Robert Stevenson Update: Community Healthcare Trust Inc (CHCT) - BUY 2Q16 Earnings REITView: Solid results; raising FV to $24

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FULL REPORT

Flash Takeaways:

CHCT reported 2Q16 FFOPS of $0.32 (Normalized was $0.34). We were at $0.31 per share, while consensus was at $0.32 per share. The 3 acquisitions ($33.5M) in 2Q16 and the 4 in the pipeline ($13.4M) are the main takeaways.

Analysts Notes:

  • Occupancy 93.0% at June 30. At the end of 2Q16, CHCT had investments in 48 properties and mortgages across 18 states, totaling roughly 1.1 million square feet, that were 93% occupied. We note that leases representing 7.2% of CHCT’s annualized rent will expire in 2H16, with roughly 12.2% expiring in 2017.

  • CHCT acquires 3 properties in 2Q16 for $33.5M. The 3 properties were 93.7% leased overall and total 153K square feet. CHCT had previously announced the acquisition of a 13,835 square foot surgery center in Arizona for $3.1M (100% leased) and the 85,000 square foot behavioral hospital in Des Plaines, IL for $20M (100% leased), for which CHCT had previously extended a $12.5M mortgage loan and subsequently exercised their purchase option. In addition to the two previously announced acquisitions, CHCT closed on a 54,611 square foot MOB in Independence, Ohio for $10.4M (82.3% leased).

  • Credit facility increased by $75M; dividend increased by $0.0025. On 8/10/16, CHCT increased the size of their credit facility from $75 million to $150 million, while also reducing their interest rate by 25bps. Additionally, the quarterly dividend increased by $0.0025 from $0.3775 to $0.3800.

  • Pipeline currently 4 properties totaling nearly $13.4M. CHCT has purchase agreements on four properties for a total cost of $13.4M. CHCT estimates an expected return on these properties in the range of 9.16%-9.97%.

  • Increasing 2016 FFOPS estimates. Given 2Q16 results, we are increasing our 2016 FFOPS estimate from $1.37 to $1.39 and our 2017 estimates from $1.53 to $1.57. Consensus is at $1.46 and $1.66, respectively. We are maintaining our Buy rating and are increasing our Fair Value estimate from $23 to $24.