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01/11 10:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed signals: a slight revenue increase and dividend growth are positives, but concerns about interest expense volatility, seasonal expense increases, and unresolved tenant issues contribute to uncertainty. The Q&A section highlights management's cautious approach to acquisitions and debt, but also reveals vague responses regarding redevelopment impacts and tenant recovery. These factors balance each other out, resulting in a neutral sentiment. Without market cap data, stock reaction prediction remains cautious.
Total Revenue $31.1 million in Q3 2025, a 4.9% increase year-over-year from $29.6 million in Q3 2024. The increase is attributed to overall business growth.
Property Operating Expenses $5.9 million in Q3 2025, a $300,000 increase quarter-over-quarter due to seasonal utility expenses. Year-over-year, it decreased by $50,000.
General and Administrative Expense $4.7 million in Q3 2025, flat quarter-over-quarter (excluding $5.9 million severance in Q2 2025). Year-over-year, it decreased by $300,000.
Interest Expense $7.1 million in Q3 2025, a $500,000 increase quarter-over-quarter due to increased borrowings and one extra day of interest. Late-quarter benefit from a 25 basis point federal funds rate cut.
Funds From Operations (FFO) $13.5 million in Q3 2025, a 5.7% increase year-over-year from $12.8 million in Q3 2024. FFO per diluted share increased from $0.48 to $0.50.
Adjusted Funds From Operations (AFFO) $15.1 million in Q3 2025, a 3.1% increase year-over-year from $14.6 million in Q3 2024. AFFO per diluted share increased from $0.55 to $0.56. Dividend payout ratio remains strong at 85%.
Acquisition of inpatient rehab facility: Acquired 1 inpatient rehab facility for $26.5 million with a lease expiration in 2040 and an anticipated annual return of approximately 9.4%.
Future property acquisitions: Signed definitive purchase and sale agreements for 6 properties with an aggregate expected investment of $146 million and expected returns ranging from 9.1% to 9.75%. Closures expected between Q4 2025 and 2027.
Tenant transition in geriatric behavioral hospitals: A tenant operating 6 geriatric behavioral hospitals paid $200,000 in rent and signed a letter of intent to sell operations to a new operator, who would sign new or amended leases for these properties.
Occupancy rate: Occupancy decreased from 90.7% to 90.1% in Q3 2025, but leasing activity is expected to increase occupancy by 50-100 basis points by year-end.
Capital recycling program: Disposed of one property for $700,000, with two more dispositions expected in Q4 2025 for $6.1 million. An inpatient rehab hospital sale is expected to generate $11.5 million in gains, with proceeds funding acquisitions through a 1031 like-kind exchange.
Dividend increase: Declared a Q3 2025 dividend of $0.475 per share, equating to an annualized dividend of $1.90 per share, continuing a trend of quarterly increases since IPO.
Tenant Transition Risk: The geriatric behavioral hospital operator, a tenant in 6 properties, is undergoing a sale of operations. The buyer is still performing due diligence, and there is no certainty that the transaction will close. This creates uncertainty regarding the continuity of lease agreements and rental income from these properties.
Occupancy Decline: Occupancy decreased from 90.7% to 90.1% during the quarter, which could impact rental income and overall financial performance if not addressed.
Capital Recycling Program Risks: The company is relying on asset sales and 1031 like-kind exchanges to fund acquisitions. This strategy depends on successful dispositions and reinvestments, which may not materialize as planned, potentially affecting liquidity and growth.
Interest Expense Volatility: Interest expense increased by $500,000 quarter-over-quarter due to higher borrowings and floating rate exposure. While rate cuts may reduce costs, reliance on floating rates introduces financial uncertainty.
Seasonal Operating Expense Increases: Property operating expenses increased by $300,000 quarter-over-quarter due to seasonal utility costs, which could strain margins if not managed effectively.
Leased Occupancy: The company expects leased occupancy to increase by 50 to 100 basis points by year-end based on current leasing activity.
Property Acquisitions: The company has signed definitive purchase and sale agreements for 6 properties to be acquired after completion and occupancy, with an aggregate expected investment of $146 million. Expected returns on these investments range from 9.1% to 9.75%. One property is expected to close in the fourth quarter, with the remaining 5 properties closing throughout 2026 and 2027.
Capital Recycling Program: The company expects to close on the sale of an inpatient rehab hospital in the fourth quarter, with an expected gain of approximately $11.5 million. Net proceeds are expected to fund fourth-quarter acquisitions through a 1031 like-kind exchange. Additional properties with similar cap rate ranges are under review for potential sales.
Interest Expense: The company anticipates reduced interest expenses in the fourth quarter due to the FOMC's 25 basis point reduction to the federal funds rate in mid-September. Further rate cuts by the FOMC could reduce interest expenses further.
Dividend Declaration: The company declared a dividend for the third quarter and raised it to $0.475 per common share, equating to an annualized dividend of $1.90 per share.
Dividend Growth: The company has raised its dividend every quarter since its IPO.
The earnings call reveals mixed signals: a slight revenue increase and dividend growth are positives, but concerns about interest expense volatility, seasonal expense increases, and unresolved tenant issues contribute to uncertainty. The Q&A section highlights management's cautious approach to acquisitions and debt, but also reveals vague responses regarding redevelopment impacts and tenant recovery. These factors balance each other out, resulting in a neutral sentiment. Without market cap data, stock reaction prediction remains cautious.
The earnings call presents a mixed picture: a slight revenue growth and dividend increase are positives, but weak FFO and AFFO due to one-time charges, and management's vague guidance on G&A expenses are concerns. The Q&A reveals a focus on capital recycling for acquisitions, but also highlights uncertainties, such as potential risks with the geriatric facilities deal. Overall, these factors balance each other out, leading to a neutral sentiment.
The earnings call revealed a mixed outlook. Financial performance showed modest growth in revenue and AFFO, but the occupancy rate remained flat. Regulatory issues, supply chain challenges, and competitive pressures were highlighted as risks. The Q&A section noted uncertainties around a significant tenant's sale process and acquisition pipeline. Dividend increase is a positive, but lack of share buybacks and low share price affecting capital raising are concerns. Overall, the sentiment is balanced with slight positives and negatives, suggesting a neutral stock price movement over the next two weeks.
The earnings call presents a mixed picture: while there are positive elements like increased dividends and FFO growth, concerns remain about tenant issues and rising interest expenses. The Q&A reveals unresolved uncertainties regarding tenant payments and redevelopment projects. Despite dividend increases, financial strain from higher debt and regulatory risks persists. Thus, the overall sentiment is neutral, expecting minimal stock price movement in the short term.
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