Q2 2024 Community Healthcare Trust Inc Earnings Call
Welcome to community Healthcare Trust 2024 second quarter earnings release Conference call.
On the call today, the company will discuss its 2024 second quarter financial results.
Operator: On the call today, the company will discuss its 2024 second quarter financial results. It will also discuss progress made in various aspects of, Following the remarks, all phone lines will be opened for a question and answer session. The company's earnings release was distributed last evening and has also been posted on its website www.chct.reit.org. The company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today, July 31st, 2024, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties
It will also discuss progress made in various aspects of its business.
Following their remarks.
Speaker Change: The phone lines will be opened for a question and answer session.
Speaker Change: The company's earnings release was distributed last evening and has also been posted on its website www Dot C. H C. D. R E D.
Speaker Change: The company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today July 31st 2024 and may contain forward looking statements that involve risks and uncertainties.
David H. Dupuy: You should review the company's disclosures regarding forward-looking statements and its earnings release, as well as its risk factors and MD&A in its SEC filing. The company undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. During this call, the company will discuss GAAP and non-GAAP financial measures. A reconciliation between the two is available in its earnings release, which is posted on its website.
Speaker Change: Actual results may differ materially from those set forth in such statements.
Speaker Change: For a discussion of these risks and uncertainties you should review the company's disclosures regarding forward looking statements in its earnings release.
Speaker Change: As well as its risk factors and M. D N D in its SEC filings.
The company undertakes no obligation to update forward looking statements, whether as a result of new information future developments or otherwise, except as may be required by law.
Speaker Change: During this call the company will discuss G. A a P and non-GAAP financial measures.
Speaker Change: A reconciliation between the two is available in its earnings release, which is posted on its website.
Speaker Change: Call participants are advised that this conference call is being recorded for playback purposes.
David H. Dupuy: Call participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the company's investor relations website for approximately 30 days and is the property of the company. This call may not be recorded or otherwise reproduced or distributed without the company's prior written consent. Now, I would like to turn the call over to David Dupuy, CEO of Community Healthcare Trust. Great and good morning.
Speaker Change: An archive of the call will be made available on the company's Investor Relations website for approximately 30 days and is the property of the company.
Speaker Change: This call may not be recorded or otherwise reproduced or distributed without the company's prior written permission.
Speaker Change: Now I would like to turn the call over to Dave Dupuy suite CEO of community Healthcare Trust.
Speaker Change: Great and good morning, Thank you for joining us today for our 2024 second quarter Conference call.
David H. Dupuy: Thank you for joining us today for our 2024 second quarter conference call. On the call with me today is Bill Monroe, our Chief Financial Officer, Leigh Ann Sack, our Chief Accounting Officer, and Tim Meyer, our EVP of Asset Management. Our earnings announcement and supplemental data report were released last night and furnished on Form 8-K, along with our quarterly report on Form 10-Q.
David H. Dupuy: In addition, an updated investor presentation was posted to our website last night. As disclosed in our filings, we determined that certain lease and interest payments from a geriatric inpatient psychiatric hospital tenant were not reasonably ascertainable for collection. CHCT has six leases with the tenant, and it is the sole tenant in five of our properties, with one lease in a multi-tenanted property representing a total of approximately 79,000 square feet. As a geriatric psychiatric hospital operator, COVID had a significant impact on the tenant's business through 2022, and during this time, the tenant was in the process of expanding its location, which led to a more
Speaker Change: Call with me today is bill Munroe, our Chief Financial Officer, Leigh Ann Stach, Our Chief Accounting Officer, and Tim Meyer RPT of asset management.
Speaker Change: Our earnings announcement and supplemental data report were released last night and furnished on form 8-K.
Speaker Change: Along with our quarterly report on Form 10-Q.
Speaker Change: In addition, an updated investor presentation was posted to our website last night.
Speaker Change: As disclosed in our filings, we determined that certain lease and interest payments from geriatric inpatient psychiatric hospital tenant will not reasonably assured of collection.
Speaker Change: <unk> had six leases with the tenant.
Speaker Change: And then as a consultant.
Speaker Change: The four properties with one lease and multi tenanted property, representing a total of approximately 79000 square feet.
Speaker Change: As the geriatric psychiatric hospital, operator that had a significant impact on the tenant's business through 2022 and during this time the tenant was in process of expanding locations, which led to a more pronounced impact.
Speaker Change: In 2023 the company.
David H. Dupuy: In 2023, the company improved census, installed a new revenue cycle management system, and made other operational improvements, resulting in improved performance. However, recent management changes resulted in a decline in census staff turnover and ultimately impacted the tenant's ability to consistently pay rent and interest. The tenant has hired a consulting team with significant behavioral operating experience to implement a turnaround plan and stabilize the business. CHCT has previous experience with this consulting team, and we have confidence in their ability to make the necessary changes to improve operations.
Speaker Change: Install the new revenue cycle management system and other operations.
Speaker Change: Resulting in improved performance.
Speaker Change: Unfortunately recent management changes resulted in a decline.
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Speaker Change: And ultimately impacted and its ability to consistently pay rent and interest.
Speaker Change: The tenant has hired a consulting team with significant behavioral operating experience to implement a turnaround plan.
Speaker Change: And to stabilize the business see HPT has previous experience with this consulting team and you have confidence in their ability to make the necessary changes to improve operations.
David H. Dupuy: We are working closely with the tenant and the consultants to monitor and evaluate progress with the turnaround. We'll discuss in more detail the financial impacts of this tenant, but let me review what we believe to be the unique features of this tenant relationship compared to the rest of our portfolio. Most importantly, this tenant is the only top 10 tenant where we are also a lender. To improve transparency of our top tenants, we are now including in our Supplemental Data Report an investor presentation, not just those tenants with greater than 4% of annualized rent but a listing of all top 10 tenants.
Speaker Change: Yeah.
Speaker Change: To monitor and evaluate progress with the turnaround.
Speaker Change: Bill will discuss in more detail the financial impacts of these tenants, but let me review, what we believe to be.
Speaker Change: Features of this strategic relationship compared to the rest of our portfolio.
Speaker Change: Most importantly, this tenant to be honest.
William G. Monroe: Well, we are also a lender.
Speaker Change: Two brief transparency of our top tenants, we are now including in our supplemental data report and Investor presentation.
Speaker Change: Those tenants with greater than 4% of annualized rent.
Speaker Change: Listing all top 10.
Janet: Another aspect to this tenant relationship that I mentioned earlier with the Covid significantly impacted as Janet given a geriatric patient base.
David H. Dupuy: Another aspect of this tenant relationship that I mentioned earlier was that COVID significantly impacted this tenant given its geriatric patient base, during a time when it had also recently expanded its location. And because this tenant is a private founder-owned business, CHCP helped finance the tenant's expansion, leading to CHCP's $22.7 million in notes receivable across a term loan and revolving credit facility. This $22.7 million is by far our largest lending relationship, with our only other notes receivable currently outstanding consisting of a $4.5 million term loan to a long-term acute care and inpatient rehab hospital tenant and a $2.2 million revolving credit facility to a substance use and eating disorder mental health provider tenant.
Speaker Change: Great timing, we had also recently when it was also recently expanded locations.
Janet: And because this tenant is a private sandra thanks Pat.
Janet: The HCP help finance, the tenant's expansion, leading to <unk> $22 7 million in notes receivable across the term loan and revolving credit facility.
Speaker Change: This $22 $7 million was by far our largest lending relationship with our only other notes receivable currently outstanding consisting of a $4 $5 million term loan to a long term acute care inpatient rehab hospital tenants.
Speaker Change: And a $2 2 million revolving credit facility to a substance use and eating disorder mental health providers.
David H. Dupuy: To conclude, we believe we can work closely with this tenant over the coming quarters to enhance returns on this unique investment within the portfolio. As for other components of the business, our occupancy increased slightly from 92.3% to 92.6% during the quarter, and we continue to see good leasing activity in the portfolio. In addition, we have five properties or significant portions of those properties that are undergoing redevelopment or significant renovations with long-term tenants in place when the renovations or redevelopment are completed. Also, our weighted average remaining lease term increased from 6.9 years to 7.1 years. During the second quarter, we acquired an inpatient rehabilitation facility for a purchase price of $23.5 million.
Speaker Change: To conclude we believe we can work closely with this tenant over the coming quarters to enhance returns on this unique investments within the portfolio.
Speaker Change: As for other components of the business, our occupancy increased slightly from 92, 3%.
Speaker Change: 92, 6% during the quarter.
Speaker Change: And you can see good leasing activity in the portfolio.
Speaker Change: In addition, we have five properties for significant portions of those properties that are undergoing redevelopment for significant renovations with long term tenants in place when the renovation or redevelopment is completed.
Speaker Change: Also our weighted average remaining lease term increased from $6 nine years to seven one years.
Speaker Change: During the second quarter, we acquired an inpatient rehabilitation facility for a purchase price of $23 $5 million, we entered into a new lease with a lease exploration 2039 and anticipated annual returns of approximately nine 1%.
David H. Dupuy: We entered into a new lease with a lease expiration in 2039 and an anticipated annual return of approximately 9.1%. Subsequent to June 30th, we acquired one medical office building for a purchase price of approximately $6.2 million, and we expected returns of approximately 9.3%. The property is 100% leased with a lease expiration in 2027. Also, the company has signed definitive purchase and sale agreements for seven properties to be acquired after completion and occupancy for an aggregate expected investment of $169.5 million. The expected return on these investments should range from 9.1 to 9.75 percent.
Speaker Change: Subsequent to June 30, we acquired one medical office building for a purchase price of approximately $6 2 million in.
Speaker Change: And expected returns of approximately nine 3%.
Speaker Change: The property is 100% leased with a lease expiration in 2027.
Speaker Change: Also the company has signed a definitive purchase and sale agreements for seven properties to be acquired after completion and occupancy for an aggregate expected investment of $169 $5 million. The expected return on these investments should range from nine 1% to 975% we expected.
David H. Dupuy: We expect to close on one of these properties in the fourth quarter of 2024, with the remaining six properties closing throughout 2025, 2026, and 2027. And we continue to have many properties under review with term sheets out on properties with indicative returns of 9 to 10 percent. With our modest leverage levels, we anticipate having enough availability on our credit facilities and through our banking relationships to fund our acquisitions, and we expect to opportunistically utilize the ATM to access the equity markets at favorable share prices.
Speaker Change: Close on one of these properties in the fourth quarter of 2024 with the remaining six properties closing throughout 'twenty five 'twenty six 'twenty seven.
Speaker Change: And we continue to have many properties under review with term sheets out on properties with indicative returns of 9% to 10%.
Speaker Change: With our modest leverage levels, we anticipate having enough availability on our credit facilities and through our banking relationships to fund our acquisitions and we expect to Opportunistically utilize the ATM to strategically access the equity markets and favorable share prices.
David H. Dupuy: These traditional capital sources, combined with proceeds from selected asset sales, will provide sufficient capital for continued growth and attractive yields. To wrap up, we declared our dividend for the second quarter and raised it to 46.25 cents per common share. This equates to an annualized dividend of $1.85 per share.
Speaker Change: These traditional capital sources combined with proceeds from selected asset sales will provide sufficient capital for continued growth at attractive yields.
Speaker Change: Wrapping up we declared our dividend for the second quarter and raised it to $46.05 per common share.
Speaker Change: This equates to an annualized dividend of $1 85 per share.
William G. Monroe: We are proud to have raised our dividend every quarter since the IPO. That takes care of the items I wanted to cover, so I will hand things off to Bill to discuss the numbers. Thank you, Dave.
Speaker Change: <unk> raised our dividend every quarter since the IPO.
Speaker Change: That takes care of the items I wanted to cover so I will hand things off to bill to discuss the numbers.
William G. Monroe: I will now provide more details on our second quarter financial performance. Let me start by detailing the impacts on our second quarter financials related to the Geriatric Inpatient Behavioral Hospital Tenant that Dave described earlier. Rental income in the second quarter was negatively impacted by the reversal of $1.9 million of rent, which includes approximately $900,000 of non-cash, straight-line rent.
William G. Monroe: Thank you Dave I will now provide more details on our second quarter financial performance, let me start by detailing the impacts to our second quarter financials related to the geriatric inpatient behavioral hospital tenants that Dave described earlier.
William G. Monroe: Also, other operating interest in the second quarter was negatively impacted by the reversal of $1.4 million of interest. Combined, these items reduced total revenue in the second quarter by approximately $3.2 million to $27.5 million. Compared to the second quarter of 2023, total revenue declined by $294,000. And compared to the first quarter of 2024, total revenue declined by $1.8 million. It is important to note that of the $3.2 million impact on the second quarter of total revenue I just described, only approximately $1.5 million is the result of rental income and interest we expect to receive in the second quarter of 2024 from the geriatric inpatient behavioral hospital tenant, with the remaining amount resulting from one-time out-of-period adjustments to prior-period amounts outstanding net of payments and security deposits.
William G. Monroe: And they come in the second quarter was negatively impacted by the reversal of $1 $9 million in Brent, which includes approximately $900000 of noncash straight line rent.
William G. Monroe: Also other operating interest in the second quarter was negatively impacted by the reversal of $1 $4 million of interest.
Speaker Change: These items reduced total revenue in the second quarter by approximately $3 $2 million to $27 $5 million.
Speaker Change: Compared to the second quarter of 2023 total revenue declined by $294000 compared to the first quarter of 2024 total revenue declined by $1.8 million.
Speaker Change: It is important to note that of the $3 $2 million impact to second quarter total revenue I. Just described only approximately $1 $5 million as a result of rental income and interest you expected to receive in the second quarter of 2024 from the geriatric inpatient behavioral hospital tenant with the <unk>.
Speaker Change: Meaning the amount, resulting from onetime out of period adjustments to prior period amounts outstanding net of payments and security deposits.
William G. Monroe: In addition to the reversals of rent and interest, we recorded an $11 million credit loss reserve on the $22.7 million notes receivable from the tenant. This credit loss reserve reduced net income and is based on an estimated value of the underlying collateral, which we will continue to monitor, but any future credit loss reserve reversals or increases will not impact FFO or AFFO. Moving to expenses, property operating expenses decreased by $219,000 quarter over quarter to $5.6 million since the first quarter due to higher seasonal expenses at several properties. General and administrative expenses increased by $206,000 quarter over quarter to $4.8 million as a result of increased professional fees.
Speaker Change: In addition to the reversals of rent and interest we recorded an $11 million credit loss reserves on the $22 $7 million notes receivable from the tenant.
Speaker Change: It's a credit loss reserve reduced net income and is based on an estimated value of the underlying collateral, which we will continue to monitor but any future credit loss reserve was oceans or increases will not impact <unk> or <unk>.
Speaker Change: Moving to expenses property operating expenses decreased by $219000 quarter over quarter to $5 $6 million.
Speaker Change: First quarter had higher seasonal expenses at several properties.
Speaker Change: General and administrative expenses increased by $206000 quarter over quarter to $4 $8 million as a result of increased professional fees.
William G. Monroe: An interest expense increased by $924,000 quarter over quarter to $6 million because of increased borrowings under our revolving credit facility to fund the $23.5 million of acquisitions during the second quarter of 2024, as well as the $27.7 million of acquisitions during the final week of the first quarter of 2024. Moving to funds from operations, FFO was $11.6 million in the second quarter of 2024. On a quarter over quarter basis, FFO decreased from $14 million in the first quarter of 2024, and on a per-dividend common share basis over these periods, FFO declined from 53 cents to 43 cents per share.
Speaker Change: Interest expense increased by $924000 quarter over quarter to $6 million because of increased borrowings under our revolving credit facility to fund the $23 $5 million of acquisitions during the second quarter of 2024, as well as the $27 $7 million of acquisitions during the final week.
Speaker Change: The first quarter of 2024.
William G. Monroe: These decreases are primarily the result of the $3.2 million of reversals of rent and interest described earlier. Adjusted funds from operations, or AFFO, which adjusts for straight-line rent and stock-based compensation, totaled $14.3 million in the second quarter of 2024. On a quarter-of-a-quarter basis, AFFO decreased from $15.7 million in the first quarter of 2024, and on a per-common-share basis over these periods, AFFO declined from 59 cents to 53 cents per share. These decreases are also primarily the result of the $3.2 million of reversals of rent and interest described earlier, net of approximately $900,000 of straight-line rent which was added back, and that is why you see a smaller impact on AFSO quarter over quarter than FSO.
Speaker Change: Moving to funds from operations <unk>.
Speaker Change: It was $11 $6 million in the second quarter of 2024.
Speaker Change: The quarter over quarter basis.
Speaker Change: Decreased from $14 million, the first quarter of 2024.
Speaker Change: On a per diluted common share basis over these periods declined from 53 to <unk> 43 per share.
Speaker Change: Christians are primarily the result of a $3 2 million of reversals of rent and interest as described earlier.
Speaker Change: Adjusted funds from operations, or <unk>, which adjusts for straight line rent and stock based compensation totaled $14 $3 million in the second quarter of 2024.
Speaker Change: On a quarter over quarter basis, <unk> decreased from $15 $7 million in the first quarter of 2024.
Speaker Change: Third the limited common share basis over these periods.
Speaker Change: <unk> declined from 59 to 53 cents per share.
Speaker Change: Decreases are also primarily the result of the $3 $2 million of reversals of rent and interest described earlier.
Speaker Change: Approximately $900000 of straight line rent, which was added back and that is why you see a smaller impact.
Speaker Change: Quarter over quarter.
Speaker Change: Uh huh.
William G. Monroe: I'll note that even at 53 cents, our dividend remains well covered with a current payout ratio of 87%. That concludes our prepared remarks for when we are now ready to begin the question and answer session. All right. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone telephone.
Speaker Change: Ill note that even at 53, our dividend remains well covered with the current payout ratio 87%.
Speaker Change: That concludes our prepared remarks, well when we are now ready to begin the question and answer session.
Speaker Change: Certainly thank you.
Speaker Change: I will begin the question and answer session.
Speaker Change: Ask a question you May press Star then one on you touched on the telephone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Operator: If you are using a speaker phone, please leave a message after the tone. Please pick up your handset before pressing the call button. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Rob Stevenson with Channy. Please go ahead. Good morning guys, could you talk a little bit about, you know, how many facilities in total this tenant has and what percentage you represent of them and, you know, sort of how these properties are performing versus maybe some of their others in case they were to file bankruptcy and look to give up some leases.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily.
Speaker Change: Assembly row style.
Speaker Change: Yeah.
Speaker Change: The first question comes from the line of Rob Stevenson with Janney. Please go ahead.
Operator: Yeah, so hey, Rob, thanks for the question. We are, you know, this tenant has a total of six hospitals. And so the buildings that they have with us are really the entire, you know, makes up the entire complexion of their business. So, you know. Obviously, the reduction in the census has been the catalyst for some of the issues that they've been having with paying rent and interest. But anyway, did that answer your question?
Robert Chapman Stevenson: Yeah. I mean, I guess the follow-up to that would wind up being, you know, how much revenue would be at risk here if they were in bankruptcy from where we've adjusted to thus far? And are any acquisitions in the pipeline with this tenant? There are no acquisitions in the pipeline with this tenant.
Robert Chapman Stevenson: Good morning, guys could.
Robert Chapman Stevenson: Could you talk a little bit about you know how many facilities in total this tenant has and what percentage you represent of them and.
Speaker Change: Sort of what how these properties.
Speaker Change: These are performing versus maybe some of their others.
Speaker Change: Hey, Casey were to file bankruptcy and look to give up some leases.
Speaker Change: Yeah, So rob thanks for the question.
Speaker Change: We are you know this.
Speaker Change: Tennant has a total of six hospitals and so the buildings that they have with US is really the <unk>.
Speaker Change: Entire yep makes up the entire inflection in their business. So.
Speaker Change: You know right.
Speaker Change: Obviously, the debt reduction that census has been the catalyst for.
Speaker Change: Some issues that they've been having in paying rent and interest but anyway.
Speaker Change: Did that answer your question, Yeah, I mean, I guess, the follow up to that would wind up being.
Speaker Change: How much revenue would be at risk here, if they were in bankruptcy from where we've adjusted to thus far and are any of the acquisitions in the pipeline with this tenant.
Speaker Change: There are no acquisitions in the pipeline with this tenant.
David H. Dupuy: You know, the run rate amount of rent and interest associated with this tenant is approximately a million and a half a quarter. So that gives you a sense. And look, like I said, we've got consultants in there that we've worked with before that are familiar with this tenant. And, you know, our intention and ours. The thought is that that consultant will be able to help affect the turnaround that should allow them to start paying us rent at some point.
Speaker Change: As you know the run rate amount of rent.
Speaker Change: Triste associated with this tenant is approximately.
Speaker Change: A million and a half a quarter.
Speaker Change: So that gives you a sense and look like I said, we've got you know.
Speaker Change: Consultants in there that we've worked with before familiar with this tenant and.
Speaker Change: Right.
Speaker Change: Our intention and our.
Speaker Change: Board is did that consultant will be able to help.
Speaker Change: Affect the turnaround that should allow them to start paying us rent at some point its difficult when youre in the middle of a turnaround to identify exactly why that is but we're.
David H. Dupuy: It's difficult when you're in the middle of the turnaround to identify exactly when that is, but we are on top of this on a weekly basis monitoring progress. Okay, and I guess, how long were these guys on the watch list? I mean, was this a sort of slow process to get to here?
Speaker Change: On top of this on a weekly basis monitoring progress.
Speaker Change: Okay, and I guess, how long what are these guys on the watch list I mean was this a sort of slow.
Speaker Change: Ooh process to get to here or was it basically you know a couple of weeks you know and it was like flipping a switch just trying to get a sense as to you know these days how quickly. These problem assets are appearing on the radar screen, whether or not it.
David H. Dupuy: Or was it basically, you know, a couple of weeks, and it was like flipping a switch, just trying to get a sense as to, you know, these days, how quickly these problem assets are appearing on the radar screen, whether or not it's, you know, something that, you know, there's a little bit more warning for, basically, you come in one day and find out that, you know, they're having much more Well, you know, one of the things I mentioned in the prepared remarks because this has been a relationship for the firm for a while, so for the last, you know, from 2020 to 2022 during COVID, they were very much on the watch list, just given the nature of the business and the geriatric patient base and the challenges they were having ramping up the two new hospitals that we had financed.
Speaker Change: Something that you know, there's a little bit more warning for basically you've come in one day and find out that they.
Speaker Change: We're having much more difficulties than you imagined.
Speaker Change: Well one of the things I mentioned in the prepared remarks, because this has been a relationship with the firm for a while so for the last.
Speaker Change: For 2000 22022 during Covid they were very much on the watch list just given the nature of the business as geriatric patient base and the challenges they were having ramping up the two new hospitals that we had that.
Speaker Change: We are fast and so they were on the watch list than they had fallen off the watch list in 2023, and the business is performing very very well.
David H. Dupuy: And so they were on the watch list then; they had fallen off the watch list in 2023, and the business was performing very, very well. Then, with these management changes late in the fourth quarter of 2023, we started seeing some late rents and some concerns with regard to census and performance. And so they came back on the watch list in the first quarter.
Speaker Change: Been with these management changes late.
Speaker Change: Fourth quarter of 2023.
Speaker Change: We started seeing some late rents and some concerns with regard to sensus and performance and so they came back on the watch list in the first quarter.
David H. Dupuy: They made partial payments in the first quarter and second quarter, but ultimately, it wasn't enough to make us comfortable that all of the rent was going to be collectible. And so that's why we moved them to a cash basis. Okay. And speaking of the watch list, how significant is that overall today? And anybody else, any other top tenants on that list today? None of the other top tenants are currently on our watch list.
Speaker Change: They make partial payments in the first quarter and second quarter that ultimately it wasn't enough to make us comfortable that.
Speaker Change: All of the rent, but what's gonna be collectible once so that's why we do think the cash basis.
Speaker Change: Okay.
Speaker Change: Speaking of the watch list, how significant is that overall today and anybody else any other of the top tenants.
Speaker Change: On that list today.
Speaker Change: None of the other top tenants are currently on our watch list.
David H. Dupuy: You know, the watch list is similar today in terms of numbers than it was before, but, you know, obviously very disappointing to us that such a large tenant on the deals of what we had to go through with Genesis care last year is having this issue and these problems. But, you know, again, we feel good about the top ten lists currently. We're very well diversified beyond, you know, these other tenants, and so we feel good about the portfolio overall. Okay, and then just one last one for me.
Speaker Change: The watch list.
Speaker Change: Hey in terms of numbers than it was before but.
Speaker Change: Obviously very disappointing to us that such a large tenant on the heels of what we have to get it through the Genesis here last year.
Speaker Change: It's having this issue in these these problems but yeah.
Speaker Change: Again, we feel good about the top 10 list currently we're very well diversified beyond.
Speaker Change: These other tenants and so we feel we feel good about the portfolio overall.
William G. Monroe: Bill, how should we be thinking about the 53 cents of AFFO per share going forward? I know that that didn't get adjusted as much as the FFO, but is there other stuff that either has to come out of that or be added back to that in future quarters? Or is that still a ballpark run rate for where the company is today given the reductions with this one tenant?
Speaker Change: Okay, and then just one last one for me Bill.
Speaker Change: How should we be thinking about the 53 cents of F O per share going forward I know that that didn't get adjusted as much as the F. F. L. But is that is there other stuff that either has to come out of that or be added back to that in future quarters or is that still owe you.
Speaker Change: You know a ballpark run rate for where the company is today given.
Speaker Change: Given the reductions with this one tenant.
Speaker Change: Yeah, I think until we see.
William G. Monroe: Yeah, I think until we see, you know, improvement from this tenant, we're kind of in the right ballpark. I mean, the short answer is, of the charges we took in the second quarter that were out of period charges, you know, charges, you know, you'd say, you know, approximately $750,000, $800,000 of AFFO should kind of be added back on a run rate basis compared to where our second quarter AFFO was.
Speaker Change: Movement from this tenant we're kind of in the right ballpark I mean, the short answer is of the charges. We took in the second quarter that were out of period charges.
Speaker Change: Yeah, you'd say.
Speaker Change: <unk> 750, $800000 of a F F O should kind of be added back on a run rate basis compared to where our second quarter.
Speaker Change: That was you know obviously as we move forward.
Speaker Change: Yeah, we don't provide guidance, but interest expense G&A other things.
William G. Monroe: You know, obviously, as we move forward, you know, we don't provide guidance, but, you know, interest expense, G&A, other things will also be taken into account as far as what AFFO will be. But clearly, the biggest impetus to an increased quarter over quarter on an AFFO basis will be improved performance and payment of rent and interest from this tenant. Okay, that's helpful, guys. Thank you. I appreciate the time this morning.
Speaker Change: It will also be taken into account as far as what that.
Speaker Change: <unk> will be.
Speaker Change: But clearly the biggest impetus to an increase quarter over quarter basis will be improved performance and payment of rent and interest from the stomach.
Speaker Change: Okay. That's helpful guys. Thank you appreciate the time this morning.
Operator: Thanks, Rob. Thanks, and thank you. The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, good morning, morning down there.
Robert Chapman Stevenson: Thanks, Rob.
Speaker Change: Thank you.
Speaker Change: The next question comes from Alexander Goldfarb.
Speaker Change: Please go ahead.
Speaker Change: Hey.
Speaker Change: Good morning, good morning down there.
Speaker Change: Dave.
Alexander David Goldfarb: Dave, I mean, I don't... As you have this tenant, and obviously, as you said, it's on the heels of Genesis, clearly something you guys didn't need. But you know, one, these were all deals that were done before you guys took over, not casting blame, but clearly, you know, these were deals done years ago, not recently. So as you look at the portfolio, and at your underwriting, you know, what are some of the lessons learned from Genesis and now here, that as you look at your acquisition pipeline and existing tenants, you go, hey, you know, maybe we want to kick these deals out or hey, you know what, we have other tenants that look like Genesis or, or this tenant, in terms of payment history, or coming up a little light, you know, in their in their, you know, envelope when they pay the monthly rent, what what are some of the things that you've seen and and reassessments of existing tenants and acquisition pipeline?
Speaker Change: I mean I don't.
Speaker Change: As you have this tenant and obviously as you said, it's on the heels of Genesis clearly something you guys Didnt need but you know one these were all deals that were done before you guys took over not casting blame but clearly you know these were deals done years ago not recently, so as you look at the <unk>.
Speaker Change: Portfolio and add your underwriting you know what are some of the lessons learned from Genesis and now here that as you look at your acquisition pipeline and existing tenants. You go Hey, you know maybe we'd want to kick these deals out or hey, you know what we have other tenants that look like genesis or or this kind of in <unk>.
Speaker Change: The payment history or coming up a little light you know in their in their envelope when they pay the monthly rent what what are some of the things that you've seen and reassessment of existing tenants and acquisition pipeline.
Speaker Change: Yeah. Thanks, Alex It's a great question I wouldn't say in the wake of Genesis care in this latest situation, we have tightened our underwriting standards. The bar is higher I will also tell you won't see us wind at these levels to a single tenant again that just won't happen.
Alexander David Goldfarb: Thanks, Alex. That's a great question. And I will say, in the wake of GenesisCare in this latest situation, we have tightened our underwriting standards. The bar is higher. I will also tell you, you won't see us lend at these levels to a single tenant again. That just won't happen.
David H. Dupuy: So, obviously, COVID was a unique situation, and everyone who went through it, we all went through it, especially the geriatric population. It was a very unusual situation, but it drove significant borrowings from this tenant. And at the end of the day, any slip in the census had an impact on their ability to pay rent and interest. And so, from our perspective, we're just going to be more rigorous with our underwriting, and you're just not going to see these same levels of loans to a single tenant going forward.
Speaker Change: So you know obviously COVID-19 was a unique situation and everyone. He went through it we all went through it, especially the geriatric population very unique situation. It was but it drove significant borrowings from this tenant and at the end of the day.
Speaker Change: Any slip incentives had an impact on your ability to pay rent and interest and so you know.
Speaker Change: From our perspective, we're just going to be more rigorous with our underwriting and youre just not going to see the same levels of loans to a single tenant going forward because you know honestly that is not insane.
David H. Dupuy: And honestly, that is not in sync with our diversification strategy as a firm, and that's very important to us. So, that is a core lesson here, for sure. But as far as, you know, it's not just the loan that went bad. It was the tenant as well. And certainly, that happened with Genesis.
Speaker Change: And same with our diversification strategy as it has done so and that's very important to us so that that is a core lesson here for sure.
Speaker Change: But as far as you know it's not just the loan that went bad it was the tenant as well it's certainly it happened with Genesis. So does this mean that you you know you want to shy away from doing portfolio deals and stick to single asset deals or like how is this changing and then also why even learned anything to a tenant why not just keep it in purely.
David H. Dupuy: So does this mean that you, you know, you want to shy away from doing portfolio deals and stick to single asset deals, or is this changing? And then also, why even lend anything to a tenant? Why not just keep it at purely a rental relationship?
Speaker Change: Rental relationship.
David H. Dupuy: Well, every situation is unique, and so, you know, sometimes there are competitive reasons, sometimes there are very good reasons for us wanting to lend as part of an overall relationship. And what I would say, Alex, relative to portfolio deals, historically, we have been reluctant to do portfolio deals in a meaningful way. But, you know, going back to GenesisCare, look, you know, that was a portfolio deal. Ultimately, it wasn't a fun process, and we were disappointed that the whole code was overleveraged and didn't perform. But ultimately, the performance at our facilities largely worked out.
Speaker Change: Well every every situation is unique.
Alex: Sometimes there are competitive reasons, sometimes there are very good reasons for us to land as part of an overall relationship and what I would say Alex relative to the portfolio deals. Historically, we have been reluctant to do portfolio deals in a meaningful way, but you know going back to Genesis care.
Alex: Look that was a portfolio deal ultimately.
Alex: It wasn't a fun process and you're disappointed at the Holdco.
Alex: Was over leveraged.
Alex: Before but ultimately the performance at our facilities largely worked out and you know it wasn't a fun process, but at the end of the day, it's important that we underwrite each individual market each individual property.
David H. Dupuy: And, you know, it wasn't a fun process, but at the end of the day, it's important that we underwrite each individual market and each individual property because that is what is ultimately going to drive rent and interest payments to us, whether from that tenant or a new tenant. So I'm not going to say we won't do a portfolio deal because there could be opportunities for us to do portfolio deals, but our underwriting standards are going to be more rigorous.
Alex: That is what is ultimately going to drive rent and interest payment to us whether from that tenant or a new tenant so I'm not going to say, we won't do a portfolio deal because there could be opportunities for us to do portfolio deals, but our underwriting standards are going to be more rigorous.
David H. Dupuy: Okay, just final question is, obviously, the stock's taken a bit of a hit, you know. Do you reconsider, you know, the committed acquisition pipeline? Or how does where the stock is now trading change the goal of getting the pipeline back up to sort of that 130-150 million a year?
Speaker Change: Just final question, obviously, the stock has taken a bit of a head you know.
T D: T D do you reconsider the committed acquisition pipeline or how does how does where the stock is now trading change you know the the goal of getting the pipeline back up to sort of that 130 $150 million a year.
David H. Dupuy: Listen, we're very focused on all of this, you know, on looking at all sources of capital. We continue to have a modestly leveraged balance sheet. We don't think that this is going to impact in any way what we've committed to do in our pipeline, and actually, you know, we recognize as a small reach that even though we are definitely going to be judicious with our capital, growth is what's going to drive our performance from a share price perspective; it's all about driving AFFO and FFO. And so, you know, we're just going to be very strategic in how we do that, and we've got other levers than just the stock.
Speaker Change: Listen we're very focused on all.
Speaker Change: I'm looking at all sources of capital we continue to have a modestly leveraged balance sheet, we don't think that.
Speaker Change: This is going to impact in any way, what we've committed to do it.
Speaker Change: Our pipeline and actually yeah, we recognize as a small REIT.
Speaker Change: We are definitely going to be judicious with our capital our growth is what's going to drive our performance from a share price perspective, it's all about driving <unk> and so.
Speaker Change: We're just going to be very strategic in how we do that and we've got other levers than just the stock.
Operator: We can do some capital recycling in the portfolio. We can borrow just given our leverage levels and the support from our banks, and so, you know, overall, we feel very positive about our ability to access the various markets to be able to continue to fund our growth. Thank you. Thanks, Alex.
Speaker Change: We can we can do some capital recycling the portfolio.
Speaker Change: We can borrow just given our leverage levels and the support from our banks and so you know overall.
Speaker Change: Overall, we feel very positive in our ability to access the various markets to be able to continue to fund our growth.
Speaker Change: Thank you.
Alex: Thanks, Alex.
Alex: Thank you.
Speaker Change: The next question comes from Michael Lewis with Lewis. Please go ahead.
Michael Robert Lewis: The next question comes from Michael Lewis with Truist. Please go ahead. Great, thank you. So Alex just asked one of the questions that I think is one of the more important questions, right?
Michael Robert Lewis: Alright, great. Thank you so.
Michael Robert Lewis: Oh, it's just that one of the questions that I think is one of the more important questions right. So.
Michael Robert Lewis: So the stock over the last 12 months was already down, you know, 18 or 20%. And I think investors were asking, you know, at what point is the cost of equity no longer acceptable to issue shares to fund new investments at nine handle cap rates? You know, obviously this morning, it's taken another leg down. It's, I know, it's a tough question to answer. You don't want to put yourself in a box, but, you know, when does the cost of equity become prohibitive?
Speaker Change: Stock over the last 12 months was already down you know 18, or 20% and I think investors were asking you know at what point is the cost of equity no longer acceptable to issue shares to fund new investment at nine handle cap rate.
Speaker Change: Obviously this morning, it's taken another leg down it's I know, it's a tough question to answer you don't want to put yourself in a box but.
Speaker Change: When does the cost of equity.
Speaker Change: Become prohibitive, because I think there's a danger here.
David H. Dupuy: Because I think there's a danger here, you know, if you lose access to some of that capital or that spread over your investment yield. So I don't know what more you could say on that. Maybe you already answered it.
Speaker Change: If you lose access to kind of that capital or that spread over your investment yield so.
Speaker Change #129: I don't know what what more you could say on that maybe you already answered it.
David H. Dupuy: Well, you know, it is a tough one to answer, but what I would tell you is, you know, we're looking to make accretive acquisitions, and we, and those acquisitions need to drive overall revenue and ASFO growth for the company. And so we're highly sensitive as shareholders in the company about doing a diluted equity raise and, you know, doing that at the ATM. And so we're going to be, you know, very mindful of that in terms of, and as I just mentioned earlier with the prior question, Michael, we've got opportunities within the portfolio to do some capital recycling to fund some growth. And so we do have other tools in our toolbox that will allow us to continue to grow without putting pressure on the stock.
Speaker Change: Well you know it is a tough one to answer but what I would tell you is.
Speaker Change: We're looking to make accretive acquisitions and.
Speaker Change: And those acquisitions need to drive overall.
Speaker Change: Revenue and <unk> growth for the company and so we're highly sensitive and shareholders in the company about doing a dilutive equity raise and.
Speaker Change: Doing that in the ATM and so we're going to be very.
Speaker Change: Mindful of that.
Speaker Change: In terms of and as I, just mentioned earlier with the prior question.
Speaker Change: Michael I mean, we've got opportunities within the portfolio to do some capital recycling to fund some growth in and so we do have other tools.
Speaker Change: Tools in our toolbox that will allow us to continue to grow without putting pressure on the stock we recognize that.
William G. Monroe: We recognize that that's not good for us, and ultimately, it's not good for driving ASFO growth. Bill, I don't know if you want to comment there. No, I agree.
Speaker Change: Not that good for us and ultimately it's not good for driving <unk> growth.
Speaker Change: I Wanna comment there no I agree.
Speaker Change: Okay. Thanks, and then.
David H. Dupuy: And then, you know, you talk about your expectations to hopefully, you know, hopefully the consultant helps and the tenant starts paying again. In a worst case scenario, you know, where the tenant doesn't recover. Are these properties, you know, do you think they're, you know, relatively easy to rent or sell or, or what kind of plan would be? I don't mean to jump right to the worst case, but I think it's, you know, I think it's important to kind of judge what that might look like.
Speaker Change: You know you you talked about your expectations to hopefully hopefully the consulting helps and the tenant that's paying again.
Speaker Change: In a worst case scenario.
Speaker Change: Where the tenant.
Speaker Change: Doesn't recover.
Speaker Change: Or are these properties do you think there.
Speaker Change: Relatively easy to re tenant or sell or or what kind of the plan would be that I don't mean to jump right to the worst case, but I think it you know I think it's important to kind of judge.
Speaker Change: What that might look like.
Speaker Change: Yeah. So.
William G. Monroe: Yeah, so, uh... Michael, one of the benefits from having been in the healthcare services sector myself and Bill for a number of years is we know a lot of operators in this space. And, obviously, we have some tenants that are operators that would be interested in these assets. But the short answer, without jumping to that scenario, is there are many potential buyers that we think, or operators, that we think would be interested in these psychiatric hospitals, and there is a little bit of a scarcity value to these businesses. And so, you know, again. The business and these individual hospitals, I think, would be attractive to an individual potential buyer. And Michael, it's Bill.
Michael Robert Lewis: Michael one of the.
Michael Robert Lewis: Benefits from having been in the health care services sector myself and bill for number of years as we know a lot of operators in this space and obviously, we have some tenants that are operators that would be interested in these assets that the short answer without jumping to that that scenario is there are.
Speaker Change: Many potential buyers that we think or operators that we think would be interested in knees.
Speaker Change: These type hospitals.
Speaker Change: And there is a a.
Speaker Change: A little bit of a scarcity value to these to these businesses and so you know again.
Speaker Change:
Speaker Change: The business.
Speaker Change: And these individual hospitals, I think would be attractive to an individual potential buyer.
Michael Robert Lewis: I'll add that, you know, we have not seen, and we do not believe there's been, a change in the competitive landscape in these local markets where this tenant operates, such that it is more of an execution issue. And so I think that helps preserve what is the value of these properties as we think about it. Okay, because for whatever it's worth, I mean, we do see REITs and other healthcare sectors lose significant tenants, and the stocks don't take hits like this. I think it has to do with, you know, being able to reposition assets.
Speaker Change: Michael It's bill I'll add that you know we have not seen and we do not believe there has been a change in the competitive landscape in these local markets, where the tenant operates such that it is more of an execution issue.
Speaker Change: And so I think that helps preserve.
Speaker Change: Is the value of these properties.
Speaker Change: Think about it.
Speaker Change: Okay.
Speaker Change #104: For whatever it's worth I mean, we do see Reits and other health care sectors.
Speaker Change: Significant tenants in the socks don't.
Speaker Change: It's like that I think you'd have to have to do with.
Speaker Change: Being able to reposition assets.
Speaker Change: My last question.
David H. Dupuy: But my last question, just on the acquisition pipeline, you know, I think the deal that you closed in the first quarter, or I'm sorry, closed in the second quarter, you had already mentioned on the first quarter call. So, you know, has there not been any new activity over the last few months? And, you know, does the pipeline still seem full? Do you think you're still on target for your acquisition goals for the year?
Speaker Change: On the acquisition pipeline.
Speaker Change: The deal that you closed in the first quarter you had already mentioned on the or I'm, sorry, close in the second quarter, you had already mentioned on the first quarter call.
Speaker Change: It's cool.
Speaker Change #103: They're not been any new activity over the last few months and.
Speaker Change #110: Does the pipeline still seem fall do you think you are still on target for your your acquisition goals for the year.
Speaker Change: Yeah.
David H. Dupuy: You know, we have continued to be active, and we've seen a number of deals. We've got term sheets outstanding, as I mentioned in the prepared remark. You know, sometimes we've seen in the past where closings are a little bit slower in the third quarter, just the reality is that, summer and vacation schedules, et cetera. But we do think that hitting our acquisition target is certainly still achievable for the balance of the year. And like I said, I think we're still seeing good activity from an acquisition standpoint, which doesn't always translate into closed deals, but it's certainly better than not seeing any activity.
Speaker Change: We have we.
Speaker Change: We have continued to be active seen the number of deals we've got term sheets outstanding as I mentioned in the prepared remarks.
Speaker Change: Sometimes we've seen in the passport closings are a little bit slower in the third quarter just the realities of.
Speaker Change: Some are in vacation schedules et cetera, but we do think that hitting our acquisition target is certainly still achievable in the balance of the year and like I said I think we're still seeing.
Speaker Change: Good activity from an acquisition standpoint, which doesn't always translate into into closed deals, but it's certainly better than Nazi b activity. So.
William G. Monroe: So yes, we still feel like that it's achievable. And Michael, I'll note that we did include that we closed a $6.2 million property early in the third quarter here. So it didn't show up in the second quarter closing numbers, but we did mention it in our investor presentation that we did close an additional property early this quarter, just this month. Okay, thank you. Ladies and gentlemen, if you have a question, please press star, then 1.
Speaker Change: Yes, we still feel like that that's that's achievable and Michael I'll note. We did include that we closed a $6 $2 million property early in the third quarter here.
Speaker Change: So it didn't show up in the second quarter close numbers, but we did mention it in our investor presentation.
Speaker Change: We did close an additional property early this quarter just this month.
Michael Robert Lewis: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change #109: Ladies and gentlemen, if you have a question. Please press Star then one.
Speaker Change #117: The next question comes from.
Operator: The next question comes from Wesley Golladay. RBC Capital Markets, please go ahead. Hey, good morning, guys.
Speaker Change #107: With RBC capital markets. Please go ahead.
Speaker Change #118: Hey, good morning, guys, it's actually Baird capital.
Wesley Keith Golladay: It's actually Baird Capital. When you look at the lease expiration schedule, you have 107 million in rent annually. Does that include the tenant that is having issues right now? And is that a cash number? work. I would think that it would include those leases in the number, but those leases that we have with the tenant don't expire in the near term.
Speaker Change #114: When you look at the lease expiration schedule you have 107 million of rent annually is that include the tenant that is having issues right now and is that a cash number.
Speaker Change: So.
Speaker Change #130: I would think that it would include those leases in the number but those leases that we have with the tenant.
Speaker Change: Yes, that's buyer in the near term lease maturities of the tenant.
David H. Dupuy: Yeah, the least maturities of the tenant, we've been discussing this between 2030 and 2036, so no upcoming maturities with that tenant. Okay, I just want to make sure the 107 million incorporates that. And then when you look at what they're paying, they're on cash accounting now. With that, did they pay anything in the second quarter? Just a little bit, not much.
Speaker Change: Been discussing that's between 20 to 30 in 2036.
Speaker Change #108: So no upcoming maturities with that tenant.
Speaker Change #113: Okay I just want to make sure. These are wider 7 million incorporates that and then when you look at what they're paying you on cash accounting now would that did they pay anything in the second quarter.
Speaker Change: Just a little bit not much.
David H. Dupuy: Just some small payments. And, you know, we're not necessarily expecting to get meaningful payments in the third quarter either. I mean, they're in the middle of this turnaround.
Speaker Change: Just some small payments.
Speaker Change #106: You know, we're not necessarily expecting to get meaningful payments in the third quarter either I mean this they are in the middle of this turnaround.
Speaker Change: Yeah.
Speaker Change: Okay, and then when you look at the line of credit.
David H. Dupuy: So, yeah. Okay. And then when you look at the line of credit, you know, the utilization is getting higher, but then you could probably issue another term loan. What are you looking at? Yeah. We had $41 million available under our revolver at the end of the quarter. The next maturity is not until March of 2026, but typically, what we do is, when we get within a year or so of those maturities, look to term out those revolver borrowings.
Speaker Change: Utilization is getting higher but then you could probably assume another term loan or how are you looking at that.
Speaker Change: Yeah.
Speaker Change #111: We had $41 million available under our revolver at the end of the quarter.
Speaker Change #115: The next maturity is not until March of 2026, but typically what we do when you get within a year or so of those maturities you know look to term out those revolver borrowings and so you would anticipate.
William G. Monroe: And so we'd anticipate taking a look at that, and again, we've had success with our bank group doing that historically. And so we've continued to evaluate that. Thanks for your time.
Speaker Change: Taking a look at that and you know again have had success with our bank group doing that historically.
Speaker Change: So we would continue.
Speaker Change: To evaluate that.
Speaker Change: Okay. Thanks for the time.
Wes: Thanks Wes.
Operator: Thanks guys. Thank you. Thank you. The next question comes from Jim Kammert with Evercore. Please go ahead.
Wes: Thank you.
Wes: The next question comes from Jim Cameron with Evercore. Please go ahead.
James Hall Kammert: Good morning. Thank you. Do you have the ability, under the lease with this tenant in question, to replace them?
James Hall Kammert: Good morning. Thank you do you have the ability under the lease with this tenant in question to replace them.
James Hall Kammert: Meaning, you know, they're in default, I presume they're not paying the rent, obviously, why wait? In other words, and, you know, if these are desirable assets, try to parallel path and look for a replacement tenant or a new owner. I mean, pardon me, new operator. Hey Jim, thanks for the question. Yes, we absolutely do have the ability to replace them. They're obviously in default of our lease, and we are taking multiple paths.
Speaker Change #112: They're in default and I presume, you're not paying the rent honestly why wait in other words an.
Speaker Change #100: If you should just horrible assets.
Speaker Change #122: Parallel path and look for the replacement tenant or a new owner pardon me.
Speaker Change #100: Later.
Wes: Hey, Jim Thanks for the question, Yes, we absolutely do have the ability to replace them. There obviously in default of our lease and we are taking multiple paths will not just kind of went to the consultants and we're looking at other options, but given the fact that this tenant.
James Hall Kammert: We're not just kind of wedded to the consultants, and we're looking at other options. But, you know, given the fact that this tenant has outstanding loans to us, and we think, you know, if you go back in 2023 and see how this tenant was able to perform and pay their rent and interest, you know, certainly from our perspective, we want to try to preserve options with this tenant. But, you know, I will say that they're on a short leash.
Wes: Has outstanding loans to us and we think you know.
Speaker Change #102: If you go back in 2023 and see how this tenant was able to perform and pay their rent and interest.
David H. Dupuy: And like I said, we've got a number of folks that we think could operate these facilities. And so, you know, obviously, we're aligned. We want to make sure that we get a paying tenant in there.
Speaker Change #102: Certainly from our perspective, we want to try to preserve.
Speaker Change #102: Options with this tenant.
Speaker Change #102: But I will say that there on a short leash and like I said, we've got a number of folks that we think.
Speaker Change #102: Could operate these facilities and so.
Speaker Change #102: Obviously, we are.
Speaker Change #102: Aligned we want to make sure that we get a paying tenant in there hopefully as those tenants, but if it's not we'll evaluate others.
Speaker Change #126: Great because I'm just trying to reconcile that with prior comments that that's very helpful. Thanks, you've taken basically at 50%.
David H. Dupuy: Hopefully, it's this tenant, but if it's not, we'll evaluate others. Great, because I'm just trying to reconcile that with the prior comments that, that's very helpful. Thanks. You know, you've taken basically a 50% reserve against the loan balance.
Speaker Change #125: Reserve against the loan balance and if these are you know.
Speaker Change #125: This is kind of a network of hospitals could be sellable.
James Hall Kammert: And if these are, you know, this is basically the business, the entire network of hospitals could be saleable, trying to understand why such a draconian hit on the receivable. If there's any additional color you can provide there, it seems inconsistent with the premise that these are saleable, marketable assets. Maybe just go and recycle them, sell them?
Speaker Change #101: Just trying understand why is that such a draconian hit then on on the receivable.
Speaker Change #116: If there's any additional color you can provide there seems inconsistent with a premise that these are saleable marketable assets.
Speaker Change #101: Yeah, maybe just go unfortunately.
Speaker Change #134: Yeah no it wasn't.
Speaker Change #123: Here yet.
David H. Dupuy: Yeah. No. Listen, I hear you.
David H. Dupuy: It's, you know, it's just... One of those processes you have to go through that CECL requires you to go through, and it's a pretty, you know, structured accounting process that we have to go through. And so that's what we went through. And look, at the end of the day, you know, you're trying to come up with a value for the business and be conservative, given the current environment. And so that's kind of what you're seeing there in terms of the reserve.
Speaker Change #133: Yeah, it's just.
Speaker Change #101: One of those processes you have to get treatment seasonal requires you to go through and it's a pretty structured accounting process that we have to take and so that's that's what we went through in <unk> and look at the end of the day.
Speaker Change #101: We're trying to we're trying to come up with a value for the business and and be conservative given the current environment and so that's kind of that's kind of what youre seeing there in terms of the reserve, but but Theres. No question. We think that there is there is value in the operations.
Speaker Change #101: Here and.
Speaker Change #101: We're trying to stabilize the business and make sure that we can drive as much value from those operations as we can.
David H. Dupuy: But there's no question. We think that there is value in the operations here. And, you know, we're trying to stabilize the business and make sure we can drive as much value from those operations as we can. Great, so you worked a little bit with your accountants, and so CECL really did drive that determination. It was not some sort of in-house.
Speaker Change #121: Great. So you worked with or was your accounts.
Speaker Change #131: Really to drive that determination it was not a.
James Hall Kammert: Yes. Okay, perfect. That's helpful. Thanks. Thanks, Jim. Thank you. Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Dave Dupuy for any closing remarks. Listen, thank you, operator, and thank you, everyone, for joining us this morning. We hope everyone has a good day and look forward to talking to you next quarter.
Speaker Change #128: Okay perfect. That's helpful. Thank you.
Speaker Change #101: Thanks.
Speaker Change #101: Thanks, Jim. Thank you. Thank you.
Speaker Change #119: Ladies and gentlemen this.
Speaker Change #119: Concludes our question and answer session.
David H. Dupuy: I would like to turn the conference back over to Dave <unk> for any closing remarks.
Speaker Change #127: Listen Thank you operator, and thank you everyone for joining us. This morning, we hope everyone has a good day and look forward to talking to you next quarter. Thank you.
Speaker Change #124: Thank you.
David H. Dupuy: Thank you. The conference has now concluded. Thank you for attending today's presentation. BF-WATCH TV 2021, [inaudible] The Ultimate Parody Site! Please see the complete disclaimer at https://sites.google.com or at www.google.com, BF-WATCH TV 2021 Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.
Speaker Change #120: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change #101: Yeah.
Speaker Change #101: Hum.
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Speaker Change #101: [music].
Speaker Change #101: Yes.
Speaker Change #101: [music].
© BF-WATCH TV 2021, ?? © BF-WATCH TV 2021, Please visit www.communityhealthcare.org for more information. ?? ?? ?? ?? This is a production of the U.S. Department of Health and Human Services U.S. Department of Health and Human Services [inaudible] ?? ?? [inaudible] ?? ?? ?? Please visit www.communityhealthcare.org for more information. [inaudible] For more information, please visit www.communityhealthcare.org ?? ?? ?? ?? © BF-WATCH TV 2021 © The Ultimate Parody Site! Visit www.communityhealthcare.org, [inaudible] or [inaudible] Goldfarb, David Dupuy, Barry Oxford, Michael Lewis, William Monroe, Alex Fagan, Community Healthcare Trust Inc ==== Transcribed by Automatic Sync Technologies ==== ==== Transcribed by Automatic Sync Technologies ==== [inaudible]
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yes.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: Okay.
Speaker Change #101: Uh huh.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: [noise].
Speaker Change #101: Yeah.
Speaker Change #101: Yes.
Speaker Change #101: Yes.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: [music].
Speaker Change #101:
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: [noise].
Speaker Change #101:
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: [noise].
Speaker Change #101: Okay.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101:
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: [music].
Speaker Change #101:
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: Uh huh.
Operator: [music].
Speaker Change #101: Okay.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Speaker Change #101: Yeah.
Speaker Change #101: [music].
Operator: Okay.
Speaker Change #101: Hum.
Speaker Change: Uh huh.
Operator: Okay.
Operator: Yeah.
Speaker Change #101: Oh.
Speaker Change #101: [music].
Operator: Okay.
Operator: [music].
Speaker Change #101: Yeah.
Operator: [music].
Operator: Yeah.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: Yeah.
Operator: Yes.
Operator: [music].
Operator: Yeah.
Operator: Yes.
Operator: Yeah.
Operator: [music].
Operator: Okay.
Operator: Yeah.
Operator: Okay.
Operator: [music].
Operator: Yeah.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: Right.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: [music].