Community Healthcare Reports Q2 2026 Results: Full Earnings Call Transcript

Community Healthcare (NYSE: CHCT ) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

33 per share to retain $25 to $30 million in capital over the next two years for accretive acquisitions and portfolio growth. The company is focusing on four strategic priorities: occupancy improvement, portfolio reinvestment, strategic capital recycling, and accelerated acquisition growth. They aim to reach 92% occupancy in 18 months and have signed new leases totaling over 100,000 square feet. Community Healthcare Trust completed a behavioral hospital project in Lafayette, Louisiana, and is engaged in speculative suite developments to capture healthcare tenants faster.

They expect to close on $85 to $90 million in acquisitions in 2026. 5 million in net proceeds, and is marketing an additional $70 million of assets to fund high-yield acquisitions while maintaining leverage. 56. They plan to retain up to $15 million annually from the right-sized dividend for reinvestment.

CHCT is working through a transaction for six properties leased to a geriatric behavioral hospital operator, with a potential transaction close by year-end. Management has reshaped the organization to drive growth and improve performance, with a focus on leasing and asset management to achieve strategic goals. Full Transcript Cindy, Operator Welcome to Community Healthcare Trust's 2026 second quarter earnings release conference call. On the call today, the Company will discuss its 2026 second quarter financial results.

It will also discuss progress made in various aspects of its business. Following the remarks, the phone lines will be opened for a question and answer session. The Company's earnings release was distributed last evening and has also been posted on its website. The Company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today, August 5, 2026, and may contain forward-looking statements that involve risk and uncertainty.

Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the Company's disclosures regarding forward-looking statements in its earnings release, as well as its risk factors and MD&A in its SEC filings. The Company undertakes no obligation to update forward-looking statements, whether as the result of new information, future developments, or otherwise, except as may be required by law. During this call, the Company will discuss GAAP and non-GAAP financial measures.

A reconciliation between the two is available in its earnings release, which is posted on its website. Call participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the Company's investor relations website for approximately 30 days and is the property of the Company. This call may not be recorded or otherwise reproduced or distributed without the Company's prior written permission.

Now I would like to turn the call over to Dave Dupuy, CEO of Community Healthcare Trust. Dave Dupuy, President and Chief Executive Officer Great. Thank you, Cindy, and good morning, everyone. Thank you for joining us for Community Healthcare Trust second quarter 2026 conference call.

Joining me on the call today are Bill Monroe, our Chief Financial Officer, Leigh Ann Stach, our Chief Accounting Officer, and Mark Kearns, our SVP of Asset Management. Before we begin, I'd like to remind everyone that our earnings release and supplemental data report were released last night and furnished on Form 8-K along with our quarterly report on Form 10-Q. Additionally, we included in our Form 8-K a new Strategic Plan Investor Presentation, which is also available in the Investor Relations section of our website. We encourage you to reference this presentation along with today's remarks.

The Board and senior leadership have spent considerable time developing CHCT's strategic plan for renewed growth, and I'm excited to share an overview with you today. 33 per share. This decision allows us to retain capital directly for accretive acquisitions and long-term portfolio growth. We expect this reduction to free up $25 to $30 million in capital over the next two years.

Combined with our capital recycling program, this incremental cash flow will accelerate our portfolio investments and fund our acquisition pipeline. Crucially, we expect these investments to be highly accretive to AFFO growth and shareholder value, all while maintaining our current target leverage levels. As part of this capital realignment, we are focusing on four core strategic priorities to drive growth and elevate the overall quality of our portfolio. Those are occupancy improvement, portfolio reinvestment, strategic capital recycling, and accelerated acquisition growth.

Our first priority is occupancy improvement. We see a clear, tangible path to reaching 92% occupancy over the next 18 months. 5% by year-end. Year to date, we have already signed new leases totaling over 100,000 square feet, surpassing our total volume for all of 2025.

Leasing activity remains strong across the majority of our footprint, and we expect these tailwinds to continue into 2027. This momentum is driven by the strategic market positioning of our assets, along with a broader supply shortage of quality healthcare properties. Fully achieving these occupancy gains and rent growth represents up to $6 million in NOI upside. Our second strategic priority is portfolio reinvestment.

We are deploying targeted capital into redevelopment projects alongside high-quality tenants with long-term leases already in place. These projects offer compelling risk-adjusted returns with a 9% to 12% yield on cost. A prime example is our recently completed behavioral hospital in Lafayette, Louisiana, a joint venture between Ochsner Health and Oceans Behavioral Health, with a lease commencement that occurred early in the third quarter. Additionally, we are selectively building out speculative suites in high-demand markets.

Proactively preparing these spaces allows us to capture prospective healthcare tenants faster, accelerating both occupancy gains and NOI realization. Our third priority is strategic capital recycling. 5 million in net proceeds. We currently have more than $70 million of assets in the market.

We expect these disposition proceeds to fund our high-yield acquisition pipeline while keeping leverage modest. We view this as truly strategic recycling whereby we are exiting select assets to fund high-conviction opportunities like our attractive inpatient rehab facility pipeline while simultaneously enhancing the credit quality and profile of our overall portfolio. Finally, our fourth priority is accelerating acquisition growth. In addition to improved occupancy and portfolio performance, acquisitions will be an important growth driver for CHCT.

1 million. By combining our capital recycling proceeds with the capital freed up from our dividend right-sizing, we have unlocked the liquidity necessary to step up our acquisition velocity. We expect to close on $85 to $90 million in acquisitions in 2026, and we anticipate activity to increase in 2027 as this newly unlocked growth capital compounds. In short, we believe the strategic plan is clear and achievable, positioning us to improve our portfolio, increase our acquisition cadence, and drive accretive AFFO growth.

Next, I'd like to walk through a few key operational updates from the second quarter. During the second quarter, the geriatric behavioral hospital operator, which leases six of our properties, paid approximately $370,000 in rent, representing a $70,000 increase over the first quarter. As previously noted, this tenant signed a letter of intent with an experienced behavioral healthcare operator to acquire the operations of all six facilities under exclusivity. Since then, the buyer has made significant progress.

They are now finalizing legal and business due diligence and have moved into drafting definitive purchase agreements, which include new leases for CHCT's six properties. Given the steady momentum through the second quarter and into July, we anticipate a signed purchase agreement during the third quarter, targeting a transaction close by year-end. While the deal is progressing constructively, transactions of this nature remain subject to final documentation and closing conditions. We cannot guarantee a closed transaction, but we remain fully committed to keeping you updated as key milestones are reached.

Also, in May, we sold one building in Batesville, Mississippi, and received net proceeds of approximately $460,000, resulting in a small gain on the property sale. We also have signed definitive purchase and sale agreements for four properties to be acquired after completion and occupancy for an aggregate expected investment of $99 million. 75%. We expect to close on one of these properties in the third quarter and another in the fourth quarter of 2026, and the remaining two in the second half of 2027.

That takes care of the items I wanted to cover, so I'll hand things off to Bill to provide additional details on our financial results for the quarter. Bill Monroe, Chief Financial Officer Thank you, Dave. Let me add more detail on our capital allocation policy. First, given our new right-sized dividend, as Dave mentioned, we expect to retain $25 to $30 million of capital over the next two years, or, to put it on an annual basis, up to $15 million of cash flow per year on a leverage-neutral basis of approximately 40% debt to capitalization.

07 of AFFO growth per year, assuming a 9% to 10% yield. As our AFFO grows from this retained cash flow, as well as the occupancy improvements Dave discussed, it also enables our dividend to grow with earnings going forward. Historically, we updated our dividend each quarter, but going forward we expect to update our dividend on an annual basis while maintaining an AFFO payout rate of approximately 60% to 65%. I also want to take a minute to point out the additional disclosures we have included within our filed second quarter 2026 supplemental information.

Within our reconciliation tables on page 8, we now include our Funds Available for Distribution, or FAD, calculation, which provides a breakout of capital expenditures across tenant improvements, leasing commissions, and recurring CapEx. And within our portfolio overview tables on page 14, we now include a breakout of our properties by ownership type—fee simple and ground lease—a detailed review of our quarterly leasing activity across new leases, renewals, vacancies, and acquisitions/dispositions, and a breakout of our lease types across net leases, modified gross leases, and gross leases, as well as a calculation of our portfolio's annual escalators.

These additional disclosures are a response to investor and analyst questions, and we are excited to provide more transparency on these items and to help save time for Q&A. 56. 4 million. 48.

56. As I mentioned earlier, both AFFO and AFFO per share were the same as the first quarter of 2026, but I'm happy to review any of these financials in more detail. That concludes our prepared remarks. Cindy, we are now ready to begin the question and answer session.

Cindy, Operator We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.

At this time, we will pause momentarily to assemble our roster. Our first question comes from Rob Stevenson of Huntington. Go ahead, please. Rob Stevenson, Analyst at Huntington Good morning, guys.

What is the occupancy on the $70 million of assets that you're marketing? Trying to figure out here, if you sell all those, if occupancy goes down because those are highly occupied assets, or goes up since some of those have the bigger chunks of vacancy. Dave Dupuy, President and Chief Executive Officer Hey, Rob, thanks for the question. Appreciate you dialing in and glad to have you back.

So as far as the occupancy goes on the buildings, what I would tell you is most of those buildings are 100% occupied. We do have a handful of buildings we're looking to sell that should, you know, result in relatively modest proceeds that are empty buildings. So the buildings that we are selling are 100% occupied with the exception of a small handful, less than five buildings that are in market that are empty. Rob Stevenson, Analyst at Huntington Okay, that's helpful.

And then, Bill, it sounded like in your commentary on the dividend that it's now an annual review going forward instead of the small quarterly increase increases. Is that, is that the takeaway there? Bill Monroe, Chief Financial Officer That's right. It's something we and the board will evaluate on an annual basis.

Rob Stevenson, Analyst at Huntington Okay. And then given your commentary about retaining the cash flow to drive AFFO growth, is there any reason why you guys would increase the dividend from the 33 cent level until you sort of get down towards minimum payout so that you could retain as much as possible for investment? Bill Monroe, Chief Financial Officer As I had mentioned in my comments, you know, we're going to be targeting that 60 to 65% AFFO payout ratio. And so that's what we'll be looking at, you know, as we, you know, evaluate the dividend on an annual basis.

Rob Stevenson, Analyst at Huntington Okay. And then last one for me, Dave, like, at this point, how comfortable are you with waiting and seeing what happens here in the third quarter with the six behavioral health hospitals? Or are you still running separate process in parallel just in case something falls through there? Dave Dupuy, President and Chief Executive Officer You know, we are.

We've obviously, over the last year and a half, we've. The good news is in this process, the company has performed well. It has recovered significantly. It's been able to pay additional rent.

I would anticipate the rent amount in the third quarter to move up from where it is in the second quarter. And so that, I think, allows us some flexibility if, for whatever reason, this transaction doesn't go forward. And as you might expect, just given our relationships in the sector, we have other folks that have expressed interest and could be potential suitors. But we think just given the amount of time that the buyer has looked at the business, how it's performed during that time, we believe that that is going to be the right buyer for the business.

And. And the delays really don't have as much to do with the buyer as they do with some of the regulatory issues that the company has had to work through in these various states that unfortunately, each have their own rules and each have their own hurdles that you have to get through. So I think they spent a lot of money, they've worked very hard, you know, in fact, engaged their operations team heavily in sort of the onboarding process. And so we feel confident that ultimately they're going to end up being the buyer.

But the good news is the business is performing so that if they aren't, we think that somebody else could come in and operate the business and be a. Be a, you know, potential alternative. Rob Stevenson, Analyst at Huntington Okay, thanks, guys. Appreciate the time.

Dave Dupuy, President and Chief Executive Officer Thank you, Rob. Cindy, Operator The next question comes from Alexander Goldfarb of Piper Sandler. Go ahead, please. Alexander Goldfarb, Analyst at Piper Sandler Hey, morning down there, Dave.

You guys addressed the all stock comp back in early 24, but the dividend was one of those issues that's been out there for a while. It's been a topic of conference calls over time. What finally made you guys decide now was the time to address it versus, I guess maybe when you did the all stock comp, maybe, you know, assessing it then. Dave Dupuy, President and Chief Executive Officer Hey, Alex, thanks for the question.