about your question specifically, you know, the buyer is still very interested in all six hospitals, and the goal is for this transaction to happen all at one time, and that is our expectation.

That is the buyer’s expectation. So there would be no plans to have any sort of a staged closing. I think it just makes it more challenging that way and a little bit messier, and so everybody is moving forward with the acquisition of the operations of all six hospitals in the three states. And so there would not be a staged closing based on our expectations or the buyer’s expectations.

Connor Mitchell: Okay. Appreciate the color. And then turning towards transactions, the pipeline seems pretty stable compared to prior quarters as well. Just curious how you balance the level of transactions, the timing of closing those transactions, along with the time needed to find the right disposition to fund the acquisitions, or if you are considering maybe increasing the debt levels or leverage if there is a ceiling you have there when you see the optimal acquisitions and the timeline needs to be sped up so you cannot really wait for the offsetting dispositions.

David H. Dupuy: You know, our goal is really to execute and sequence the dispositions just like we did in the fourth quarter where we sold the inpatient rehab facility. There was a little bit of a gap between selling that facility and acquiring the new facility, which had some small impact on our financials, but overall it worked very, very well. And as I mentioned in the prepared remarks, we are working right now on a handful of other acquisitions so that we could similarly sequence in the same way when we acquire these facilities that we expect, these inpatient rehab that we expect to close sometime in the third quarter.

So the goal is obviously to do it and sequence it in a way that we can do a 1031 like-kind exchange if that is appropriate because we would anticipate a significant gain on some of the assets that we are looking to sell. But you are right. I mean, buying and selling real estate is inherently sometimes those time gaps do not always sequence correctly. I think everybody should know that there may be some gaps between when we close and when we sell. But the goal is to keep that leverage in the ZIP code that it is today and certainly not add leverage over time.

But some of that is going to be dependent on the timing of close. But we feel confident that based on what we have in progress from a capital recycling perspective, it will allow us to acquire assets without adding meaningful leverage to the balance sheet.

Connor Mitchell: Okay. Appreciate that as well. And maybe just one more if I can sneak it in. Can you just give an update on if there has really been any change in what you are seeing for cap rates for either acquisitions or dispositions? I know you gave some color in your opening remarks. Just maybe if there is anything you are seeing in the market right now that is really changing drastically from the recent closed transactions. You know, I think

David H. Dupuy: look, the good news is I think there is a high level of demand for the assets that we are looking to selectively manage through a disposition process and our capital recycling. We received an indicative 7.9% cap rate on the sale of inpatient rehab. We would expect similar sort of pricing on other types of dispositions that we are looking at. So we feel like that disposition capital recycling activity is going to be accretive to us and to the business. And we do see opportunities on the buy side in that 9% to 10% cap rate range. But, of course, not wanting to raise stock through the ATM at these price levels, we are being very, very selective.

What I would say is, in addition to these acquisitions that are in the pipeline, as I mentioned in the prepared remarks, we have some embedded growth in our 2026 numbers because we have a redevelopment project that we anticipate coming online in mid-2026, and then we have another redevelopment project that should be coming online at the end of the year. And so those are essentially like acquisitions for us, and so we expect that to be a nice tailwind in the second half of the year for us.

Connor Mitchell: Understood. That is all for me. Thank you very much.

David H. Dupuy: Thanks for the questions.

Operator: The next question will come from Michael Lewis with Truist. Please go ahead. Great. Thank you. Dave, last quarter on the call, you said you expected the lease percentage for the portfolio to be up 50 to 100 bps in 4Q, and it was. It was up 50 bps. I was just wondering if you felt compelled to give a little bit of insight into what you might expect for occupancy either over the next quarter or two or for the full year. Do you expect that to continue going up this year?

David H. Dupuy: Hey, Michael. Thanks for the question. You know, I think over the next week, we have had great leasing in the portfolio. We have also had some terminations toward the end of last year, and so I think Mark and his team are doing a remarkable job of taking some of those terminations, releasing the space. I think our view, big picture, is that is going to be really good overall for the portfolio. As you know, it takes a little bit of time for those new leases to become economic. But we feel very good about the leasing activity we are seeing.

David H. Dupuy: But

David H. Dupuy: the reality of it is, I would say this range in the low nineties will continue for the next couple of quarters. I would not suspect that it goes up meaningfully or down meaningfully just because some of the new leases we are getting in place. I think it is really in the second half of the year that we would expect to see some improvement as it relates to growing leased occupancy. So I would anticipate that leased occupancy would stay in that general ZIP code of where it is today for the next couple of quarters, with it looking to increase in the second half of this year.

Operator: Okay. And then my second question is about the pipeline. You know, I remember the days when the annual target was $120 million to $150 million annually. Obviously, with COVID and some changes in the cost of capital, you have been below that in recent years. Is the goal now you have these developments that you will be taking down. Is that kind of the pipeline

David H. Dupuy: Or, you know, if you were going to do $120 million to $150 million annually and you had the cost of capital,

Operator: is there still that volume of opportunity out there, or has something changed since the pandemic and maybe there are not as many opportunities in your niche?

David H. Dupuy: Yeah. The opportunity is still there, Michael. We are chomping at the bit and see a lot of great opportunities. We are constantly in touch with that core group of brokers that we have worked with routinely over the last ten years with the company. We have got great relationships, and we are seeing the activity in that 9% to 10% range. And what I would tell you is if our stock was in a different spot and we were doing what we had done prior to the last year and a half, we would be looking to make those acquisitions.

We have always, as you will recall because you have covered the company for a long time, had sort of half of our business as client business that we have done programmatically, so call it $50 million to $60 million a year. And then the other half has been that brokered business, with some redevelopment projects mixed in.

And I think what you have seen and what we have acted on over the last couple of years with our stock price where it was is we have been focused more on supporting our clients, and as soon as that dynamic changes, and the share price gets to a level where we can raise capital accretively, we would absolutely look to augment that

Michael Lewis: client

David H. Dupuy: acquisition with the broker deals that we have done historically. Okay. And then lastly for me,

Operator: you know, the last few years, you have also had a note in the investor presentation about this dialysis term sheet pipeline. I did not see that disclosure this time. Is that relationship kind of done, or is that

David H. Dupuy: on the back burner and that could still become something programmatic down the line? It is on I think you nailed it. It is on the back burner. Most of that company’s growth has really been buying operations. There has not been real estate as part of their overall acquisition cadence. And that has been the case now for a while. And they have been focused on really their core business over the last couple of years now that they have done several acquisitions. So putting it in there just did not seem like it made sense, just given the fact that we have not had any transactions under that deal.

We still have a great relationship and four dialysis clinics with the operator, and we will continue to monitor their acquisition activity. But yes, I would anticipate that

Michael Lewis: that

David H. Dupuy: that is opportunistic and not a focus or an expectation that would occur anytime soon.

Michael Lewis: Okay. Thank you.

David H. Dupuy: Thank you, Michael. Appreciate the questions.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to David H. Dupuy for any closing remarks.

David H. Dupuy: Thanks, everybody. I appreciate everyone joining us. And feel free to reach out if you ever have any additional questions. Hope everyone has a good day. Thank you.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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