Community Healthcare Trust Inc - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019
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 (State or Other Jurisdiction of Incorporation or Organization)		46-5212033 (I.R.S. Employer Identification No.)

3326 Aspen Grove Drive

Suite 150

Franklin, Tennessee 37067

(Address of Principal Executive Offices) (Zip Code)

(615) 771-3052

(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 x 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 x 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 x	Emerging-growth company x	Non-accelerated filer ¨	Smaller reporting company x

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. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The Registrant had 20,177,693 shares of Common Stock, $0.01 par value per share, outstanding as of October 31, 2019.

COMMUNITY HEALTHCARE TRUST INCORPORATED

FORM 10-Q

September 30, 2019

TABLE OF CONTENTS



		Page
PART I.—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29

PART II.—OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31

SIGNATURES		33

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)



	(Unaudited)
	September 30, 2019			December 31, 2018
ASSETS
Real estate properties
Land and land improvements	$	63,015		$	50,270
Buildings, improvements, and lease intangibles	503,110			394,527
Personal property	202			133
Total real estate properties	566,327			444,930
Less accumulated depreciation	(71,617		)	(55,298		)
Total real estate properties, net	494,710			389,632
Cash and cash equivalents	1,724			2,007
Restricted cash	224			385
Other assets, net	36,414			34,546
Total assets	$	533,072		$	426,570

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net	$	215,460		$	147,766
Accounts payable and accrued liabilities	4,004			3,196
Other liabilities	12,661			3,949
Total liabilities	232,125			154,911

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; 20,177,693 and 18,634,502 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	202			186
Additional paid-in capital	391,247			337,180
Cumulative net income	15,341			9,178
Accumulated other comprehensive (loss) income	(6,826		)	633
Cumulative dividends	(99,017		)	(75,518		)
Total stockholders’ equity	300,947			271,659
Total liabilities and stockholders' equity	$	533,072		$	426,570

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited; Dollars in thousands, except per share amounts)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
REVENUES
Rental income	$	15,718		$	11,858		$	41,977		$	34,743
Other operating interest	541			679			2,039			1,625
	16,259			12,537			44,016			36,368

EXPENSES
Property operating	3,327			2,627			9,395			7,497
General and administrative	2,041			1,395			5,602			4,092
Depreciation and amortization	5,774			4,925			16,319			14,471
	11,142			8,947			31,316			26,060

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS	5,117			3,590			12,700			10,308
Interest expense	(2,483		)	(1,643		)	(6,788		)	(4,482		)
Interest and other income, net	13			52			251			462
INCOME FROM CONTINUING OPERATIONS	2,647			1,999			6,163			6,288
NET INCOME	$	2,647		$	1,999		$	6,163		$	6,288

NET INCOME PER COMMON SHARE:
Net income per common share – Basic	$	0.12		$	0.10		$	0.28		$	0.31
Net income per common share – Diluted	$	0.12		$	0.10		$	0.28		$	0.31
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC	18,832,902			17,669,681			18,347,630			17,695,688
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED	18,832,902			17,669,681			18,347,630			17,695,688

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited; Dollars in thousands)



			Three Months Ended September 30,					Nine Months Ended September 30,
			2019			2018		2019			2018

NET INCOME			$	2,647		$	1,999	$	6,163		$	6,288
	Other comprehensive (loss) income:
		(Decrease) increase in fair value of cash flow hedges	(2,060		)	527		(7,305		)	2,152
		Reclassification for amounts recognized as interest expense	3			46		(154		)	201
	Total other comprehensive (loss) income		(2,057		)	573		(7,459		)	2,353
COMPREHENSIVE INCOME (LOSS)			$	590		$	2,572	$	(1,296	)	$	8,641

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(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		Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive (Loss) Income			Cumulative Dividends			Total Stockholders' Equity
Balance at June 30, 2019	—	$	—	19,401,244	$	194	$	361,913	$	12,694	$	(4,769	)	$	(90,912	)	$	279,120
Issuance of common stock, net of issuance costs	—	—		680,309	$	7	$	28,333	$	—	$	—		$	—		$	28,340
Stock-based compensation	—	—		96,140	1		1,001		—		—			—			1,002
Unrecognized gain on cash flow hedges	—	—		—	—		—		—		(2,060		)	—			(2,060		)
Reclassification adj for losses included in net income (interest expense)	—	—		—	—		—		—		3			—			3
Net income	—	—		—	—		—		2,647		—			—			2,647
Dividends to common stockholders ($0.4125 per share)	—	—		—	—		—		—		—			(8,105		)	(8,105		)
Balance at September 30, 2019	—	$	—	20,177,693	$	202	$	391,247	$	15,341	$	(6,826	)	$	(99,017	)	$	300,947

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	—	—		1,321,362	14		51,318		—		—			—			51,332
Stock-based compensation	—	—		221,829	2		2,749		—		—			—			2,751
Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(7,305		)	—			(7,305		)
Reclassification adj for gain included in net income (interest expense)	—	—		—	—		—		—		(154		)	—			(154		)
Net income	—	—		—	—		—		6,163		—			—			6,163
Dividends to common stockholders ($1.23 per share)	—	—		—	—		—		—		—			(23,499		)	(23,499		)
Balance at September 30, 2019	—	$	—	20,177,693	$	202	$	391,247	$	15,341	$	(6,826	)	$	(99,017	)	$	300,947

Balance at June 30, 2018	—	—		18,199,975	182		325,719		9,064		2,039			(60,646		)	276,358
Issuance of common stock, net of issuance costs	—	—		234,000	2		7,062		—		—			—			7,064
Stock-based compensation	—	—		99,827	1		687		—		—			—			688
Unrecognized gain on cash flow hedges	—	—		—	—		—		—		527			—			527
Reclassification adj for losses included in net income (interest expense)	—	—		—	—		—		—		46			—			46
Net income	—	—		—	—		—		1,999		—			—			1,999
Dividends to common stockholders ($0.4025 per share)	—	—		—	—		—		—		—			(7,365		)	(7,365		)
Balance at September 30, 2018	—	$	—	18,533,802	185		333,468		11,063		2,612			(68,011		)	279,317

Balance at December 31, 2017	—	$	—	18,085,798	$	181	$	324,303	$	4,775	$	258		$	(46,143	)	$	283,374
Issuance of common stock, net of issuance costs	—	—		234,000	2		7,062		—		—			—			7,064
Stock-based compensation	—	—		214,004	2		2,103		—		—			—			2,105
Unrecognized gain on cash flow hedges	—	—		—	—		—		—		2,153			—			2,153
Reclassification adj for loss included in net income (interest expense)	—	—		—	—		—		—		201			—			201
Net income	—	—		—	—		—		6,288		—			—			6,288
Dividends to common stockholders ($1.20 per share)	—	—		—	—		—		—		—			(21,868		)	(21,868		)
Balance at September 30, 2018	—	$	—	18,533,802	$	185	$	333,468	$	11,063	$	2,612		$	(68,011	)	$	279,317

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in thousands)



	Nine Months Ended September 30,
	2019			2018
OPERATING ACTIVITIES
Net income	$	6,163		$	6,288
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,731			14,929
Stock-based compensation	2,751			2,105
Straight-line rent receivable	(1,353		)	(1,165		)
Deferred income tax expense (benefit)	9			(103		)
Changes in operating assets and liabilities:
Other assets	(1,889		)	(3,332		)
Accounts payable and accrued liabilities	723			(373		)
Other liabilities	52			(427		)
Net cash provided by operating activities	23,187			17,922

INVESTING ACTIVITIES
Acquisitions of real estate	(115,624		)	(26,820		)
Acquisitions of notes receivable	—			(2,201		)
Funding of notes receivable	—			(4,833		)
Proceeds from the repayment of notes receivable	752			50
Capital expenditures on existing real estate properties	(3,461		)	(4,220		)
Net cash used in investing activities	(118,333		)	(38,024		)

FINANCING ACTIVITIES
Net repayments on revolving credit facility	(6,750		)	(6,000		)
Term loan borrowings	75,000			40,000
Mortgage note repayments	(77		)	—
Dividends paid	(23,499		)	(21,868		)
Proceeds from issuance of common stock	51,640			7,147
Equity issuance costs	(308		)	(83		)
Debt issuance costs	(1,304		)	(218		)
Net cash provided by financing activities	94,702			18,978
Decrease in cash and cash equivalents and restricted cash	(444		)	(1,124		)
Cash and cash equivalents and restricted cash, beginning of period	2,392			2,130
Cash and cash equivalents and restricted cash, end of period	$	1,948		$	1,006

Supplemental Cash Flow Information:
Interest paid	$	6,380		$	3,823
Invoices accrued for construction, tenant improvement and other capitalized costs	$	270		$	102
Reclassification between accounts and notes receivable	$	45		$	—
Reclassification of registration statement costs incurred in prior year to equity issuance costs	$	321		$	34
(Decrease) increase in fair value of cash flow hedges	$	(7,305	)	$	2,152
Fair value of property received in foreclosure	$	—		$	4,541
Notes and mortgage receivable repayments utilized to originate note receivable	$	—		$	18,167

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(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 in our target submarkets. As of September 30, 2019, the Company had investments of approximately $566.3 million in 111 real estate properties, located in 32 states, totaling approximately 2.5 million square feet in the aggregate.

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, 2018.

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, 2019. 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.

Reclassifications

Tenant reimbursements totaling $1.7 million and $4.7 million, respectively, on the Company's Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 were reclassified into rental income.

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 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 GAAP) and meet other requirements to continue to qualify as a REIT.

Notes to Condensed Consolidated Financial Statements - Continued

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Lease Accounting

In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases; in January 2018, the FASB issued ASU 2018-01, Leases - Land Easement Practical Expedient for Transition to Topic 842; in July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases - Targeted Improvements; and in December 2018, the FASB issued ASU 2018-20, Narrow-Scope Improvements for Lessors. The Company adopted this group of ASUs, collectively referred to as Topic 842, on January 1, 2019. Topic 842 superseded the existing standard for lease accounting (Topic 840, Leases).

The Company elected to utilize the following practical expedients provided by Topic 842:

• the package of practical expedients that allows an entity not to reassess upon adoption (i) whether an expired or existing contract contains a lease, (ii) whether a lease classification related to expired or existing lease arrangements, and (iii) whether costs incurred on expired or existing leases qualify as initial direct costs, and

• as a lessor, the practical expedient not to separate certain non-lease components, such as common area maintenance, from the lease component if (i) the timing and pattern of transfer are the same for the nonlease component and associated lease component, and (ii) the lease component would be classified as an operating lease if accounted for separately.

Topic 842 requires lessees to record most leases on their balance sheet through a right-of-use ("ROU") model, in which a lessee records a ROU asset and a lease liability on their balance sheet. Leases with terms that are 12 months or less or leases that are clearly insignificant have not been accounted for under the ROU model. Lessees will account for leases as financing or operating leases, with the classification affecting the timing and pattern of expense recognition in the income statement. Lease expense will be recognized based on the effective interest method for leases accounted for as finance leases and on a straight-line basis over the term of the lease for leases accounted for as operating leases.

The accounting by a lessor under Topic 842 is largely unchanged from that of Topic 840. Under Topic 842, lessors will continue to account for leases as a sales-type, direct-financing, or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease. Topic 842 requires accounting for a transaction as a financing in a sale leaseback when the seller-lessee is provided an option to purchase the property from the landlord at the tenant's option. The Company expects that this provision could change the accounting for these types of leases in the future. Topic 842 also includes the concept of separating lease and nonlease components. Under Topic 842, nonlease components, such as common area maintenance, would be accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. With this election, the Company combined tenant reimbursements with rental income on its Condensed Consolidated Statements of Income. Additionally, we will recognize a charge to rental income for amounts deemed uncollectible. Further, the Company has historically only capitalized direct leasing costs, such as leasing commissions. While the new standard revises the treatment of indirect leasing costs and permits the capitalization and amortization only of direct leasing costs, the Company does not expect an impact to its financial statements related to the capitalization of leasing costs. Also, the Narrow-Scope Improvements for Lessors under ASU 2018-20 allows the Company to continue to exclude from revenue costs paid by our tenants on our behalf directly to third parties, such as property taxes and insurance.

Topic 842 provided two transition alternatives. The Company adopted the standard based on the prospective optional transition method, in which leases for comparative periods continue to be accounted for in accordance with Topic 840.

Notes to Condensed Consolidated Financial Statements - Continued

Upon adoption, where the Company is the lessee, we recorded a ROU asset and a related operating lease liability, each totaling approximately $0.1 million, related to one ground lease which will have minimal impact on the recognition of future ground lease expense. The ROU lease asset is included in other assets and the operating lease liability is included in other liabilities on the Company's Condensed Consolidated Balance Sheets.

Derivatives and Hedge Accounting

In October 2018, the FASB issued an update, ASU 2018-16, Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes to ASC Topic 815, Derivatives and Hedging. ASU 2018-16 expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. ASU 2018-16 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We adopted this update effective January 1, 2019. The adoption of this update did not have an impact on our Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

Financial Instruments-Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses, 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 will be required to use a new current expected credit loss ("CECL") model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, companies will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. Companies will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Companies will 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. This standard is effective for the Company on January 1, 2020 with early adoption permitted. In August 2018, the FASB issued a proposal that would amend the ASU to clarify that receivables arising from leases would not be within the scope of the ASU but rather would be accounted for under the leasing standard. The Company continues to monitor the FASB's activity relating to this ASU and the effects that it could have on our Consolidated Financial Statements.

Note 2. Real Estate Investments

At September 30, 2019, the Company had investments of approximately $566.3 million in 111 real estate properties. The following table summarizes the Company's real estate investments.



(Dollars in thousands)	Number of Facilities	Land and Land Improvements		Buildings, Improvements, and Lease Intangibles		Personal Property		Total		Accumulated Depreciation
Medical office buildings:
Florida	5	$	4,648	$	29,384	$	—	$	34,032	$	5,328
Ohio	6	3,665		26,578		—		30,243		6,209
Texas	3	3,164		15,591		—		18,755		4,862
Illinois	3	1,918		15,019		—		16,937		3,195
Kansas	3	2,455		15,539		—		17,994		4,480
Iowa	1	2,241		9,062		—		11,303		2,967
Other states	16	5,587		40,952		—		46,539		5,805
	37	23,678		152,125		—		175,803		32,846
Physician clinics:
Kansas	2	610		6,921		—		7,531		1,690
Illinois	6	2,888		9,709		—		12,597		838
Florida	5	506		10,322		—		10,828		1,101
Other states	9	2,903		21,742		—		24,645		3,984
	22	6,907		48,694		—		55,601		7,613
Surgical centers and hospitals:
Louisiana	1	1,683		21,353		—		23,036		1,511
Michigan	2	637		8,383		—		9,020		2,623
Illinois	2	2,355		8,222		—		10,577		1,797
Florida	1	271		7,070		—		7,341		1,043
Arizona	2	576		5,389		—		5,965		1,774
Other states	7	2,130		17,935		—		20,065		4,534
	15	7,652		68,352		—		76,004		13,282
Specialty centers:
Illinois	3	3,489		24,733		—		28,222		2,916
Other states	22	5,207		38,623		—		43,830		8,365
	25	8,696		63,356		—		72,052		11,281
Behavioral facilities:
Massachusetts	1	3,835		23,303		—		27,138		177
West Virginia	1	2,138		22,897		—		25,035		1,171
Illinois	1	1,300		18,803		—		20,103		1,568
Washington	1	2,725		25,064		—		27,789		120
Other states	5	2,538		18,880		—		21,418		1,097
	9	12,536		108,947		—		121,483		4,133
Inpatient rehabilitation facilities:
Texas	2	3,023		44,530		—		47,553		548
	2	3,023		44,530		—		47,553		548
Long-term acute care hospitals:
Indiana	1	523		14,405		—		14,928		1,566
	1	523		14,405		—		14,928		1,566
Corporate property	—	—		2,701		202		2,903		348
Total real estate investments	111	$	63,015	$	503,110	$	202	$	566,327	$	71,617

Notes to Condensed Consolidated Financial Statements - Continued

Note 3. Real Estate Leases

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2034. 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 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 September 30, 2019, are as follows (in thousands):



2019 (three months ending December 31)	$	12,889
2020	49,652
2021	46,663
2022	43,440
2023	39,016
2024 and thereafter	247,654
	$	439,314

Straight-line rental income

Rental income is recognized as earned over the life of the lease agreement on a straight-line basis. Straight-line rent included in rental income was approximately $0.6 million and $0.4 million, respectively, for the three months ended September 30, 2019 and 2018 and was approximately $1.4 million and $1.2 million, respectively, for the nine months ended September 30, 2019 and 2018.

Deferred revenue

Rent received but not yet earned is deferred until such time it is earned. Deferred revenue, included in other liabilities, was approximately $2.0 million and $1.6 million, respectively, at September 30, 2019 and December 31, 2018.

Note 4. Real Estate Acquisitions

During the third quarter of 2019, the Company acquired three real estate properties totaling approximately 130,000 square feet for an aggregate purchase price of approximately $52.6 million and cash consideration of approximately $52.2 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations through 2034. Amounts reflected in revenues and net income for the nine months ended September 30, 2019 for these properties were approximately $1.0 million and $0.7 million, respectively. Transaction costs totaling approximately $0.4 million related to these asset acquisitions were capitalized in the period and included in real estate assets.

During the second quarter of 2019, the Company acquired three real estate properties totaling approximately 110,000 square feet for an aggregate purchase price of approximately $31.9 million and cash consideration of approximately $30.7 million. Upon acquisition, the properties were approximately 97.1% leased in the aggregate with lease expirations through 2034. Amounts reflected in revenues and net income for the nine months ended September 30, 2019 for these properties were approximately $1.4 million and $1.0 million, respectively. Due to the original structuring of one of the acquisitions in April 2019, the Company recorded interest income for the second quarter of 2019 totaling approximately $0.4 million that was included in other operating interest on the Condensed Consolidated Statements of Income, rather than rental income. Transaction costs totaling approximately $0.2 million related to these asset acquisitions were capitalized in the period and included in real estate assets.

Notes to Condensed Consolidated Financial Statements - Continued

During the first quarter of 2019, the Company acquired two real estate properties totaling approximately 83,000 square feet for an aggregate purchase price and cash consideration of approximately $32.7 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations in 2029. Amounts reflected in revenues and net income for the nine months ended September 30, 2019 for these properties were approximately $2.0 million and $1.5 million, respectively. Transaction costs totaling approximately $0.1 million related to these asset acquisitions were capitalized in the period and included in real estate assets.

The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the nine months ended September 30, 2019.



			Relative Fair Value			Estimated Useful Life
			(in thousands)			(In years)
Land and land improvements			$	12,497		4.7-18.4
Building and building improvements			103,253			20-40
Intangibles:
	At-market lease intangibles		2,186			3.8-10.8
	Below-market lease intangibles		(44		)	8.3
		Total intangibles	2,142
Accounts receivable and other assets assumed			15
Accounts payable, accrued liabilities and other liabilities assumed			(2,198		)
Prorated rent, interest and operating expense reimbursement amounts collected			(85		)
	Total cash consideration		$	115,624

Note 5. Debt, net

The table below details the Company's debt as of September 30, 2019 and December 31, 2018.



	Balance as of
(Dollars in thousands)	September 30, 2019		December 31, 2018		Maturity Dates

Revolving Credit Facility	$	36,250	$	43,000	3/23
A-1 Term Loan, net	49,815		49,759		3/22
A-2 Term Loan, net	49,761		49,722		3/24
A-3 Term Loan, net	74,411		—		3/26
Mortgage Note Payable	5,223		5,285		5/24
	$	215,460	$	147,766

The Company's second amended and restated credit facility (the "Credit Facility") is by and among Community Healthcare OP, LP, the Company, the lenders from time to time party thereto, and SunTrust Bank, as Administrative Agent. The Company’s material subsidiaries are guarantors of the obligations under the Credit Facility. The Company entered into a third amendment to its Credit Facility (the "Third Amendment") on March 29, 2019, which added a $75.0 million term loan (the "A-3 Term Loan"), which matures on March 29, 2026, extended the maturity of the revolving credit facility (the "Revolving Credit Facility") to March 29, 2023, improved pricing on the Credit Facility, and adjusted certain financial covenants. The Company paid approximately $1.3 million in fees and expenses related to the Third Amendment, of which $0.7 million was related to the Revolving Credit Facility and was recorded as deferred financing costs, included in Other Assets, and $0.6 million was related to the A-3 Term

Notes to Condensed Consolidated Financial Statements - Continued

Loan and was recorded as deferred financing costs, included in Debt, net, on the Company's Condensed Consolidated Balance Sheets.

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 term loan facility in the aggregate principal amount of $50.0 million (the "A-2 Term Loan"), which matures on March 29, 2024 and the new seven-year, $75.0 million 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 $36.3 million outstanding under the Revolving Credit Facility with a borrowing capacity remaining of approximately $113.8 million at September 30, 2019.

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 6 for more details on the interest rate swaps. At September 30, 2019, 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 September 30, 2019.

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.

Notes to Condensed Consolidated Financial Statements - Continued

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 September 30, 2019, 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 the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018.



	Asset Derivatives Fair Value at					Liability Derivatives Fair Value at
	September 30, 2019		December 31, 2018		Balance Sheet Classification	September 30, 2019		December 31, 2018		Balance Sheet Classification
Interest rate swaps	$	—	$	902	Other assets	$	6,826	$	98	Other Liabilities

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive (loss) income ("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 $1.1 million will be reclassified from other comprehensive (loss) income ("OCI") as an increase to interest expense.

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 and nine months ended September 30, 2019 and 2018.



	Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)	2019			2018		2019			2018
Amount of unrealized (loss) gain recognized in OCI on derivative	$	(2,060	)	$	527	$	(7,305	)	$	2,152
Amount of (gain) loss reclassified from accumulated OCI into interest expense	$	3		$	46	$	(154	)	$	201
Total Interest Expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	2,483		$	1,643	$	6,788		$	4,482

Credit-risk-related Contingent Features

As of September 30, 2019, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $7.2 million. As of September 30, 2019, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of approximately $7.2 million at September 30, 2019.

Notes to Condensed Consolidated Financial Statements - Continued

Note 7. Stockholders’ Equity

Common Stock

The following table provides a reconciliation of the beginning and ending common stock balances for the nine months ended September 30, 2019 and for the year ended December 31, 2018:



	Nine Months Ended September 30, 2019	Year Ended December 31, 2018
Balance, beginning of period	18,634,502	18,085,798
Issuance of common stock	1,321,362	334,700
Restricted stock-based awards	221,829	214,004
Balance, end of period	20,177,693	18,634,502

ATM Program

On August 7, 2018, the Company entered into an at-the-market offering program ("ATM Program") with Sandler O’Neill & Partners, L.P., Evercore Group L.L.C., SunTrust Robinson Humphrey, Inc., BB&T Capital Markets, a division of BB&T Securities, LLC, Fifth Third Securities, Inc. and Janney Montgomery Scott LLC, as sales agents (collectively, the “Agents”), under which the Company may issue and sell shares of its common stock, par value $0.01 per share (the “Common Stock”), having an aggregate gross sales price of up to $100.0 million (the “Shares”) 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's activity under the ATM Program for the three and nine months ended September 30, 2019 is detailed in the table below. As of September 30, 2019, the Company had approximately $36.9 million remaining that may be issued under the ATM Program.



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Shares issued	680,309		1,321,362
Proceeds received (in millions)	$	28.5	$	51.6
Average gross sales price per share ($)	$	42.70	$	39.88

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.



	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2019			2018			2019			2018
Net income	$	2,647		$	1,999		$	6,163		$	6,288
Participating securities' share in earnings	(373		)	(287		)	(1,024		)	(769		)
Net income, less participating securities' share in earnings	$	2,274		$	1,712		$	5,139		$	5,519

Weighted average Common Shares outstanding
Weighted average Common Shares outstanding	19,697,574			18,330,340			19,166,309			18,228,006
Unvested restricted shares	(864,672		)	(660,659		)	(818,679		)	(532,318		)
Weighted average Common Shares outstanding–Basic	18,832,902			17,669,681			18,347,630			17,695,688
Dilutive potential common shares	—			—			—			—
Weighted average Common Shares outstanding –Diluted	18,832,902			17,669,681			18,347,630			17,695,688

Basic Net Income per Common Share	$	0.12		$	0.10		$	0.28		$	0.31

Diluted Net Income per Common Share	$	0.12		$	0.10		$	0.28		$	0.31

Note 9. Incentive Plan

Under the Company's 2014 Incentive Plan, as amended, awards may be made in the form of restricted stock, cash or a combination of both. Compensation expense recognized from the amortization of the value of the Company's officer, employee and director shares over the applicable vesting periods during the three months ended September 30, 2019 and 2018 was approximately $1.0 million and $0.7 million, respectively, and during the nine months ended September 30, 2019 and 2018 was approximately $2.8 million and $2.1 million, respectively. Included in general and administrative expense for the nine months ended September 30, 2018 was approximately $0.2 million related to fully amortized shares previously granted to a board member who did not stand for re-election to the Company's board. A summary of the activity under the 2014 Incentive Plan for the three and nine months ended September 30, 2019 and 2018 is included in the table below.



		Three Months Ended September 30,		Nine Months Ended September 30,
		2019	2018	2019		2018
Stock-based awards, beginning of period		813,752	609,660	709,487		512,115
	Stock in lieu of compensation	14,862	17,420	72,391		69,767
	Stock awards	81,278	82,407	149,438		144,237
	Total stock granted	96,140	99,827	221,829		214,004
	Vested shares	—	—	(21,424	)	(16,632	)
Stock-based awards, end of period		909,892	709,487	909,892		709,487

Note 10. Other Assets

Items included in Other assets, net on the Company's Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 are detailed in the table below.



	Balance as of
(Dollars in thousands)	September 30, 2019		December 31, 2018
Notes receivable	$	23,402	$	24,110
Accounts and interest receivables	3,573		2,158
Straight-line rent receivables	4,567		3,254
Prepaid assets	688		487
Deferred financing costs, net	746		318
Leasing commissions, net	900		790
Deferred tax asset	2,016		2,024
Fair value of interest rate swaps	—		902
Above-market intangible assets, net	150		168
Right-of-use leased asset	140		—
Other	232		335
	$	36,414	$	34,546

The Company's $23.4 million in notes receivable at September 30, 2019 include mainly the following notes. Interest related to these notes is included in Other Operating Interest on the Company's Condensed Consolidated Statements of Income.


•	On April 25, 2018, the Company provided a $23.0 million loan to a newly formed company, secured by all assets and ownership interests in seven long-term acute care hospitals and one inpatient rehabilitation hospital. The loan, which matures on May 1, 2031, currently bears interest at 9% per annum, with principal payments beginning in May 2021.


•	On December 31, 2018, the Company entered into notes with a tenant totaling $0.9 million. The notes bear interest at 9% per annum and mature on December 31, 2019.

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 impact in the activities 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 September 30, 2019 are summarized in the table below.



Classification	Carrying Amount (in millions)		Maximum Exposure to Loss (in millions)
Notes receivable	$	0.4	$	0.4
Note receivable	$	23.0	$	23.0

Note 11. 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.

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 September 30, 2019 and December 31, 2018, using level 2 inputs.



	September 30, 2019				December 31, 2018
(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Notes receivable	$	23,402	$	23,494	$	24,110	$	23,936
Interest rate swap asset	$	—	$	—	$	902	$	902
Interest rate swap liability	$	6,826	$	6,826	$	269	$	269
Mortgage note payable	$	5,314	$	5,323	$	5,391	$	5,307

Note 12. Subsequent Events

Dividend Declared

On October 31, 2019, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of $0.4150 per share. The dividend is payable on November 29, 2019 to stockholders of record on November 15, 2019.

Subsequent Acquisitions

Subsequent to September 30, 2019, the Company acquired seven real estate properties, including one that was previously under construction, totaling approximately 114,000 square feet for a purchase price of approximately $34.8 million and cash consideration of approximately $34.4 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expiration through 2034. The Company funded the acquisitions with cash from operations, net proceeds from the ATM Program, and proceeds from the Company's Revolving Credit Facility.

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, contains 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 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, 2018, 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 in our target submarkets.

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.

Real estate acquisitions

See Note 4 to the Condensed Consolidated Financial Statements for more details on these acquisitions.

4th Quarter 2019 Acquisitions

Acquisition Pipeline

The Company has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $68.0 million. The Company's expected aggregate returns on these investments range from approximately 9.5% to 11.0%. The Company expects to close these properties through 2020; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings.

Leased square footage

As of September 30, 2019, our real estate portfolio was approximately 89.3% leased. During the first nine months of 2019, we had expiring or terminated leases related to approximately 134,000 square feet, and we leased or renewed leases relating to approximately 170,000 square feet.

Highland Transition Update

A new operator is currently managing Highland Hospital pursuant to a management agreement and is in the process of preparing for transfer of licenses and other assets.

Highland Hospital will likely be the subject of a pre-packaged bankruptcy, with an anticipated sale to the new operator, to expedite and facilitate the transfer of licenses.

The Company has received and anticipates continuing to receive monthly payments of approximately $0.3 million.

The Company's lease with the new operator will become effective upon the transfer of the licenses to the new operator.

The Company does not anticipate any material adverse long-term effect to its cash flows or net income related to the transition or subsequent leasing of this facility.

The Company cannot provide assurance as to the timing or whether, this transaction will actually close.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a material effect on the Company's consolidated financial condition, results of operations or liquidity.

Inflation

We believe inflation will have a minimal impact on the operating performance of our properties. Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation. These provisions include clauses that enable us to receive payment of increased rent pursuant to escalation clauses which generally increase rental rates during the terms of the leases. These escalation clauses often provide for fixed rent increases or indexed escalations (based upon the Consumer Price Index or other measures). However, some of these contractual rent increases may be less than the actual rate of inflation. Generally, our lease agreements require the tenant to pay property operating expenses, including maintenance costs, real estate taxes and insurance. This requirement reduces our exposure to increases in these costs and property operating expenses resulting from inflation.

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 not yet adopted.

Results of Operations

The Company's results of operations for the three and nine months ended September 30, 2019 compared to the same periods in 2018 have most significantly been impacted by its real estate acquisitions. As of September 30, 2019 and 2018, the Company had investments in real estate properties totaling approximately $566.3 million and $424.2 million, respectively.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The table below shows our results of operations for the three months ended September 30, 2019 compared to the same period in 2018 and the effect of changes in those results from period to period on our net income.



	Three Months Ended September 30,						Increase (Decrease) to Net Income
(dollars in thousands)	2019			2018			$			%
REVENUES
Rental income	$	15,718		$	11,858		$	3,860		32.6	%
Other operating interest	541			679			(138		)	(20.3	)%
	16,259			12,537			3,722			29.7	%
EXPENSES
Property operating	3,327			2,627			(700		)	(26.6	)%
General and administrative	2,041			1,395			(646		)	(46.3	)%
Depreciation and amortization	5,774			4,925			(849		)	(17.2	)%
	11,142			8,947			(2,195		)	(24.5	)%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS	5,117			3,590			1,527			42.5	%
Interest expense	(2,483		)	(1,643		)	(840		)	(51.1	)%
Other income	13			52			(39		)	(75.0	)%
INCOME FROM CONTINUING OPERATIONS	2,647			1,999			648			32.4	%
NET INCOME	$	2,647		$	1,999		$	648		32.4	%

Revenues

Revenues increased approximately $3.7 million, or 29.7%, for the three months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate.

Expenses

Property operating expenses increased approximately $0.7 million, or 26.6%, for the three months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate of approximately $0.5 million, as well as an increase in overall expenses on our existing portfolio of approximately $0.2 million.

General and administrative expenses increased approximately $0.6 million, or 46.3%, for the three months ended September 30, 2019 compared to the same period in 2018 due mainly to compensation-related expenses and occupancy costs related to to the addition of employees, including the amortization of non-vested restricted common shares issued under our 2014 Incentive Plan.

Depreciation and amortization expense increased approximately $0.8 million, or 17.2%, for the three months ended September 30, 2019 compared to the same period in 2018. Acquisitions accounted for an increase of approximately $1.3 million, offset by a decrease of approximately $0.5 million in amortization due to fully depreciated real estate lease intangibles which generally have a shorter depreciable life than a building.

Interest expense

Interest expense increased approximately $0.8 million, or 51.1%, for the three months ended September 30, 2019 compared to the same period in 2018 due mainly to additional Term Loan borrowings under its Credit Facility in the first quarters of 2018 and 2019, as well as a higher weighted average debt balance and a higher weighted average interest rate on the Revolving Credit Facility in the third quarter of 2019 compared to the same period in 2018.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The table below shows our results of operations for the nine months ended September 30, 2019 compared to the same period in 2018 and the effect of changes in those results from period to period on our net income.



	Nine Months Ended September 30,						Increase (Decrease) to Net Income
(dollars in thousands)	2019			2018			$			%
REVENUES
Rental income	$	41,977		$	34,743		$	7,234		20.8	%
Other operating interest	2,039			1,625			414			25.5	%
	44,016			36,368			7,648			21.0	%
EXPENSES
Property operating	9,395			7,497			(1,898		)	(25.3	)%
General and administrative	5,602			4,092			(1,510		)	(36.9	)%
Depreciation and amortization	16,319			14,471			(1,848		)	(12.8	)%
	31,316			26,060			(5,256		)	(20.2	)%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS	12,700			10,308			2,392			23.2	%
Interest expense	(6,788		)	(4,482		)	(2,306		)	51.5	%
Other income	251			462			(211		)	(45.7	)%
INCOME FROM CONTINUING OPERATIONS	6,163			6,288			(125		)	(2.0	)%
NET INCOME	$	6,163		$	6,288		$	(125	)	(2.0	)%

Revenues

Revenues increased approximately $7.6 million, or 21.0%, for the nine months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate. Due to the original structuring of an acquisition in April 2019, the Company recorded interest income of approximately $0.4 million, included in other operating interest, rather than rental income, which was recorded for the second quarter of 2019.

Expenses

Property operating expenses increased approximately $1.9 million, or 25.3%, for the nine months ended September 30, 2019 compared to the same period in 2018 mainly due to acquisitions of real estate of approximately $1.2 million, as well as an increase in overall expenses on our existing portfolio of approximately $0.7 million.

General and administrative expenses increased approximately $1.5 million, or 36.9%, for the nine months ended September 30, 2019 compared to the same period in 2018. Compensation-related expenses and occupancy costs related to our employees, including the amortization of non-vested restricted common shares issued under our 2014 Incentive Plan, and expenses related to the addition of employees increased approximately $1.2 million. Further, state and federal income taxes and franchise taxes increased approximately $0.4 million.

Depreciation and amortization expense increased approximately $1.8 million, or 12.8%, for the nine months ended September 30, 2019 compared to the same period in 2018. Acquisitions accounted for an increase of approximately $2.9 million, offset by a decrease of approximately $1.6 million in amortization due to fully depreciated real estate

lease intangibles which generally have a shorter depreciable life than a building. Also, land, building and tenant improvements accounted for an increase of approximately $0.4 million.

Interest expense

Interest expense increased approximately $2.3 million, or 51.5%, for the nine months ended September 30, 2019 compared to the same period in 2018 due mainly to additional Term Loan borrowings under its Credit Facility in the first quarters of 2018 and 2019, as well as a higher weighted average debt balance and a higher weighted average interest rate on the Revolving Credit Facility in the first nine months of 2019 compared to the same period in 2018. The Company also assumed a mortgage relating to one of its real estate acquisitions in the fourth quarter of 2018 resulting in mortgage note interest of approximately $0.2 million for the nine months ended September 30, 2019.

Funds from Operations

Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to net income (calculated in accordance with GAAP), excluding gains or losses from the sale of certain real estate assets and gains or losses from change in control, plus depreciation and amortization related to real estate, plus impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, and after adjustments for unconsolidated partnerships and joint ventures, as well as other items discussed in NAREIT's Funds From Operations White Paper - 2018 Restatement.

Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO and FFO per share to be supplemental measures of a REIT’s performance because they provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO and FFO per share can facilitate comparisons of operating performance between periods. The Company reports FFO and FFO per share because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share is consistently reported, discussed, and compared by research analysts in their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share. However, FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income attributable to common stockholders as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.

The table below reconciles FFO to net income for the three and nine months ended September 30, 2019 and 2018, respectively.



	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, excepts per share amounts)	2019		2018		2019		2018
Net income	$	2,647	$	1,999	$	6,163	$	6,288
Real estate depreciation and amortization	5,812		4,918		16,434		14,453
Total adjustments	5,812		4,918		16,434		14,453
Funds from Operations	$	8,459	$	6,917	$	22,597	$	20,741
Funds from Operations per Common Share-Basic	$	0.45	$	0.39	$	1.23	$	1.17
Funds from Operations per Common Share-Diluted	$	0.44	$	0.39	$	1.20	$	1.16
Weighted Average Common Shares Outstanding-Basic	18,832,902		17,669,681		18,347,630		17,695,688
Weighted Average Common Shares Outstanding-Diluted ⁽¹⁾	19,315,354		17,947,568		18,769,670		17,839,014

(1) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share.

Liquidity and Capital Resources

The Company monitors its liquidity and capital resources and relies on several key indicators in its assessment of capital markets for financing acquisitions and other operating activities as needed, including the following:


•	Leverage ratios and financial covenants included in our Credit Facility;


•	Dividend payout percentage; and


•	Interest rates, underlying treasury rates, debt market spreads and equity markets.

The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.

Sources and Uses of Cash

The Company derives most of its revenues from its real estate property and notes portfolio, collecting rental income, operating expense reimbursements and interest based on contractual arrangements with its tenants and borrowers. These sources of revenue represent our primary source of liquidity to fund our dividends, general and administrative expenses, property operating expenses, interest expense on our Credit Facility and other expenses incurred related to managing our existing portfolio and investing in additional properties. To the extent additional resources are needed, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets or through proceeds from our Credit Facility.

The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.

The Company's Credit Facility, as amended on March 29, 2019, provides for a $150.0 million Revolving Credit Facility and $175.0 million in Term Loans, as well as an accordion feature which allows borrowings up to a total of $525.0 million, including the ability to add and fund additional term loans. Note 5 to the Condensed Consolidated Financial Statements provides more details on the Company's Credit Facility and the amendment on March 29, 2019. At September 30, 2019, the Company had borrowed $175.0 million in Term Loans and had borrowing capacity remaining under the Revolving Credit Facility of approximately $113.8 million. At September 30, 2019,

our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 36.6%.

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. Also, the Company’s current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods. The Company was in compliance with its financial covenants under its Credit Facility as of September 30, 2019.

4th Quarter 2019 Acquisitions

Acquisition Pipeline

The Company has three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately $68.0 million. The Company's expected aggregate returns on these investments is approximately 9.5% to 11.0%. The Company expects to close these properties through 2020; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close. The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings.

Other Contractual Obligations

The Company has tenant improvement allowances included in certain leases with its tenants totaling approximately $4.7 million that it could be obligated to fund or reimburse the tenants for if the tenants completed such improvements.

The Company has also entered into contracts regarding certain capital expenditures totaling approximately $1.7 million. Reimbursement of these expenses by our tenants will be determined by each tenant's lease.

Universal Shelf S-3 Registration Statement

On September 20, 2019, the Company filed with the SEC a Post-Effective Amendment No. 1 to Form S- 3 (File No. 333-213614), or the Registration Statement, which Post-Effective Amendment was declared effective by the SEC on September 24, 2019, to amend the Registration Statement to deregister any securities registered pursuant to the Registration Statement and not otherwise sold thereunder.

ATM Program

During the first nine months of 2019, the Company issued, through its ATM Program, 1,321,362 shares of common stock at an average gross sales price of $39.88 per share and received proceeds of approximately $51.6 million, as discussed in more detail in Note 7 to the Condensed Consolidated Financial Statements. The proceeds were used for additional acquisitions, to repay outstanding balances under the Company's Credit Facility and for general corporate purposes.

Operating Activities

Cash flows provided by operating activities for the nine months ended September 30, 2019 and 2018 were approximately $23.2 million and $17.9 million, respectively. Cash flows provided by operating activities were generally provided by contractual rents, net of expenses, on our real estate property portfolio.

Investing Activities

Cash flows used in investing activities for the nine months ended September 30, 2019 and 2018 were approximately $118.3 million and $38.0 million, respectively. During the nine months ended September 30, 2019, the Company invested in eight properties for an aggregate cash consideration of approximately $115.6 million. During the nine months ended September 30, 2018, the Company invested in eight properties for an aggregate cash consideration of approximately $26.8 million and $4.5 million fair value of real estate received in foreclosure. In addition, the Company acquired or funded $7.0 million of certain promissory notes during the nine months ended September 30, 2018.

Financing Activities

Cash flows provided by financing activities for the nine months ended September 30, 2019 and 2018 were approximately $94.7 million and $19.0 million, respectively. During the nine months ended September 30, 2019, the Company amended its Credit Facility which provided an additional $75.0 million Term Loan. The proceeds from the Term Loan were used to pay down the outstanding balance under the Company's Revolving Credit Facility. The Company also sold shares under its ATM Program and received proceeds of approximately $51.6 million, and paid dividends totaling $23.5 million. Dividends paid for the nine months ended September 30, 2019 exceeded cash flows from operations by approximately $0.3 million, which amount was funded from proceeds under the Company's Revolving Credit Facility. During the nine months ended September 30, 2018, the Company borrowed $40.0 million under its Term Loans, which was used to repay outstanding amounts on its Revolving Credit Facility, had net repayments on its Revolving Credit Facility of $6.0 million, received net proceeds under its at-the-market equity offering program of approximately $7.1 million, and paid dividends totaling $21.9 million. Dividends paid for the nine months ended September 30, 2018 exceeded cash flows from operations by approximately $3.9 million, which amount was funded from proceeds under the Company's Revolving Credit Facility.

Security Deposits

As of September 30, 2019, the Company held approximately $3.0 million 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.

Dividends

The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT.

The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We may use certain derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. We will not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. An interest rate swap is a contractual agreement entered into by two counterparties under which each agrees to make periodic payments to the other for an agreed period of time based on a notional amount of principal. Under the most common form of interest rate swap, known from our perspective as a floating-to-fixed interest rate swap, a series of floating, or variable, rate payments on a notional amount of principal is exchanged for a series of fixed interest rate payments on such notional amount.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on this evaluation, Company’s management has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files or submits under the Exchange Act.

Changes In Internal Control Over Financial Reporting

There were no changes in our system of internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company may, from time to time, be involved in litigation arising in the ordinary course of business or which may be expected to be covered by insurance. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, an investor should consider the risk factors included in its Annual Report on Form 10-K for the year ended December 31, 2018, and other reports that may be filed by the Company. Investors should also consider the following risk factors:

We will no longer qualify as an “emerging growth company” as of December 31, 2019, and as a result, we will have to comply with increased disclosure and compliance requirements.

We are currently an “emerging growth company” as defined in the JOBS Act, but, based on the market value of our common stock held by non-affiliates exceeding $700 million as of the last business day of our second fiscal quarter of 2019, we will no longer qualify as an “emerging growth company” but instead will be deemed a large accelerated filer as of December 31, 2019.

As a large accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company. These requirements include, but are not limited to:


•	the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002;


•	compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;


•	the requirement that we provide full and more detailed disclosures regarding executive compensation; and


•	the requirement that we hold a non-binding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved.

An emerging growth company may also elect to delay the adoption of new accounting standards to when they become applicable to private companies, rather than when public companies must adopt them. However, the Company elected to adopt new accounting standards at the same time as applicable to other public companies.

We expect that the loss of emerging growth company status and compliance with the additional requirements of being a large accelerated filer will increase our legal and financial compliance costs and cause management and other personnel to divert attention from operational and other business matters to devote substantial time to public company reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the Securities and Exchange Commission, (the "SEC"), or other regulatory authorities, which would require additional financial and management resources.

If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors' views of us and, as a result, the value of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act, management of our Company was required to report upon the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ended December 31, 2016. However, since we will be deemed a large accelerated filer beginning with our Annual Report of Form 10-K for the year ending December 31, 2019, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.

The rules governing the standards that must be met for management and our independent registered public accounting firm to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. In connection with our and our independent registered public accounting firm’s evaluations of our internal control over financial reporting, we may need to upgrade systems, including information technology; implement additional financial and management controls, reporting systems, and procedures; and hire additional accounting and finance staff.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us or our independent registered public accounting firm conducted in connection with Section 404 of the Sarbanes-Oxley Act may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. Internal control deficiencies could also result in a restatement of our financial results in the future. We could become subject to stockholder or other third-party litigation, as well as investigations by the SEC, the New York Stock Exchange, or

other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions, payment of damages or other remedies. Further, any delay in compliance with the auditor attestation provisions of Section 404 could subject us to a variety of administrative sanctions, including ineligibility for short-form resale registration, action by the SEC and the suspension or delisting of our common stock, which could reduce the trading price of our common stock and could harm our business.

If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on our Credit Facility may be adversely impacted.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (AARC) has proposed that the Secured Overnight Financing Rate (SOFR) is the rate that represents best practice as the alternative to LIBOR for use in derivatives and other financial contracts currently indexed to LIBOR. AARC has proposed a paced market transition plan to SOFR from LIBOR. We are currently evaluating the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including SOFR. We do not currently have material contracts, with the exception of our Credit Facility, that are indexed to LIBOR. We will continue to actively assess the related opportunities and risks involved in this transition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-X which are filed with this report are listed in the Exhibit Index and are hereby incorporated in by reference.

EXHIBIT INDEX



Exhibit Number		Description
3.1		Corporate Charter of Community Healthcare Trust Incorporated, as amended (1)
3.2		Bylaws of Community Healthcare Trust Incorporated, as amended (2)
31.1 *		Certification of the Chief Executive Officer of Community Healthcare Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Rule 302 of the Sarbanes-Oxley Act of 2002
31.2 *		Certification of the Chief Financial Officer of Community Healthcare Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Rule 302 of the Sarbanes-Oxley Act of 2002
32.1 **		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


(1)	Filed as Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on May 6, 2015 (Registration No. 333-203210) and incorporated herein by reference.


(2)	Filed as Exhibit 3.2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on April 2, 2015 (Registration No. 333-203210) and incorporated herein by reference.

_________


*	Filed herewith.


**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 5, 2019



	COMMUNITY HEALTHCARE TRUST INCORPORATED

	By:	/s/ Timothy G. Wallace
		Timothy G. Wallace
		Chief Executive Officer and President

	By:	/s/ David H. Dupuy
		David H. Dupuy
		Executive Vice President and Chief Financial Officer