Community Healthcare Trust(CHCT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements, covering balance sheets, operations, comprehensive loss, equity, cash flows, and accounting notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (June 30, 2025 vs. December 31, 2024) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total real estate properties, net | $895,351 | $903,322 | | Cash and cash equivalents | $4,863 | $4,384 | | Assets held for sale, net | $5,465 | $6,755 | | Other assets, net | $60,613 | $78,102 | | Total assets | $966,292 | $992,563 | | Debt, net | $500,077 | $485,955 | | Total liabilities | $528,472 | $516,598 | | Total stockholders' equity | $437,820 | $475,965 | | Total liabilities and stockholders' equity | $966,292 | $992,563 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | | :-------------------- | :------------ | :------------ | | Rental income | $30,128 | $27,905 | | Other operating interest | $(1,043) | $(389) | | Total Revenues | $29,085 | $27,516 | | Property operating | $5,585 | $5,572 | | General and administrative | $10,559 | $4,760 | | Depreciation and amortization | $10,879 | $10,792 | | Total Expenses | $27,023 | $21,124 | | Gains on sale, net of impairments | $640 | $(140) | | Interest expense | $(6,592) | $(5,986) | | Credit loss reserve | $(8,672) | $(11,000) | | Interest and other income, net | $5 | $307 | | Total Other (Expense) Income | $(14,619) | $(16,819) | | NET LOSS | $(12,557) | $(10,427) | | Net loss per common share - Basic | $(0.50) | $(0.42) | | Net loss per common share - Diluted | $(0.50) | $(0.42) | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | | :-------------------- | :------------ | :------------ | | Rental income | $59,858 | $56,247 | | Other operating interest | $(695) | $602 | | Total Revenues | $59,163 | $56,849 | | Property operating | $11,680 | $11,363 | | General and administrative | $15,659 | $9,314 | | Depreciation and amortization | $21,822 | $21,054 | | Total Expenses | $49,161 | $41,731 | | Gains on sale, net of impairments | $640 | $(140) | | Interest expense | $(12,944) | $(11,048) |\n| Credit loss reserve | $(8,672) | $(11,000) | | Interest and other income, net | $8 | $308 | | Total Other (Expense) Income | $(20,968) | $(21,880) | | NET LOSS | $(10,966) | $(6,762) | | Net loss per common share - Basic | $(0.47) | $(0.31) | | Net loss per common share - Diluted | $(0.47) | $(0.31) | - General and administrative expenses for the three and six months ended June 30, 2025, included severance and transition-related expenses totaling $1.3 million and non-cash stock-based compensation expense totaling $7.1 million and $9.8 million, respectively, which includes accelerated amortization of $4.6 million related to a termination in the second quarter of 2025. This is a significant increase compared to $2.5 million and $4.9 million in non-cash stock-based compensation for the same periods in 2024[9] Condensed Consolidated Statements of Comprehensive Loss Condensed Consolidated Statements of Comprehensive Loss (Three and Six Months Ended June 30) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | NET LOSS | $(12,557) | $(10,427) | $(10,966) | $(6,762) | | Other comprehensive (loss) income: | | | | | | (Decrease) increase in fair value of cash flow hedges | $(1,463) | $2,703 | $(4,876) | $10,573 | | Reclassification for amounts recognized as interest expense | $(1,818) | $(2,703) | $(3,634) | $(5,500) | | Total other comprehensive (loss) income | $(3,281) | $— | $(8,510) | $5,073 | | COMPREHENSIVE LOSS | $(15,838) | $(10,427) | $(19,476) | $(1,689) | Condensed Consolidated Statements of Stockholders' Equity Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Metric (in thousands) | Balance at Dec 31, 2024 | Issuance of common stock, net | Stock-based compensation, net | Shares withheld on vesting | Decrease in fair value of cash flow hedges | Reclassification for interest expense | Net loss | Dividends to common stockholders | Balance at Jun 30, 2025 | | :-------------------- | :---------------------- | :---------------------------- | :---------------------------- | :------------------------- | :----------------------------------------- | :------------------------------------ | :------- | :------------------------------- | :---------------------- | | Common Stock (Shares) | 28,242 | — | 228 | (102) | — | — | — | — | 28,368 | | Common Stock (Amount) | $282 | $— | $2 | $— | $— | $— | $— | $— | $284 | | Additional Paid-in Capital | $704,524 | $(121) | $9,830 | $(1,735) | $— | $— | $— | $— | $712,498 | | Cumulative Net Income | $85,675 | $— | $— | $— | $— | $— | $(10,966) | $— | $74,709 | | Accumulated Other Comprehensive Income | $17,631 | $— | $— | $— | $(4,876) | $(3,634) | $— | $— | $9,121 | | Cumulative Dividends | $(332,147) | $— | $— | $— | $— | $— | $— | $(26,645) | $(358,792) | | Total Stockholders' Equity | $475,965 | $(121) | $9,832 | $(1,735) | $(4,876) | $(3,634) | $(10,966) | $(26,645) | $437,820 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | | :-------------------- | :------------ | :------------ | | Net cash provided by operating activities | $28,208 | $29,372 | | Net cash used in investing activities | $(13,032) | $(68,797) | | Net cash (used in) provided by financing activities | $(14,697) | $35,526 | | Increase (decrease) in cash, cash equivalents and restricted cash | $479 | $(3,899) | | Cash, cash equivalents and restricted cash, beginning of period | $4,384 | $4,633 | | Cash, cash equivalents and restricted cash, end of period | $4,863 | $734 | - Operating activities provided $28.2 million in cash for the six months ended June 30, 2025, a slight decrease from $29.4 million in 2024. Investing activities used significantly less cash in 2025 ($13.0 million) compared to 2024 ($68.8 million), primarily due to fewer real estate acquisitions. Financing activities shifted from providing $35.5 million in 2024 to using $14.7 million in 2025, mainly due to lower net borrowings on the revolving credit facility and no proceeds from common stock issuance in 2025[18] Notes to Condensed Consolidated Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Details the Company's healthcare real estate business, accounting policies, financial statement presentation, and the impact of recently issued accounting pronouncements - Community Healthcare Trust Incorporated is a fully-integrated healthcare real estate company owning and acquiring properties leased to healthcare providers. As of June 30, 2025, it had gross investments of approximately $1.2 billion in 200 properties across 36 states, with an occupancy rate of approximately 90.7% and a weighted average remaining lease term of approximately 6.6 years[20] - The Company operates and manages its business as one reportable operating segment, with the CEO acting as the chief operating decision maker[23] - New accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Disaggregation of Income Statement Expenses), are effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively. While not expected to impact financial statements, they will require incremental disclosures[25][26] NOTE 2. REAL ESTATE INVESTMENTS Details the Company's real estate investments, categorized by property type, geographic location, and primary tenant, showcasing portfolio diversification Real Estate Investments by Property Type (as of June 30, 2025) | Property Type | of Properties | Gross Investment (in thousands) | | :---------------------------- | :-------------- | :------------------------------ | | Medical Office Building | 93 | $472,188 | | Inpatient Rehabilitation Hospitals | 9 | $198,319 | | Acute Inpatient Behavioral | 5 | $130,535 | | Specialty Centers | 36 | $116,771 | | Physician Clinics | 35 | $108,634 | | Behavioral Specialty Facilities | 13 | $75,271 | | Surgical Centers and Hospitals | 7 | $48,644 | | Long-term Acute Care Hospitals | 2 | $21,484 | | Total | 200 | $1,171,846 | Real Estate Investments by State (as of June 30, 2025) | State | of Properties | Gross Investment (in thousands) | | :---------- | :-------------- | :------------------------------ | | Texas | 16 | $184,275 | | Illinois | 20 | $140,956 | | Ohio | 25 | $115,518 | | Florida | 25 | $110,324 | | Pennsylvania | 16 | $68,043 | | All Others | 98 | $552,730 | | Total | 200 | $1,171,846 | Real Estate Investments by Primary Tenant (as of June 30, 2025) | Primary Tenant | of Properties | Gross Investment (in thousands) | | :---------------------- | :-------------- | :------------------------------ | | Lifepoint Health | 5 | $86,712 | | US HealthVest | 3 | $77,964 | | All Others (less than 4%) | 192 | $1,007,170 | | Total | 200 | $1,171,846 | NOTE 3. REAL ESTATE LEASES Details the Company's role as lessor and lessee, outlining lease terms, future minimum payments, purchase options, and ground lease obligations Future Minimum Lease Payments (Lessor) (in thousands) | Year | Amount | | :-------------------- | :-------- | | 2025 (six months ended December 31) | $51,112 | | 2026 | $96,061 | | 2027 | $88,618 | | 2028 | $81,757 | | 2029 | $71,842 | | 2030 and thereafter | $383,555 | | Total | $772,945 | - As of June 30, 2025, the Company had an aggregate gross investment of approximately $37.4 million in twelve real estate properties with unexercised purchase options[31] Future Lease Payments (Lessee) for Ground Leases (in thousands) | Year | Operating Lease | Financing Lease | | :-------------------- | :-------------- | :-------------- | | 2025 (six months ended December 31) | $22 | $77 | | 2026 | $44 | $154 | | 2027 | $45 | $154 | | 2028 | $46 | $154 | | 2029 | $47 | $154 | | 2030 and thereafter | $1,055 | $6,649 | | Total undiscounted lease payments | $1,259 | $7,342 | | Discount | $(503) | $(4,088) | | Lease liabilities | $756 | $3,254 | NOTE 4. REAL ESTATE ACQUISITION, DISPOSITIONS, AND ASSET HELD FOR SALE Details the Company's real estate acquisition and disposition activities, including a Q1 2025 acquisition, property sales, lease reclassifications, and assets held for sale with impairment charges - During Q1 2025, the Company acquired a behavioral specialty facility in Cartersville, GA, for approximately $9.7 million cash consideration. The property is 100% leased with an expiration in 2040[36] - In Q2 2025, the Company disposed of an Ohio building for $0.6 million net proceeds, recognizing a $0.2 million gain. Additionally, an operating lease was amended to a sales-type lease, reclassifying $3.7 million of real estate to other assets and recognizing a $1.3 million gain[37][38] - The Company had one property classified as held for sale as of June 30, 2025, on which impairment charges of $0.9 million were recorded in Q2 2025[39] NOTE 5. DEBT, NET Details the Company's debt structure, focusing on the Credit Facility, including outstanding amounts, maturity dates, interest rates, and financial covenant compliance Company's Debt (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | Maturity Dates | | :-------------------- | :------------ | :---------------- | :------------- | | Revolving Credit Facility | $226,000 | $212,000 | 10/29 | | A-4 Term Loan, net | $124,692 | $124,635 | 3/28 | | A-5 Term Loan, net | $149,385 | $149,320 | 3/30 | | Total | $500,077 | $485,955 | | - The Credit Facility includes a $400.0 million revolving credit facility (maturing Oct 2029) and $275.0 million in term loans (A-4 maturing Mar 2028, A-5 maturing Mar 2030). As of June 30, 2025, $226.0 million was outstanding on the Revolving Credit Facility, with $174.0 million remaining borrowing capacity[43][44] - The Company has fixed interest rates on the $275.0 million Term Loans and $75.0 million of the Revolving Credit Facility through interest rate swaps, with an aggregate fixed weighted average interest rate of approximately 4.7% and 3.8% respectively. The floating rate for the unhedged $151.0 million of the Revolving Credit Facility was approximately 6.0% at June 30, 2025[46] NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS Details the Company's use of derivative financial instruments, primarily interest rate swaps, to manage interest rate risk, including fair value disclosures and cash flow hedge accounting impact - The Company uses interest rate swaps to hedge interest rate risk, aiming to stabilize interest expense. As of June 30, 2025, it had fifteen outstanding interest rate derivatives designated as cash flow hedges for notional amounts totaling $350.0 million, maturing between 2026 and 2030[48][49][50] Fair Value of Interest Rate Swaps (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Interest rate swaps (Other assets, net) | $9,121 | $17,631 | - Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (AOCI) and reclassified to interest expense as payments are made. An estimated $5.2 million will be reclassified from AOCI as a decrease to interest expense over the next twelve months[53][54] NOTE 7. STOCKHOLDERS' EQUITY Provides a reconciliation of common stock balances and details the Company's At-The-Market (ATM) Program for issuing common stock Common Stock Balance Reconciliation (in thousands) | Metric | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | | :-------------------------- | :----------------------------- | :--------------------------- | | Balance, beginning of period | 28,242 | 27,613 | | Issuance of common stock | — | 313 | | Vested RSUs | 28 | 11 | | Restricted stock issued, net of withheld shares and forfeitures | 98 | 305 | | Balance, end of period | 28,368 | 28,242 | - The Company amended its ATM Program on February 18, 2025, allowing it to issue and sell up to $300.0 million in common stock. No shares were issued under this program during the six months ended June 30, 2025, leaving the full $300.0 million capacity remaining[62][63][64] NOTE 8. NET LOSS PER COMMON SHARE Presents the computation of basic and diluted net loss per common share for the three and six months ended June 30, 2025 and 2024 Net Loss Per Common Share (Three and Six Months Ended June 30) | Metric (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(12,557) | $(10,427) | $(10,966) | $(6,762) | | Participating securities' share in earnings | $(770) | $(657) | $(1,528) | $(1,303) | | Net loss, less participating securities' share in earnings | $(13,327) | $(11,084) | $(12,494) | $(8,065) | | Weighted average Common Shares outstanding–Basic | 26,803 | 26,479 | 26,768 | 26,388 | | Weighted average Common Shares outstanding–Diluted | 26,803 | 26,479 | 26,768 | 26,388 | | Basic Net Loss Per Common Share | $(0.50) | $(0.42) | $(0.47) | $(0.31) | | Diluted Net Loss Per Common Share | $(0.50) | $(0.42) | $(0.47) | $(0.31) | NOTE 9. STOCK INCENTIVE PLAN Summarizes the Company's restricted stock award and RSU activity, including grants, vesting, forfeitures, compensation expenses, and accelerated amortization from an executive termination Restricted Stock Award Activity (in thousands) | Metric (Dollars and shares) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock-based awards, beginning of period | 1,598 | 1,380 | 1,560 | 1,374 | | Total stock granted | 84 | 54 | 203 | 144 | | Vested shares | (225) | (17) | (306) | (101) | | Forfeited shares | (2) | — | (2) | — | | Stock-based awards, end of period | 1,455 | 1,417 | 1,455 | 1,417 | | Amortization expense | $6,735 | $2,152 | $9,360 | $4,260 | - Amortization expense for restricted stock awards for the three and six months ended June 30, 2025, includes $4.4 million in accelerated amortization due to an executive termination[68] - The Company recognized $4.6 million of accelerated amortization expense in Q2 2025 due to the termination of its former Executive Vice President, Asset Management, which resulted in the immediate vesting of 198,015 restricted shares and 18,275 restricted stock units[74] NOTE 10. OTHER ASSETS, NET Provides a detailed breakdown of the Company's other assets, net, including receivables, fair value of interest rate swaps, notes receivable, and significant credit loss reserves Other Assets, Net (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Straight-line rent receivables, net | $22,248 | $20,426 | | Fair value of interest rate swaps | $9,121 | $17,631 | | Sales-type lessor receivable | $8,004 | $3,012 | | Notes receivable, net of credit loss reserve | $2,080 | $15,727 | | Mortgage note receivable | $2,000 | $2,000 | | Accounts and interest receivables, net | $1,709 | $4,138 | | Total Other assets, net | $60,613 | $78,102 | - In Q2 2025, the Company recognized an additional credit loss reserve of approximately $8.7 million for notes and $1.7 million for interest receivable related to a geriatric inpatient behavioral hospital tenant, due to collectability concerns[79] - A note receivable secured by seven long-term acute care hospitals and one inpatient rehabilitation hospital was prepaid in full in June 2025, with a balance of $3.0 million at December 31, 2024[78] NOTE 11. OTHER LIABILITIES, NET Provides a breakdown of the Company's other liabilities, net, including prepaid rent, security deposits, and lease intangibles Other Liabilities, Net (in thousands) | Liability Type | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Prepaid rent | $5,813 | $6,504 | | Security deposits | $2,677 | $2,975 | | Below-market lease intangibles, net | $1,940 | $2,359 | | Financing lease liability | $3,254 | $3,262 | | Operating lease liability | $756 | $763 | | Total Other liabilities, net | $14,451 | $16,354 | NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS Describes methods and assumptions for estimating fair value of financial instruments, including cash, notes, Credit Facility borrowings, and derivatives, with a table detailing carrying and fair values Fair Values and Carrying Values of Financial Instruments (in thousands) | Instrument | June 30, 2025 Carrying Value | June 30, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :---------------------------------- | :----------------------------- | :----------------------- | :------------------------------- | :--------------------------- | | Notes and mortgage note receivable, level 2 | $4,080 | $4,170 | $7,180 | $7,248 | | Notes receivable, net of credit loss, level 3 | $— | $— | $10,547 | $10,547 | | Interest rate swap asset | $9,121 | $9,121 | $17,631 | $17,631 | - Fair value estimates for cash and cash equivalents use Level 1 inputs, while notes and mortgage notes receivable, Credit Facility borrowings, and derivative financial instruments primarily use Level 2 inputs. Notes receivable, net of credit loss, are classified as Level 3 due to valuation based on underlying collateral[85][86][87][88] NOTE 13. COMMITMENTS AND CONTINGENCIES Outlines the Company's commitments for tenant and capital improvements, along with its legal proceedings - As of June 30, 2025, the Company had approximately $29.4 million in commitments for tenant improvements, with $7.2 million related to one ongoing redevelopment project. It also had $4.1 million in commitments for capital improvement projects, with $1.6 million related to two ongoing redevelopment projects[93][94] - The Company is not aware of any pending or threatened litigation that would have a material adverse effect on its financial statements[95] NOTE 14. SUBSEQUENT EVENTS Reports significant events after June 30, 2025, including a dividend declaration, a property acquisition, and RSU issuances - On July 24, 2025, the Board declared a quarterly common stock dividend of $0.4725 per share, payable August 22, 2025[96] - On July 9, 2025, the Company acquired an inpatient rehabilitation facility in Florida for approximately $26.5 million, funded by the Revolving Credit Facility and cash on hand. The property is 100% leased with an expiration in 2040[97] - On July 24, 2025, the Company granted performance-based and time-based RSUs to executive officers, with vesting tied to Absolute TSR, Relative TSR, and continued service through June 2026, 2027, and 2028[98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition, operations, and cash flows, discussing key trends, acquisitions, credit losses, non-GAAP measures, liquidity, and capital resources Overview - Community Healthcare Trust Incorporated is a self-administered, self-managed healthcare REIT that acquires and owns properties leased to hospitals, doctors, healthcare systems, or other healthcare service providers[102] Trends and Matters Impacting Operating Results Management monitors factors impacting operations, including acquisitions, dispositions, pipeline, leased square footage, credit losses, accelerated compensation amortization, and inflation - The Company acquired a behavioral specialty facility for approximately $9.7 million in Q1 2025, which became a recognized real estate purchase in Q2 2025[104] - A subsequent acquisition of an inpatient rehabilitation facility in Florida for approximately $26.5 million occurred on July 9, 2025[105] - The Company has six properties under definitive purchase agreements for an aggregate expected purchase price of approximately $146.0 million, anticipated to close throughout 2025, 2026, and 2027[106] - As of June 30, 2025, the real estate portfolio was approximately 90.7% leased, excluding one property held for sale[108] - An additional credit loss reserve of approximately $8.7 million for notes and $1.7 million for interest receivable was recognized in Q2 2025 due to collectability concerns with a geriatric inpatient behavioral hospital tenant[111] - The termination of the former Executive Vice President, Asset Management, resulted in $4.6 million of accelerated amortization expense for unvested restricted shares and RSUs, plus $1.3 million in severance and transition-related expenses[112] - Inflation and rising interest rates pose risks, potentially increasing expenses, capital expenditures, and variable-rate borrowing costs, although many leases include provisions for annual rent increases[113] Results of Operations Analyzes the Company's financial performance for the three and six months ended June 30, 2025 and 2024, highlighting changes in revenues, expenses, gains, interest expense, and credit loss reserves Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 - Rental income increased by $2.2 million (8.0%) due to properties acquired in 2024 and 2025 ($0.8 million) and a $1.2 million increase from the reversal of revenues related to a geriatric behavioral hospital tenant[115] - General and administrative expenses increased by $5.8 million, primarily due to $4.6 million in non-cash accelerated amortization of deferred compensation and $1.3 million in severance and transition-related expenses from an executive termination[117] - Interest expense increased by $0.6 million (10.1%) due to higher weighted average balance and interest rates on the Credit Facility[119] - An additional credit loss reserve of $8.7 million was recorded in Q2 2025 for notes receivable with a geriatric inpatient behavioral hospital tenant, following an $11.0 million reserve in Q2 2024[120] Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 - Rental income increased by $3.6 million (6.4%), driven by $2.7 million from acquired properties and $0.4 million from the reversal of revenues related to the geriatric behavioral hospital tenant[122] - General and administrative expenses increased by $6.3 million (68.1%), mainly due to $4.6 million in accelerated amortization and $1.3 million in severance/transition expenses from an executive termination, plus a $0.7 million increase in other compensation expense[125][128] - Interest expense increased by $1.9 million (17.2%) due to higher weighted average balance and interest rates on the Credit Facility, including the replacement of maturing interest rate swaps with higher-rate forward-starting swaps[127] - Gains on sale, net of impairment, increased by $0.8 million, primarily from a $1.3 million gain on a sales-type lease and a $0.2 million gain on property sale, partially offset by a $0.9 million impairment on a property held for sale[126][128] Non-GAAP Financial Measures and Key Performance Indicators Presents and reconciles non-GAAP financial measures like FFO, AFFO, NOI, and EBITDAre, used to evaluate operating performance by excluding certain non-cash items and adjustments FFO and AFFO Reconciliation (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(12,557) | $(10,427) | $(10,966) | $(6,762) | | Real estate depreciation and amortization | 10,861 | 10,895 | 21,938 | 21,273 | | Gains on sale, net of impairments | (640) | 140 | (640) | 140 | | Credit loss reserve | 8,672 | 11,000 | 8,672 | 11,000 | | FFO | 6,336 | 11,608 | 19,004 | 25,651 | | Straight-line rent | (1,184) | 204 | (1,823) | (551) | | Stock-based compensation | 2,531 | 2,469 | 5,241 | 4,893 | | Accelerated amortization of deferred compensation | 4,591 | — | 4,591 | — | | Severance and transition related expenses | 1,311 | — | 1,311 | — | | AFFO | $13,585 | $14,281 | $28,324 | $29,993 | | FFO per diluted common share | $0.23 | $0.43 | $0.70 | $0.96 | | AFFO per diluted common share | $0.50 | $0.53 | $1.05 | $1.12 | NOI Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(12,557) | $(10,427) | $(10,966) | $(6,762) | | General and administrative (excluding severance) | 4,657 | 4,760 | 9,757 | 9,314 | | Severance and transition-related compensation | 5,902 | — | 5,902 | — | | Depreciation and amortization | 10,879 | 10,792 | 21,822 | 21,054 | | Gains on sale, net of impairments | (640) | 140 | (640) | 140 | | Credit loss reserve | 8,672 | 11,000 | 8,672 | 11,000 | | Interest expense | 6,592 | 5,986 | 12,944 | 11,048 | | Interest and other income, net | (5) | (307) | (8) | (308) | | NOI | $23,500 | $21,944 | $47,483 | $45,486 | EBITDAre and Adjusted EBITDAre Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(12,557) | $(10,427) | $(10,966) | $(6,762) | | Interest expense | 6,592 | 5,986 | 12,944 | 11,048 | | Depreciation and amortization | 10,879 | 10,792 | 21,822 | 21,054 | | Gains on sale, net of impairments | (640) | 140 | (640) | 140 | | EBITDAre | $4,274 | $6,491 | $23,160 | $25,480 | | Non-cash stock-based compensation expense | 2,531 | 2,469 | 5,241 | 4,893 | | Accelerated amortization of deferred compensation | 4,591 | — | 4,591 | — | | Credit loss reserve | 8,672 | 11,000 | 8,672 | 11,000 | | Adjusted EBITDAre | $20,068 | $19,960 | $41,664 | $41,373 | Liquidity and Capital Resources Discusses the Company's liquidity management, financing policies, and cash flows, detailing the Credit Facility, acquisition pipeline, commitments, notes receivable, and equity programs - The Company's financing policy limits aggregate debt to 40% of total capitalization, with the ratio at approximately 41.6% as of June 30, 2025[150] - Primary liquidity sources include rental income, operating expense reimbursements, cash on hand, cash flows from operations, and proceeds from equity/debt issuances, the Revolving Credit Facility, or asset sales[151][152] - As of June 30, 2025, the Company had $226.0 million outstanding on its Revolving Credit Facility (maturity Oct 2029) and $275.0 million in Term Loans (maturities 2028-2030), with $174.0 million remaining borrowing capacity on the Revolving Credit Facility[154] - The Company has an acquisition pipeline of six properties under definitive purchase agreements for an aggregate expected purchase price of approximately $146.0 million, anticipated to close throughout 2025, 2026, and 2027[158] - Cash flows provided by operating activities were $28.2 million for the six months ended June 30, 2025, down from $29.4 million in 2024. Investing activities used $13.0 million in 2025, a significant decrease from $68.8 million in 2024. Financing activities used $14.7 million in 2025, compared to providing $35.5 million in 2024[164][165][167] - The Company declared a quarterly common stock dividend of $0.4725 per share on July 24, 2025, equating to an annualized dividend of $1.89 per share[170] Item 3. Quantitative and Qualitative Disclosures about Market Risk Addresses the Company's exposure to market interest rate risk and its use of derivative financial instruments to manage this risk, confirming no material changes since the previous annual report - The Company's income, cash flows, and fair values are sensitive to market interest rates. It uses derivative financial instruments, such as interest rate swaps, to hedge interest rate risks associated with borrowings, not for speculative purposes[172] - There were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, during the six months ended June 30, 2025[172] Item 4. Controls and Procedures Reports on the effectiveness of the Company's disclosure controls and procedures and any changes in internal control over financial reporting - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[173] - There were no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025[174] PART II. OTHER INFORMATION Item 1. Legal Proceedings Confirms the Company is not involved in any pending or threatened litigation that would materially adversely affect its financial position, results of operations, or cash flows - The Company is not aware of any pending or threatened litigation that, if resolved against it, would have a material adverse effect on its consolidated financial position, results of operations, or cash flows[175] Item 1A. Risk Factors Refers to risk factors in the Annual Report on Form 10-K, highlighting material changes, specifically potential adverse effects from U.S. trade policy changes - No material changes to risk factors were reported other than potential adverse effects on business, financial condition, and results of operations from significant changes or discussions regarding U.S. trade policies, treaties, and tariffs[176][177] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports on shares of common stock canceled to satisfy employee tax withholding obligations upon the vesting of stock-based awards during the quarter ended June 30, 2025 Shares Canceled for Employee Tax Withholding (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per share | | :-------------- | :------------------------------- | :--------------------------- | | April 1 - April 30 | — | $— | | May 1 - May 30 | 78 | $16.36 | | June 1 - June 30 | 2 | $16.77 | | Total | 80 | | Item 3. Defaults Upon Senior Securities States that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities during the reporting period[179] Item 4. Mine Safety Disclosures Indicates that there are no mine safety disclosures to report - There are no mine safety disclosures to report[180] Item 5. Other Information Details recent changes to equity vesting conditions upon retirement, reports on RSU issuances to executive officers, and provides a statement on Rule 10b5-1 trading arrangements - Effective July 24, 2025, the Board approved an amendment to equity vesting upon retirement, requiring at least one year of continuous employment and one year's written notice of retirement for award shares to vest[181] - On July 24, 2025, performance-based and time-based RSUs were granted to executive officers, with vesting contingent on Absolute TSR, Relative TSR (measured over three years from July 1, 2025), and ratable vesting for time-based RSUs on June 30, 2026, 2027, and 2028[182] - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[183] Item 6. Exhibits Lists all exhibits filed with the report, including corporate documents, certifications, and XBRL-related files - The report includes various exhibits such as the Corporate Charter, Amended and Restated Bylaws, Severance Agreement, CEO and CFO certifications (31.1, 31.2, 32.1), and Inline XBRL documents[184] SIGNATURES Contains the official signatures of the registrant's authorized officers, confirming the submission of the report - The report was signed on July 29, 2025, by David H. Dupuy, Chief Executive Officer and President, and William G. Monroe IV, Executive Vice President and Chief Financial Officer[191]