10-Q 1 chct-20220331.htm 10-Q chct-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO
Commission file number: 001-37401
Community Healthcare Trust Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Maryland
46-5212033
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
3326 Aspen Grove Drive
Suite 150
Franklin, Tennessee 37067
(Address of Principal Executive Offices) (Zip Code)
(615771-3052
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading SymbolName of each exchange on which registered
Common stock, $0.01 par value per shareCHCTNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Emerging-growth company
Non-accelerated filer
Smaller reporting 
company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Yes       No
The Registrant had 25,072,355 shares of Common Stock, $0.01 par value per share, outstanding as of April 27, 2022.
1


COMMUNITY HEALTHCARE TRUST INCORPORATED
FORM 10-Q
March 31, 2022
TABLE OF CONTENTS
Page
2


PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
(Unaudited)
March 31, 2022December 31, 2021
ASSETS
Real estate properties
Land and land improvements
$98,561 $97,397 
Buildings, improvements, and lease intangibles
741,969 736,465 
Personal property
225 223 
Total real estate properties
840,755 834,085 
Less accumulated depreciation
(140,985)(133,056)
Total real estate properties, net
699,770 701,029 
Cash and cash equivalents
1,178 2,351 
Restricted cash
521 516 
Other assets, net
59,761 50,337 
Total assets
$761,230 $754,233 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net
$269,670 $265,625 
Accounts payable and accrued liabilities
6,894 7,845 
Other liabilities, net
13,552 18,651 
Total liabilities
290,116 292,121 
Commitments and contingencies


Stockholders' Equity
Preferred stock, $0.01 par value; 50,000 shares authorized; none issued and outstanding
  
Common stock, $0.01 par value; 450,000 shares authorized; 25,072 and 24,983 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
251 250 
Additional paid-in capital
597,548 595,624 
Cumulative net income
64,647 59,123 
Accumulated other comprehensive income (loss)
7,542 (4,980)
Cumulative dividends
(198,874)(187,905)
Total stockholders’ equity
471,114 462,112 
Total liabilities and stockholders' equity
$761,230 $754,233 

See accompanying notes to the condensed consolidated financial statements.
3


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Unaudited; Dollars and shares in thousands, except per share amounts)
Three Months Ended
March 31,
20222021
REVENUES
Rental income
$22,604 $20,780 
Other operating interest
877 615 
23,481 21,395 
EXPENSES
Property operating
4,091 3,729 
General and administrative
3,316 2,859 
Depreciation and amortization
7,942 7,225 
15,349 13,813 
INCOME BEFORE INCOME TAXES AND OTHER ITEMS
8,132 7,582 
Interest expense
(2,626)(2,229)
Deferred income tax benefit (expense)
17 (39)
Interest and other income
1 1 
NET INCOME
$5,524 $5,315 
NET INCOME PER COMMON SHARE:
Net income per common share – Basic
$0.21 $0.21 
Net income per common share – Diluted
$0.21 $0.21 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC
23,570 22,809 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED
23,570 22,809 

See accompanying notes to the condensed consolidated financial statements.
4


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Unaudited; Dollars in thousands)
Three Months Ended
March 31,
20222021
NET INCOME
$5,524 $5,315 
Other comprehensive income:
Increase in fair value of cash flow hedges
11,407 2,803 
Reclassification for amounts recognized as interest expense
1,115 932 
Total other comprehensive income
12,522 3,735 
COMPREHENSIVE INCOME
$18,046 $9,050 

See accompanying notes to the condensed consolidated financial statements.

5


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2022
(Unaudited; Dollars and shares in thousands, except per share amounts)
Preferred Stock
Common Stock
Additional Paid in Capital
Cumulative Net Income
Accumulated Other Comprehensive Income (Loss)
Cumulative Dividends
Total Stockholders' Equity
Shares
Amount
Shares
Amount
Balance at December 31, 2021 $ 24,983$250 $595,624 $59,123 $(4,980)$(187,905)$462,112 
Stock issuance costs— — — (197)— — — (197)
Stock-based compensation— — 891 2,121 — — — 2,122 
Unrecognized gain on cash flow hedges— — — — — 11,407 — 11,407 
Reclassification adjustment for losses included in net income (interest expense)— — — — — 1,115 — 1,115 
Net income— — — — 5,524 — — 5,524 
Dividends to common stockholders ($0.4375 per share)
— — — — — — (10,969)(10,969)
Balance at March 31, 2022 $ 25,072$251 $597,548 $64,647 $7,542 $(198,874)$471,114 


See accompanying notes to the condensed consolidated financial statements.
6


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(Unaudited; Dollars and shares in thousands, except per share amounts)
Preferred Stock
Common Stock
Additional Paid in Capital
Cumulative Net Income
Accumulated Other Comprehensive (Loss) Income
Cumulative Dividends
Total Stockholders' Equity
Shares
Amount
Shares
Amount
Balance at December 31, 2020 $ 23,888$239 $550,391 $36,631 $(11,846)$(145,499)$429,916 
Issuance of common stock, net of issuance costs— — 4354 19,841 — — — 19,845 
Stock-based compensation— — 941 1,549 — — — 1,550 
Unrecognized gain on cash flow hedges— — — — — 2,803 — 2,803 
Reclassification adjustment for losses included in net income (interest expense)— — — — — 932 — 932 
Net income— — — — 5,315 — — 5,315 
Dividends to common stockholders ($0.4275 per share)
— — — — — — (10,275)(10,275)
Balance at March 31, 2021 $ 24,417$244 $571,781 $41,946 $(8,111)$(155,774)$450,086 


See accompanying notes to the condensed consolidated financial statements.
7


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Three Months Ended
March 31,
20222021
OPERATING ACTIVITIES
Net income
$5,524 $5,315 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
7,942 7,225 
Other amortization
216 229 
Stock-based compensation
2,122 1,550 
Straight-line rent receivable
(820)(838)
Deferred income tax (benefit) expense
(17)39 
Changes in operating assets and liabilities:
Other assets
(844)(291)
Accounts payable and accrued liabilities
352 (820)
Other liabilities
(73)1,084 
Net cash provided by operating activities
14,402 13,493 
INVESTING ACTIVITIES
Acquisitions of real estate
(5,845)(60,007)
        Acquisition and funding of notes receivable
(1,500)(7,110)
Proceeds from the repayment of notes receivable
750 890 
Capital expenditures on existing real estate properties
(1,892)(1,045)
Net cash used in investing activities
(8,487)(67,272)
FINANCING ACTIVITIES
Net borrowings (repayments) on revolving credit facility
4,000 (26,000)
Term loan borrowings
 125,000 
Term loan repayments (50,000)
Mortgage note repayments
(40)(29)
Dividends paid
(10,969)(10,275)
Proceeds from issuance of common stock
 19,919 
Equity issuance costs
(74)(76)
Debt issuance costs
 (1,649)
Net cash (used in) provided by financing activities
(7,083)56,890 
(Decrease) increase in cash and cash equivalents and restricted cash
(1,168)3,111 
Cash and cash equivalents and restricted cash, beginning of period
2,867 2,892 
Cash and cash equivalents and restricted cash, end of period
$1,699 $6,003 
Supplemental Cash Flow Information:
Interest paid
$2,476 $2,105 
Invoices accrued for construction, tenant improvement and other capitalized costs
$982 $1,591 
Reclassification of registration statement costs incurred in prior year to equity issuance costs
$119 $81 
Increase in fair value of cash flow hedges
$11,407 $2,803 
Income taxes paid
$12 $25 
Capitalized interest$228 $37 
See accompanying notes to the condensed consolidated financial statements.
8


COMMUNITY HEALTHCARE TRUST INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2022
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Business Overview
Community Healthcare Trust Incorporated (the ‘‘Company’’, ‘‘we’’, ‘‘our’’) was organized in the State of Maryland on March 28, 2014. The Company is a fully-integrated healthcare real estate company that owns and acquires real estate properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers. As of March 31, 2022, the Company had investments of approximately $843.8 million in 158 real estate properties (including a portion of one property accounted for as a financing lease with a gross amount totaling approximately $3.0 million). The properties are located in 34 states, totaling approximately 3.4 million square feet in the aggregate and were approximately 89.9% leased at March 31, 2022 with a weighted average remaining lease term of approximately 7.6 years. Any references to square footage, property count, or occupancy percentages, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm's review.

Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. This interim financial information should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2022. All material intercompany accounts and transactions have been eliminated.

Use of Estimates in the Condensed Consolidated Financial Statements
Preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates.

Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash consists of amounts held by the lender of our mortgage note payable to provide for future real estate tax, insurance expenditures and tenant improvements related to one property. The carrying amounts approximate fair value due to the short term maturity of these investments. The following table provides a reconciliation of cash and cash equivalents and restricted cash:
 Balance as of March 31,
(Dollars in thousands)20222021
Cash and cash equivalents$1,178 $5,605 
Restricted cash521 398 
Cash, cash equivalents and restricted cash$1,699 $6,003 

Income Taxes
The Company has elected to be taxed as a real estate investment trust ("REIT"), as defined under the Internal Revenue Code of 1986, as amended (the "Code"). The Company and two subsidiaries have also elected for those subsidiaries to be treated as taxable REIT subsidiaries ("TRSs"), which are subject to federal and state income taxes.
9

Notes to Condensed Consolidated Financial Statements - Continued
No provision has been made for federal income taxes for the REIT; however, the Company has recorded income tax expense or benefit for the TRSs to the extent applicable. The Company also evaluates the realizability of its deferred tax assets and will record valuation allowances if it is determined that more likely than not the asset will not be recovered. The Company intends at all times to qualify as a REIT under the Code. The Company must distribute at least 90% per annum of its REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles) and meet other requirements to continue to qualify as a REIT.

New Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Note 2. Real Estate Properties

As of March 31, 2022, we had investments of approximately $843.8 million in 158 real estate properties (including a portion of one property accounted for as a financing lease with a gross amount totaling approximately $3.0 million). In addition to the Company's two acquisitions during the three months ended March 31, 2022, the property count as of March 31, 2022 was increased due to the breakout of three properties previously included within the property count of two other buildings, thereby increasing the property count by five for the quarter. The Company's investments are diversified by property type, geographic location, and tenant as shown in the following tables:
Property Type# of PropertiesGross Investment
(in thousands)
Medical Office Building65 $297,138 
Acute Inpatient Behavioral5 130,367 
Inpatient Rehabilitation Facilities6 127,676 
Specialty Centers34 106,169 
Physician Clinics29 81,988 
Surgical Centers and Hospitals10 54,518 
Behavioral Specialty Facilities8 30,978 
Long-term Acute Care Hospitals1 14,937 
Total158 $843,771 

10

Notes to Condensed Consolidated Financial Statements - Continued
State# of PropertiesGross Investment
(in thousands)
Texas15 $136,953 
Illinois16 120,172 
Ohio22 77,230 
Florida14 66,037 
Massachusetts2 35,298 
All Others89 408,081 
Total158 $843,771 

Primary Tenant# of PropertiesGross Investment
(in thousands)
US Healthvest3 $77,964 
Everest Rehabilitation3 57,100 
All Others152 708,707 
Total158 $843,771 

Note 3. Real Estate Leases

Lessor Accounting
The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2039. The Company’s leases generally require the lessee to pay minimum rent, with fixed rent renewal terms or increases based on a Consumer Price Index and may also include additional rent, which may include the reimbursement of taxes (including property taxes), insurance, maintenance and other operating costs associated with the leased property.

Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. Some leases also allow the lessee to renew or extend their lease term or in some cases terminate their lease, based on conditions provided in the lease.

Future minimum lease payments under the non-cancelable operating leases due to the Company for the years ending December 31, as of March 31, 2022, are as follows (in thousands):
2022 (nine months ending December 31)$57,145 
202372,288 
202473,219 
202562,603 
202655,044 
2027 and thereafter339,736 
$660,035 

Rental income is recognized as earned over the life of the lease agreement on a straight-line basis when collection of rental payments over the term of the lease is probable. Straight-line rent included in rental income was approximately $0.8 million and $0.8 million, respectively, for the three months ended March 31, 2022 and 2021.


11

Notes to Condensed Consolidated Financial Statements - Continued
Purchase Option Provisions
Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property. The purchase option provisions generally allow the lessee to purchase the leased property at fair value or at an amount greater than the Company's gross investment in the leased property at the time of the purchase.

At March 31, 2022, the Company had an aggregate gross investment of approximately $25.2 million in four real estate properties with purchase options exercisable at March 31, 2022 that had not been exercised.

Sales-type lease
The Company has a portion of one property accounted for as a sales-type lease with a gross amount totaling approximately $3.0 million included in other assets, net on the Company's Condensed Consolidated Balance Sheets. Future lease payments due to the Company under this lease for the years ending December 31, as of March 31, 2022, are as follows (in thousands):

2022 (nine months ended December 31)$246 
2023336 
2024346 
2025356 
2026367 
2027 and thereafter5,587 
Total undiscounted lease receivable7,238 
Discount(4,206)
Lease receivable$3,032 

During the three months ended March 31, 2022 and 2021, the Company recognized interest income of approximately $0.1 million and $0.1 million, respectively, related to this lease which is included in other operating interest on the Company's Consolidated Income Statements.

Lessee Accounting
At March 31, 2022, the Company was obligated, as the lessee, under four non-prepaid ground leases accounted for as operating leases with expiration dates, including renewal options, through 2076, and one non-prepaid ground lease accounted for as a financing lease with an expiration date through 2085, including renewal options. Any rental increases related to the Company's ground leases are generally either stated or based on the Consumer Price Index. The Company's future lease payments under these non-prepaid ground leases were as follows (in thousands):

OperatingFinancing
2022 (nine months ended December 31)$31 $94 
202342 125 
202443 138 
202544 138 
202644 138 
2027 and thereafter1,193 5,483 
Total undiscounted lease payments1,397 6,116 
Discount(604)(3,144)
Lease liabilities$793 $2,972 

12

Notes to Condensed Consolidated Financial Statements - Continued
The following table discloses other information regarding the ground leases.
Three Months Ended
March 31,
20222021
Operating leases:
Weighted-average remaining lease term in years (including renewal options)36.7337.97
Weighted-average discount rate4.0 %4.0 %
Financing leases:
Weighted-average remaining lease term in years (including renewal options)36.75n/a
Weighted-average discount rate4.1 %n/a

Note 4. Real Estate Acquisitions

During the first quarter of 2022, the Company acquired two real estate properties. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations through 2028. Amounts reflected in revenues and net income for these properties for the three months ended March 31, 2022 were approximately $45,000 and a $5,000 loss, respectively, and transaction costs totaling approximately $0.1 million were capitalized relating to these property acquisitions.

Location
Property
Type (1)
Date
Acquired
Purchase
Price
Cash
Consideration
Real EstateOtherSquare Footage
(000's)(000's)(000's)(000's)
Toledo, OHMOB03/09/22$2,606 $2,621 $2,735 $(114)17,465 
Fremont, NEMOB03/09/223,232 3,224 3,443 (219)12,850 
$5,838 $5,845 $6,178 $(333)30,315 
(1) MOB - Medical Office Building

The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the three months ended March 31, 2022.
Relative
Fair Value
Estimated
Useful Life
(in thousands)(in years)
Land and land improvements$1,123 6.2
Building and building improvements3,868 20.5
Intangibles:
At-market lease intangibles1,187 4.5
Below-market lease intangibles(194)6.1
Total intangibles993 
Accounts payable, accrued liabilities and other liabilities assumed(97)
Prorated rent, interest and operating expense reimbursement amounts collected(42)
Total cash consideration$5,845 


13

Notes to Condensed Consolidated Financial Statements - Continued
Note 5. Debt, net

The table below details the Company's debt as of March 31, 2022 and December 31, 2021.
Balance as of
(Dollars in thousands)March 31, 2022December 31, 2021Maturity Dates
Credit Facility:
Revolving Credit Facility$16,000 $12,000 3/26
A-2 Term Loan, net49,833 49,813 3/24
A-3 Term Loan, net74,518 74,487 3/26
A-4 Term Loan, net124,324 124,296 3/28
Mortgage Note Payable, net4,995 5,029 5/24
$269,670 $265,625 

On March 19, 2021, Community Healthcare Trust Incorporated, as borrower, entered into a third amended and restated credit facility by and among Community Healthcare Trust Incorporated, as borrower, the several banks and financial institutions party thereto as lenders, and Truist Bank, as administrative agent (the "Credit Facility").

The Credit Facility allows the Company to borrow, through the accordion feature, up to $600.0 million, including the ability to add and fund incremental term loans, and provides the Company the ability to apply lower margins to its annual interest rate after it obtains an investment grade rating of BBB-/Baa3 (or the equivalent) from a rating agency, and modified its debt covenants.

The Credit Facility provides for a $150.0 million Revolving Credit Facility and $250.0 million in term loans (the "Term Loans"). The Revolving Credit Facility matures on March 19, 2026 and includes one 12-month option to extend the maturity date, subject to the satisfaction of certain conditions. The Term Loans include a seven-year term loan facility in the aggregate principal amount of $50.0 million (the "A-2 Term Loan"), which matures on March 29, 2024, a seven-year term loan facility in the aggregate principal amount of $75.0 million (the "A-3 Term Loan"), which matures on March 29, 2026, and a seven-year term loan facility in the aggregate principal amount of $125.0 million (the "A-4 Term Loan), which matures on March 19, 2028.

Amounts outstanding under the Revolving Credit Facility bear annual interest at a floating rate that is based, at the Company’s option, on either: (i) LIBOR plus 1.25% to 1.90% or (ii) a base rate plus 0.25% to 0.90% in each case, depending upon the Company’s leverage ratio. In addition, the Company is obligated to pay an annual fee equal to 0.20% of the amount of the unused portion of the Revolving Credit Facility if amounts borrowed are greater than 33.3% of the borrowing capacity under the Revolving Credit Facility and 0.25% of the unused portion of the Revolving Credit Facility if amounts borrowed are less than or equal to 33.3% of the borrowing capacity under the Revolving Credit Facility. The Company had $16.0 million outstanding under the Revolving Credit Facility with a weighted average interest rate of 3.0% and a borrowing capacity remaining of $134.0 million at March 31, 2022.

Amounts outstanding under the Term Loans, as amended, bear annual interest at a floating rate that is based, at the Company’s option, on either: (i) LIBOR plus 1.45% to 2.30% or (ii) a base rate plus 0.45% to 1.30%, in each case, depending upon the Company’s leverage ratio. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. See Note 6 for more details on the interest rate swaps. At March 31, 2022, the Company had $250.0 million outstanding under the Term Loans which had a fixed weighted average interest rate under the swaps of approximately 3.79%.

The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial
14

Notes to Condensed Consolidated Financial Statements - Continued
maintenance covenants. The Company was in compliance with its financial covenants under its Credit Facility as of March 31, 2022.

Note 6. Derivative Financial Instruments

Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of March 31, 2022, the Company had twelve outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $250.0 million.

Tabular Disclosure of Fair Value of Derivative Instruments on the Balance Sheet
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.
Asset Derivatives Fair Value atLiability Derivatives Fair Value at
(Dollars in thousands)March 31, 2022December 31, 2021Balance Sheet ClassificationMarch 31, 2022December 31, 2021Balance Sheet Classification
Interest rate swaps$7,645 $343 Other assets, net$103 $5,324 Other liabilities, net

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss ("AOCI") and are subsequently reclassified to interest expense in the period that the hedged forecasted transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s Term Loans. During the next twelve months, the Company estimates that an additional $5,200 will be reclassified from AOCI as a decrease to interest expense.


15

Notes to Condensed Consolidated Financial Statements - Continued
Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)
The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2022 and 2021.
Three Months Ended
March 31,
(Dollars in thousands)20222021
Amount of unrealized gain recognized in OCI on derivatives$11,407 $2,803 
Amount of loss reclassified from AOCI into interest expense$1,115 $932 
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded$2,626 $2,229 

Tabular Disclosures of Offsetting Derivatives
The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of March 31, 2022 and December 31, 2021. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Condensed Consolidated Balance Sheets.
Offsetting of Derivative Assets (as of March 31, 2022)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)Gross Amounts of Recognized AssetsGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Assets in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$7,645 $ $7,645 $(103)$ $7,542 

Offsetting of Derivative Liabilities (as of March 31, 2022)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Liabilities in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$(103)$ $(103)$103 $ $ 

Offsetting of Derivative Assets (as of December 31, 2021)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)Gross Amounts of Recognized AssetsGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Assets in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$343 $ $343 $(247)$ $96 

16

Notes to Condensed Consolidated Financial Statements - Continued
Offsetting of Derivative Liabilities (as of December 31, 2021)
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Condensed Consolidated Balance SheetNet Amounts of Liabilities in the Condensed Consolidated Balance SheetsFinancial InstrumentsCash Collateral ReceivedNet Amount
Derivatives$(5,324)$ $(5,324)$247 $ $(5,077)

Credit-risk-related Contingent Features
As of March 31, 2022, the Company did not have any derivatives in a net liability position. As of March 31, 2022, the Company had not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company terminated these interest rate swaps or breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value.

Note 7. Stockholders’ Equity

Common Stock
The following table provides a reconciliation of the beginning and ending common stock balances for the three months ended March 31, 2022 and for the year ended December 31, 2021:
(In thousands)Three Months Ended
March 31, 2022
Year Ended
December 31, 2021
Balance, beginning of period24,983 23,888 
Issuance of common stock
 823 
Restricted stock issued92 273 
Restricted stock forfeited(3)(1)
Balance, end of period25,072 24,983

ATM Program
The Company has an at-the-market offering program ("ATM Program"), with Piper Sandler & Co., Evercore Group L.L.C., Truist Securities, Inc., Regions Securities LLC, Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc. and Janney Montgomery Scott LLC., as sales agents (collectively, the “Agents”). Under the ATM Program, the Company may issue and sell shares of its common stock, having an aggregate gross sales price of up to $360.0 million. The shares of common stock may be sold from time to time through or to one or more of the Agents, as may be determined by the Company in its sole discretion, subject to the terms and conditions of the agreement and applicable law.

The Company elected not to issue any shares under the ATM Program during the three months ended March 31, 2022. As of March 31, 2022, the Company had approximately $101.0 million remaining that may be issued under the ATM Program.


17

Notes to Condensed Consolidated Financial Statements - Continued
Note 8. Net Income Per Common Share

The following table sets forth the computation of basic and diluted net income per common share for the three months ended March 31, 2022 and 2021, respectively.

Three Months Ended
March 31,
(In thousands, except per share data)20222021
Net income$5,524 $5,315 
          Participating securities' share in earnings(658)(538)
Net income, less participating securities' share in earnings$4,866 $4,777 
Weighted average Common Shares outstanding
Weighted average Common Shares outstanding
25,060 24,053 
Unvested restricted shares
(1,490)(1,244)
Weighted average Common Shares outstanding–Basic
23,570 22,809 
Dilutive potential common shares
  
Weighted average Common Shares outstanding –Diluted
23,570 22,809 
Basic Net Income per Common Share$0.21 $0.21 
Diluted Net Income per Common Share$0.21 $0.21 

Note 9. Stock Incentive Plan

A summary of the activity under the Company's 2014 Incentive Plan, as amended, for the three months ended March 31, 2022 and 2021 is included in the table below, as well as compensation expense recognized from the amortization of the value of shares over the applicable vesting periods.
Three Months Ended
March 31,
(Dollars and shares in thousands)20222021
Stock-based awards, beginning of period1,416 1,165 
Stock in lieu of compensation44 44 
Stock awards48 49 
   Total stock granted92 93 
Vested shares(5) 
Forfeited shares(1) 
Stock-based awards, end of period1,502 1,258 
Amortization expense$2,122 $1,558 


18

Notes to Condensed Consolidated Financial Statements - Continued
Note 10. Other Assets, net

Other assets, net on the Company's Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 are detailed in the table below.
Balance as of
(Dollars in thousands)March 31, 2022December 31, 2021
Notes receivable$26,750 $26,000 
Accounts and interest receivable2,741 2,116 
Straight-line rent receivable12,806 11,968 
Prepaid assets749 701 
Deferred financing costs, net843 896 
Leasing commissions, net1,249 1,239 
Deferred tax assets, net365 348 
Fair value of interest rate swaps7,645 343 
Above-market lease intangible assets, net557 611 
Sales-type lease receivable3,032 3,031 
Financing right-of-use asset1,857 1,870 
Operating lease right-of-use assets781 788 
Other386 426 
$59,761 $50,337 

The Company's notes receivable mainly included:

At March 31, 2022 and December 31, 2021, notes receivable included a $11.3 million and $12.0 million, respectively, term loan, secured by all assets and ownership interests in seven long-term acute care hospitals and one inpatient rehabilitation hospital owned by the borrower. The term loan will be repaid in equal monthly installments of $250,000 through the maturity date of December 31, 2025 and bears interest at 9% per annum.

At March 31, 2022, notes receivable included a $6.0 million term loan and a $9.5 million revolving credit facility, secured by assets and ownership interests of six geriatric behavioral hospitals and affiliated companies all of which are co-borrowers on the loans. The term loan bears interest at 9% per annum, with interest only payments due for the first year and then equal monthly installments of principal payments due beginning June 30, 2022. The term loan facility matures on July 1, 2027. The revolving credit facility bears interest at 9% per annum and matures on December 31, 2025. In addition, the Company has committed to fund, at the Company’s discretion, additional amounts, up to $5.0 million with interest at 9% per annum on any amount funded, that may be used by the borrower to pay existing liabilities of co-borrowers. The term loan, the revolving credit facility and the additional commitment all include a 3% non-cash interest charge that is due and payable upon the earlier of the repayment or maturity of each note.


19

Notes to Condensed Consolidated Financial Statements - Continued
The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through related parties any material decision-making rights or control of the entities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The VIEs that we have identified at March 31, 2022 are summarized in the table below.
Classification
Carrying Amount
(in thousands)
Maximum Exposure to Loss
(in thousands)
Note receivable (term loan)$11,250 $11,250 
Note receivable (revolving credit facility)$9,500 $9,500 
Note receivable (term loan)$6,000 $6,000 

Note 11. Other Liabilities, net

Other liabilities, net on the Company's Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 are detailed in the table below.

Balance as of
(Dollars in thousands)March 31, 2022December 31, 2021
Prepaid rent$3,860 $3,791 
Security deposits4,610 4,640 
Below-market lease intangibles, net768 616 
Fair value of derivatives103 5,324 
Financing lease liability2,972 2,973 
Operating lease liability793 795 
Other446 512 
$13,552 $18,651 

Note 12. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate the fair value.

Cash and cash equivalents and restricted cash - The carrying amount approximates the fair value.

Notes receivable - The fair value is estimated using cash flow analyses, based on an assumed market rate of interest or at a rate consistent with the rates on notes carried by the Company and are classified as level 2 in the hierarchy.

Borrowings under our Credit Facility - The carrying amount approximates the fair value because the borrowings are based on variable market interest rates.

Derivative financial instruments - The fair value is estimated using discounted cash flow techniques. These techniques incorporate primarily level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as level 2 in the hierarchy.

20

Notes to Condensed Consolidated Financial Statements - Continued
Mortgage note payable - The fair value is estimated using cash flow analyses which are based on an assumed market rate of interest or at a rate consistent with the rates on mortgage notes assumed by the Company and are classified as level 2 in the hierarchy.

The table below details the fair values and carrying values for our notes receivable, interest rate swaps, and mortgage note payable at March 31, 2022 and December 31, 2021, using level 2 inputs.
March 31, 2022December 31, 2021
(Dollars in thousands)Carrying ValueFair ValueCarrying ValueFair Value
Notes receivable$26,750 $26,152 $26,000 $25,869 
Interest rate swap asset$7,645 $7,645 $343 $343 
Interest rate swap liability$103 $103 $5,324 $5,324 
Mortgage note payable (principal amount)$5,036 $4,965 $5,076 $5,129 

Note 13. Subsequent Events

Dividend Declared
On April 28, 2022, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.44 per share. The dividend is payable on May 27, 2022 to stockholders of record on May 13, 2022.
21


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward-Looking Statements
This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believes”, “expects”, “may”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates” or other similar words or expressions, including the negative thereof. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Because forward-looking statements relate to future events, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. Thus, the Company’s actual results and financial condition may differ materially from those indicated in such forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, changes in the real estate industry in general, interest rates or the general economy, adverse developments related to the healthcare industry, the degree and nature of the Company’s competition, the ability to consummate acquisitions under contract, effects on global and national markets as well as businesses resulting from the COVID-19 pandemic, and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the Company’s other filings with the Securities and Exchange Commission from time to time. Readers are therefore cautioned not to place undue reliance on the forward-looking statements contained herein which speak only as of the date hereof. The Company intends these forward-looking statements to speak only as of the time of this report and 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.

The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and cash. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Condensed Consolidated Financial Statements and accompanying notes.

Overview
References such as "we," "us," "our," and "the Company" mean Community Healthcare Trust Incorporated, a Maryland corporation, and its consolidated subsidiaries.

We were organized in the State of Maryland on March 28, 2014. We are a self-administered, self-managed healthcare real estate investment trust, or REIT, that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers.

Trends and Matters Impacting Operating Results
Management monitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.


22

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Real estate acquisitions
During the first three months of 2022, the Company acquired two real estate properties totaling approximately 30,315 square feet for an aggregate purchase price and cash consideration of approximately $5.8 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations through 2028. These acquisitions were funded with cash on hand and proceeds from the Company's Revolving Credit Facility. See Note 4 to the Condensed Consolidated Financial Statements for more details on these acquisitions.

Acquisition Pipeline
The Company has one property under a definitive purchase agreement for an expected purchase price of approximately $5.9 million. The Company expects to close on this property during the second or third quarter of 2022; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company expects to fund these acquisitions with cash on hand, proceeds from the Company's ATM Program, or proceeds from the Company's Revolving Credit Facility.

The Company also has six properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $141.0 million. The Company's expected returns on these investments range from approximately 9.75% to 10.25%. The Company anticipates closing on these properties from the second quarter of 2022 through the fourth quarter of 2023; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

Leased square footage
As of March 31, 2022, our real estate portfolio was approximately 89.9% leased. During the first three months of 2022, we had expiring or terminated leases related to approximately 83,000 square feet, and we leased or renewed leases relating to approximately 80,000 square feet.

Purchase Option Provisions
Certain of the Company's leases provide the lessee with a purchase option or a right of first refusal to purchase the leased property. The purchase option provisions generally allow the lessee to purchase the leased property at fair value or at an amount greater than the Company's gross investment in the leased property at the time of the purchase.

At March 31, 2022, the Company had an aggregate gross investment of approximately $25.2 million in four real estate properties with purchase options exercisable at March 31, 2022 that had not been exercised.

Seasonality
We do not expect our business to be subject to material seasonal fluctuations.

New Accounting Pronouncements
See Note 1 to the Company’s Condensed Consolidated Financial Statements accompanying this report for information on new accounting standards recently adopted and not yet adopted.


23

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Results of Operations
The Company's results of operations for the three months ended March 31, 2022 compared to the same period in 2021 have most significantly been impacted by its real estate acquisitions. As of March 31, 2022 and 2021, the Company had investments in real estate properties totaling approximately $843.8 million and $801.0 million, respectively, both amounts including a portion of one property accounted for as a financing lease with a gross amount totaling approximately $3.0 million.

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
The table below shows our results of operations for the three months ended March 31, 2022 compared to the same period in 2021 and the effect of changes in those results from period to period on our net income.

Three Months Ended March 31,Increase (Decrease) to
Net income
(Dollars in thousands)
20222021$%
REVENUES
Rental income
$22,604 $20,780 $1,824 8.8 %
Other operating interest
877 615 262 42.6 %
23,481 21,395 2,086 9.7 %
EXPENSES
Property operating
4,091 3,729 (362)(9.7)%
General and administrative
3,316 2,859 (457)(16.0)%
Depreciation and amortization
7,942 7,225 (717)(9.9)%
15,349 13,813 (1,536)(11.1)%
INCOME BEFORE INCOME TAXES AND OTHER ITEMS
8,132 7,582 550 7.3 %
Interest expense
(2,626)(2,229)(397)(17.8)%
Deferred income tax benefit (expense)
17 (39)56 143.6 %
Interest and other income
— — %
NET INCOME
$5,524 $5,315 $209 3.9 %

Revenues
Revenues increased approximately $2.1 million, or 9.7%, for the three months ended March 31, 2022 compared to the same period in 2021 mainly due to acquisitions of real estate and interest on the issuance of notes receivable.

Expenses
Property operating expenses increased approximately $0.4 million, or 9.7%, for the three months ended March 31, 2022 compared to the same period in 2021 mainly due to acquisitions of real estate.

General and administrative expenses increased approximately $0.5 million, or 16.0%, for the three months ended March 31, 2022 compared to the same period in 2021 due mainly to the non-cash amortization of non-vested restricted common shares of approximately $564,000, offset partially by reductions in state and local taxes of approximately $59,000, professional fees of approximately $63,000 and office-related expenses of approximately $27,000.