Company Quick10K Filing
Community Healthcare Trust
Price43.16 EPS0
Shares20 P/E141
MCap871 P/FCF38
Net Debt214 EBIT13
TEV1,084 TEV/EBIT84
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-04
10-Q 2020-03-31 Filed 2020-05-05
10-K 2019-12-31 Filed 2020-02-25
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-06
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-02-26
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-11-10
10-Q 2016-06-30 Filed 2016-08-11
10-Q 2016-03-31 Filed 2016-05-12
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-13
8-K 2020-08-04 Earnings, Regulation FD, Exhibits
8-K 2020-05-07
8-K 2020-05-05
8-K 2020-02-25
8-K 2020-01-03
8-K 2019-11-05
8-K 2019-11-05
8-K 2019-11-05
8-K 2019-08-06
8-K 2019-05-16
8-K 2019-05-07
8-K 2019-05-02
8-K 2019-04-01
8-K 2019-03-11
8-K 2019-02-26
8-K 2019-01-03
8-K 2018-11-06
8-K 2018-08-07
8-K 2018-08-07
8-K 2018-05-18
8-K 2018-05-08
8-K 2018-04-02
8-K 2018-02-22
8-K 2018-01-23
8-K 2018-01-02

CHCT 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Real Estate Leases
Note 3. Real Estate Acquisitions and Dispositions
Note 4. Debt, Net
Note 5. Derivative Financial Instruments
Note 6. Stockholders' Equity
Note 7. Net Income per Common Share
Note 8. Incentive Plan
Note 9. Other Assets, Net
Note 10. Fair Value of Financial Instruments
Note 11. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 chct-20200630xexhibit311.htm
EX-31.2 chct-20200630xexhibit312.htm
EX-32.1 chct-20200630xexhibit321.htm

Community Healthcare Trust Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
0.60.50.40.20.10.02013201520172020
Assets, Equity
0.10.10.10.00.00.02016201720182020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12013201520172020
Ops, Inv, Fin

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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 JUNE 30, 2020
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 Class
Trading Symbol
Name of each exchange on which registered
 
 
Common stock, $0.01 par value per share
CHCT
New 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 22,726,373 shares of Common Stock, $0.01 par value per share, outstanding as of July 31, 2020.

1


COMMUNITY HEALTHCARE TRUST INCORPORATED
FORM 10-Q
June 30, 2020
TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 

2


PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
 
(Unaudited)
 
 
 
June 30, 2020
 
December 31, 2019
ASSETS
 
 
 
Real estate properties
 
 
 
Land and land improvements
$
78,999

 
$
68,129

Buildings, improvements, and lease intangibles
585,454

 
534,503

Personal property
234

 
220

Total real estate properties
664,687

 
602,852

Less accumulated depreciation
(89,698
)
 
(77,523
)
Total real estate properties, net
574,989

 
525,329

Cash and cash equivalents
4,896

 
1,730

Restricted cash
351

 
293

Other assets, net
32,068

 
35,179

Total assets
$
612,304

 
$
562,531

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Liabilities
 
 
 
Debt, net
$
197,309

 
$
194,243

Accounts payable and accrued liabilities
5,497

 
3,606

Other liabilities
22,395

 
11,271

Total liabilities
225,201

 
209,120

 
 
 
 
Commitments and contingencies


 


 
 
 
 
Stockholders' Equity
 
 
 
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued and outstanding

 

Common stock, $0.01 par value; 450,000,000 shares authorized; 22,726,141 and 21,410,578 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
227

 
214

Additional paid-in capital
500,477

 
447,916

Cumulative net income
26,180

 
17,554

Accumulated other comprehensive loss
(13,969
)
 
(4,808
)
Cumulative dividends
(125,812
)
 
(107,465
)
Total stockholders’ equity
387,103

 
353,411

Total liabilities and stockholders' equity
$
612,304

 
$
562,531


See accompanying notes to the condensed consolidated financial statements.

3


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Unaudited; Dollars in thousands, except per share amounts)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
REVENUES
 
 
 
 
 
 
 
Rental income
$
17,830

 
$
13,361

 
$
35,258

 
$
26,259

Other operating interest
450

 
955

 
958

 
1,498

 
18,280

 
14,316

 
36,216

 
27,757

 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
Property operating
3,223

 
2,993

 
6,566

 
6,068

General and administrative
1,919

 
1,776

 
4,111

 
3,561

Depreciation and amortization
6,119

 
5,299

 
12,178

 
10,545

 
11,261

 
10,068

 
22,855

 
20,174

 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
 
 
 
Loss on sale of real estate
(313
)
 

 
(313
)
 

Interest expense
(2,183
)
 
(2,251
)
 
(4,432
)
 
(4,305
)
Interest and other income, net
3

 
69

 
10

 
238

 
(2,493
)
 
(2,182
)
 
(4,735
)
 
(4,067
)
NET INCOME
$
4,526

 
$
2,066

 
$
8,626

 
$
3,516

 
 
 
 
 
 
 
 
NET INCOME PER COMMON SHARE:
 
 
 
 
 
 
 
Net income per common share – Basic
$
0.19

 
$
0.09

 
$
0.37

 
$
0.16

Net income per common share – Diluted
$
0.19

 
$
0.09

 
$
0.37

 
$
0.16

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC
21,263,575

 
18,245,668

 
20,999,097

 
18,100,973

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED
21,263,575

 
18,245,668

 
20,999,097

 
18,100,973


See accompanying notes to the condensed consolidated financial statements.

4


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Unaudited; Dollars in thousands)

 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
 
NET INCOME
$
4,526

 
$
2,066

 
$
8,626

 
$
3,516

 
Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
Decrease in fair value of cash flow hedges
(1,317
)
 
(4,032
)
 
(10,193
)
 
(5,245
)
 
 
Reclassification for amounts recognized as interest expense
774

 
(95
)
 
1,032

 
(157
)
 
Total other comprehensive loss
(543
)
 
(4,127
)
 
(9,161
)
 
(5,402
)
COMPREHENSIVE INCOME (LOSS)
$
3,983

 
$
(2,061
)
 
$
(535
)
 
$
(1,886
)

See accompanying notes to the condensed consolidated financial statements.


5


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020
(Unaudited; Dollars 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 March 31, 2020

$

 
22,125,269

$
221

 
$
475,824

 
$
21,654

 
$
(13,426
)
 
$
(116,498
)
 
$
367,775

Issuance of common stock, net of issuance costs


 
578,759

6

 
23,584

 

 

 

 
23,590

Stock-based compensation


 
22,113


 
1,069

 

 

 

 
1,069

Unrecognized loss on cash flow hedges


 


 

 

 
(1,317
)
 

 
(1,317
)
Reclassification adjustment for losses included in net income (interest expense)


 


 

 

 
774

 

 
774

Net income


 


 

 
4,526

 

 

 
4,526

Dividends to common stockholders ($0.42 per share)


 


 

 

 

 
(9,314
)
 
(9,314
)
Balance at June 30, 2020

$

 
22,726,141

$
227

 
$
500,477

 
$
26,180

 
$
(13,969
)
 
$
(125,812
)
 
$
387,103

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019

$

 
21,410,578

$
214

 
$
447,916

 
$
17,554

 
$
(4,808
)
 
$
(107,465
)
 
$
353,411

Issuance of common stock, net of issuance costs


 
1,189,545

12

 
50,480

 

 

 

 
50,492

Stock-based compensation


 
126,018

1

 
2,081

 

 

 

 
2,082

Unrecognized loss on cash flow hedges


 


 

 

 
(10,193
)
 

 
(10,193
)
Reclassification adjustment for losses included in net income (interest expense)


 


 

 

 
1,032

 

 
1,032

Net income


 


 

 
8,626

 

 

 
8,626

Dividends to common stockholders ($0.8375 per share)


 


 

 

 

 
(18,347
)
 
(18,347
)
Balance at June 30, 2020

$

 
22,726,141

$
227

 
$
500,477

 
$
26,180

 
$
(13,969
)
 
$
(125,812
)
 
$
387,103



See accompanying notes to the condensed consolidated financial statements.














6



COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019
(Unaudited; Dollars 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 March 31, 2019


 
18,862,792

$
189

 
$
342,654

 
$
10,628

 
$
(642
)
 
$
(83,146
)
 
$
269,683

Issuance of common stock, net of issuance costs


 
497,453

5

 
18,363

 

 

 

 
18,368

Stock-based compensation


 
40,999


 
896

 

 

 

 
896

Unrecognized loss on cash flow hedges


 


 

 

 
(4,032
)
 

 
(4,032
)
Reclassification adjustment for losses included in net income (interest expense)


 


 

 

 
(95
)
 

 
(95
)
Net income


 


 

 
2,066

 

 

 
2,066

Dividends to common stockholders ($0.41 per share)


 


 

 

 

 
(7,766
)
 
(7,766
)
Balance at June 30, 2019

$

 
19,401,244

$
194

 
$
361,913

 
$
12,694

 
$
(4,769
)
 
$
(90,912
)
 
$
279,120

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

$

 
18,634,502

$
186

 
$
337,180

 
$
9,178

 
$
633

 
$
(75,518
)
 
$
271,659

Issuance of common stock, net of issuance costs


 
641,053

7

 
22,985

 

 

 

 
22,992

Stock-based compensation


 
125,689

1

 
1,748

 

 

 

 
1,749

Unrecognized loss on cash flow hedges


 


 

 

 
(5,245
)
 

 
(5,245
)
Reclassification adjustment for losses included in net income (interest expense)


 


 

 

 
(157
)
 

 
(157
)
Net income


 


 

 
3,516

 

 

 
3,516

Dividends to common stockholders ($0.8175 per share)


 


 

 

 

 
(15,394
)
 
(15,394
)
Balance at June 30, 2019

$

 
19,401,244

$
194

 
$
361,913

 
$
12,694

 
$
(4,769
)
 
$
(90,912
)
 
$
279,120



See accompanying notes to the condensed consolidated financial statements.

7


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
 
Six Months Ended June 30,
 
2020
 
2019
OPERATING ACTIVITIES
 
 
 
Net income
$
8,626

 
$
3,516

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
12,178

 
10,545

Other amortization
(224
)
 
294

Stock-based compensation
2,082

 
1,749

Straight-line rent receivable
(1,604
)
 
(749
)
Loss on sale of real estate
313

 

Deferred income tax expense
20

 
27

Changes in operating assets and liabilities:
 
 
 
Other assets
(119
)
 
(1,087
)
Accounts payable and accrued liabilities
1,089

 
114

Other liabilities
1,386

 
(26
)
Net cash provided by operating activities
23,747

 
14,383

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Acquisitions of real estate
(57,890
)
 
(63,449
)
        Proceeds from sale of real estate
248

 

        Acquisition of note receivable
(1,750
)
 

Proceeds from the repayment of notes receivable
6,910

 
320

Capital expenditures on existing real estate properties
(3,081
)
 
(1,654
)
Net cash used in investing activities
(55,563
)
 
(64,783
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Net borrowings (repayments) on revolving credit facility
3,000

 
(24,000
)
Term loan borrowings

 
75,000

Mortgage note repayments
(53
)
 
(52
)
Dividends paid
(18,347
)
 
(15,394
)
Proceeds from issuance of common stock
50,579

 
23,172

Equity issuance costs
(139
)
 
(180
)
Debt issuance costs

 
(1,273
)
Net cash provided by financing activities
35,040

 
57,273

Increase in cash and cash equivalents and restricted cash
3,224

 
6,873

Cash and cash equivalents and restricted cash, beginning of period
2,023

 
2,392

Cash and cash equivalents and restricted cash, end of period
$
5,247

 
$
9,265

 
 
 
 
Supplemental Cash Flow Information:
 
 
 
Interest paid
$
3,110

 
$
2,781

Invoices accrued for construction, tenant improvement and other capitalized costs
$
707

 
$
29

Reclassification between accounts and notes receivable
$

 
$
45

Reclassification of registration statement costs incurred in prior year to equity issuance costs
$
95

 
$
187

Decrease in fair value of cash flow hedges
$
(10,193
)
 
$
(5,245
)
Income taxes paid
$
31

 
$

See accompanying notes to the condensed consolidated financial statements.

8


COMMUNITY HEALTHCARE TRUST INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(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 June 30, 2020, the Company had investments of approximately $664.7 million in 131 real estate properties, located in 33 states, totaling approximately 2.8 million square feet in the aggregate. Any references to square footage 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, 2019. 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, 2020. All material intercompany accounts and transactions have been eliminated.

A novel strain of coronavirus (SARS-CoV-2) was first identified in late 2019, and subsequently declared a global pandemic by the World Health Organization ("COVID-19"). The Company considered the impact of the COVID-19 on the assumptions and estimates used for the three and six months ended June 30, 2020. The full extent of the future impacts of COVID-19 on the Company's operations is uncertain. A prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company.

During the second quarter of 2020, the Company has provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Company has made an election to account for such lease concessions consistent with how those concessions would be accounted for under the current leasing guidance if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in our rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than total payments required by the original lease.

All of the Company’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its lease receivable as tenant payments accrue and continues to recognize rental income. As of July 31, 2020, the Company has entered into, or anticipates entering into, deferral agreements with up to approximately 20 tenants representing less than one percent of our annualized rent. Pursuant to these agreements, the tenants are generally required to repay the deferred amounts in equal monthly installments during the third and fourth quarters of 2020.


9

Notes to Condensed Consolidated Financial Statements - Continued

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, 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 amount approximates 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 June 30,
(Dollars in thousands)
2020
 
2019
Cash and cash equivalents
$
4,896

 
$
9,031

Restricted cash
351

 
234

Cash, cash equivalents and restricted cash
$
5,247

 
$
9,265



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 one subsidiary have also elected for that subsidiary to be treated as a taxable REIT subsidiary ("TRS"), which is subject to federal and state income taxes. No provision has been made for federal income taxes for the REIT; however, the Company has recorded income tax expense or benefit for the TRS 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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act) was enacted into law and was immediately effective. The CARES Act includes several tax provisions that allow for the carryback of net operating losses, provides relief from the taxable income limitation on the use of net operating losses carried forward, increases the business interest limitation from 30% to 50%, makes technical corrections to tax depreciation methods for qualified improvement property, and provides payroll tax credits and for the deferral of employer social security payments. The Company does not believe that there have been or will be material impacts to its income taxes related to the CARES Act. The Company will continue to evaluate the tax impact of the CARES Act and any guidance provided by the U.S. Treasury and Internal Revenue Service.

New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Financial Instruments-Credit Losses
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies are required to use a new current expected credit loss ("CECL") model that generally results in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, companies are required to measure credit losses in a manner similar to prior guidance, except that the losses are recognized as allowances rather than as reductions in the amortized cost of the securities. In November 2018, the FASB amended the ASU to clarify that receivables arising from leases would not be within the scope of

10

Notes to Condensed Consolidated Financial Statements - Continued

the ASU but rather would be accounted for under the leasing standard. Companies have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Companies must apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted ASU No. 2016-13 on January 1, 2020. The Company did not record an adjustment upon adoption as the impact was determined to be immaterial. However, this standard could impact the Company's financial statements and results of operations in future periods.

Recently Issued 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 Leases

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2035. 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 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 the Company for the years ending December 31, as of June 30, 2020, are as follows (in thousands):
2020 (six months ending December 31)
$
30,417

2021
58,659

2022
55,024

2023
49,996

2024
46,867

2025 and thereafter
299,485

 
$
540,448



Straight-line rental income
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 $0.7 million and $0.4 million, respectively, for the three months ended June 30, 2020 and 2019. Straight-line rent included in rental income was approximately $1.6 million and $0.7 million, respectively, for the six months ended June 30, 2020 and 2019.


11

Notes to Condensed Consolidated Financial Statements - Continued

Deferred revenue
Income received but not yet earned is deferred until such time it is earned. Deferred revenue, included in other liabilities on the Condensed Consolidated Balance Sheet, was approximately $2.1 million and $2.0 million, respectively, at June 30, 2020 and December 31, 2019.

Security Deposits
As of June 30, 2020 and December 31, 2019, the Company held approximately $4.1 million and $3.5 million, respectively, in security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon the security deposits if there are any defaults under the leases.

Note 3. Real Estate Acquisitions and Dispositions

2020 Real Estate Acquisitions
During the second quarter of 2020, the Company acquired seven real estate properties and a land parcel adjacent to one of our existing properties to be used for additional parking. Upon acquisition, the real estate properties were 100% leased in the aggregate with lease expirations through 2035. Amounts reflected in revenues and net income for these properties for the three months ended June 30, 2020 were approximately $0.1 million and four thousand dollars, respectively, and transaction costs totaling approximately $0.4 million were capitalized relating to these property acquisitions.

During the first quarter of 2020, the Company acquired six real estate properties. Upon acquisition, the properties were 98.2% leased in the aggregate with lease expirations through 2035. Amounts reflected in revenues and net income for these properties for the six months ended June 30, 2020 were approximately $1.4 million and $0.8 million, respectively, and transaction costs totaling approximately $0.2 million were capitalized relating to these property acquisitions.
Location
Property
Type (1)
Date
Acquired
Purchase
Price
Cash
Consideration
Real Estate
Other (2)
Square Footage
 
 
 
(000's)
(000's)
(000's)
(000's)
 
San Antonio, TX
MOB
01/27/20
$
4,003

$
4,022

$
4,036

$
(14
)
13,500

San Antonio, TX
MOB
01/27/20
1,931

1,955

1,961

(6
)
6,500

Decatur, AL
MOB
02/18/20
5,784

5,792

5,777

15

35,943

Ramona, CA
SC
03/13/20
4,100

4,124

4,143

(19
)
11,300

Cuero, TX
SC
03/18/20
2,153

2,174

2,207

(33
)
15,515

Rogers, AR
IRF
03/27/20
19,000

18,317

19,042

(725
)
38,817

Oak Lawn, IL (land)
MOB
04/20/20
400

403

421

(18
)

Germantown, TN
SC
04/29/20
3,900

3,949

3,949


10,600

Westlake, OH
SC
06/05/20
2,443

2,456

2,487

(31
)
15,057

Columbus, IN (3)
SC
06/05/20
1,813

1,828

1,787

41

13,969

Niceville, FL
MOB
06/15/20
2,294

2,340

2,344

(4
)
10,250

Greensburg, PA
MOB
06/16/20
3,389

3,484

3,497

(13
)
15,650

Gardendale, AL
MOB
06/24/20
2,948

2,935

2,878

57

12,956

Prattville, AL
MOB
06/24/20
4,091

4,111

4,078

33

13,319

 
 
 
$
58,249

$
57,890

$
58,607

$
(717
)
213,376

 
 
 
 
 
 
 
 
(1) MOB - Medical Office Building; SC - Specialty Center; IRF - Inpatient Rehabilitation Facility
(2) Includes, but is not limited to, above- and below-market lease intangibles, liabilities assumed, and security deposits.
(3) The Company assumed a ground lease in connection with this acquisition that is classified as an operating lease. The present value of future lease payments and the right-of-use asset, each totaling approximately $0.2 million, are included in other liabilities and other assets, respectively, on the Company's Condensed Consolidated Balance Sheets.


12

Notes to Condensed Consolidated Financial Statements - Continued

The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the six months ended June 30, 2020.
 
 
 
Relative
Fair Value
Estimated
Useful Life
 
 
 
(in thousands)
(in years)
Land and land improvements
$
11,323

8.5
Building and building improvements
41,709

30.2
Intangibles:
 
 
 
At-market lease intangibles
5,575

5.4
 
Above-market lease intangibles
292

4.8
 
Below-market lease intangibles
(111
)
3.1
 
 
Total intangibles
5,756

 
Accounts receivable and other assets assumed
247

 
Accounts payable, accrued liabilities and other liabilities assumed
(807
)
 
Prorated rent, interest and operating expense reimbursement amounts collected
(338
)
 
 
Total cash consideration
$
57,890

 


2020 Real Estate Disposition
During the second quarter of 2020, the Company sold a land parcel related to one of its properties for approximately $0.3 million and recognized a loss on sale of approximately $0.3 million.

Note 4. Debt, net

The table below details the Company's debt as of June 30, 2020 and December 31, 2019.
 
Balance as of
 
(Dollars in thousands)
June 30, 2020
December 31, 2019
Maturity Dates
 
 
 
 
Revolving Credit Facility
$
18,000

$
15,000

3/23
A-1 Term Loan, net
49,871

49,833

3/22
A-2 Term Loan, net
49,801

49,775

3/24
A-3 Term Loan, net
74,479

74,433

3/26
Mortgage Note Payable, net
5,158

5,202

5/24
 
$
197,309

$
194,243

 


The Company's second amended and restated credit facility (the "Credit Facility") is by and among Community Healthcare OP, LP, the Company, and a syndicate of lenders with Truist Bank (formerly SunTrust Bank) serving as Administrative Agent. The Company’s material subsidiaries are guarantors of the obligations under the Credit Facility.

The Credit Facility, as amended, provides for a $150.0 million Revolving Credit Facility and $175.0 million in term loans (the "Term Loans"). The Credit Facility, through the accordion feature, allows borrowings up to a total of $525.0 million including the ability to add and fund additional term loans. The Revolving Credit Facility matures on March 29, 2023 and includes one 12-month option to extend the maturity date of the Revolving Credit Facility, subject to the satisfaction of certain conditions. The Term Loans include a five-year term loan facility in the aggregate principal amount of $50.0 million (the "A-1 Term Loan"), which matures on March 29, 2022, a seven-year

13

Notes to Condensed Consolidated Financial Statements - Continued

term loan facility in the aggregate principal amount of $50.0 million (the "A-2 Term Loan"), which matures on March 29, 2024, and 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.

Amounts outstanding under the Revolving Credit Facility, as amended, 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 0.25% 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 0.35% 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 $18.0 million outstanding under the Revolving Credit Facility with a 2.06% weighted average interest rate at June 30, 2020, and a borrowing capacity remaining of approximately $132.0 million at June 30, 2020.

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 1.25% to 2.30% or (ii) a base rate plus 0.25% to 1.30%, in each case, depending upon the Company’s leverage ratio. In addition, the Company is obligated to pay an annual fee equal to 0.35% of the amount of the unused portion of the Term Loans. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. See Note 5 for more details on the interest rate swaps. At June 30, 2020, the Company had drawn the full $175.0 million under the Term Loans which had a fixed weighted average interest rate under the swaps of approximately 4.569%.

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 maintenance covenants. The Company was in compliance with its financial covenants under its Credit Facility as of June 30, 2020.

Note 5. 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. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract.

As of June 30, 2020, the Company had seven outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $175.0 million. The table below presents the fair value of

14

Notes to Condensed Consolidated Financial Statements - Continued

the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019.
 
Asset Derivatives Fair Value at
 
Liability Derivatives Fair Value at
 
June 30, 2020
December 31, 2019
Balance Sheet Classification
 
June 30, 2020
December 31, 2019
Balance Sheet Classification
Interest rate swaps
$