Welcome to the Community Healthcare Trust 2024 second quarter earnings release conference call. On the call today, the company will discuss its 2024 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, www.chct.reit. 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, July 31st, 2024, 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 a 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. All 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. Great, and good morning. Thank you for joining us today for our 2024 second quarter conference call. On the call with me today is Bill Monroe, our Chief Financial Officer, Leigh Ann Stach, our Chief Accounting Officer, and Tim Meyer, our EVP of Asset Management. Our earnings announcement and supplemental data report were released last night and furnished on Form 8-K, along with our quarterly report on Form 10-Q. In addition, an updated investor presentation was posted to our website last night. As disclosed in our filings, we determined that certain lease and interest payments from a geriatric inpatient psychiatric hospital tenant were not reasonably assured of collection. CHCT had 6 leases with the tenant, and it is the sole tenant in 5 of our properties, with 1 lease in a multi-tenanted property representing a total of approximately 79,000 sq ft. As a geriatric psychiatric hospital operator, COVID had a significant impact on the tenant's business through 2022, and during this time, the tenant was in process of expanding locations, which led to a more pronounced impact. In 2023, the company improved census, installed a new revenue cycle management system, and made other operational improvements, resulting in improved performance. Unfortunately, recent management changes resulted in a decline in census, staff turnover, and ultimately impacted the tenant's ability to consistently pay rent and interest. The tenant has hired a consulting team with significant behavioral operating experience to implement a turnaround plan and to stabilize the business. CHCT has previous experience with this consulting team, and we have confidence in their ability to make the necessary changes to improve operations. We are working closely with the tenant and the consultants to monitor and evaluate progress with the turnaround. Bill will discuss in more detail the financial impacts from this tenant, but let me review what we believe to be the unique features of this tenant relationship compared to the rest of our portfolio. Most importantly, this tenant is the only top 10 tenant where we are also a lender. To improve transparency of our top tenants, we are now including in our supplemental data report an investor presentation, not just those tenants with greater than 4% of annualized rent, but a listing of all top 10 tenants. Another aspect of this tenant relationship that I mentioned earlier was that COVID significantly impacted this tenant, given its geriatric patient base, during a time when it had also recently expanded locations. Because this tenant is a private founder-owned business, CHCT helped finance the tenant's expansion, leading to CHCT's $22,700,00 in notes receivable across a term loan and revolving credit facility. This $22,700,000 is by far our largest lending relationship, with our only other notes receivable currently outstanding, consisting of a $4,500,000 term loan to a long-term acute care and inpatient rehab, rehab hospital tenant and a $2,200,000 revolving credit facility to a substance use and eating disorder mental health provider tenant. To conclude, we believe we can work closely with this tenant over the coming quarters to enhance returns on this unique investment within the portfolio. As for other components of the business, our occupancy increased slightly from 92.3%-.. - 92.6% during the quarter, and we continue to see good leasing activity in the portfolio. In addition, we have five properties or significant portions of those properties that are undergoing redevelopment or significant renovations, with long-term tenants in place when the renovations or redevelopment is completed. Also, our weighted average remaining lease term increased from 6.9 years- 7.1 years. During the second quarter, we acquired an inpatient rehabilitation facility for a purchase price of $23,500,000. We entered into a new lease with a lease expiration in 2039, an anticipated annual return of approximately 9.1%. Subsequent to June 30, we acquired one medical office building for a purchase price of approximately $6.2 million, an expected return of approximately 9.3%. The property is 100% leased, with a lease expiration in 2027. Also, the company has signed definitive purchase and sale agreements for 7 properties to be acquired after completion and occupancy for an aggregate expected investment of $169,500,000. The expected return on these investments should range from 9.1% - 9.75%. We expect to close on 1 of these properties in the fourth quarter of 2024, with the remaining 6 properties closing throughout 2025, 2026, and 2027. We continue to have many properties under review, with term sheets out on properties with indicative returns of 9%-10%. With our modest leverage levels, we anticipate having enough availability on our credit facilities and through our banking relationships to fund our acquisitions, and we expect to opportunistically utilize the ATM to strategically access the equity markets at favorable share prices. These traditional capital sources, combined with proceeds from selected asset sales, will provide sufficient capital for continued growth at attractive yields. To wrap up, we declared our dividend for the second quarter and raised it to $0.4625 per common share. This equates to an annualized dividend of $1.85 per share. We are proud to have raised our dividend every quarter since the IPO. That takes care of the items I wanted to cover, so I will hand things off to Bill to discuss the numbers. Thank you, Dave. I will now provide more details on our second quarter financial performance. Let me start by detailing the impacts to our second quarter financials related to the geriatric inpatient behavioral hospital tenant that Dave described earlier. Rental income in the second quarter was negatively impacted by the reversal of $1,900,000 of rent, which includes approximately $900,000 of non-cash straight line rent. Also, other operating interest in the second quarter was negatively impacted by the reversal of $1,400,000 of interest. Combined, these items reduced total revenue in the second quarter by approximately $3,200,000- $27,500,000. Compared to the second quarter of 2023, total revenue declined by $294,000, and compared to the first quarter of 2024, total revenue declined by $1,800,000. It is important to note that of the $3,200,000 impact to the second quarter total revenue I just described, only approximately $1,500,000 is the result of rental income and interest we expected to receive in the second quarter of 2024 from the geriatric inpatient behavioral hospital tenant, with the remaining amount resulting from one-time, out-of-period adjustments to prior period amounts outstanding, net of payments and security deposits. In addition to the reversals of rent and interest, we recorded an $11,000,000 credit loss reserve on the $22,000,000 notes receivable from the tenant. This credit loss reserve reduced net income and is based on an estimated value of the underlying collateral, which we will continue to monitor, but any future credit loss reserve reversals or increases will not impact FFO or AFFO. Moving to expenses, property operating expenses decreased by $219,000 quarter-over-quarter to $5,600,000, since the first quarter had higher seasonal expenses at several properties. General and administrative expenses increased by $206 thousand quarter-over-quarter to $4,800,000 n as a result of increased professional fees. Interest expense increased by $924,000 quarter-over-quarter to $6,000,000 because of increased borrowings under our revolving credit facility to fund the $23,500,000 of acquisitions during the second quarter of 2024, as well as the $27,700,000 of acquisitions during the final week of the first quarter of 2024. Moving to funds from operations, FFO was $11,600,000 in the second quarter of 2024. On a quarter-over-quarter basis, FFO decreased from $14 million in the first quarter of 2024, and on a per diluted common share basis over these periods, FFO declined from $0.53 to $0.43 per share. These decreases are primarily the result of the $3,200,000 of reversals of rent and interest described earlier. Adjusted funds from operations, or AFFO, which adjusts for straight-line rent and stock-based compensation, totaled $14,300,000 in the second quarter of 2024. On a quarter-over-quarter basis, AFFO decreased from $15,700,000 in the first quarter of 2024, and on a per diluted common share basis over these periods, AFFO declined from $0.59- $0.53 per share.... These decreases are also primarily the result of the $3,200,000 of reversals of rent and interest described earlier, net of approximately $900,000 of straight-line rent, which was added back, and that is why you see a smaller impact to AFFO quarter over quarter than FFO. I'll note that even at $0.53, our dividend remains well covered, with a current payout ratio of 87%. That concludes our prepared remarks. We're now ready to begin the question and answer session. Certainly. Thank you. We will now begin the question-and-answer session. To ask a question, you may press Star, then one on your touchtone telephone. 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. The first question comes from the line of Rob Stevenson with Janney. Please go ahead. Good morning, guys. Could you talk a little bit about, you know, how many facilities in total this tenant has and what percentage you represent of them, and, you know, sort of what, how these properties are performing versus maybe some of their others, in case they were to file bankruptcy and look to give up some leases? Yeah. So, hey, Rob, thanks for the question. We are, you know, this tenant has a total of six hospitals, and so the buildings that they have with us is really the entire, you know, makes up the entire complexion of their business. So, you know, obviously, the reduction in census has been the catalyst for some of the issues that they've been having in paying rent and interest. But, but anyway, what... Did that answer your question? Yeah. I mean, I guess the follow-up to that would wind up being, you know, how much revenue would be at risk here if they were in bankruptcy from where we've adjusted to thus far, and are any of the acquisitions in the pipeline with this tenant? There are no acquisitions in the pipeline with this tenant. You know, the run rate amount of rent and interest associated with this tenant is approximately $1,500,000 a quarter. So that gives you a sense. And look, like I said, we've got, you know, consultants in there that we've worked with before, that's familiar with this tenant, and, you know, our intention and our thought is that that consultant will be able to help affect the turnaround that should allow them to start paying us rent at some point. It's difficult when you're in the middle of a turnaround to identify exactly when that is, but we are on top of this on a weekly basis, monitoring progress. Okay. I guess, how long were these guys on the watch list? I mean, was this a sort of slow process to get to here, or was it basically, you know, a couple of weeks, you know, and it was like flipping a switch? Just trying to get a sense as to, you know, these days, how quickly these problem assets are appearing on the radar screen, whether or not it's, you know, something that, you know, there's a little bit more warning for, or basically, you come in one day and find out that, you know, they're having much more difficulties than you imagined. Well, you know, one of the things I mentioned in the prepared remarks, because this has been a relationship for the firm for a while, so for the last, you know, from 2020 to 2022, during COVID, they were very much on the watch list, just given the nature of the business and the geriatric patient base and the challenges they were having ramping up the two new hospitals that we had that we had financed. And so, they were on the watch list then. They had fallen off the watch list in 2023, and the business was performing very, very well. Then with these management changes late in the fourth quarter of 2023, we started seeing some late rent and some concerns with regard to census and performance, and so they came back on the watch list in the first quarter. They made partial payments in the first quarter and second quarter, but ultimately it wasn't enough to make us comfortable that all of the rent was gonna be collectible, and so that's why we moved them to cash basis. Okay. And speaking of the watch list, how significant is that overall today? And anybody else, any other of the top tenants, on that list today? None of the other top tenants are currently on our watch list. You know, the watch list is similar today in terms of numbers than it was before, but, you know, obviously, very disappointing to us that such a large tenant on the heels of what we had to go through with GenesisCare last year, is having this issue and these problems. But, you know, again, we feel good about the top 10 list currently. We're very well diversified beyond, you know, these other tenants, and so we feel good about the portfolio overall. Okay, and then just one last one for me. Bill, how should we be thinking about the $0.53 of AFFO per share going forward? I know that that didn't get adjusted as much as the FFO, but is that-- is there other stuff that either has to come out of that or be added back to that in future quarters? Or is that still a, you know, a ballpark run rate for where the company is today, given the reductions with this one tenant? ... Yeah, I think until we see, you know, improvements from this tenant, we're kind of in the right ballpark. I mean, the short answer is, of the, you know, charges we took in the second quarter that were out of period, you know, charges, you know, you'd say, you know, approximately $750,000-$800,000 of AFFO should kind of be added back, on a run rate basis, you know, compared to where our second quarter AFFO was. You know, obviously, as we move forward, you know, we don't provide guidance, but, you know, interest expense, G&A, other things, will also be taken into account as far as what, you know, AFFO will be. But clearly, the biggest impetus to an increase quarter-over-quarter on an AFFO basis will be improved performance and payment of rent and interest from this tenant. Okay. That's helpful, guys. Thank you. Appreciate the time this morning. Thanks, Rob. Thank you. The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, good morning. Morning down there. Dave, I mean, I don't— As you have this tenant, and obviously, as you said, it's on the heels of Genesis, clearly something you guys didn't need. But, you know, one, these were all deals that were done before you guys took over, not casting blame, but clearly, you know, these were deals done years ago, not recently. So as you look at the portfolio and at your underwriting, you know, what are some of the lessons learned from Genesis and now here, that as you look at your acquisition pipeline and existing tenants, you go, Hey, you know, maybe we wanna kick these deals out, or, Hey, you know what? We have other tenants that look like Genesis or this tenant in terms of payment history or coming up a little light, you know, in their you know envelope when they pay the monthly rent. What are some of the things that you've seen and reassessments of existing tenants and acquisition pipeline? Yeah. Thanks, Alex. That's a great question. And I will say, in the wake of GenesisCare and this latest situation, you know, we have tightened our underwriting standards. The bar is higher. I will also tell you, you won't see us lend at these levels to a single tenant again. That just won't happen. So you know, obviously, COVID was a unique situation, and everyone who went through it, we all went through it, especially the geriatric population. Very unique situation. It was, but it drove significant borrowings from this tenant, and at the end of the day, you know, any slip in census had an impact on their ability to pay rent and interest. And so, you know, from our perspective, we're just gonna be more rigorous with our underwriting, and you're just not gonna see these same levels of loans to a single tenant going forward, because, you know, honestly, that is not in sync with our diversification strategy as a firm. So and that's very important to us. So that is a core lesson here for sure. But as far as... You know, it's not just the loan that went bad, it was the tenant as well, and certainly it happened with Genesis. So does this mean that you, you know, you wanna shy away from doing portfolio deals and, and stick to single asset deals? Or, like, how is this changing? And then also, why even lend anything to a tenant? Why not just keep it at purely a rental relationship? Well, every situation is unique, and so, you know, sometimes there are competitive reasons, sometimes there are very good reasons for us wanting to lend as part of an overall relationship. And what I would say, Alex, relative to portfolio deals, historically, we have been reluctant to do portfolio deals in a meaningful way. But, you know, going back to GenesisCare, look, you know, that was a portfolio deal. Ultimately, you know, it wasn't a fun process, and we were disappointed that the holdco was overleveraged and didn't perform. But ultimately, the performance at our facilities largely worked out. You know, it wasn't a fun process, but at the end of the day, you know, it's important that we underwrite each individual market and each individual property, because that is what is ultimately gonna drive rent and interest payment to us, whether from that tenant or a new tenant. So, I'm not gonna say we won't do a portfolio deal, 'cause there could be opportunities for us to do portfolio deals, but our underwriting standards are gonna be more rigorous. Okay, just the final question is, obviously, the stock's taken a bit of a hit, you know, to the... You know, do you reconsider, you know, the committed acquisition pipeline, or how does, how does, where the stock is now trading, change, you know, the, the goal of getting the pipeline back up to sort of that $130,000,000-$150,000,000 a year? Listen, we're very focused on all, you know, on looking at all sources of capital. We continue to have a modestly leveraged balance sheet. We don't think that this is going to impact in any way what we've committed to do in our pipeline. And actually, you know, we recognize as a small REIT, that even though we are definitely gonna be judicious with our capital, growth is what's gonna drive our performance. From a share price perspective, it's all about driving AFFO and FFO. And so, you know, we're just gonna be very strategic in how we do that, and we've got other levers than just the stock. We can do some capital recycling in the portfolio. We can borrow, just given our leverage levels and the support from our banks. And so, you know, overall, we feel very positive in our ability to access the various markets to be able to continue to fund our growth. Thank you. Thanks, Alex. Thank you. The next question comes from Michael Lewis with Truist. Please go ahead. All right, great. Thank you. So, Alex just asked one of the questions that I think is one of the more important questions, right? So the stock over the last 12 months was already down, you know, 18% or 20%, and I think investors were asking, you know, at what point is the cost of equity no longer acceptable to issue shares to fund new investments at 9 handle cap rates? You know, it's obviously, this morning, it's taken another leg down. It, it's... I know it's a tough question to answer. You don't want to put yourself in a box, but, you know, when does the cost of equity become prohibitive? Because I think there's a danger here, you know, if you lose access to kind of that capital or that spread over your investment yield. I don't know what more you could say on that. Maybe you already answered it. Well, you know, it is a tough one to answer, but what I would tell you is, you know, we're looking to make accretive acquisitions, and, you know, and those acquisitions need to drive overall, you know, revenue and AFFO growth for the company. And so we're highly sensitive as shareholders in the company about doing a dilutive equity raise and, you know, doing that in the ATM. And so we're gonna be, you know, very, mindful of that in terms of. And as I just mentioned earlier with the prior question, Michael, I mean, we've got opportunities within the portfolio to do some capital recycling to fund some growth. And so we do have other, you know, tools in our toolbox that will allow us to continue to grow without putting pressure on the stock. We recognize that that's not good for us, and ultimately, it's not good for driving AFFO growth. Bill, I don't know if you want to comment there. Yeah, I agree. Okay, thanks. And then, you know, you talked about your expectations to hopefully, you know, hopefully, the consultant helps and the tenant gets paying again. In a worst-case scenario, you know, where the tenant, you know, doesn't recover, are these properties, you know, do you think they're, you know, relatively easy to retenant or sell, or what kind of the plan would be? I don't mean to jump right to the worst case, but I think it's, you know, I think it's important to kind of judge what that might look like. Yeah. So, Michael, one of the benefits from having been in the healthcare services sector myself and Bill for a number of years, is we know a lot of operators in this space, and obviously, we have some tenants that are operators that would be interested in these assets. The short answer, without jumping to that scenario, is there are many potential buyers that we think, or operators, that we think would be interested in these psych hospitals. And there is a little bit of a scarcity value to these businesses. And so, you know, again, the business and these individual hospitals, I think, would be attractive to an individual potential buyer. Michael, it's Bill. I'll add that, you know, we have not seen, and we do not believe there's been a change in the competitive landscape in these local markets where this tenant operates, you know, such that it is more of an execution issue. And so I think that helps preserve, you know, what is the value of these properties, as we think about it. Okay. Because for whatever it's worth, I mean, we do see REITs and other healthcare sectors, you know, lose significant tenants, and the stocks don't take hits like this. I think it has to do with, you know, being able to reposition assets. But my last question, just on the acquisition pipeline, you know, I think the deal that you closed in the first quarter, you had already mentioned on the... Or I'm sorry, closed in the second quarter, you had already mentioned on the first quarter call. So, you know, has there not been any, you know, new activity over the last few months? And, you know, does the pipeline still seem full? Do you think you're still on target for your acquisition goals for the year? You know, we have, we have continued to be active seeing a number of deals. We've got term sheets outstanding, as I mentioned in the prepared remarks. You know, sometimes we've seen in the past where closings are a little bit slower in the third quarter, just the realities of summer and vacation schedules, et cetera. But, we do think that, hitting our acquisition target is certainly still achievable the balance of the year. And like I said, I think we're still seeing good activity from an acquisition standpoint, which doesn't always translate into closed deals, but it's certainly better than not seeing the activity. So, yes, we, we still feel like that that's, that's achievable. And, and Michael, I'll, I'll note, we did, include that we closed a $6,200,000 property early in, in the third quarter here. So, it didn't show up in the second quarter closed numbers, but we did mention it in our investor presentation that we did close an additional property early this quarter, just this month. Okay. Thank you. Thank you. Ladies and gentlemen, if you have a question, please press Star then One. Next question comes from Wes Golladay with RBC Capital Markets. Please go ahead. Hey, good morning, guys. It's actually Baird Capital. When you look at the lease expiration schedule, you have $107,000,000 of rent annually. Does that include the tenant that is having issues right now? And is that a cash number? I'd have to look. So I would think that it would include those leases in the number, but those leases that we have with the tenant don't. Yeah, that Those expire in the near term. Yeah, the lease maturities of the tenant we've been discussing is between 2030 and 2036. So no upcoming maturities with that tenant. Okay, I just wanna make sure the $107,000,000 incorporates that. And then when you look at what they're paying, they're on cash accounting now, would that Did they pay anything in the second quarter? Just a little bit, not much. Just some small payments. You know, we're not necessarily expecting to get meaningful payments in the third quarter either. I mean, this, they're in the middle of this turnaround, so yeah. Okay. Okay, now, and then when you look at the line of credit, you know, the utilization is getting higher, but then you could probably issue another term loan. How are you looking at that? Yeah, we had, you know, $41,000,000 available under our revolver, you know, at the end of the quarter. The next maturity is not until March 2026, but typically what we do is when we get within, you know, a year or so, you know, of those maturities, you know, look to term out those revolver borrowings. And so, you know, we'd anticipate, you know, taking a look at that, and, you know, again, have had success with our bank group, doing that historically. And, so we'd continue to evaluate that. Okay, thanks for the time. Thanks, Wes. Thank you. The next question comes from Jim Kammert with Evercore. Please go ahead. Good morning. Thank you. Do you have the ability, under the lease with this tenant in question, to replace them? Meaning, you know, they're in default. I presume they're not paying the rent, obviously. Why wait, in other words, and, you know, if these are desirable assets, try to parallel path and look for a replacement tenant or a new owner, I mean, pardon me, new operator? Hey, Jim, thanks for the question. Yes, we absolutely do have the ability to replace them. They're obviously in default of our lease, and we are taking multiple paths. We're not just kind of wed to the consultants, and we're looking at other options. But, you know, given the fact that this tenant, you know, has outstanding loans to us, and we think, you know, if you go back in 2023 and you see how this tenant was able to perform and pay their rent and interest, you know, certainly from our perspective, we wanna try to preserve options with this tenant. But, you know, I will say that they're on a short leash, and like I said, we've got a number of folks that we think could operate these facilities. And so we're, you know, obviously, we're aligned. We wanna make sure that we get a paying tenant in there. Hopefully, it's this tenant, but if it's not, we'll evaluate others. Great, 'cause I'm just trying to reconcile that with the prior comments that... That's very helpful, thanks. You know, you've taken basically a 50% reserve against the loan balance, and if these are, you know, this is basically the business entire network of hospitals could be saleable. Just trying to understand why such a draconian hit then on the receivable. If there's any additional color you can provide there, it seems sort of inconsistent with the premise that these are saleable, marketable assets. You know, maybe just go and recycle them. Thanks. Sell it. Yeah, no, listen, I hear you. It's, you know, it's just one of those processes you have to go through, that CECL requires you to go through, and it's a pretty- Uh. You know, structured accounting process that we have to take. And so that's what we went through. And look, at the end of the day, you know, you're trying to come up with a value for the business and be conservative, given the current environment. And so that's kind of what you're seeing there in terms of the reserve. But there's no question, we think that there is value in the operations here, and you know, we're trying to stabilize the business and make sure we can drive as much value from those operations as we can. Great, so you worked a little bit with your accountants, and so CECL really did drive that determination. It was not a sort of in-house- Correct. Okay, perfect. That, that's helpful. Thank you. Thanks. Yep. Thanks, Jim. Thank you. Thank you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Dave Dupuy for any closing remarks. Listen, thank you, operator, and thank you everyone for joining us, this morning. We hope everyone has a good day, and look forward to talking to you next quarter. Thank you. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.