Community Healthcare Trust (NYSE:CHCT) outlined a strategic plan centered on retaining more capital for acquisitions, improving occupancy and recycling assets after reporting second-quarter adjusted funds from operations of $0.56 per diluted share, unchanged from the first quarter.
Chief Executive Officer Dave Dupuy said the company is reducing its quarterly dividend to $0.33 per share from $0.48 per share. The change is expected to retain $25 million to $30 million of capital over the next two years for acquisitions and portfolio investments.
Capital Plan and Dividend Policy
Chief Financial Officer Bill Monroe said the lower dividend could retain up to $15 million annually. At an approximately 40% debt-to-capitalization level, he said that retained cash flow could support up to $25 million of additional annual acquisitions or reinvestment, assuming 9% to 10% yields.
Monroe estimated the strategy could generate $0.06 to $0.07 of incremental AFFO growth per year. Going forward, Community Healthcare Trust expects to review its dividend annually rather than quarterly and target an AFFO payout ratio of roughly 60% to 65%.
Dupuy said the board’s decision was driven by the need to resume growth after the company’s share price remained in a relatively narrow range over the past two years. He said there was no single event that prompted the decision.
“The only way we were going to be able to pull it out is for us to do something different from a growth perspective,” Dupuy said.
Occupancy, Redevelopment and Asset Sales
The company identified four priorities in its strategic plan: occupancy improvement, portfolio reinvestment, strategic capital recycling and accelerated acquisition growth.
Community Healthcare Trust is targeting occupancy of 90.5% by the end of 2026, an increase of 70 basis points, and sees a path to reach 92% occupancy within 18 months. Dupuy said the company could reach that level as early as the end of 2027, while noting that rent commencement can lag signed leases.
The company has signed more than 100,000 square feet of new leases year to date, exceeding its leasing volume for all of 2025, according to Dupuy. Fully realizing anticipated occupancy gains and rent growth could provide as much as $6 million in net operating income upside, he said.
Dupuy attributed the leasing outlook in part to lower lease expirations following heavier turnover in 2025 and 2026, as well as demand for healthcare space. He said the company expanded its leasing and asset-management capabilities over the last two years, including hiring Senior Vice President of Asset Management Mark Kearns more than a year ago.
For redevelopment, the company is targeting projects with 9% to 12% yields on cost. Dupuy highlighted a completed behavioral hospital in Lafayette, Louisiana, operated through a joint venture between Ochsner Health and Oceans Behavioral Health. Lease commencement at the property occurred early in the third quarter.
Community Healthcare Trust also has three speculative-suite projects underway in higher-demand markets. Dupuy said the projects are generally small, designed for physician-group practices, and are intended to reduce the time required to accommodate prospective tenants. He said redevelopment activity has historically totaled about $10 million to $15 million over a three-year period and could remain around that level over time.
Since beginning its asset-recycling initiative in 2025, the company has sold seven properties for $38.5 million in net proceeds. More than $70 million of assets are currently being marketed for sale. Dupuy said most of those properties are fully occupied, although fewer than five empty properties are also being marketed and are expected to generate relatively modest proceeds.
Acquisition Pipeline and Behavioral Hospital Tenant
The company expects to complete $85 million to $90 million in acquisitions during 2026, compared with acquisition volume of $64.5 million and $72.1 million over the prior two years, according to Dupuy. The planned growth is to be funded through disposition proceeds and cash retained under the revised dividend policy.
Community Healthcare Trust has signed definitive purchase and sale agreements to acquire four properties after their completion and occupancy, representing an aggregate expected investment of $99 million. Expected returns range from 9.1% to 9.75%.
One of those acquisitions is expected to close in the third quarter, another in the fourth quarter, and the remaining two in the second half of 2027. Dupuy also said the company could complete an additional $5 million to $15 million of selective acquisitions in the fourth quarter and $20 million to $30 million of such transactions next year.
On the tenant front, the geriatric behavioral hospital operator leasing six Community Healthcare Trust properties paid about $370,000 in rent during the second quarter, up $70,000 from the first quarter. The operator has signed a letter of intent with an experienced behavioral healthcare operator to sell the operations of all six facilities.
Dupuy said the prospective buyer has moved into drafting definitive purchase agreements, including new leases for the six properties. The company anticipates a signed purchase agreement during the third quarter and is targeting a closing by year-end, though he cautioned that the transaction remains subject to documentation and closing conditions.
He said the tenant’s operational improvement and increased rent payments provide flexibility should the transaction not close, and that other potential operators have expressed interest.
Second-Quarter Results
For the second quarter, Community Healthcare Trust reported total revenue of $31.2 million, property operating expenses of $5.9 million, general and administrative expense of $4.9 million, and interest expense of $7.4 million.
Funds from operations totaled $13.2 million, or $0.48 per diluted common share. AFFO totaled $15.4 million, or $0.56 per diluted common share, matching the first-quarter level.
The company also said it expanded its supplemental disclosures to include funds available for distribution calculations, capital-expenditure detail, ownership structures, leasing activity, lease types and portfolio annual escalators.
About Community Healthcare Trust (NYSE:CHCT)
Community Healthcare Trust Incorporated (NYSE:CHCT) is a real estate investment trust that specializes in owning and leasing healthcare-related properties. The company’s portfolio is focused primarily on senior housing and care facilities, including skilled nursing centers, assisted living communities, memory care units, independent living apartments and continuing care retirement communities. Through long‐term, triple‐net leases, Community Healthcare Trust seeks stable, predictable cash flows by partnering with experienced operators that manage day-to-day resident care and property operations.
As of the latest reporting, Community Healthcare Trust’s holdings span multiple regions across the United States, with properties located in both urban and suburban markets.
