Universal Health Realty me Trust(UHT) - 2019 Q4 - Annual Report

PART I ITEM 1. Business Universal Health Realty Income Trust (UHT) is a REIT investing in healthcare and human service facilities across twenty states, with revenue significantly influenced by UHS and government programs - As of February 26, 2020, UHT has seventy-one real estate investments located in twenty states, including seven hospital facilities, fifty-six medical/office buildings, four free-standing emergency departments, and four preschool and childcare centers[17] - Hospital facilities comprised approximately 26% of consolidated revenues in 2019, 25% in 2018, and 26% in 2017, with two non-renewed leases contributing approximately 2% in 2018 and 2017[26][27] - Lease payments from UHS-related tenants accounted for approximately 31% of consolidated revenues in 2019, 30% in 2018, and 32% in 2017, with three acute care hospitals leased to UHS subsidiaries expiring in 2021 and 2026[32][99] UHS Hospital Lease Terms and Annual Minimum Rent (as of Dec 31, 2019) | Hospital Name | Annual Minimum Rent ($) | End of Lease Term | Renewal Term (years) | | :------------------------------------ | :---------------------- | :---------------- | :------------------- | | McAllen Medical Center | $5,485,000 | December, 2026 | 5 (a) | | Wellington Regional Medical Center | $3,030,000 | December, 2021 | 10 (b) | | Southwest Healthcare System, Inland Valley Campus | $2,648,000 | December, 2021 | 10 (b) | - UHS of Delaware, Inc. serves as the Trust's Advisor, with an advisory fee of $4.0 million in 2019 (0.70% of average invested real estate assets), and the incentive fee provision was eliminated effective January 1, 2019[40][41][42] - The Trust qualifies as a REIT, requiring distribution of at least 90% of annual REIT taxable income to shareholders and is generally not subject to federal income tax on distributed income[45] - A significant portion of revenue for acute care hospitals and FEDs is derived from federal and state healthcare programs (Medicare and Medicaid), making the Trust vulnerable to changes in reimbursement policies and funding restrictions[52][53][60] ITEM 1A. Risk Factors The Trust faces significant risks from government and third-party payor dependence, healthcare reform uncertainties, intense competition, reliance on UHS, and inherent real estate and external event vulnerabilities - Revenues of the Trust's tenants are significantly affected by payments from government programs (Medicare, Medicaid) and private payors, which have seen limitations and reductions in reimbursement[67][69][70] - The uncertain future of the Patient Protection and Affordable Care Act (ACA) due to legal challenges and executive actions could materially adversely affect hospital operators and the Trust's revenues[73][81] - The healthcare industry is highly competitive, with facilities competing against other providers and facing increased competition from outpatient treatment and diagnostic facilities[84][85] - Substantial dependence on UHS for approximately 31% of consolidated revenues in 2019, coupled with potential non-renewal of leases or purchase options, could materially reduce the Trust's revenues and net income[99] - The phase-out of LIBOR after 2021 introduces uncertainty regarding alternative benchmark rates, potentially impacting interest payments on the Trust's variable-rate debt and derivative instruments[98] - Maintaining REIT status requires distributing at least 90% of taxable income, limiting growth capital and subjecting the Trust to federal income tax if status is lost[94][117] - Real estate ownership carries inherent risks including illiquidity, market fluctuations, maintenance costs, environmental hazards, and tenant defaults, potentially requiring significant renovation costs for new tenants[112][132] - External events such as pandemics (e.g., Coronavirus), epidemics, or catastrophic weather could adversely impact tenant operations, public trust, and the Trust's business[113][114] ITEM 1B. Unresolved Staff Comments The registrant reported no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[136] ITEM 2. Properties This section details the Trust's real estate investments, including hospital facilities and medical office buildings, covering locations, occupancy, lease terms, and rental information Hospital Facilities Overview (as of 12/31/2019) | Facility Name | Type | Available Beds | 2019 Occupancy | End of Lease Term | Renewal Term (years) | Annual Minimum Rent ($) | | :-------------------------------------- | :----------- | :------------- | :--------------- | :---------------- | :------------------- | :---------------------- | | Southwest Healthcare System | Acute Care | 130 | 63% | 2021 | 10 | $2,648,000 | | McAllen Medical Center | Acute Care | 370 | 50% | 2026 | 5 | $5,485,000 | | Wellington Regional Medical Center | Acute Care | 153 | 62% | 2021 | 10 | $3,030,000 | | Evansville Rehabilitation Hospital | Specialty | 0 (vacant) | — | — | — | $0 | | Corpus Christi | Specialty | 0 (vacant) | — | — | — | $0 | | Kindred Hospital Chicago Central | Specialty | 68 | 27% | 2021 | — | $1,550,000 | - During 2019, the Trust executed 62 new or renewed leases for medical office buildings, comprising approximately 24% of aggregate rentable square feet (17% renewed, 7% new), with weighted-average rental rates on renewed leases remaining relatively unchanged and tenant improvement costs averaging $15 per square foot[142] Average Effective Annual Rental per Square Foot (2019 vs. 2018) | Property Type | 2019 | 2018 | | :-------------------------------- | :----- | :----- | | Hospital facilities | $20.55 | $18.28 | | MOBs, FEDs, childcare centers | $30.27 | $29.65 | | All properties (combined) | $27.41 | $25.99 | Lease Expirations by Year (as of December 31, 2019) | Year | Expiring Square Feet | Number of Tenants | Annual Rentals of Expiring Leases ($) | Percentage of Annual Rentals | | :--- | :------------------- | :---------------- | :------------------------------------ | :--------------------------- | | 2020 | 305,629 | 90 | 9,949,053 | 12% | | 2021 | 844,249 | 77 | 21,181,868 | 25% | | 2022 | 316,897 | 74 | 9,664,573 | 11% | | 2023 | 313,470 | 61 | 9,099,573 | 11% | | 2024 | 177,961 | 36 | 5,449,569 | 6% | | 2025 | 207,518 | 28 | 6,118,957 | 7% | | 2026 | 206,852 | 29 | 5,963,291 | 7% | | 2027 | 171,541 | 16 | 5,389,932 | 6% | | 2028 | 38,693 | 8 | 1,254,829 | 1% | | 2029 | 22,529 | 4 | 663,594 | 1% | | Thereafter | 127,819 | 9 | 3,788,030 | 4% | | Total | 3,155,434 | 433 | 86,291,092 | 100% | ITEM 3. Legal Proceedings The registrant reported no legal proceedings - There are no legal proceedings[156] ITEM 4. Mine Safety Disclosures This item is not applicable to the registrant - This item is not applicable[156] PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section covers the Trust's common equity market, shareholder matters, and equity purchases, detailing stock exchange listing, shareholder count, dividend policy, and stock price performance - The Trust's shares of beneficial interest are listed on the New York Stock Exchange under the symbol UHT[157] - As of January 31, 2020, there were approximately 307 shareholders of record[158] - The Trust intends to declare quarterly dividends to comply with REIT requirements, mandating distribution of at least 90% of annual REIT taxable income to shareholders[159] Indexed Stock Price Performance (Base Period Dec 2014 = $100) | Company Name / Index | Dec 15 | Dec 16 | Dec 17 | Dec 18 | Dec 19 | | :-------------------------------- | :----- | :----- | :----- | :----- | :----- | | Universal Health Realty Income Trust | $109.52 | $150.23 | $178.51 | $151.93 | $299.21 | | S&P 500 Index | $101.38 | $113.51 | $138.29 | $132.23 | $173.86 | | Peer Group | $94.32 | $94.43 | $92.99 | $106.66 | $132.65 | ITEM 6. Selected Financial Data This section provides a five-year summary of selected financial data, including operating results, balance sheet, FFO, cash flow, and per-share data, with a reconciliation of net income to FFO Selected Financial Data (000s, except per share amounts) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :------------------------------------------ | :----- | :----- | :----- | :----- | :----- | | Total revenues | $77,163 | $76,210 | $72,348 | $67,081 | $63,950 | | Net income | $18,964 | $24,196 | $45,619 | $17,215 | $23,691 | | Real estate investments, net | $432,507 | $437,730 | $446,397 | $447,240 | $390,496 | | Total assets | $488,789 | $483,756 | $490,008 | $524,750 | $458,503 | | Total indebtedness | $273,694 | $261,281 | $256,409 | $315,717 | $252,306 | | Funds from operations (FFO) | $44,024 | $45,034 | $42,228 | $41,559 | $38,349 | | Cash provided by operating activities | $42,652 | $42,928 | $46,005 | $40,733 | $38,178 | | Basic earnings per share | $1.38 | $1.76 | $3.35 | $1.28 | $1.78 | | Diluted funds from operations per share | $3.20 | $3.28 | $3.10 | $3.09 | $2.88 | | Dividends per share | $2.720 | $2.680 | $2.640 | $2.600 | $2.560 | - Net income in 2019 included $2.0 million in net gains from real estate asset sales; in 2018, it included $4.5 million in hurricane recovery proceeds, $1.2 million in business interruption insurance, and $1.7 million from a lease termination; in 2017, it included $2.0 million in hurricane recovery proceeds and a $27.2 million net gain from the Arlington transaction[167] Reconciliation of Net Income to Funds From Operations (FFO) (000s) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :---------------------------------------------------- | :----- | :----- | :----- | :----- | :----- | | Net income | $18,964 | $24,196 | $45,619 | $17,215 | $23,691 | | Depreciation and amortization (consolidated) | 25,870 | 24,337 | 24,598 | 22,493 | 21,710 | | Depreciation and amortization (unconsolidated affiliates) | 1,141 | 1,036 | 1,240 | 1,851 | 1,690 | | Less gains (property exchange, sales, Arlington, hurricane) | (1,951) | (4,535) | (29,229) | — | (8,742) | | Funds From Operations | $44,024 | $45,034 | $42,228 | $41,559 | $38,349 | ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the Trust's financial condition and operations, covering business overview, critical accounting policies, detailed financial performance, hurricane impact, lease dynamics, inflation, and liquidity and capital resources - Net income decreased by $5.2 million to $19.0 million in 2019 compared to $24.2 million in 2018, primarily due to lower hurricane recovery proceeds and lease termination income in 2018, partially offset by gains on real estate sales and increased bonus rent from UHS facilities in 2019[191] - Total revenues increased by $1.0 million (1.3%) in 2019 to $77.2 million, driven by a $563,000 increase in bonus rental revenue from UHS hospital facilities and a $718,000 increase from a short-term lease, partially offset by a $428,000 decrease due to a vacant hospital facility[191] - Funds from operations (FFO) decreased by $1.0 million, or $0.08 per diluted share, in 2019 compared to 2018, mainly due to a $1.7 million decrease from a 2018 lease termination agreement and a $500,000 decrease from 2018 business interruption insurance proceeds, partially offset by a $563,000 increase in bonus rent from UHS hospital facilities[196] - In 2018, the Trust received approximately $4.5 million in hurricane insurance recovery proceeds in excess of damaged property write-downs and $1.2 million in hurricane business interruption insurance recoveries related to Hurricane Harvey's impact on five medical office buildings in 2017[199] - Two hospital facilities became vacant in 2019 due to lease expirations (Evansville, Indiana, and Corpus Christi, Texas), which had previously contributed approximately 2% of consolidated revenues in 2019, 2018, and 2017[201][202] - Net cash provided by operating activities was $42.7 million in 2019, $42.9 million in 2018, and $46.0 million in 2017, consistently exceeding dividends paid in all three years[213][221][222] - Net cash used in investing activities was $16.5 million in 2019, compared to $8.0 million in 2018 and $39.5 million provided in 2017 (due to the St. Mary's divestiture); 2019 investing activities included $12.3 million for capital additions, $5.1 million for property acquisitions, and $2.1 million for equity investments in LLCs[213][214][217][218] Revolving Credit Agreement Status (as of December 31, 2019) | Metric | Amount ($) | | :-------------------- | :------------- | | Borrowing Capacity | $300 million | | Outstanding Borrowings | $213.0 million | | Available Capacity | $87.0 million | | Maturity Date | March 2022 | | Average Interest Rate (2019) | 3.7% | Debt Compliance Ratios (as of December 31, 2019) | Covenant | UHT (2019) | Covenant (Limit) | | :-------------------- | :--------- | :--------------- | | Tangible net worth | $167,181 | > $125,000 | | Total leverage | 42.3% | < 60% | | Secured leverage | 9.1% | < 30% | | Unencumbered leverage | 38.5% | < 60% | | Fixed charge coverage | 4.0x | > 1.50x | Total Contractual Obligations (as of December 31, 2019, in thousands) | Obligation Type | Total | < 1 Year | 2-3 Years | 4-5 Years | > 5 Years | | :------------------------------------ | :------ | :------- | :-------- | :-------- | :-------- | | Long-term non-recourse debt-fixed | $61,144 | $1,913 | $14,278 | $25,442 | $19,511 | | Long-term debt-variable | $212,950 | — | $212,950 | — | — | | Estimated future interest payments | $29,555 | $8,922 | $12,620 | $2,735 | $5,278 | | Operating leases | $27,842 | $480 | $960 | $960 | $25,442 | | Construction commitments | $45,981 | $45,981 | — | — | — | | Equity and debt financing commitments | $362 | $362 | — | — | — | | Total | $377,834 | $57,658 | $240,808 | $29,137 | $50,231 | ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Trust's exposure to market risks, particularly interest rate risk and the LIBOR transition, detailing the use of financial instruments to manage this risk - The Financial Conduct Authority (FCA) intends to stop compelling banks to submit rates for LIBOR after 2021, with SOFR identified as the preferred alternative, creating uncertainty for LIBOR-indexed contracts[238][240] - The Trust entered into a $50 million notional interest rate swap in September 2019 (fixed rate 1.144%, matures September 2024) and a $35 million notional swap in January 2020 (fixed rate 1.4975%, matures January 2024) to manage interest rate risk[242][243] - Based on variable rate debt outstanding as of December 31, 2019, and accounting for the interest rate swap, each 1% change in interest rates would impact the Trust's net income by approximately $1.6 million[250] Financial Instruments Sensitive to Interest Rate Changes (as of December 31, 2019, in thousands) | Type | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | Average Interest Rate | | :---------------- | :--- | :--- | :----- | :----- | :----- | :--------- | :------ | :----------------- | | Fixed rate debt | $1,913 | $2,081 | $12,197 | $11,892 | $13,550 | $19,511 | $61,144 | 4.3% | | Variable rate debt | — | — | $212,950 | — | — | — | $212,950 | 3.0% | | Interest rate swaps (notional) | — | — | — | — | $50,000 | — | $50,000 | 1.1% | ITEM 8. Financial Statements and Supplementary Data This section refers to the consolidated financial statements (Balance Sheets, Statements of Income, Comprehensive Income, Changes in Equity, and Cash Flows) and the independent auditor's report included elsewhere in the Annual Report - The Consolidated Balance Sheets, Consolidated Statements of Income, Comprehensive Income, Changes in Equity and Cash Flows, along with the reports of KPMG LLP, are included elsewhere in this Annual Report[251] ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The registrant reported no changes in or disagreements with accountants on accounting and financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[251] ITEM 9A. Controls and Procedures This section details management's conclusion on the effectiveness of disclosure controls and internal control over financial reporting, including changes due to ASC 842 adoption, and the independent auditor's unqualified opinion - The CEO and CFO concluded that the Trust's disclosure controls and procedures were effective as of December 31, 2019[252] - Changes were implemented to internal controls relating to leases due to the adoption of ASC 842 on January 1, 2019, including new policies and enhanced contract review requirements[253] - Management concluded that the Trust maintained effective internal control over financial reporting as of December 31, 2019, based on criteria established in the COSO framework[257] - KPMG LLP, the independent registered public accounting firm, expressed an unqualified opinion on the effectiveness of the Trust's internal control over financial reporting as of December 31, 2019[259] ITEM 9B. Other Information The registrant reported no other information - No other information was reported[265] PART III ITEM 10. Directors, Executive Officers and Corporate Governance This section incorporates by reference information on Directors, Executive Officers, and Corporate Governance from the Trust's definitive proxy statement for the 2020 Annual Meeting of Shareholders - Information regarding Directors, Executive Officers, and Corporate Governance is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Shareholders[267] ITEM 11. Executive Compensation This section incorporates by reference information regarding executive compensation from the Trust's definitive proxy statement for the 2020 Annual Meeting of Shareholders - Information regarding Executive Compensation is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Shareholders[268] ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section incorporates by reference information on security ownership of certain beneficial owners and management, and related stockholder matters, from the Trust's definitive proxy statement for the 2020 Annual Meeting of Shareholders - Information regarding Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Shareholders[269] ITEM 13. Certain Relationships and Related Transactions, and Director Independence This section incorporates by reference information on certain relationships and related transactions, and director independence, from the Trust's definitive proxy statement for the 2020 Annual Meeting of Shareholders - Information regarding Certain Relationships and Related Transactions, and Director Independence is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Shareholders[270] ITEM 14. Principal Accountant Fees and Services This section incorporates by reference information regarding principal accountant fees and services from the Trust's definitive proxy statement for the 2020 Annual Meeting of Shareholders - Information regarding Principal Accountant Fees and Services is incorporated by reference from the definitive proxy statement for the 2020 Annual Meeting of Shareholders[271] PART IV ITEM 15. Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the 10-K report, including the Declaration of Trust, Advisory Agreement, Lease Forms, Credit Agreement, and various certifications - The report includes financial statements, financial statement schedules, and various exhibits such as the Declaration of Trust, Amended and Restated Bylaws, Amended and Restated Advisory Agreement, Form of Leases, Credit Agreement, and certifications from the CEO and CFO[274][277] ITEM 16. Form 10-K Summary The registrant reported no Form 10-K Summary - No Form 10-K Summary was reported[278] SIGNATURES SIGNATURES This section contains the signatures of the registrant's authorized officers and trustees, certifying the filing of the report - The report was signed by Alan B. Miller, Chairman of the Board, Chief Executive Officer and President, and other Trustees and the Chief Financial Officer on February 26, 2020[281][282] INDEX TO FINANCIAL STATEMENTS AND SCHEDULE Consolidated Financial Statements This section provides an index to the consolidated financial statements and Schedule III, including the Independent Auditor's Report, Balance Sheets, Statements of Income, Comprehensive Income, Changes in Equity, Cash Flows, and accompanying notes - The index lists the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Income, Comprehensive Income, Changes in Equity, Cash Flows, and Notes to the Consolidated Financial Statements[284] Report of Independent Registered Public Accounting Firm KPMG LLP provided an unqualified opinion on the consolidated financial statements and internal control over financial reporting, identifying the assessment of net real estate investments' carrying value as a critical audit matter - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the three-year period ended December 31, 2019[286] - KPMG LLP also issued an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2019[287] - The assessment of the carrying value of net real estate investments was identified as a critical audit matter due to the high degree of subjective and complex auditor judgment required in evaluating impairment indicators and assumptions[293][294] - The Company changed its method of accounting for leases as of January 1, 2019, due to the adoption of Accounting Standards Codification Topic 842, Leases[288] Consolidated Balance Sheets—December 31, 2019 and December 31, 2018 Presents the consolidated balance sheets for Universal Health Realty Income Trust as of December 31, 2019, and December 31, 2018, detailing assets, liabilities, and equity Consolidated Balance Sheet Data (amounts in thousands) | Metric | Dec 31, 2019 | Dec 31, 2018 | | :------------------------------------------ | :----------- | :----------- | | Net Real Estate Investments | $432,507 | $437,730 | | Investments in limited liability companies ("LLCs") | $6,918 | $5,019 | | Cash and cash equivalents | $6,110 | $5,036 | | Intangible assets, net | $14,553 | $17,407 | | Right-of-use land assets, net | $8,944 | — | | Total Assets | $488,789 | $483,756 | | Line of credit borrowings | $212,950 | $196,400 | | Mortgage notes payable, non-recourse to us, net | $60,744 | $64,881 | | Ground lease liabilities, net | $8,944 | — | | Total Liabilities | $307,055 | $285,146 | | Total Equity | $181,734 | $198,610 | Consolidated Statements of Income—Years Ended December 31, 2019, 2018 and 2017 Presents the consolidated statements of income for the years ended December 31, 2019, 2018, and 2017, showing revenues, expenses, net income, and earnings per share Consolidated Statements of Income Data (amounts in thousands, except per share amounts) | Metric | 2019 | 2018 | 2017 | | :------------------------------------------ | :----- | :----- | :----- | | Lease revenue - UHS facilities | $23,095 | $22,661 | $22,611 | | Lease revenue - Non-related parties | $52,020 | $50,466 | $48,642 | | Total Revenues | $77,163 | $76,210 | $72,348 | | Depreciation and amortization | $25,870 | $24,976 | $25,116 | | Advisory fees to UHS | $3,974 | $3,806 | $3,577 | | Other operating expenses | $21,569 | $20,723 | $19,511 | | Net income | $18,964 | $24,196 | $45,619 | | Basic earnings per share | $1.38 | $1.76 | $3.35 | | Diluted earnings per share | $1.38 | $1.76 | $3.35 | - Bonus rental on UHS hospital facilities amounted to $5,551 thousand in 2019, $4,988 thousand in 2018, and $4,917 thousand in 2017[302] Consolidated Statements of Comprehensive Income —Years Ended December 31, 2019, 2018 and 2017 Presents the consolidated statements of comprehensive income for the years ended December 31, 2019, 2018, and 2017, including net income and other comprehensive income/loss components Consolidated Statements of Comprehensive Income (amounts in thousands) | Metric | 2019 | 2018 | 2017 | | :------------------------------------------ | :----- | :----- | :----- | | Net Income | $18,964 | $24,196 | $45,619 | | Unrealized derivative gain/(loss) on cash flow hedges | $878 | $(12) | $39 | | Total comprehensive income | $19,842 | $24,184 | $45,658 | Consolidated Statements of Changes in Equity—Years Ended December 31, 2019, 2018 and 2017 Presents the consolidated statements of changes in equity for 2019, 2018, and 2017, detailing changes in common shares, capital in excess of par value, cumulative net income, cumulative dividends, and accumulated other comprehensive income Consolidated Statements of Changes in Equity (amounts in thousands) | Metric | Jan 1, 2017 | Dec 31, 2017 | Dec 31, 2018 | Dec 31, 2019 | | :-------------------------------- | :---------- | :----------- | :----------- | :----------- | | Total Equity | $191,277 | $210,561 | $198,610 | $181,734 | | Number of Common Shares (thousands) | 13,599 | 13,735 | 13,747 | 13,757 | | Capital in excess of par value | $255,656 | $265,335 | $266,031 | $266,723 | | Cumulative net income | $572,501 | $618,120 | $642,316 | $661,280 | | Cumulative dividends | $(637,121) | $(673,175) | $(710,006) | $(747,417) | | Stock-based compensation expense | — | $538 | $571 | $702 | | Dividends per share | $2.64 | $2.64 | $2.68 | $2.72 | Consolidated Statements of Cash Flows—Years Ended December 31, 2019, 2018 and 2017 Presents the consolidated statements of cash flows for the years ended December 31, 2019, 2018, and 2017, categorizing cash flows into operating, investing, and financing activities Consolidated Statements of Cash Flows (amounts in thousands) | Activity | 2019 | 2018 | 2017 | | :------------------------------------------ | :----- | :----- | :----- | | Net cash provided by operating activities | $42,652 | $42,928 | $46,005 | | Net cash (used in)/provided by investing activities | $(16,472) | $(7,959) | $39,461 | | Net cash used in financing activities | $(25,106) | $(33,320) | $(86,009) | | Increase/(decrease) in cash and cash equivalents | $1,074 | $1,649 | $(543) | | Cash and cash equivalents, end of year | $6,110 | $5,036 | $3,387 | - Supplemental disclosures show interest paid of $10,025 thousand in 2019, $9,469 thousand in 2018, and $9,692 thousand in 2017; invoices accrued for construction and improvements were $1,485 thousand in 2019, $924 thousand in 2018, and $546 thousand in 2017[311] Notes to the Consolidated Financial Statements This section details the Trust's organization, accounting policies, UHS relationships, construction, acquisitions, lease accounting, debt, dividends, incentive plans, equity affiliates, segment reporting, and Hurricane Harvey impact - The Trust is a Maryland real estate investment trust (REIT) that invests in 71 healthcare and human service related facilities across 20 states as of February 26, 2020[314] - Net intangible assets totaled $14.6 million as of December 31, 2019, primarily consisting of in-place lease values ($12.8 million net) and above-market leases ($1.5 million net)[320] - Consolidated depreciation expense was $21.8 million in 2019, $20.5 million in 2018, and $19.7 million in 2017[321] - The Trust accounts for its five unconsolidated investments in LLCs/LPs (33% to 95% non-controlling ownership interests) using the equity method of accounting[327][329][410] - Lease revenue from McAllen Medical Center, a related party, represented approximately 10% of consolidated revenues in 2019, 9% in 2018, and 10% in 2017[340] - The Trust adopted ASC 842, Leases, on January 1, 2019, recognizing right-of-use assets and lease liabilities for ground leases where it is the lessee, totaling approximately $8.9 million each as of December 31, 2019[345][381] - In 2019, the Trust initiated construction of Texoma Medical Plaza II (MOB, 95% interest) and Clive Behavioral Health Hospital (108-bed, wholly-owned), both expected to be completed in late 2020[364][365] - The Trust acquired Bellin Health Family Medicine Center for $5.1 million in late 2019 and sold Kings Crossing II MOB for $2.5 million (net, $1.7 million gain) and a parcel of land for $250,000 (gain) in 2019[366][367][368] Minimum Future Base Rents from Non-Cancelable Leases (Consolidated, in thousands) | For the year ended December 31, | 2019 | 2018 | | :------------------------------ | :----- | :----- | | 2020 | $57,102 | $50,291 | | 2021 | $50,580 | $45,357 | | 2022 | $35,030 | $30,089 | | 2023 | $28,899 | $24,972 | | 2024 | $23,147 | $67,288 | | Thereafter | $55,482 | $274,491 | | Total minimum base rents | $250,240 | $274,491 | Summarized Combined Statements of Income for Equity Affiliates (amounts in thousands) | Metric | 2019 | 2018 | 2017 | | :------- | :----- | :----- | :----- | | Revenues | $10,063 | $9,592 | $10,673 | | Operating expenses | $4,046 | $3,557 | $3,883 | | Depreciation and amortization | $1,758 | $1,772 | $1,988 | | Interest, net | $1,295 | $1,311 | $1,570 | | Net income | $2,964 | $2,952 | $3,232 | | Our share of net income | $1,796 | $1,771 | $2,416 | Summarized Combined Balance Sheets for Equity Affiliates (amounts in thousands) | Metric | Dec 31, 2019 | Dec 31, 2018 | | :------------------------------------------ | :----------- | :----------- | | Net property, including construction in progress | $33,207 | $31,818 | | Other assets | $7,452 | $3,251 | | Total assets | $40,659 | $35,069 | | Other liabilities | $6,785 | $2,717 | | Mortgage notes payable, non-recourse to us | $26,650 | $27,256 | | Equity | $7,224 | $5,096 | | Total liabilities and equity | $40,659 | $35,069 | Quarterly Results (Unaudited, 2019, amounts in thousands) | Metric | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | Total 2019 | | :-------------------------------- | :------ | :------ | :------ | :------ | :--------- | | Revenues | $19,112 | $19,326 | $19,866 | $18,859 | $77,163 | | Net income | $4,212 | $4,261 | $4,653 | $5,838 | $18,964 | | Basic earnings per share | $0.31 | $0.31 | $0.34 | $0.43 | $1.38 | | Diluted earnings per share | $0.31 | $0.31 | $0.34 | $0.42 | $1.38 | Quarterly Results (Unaudited, 2018, amounts in thousands) | Metric | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | Total 2018 | | :-------------------------------- | :------ | :------ | :------ | :------ | :--------- | | Revenues | $18,539 | $20,111 | $18,828 | $18,732 | $76,210 | | Net income | $9,604 | $5,805 | $4,374 | $4,413 | $24,196 | | Basic earnings per share | $0.70 | $0.42 | $0.32 | $0.32 | $1.76 | | Diluted earnings per share | $0.70 | $0.42 | $0.32 | $0.32 | $1.76 | Schedule III—Real Estate and Accumulated Depreciation—December 31, 2019 This schedule details the Trust's real estate properties, including initial cost, improvements, basis adjustments, gross amount, accumulated depreciation, acquisition/improvement dates, and average depreciable life for each facility - The schedule provides a detailed listing of each real estate property, including its initial cost, building and improvements, adjustments to basis, gross amount carried at year-end, accumulated depreciation as of December 31, 2019, and average depreciable life[426][428][430] - The total gross amount of real estate investments carried at the end of 2019 was $627,395 thousand, with accumulated depreciation of $194,888 thousand[430] Notes to Schedule III—December 31, 2019 This section provides reconciliations of real estate properties and accumulated depreciation from January 1, 2017, to December 31, 2019, detailing additions, acquisitions, disposals, and depreciation expense Reconciliation of Real Estate Properties (amounts in thousands) | Metric | 2019 | 2018 | 2017 | | :---------------------- | :----- | :----- | :----- | | Balance at January 1 | $611,046 | $599,776 | $585,828 | | Additions | $12,882 | $8,641 | $12,492 | | Acquisitions | $4,510 | $3,222 | $9,931 | | Disposals/Divestitures | $(1,043) | $(593) | $(8,475) | | Balance at December 31 | $627,395 | $611,046 | $599,776 | Reconciliation of Accumulated Depreciation (amounts in thousands) | Metric | 2019 | 2018 | 2017 | | :---------------------- | :----- | :----- | :----- | | Balance at January 1 | $173,316 | $153,379 | $138,588 | | Disposals/Divestitures | $(220) | $(593) | $(4,896) | | Depreciation expense | $21,792 | $20,530 | $19,687 | | Balance at December 31 | $194,888 | $173,316 | $153,379 |