Community Healthcare Trust Inc - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
OR
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-37401

Community Healthcare Trust Incorporated

(Exact Name of Registrant as Specified in Its Charter)


Maryland						46-5212033
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

3326 Aspen Grove Drive

Suite 150

Franklin, Tennessee 37067

(Address of Principal Executive Offices) (Zip Code)

(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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Emerging-growth company

☐

Non-accelerated filer

☐

Smaller reporting

company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐

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

Yes ☐ No ☒

The Registrant had 25,072,355 shares of Common Stock, $0.01 par value per share, outstanding as of April 27, 2022.

COMMUNITY HEALTHCARE TRUST INCORPORATED

FORM 10-Q

March 31, 2022

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	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31

PART II.—OTHER INFORMATION		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32

SIGNATURES		34

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars and shares in thousands, except per share amounts)


	(Unaudited)
	March 31, 2022		December 31, 2021
ASSETS
Real estate properties
Land and land improvements	$	98,561	$	97,397
Buildings, improvements, and lease intangibles	741,969		736,465
Personal property	225		223
Total real estate properties	840,755		834,085
Less accumulated depreciation	(140,985)		(133,056)
Total real estate properties, net	699,770		701,029
Cash and cash equivalents	1,178		2,351
Restricted cash	521		516

Other assets, net	59,761		50,337
Total assets	$	761,230	$	754,233

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net	$	269,670	$	265,625
Accounts payable and accrued liabilities	6,894		7,845
Other liabilities, net	13,552		18,651
Total liabilities	290,116		292,121

Commitments and contingencies

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

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

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


	Three Months Ended March 31,
	2022		2021
REVENUES
Rental income	$	22,604	$	20,780


Other operating interest	877		615
	23,481		21,395

EXPENSES
Property operating	4,091		3,729
General and administrative	3,316		2,859
Depreciation and amortization	7,942		7,225

	15,349		13,813

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	8,132		7,582

Interest expense	(2,626)		(2,229)

Deferred income tax benefit (expense)	17		(39)
Interest and other income	1		1

NET INCOME	$	5,524	$	5,315

NET INCOME PER COMMON SHARE:
Net income per common share – Basic	$	0.21	$	0.21
Net income per common share – Diluted	$	0.21	$	0.21
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC	23,570		22,809
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED	23,570		22,809

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Unaudited; Dollars in thousands)


			Three Months Ended March 31,
			2022		2021

NET INCOME			$	5,524	$	5,315
	Other comprehensive income:
		Increase in fair value of cash flow hedges	11,407		2,803
		Reclassification for amounts recognized as interest expense	1,115		932
	Total other comprehensive income		12,522		3,735
COMPREHENSIVE INCOME			$	18,046	$	9,050

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2022

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


	Preferred Stock			Common Stock			Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive Income (Loss)		Cumulative Dividends		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	—	$	—	24,983	$	250	$	595,624	$	59,123	$	(4,980)	$	(187,905)	$	462,112
Stock issuance costs	—	—		—	—		(197)		—		—		—		(197)
Stock-based compensation	—	—		89	1		2,121		—		—		—		2,122
Unrecognized gain on cash flow hedges	—	—		—	—		—		—		11,407		—		11,407
Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		1,115		—		1,115
Net income	—	—		—	—		—		5,524		—		—		5,524
Dividends to common stockholders ($0.4375 per share)	—	—		—	—		—		—		—		(10,969)		(10,969)
Balance at March 31, 2022	—	$	—	25,072	$	251	$	597,548	$	64,647	$	7,542	$	(198,874)	$	471,114

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021

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


	Preferred Stock			Common Stock			Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive (Loss) Income		Cumulative Dividends		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	—	$	—	23,888	$	239	$	550,391	$	36,631	$	(11,846)	$	(145,499)	$	429,916
Issuance of common stock, net of issuance costs	—	—		435	4		19,841		—		—		—		19,845
Stock-based compensation	—	—		94	1		1,549		—		—		—		1,550
Unrecognized gain on cash flow hedges	—	—		—	—		—		—		2,803		—		2,803
Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		932		—		932
Net income	—	—		—	—		—		5,315		—		—		5,315
Dividends to common stockholders ($0.4275 per share)	—	—		—	—		—		—		—		(10,275)		(10,275)
Balance at March 31, 2021	—	$	—	24,417	$	244	$	571,781	$	41,946	$	(8,111)	$	(155,774)	$	450,086

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in thousands)


	Three Months Ended March 31,
	2022		2021
OPERATING ACTIVITIES
Net income	$	5,524	$	5,315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	7,942		7,225
Other amortization	216		229
Stock-based compensation	2,122		1,550
Straight-line rent receivable	(820)		(838)




Deferred income tax (benefit) expense	(17)		39
Changes in operating assets and liabilities:
Other assets	(844)		(291)
Accounts payable and accrued liabilities	352		(820)
Other liabilities	(73)		1,084
Net cash provided by operating activities	14,402		13,493

INVESTING ACTIVITIES
Acquisitions of real estate	(5,845)		(60,007)

Acquisition and funding of notes receivable	(1,500)		(7,110)

Proceeds from the repayment of notes receivable	750		890
Capital expenditures on existing real estate properties	(1,892)		(1,045)
Net cash used in investing activities	(8,487)		(67,272)

FINANCING ACTIVITIES
Net borrowings (repayments) on revolving credit facility	4,000		(26,000)
Term loan borrowings	—		125,000
Term loan repayments	—		(50,000)
Mortgage note repayments	(40)		(29)
Dividends paid	(10,969)		(10,275)
Proceeds from issuance of common stock	—		19,919
Equity issuance costs	(74)		(76)
Debt issuance costs	—		(1,649)

Net cash (used in) provided by financing activities	(7,083)		56,890
(Decrease) increase in cash and cash equivalents and restricted cash	(1,168)		3,111
Cash and cash equivalents and restricted cash, beginning of period	2,867		2,892
Cash and cash equivalents and restricted cash, end of period	$	1,699	$	6,003

Supplemental Cash Flow Information:
Interest paid	$	2,476	$	2,105
Invoices accrued for construction, tenant improvement and other capitalized costs	$	982	$	1,591

Reclassification of registration statement costs incurred in prior year to equity issuance costs	$	119	$	81

Increase in fair value of cash flow hedges	$	11,407	$	2,803
Income taxes paid	$	12	$	25
Capitalized interest	$	228	$	37

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Business Overview

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

Basis of Presentation

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

Use of Estimates in the Condensed Consolidated Financial Statements

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

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash consists of amounts held by the lender of our mortgage note payable to provide for future real estate tax, insurance expenditures and tenant improvements related to one property. The carrying amounts approximate fair value due to the short term maturity of these investments. The following table provides a reconciliation of cash and cash equivalents and restricted cash:


	Balance as of March 31,
(Dollars in thousands)	2022		2021
Cash and cash equivalents	$	1,178	$	5,605
Restricted cash	521		398
Cash, cash equivalents and restricted cash	$	1,699	$	6,003

Income Taxes

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

Notes to Condensed Consolidated Financial Statements - Continued

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

New Accounting Pronouncements

Reference Rate Reform

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

Note 2. Real Estate Properties

As of March 31, 2022, we had investments of approximately $843.8 million in 158 real estate properties (including a portion of one property accounted for as a financing lease with a gross amount totaling approximately $3.0 million). In addition to the Company's two acquisitions during the three months ended March 31, 2022, the property count as of March 31, 2022 was increased due to the breakout of three properties previously included within the property count of two other buildings, thereby increasing the property count by five for the quarter. The Company's investments are diversified by property type, geographic location, and tenant as shown in the following tables:


Property Type	# of Properties	Gross Investment (in thousands)
Medical Office Building	65	$	297,138
Acute Inpatient Behavioral	5	130,367
Inpatient Rehabilitation Facilities	6	127,676
Specialty Centers	34	106,169
Physician Clinics	29	81,988
Surgical Centers and Hospitals	10	54,518
Behavioral Specialty Facilities	8	30,978
Long-term Acute Care Hospitals	1	14,937
Total	158	$	843,771

Notes to Condensed Consolidated Financial Statements - Continued


State	# of Properties	Gross Investment (in thousands)
Texas	15	$	136,953
Illinois	16	120,172
Ohio	22	77,230
Florida	14	66,037
Massachusetts	2	35,298
All Others	89	408,081
Total	158	$	843,771


Primary Tenant	# of Properties	Gross Investment (in thousands)
US Healthvest	3	$	77,964
Everest Rehabilitation	3	57,100
All Others	152	708,707
Total	158	$	843,771

Note 3. Real Estate Leases

Lessor Accounting

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

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

Future minimum lease payments under the non-cancelable operating leases due to the Company for the years ending December 31, as of March 31, 2022, are as follows (in thousands):


2022 (nine months ending December 31)	$	57,145
2023	72,288
2024	73,219
2025	62,603
2026	55,044
2027 and thereafter	339,736
	$	660,035

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

Notes to Condensed Consolidated Financial Statements - Continued

Purchase Option Provisions

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

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

Sales-type lease

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


2022 (nine months ended December 31)	$	246
2023	336
2024	346
2025	356
2026	367
2027 and thereafter	5,587
Total undiscounted lease receivable	7,238
Discount	(4,206)
Lease receivable	$	3,032

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

Lessee Accounting

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


	Operating		Financing
2022 (nine months ended December 31)	$	31	$	94
2023	42		125
2024	43		138
2025	44		138
2026	44		138
2027 and thereafter	1,193		5,483
Total undiscounted lease payments	1,397		6,116
Discount	(604)		(3,144)
Lease liabilities	$	793	$	2,972

Notes to Condensed Consolidated Financial Statements - Continued

The following table discloses other information regarding the ground leases.


	Three Months Ended March 31,
	2022		2021
Operating leases:
Weighted-average remaining lease term in years (including renewal options)	36.73		37.97
Weighted-average discount rate	4.0	%	4.0	%

Financing leases:
Weighted-average remaining lease term in years (including renewal options)	36.75		n/a
Weighted-average discount rate	4.1	%	n/a

Note 4. Real Estate Acquisitions

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


Location	Property Type (1)	Date Acquired	Purchase Price		Cash Consideration		Real Estate		Other		Square Footage
			(000's)		(000's)		(000's)		(000's)
Toledo, OH	MOB	03/09/22	$	2,606	$	2,621	$	2,735	$	(114)	17,465
Fremont, NE	MOB	03/09/22	3,232		3,224		3,443		(219)		12,850
			$	5,838	$	5,845	$	6,178	$	(333)	30,315

(1) MOB - Medical Office Building

The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the three months ended March 31, 2022.


			Relative Fair Value		Estimated Useful Life
			(in thousands)		(in years)
Land and land improvements			$	1,123	6.2
Building and building improvements			3,868		20.5
Intangibles:
	At-market lease intangibles		1,187		4.5

	Below-market lease intangibles		(194)		6.1
		Total intangibles	993



Accounts payable, accrued liabilities and other liabilities assumed			(97)
Prorated rent, interest and operating expense reimbursement amounts collected			(42)
	Total cash consideration		$	5,845

Notes to Condensed Consolidated Financial Statements - Continued

Note 5. Debt, net

The table below details the Company's debt as of March 31, 2022 and December 31, 2021.


	Balance as of
(Dollars in thousands)	March 31, 2022		December 31, 2021		Maturity Dates

Credit Facility:
Revolving Credit Facility	$	16,000	$	12,000	3/26
A-2 Term Loan, net	49,833		49,813		3/24
A-3 Term Loan, net	74,518		74,487		3/26
A-4 Term Loan, net	124,324		124,296		3/28
Mortgage Note Payable, net	4,995		5,029		5/24
	$	269,670	$	265,625

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

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

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

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

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

Notes to Condensed Consolidated Financial Statements - Continued

maintenance covenants. The Company was in compliance with its financial covenants under its Credit Facility as of March 31, 2022.

Note 6. Derivative Financial Instruments

Risk Management Objective of Using Derivatives

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

Cash Flow Hedges of Interest Rate Risk

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

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

Tabular Disclosure of Fair Value of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.


	Asset Derivatives Fair Value at					Liability Derivatives Fair Value at
(Dollars in thousands)	March 31, 2022		December 31, 2021		Balance Sheet Classification	March 31, 2022		December 31, 2021		Balance Sheet Classification
Interest rate swaps	$	7,645	$	343	Other assets, net	$	103	$	5,324	Other liabilities, net

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

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

Notes to Condensed Consolidated Financial Statements - Continued

Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (Loss)

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2022 and 2021.


	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Amount of unrealized gain recognized in OCI on derivatives	$	11,407	$	2,803
Amount of loss reclassified from AOCI into interest expense	$	1,115	$	932
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	2,626	$	2,229

Tabular Disclosures of Offsetting Derivatives

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company's derivatives as of March 31, 2022 and December 31, 2021. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Condensed Consolidated Balance Sheets.


Offsetting of Derivative Assets (as of March 31, 2022)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	7,645	$	—	$	7,645	$	(103)	$	—	$	7,542


Offsetting of Derivative Liabilities (as of March 31, 2022)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Liabilities in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	(103)	$	—	$	(103)	$	103	$	—	$	—


Offsetting of Derivative Assets (as of December 31, 2021)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Assets in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	343	$	—	$	343	$	(247)	$	—	$	96

Notes to Condensed Consolidated Financial Statements - Continued


Offsetting of Derivative Liabilities (as of December 31, 2021)
							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
(In thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheet		Net Amounts of Liabilities in the Condensed Consolidated Balance Sheets		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	(5,324)	$	—	$	(5,324)	$	247	$	—	$	(5,077)

Credit-risk-related Contingent Features

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

Note 7. Stockholders’ Equity

Common Stock

The following table provides a reconciliation of the beginning and ending common stock balances for the three months ended March 31, 2022 and for the year ended December 31, 2021:


(In thousands)	Three Months Ended March 31, 2022	Year Ended December 31, 2021
Balance, beginning of period	24,983	23,888
Issuance of common stock	—	823
Restricted stock issued	92	273
Restricted stock forfeited	(3)	(1)
Balance, end of period	25,072	24,983

ATM Program

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

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

Notes to Condensed Consolidated Financial Statements - Continued

Note 8. Net Income Per Common Share

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


	Three Months Ended March 31,
(In thousands, except per share data)	2022		2021
Net income	$	5,524	$	5,315
Participating securities' share in earnings	(658)		(538)
Net income, less participating securities' share in earnings	$	4,866	$	4,777

Weighted average Common Shares outstanding
Weighted average Common Shares outstanding	25,060		24,053
Unvested restricted shares	(1,490)		(1,244)
Weighted average Common Shares outstanding–Basic	23,570		22,809

Dilutive potential common shares	—		—
Weighted average Common Shares outstanding –Diluted	23,570		22,809

Basic Net Income per Common Share	$	0.21	$	0.21

Diluted Net Income per Common Share	$	0.21	$	0.21

Note 9. Stock Incentive Plan

A summary of the activity under the Company's 2014 Incentive Plan, as amended, for the three months ended March 31, 2022 and 2021 is included in the table below, as well as compensation expense recognized from the amortization of the value of shares over the applicable vesting periods.


		Three Months Ended March 31,
(Dollars and shares in thousands)		2022		2021
Stock-based awards, beginning of period		1,416		1,165
	Stock in lieu of compensation	44		44
	Stock awards	48		49
	Total stock granted	92		93
	Vested shares	(5)		—
	Forfeited shares	(1)		—
Stock-based awards, end of period		1,502		1,258
Amortization expense		$	2,122	$	1,558

Notes to Condensed Consolidated Financial Statements - Continued

Note 10. Other Assets, net

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


	Balance as of
(Dollars in thousands)	March 31, 2022		December 31, 2021
Notes receivable	$	26,750	$	26,000

Accounts and interest receivable	2,741		2,116
Straight-line rent receivable	12,806		11,968

Prepaid assets	749		701
Deferred financing costs, net	843		896
Leasing commissions, net	1,249		1,239
Deferred tax assets, net	365		348
Fair value of interest rate swaps	7,645		343
Above-market lease intangible assets, net	557		611
Sales-type lease receivable	3,032		3,031
Financing right-of-use asset	1,857		1,870

Operating lease right-of-use assets	781		788
Other	386		426
	$	59,761	$	50,337

The Company's notes receivable mainly included:

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

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

Notes to Condensed Consolidated Financial Statements - Continued

The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through related parties any material decision-making rights or control of the entities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The VIEs that we have identified at March 31, 2022 are summarized in the table below.


Classification	Carrying Amount (in thousands)		Maximum Exposure to Loss (in thousands)
Note receivable (term loan)	$	11,250	$	11,250
Note receivable (revolving credit facility)	$	9,500	$	9,500
Note receivable (term loan)	$	6,000	$	6,000

Note 11. Other Liabilities, net

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


	Balance as of
(Dollars in thousands)	March 31, 2022		December 31, 2021
Prepaid rent	$	3,860	$	3,791
Security deposits	4,610		4,640
Below-market lease intangibles, net	768		616
Fair value of derivatives	103		5,324
Financing lease liability	2,972		2,973
Operating lease liability	793		795

Other	446		512
	$	13,552	$	18,651

Note 12. Fair Value of Financial Instruments

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

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

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

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

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

Notes to Condensed Consolidated Financial Statements - Continued

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

The table below details the fair values and carrying values for our notes receivable, interest rate swaps, and mortgage note payable at March 31, 2022 and December 31, 2021, using level 2 inputs.


	March 31, 2022				December 31, 2021
(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value

Notes receivable	$	26,750	$	26,152	$	26,000	$	25,869
Interest rate swap asset	$	7,645	$	7,645	$	343	$	343
Interest rate swap liability	$	103	$	103	$	5,324	$	5,324
Mortgage note payable (principal amount)	$	5,036	$	4,965	$	5,076	$	5,129

Note 13. Subsequent Events

Dividend Declared

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

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

Disclosure Regarding Forward-Looking Statements

This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believes”, “expects”, “may”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates” or other similar words or expressions, including the negative thereof. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Because forward-looking statements relate to future events, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. Thus, the Company’s actual results and financial condition may differ materially from those indicated in such forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, changes in the real estate industry in general, interest rates or the general economy, adverse developments related to the healthcare industry, the degree and nature of the Company’s competition, the ability to consummate acquisitions under contract, effects on global and national markets as well as businesses resulting from the COVID-19 pandemic, and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the Company’s other filings with the Securities and Exchange Commission from time to time. Readers are therefore cautioned not to place undue reliance on the forward-looking statements contained herein which speak only as of the date hereof. The Company intends these forward-looking statements to speak only as of the time of this report and the Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law.

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

Overview

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

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

Trends and Matters Impacting Operating Results

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

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Real estate acquisitions

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

Acquisition Pipeline

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

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

Leased square footage

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

Purchase Option Provisions

Seasonality

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

New Accounting Pronouncements

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

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Results of Operations

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

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

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


	Three Months Ended March 31,				Increase (Decrease) to Net income
(Dollars in thousands)	2022		2021		$		%
REVENUES
Rental income	$	22,604	$	20,780	$	1,824	8.8	%

Other operating interest	877		615		262		42.6	%
	23,481		21,395		2,086		9.7	%
EXPENSES
Property operating	4,091		3,729		(362)		(9.7)	%
General and administrative	3,316		2,859		(457)		(16.0)	%
Depreciation and amortization	7,942		7,225		(717)		(9.9)	%
	15,349		13,813		(1,536)		(11.1)	%

INCOME BEFORE INCOME TAXES AND OTHER ITEMS	8,132		7,582		550		7.3	%

Interest expense	(2,626)		(2,229)		(397)		(17.8)	%
Deferred income tax benefit (expense)	17		(39)		56		143.6	%
Interest and other income	1		1		—		—	%

NET INCOME	$	5,524	$	5,315	$	209	3.9	%

Revenues

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

Expenses

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

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

Depreciation and amortization expense increased approximately $0.7 million, or 9.9%, for the three months ended March 31, 2022 compared to the same period in 2021. Acquisitions accounted for an increase of approximately $0.9 million, offset by a decrease of approximately $0.4 million in amortization due to fully amortized real estate lease

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

intangibles which generally have a shorter depreciable life than a building. The remaining increase is generally due to the depreciation of building and tenant improvements.

Interest expense

Interest expense increased approximately $0.4 million, or 17.8%, for the three months ended March 31, 2022 compared to the same period in 2021 due mainly to the refinancing of the Credit Facility in March 2021 resulting in an increase in interest expense of approximately $0.6 million, offset partially by an increase in capitalized interest on construction projects of approximately $0.2 million.

Non-GAAP Financial Measures and Key Performance Indicators

Management considers certain non-GAAP financial measures and key performance indicators to be useful supplemental measures of the Company's operating performance. A non-GAAP financial measure is generally defined as one that purports to measure financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable measure determined in accordance with GAAP. The Company reports non-GAAP financial measures because these measures are observed by management to also be among the most predominant measures used by the REIT industry and by industry analysts to evaluate REITs. For these reasons, management deems it appropriate to disclose and discuss these non-GAAP financial measures. Set forth below are descriptions of the non-GAAP financial measures management considers relevant to the Company's business and useful to investors, as well as reconciliations of those measures to the most directly comparable GAAP financial measure.

The non-GAAP financial measures and key performance indicators presented herein are not necessarily identical to those presented by other real estate companies due to the fact that not all real estate companies use the same definitions. These measures should not be considered as alternatives to net income, as indicators of the Company's financial performance, or as alternatives to cash flow from operating activities as measures of the Company's liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of the Company's needs. Management believes that in order to facilitate a clear understanding of the Company's historical consolidated operating results, these measures should be examined in conjunction with net income and cash flows from operations as presented in the Condensed Consolidated Financial Statements and other financial data included elsewhere in this Quarterly Report on Form 10-Q.

Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")

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, gains and losses from change in control, 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, plus depreciation and amortization related to real estate properties, and after adjustments for unconsolidated partnerships and joint ventures. NAREIT also provides REITs with an option to exclude gains, losses and impairments of assets that are incidental to the main business of the REIT from the calculation of FFO.

In addition to FFO, the Company presents AFFO and AFFO per share. The Company defines AFFO as FFO, excluding certain expenses related to closing costs of properties acquired accounted for as business combinations and mortgages funded, excluding straight-line rent and the amortization of stock-based compensation, and including or excluding other non-cash items from time to time. AFFO presented herein may not be comparable to similar measures presented by other real estate companies due to the fact that not all real estate companies use the same definition.

Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO, AFFO, FFO per share and AFFO per share provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items,

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

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, impairments and gains or losses from sales of real estate, losses and impairment of incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO, AFFO, FFO per share and AFFO per share can facilitate comparisons of operating performance between periods.

The table below reconciles net income to FFO and AFFO for the three months ended March 31, 2022 compared to the same period in 2021.


	Three Months Ended March 31,
(In thousands, excepts per share amounts)	2022		2021
Net income	$	5,524	$	5,315
Real estate depreciation and amortization	8,001		7,276


FFO	$	13,525	$	12,591
Straight-line rent	(820)		(838)
Stock-based compensation	2,122		1,558
AFFO	$	14,827	$	13,311

FFO per diluted common share	$	0.56	$	0.54

AFFO per diluted common share	$	0.61	$	0.57
Weighted average common shares outstanding - diluted (1)	24,344		23,500

___________________

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

Net Operating Income ("NOI")

NOI is a key performance indicator. NOI is defined as net income or loss, computed in accordance with GAAP, generated from our total portfolio of properties and other investments before general and administrative expenses, depreciation and amortization expense, gains or loss on the sale of real estate properties or other investments, interest expense, and income tax expense. We believe that NOI provides an accurate measure of operating performance of our operating assets because NOI excludes certain items that are not associated with management of the properties. The Company's use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing NOI.

The table below reconciles net income to NOI for the three months ended March 31, 2022 compared to the same period in 2021.


		Three Months Ended March 31,
(In thousands)		2022		2021
Net income		$	5,524	$	5,315
	General and administrative	3,316		2,859
	Depreciation and amortization	7,942		7,225

	Interest expense	2,626		2,229
	Deferred income taxes	(17)		39
	Interest and other income	(1)		(1)
NOI		$	19,390	$	17,666

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

EBITDAre and Adjusted EBITDAre

The Company uses the NAREIT definition of EBITDAre which is net income plus interest expense, income tax expense, and depreciation and amortization, plus losses or minus gains on the disposition of depreciable property, including losses/gains on change of control, plus impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate, plus or minus adjustments to reflect the entity's share of EBITDAre of unconsolidated affiliates and consolidated affiliates with non-controlling interest. The Company also presents Adjusted EBITDAre which is EBITDAre before non-cash stock-based compensation expense.

We consider EBITDAre and Adjusted EBITDAre important measures because they provide additional information to allow management, investors, and our current and potential creditors to evaluate and compare our core operating results and our ability to service debt.

The table below reconciles net income to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2022 compared to the same period in 2021.


		Three Months Ended March 31,
(In thousands)		2022		2021
Net income		$	5,524	$	5,315
	Interest expense	2,626		2,229
	Depreciation and amortization	7,942		7,225
	Deferred income tax (benefit) expense	(17)		39

EBITDAre		$	16,075	$	14,808
	Non-cash stock-based compensation expense	2,122		1,558
Adjusted EBITDAre		$	18,197	$	16,366

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 properties. Our rental income represents 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. 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

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

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.

Credit Facility

The Company's third amended and restated credit facility (the "Credit Facility") provides for a $150.0 million Revolving Credit Facility that matures on March 19, 2026 and includes one 12-month option to extend the maturity date, and $250.0 million in Term Loans, as well as an accordion feature which allows borrowings up to a total of $600.0 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. At March 31, 2022, the Company had borrowing capacity remaining under the Revolving Credit Facility of approximately $134.0 million.

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. At March 31, 2022, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 30.6%. The Company was in compliance with its financial covenants under its Credit Facility as of March 31, 2022.

Mortgage Note Payable

The Company also had outstanding at March 31, 2022, a $5.0 million mortgage note payable, secured by one of its properties. The mortgage note amortizes monthly at a fixed interest rate of 4.98% with a balloon payment due upon maturity on May 1, 2024.

Acquisition Pipeline

Other Contractual Obligations

Subject to Company approval, we may fund or reimburse tenants for tenant improvements, which are allowed for in certain leases, of up to approximately $8.8 million as of March 31, 2022.

The Company has also entered into contracts regarding certain capital expenditures totaling approximately $1.5 million as of March 31, 2022. Reimbursement of these expenditures by our tenants will be determined by each tenant's lease.

The Company has ground lease obligations relating to five properties, with total obligations of approximately $7.5 million with maturities through 2085, including renewals.

The Company expects to fund these obligations with cash on hand, proceeds from the Company's ATM Program, proceeds from the Company's Revolving Credit Facility, or other debt or equity offerings.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Automatic Shelf Registration Statement

On November 5, 2019, the Company filed an automatic shelf registration statement on Form S-3 with the Securities and Exchange Commission. The registration statement is for an indeterminate number of securities and is effective for three years. Under this registration statement, the Company has the capacity to offer and sell from time to time various types of securities, including common stock, preferred stock, depository shares, rights, debt securities, warrants and units.

Operating Activities

Cash flows provided by operating activities for the three months ended March 31, 2022 and 2021 were approximately $14.4 million and $13.5 million, respectively. Cash flows provided by operating activities were generally provided by contractual rents and interest on our notes receivable, net of property operating expenses not reimbursed by the tenants and general and administrative expenses.

Investing Activities

Cash flows used in investing activities for the three months ended March 31, 2022 and 2021 were approximately $8.5 million and $67.3 million, respectively. During the three months ended March 31, 2022, the Company invested in 2 properties for an aggregate cash consideration of approximately $5.8 million and funded notes totaling approximately $1.5 million. Also, during the three months ended March 31, 2022, the Company received payments on its notes totaling $0.8 million and funded capital expenditures on its existing portfolio totaling approximately $1.9 million.

During the three months ended March 31, 2021, the Company invested in 6 properties for an aggregate cash consideration of approximately $60.0 million and funded notes receivable totaling approximately $7.1 million. Also, during the three months ended March 31, 2021, the Company received payments on its notes receivable totaling $0.9 million and funded capital expenditures on its existing portfolio totaling approximately $1.0 million.

Financing Activities

Cash flows used in financing activities for the three months ended March 31, 2022 were approximately $7.1 million and cash flows provided by financing activities for the three months ended March 31, 2021 were approximately $56.9 million. During the three months ended March 31, 2022, the Company borrowed $4.0 million under its Credit Facility and paid dividends totaling approximately $11.0 million.

During the three months ended March 31, 2021, the Company repaid $26.0 million under its Credit Facility, entered into an amended and restated credit facility in which the Company entered into a 7-year term loan facility totaling $125.0 million, repaid a $50.0 million term loan facility, and incurred $1.6 million in additional debt issuance costs. The Company also sold shares under its ATM Program and received proceeds of approximately $19.9 million, and paid dividends totaling approximately $10.3 million.

Security Deposits

As of March 31, 2022, the Company held approximately $4.6 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.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

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

Corporate Responsibility

The Company is committed to conducting its business according to the highest ethical standards and upholding its corporate responsibilities as a public company operating for the benefit of its stockholders. The Company's Environmental, Social, and Governance (“ESG”) Committee charter is included on the Company’s website at www.chct.reit. Among other duties, the ESG Committee meets at least annually to review and recommend to the Board the general strategy and initiatives regarding ESG matters, including the Company’s internal and external communications and disclosures.

The Company’s Code of Ethics and Business Conduct not only applies to the Company's directors, officers, and other employees but also extends the Company's expectations that its vendors, service providers, contractors, and consultants will embrace the Company's commitment to integrity and personal responsibility by complying with this Code at all times. The Code of Ethics and Business Conduct includes the Company’s commitment to promote high standards of integrity by conducting its affairs honestly and ethically and to include in its periodic reports or other publicly available documents information and metrics related to internal monitoring, whistleblower, or reporting systems.

The Company’s whistleblower policy prohibits the Company and its affiliates and their officers, employees and agents from discharging, demoting, suspending, threatening, harassing or in any other manner discriminating against any employee for raising a concern. If an employee desires to raise a concern in a confidential or anonymous manner, the concern may be directed to the whistleblower officer at the Company’s whistleblower hotline. During the quarter ended March 31, 2022, the whistleblower officer received no whistleblower complaints.

The Company’s Information Technology infrastructure is cloud-based, utilizing Software as a Service (“SaaS”) applications for substantially all of its software requirements. The Company's IT Committee consists of the Chief Executive Officer, Chief Financial Officer, and the Vice President of Information Technology. The IT Committee reviews and discusses information security matters and cyber security risks. The committee meets at least twice a year and reports to the Board of Directors as needed or at least annually. The Company has adopted the Center of Internet Security (CIS) v8 IG1 cyber security controls including adopting an information security training program for its employees. Since the Company’s inception, the Company has not had a security breach resulting in expenses,

penalties or settlements.

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. During the three months ended March 31, 2022, there were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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(e) and 15d-15(e) 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, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.

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 March 31, 2022 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, 2021 and other reports that may be filed by the Company.

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

During the three months ended March 31, 2022, the Company canceled shares of Company common stock to satisfy employee tax withholding obligations payable upon the vesting of non-vested shares, as follows:


Period	Total Number of Shares Purchased	Average Price Paid per share		Total Number of Shares purchased as part of publicly announced plans or programs	Maximum Number of Shares that may yet be purchased under the plans or programs

January 1 - January 31	1,651	$	47.17	—	—
February 1 - February 28	—	$	—	—	—
March 1 - March 31	—	$	—	—	—
Total	1,651

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-K which are filed with this report are listed in the Exhibit Index and are hereby incorporated in by reference.

EXHIBIT INDEX


Exhibit No.						Description
3.1						Corporate Charter of Community Healthcare Trust Incorporated, as amended (1)
3.2						Amended and Restated Bylaws of Community Healthcare Trust Incorporated (2)
10.1 †						Sixth Amendment to Employment Agreement between Community Healthcare Trust Incorporated and Timothy G. Wallace (3)
10.2 †						Third Amendment to Employment Agreement between Community Healthcare Trust Incorporated and David H. Dupuy (4)
10.3 †						Third Amendment to Employment Agreement between Community Healthcare Trust Incorporated and Leigh Ann Stach (5)
10.4 †						First Amendment to Employment Agreement between Community Healthcare Trust Incorporated and Timothy L. Meyer (6)
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						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Labels Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

___________________

(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 Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission on November 3, 2020 (File No. 001-37401) and incorporated herein by reference.

(3)Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2022 (File No. 001-37401) and incorporated herein by reference.

(4)Filed as Exhibit 10.2 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2022 (File No. 001-37401) and incorporated herein by reference.

(5)Filed as Exhibit 10.3 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2022 (File No. 001-37401) and incorporated herein by reference.

(6)Filed as Exhibit 10.4 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4, 2022 (File No. 001-37401) and incorporated herein by reference.

* Filed herewith.

** Furnished herewith.

† Denotes executive compensation plan or arrangement.

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: May 3, 2022


			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