COMMUNITY
HEALTHCARE
---TRUST ---
Notice of 2024 Annual Meeting
and Proxy Statement
Annual Report on Form 70-K
Year Ended December
for Fiscal
37, 2023
ANNUAL MEETING OF STOCKHOLDERS
MAY 2, 2024 -8:00 A .M. CDT
Community Healthcare
Trust Incorporated
3326 Aspen Grove Drive, Suite 750
Franklin,
Tennessee
37067
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Proxy
Form 10-K
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March 14, 2024
DEAR STOCKHOLDER:
On behalf of the Board of Directors, we cordially invite you to attend the 2024 annual meeting of stockholders of
Community Healthcare Trust Incorporated, a Maryland corporation (the "Company"). The annual meeting will be held
beginning at 8:00 a.m., Central time, on Thursday, May 2, 2024 at the principal offices of the Company, located at 3326
Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. The formal notice of the annual meeting appears on the next
page. At the annual meeting, you will be asked to:
1.
2.
3.
4.
5.
Elect six directors, each to serve a one-year term expiring in 2025;
Approve the Community Healthcare Trust Incorporated 2024 Incentive Plan;
Vote to approve, on a non-binding advisory basis, a resolution approving the Company's compensation of
its named executive officers;
Ratify the appointment of BDO USA, P.C. as our independent registered public accountants for 2024; and
Transact such other business as may properly come before the annual meeting or any adjournment or
postponement thereof.
The accompanying proxy statement provides detailed information concerning the matters to be acted upon at the
annual meeting. We urge you to review this proxy statement and each of the proposals carefully. Your vote is very
important. It is important that your views be represented at the annual meeting regardless of the number of shares of
common stock you own or whether you are able to attend the annual meeting in person.
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On March 14, 2024, we posted on the investor's relations page of our Internet website, http://investors.chct.reit, a copy
of our 2024 proxy statement, proxy card and our annual report to stockholders. Also, on or around March 14, 2024, we
mailed a notice (the "Notice") containing instructions on how to access our proxy materials and vote online to our
stockholders who own our stock directly in their name and in the name of other stockholders.
You may vote your shares on the Internet or by phone. If you request a paper copy of the proxy card or voting
instruction form, we will mail you the paper copy and you may sign, date and mail the accompanying proxy card or
voting instruction form in the envelope provided with your proxy card. Instructions regarding the three methods of
voting by proxy are contained on the proxy card. As always, if you are the record holder of our stock, you may vote in
person at the annual meeting. The accompanying proxy statement explains how to obtain driving directions to the
meeting.
On behalf of our Board of Directors, I would like to express our appreciation for your continued interest in Community
Healthcare Trust Incorporated.
Sincerely,
Alan Gardner
Chairman of the Board
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on May 2,
2024: Community Healthcare Trust Incorporated's 2024 proxy statement, proxy card and annual report to
stockholders are available at http://investors.chct.reit.
___________
TIME
8:00 a.m.,
Central Time, on
Thursday, May 2, 2024
___________
PLACE
Community Healthcare
Trust Incorporated
3326 Aspen Grove Drive,
Suite 150
Franklin, Tennessee
37067
___________
RECORD DATE
You can vote if you are a
stockholder of record as
of the close of business
on February 29, 2024.
Community Healthcare Trust Incorporated
3326 Aspen Grove Drive, Suite 150
Franklin, Tennessee 37067
Notice of Annual Meeting of Stockholders
ITEMS OF BUSINESS
1. To elect six directors, each to serve a one-year term expiring in 2025;
2. To approve the Community Healthcare Trust Incorporated 2024 Incentive Plan;
3. To vote to approve, on a non-binding advisory basis, a resolution approving the
Company's compensation of its named executive officers;
4. To ratify the appointment of BDO USA, P.C. as our independent registered
public accountants for 2024; and
5. To transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof.
ANNUAL REPORT
All of these documents are accessible on our Internet website, http://investors.chct.reit.
You may request a paper copy of the proxy statement, the proxy card, and our annual
report to stockholders, which is not part of the proxy solicitation material.
PROXY VOTING
It is important that your shares be represented and voted at the annual meeting. You
may vote your shares on the Internet, by phone or, if you request and receive written
proxy materials, you may vote by signing, dating and mailing the accompanying proxy
card or voting instruction form in the envelope provided. Instructions regarding the
three methods of voting are contained on the proxy card. The Notice has instructions
regarding voting on the Internet. Any proxy may be revoked at any time prior to its
exercise at the annual meeting.
By Order of the Board of Directors,
William G. Monroe IV
Secretary of Community Healthcare Trust Incorporated
Franklin, Tennessee
March 14, 2024
Community Healthcare Trust Incorporated Proxy
Statement
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON THURSDAY, MAY 2, 2024
We are furnishing this proxy statement to the stockholders of Community Healthcare Trust Incorporated in
connection with the solicitation of proxies by its Board of Directors for use at the annual meeting of stockholders of
Community Healthcare Trust Incorporated to be held at 8:00 a.m., Central Time, on Thursday, May 2, 2024, at 3326
Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067, as well as in connection with any adjournments or
postponements of the meeting. This solicitation is made by Community Healthcare Trust Incorporated on behalf of
our Board of Directors (also referred to as the "Board" in this proxy statement). "We," "our," "us" and the "Company" refer
to Community Healthcare Trust Incorporated, a Maryland corporation.
We have elected to provide access to our proxy materials and annual report over the Internet through a "notice and
access" model. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the "Notice") to our
stockholders of record as of February 29, 2024. All stockholders will have the ability to access the proxy materials on
the website referred to in the Notice or to request a printed set of the proxy materials. Instructions on how to request a
printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice,
including an option to request paper copies on an ongoing basis. On March 14, 2024, we intend to make this proxy
statement available on the Internet and, on or around March 14, 2024, we intend to mail the Notice to all stockholders
entitled to vote at the annual meeting. We intend to mail this Proxy Statement, together with a proxy card, to those
stockholders entitled to vote at the annual meeting who have properly requested paper copies of such materials,
within three business days of such receipt.
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This proxy statement, proxy card and our annual report to stockholders are available at http://investors.chct.reit. This
website address contains the following documents: the Notice, the proxy statement and proxy card sample, and the
annual report to stockholders. You are encouraged to access and review all of the important information contained in
the proxy materials before voting.
Table of Contents
Questions and Answers Regarding the 2024 Annual Meeting of Stockholders . . . . . . . . . . . . . . . .
Proposal 1—Election of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Compensation Plan Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 2—Approval of Community Healthcare Trust Incorporated 2024 Incentive Plan . . . . .
Proposal 3—Non-Binding Advisory Vote on Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal 4—Ratification of the Appointment of BDO USA, P.C. as Our Independent
Registered Public Accountants for 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficial Ownership of Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Proposals for the 2025 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A—Community Healthcare Trust Incorporated 2024 Incentive Plan . . . . . . . . . . . . . . . . .
Appendix B—Reconciliation of Non-GAAP Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Questions and Answers Regarding the 2024 Annual
Meeting of Stockholders
Who is soliciting proxies from the stockholders?
Our Board of Directors is soliciting your proxy. The proxy provides you with the opportunity to vote on the proposals
presented at the annual meeting, whether or not you attend the annual meeting.
What will be voted on at the annual meeting?
Our stockholders will vote on four proposals at the annual meeting:
1.
2.
3.
4.
The election of six directors, who are each to serve a one-year term expiring in 2025;
The approval of the Community Healthcare Trust Incorporated 2024 Incentive Plan (the "2024 Incentive
Plan");
The approval of, on a non-binding advisory basis, a resolution approving the Company's compensation of
its named executive officers; and
The ratification of the appointment of BDO USA, P.C. as our independent registered public accountants for
2024.
Your proxy will also give the proxy holders discretionary authority to vote the shares represented by the proxy on any
matter, other than the above proposals, that is properly presented for action at the annual meeting.
How will we solicit proxies, and who bears the cost of proxy solicitation?
Our directors, officers and employees may solicit proxies by telephone, mail, facsimile, via the Internet or by overnight
delivery service. These individuals do not receive separate compensation for these services. Finally, in accordance with
the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"), we will reimburse brokerage
firms and other persons representing beneficial owners of our common stock for their reasonable expenses in
forwarding solicitation materials to such beneficial owners.
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Who can vote at the annual meeting?
Our Board of Directors has fixed the close of business on Thursday, February 29, 2024, as the record date for our annual
meeting. Only stockholders of record on that date are entitled to receive notice of and vote at the annual meeting. As
of February 29, 2024, our only outstanding class of securities was common stock, $0.01 par value per share. On that
date, we had 450,000,000 shares of common stock authorized, of which 27,691,036 shares were outstanding.
You (if you, rather than your broker, are the record holder of our stock) can vote either in person at the annual meeting
or by proxy, whether or not you attend the annual meeting. If you would like to attend the annual meeting in person
and need directions, please contact William G. Monroe IV by e-mail at investorrelations@chct.reit or by telephone at
615-771-3052. You may vote your shares on the Internet, by phone or, to the extent you request written proxy
materials, by signing, dating and mailing the accompanying proxy card in the envelope provided. Instructions
regarding the three methods of voting by proxy are contained on the proxy card.
How many votes must be present to hold the annual meeting?
A quorum must be present to hold our annual meeting. The presence, in person or by proxy, of a majority of the votes
entitled to be cast at the annual meeting constitutes a quorum. Your shares, once represented for any purpose at the
annual meeting, are deemed present for purposes of determining a quorum for the remainder of the meeting and for
any adjournment, unless a new record date is set for the adjourned meeting. This is true even if you abstain from
voting with respect to any matter brought before the annual meeting. As of February 29, 2024, we had 27,691,036
shares of common stock outstanding; thus, we anticipate that the quorum for our annual meeting will be 13,845,519
shares.
Community Healthcare Trust | 2024 PROXY STATEMENT
1
How many votes does a stockholder have per share?
Our stockholders are entitled to one vote for each share held.
What is the required vote on each proposal?
Pursuant to our Amended and Restated Bylaws (the "Bylaws"), in uncontested elections (which is the case for the
Annual Meeting), the nominees for election to the Board of Directors who receive a majority of all of the votes cast for
the election of directors shall be elected directors. In accordance with our Bylaws, if an incumbent director who is
nominated for election to the Board of Director fails to receive a majority of votes for re-election, the director is
required to tender his or her resignation promptly following the Annual Meeting; in which case, within 90 days
following certification of the stockholder vote, the Environmental, Social, and Governance Committee (the "ESG
Committee") will determine whether to recommend that the Board of Directors accept the director's resignation, and
upon submission of the ESG Committee's recommendation to the Board of Directors, the Board will decide and act
on the matter in its discretion. The ESG Committee and the Board may consider any factors they deem relevant in
deciding whether to recommend or accept a director's resignation. In general, any director who tenders his or her
resignation will not participate in the ESG Committee's recommendation or the Board of Director's action regarding
whether to accept the resignation offer. We will disclose promptly the Board of Director's decision regarding whether
to accept or reject the director's resignation offer and its rationale for such decision in a Current Report on Form 8-K
filed with the Securities and Exchange Commission.
The proposal to approve the 2024 Incentive Plan requires the affirmative vote of a majority of the shares of common
stock cast on the matter.
The affirmative vote of a majority of the shares of common stock cast on the matter is required to approve, on an
advisory basis, the say on pay vote. As an advisory vote, this proposal is not binding upon us. However, the
Compensation Committee of our Board of Directors, which is responsible for designing and administering our
executive compensation program, values the opinions expressed by our stockholders and will consider the outcome
of the vote when making future compensation decisions.
The proposal to ratify our appointment of BDO USA, P.C., or BDO, as our independent registered public accountants
for 2024, is approved by our stockholders if the votes cast favoring the ratification exceed the votes cast opposing the
ratification.
Stockholders do not have the right to cumulate their votes.
How will the proxy be voted, and how are votes counted?
If you vote by proxy (either voting on the Internet, by phone or by properly completing and returning a paper proxy
card that you receive upon requesting written proxy materials), the shares represented by your proxy will be voted at
the annual meeting as you instruct, including any adjournments or postponements of the meeting. If you return a
signed proxy card but no voting instructions are given, the proxy holders will exercise their discretionary authority to
vote the shares represented by the proxy at the annual meeting and any adjournments or postponements as follows:
1.
2.
3.
4.
"FOR" the election of nominees Cathrine Cotman, David Dupuy, Alan Gardner, Claire Gulmi, Robert Hensley,
and Lawrence Van Horn.
"FOR" the approval of the 2024 Incentive Plan.
"FOR" the resolution approving the compensation of the Company's named executive officers.
"FOR" the ratification of the appointment of BDO USA, P.C. as our independent registered public
accountants for 2024.
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Community Healthcare Trust | 2024 PROXY STATEMENT
If you hold your shares in broker's name (sometimes called "street name" or "nominee name"), you must provide voting
instructions to your broker. If you do not provide instructions to your broker, your shares will not be voted in any matter
on which your broker does not have discretionary authority to vote, which generally includes non-routine matters. A
vote that is not cast for this reason is called a "broker non-vote." Broker non-votes will be treated as shares present for
the purpose of determining whether a quorum is present at the annual meeting, but they will not be considered
present for purposes of calculating the vote on a particular matter, nor will they be counted as a vote FOR or AGAINST
a matter or as an abstention on the matter. Under the rules of the New York Stock Exchange ("NYSE"), which is the
stock exchange on which our common stock is listed, the ratification of our appointment of our independent
registered public accountants is considered a routine matter for broker voting purposes, but the election of directors,
the approval of the 2024 Incentive Plan, and the advisory (non-binding) vote on the compensation of our named
executive officers are not considered routine. It is important that you instruct your broker as to how you wish to have
your shares voted, even if you wish to vote as recommended by the Board.
Can a proxy be revoked?
Yes. You can revoke your proxy at any time before it is voted. You revoke your proxy (1) by giving written notice to our
Corporate Secretary before the annual meeting, (2) by granting a subsequent proxy on the Internet or by phone, or
(3) by delivering a signed proxy card dated later than your previous proxy. If you, rather than your broker, are the record
holder of your stock, a proxy can also be revoked by appearing in person and voting at the annual meeting. Written
notice of the revocation of a proxy should be delivered to the following address: William G. Monroe IV, Community
Healthcare Trust Incorporated, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067.
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Community Healthcare Trust | 2024 PROXY STATEMENT
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PROPOSAL 1
Election of Directors
Our Board
of Directors
unanimously
recommends a
vote "FOR" the
election of each
of the six
nominees for
director to the
Board of Directors.
QUALIFICATIONS OF
DIRECTOR NOMINEES
The persons listed below have been nominated by our Board of Directors to serve as
directors for a one-year term expiring at the annual meeting of stockholders occurring
in 2025: Cathrine Cotman, David Dupuy, Alan Gardner, Claire Gulmi, Robert Hensley,
and Lawrence Van Horn. Each nominee has consented to serve on our Board of
Directors. If any nominee were to become unavailable to serve as a director, our Board
of Directors may designate a substitute nominee. In that case, the persons named as
proxies on the accompanying proxy card will vote for the substitute nominee
designated by our Board of Directors. The following lists each director nominated for
election to serve as a director for a one-year term expiring at the annual meeting of
stockholders occurring in 2025, which includes a brief discussion of the experience,
qualifications and skills that led us to conclude that such individual should be a
member of our Board.
We believe that our director nominees consists of a diverse collection of individuals
who possess the integrity, education, work ethic and ability to work with others
necessary to oversee our business effectively and to represent the interests of all
stockholders, including the qualities listed below. We have attempted below to
highlight certain notable experience, qualifications and skills for each director
nominee, rather than provide an exhaustive catalog of each and every qualification
and skill that a director possesses. Each of the nominees set forth below is currently
serving as a director of the Company.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Cathrine
Cotman
Age: 58
Director Since: 2022
Ms. Cotman serves as Senior Vice President, Corporate Real Estate of LPL Financial,
a high growth Fortune 500 Financial Services firm, from 2020 to present.
Prior to joining LPL Financial, she was the Global Alliance Director, Global Portfolio
Solutions at Cresa Global from 2019 to 2020, served as the Senior Managing Director,
Strategy at Newmark Knight Frank from 2017 to 2019, and was the Senior
Managing Director, Global Occupier Services at Cushman and Wakefield from 2012
to 2017. In addition, Ms. Cotman held various other positions of prominence at a
variety of financial services and insurance companies, including Bank of America
Corporation, Capital One Financial Corporation and Prudential Insurance Company,
among others.
Ms. Cotman has received multiple achievement awards and participated in a variety of
community activities, including being the 2021 Speaker for Corenet Events featuring
senior leaders and black leaders, was a 2016-2020 Omni Montessori School Board of
Trustees Officer, was honored as a 2019 Globe St. Women of Influence, selected as a
2016 50 Most Influential Women of Charlotte, and was the winner of the 2014
Cassidy Turley Client Service Award.
Ms. Cotman earned a B.A. degree in Philosophy from Swarthmore College, a
Master’s in Business Administration degree from New York University’s Stern School
of Business and a Master’s degree in the graduate school of design (AMDP
executive education graduate) from Harvard University.
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Ms. Cotman's over 30 years of experience in corporate real estate
strategy, business and financial analytics, and operational
process innovation makes her a valuable resource to our Board
of Directors.
Community Healthcare Trust | 2024 PROXY STATEMENT
5
David Dupuy
Age: 55
Director Since: 2023
Alan Gardner
Age: 70
Director Since: 2015
Mr. Dupuy has served as the Company's Chief Executive Officer since March 6, 2023,
and previously was the Company's Chief Financial Officer since joining the Company
in May 2019.
From 2008 to 2019, Mr. Dupuy served as a Managing Director, Healthcare Investment
Banking Group at SunTrust Robinson Humphrey (now “Truist Securities” or “Truist”).
From 2004 to 2008, Mr. Dupuy served as a Senior Vice President of the Healthcare
Group at Bank of America. From 2000 to 2004, Mr. Dupuy served as a Vice President
and Regional Director for KDA Holdings with responsibility for consulting, financing,
and development of outpatient medical facilities. Previously, Mr. Dupuy served as
Chief Financial Officer and Founding Partner of LIFESIGNS Holdings, Inc., a provider
of diagnostic healthcare services, from 1997 to 2000. Mr. Dupuy began his career in
1991 with Bank of America.
Mr. Dupuy holds a Bachelor of Arts in Business Administration from Furman
University and a Master of Business Administration from the Owen School at
Vanderbilt University.
Mr. Dupuy's corporate finance and investment banking
experience, along with his deep understanding of the Company
and its strategy from his roles as our Chief Executive Officer and
Chief Financial Officer, make him a valuable resource to our
Board of Directors.
Mr. Gardner retired from Wells Fargo in October 2015. Prior to his retirement, he was a
Senior Relationship Manager in Healthcare Corporate Banking. He primarily covered
national healthcare companies with market capitalization exceeding $5 billion,
generally in the pharmaceutical, medical device and healthcare services sectors.
Mr. Gardner has over 26 years of corporate and investment banking experience, with
20 years covering healthcare companies. Prior to joining Wells Fargo (Wachovia) in
March 2004, Mr. Gardner was Head of Healthcare for FleetBoston Financial from
2003 to 2004 and was a Managing Director for Banc of America Securities from 1996
to 2003.
During his career, Mr. Gardner has led a number of significant financing transactions
for leading public healthcare companies. Mr. Gardner previously served as Board
Member and President of Omni Montessori School in Charlotte, North Carolina, as
Charlotte Chapter Chair for the Impact Angel Network ("IAN"). IAN is managed by
RENEW, LLC, an investment advisory and management consulting firm based in Addis
Ababa, Ethiopia and Washington D.C.
Mr. Gardner earned a B.S. and M.S. from Virginia Polytechnic Institute and State
University and an M.B.A. in finance and accounting from the University of Rochester.
Mr. Gardner is our Chairman of the Board, and Mr. Gardner's
corporate banking, capital markets and healthcare industry
experience makes him a valuable resource to our Board of
Directors.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Claire Gulmi
Age: 70
Director Since: 2018
Ms. Gulmi served as Executive Vice President and Chief Financial Officer of Envision
Healthcare, a private company, one of the largest owner/operators of ambulatory
surgery centers in the United States, and a leading provider of hospital based
physician services, until her retirement in October 2017. Ms. Gulmi continued to serve
as an advisor to Envision until September 2018.
Prior to Envision's merger with AmSurg Corp in 2016, Ms. Gulmi served as Executive
Vice President and Chief Financial Officer of AmSurg starting in 1994. She was a
member of the Board of Directors of AmSurg from 2004 until the merger in 2016.
From 2015 to 2017, Ms. Gulmi served on the Board of Directors and as the Audit
Committee Chair of Air Methods Corp, a $1.5 billion public company and the largest
provider of air medical emergency transport services in the U.S. From 2001 to 2015 she
served on the advisory board of the Bank of Nashville. Ms. Gulmi is the past Board
Chair of the YWCA of Nashville and a past Board Member of Nashville Public Radio
and serves on the boards of several privately held companies. She has served as Board
Chair for the Bethlehem Centers of Nashville and has served on the boards of the
Girl Scouts, the American Heart Association and All About Women.
Ms. Gulmi has been named by the Nashville Business Journal as one of its Healthcare
100, was one of the 2007 winners of the Nashville Business Journal's Women of
Influence and in 2011 received the Nashville Business Journal's CFO Lifetime
Achievement Award. Ms. Gulmi has a BBA in Accounting and Finance from Belmont
University.
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Ms. Gulmi's over 30 years of experience in corporate finance,
accounting and healthcare makes her a valuable resource to our
Board of Directors.
Community Healthcare Trust | 2024 PROXY STATEMENT
7
Robert
Hensley
Age: 66
Director Since: 2015
Mr. Hensley has more than 40 years of experience serving public and privately-held
companies across a range of industries, including healthcare, insurance, real estate
and private equity capital funds. Mr. Hensley is also the principal owner of two real
estate and rental property development companies.
Mr. Hensley was an Audit Partner with Ernst & Young from 2002 to 2003. Previously,
he was with Arthur Andersen, where he served as an Audit Partner from 1990 to
2002 and was the Managing Partner of their Nashville office from 1997 to 2002. His
significant experience includes mergers and acquisitions, identification of enterprise
and healthcare industry risks, corporate governance and forensic investigations and
disputes. Since 2006, Mr. Hensley has served as a Senior Advisor to the healthcare
and transaction advisory services groups of Alvarez and Marsal, LLC ("A&M").
Mr. Hensley also serves on the board of directors of several privately held companies.
Mr. Hensley previously served as a Director of Diversicare Healthcare Services, Inc.
from 2005 to 2021, Capella Healthcare from 2008 to 2015, Greenway Medical
Technologies from 2011 to 2013, HealthSpring, Inc. from 2006 to 2012 and Comsys
IT Partners, Inc. and Spheris, Inc. from 2006 to 2010.
Mr. Hensley earned a B.S. in accounting and a Master's of Accountancy from the
University of Tennessee and is a Certified Public Accountant.
Mr. Hensley's financial accounting, healthcare and real estate
industry and transactional experience makes him a valuable
resource to our Board of Directors.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Lawrence
Van Horn
Age: 56
Director Since: 2015
Professor Van Horn is the founder, CEO and a Board member of Preverity Inc.
Preverity is an Insurtech health analytics firm that created the market leading risk
prediction and patient safety platform for medical malpractice in the United States.
Professor Van Horn retired from Vanderbilt University and holds the title of Professor
of Economics and Strategy, Emeritus. Professor Van Horn was previously an
Associate Professor of Economics and Management and the Executive Director of
Health Affairs at the Vanderbilt University Owen Graduate School of Management
("Owen") from 2006 through 2023.
Professor Van Horn is a leading expert and researcher on healthcare management and
economics. His research interests focuses on the role of the consumer in health care
markets and the measurement of healthcare outcomes and productivity. His research
on healthcare organizations, managerial incentives in nonprofit hospitals and the
conduct of managed care firms has appeared in leading publications, and media.
Professor Van Horn consults for national consulting firms, providers, managed care
organizations, and pharmaceutical firms as well as the federal government on topics
of health policy. Professor Van Horn also held faculty appointments in the Vanderbilt
University School of Medicine and Law School. Prior to his tenure at Owen, from 1996
to 2006, Professor Van Horn served as an Associate Professor of Economics and
Management at the William E. Simon Graduate School of Business at the University
of Rochester where he was responsible for their graduate programs in health
administration.
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Professor Van Horn previously served on the Board of Directors of Quorum Health
Corporation until July 2020 and served on the Board of Harrow Inc. as Chairman of
the Compensation and Governance Committees and a member of the Audit
Committee until November 2023. Professor Van Horn currently serves on the boards of
several privately held companies.
Professor Van Horn holds a Ph.D. from the University of Pennsylvania's Wharton
School and a Master's in Business Administration, a Master's in Public Health and a
B.A. from the University of Rochester.
Professor Van Horn's extensive knowledge and research into
healthcare industry economics and governance as well as his
unique experience with healthcare decision makers and
business executives nationwide regarding healthcare policy
make him a valuable resource to our Board of Directors.
Community Healthcare Trust | 2024 PROXY STATEMENT
9
Board Matrix
Required Vote
Directors are elected by
the affirmative vote of a
majority vote of all of the
votes cast for the election
of directors.
The following matrix provides information regarding the current members of our
Board, including certain types of knowledge, skills, experiences and attributes which
our Board believes are relevant to our business, industry or real estate investment trust
("REIT") structure. The matrix does not encompass all of the knowledge, skills,
experience or attributes of such persons, and the absence of a particular knowledge,
skill, experience or attribute with respect to such person does not mean the person
does not possess it or is unable to contribute to the decision-making process in that
area. The type and degree of knowledge, skill and experience listed below may vary.
Each of the persons listed above has been nominated by our Board of Directors to
serve as directors for a one-year term expiring at the annual meeting of stockholders
occurring in 2025. Each nominee has consented to serve on our Board of Directors. If
any nominee were to become unavailable to serve as a director, our Board of Directors
may designate a substitute nominee. In that case, the persons named as proxies on
the accompanying proxy card will vote for the substitute nominee designated by our
Board of Directors.
KNOWLEDGE, SKILLS AND EXPERIENCE
Cotman Dupuy Gardner Gulmi Hensley Van Horn
Public Company Board Experience
Financial
Risk Management
Accounting
Corporate Governance/Ethics
Executive Experience
Operations
Strategic Planning/Oversight
Technology
Real Estate/REIT Industry
Academics/Education
DEMOGRAPHICS
Race/Ethnicity
African American
White/Caucasian
Gender
Male
Female
LGBTQ+
Yes
No
Board Tenure
Years
X
X
X
X
X
X
X
X
X
X
2
X
X
X
X
X
X
X
X
X
X
X
X
X
1
X
X
X
X
X
X
X
X
X
X
X
9
X
X
X
X
X
X
X
X
X
X
X
X
X
5
X
X
X
X
X
X
X
X
X
X
X
X
9
X
X
X
X
X
X
X
X
X
X
X
9
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Community Healthcare Trust | 2024 PROXY STATEMENT
Corporate Governance
BOARD LEADERSHIP STRUCTURE
Our Board of Directors currently consists of the following six directors: Cathrine Cotman, David Dupuy, Alan Gardner,
Claire Gulmi, Robert Hensley, and Lawrence Van Horn, each for a term expiring at the 2024 annual meeting. Our
Board has affirmatively determined that each of Cathrine Cotman, Alan Gardner, Claire Gulmi, Robert Hensley, and
Lawrence Van Horn is an "independent director" as defined under the listing rules of the NYSE, Rule 10A-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Company's Corporate Governance
Guidelines.
The Board considered the relationships between our directors and the Company when determining each such
person's status as an "independent director" under the listing rules of the NYSE, Rule 10A-3 of the Exchange Act and
the Company's Corporate Governance Guidelines, including the relationships listed below under "Certain
Relationships and Related Party Transactions." The Board determined that these relationships did not affect such
person's status as an "independent director." Furthermore, we are not aware of any family relationships between any
director, executive officer or person nominated to become a director or executive officer.
Timothy Wallace served as our Chairman, Chief Executive Officer and President since the formation of our Company in
March 2014. On February 10, 2023, Mr. Wallace took a medical leave of absence from his roles as Chairman of the
Board, Chief Executive Officer and President. During Mr. Wallace's medical leave, our Lead Independent Director, Alan
Gardner, performed the functions of the Chairman. On March 3, 2023, Mr. Wallace passed away, and the Board
appointed Mr. Gardner to serve as Chairman of the Board. On March 6, 2023, the Board appointed Mr. Dupuy as the
Company's Chief Executive Officer on a permanent basis and also appointed Mr. Dupuy to the Board to fill the vacancy
created by the death of Mr. Wallace.
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The Board previously combined the role of Chairman of the Board with the roles of Chief Executive Officer and
President, coupled with a Lead Independent Director position because it believed that such structure further
strengthened the Board's governance structure. Following the passing of Mr. Wallace, the Board decided that
oversight of the Board and attention to the Company’s overall operations would be better served by having a non-
executive chair lead the meetings of the Board. The Board believes that separation of the principal executive officer
and the Board chair position is best for the Company so that Mr. Dupuy can fully focus on his role as principal
executive officer and has the flexibility to execute his overall management responsibilities.
As Chairman of the Board, Mr. Gardner can provide leadership to the Board without perceived conflicts associated
with individual and collective interests of management. Mr. Gardner has been a director since 2015 and was the
second director to join the Board following Mr. Wallace, which we believe adds weight to his independent voice and
selection as Chairman of the Board. We also believe that having Mr. Gardner continue to lead the Board in an
executive session (that is, a meeting of only those directors who are "independent directors" under the listing rules of
the NYSE) to discuss matters outside the presence of management is an advantage for the Company.
In general, our Chairman of the Board is responsible for:
• calling and presiding at executive sessions of the independent directors;
• serving as the focal point of communication to the Board of Directors regarding management plans and
initiatives;
• ensuring that the management adheres to the Board of Directors' oversight role over management operations;
• providing the medium for informal dialogue with and between independent directors, allowing for free and
open communication within that group; and
• serving as the communication conduit for third parties who wish to communicate with our Board of Directors.
Community Healthcare Trust | 2024 PROXY STATEMENT
11
In addition to these specific duties, we expect our Chairman of the Board to familiarize himself with the Company and
the real estate investment trust and healthcare industries in general. He also is expected to keep abreast of
developments in the principles of sound corporate governance. Notwithstanding the foregoing, the Board retains the
authority to combine the positions of Chairman of the Board and Chief Executive Officer if it finds that the Board's
responsibilities can be better fulfilled with such structure.
THE BOARD’S ROLE IN RISK OVERSIGHT
One of the key functions of our Board of Directors is to provide oversight of our risk management process. Our Board
of Directors administers this oversight function directly, with support from its three standing committees—the Audit
Committee, the Compensation Committee, and the Environmental, Social, and Governance Committee ("ESG
Committee")—each of which addresses risks specific to their respective areas of oversight. In particular, our Audit
Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our
management has taken to monitor and control these exposures, including guidelines and policies to govern the
process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance
with legal and regulatory requirements and has oversight of the performance of our internal audit function. Our
Compensation Committee assesses and monitors whether any of our compensation policies and programs has the
potential to encourage excessive risk-taking. Our ESG Committee monitors the effectiveness of our corporate
governance guidelines, including whether they are successful in preventing illegal or improper liability-creating
conduct, and also oversees the Company's operational controls and risks regarding ESG matters.
Each committee meets regularly with management to assist it in identifying all of the risks within such committee's
areas of responsibility and in monitoring and, where necessary, taking appropriate action to mitigate the applicable
risks. At each Board meeting, the committee chairman of each committee that met prior to such Board meeting
provides a report to the full Board on issues related to such committee's risk oversight duties, as applicable. To the
extent that any risks reported to the full Board need to be discussed outside the presence of management, the Board
meets in executive session to discuss these issues.
We believe the Board's approach to fulfilling its risk oversight responsibilities complements its leadership structure.
Our Chairman of the Board reviews whether Board committees are addressing their risk oversight duties in a
comprehensive and timely manner. Our Chief Executive Officer is able to assist these committees in fulfilling their
duties by (1) requiring that our management team provide these committees with all requested reports and other
information as well as with access to our employees and (2) implementing recommendations of the various Board
committees to mitigate risk. At the same time, our Chairman of the Board is able to lead an independent review of the
risk assessments developed by management and reported to the committees.
Our Board held eight meetings during 2023. In 2023, each director attended greater than 75% of all Board and
applicable committee meetings. The members who are "independent directors" met in executive session seven times
during 2023.
We do not have a policy requiring director attendance at our annual stockholder meeting. Messrs. Gardner and Dupuy
attended our 2023 annual stockholder meeting.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has three standing committees: an Audit Committee, a Compensation Committee and an ESG
Committee. The principal functions of each committee are described below. We currently comply, and we intend to
continue to comply, with the listing requirements and other rules and regulations of the NYSE and each of these
committees are comprised exclusively of independent directors. Additionally, our Board of Directors may from time to
time establish certain other committees to facilitate the management of our Company.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Audit Committee
Our Audit Committee consists of Ms. Cotman, Ms. Gulmi, and Mr. Hensley, all of whom are independent directors, with
Mr. Hensley serving as the chairman. Ms. Gulmi and Mr. Hensley each qualify as an "audit committee financial expert"
as that term is defined by the applicable SEC regulations and NYSE corporate governance listing standards. Our Board
of Directors has determined that each of the Audit Committee members is "financially literate" as that term is defined
by the NYSE corporate governance listing standards. We have adopted an Audit Committee Charter, which details the
principal functions of the Audit Committee, including oversight related to:
• our accounting and financial reporting processes;
• the integrity of our consolidated financial statements and financial reporting process;
• our system of disclosure controls and procedures and internal control over financial reporting;
• our compliance with financial, legal and regulatory requirements;
• the evaluation of the qualifications, independence and performance of our independent registered public
accounting firm;
• reviewing the adequacy of our Audit Committee Charter on an annual basis;
• the performance of our internal audit function; and
• our overall financial risk profile.
The Audit Committee is also responsible for engaging an independent registered public accounting firm, reviewing
with the independent registered public accounting firm the plans and results of the audit engagement, approving
professional services provided by the independent registered accounting firm, including all audit and non-audit
services, reviewing the independence of the independent registered public accounting firm, considering the range of
audit and non-audit fees and reviewing the adequacy of our internal accounting controls.
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The Audit Committee met four times in 2023. A copy of the charter of our Audit Committee is available on the
investor relations webpage of our website, http://investors.chct.reit.
Compensation Committee
Our Compensation Committee consists of Ms. Gulmi, Mr. Hensley, and Mr. Van Horn, all of whom are "independent
directors" as defined in NYSE Rule 303A.02, with Ms. Gulmi serving as chairperson. Further, each member of the
Compensation Committee is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange
Act. We have adopted a Compensation Committee Charter, which details the principal functions of the Compensation
Committee, including:
• reviewing and recommending to our Board of Directors on an annual basis the corporate goals and objectives
relevant to our chief executive officer's compensation, evaluating our chief executive officer's performance in light
of such goals and objectives and determining and approving the remuneration of our chief executive officer
based on such evaluation;
• reviewing and recommending to our Board of Directors the compensation, if any, of all of our other executive
officers;
• evaluating our executive compensation policies and plans;
• assisting management in complying with our proxy statement and annual report disclosure requirements;
• administering our incentive plans;
• reviewing and recommending to our Board of Directors policies with respect to incentive compensation and
equity compensation arrangements;
• reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our
compensation policy and strategy in achieving expected benefits to us;
• evaluating and overseeing risks associated with compensation policies and practices;
• reviewing and recommending to our Board of Directors the terms of any employment agreements, severance
arrangements, change in control protections, and any other compensatory arrangements for our executive
officers;
Community Healthcare Trust | 2024 PROXY STATEMENT
13
• reviewing the adequacy of its Compensation Committee Charter on an annual basis;
• producing a report on executive compensation to be included in our annual proxy statement as required;
• reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors; and
• overseeing the administration of our Policy for the Recovery of Erroneously Awarded Compensation (Clawback
Policy).
The Compensation Committee met six times in 2023. A copy of the charter of our Compensation Committee is
available on the investor relations webpage of our website, http://investors.chct.reit.
Environmental, Social, and Governance Committee
Our ESG Committee consists of Ms. Cotman and Messrs. Gardner and Van Horn, all of whom are "independent
directors" as defined in NYSE Rule 303A.02, with Mr. Van Horn serving as chairman. We have adopted an ESG
Committee charter, which details the principal functions of the ESG Committee, including:
• identifying, evaluating and recommending to the full Board of Directors qualified candidates for election as
directors and recommending nominees for election as directors at the annual meeting of stockholders;
• developing and recommending to the Board of Directors corporate governance guidelines and implementing
and monitoring such guidelines;
• reviewing and making recommendations on matters involving the general operation of the Board of Directors,
including Board size and composition, and committee composition and structure;
• evaluating and recommending to the Board of Directors nominees for each committee of the Board of Directors;
• annually facilitating the assessment of the Board of Directors' performance as a whole and of the individual
directors, as required by applicable law, regulations and the NYSE corporate governance listing standards;
• considering nominations by stockholders of candidates for election to our Board of Directors;
• considering and assessing the independence of members of our Board of Directors;
• developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to our
Board of Directors any changes to such principles;
• periodically reviewing our policy statements and overseeing and recommending to our Board of Directors for
approval the Company's policies regarding ESG matters, including the Company's Corporate Environmental
Policy, Human Capital Support & Development Policy, Human Rights Policy, and Environmental/Social/
Governance Guidelines;
• reviewing and recommending to our Board of Directors the Company's overall general strategy and initiatives
regarding ESG matters;
• overseeing and reviewing the Company's operational controls and risks regarding ESG matters, including
ensuring that the employee responsible for leading the Company's environment management system reports
directly to our Chief Executive Officer or Board of Directors, and discussing with our Board of Directors and
management the steps taken to manage risks associated with ESG matters and their impact on the
environment, the community and employees;
• reviewing, assessing, and reporting to our Board of Directors at least annually on the Company's performance and
reporting standards regarding ESG matters, including the Company's internal and external communications and
disclosures;
• reporting to our Board of Directors on current and emerging topics relating to ESG matters that may affect the
business and performance of the Company or are otherwise pertinent to the Company;
• advising our Board of Directors on stockholder proposals and other significant stakeholder concerns relating to
ESG matters; and
• reviewing, at least annually, the adequacy of its ESG Committee Charter.
When evaluating director candidates, the ESG Committee's objective is to craft a Board composed of individuals with
a broad and diverse mix of backgrounds and experiences and possessing, as a whole, all of the skills and expertise
necessary to guide a company like us in the prevailing business environment. The ESG Committee uses the same
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Community Healthcare Trust | 2024 PROXY STATEMENT
criteria to assess all candidates for director, regardless of who proposed the candidate. The ESG Committee considers
whether the candidate possesses the following qualifications and qualities:
• independence for purposes of the NYSE rules and SEC rules and regulations, and a record of honest and ethical
conduct and personal integrity;
• experience in the healthcare, real estate and/or public real estate investment trust industry or in finance,
accounting, legal or other professional disciplines;
• ability to represent the interests of all of our stakeholders; and
• ability to devote time to the Board of Directors and to enhance their knowledge of our industry.
Although the ESG Committee and the Board does not have a formal policy specifying how diversity of background
and personal experience should be applied in identifying or evaluating director candidates, to help ensure that the
Board remains aware of and responsive to the needs and interests of our stockholders, employees and other
stakeholders, the ESG Committee and the Board believes identifying highly qualified individuals from diverse
backgrounds and experiences is important to the success of the business, in addition to promoting better corporate
governance and effective decision-making. When evaluating the current directors and considering the nomination of
new directors, the ESG Committee makes an effort to ensure the composition of the Board reflects a broad diversity of
experience, profession, expertise, skill, education and background, including gender, racial, ethnic, and/or cultural
diversity. The Board and the ESG Committee are committed to ensuring the Board functions effectively and with
appropriate diversity and expertise, including women and minorities. Accordingly, as of the date of this proxy
statement, 33% of our directors are women or minorities.
The ESG Committee met five times in 2023. A copy of the charter of the ESG Committee is available on the investor
relations webpage of our website, http://investors.chct.reit. Our Corporate Governance Guidelines and Code of
Ethics and Business Conduct are also available on the investor relations webpage of our website, http://
investors.chct.reit. If we make any substantive amendment to the Code of Ethics and Business Conduct or grant any
waiver, including any implicit waiver, from a provision of the Code of Ethics and Business Conduct to certain executive
officers, we are obligated to disclose the nature of such amendment or waiver, the name of the person to whom any
waiver was granted, and the date of waiver on our website or in a report on Form 8-K filed with the SEC. Since the
Company's inception, there have been no such waivers. On October 28, 2021, in connection with its periodic review of
the Code of Ethics and Business Conduct, our Board of Directors amended the Code of Ethics and Business Conduct.
The amendments include, among other things, clarification that the Company's chief financial officer shall serve as its
chief compliance officer, the addition of guidelines on anti-bribery, anti-corruption, gifts, entertainment and suppliers,
updated committee names and updated public disclosure guidelines for internal monitoring, whistleblower or
reporting systems. Further, in 2022 and going forward, the ESG Committee proposed, and the Board adopted, a
requirement that the approval of our majority of stockholders is required in order for the Company to materially
modify our capital structure.
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In addition, we have adopted a number of ESG policies including (i) ESG Guidelines to guide our sustainability efforts
and monitor our performance; (ii) a Corporate Environmental Policy, which sets forth our commitment to
implementing environmentally sustainable best practices for our own operations, and to assist our tenants in their
efforts to address their environmental concerns; (iii) a Human Capital Support and Development Policy, which sets
forth our commitment to invest significant time and resources in supporting and developing our employees; and (iv) a
Human Rights Policy, which sets forth our commitment to the protection and advancement of human rights and to
ensuring that all members of our team function with integrity. These policies are available on the investor relations
webpage of our website, http://investors.chct.reit.
We have adopted an Environmental Management System (“EMS”) as the framework to drive value and results through
improved ESG performance. The EMS, among other things, provides specific targets for reduction in GHG emissions,
water consumption, and utility usage along with various policies that support sustainable building construction,
management, and waste. Currently, we are tracking these data for that portion of our portfolio in which we have
operational control and disclosing through GRESB. Our policy is in general alignment with UN Sustainability Goals and
with the International Organization for Standardization (“ISO”) 14001 and 50001 standards that follows the “Plan-Do-
Check-Act” model. In addition, our buildings’ energy information is monitored through the ENERGY STAR Portfolio
Community Healthcare Trust | 2024 PROXY STATEMENT
15
Manager, where energy and water usage data is tracked on a monthly basis. We intend to report 2023 data in a
forthcoming corporate sustainability report that will provide details on our progress related to our ESG goals.
The current members of the Board propose nominees for election to the Board. In addition, the ESG Committee will
also consider candidates that stockholders and others recommend. Stockholder recommendations should be
addressed to: William G. Monroe IV, Corporate Secretary, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee
37067. Your recommendations must be submitted to us no earlier than October 15, 2024, nor later than 5:00 p.m.,
Eastern Time, on November 14, 2024, for consideration as a possible nominee for election to the Board at our 2025
annual meeting.
On November 2, 2020, the Board adopted certain amendments to the Company's Bylaws which altered the
procedures by which a stockholder may nominate persons to the Board of Directors. The Board adopted an
amendment to Article II, Section 12 of its Bylaws to allow proxy access for director nominations for a stockholder, or a
group of no more than twenty stockholders, that holds at least 3% of the Company's stock, and have held such stock
for at least three years.
The Board has not adopted a formal procedure that you must follow to send communications to it, but it does have
informal procedures, described below, which it believes adequately facilitate stockholder and other interested party
communications with the Board. Stockholders and other interested parties can send communications to the Board by
contacting William G. Monroe IV, our Corporate Secretary, in one of the following ways:
• By writing to Community Healthcare Trust Incorporated,
3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee, 37067
Attention: Corporate Secretary;
• By e-mail to investorrelations@chct.reit; or
• By phone at 615-771-3052.
If you request information or ask questions that can be more efficiently addressed by management, Mr. Monroe will
respond to your questions instead of the Board. He will forward to the Audit Committee any communication
concerning employee fraud or accounting matters and will forward to the full Board any communication relating to
corporate governance or those requiring action by the Board of Directors. A stockholder or interested party may
communicate directly with Mr. Gardner, our Chairman of the Board, by sending a confidential letter addressed to his
attention at 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee, 37067.
DIRECTOR COMPENSATION
The Compensation Committee recommends the compensation for our non-employee directors; our full Board
approves or modifies the recommendation. Any modifications are implemented after the annual meeting. Directors
who are also employees, currently only Mr. Dupuy, receive no additional compensation for their service as a director,
but are reimbursed for any direct board related expenses. Annual compensation of non-employee directors may be a
combination of cash and restricted stock at levels set by the Compensation Committee.
The Company expects to meet every three years with a compensation consultant to discuss director compensation
trends. The consultant may also attend Compensation Committee meetings periodically. The Compensation
Committee retained Ferguson Partners Consulting ("FPC") as its independent compensation consultant in 2023 to
advise it regarding market trends and practices in director compensation and with respect to specific compensation
decisions. FPC provided a report to the Compensation Committee in 2023 and discussed the report with the chair of
the committee. FPC received a fee of $20,000 for its compensation consulting services provided to the Compensation
Committee in 2023 with respect to director compensation.
Cash Compensation
Each non-employee director receives an annual retainer, and chairpersons of our board committees and the
Chairman of the Board receive additional annual retainers. The annual retainers are payable after each annual
meeting of our stockholders. Director compensation may be adjusted by the Compensation Committee based on an
evaluation of director compensation at peer companies. In March 2024, the Compensation Committee approved an
increase in the annual cash retainer from $50,000 to $65,000 per year, beginning with the retainer earned at the 2024
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Community Healthcare Trust | 2024 PROXY STATEMENT
annual meeting. Additionally, the chairs of the Audit Committee, the Compensation Committee and the ESG
Committee and the Board Chairman receive additional annual retainers. These annual cash retainers were unchanged
from the prior amounts. The Audit Committee Chair remains at $20,000, the Compensation Committee Chair and ESG
Committee Chair each remained at $17,500, and the Board Chairman annual cash retainer remained the same as set
in 2023 at $100,000. Mr. Gardner, who was previously our lead independent director, was appointed as Chairman of
the Board following Mr. Wallace's death in 2023.
Each year, non-employee directors may elect to acquire shares of restricted stock with all or a portion of each of their
retainers. These shares are issued 10 business days following the date of our annual meeting of stockholders. The
number of shares of restricted stock to be acquired is determined by dividing the total amount of annual retainer the
director elected to use to acquire shares by the average price of shares of common stock for the immediately
preceding 10 trading days. Pursuant to the Company's Second Amended and Restated Alignment of Interest Program
(the "Second Amended and Restated Alignment of Interest Program"), each director who makes an election to
acquire shares of restricted stock with all or a portion of their retainers will be awarded additional shares, at no
additional cost to the director, according to the following multiples:
DURATION OF RESTRICTION PERIOD
1 year
2 years
3 years
Restriction
Multiple
0.2x
0.4x
0.6x
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Accordingly, for example, if a non-employee director elects to acquire shares of restricted stock in lieu of cash
compensation that is equivalent in value to 1,000 shares of common stock and the director elected a three-year
restriction period for such restricted stock, the non-employee director would receive the 1,000 shares of restricted
stock plus an award of 600 shares of restricted common stock for electing to subject his or her restricted stock to a
three-year restriction period, resulting in a total receipt of 1,600 shares of restricted stock, all of which would be
subject to a three-year cliff vesting schedule whereby no shares vest until the third anniversary of the date of grant, at
which time 100% of the shares of restricted stock will vest.
The restriction period subjects the shares purchased by the director and the additional shares awarded by the
Company to the risk of forfeiture in the event that a director voluntarily resigns or is removed by the stockholders prior
to the vesting of these shares. All unvested shares will be forfeited if such non-employee director voluntarily resigns or
is removed by the stockholders for any reason prior to vesting. During the restriction periods described above, the
restricted shares may not be sold, assigned, pledged, or otherwise transferred. Subject to the risk of forfeiture and
transfer restrictions, non-employee directors have all rights as stockholders with respect to restricted shares, including
the right to vote and receive dividends or other distributions on such shares.
Stock Awards
Each non-employee director is also awarded an annual grant of shares of restricted stock. Our goal is to have a
minimum of 60% to 75% of the aggregate total compensation for our non-employee directors paid in the form of
restricted stock having a restriction period of up to three years. Directors are not entitled to receive additional shares
through a restriction multiple for these awards.
In March 2024, the Compensation Committee approved an increase in the annual equity award, whereby, beginning
with the 2024 annual meeting, each non-employee director will receive an annual equity award of restricted stock
with an aggregate market value of $110,000 at the conclusion of each annual stockholders' meeting, an increase from
$100,000 approved in 2020. These shares are subject to a three-year cliff vesting schedule whereby no shares vest until
the third anniversary of the date of grant, at which time 100% of the shares of restricted stock will vest. During the
restriction period described above, the restricted shares may not be sold, assigned, pledged, or otherwise transferred.
Additionally, such non-employee director must forfeit such equity award if the non-employee director voluntarily
resigns or is removed for any reason during the three-year restriction period. Subject to the risk of forfeiture and
transfer restrictions, non-employee directors have all rights as stockholders with respect to restricted shares, including
the right to vote and receive dividends or other distributions on such shares.
Community Healthcare Trust | 2024 PROXY STATEMENT
17
2023 DIRECTOR COMPENSATION
The following table sets forth compensation paid during 2023 to each of our non-employee directors:
NAME(1)
Alan Gardner
Claire Gulmi
Robert Hensley
Lawrence Van Horn
Cathrine Cotman
Fees Earned or Paid
Fees Paid in
Cash
($)
Fees Paid in
Stock(2)
($)
Stock Awards(3)
($)
All Other
Compensation
($)
—
—
162,500
183,544
67,500
134,208
20,000
50,000
125,322
—
—
65,000
132,934
50,000
125,322
—
—
—
—
—
Total
($)
346,044
201,708
195,322
197,934
175,322
(1) Mr. Wallace, our former CEO and Chairman, and Mr. Dupuy were also directors during 2023 and were also full-time employees
during the year whose compensation is discussed below under the section titled "Summary Compensation Table." Mr. Wallace
and Mr. Dupuy received no additional compensation for service as directors.
(2) This column represents non-employee director annual retainer and additional annual retainer amounts, approximately 95% of
which was paid in shares of our restricted common stock in lieu of cash. All of the shares are subject to a three-year cliff vesting
schedule whereby no shares vest until the third anniversary of the date of grant, at which time 100% of the shares of restricted
stock will vest, subject to the director's continuing service as a director of the Company.
(3) Represents the grant date fair value computed in accordance with FASB ASC Topic 718 of awards of restricted stock to the non-
employee directors under the 2014 Incentive Plan, or the 2023 Director Awards. The dollar value of the 2023 Director Awards
was based upon the grant date price of our common stock, which was $36.34 on May 4, 2023. This column also includes the
amount of the grant date value of the shares received in accordance with restriction multiples with respect to the deferral of
director retainer amounts based on the price of our common stock of $33.40 on the determination date, May 19, 2023. Further, it
includes the amount of the grant date value of the shares received by Mr. Gardner in accordance with restriction multiples with
respect to the deferral of an additional director retainer amount upon his appointment as Chairman of the Board during 2023
based on the price of our common stock of $36.27 on the determination date, April 21, 2023, All of the shares are subject to a
three-year cliff vesting schedule whereby no shares vest until the third anniversary of the date of grant, at which time 100% of
the shares of restricted stock will vest, subject to the director's continuing service as a director of the Company.
We also reimburse our directors for expenses they incur in connection with their service on our Board, such as director
education, travel and lodging expenses.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the material elements of the Company's named executive
officer compensation program and analyzes the compensation decisions made for our executive officers included in
the Summary Compensation Table beginning on page 41 (the "named executive officers").
This Compensation Discussion & Analysis also describes the significant changes we made in January 2024 to our
named executive officer compensation program based on stockholder feedback and guidance from our independent
compensation consultant, Ferguson Partners Consulting ("FPC"). While these changes are not reflected in our
discussions of 2023 performance and 2023 compensation, we have included a separate section titled Summary of
2024 Changes to the Compensation Program to introduce our new named executive officer compensation program.
SUMMARY OF 2024 CHANGES TO THE COMPENSATION PROGRAM
At the Company’s 2023 annual meeting of stockholders, approximately 76% of votes were cast FOR the advisory vote
to approve the Company’s named executive officer compensation. While the vote provided continued support of the
Company’s named executive officer compensation program, this level of support was lower than our prior three years’
advisory votes, which ranged from 95% to 98%, and lower than what the Board of Directors and management believe
is satisfactory.
As a result, during the summer of 2023, the Compensation Committee engaged FPC to assist it in reviewing and
revising its named executive officer compensation program. Also, during the summer and into the fall of 2023, we
met with several large stockholders and solicited their feedback on our compensation program.
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After carefully considering stockholder feedback, FPC’s recommendations, as well as the analysis of proxy advisory
firms, the Compensation Committee adopted a new named executive officer compensation program for 2024, which
it believes is both responsive to the above parties and designed in the best interests of the Company and its
stockholders.
FEEDBACK WE RECEIVED
CHANGES WE MADE
Named executive officers’
election to acquire restricted
stock in lieu of cash salary and
cash annual incentive rewards
provides a strong alignment with
stockholders and investors
recognize and appreciate the 8-
year cliff vesting as a significant
retention tool that far surpasses
market practices, but when
including the amount of
restricted stock awarded, total
compensation increases
significantly
Reduces the maximum amount of cash compensation eligible to
acquire restricted stock from 100% to 50% and also reduces the
available eligible vesting period(s), and therefore restriction multiple(s),
based on the named executive officer’s retirement eligibility date (e.g.
if retirement eligibility is in two years, named executive officer may not
select vesting schedule of five-years (0.5x restriction multiple) or eight-
years (1.0x restriction multiple))
Date Effective: January 1, 2024 for salary elections; July 1, 2024 for
annual incentive reward elections to align with the start of the next
annual incentive performance period which is measured from July 1 to
the following June 30 each year
è
Community Healthcare Trust | 2024 PROXY STATEMENT
19
FEEDBACK WE RECEIVED
CHANGES WE MADE
Annual incentive rewards should
be based on more specific
company metrics with
appropriate weightings and
goals though still allowing a
portion to distinguish individual
performance that may not be
entirely quantifiable
Increased the percentage of the annual incentive metrics tied to
objective, company metrics to 70% (up from 50%)
The annual incentive reward for each named executive officer is based
(i) 70% on three specific company performance metrics set by the
Compensation Committee each year with payout amounts subject to
threshold, target, and maximum levels, and (ii) 30% on individual
performance (a decrease from 50% for individual performance
previously)
è
Long term equity incentive
awards are based on backward-
looking performance periods
instead of the market standard of
forward-looking performance
periods; investors support
continued use of relative TSR as a
primary metric to align with
shareholders
Date Effective: July 1, 2024 to align with the start of the next annual
incentive performance period which is measured from July 1 to the
following June 30 each year
New, forward-looking long-term incentive program with three-year
goals
è
The three-year forward-looking awards for each named executive
officer are based (i) 65% on performance-based restricted stock units
(“RSUs”) set by the Compensation Committee each year with payout
amounts subject to threshold, target, and maximum levels, and (ii)
35% on time-based RSUs
Date Effective: January 1, 2024 with the first forward-looking
performance period ending June 30, 2026
A detailed review of the new named executive officer compensation program is provided at the end of the
compensation discussion and analysis in a separate section titled New 2024 Named Executive Officer Compensation
Program.
2023 NAMED EXECUTIVE OFFICERS
Our named executive officers for 2023 were:
Timothy Wallace | Former Chief Executive Officer and President(1)
David Dupuy | Chief Executive Officer and President(2)
William G. Monroe IV | Chief Financial Officer and Executive Vice President(3)
Leigh Ann Stach | Chief Accounting Officer and Executive Vice President
Timothy L. Meyer | Executive Vice President-Asset Management
(1) Mr. Wallace served as Chief Executive Officer and President until taking a medical leave of absence on February 10, 2023. Mr.
Wallace passed away on March 3, 2023.
(2) Mr. Dupuy was appointed to serve as Chief Executive Officer on March 6, 2023 upon the passing of Mr. Wallace. Mr. Dupuy also
served as our Chief Financial Officer until June 1, 2023.
(3) Mr. Monroe joined the Company on June 1, 2023 to serve as Chief Financial Officer and Executive Vice President.
Because only five individuals served as our executive officers (as defined in Exchange Act Rule 3b-7) at any time during
2023, we have only five named executive officers for 2023.
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Community Healthcare Trust | 2024 PROXY STATEMENT
2023 HIGHLIGHTS
2023 was a difficult time of transition for the Company due to the sudden passing of Tim
Wallace, our Founder, Chairman, and CEO. On March 6, 2023, David H. Dupuy assumed
the role of President and CEO, and William G. Monroe IV joined the Company on June 1,
2023 to serve as Chief Financial Officer. Tim Wallace's passing resulted in the accelerated
vesting of his shares causing a one-time, non-cash charge on the Company's financial
statements and FFO as detailed and reconciled in Appendix B. Despite these transition
challenges, our named executive officers continued to execute the business plan during
2023 and built upon our operating and financial performance results achieved since our
initial public offering in May 2015.
Our operating and financial performance highlights in 2023 included:
• Acquiring nineteen (19) real estate properties and one (1) land parcel for an aggregate purchase price of
approximately $97.8 million with estimated yields ranging from 9.10% to 10.58%. These properties were
approximately 99.2% leased with lease expirations through 2038;
• Surpassing $1 billion in real estate investments;
• Growing total revenues to $112.8 million in 2023, a 15.5% increase over the prior year;
• Achieving net income of $7.7 million, or $0.20 per diluted share and FFO of $1.86 per diluted share, both of which
include the acceleration of stock-based compensation totaling $11.8 million due to the passing of our former
CEO, reducing net income and FFO per diluted share by $0.46 for 2023. We also achieved AFFO per diluted share
of $2.49 in 2023;
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• Achieving net operating income ("NOI") of $92.1 million in 2023;
• Paying dividends in 2023 totaling $1.805 per share, a 2.3% increase from the prior year and 34 consecutive
quarters of dividend growth since our IPO, with a payout ratio of 72%; and
• Maintaining low leverage levels with a debt-to-total capitalization ratio (debt plus stockholders' equity plus
accumulated depreciation) of approximately 36.1%.
15.5%
Revenue growth
year-over-year
AFFO
$2.49
per diluted share
Surpassing
$1 Billion
in real estate investments
34
consecutive quarters of
dividend growth
Maintained relatively low
72% dividend
payout ratio to AFFO
Acquiring nineteen (19)
real estate properties
and one land parcel for
an aggregate purchase
price of approximately
$97.8 million with
estimate yields ranging
from 9.10% to 10.58%
Maintaining low leverage
levels with a debt-to-
total capitalization ratio
(debt plus stockholders’
equity plus accumulated
depreciation) of
approximately 36.1%.
Reconciliations of FFO, AFFO, and NOI are provided in Appendix B beginning on page 83 of this proxy statement.
COMPREHENSIVE COMPENSATION POLICY
We believe that the compensation of our executive officers aligns their interests with those of the stockholders in a
way that encourages prudent decision-making, links compensation to our overall performance, provides a competitive
level of total compensation necessary to attract and retain talented and experienced executive officers and motivates
the executive officers to contribute to our success.
Community Healthcare Trust | 2024 PROXY STATEMENT
21
All of our executive officers are eligible to receive performance-based compensation under the 2014 Incentive Plan as
amended by Amendment No. 1 to the 2014 Incentive Plan, Amendment No. 2 to the 2014 Incentive Plan,
Amendment No. 3 to the 2014 Incentive Plan, and Amendment No. 4 to the 2014 Incentive Plan (as so amended, our
2014 Incentive Plan).
We use a combination of allowing the acquisition of shares of restricted stock in connection with grants of restricted
stock as the primary means of delivering long-term compensation to our executive officers. Shares of restricted stock
are forfeitable until the lapse of the applicable restrictions. We believe that restricted stock with long vesting periods
align the interests of executive officers and stockholders and provide strong incentives to our executive officers to
achieve long-term growth in our business, grow the value of our common stock and maintain or increase our
dividends.
The executive officers personally benefit from these efforts through their restricted stock, which pay dividends at the
same rate as unrestricted stock and increase in value as the value of unrestricted stock increases. However, the
Company's executive officers essentially have to earn this equity compensation twice: the first time through their
efforts to meet the initial performance criteria necessary to receive the restricted stock; and the second time by
continued service and increasing share value through the at-risk vesting period.
Substantially all of our executive officers' compensation is tied to the value of our common stock since the officers
have elected to receive restricted stock in lieu of cash compensation. Therefore, if we have superior long-term
operating performance, our executive officers, through their restricted stock, will eventually receive more value, due to
increases in the price of our common stock, than if they had been paid in cash. Conversely, if we have inferior long-
term operating performance, our executive officers through their restricted stock will eventually receive less value, due
to decreases in the price of our common stock, than if they had been paid in cash.
Our Compensation Committee determines the restrictions for each award granted pursuant to the 2014 Incentive
Plan. Restrictions on the restricted stock may include time-based restrictions, the achievement of specific
performance goals, or the occurrence of a specific event. Vesting of restricted stock will generally be subject to cliff
vesting periods ranging from three to eight years and will be conditioned upon the participant's continued
employment, among other restrictions that may apply.
Generally, if the performance goals are not achieved or the time-based restrictions do not lapse within the time period
provided in the award agreement, the participant will forfeit his or her unvested restricted stock.
COMPENSATION METHODOLOGY
Compensation Committee's Governance
The Board established the Compensation Committee to carry out the Board's responsibilities to administer our
compensation programs. The Compensation Committee has the final decision-making authority for the
compensation of our executive officers. The Compensation Committee operates under a written charter adopted by
the Compensation Committee and approved by the Board. The charter is available in the investor relations section of
our website (http://investors.chct.reit).
Our Compensation Committee has independent authority to engage outside consultants and obtain input from
external advisers as well as our management team or other employees.
The Compensation Committee may retain any independent counsel, experts or advisors that it believes to be
desirable and appropriate. The Compensation Committee may also use the services of the Company's regular legal
counsel or other advisors to the Company. The Compensation Committee undertakes an independent assessment
prior to retaining or otherwise selecting any independent counsel, compensation consultant, search firm, expert or
other advisor that will provide advice to it, taking such factors into account and as otherwise may be required by the
NYSE from time to time. On at least an annual basis, the Compensation Committee evaluates whether any work
performed by any compensation consultant raised any conflict of interest.
On April 14, 2023, Institutional Shareholder Services (“ISS”) issued a report recommending that our shareholders vote
against the non-binding advisory vote on executive compensation (also known as “say-on-pay”). Although our
shareholders voted to approve executive compensation, the Compensation Committee retained Ferguson Partners
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Community Healthcare Trust | 2024 PROXY STATEMENT
Consulting ("FPC") as its independent compensation consultant in 2023 to advise it regarding market trends and
practices in executive compensation, as well as assist with evaluating changes to the executive compensation plan
design. FPC met with the chair of the Compensation Committee in 2023, during and in which it provided a review of
recent trends and developments in executive compensation practices within the Company's industry and in general.
Based on the work performed by FPC and discussions with our shareholders, the Compensation Committee made
changes to the executive compensation plans for 2024. A summary of these changes are included on page 33 under
the heading of “New 2024 Named Executive Officer Compensation Program." Based on its expanded scope of
services, FPC received a fee of $42,500 for its compensation consulting services provided to the Compensation
Committee in 2023 with respect to annual and long-term executive compensation plan design.
Our Chief Executive Officer may attend Compensation Committee meetings (except for executive sessions where his
compensation is discussed) as requested by the Compensation Committee. No executive officer is in attendance
when his or her compensation is considered. Our Chief Executive Officer may provide recommendations with respect
to compensation for the executive officers other than himself. The Compensation Committee considers these
recommendations, but may approve, reject or adjust them as it deems appropriate.
Compensation Risk Assessment
The Compensation Committee believes its compensation policies and practices do not promote excessive risk-taking
and are not likely to have a material adverse effect on the Company. In particular, the Compensation Committee
believes that the following factors mitigate excessive risk-taking by the named executive officers:
• The use of restricted stock, with long vesting periods during which the stock cannot be sold, margined, pledged
or otherwise hypothecated, provides an incentive to the named executive officers to make decisions that
contribute to long-term growth of the Company, the stability of Net Operating Income ("NOI"), and the delivery of
dividends to stockholders.
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• The maximum potential cash and stock incentive payments are designed at levels such that total compensation
would remain comparable within the peer group.
• The Compensation Committee retains broad discretionary authority to adjust annual awards and payments,
which further mitigates risks associated with the Company's compensation plans and policies.
Peer Group
For 2023, the Compensation Committee, based on FPC's recommendation, used the companies listed below as the
peer group against which to measure the Company's relative three-year and five-year Total Shareholder Return ("TSR")
performance. The peer group is selected each year in accordance with the Amended and Restated Executive Officer
Incentive Program. The Amended and Restated Executive Officer Incentive Program provides a mechanism for
determining the peer group, which the Compensation Committee believes provides for the most closely comparable
companies with respect to market capitalization and appropriate pay levels. In determining our peer group, all
publicly-traded equity REITs are sorted by market capitalization. Additional criteria used can include industry
segment, asset base, externally/internally managed and years of operating history. The Compensation Committee,
based on FPC's recommendations, makes discretionary adjustments to include or exclude companies in the peer
group to capture the Company's closest competitors and to adjust for events such as mergers that might occur during
the period. The following companies comprised the peer group for 2023:
BRT Apartments Corp.
CareTrust REIT, Inc.
City Office REIT, Inc.
CTO Realty Growth, Inc.
National Health Investors, Inc.
NETSTREIT Corp.
One Liberty Properties, Inc.
Orion Office REIT, Inc.
Easterly Government Properties, Inc.
Plymouth Industrial REIT, Inc.
LTC Properties, Inc.
UMH Properties, Inc.
The Compensation Committee determines the peer group each year and compares the compensation of the peer
group for the year preceding the applicable year.
Community Healthcare Trust | 2024 PROXY STATEMENT
23
MATERIAL COMPONENTS OF COMPENSATION
Elements of Pay
In 2023, the Company's compensation program for its named executive officers consisted of the following key
elements:
• Annual base salaries;
• Elective acquisition of restricted shares with corresponding restricted share grants, allowing named executive
officers to increase their ownership portion in the Company;
• Annual performance-based awards of cash, restricted stock, or a combination of both;
• Long-term equity incentive awards of restricted stock; and
• Perquisites and retirement benefits.
ANNUAL BASE SALARY
Each of our named executive officers has an employment agreement that establishes his or her base salary.
Adjustments to base salary are determined by the Compensation Committee and are based upon a review of a variety
of factors, including:
• individual and Company performance, measured against quantitative and qualitative goals, such as growth, asset
quality and other matters;
• duties and responsibilities, as well as the named executive officer's experience;
• the types and amount of each element of compensation to be paid to the named executive officer;
• salary levels of persons holding similar positions at companies included in our peer group; and
• annual inflation rate in the United States.
The base salary of the Company's named executive officers for 2023, before any elective deferral of cash for restricted
stock, was as follows:
NAMED EXECUTIVE OFFICER
Timothy G. Wallace(1)
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
2023 Base Salary
($)
863,295
647,250
480,000
446,214
339,579
(1) Mr. Wallace was our former Chief Executive Officer and President until his passing on March 3, 2023.
Pursuant to the Second Amended and Restated Alignment of Interest Program described below, executive officers
may elect to utilize any cash compensation they receive to acquire shares of restricted stock. In the event that an
executive officer elects to acquire shares of restricted stock, rather than cash compensation, the officer will be
awarded shares of restricted stock pursuant to the Second Amended and Restated Alignment of Interest Program,
subject to a three-, five-, or eight- year cliff-vesting schedule, depending on the officer's election. Each executive officer
who makes this election will be awarded the additional restricted common stock award, subject to the restrictions, at
no additional cost to the officer, according to the multiple-based formula set forth on page 26 of this proxy statement.
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Community Healthcare Trust | 2024 PROXY STATEMENT
2014 Incentive Plan
Awards may be made in the form of restricted stock or cash under our 2014 Incentive Plan. The purposes of the 2014
Incentive Plan are to attract and retain qualified persons upon whom, in large measure, our sustained progress,
growth and profitability depend; to motivate the participants to achieve long-term Company goals; and to more
closely align the participants' interests with those of our other stockholders by providing them with a proprietary
interest in our growth and performance.
Our executive officers, non-executive officers, employees, consultants and non-employee directors may be eligible to
participate in the 2014 Incentive Plan as determined by the Compensation Committee. As of February 29, 2024, the
number of shares of our common stock available for issuance under the 2014 Incentive Plan is 345,994. The 2014
Incentive Plan and the remaining shares available for issuance under the 2014 Incentive Plan will expire on March 31,
2024.
The 2014 Incentive Plan is administered by our Compensation Committee, which interprets the 2014 Incentive Plan
and has broad discretion to select the eligible persons to whom awards will be granted, as well as the type, size and
terms and conditions of each award, including the amount of cash or number of shares subject to awards and the
expiration date of, and the vesting schedule or other restrictions (including, without limitation, restrictive covenants)
applicable to, awards. However, during a calendar year, no participant may receive awards intended to comply with
the performance-based compensation requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), which exceed 150,000 shares of common stock.
Unless the 2014 Incentive Plan is terminated earlier by our Board of Directors, the 2014 Incentive Plan will
automatically terminate on March 31, 2024. Awards granted before the termination of the 2014 Incentive Plan may
extend beyond that date in accordance with their terms.
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The two distinct programs applicable to executive officers under the 2014 Incentive Plan are the Second Amended
and Restated Alignment of Interest Program and the Second Amended and Restated Executive Officer Incentive
Program. In addition, we believe it is in the best interests of our stockholders to encourage all executive officers to
increase their equity position in the Company to promote share ownership and further align employee and
stockholder interests and have therefore adopted stock ownership guidelines with respect to our executive officers
and directors.
Second Amended and Restated Alignment of Interest Program
The Company's Second Amended and Restated Alignment of Interest Program, under the 2014 Incentive Plan, is
designed to provide the Company's executive officers with an incentive to remain with the Company and to
incentivize long-term growth and profitability. The original Alignment of Interest Program was amended in November
2016 by the Company's Board of Directors to, among other items, reserve 500,000 shares of the Company's common
stock to be acquired by employees and directors pursuant to elections to acquire restricted stock with their
compensation. On May 5, 2022, the Company's Board of Directors adopted the Second Amended and Restated
Alignment of Interest Program to reserve an additional 500,000 shares of the Company's common stock (for an
aggregate of 1,000,000 shares of the Company's common stock) to be acquired by employees and directors pursuant
to elections to acquire restricted stock with their compensation.
Pursuant to the Second Amended and Restated Alignment of Interest Program, executive officers may elect to
acquire restricted stock in lieu of up to 100% of any compensation otherwise payable in cash under their employment
agreements. The executive officer must elect his or her participation level and the applicable vesting period for the
upcoming year no later than December 31 of the then-current year. The number of shares of restricted stock to be
acquired will be determined as of January 15 of the year following the election or, if such date is not a trading day, on
the trading day immediately before January 15 by dividing the total of the named executive officer's elected deferred
salary, cash bonus or other compensation by the average price of our common stock for the 10 trading days
immediately preceding the determination date. If the dollar amount of any reduced salary, cash bonus or other
compensation has not been determined by January 15, then the determination date will be the 10th business day
following the date on which the amount of such cash compensation is fixed and determined. Payments of restricted
stock in lieu of compensation otherwise payable in cash will be made immediately thereafter.
Community Healthcare Trust | 2024 PROXY STATEMENT
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To the extent an executive officer elects to acquire stock in lieu of cash compensation, the executive officer is entitled
to receive an award of restricted stock pursuant to the Second Amended and Restated Alignment of Interest Program,
subject to a three, five or eight-year cliff vesting schedule, depending on each executive officer's election. Each
executive officer who makes this election is awarded the stock award at no cost to the executive officer, according to
the following multiple-based formula:
DURATION OF RESTRICTION PERIOD
Restriction Multiple
3 years
5 years
8 years
0.3x
0.5x
1.0x
Accordingly, for example, if an executive officer elects to acquire shares of restricted stock in lieu of cash
compensation that is equivalent in value to 1,000 shares of common stock and the executive officer elected an eight-
year restriction period for such restricted stock, the executive officer would receive the 1,000 shares of restricted stock
plus an award of 1,000 shares of restricted stock for electing to subject his or her restricted stock to an eight-year
restriction period, resulting in a total receipt of 2,000 shares of restricted stock, all of which would be subject to an
eight-year cliff vesting schedule whereby no shares vest until the eighth anniversary of the date of grant, at which time
100% of the shares of restricted stock will vest.
The restriction period subjects the shares acquired by the executive officer and the additional shares awarded by the
Company to the risk of forfeiture in the event that the executive officer voluntarily terminates employment or is
terminated for cause from employment with the Company, as those terms are described below, prior to the vesting of
the shares. All unvested shares will be forfeited if such executive officer voluntarily terminates employment or is
terminated for cause prior to vesting. During the restriction periods described above, the restricted shares may not be
sold, assigned, pledged or otherwise transferred. Subject to the risk of forfeiture and transfer restrictions, executive
officers have all rights as stockholders with respect to restricted shares, including the right to vote and receive
dividends or other distributions on such shares.
Second Amended and Restated Executive Officer Incentive Program
We also have a Second Amended and Restated Executive Officer Incentive Program under the 2014 Incentive Plan
pursuant to which our executive officers may earn performance-based awards in the form of cash and/or restricted
stock. Any awards under the Second Amended and Restated Executive Officer Incentive Program and its
interpretation and operation are subject to the discretion of the Compensation Committee.
The Second Amended and Restated Executive Officer Incentive Program is designed to directly link compensation to
performance. The Company believes that the combination of operating metrics and shareholder returns provides the
best incentive structure for the growth of long-term shareholder value.
Through the Second Amended and Restated Executive Officer Incentive Program, our named executive officers are
rewarded for attaining targeted individual performance, targeted company performance and relative TSR
performance. For 2023, excluding Mr. Wallace who passed away in March 2023, approximately 79.0% of the aggregate
total compensation for our named executive officers was paid in the form of performance-based compensation, all of
which was in restricted stock with cliff vesting periods of eight years.
The Compensation Committee believes that this further demonstrates alignment of the interests of our named
executive officers with that of the Company's shareholders.
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Community Healthcare Trust | 2024 PROXY STATEMENT
2023 ANNUAL INCENTIVE REWARDS
The Compensation Committee takes the named executive officer's base salary levels into account when it establishes
each executive's potential incentive award, with the intent that each executive's targeted annual cash or stock
opportunity is competitive, and that each executive has a meaningful upside annual cash or stock compensation
opportunity for performance excellence. We believe this compensation philosophy is consistent with our pay-for-
performance culture and our compensation objective of linking pay to performance.
Individual Performance Awards
The Compensation Committee grants awards of cash, stock, or a combination of both under the 2014 Incentive Plan
based on each executive officer's individual performance, and may determine all terms of the award, including to
whom, and the time or times at which, individual performance awards may be granted, the number of shares, units or
other rights subject to each individual performance award, the exercise, base or purchase price of such individual
performance award (if any), the time or times at which such individual performance award will become vested,
exercisable or payable, the performance criteria, goals and other conditions of the individual performance award, and
the duration of the individual performance award. Key metrics used to measure individual performance include:
• Business development activity—this includes the acquisition of new properties, development of relations with
potential tenants and development of relationships with providers who may become recurring clients of the
Company;
• Leasing activity—this includes working with tenants as existing leases are set to expire; working with tenants as
they need additional space or have other needs; working with tenants on the collection of receivables; working
with potential tenants and brokers to fill vacancies as they arise; and working to increase overall portfolio rental
rates and weighted average remaining lease term;
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• Employee satisfaction and turnover—this includes reviewing employee compensation levels, bonus potentials,
and benefits; providing an environment where employees can obtain their desired work/life balance; and
reducing overall employee turnover;
• Timely and accurate financial statement preparation and filing—this includes the timely preparation of the
Company's quarterly filings, on Form 10-Q, and annual filings, on Form 10-K; timely preparation and filing of other
SEC forms including Forms 8-K, Form-4, etc.; and providing the documentation, processes and controls to insure
there are no material weaknesses in the Company's Internal Control over Financial Reporting;
• Investor relations activities—this includes maintaining relationships with current and potential investors;
participating in conferences and non-deal road shows; and reviewing and updating the Company's website,
investor presentation, supplemental data report and other investor information;
• Capital markets activities—this includes maintaining relationships with investment and commercial banks and
managing the Company's credit facilities and equity raising activities through the Company's "At-The-Market
Offering Program" and other capital raising alternatives; and
• Environmental, Social and Governance (ESG) policy management—this includes reviewing the Company's
existing ESG policies, comparing those policies to peers and guidelines to determine where the Company can
improve, and implementing policies to increase the Company's overall attainment of ESG goals.
In 2023, the Compensation Committee approved the payment of cash individual performance awards to the
Company's executive officers in the aggregate of approximately $662,869. The executive officers each elected to
acquire restricted shares of common stock in lieu of the cash bonuses, which based on their elections are subject to
an eight-year cliff vesting schedule. Based on the eight-year restriction period elected, the executive officers acquired
an aggregate of 18,631 shares of restricted stock in lieu of their cash bonuses and were granted 18,630 additional
shares based on the restriction period elected.
Company Performance Awards
Company Performance Awards ("CPA") may be issued under the 2014 Incentive Plan based on Company performance
targets. The Compensation Committee may determine, in its discretion, the particular financial and/or operating
metrics to be targeted, which may include, but are not limited to AFFO, payout percentages, etc. The measurement
period is four consecutive quarters ending on June 30 of each year or such date as the Compensation Committee may
determine.
Community Healthcare Trust | 2024 PROXY STATEMENT
27
Participants have the opportunity to earn Company Performance Awards each year. The Company will generally
target a maximum of three performance metrics during any given measurement period and a maximum combined
award for all such metrics of up to 75% of such participant's base salary.
Consistent with prior years, the metrics used by the Compensation Committee to determine the CPA for 2023 were as
follows:
• The actual AFFO for the trailing four quarters ended June 30, 2023 which was $2.50 per share. This was a 2.9%
increase over the $2.43 AFFO for the trailing four quarters ended June 30, 2022.
• The Amended and Restated Executive Officer Incentive Program targets an annual dividend increase of $0.05
cents per share, which is approximately $0.01 per share more than the actual increases have been. The
Compensation Committee believes this fixed targeted increase presents an aggressive target and removes any
potential to manipulate the actual dividend to benefit executive officer compensation.
• The targeted dividend per share for 2023 was $1.85 per share. The actual AFFO of $2.50 per share provided an
74% dividend payout coverage for the $1.85 targeted dividend. This was the equivalent of an 72% payout ratio
for the actual dividends of $1.795 per share.
• The Amended and Restated Executive Officer Incentive Program provides for payment of a range from 0.00% to
150.00% of executive salary based on decreasing calculated targeted dividend payout ratios moving from 95.0%
to 80.0%. The coverage ratio of 74% resulted in a CPA award percentage of 150%. Since the CPA targets 50% of
each executive officer's base pay, the CPA resulted in a 75% of base salary bonus payment.
The Compensation Committee believes the CPA measures three critical components of Company performance:
• First, it measures actual AFFO for the trailing four quarters. Actual AFFO is an important measure of the ongoing
growth and operating performance of the Company.
• Second, the CPA targets an increasing targeted dividend. The Compensation Committee believes that an
increasing dividend is an important attribute of the Company's stock for its investors. This is a critical concept
because the Amended and Restated Executive Officer Incentive Program requires the ability for dividend growth
every year which cannot be modified without Compensation Committee approval.
• Third, the CPA measures dividend payout coverage of the Target Dividend and will only pay a bonus when that
coverage is at or below 95%. As the dividend coverage increases and the payout ratio goes down, the bonus
potential goes up.
As a result of these rigorous performance requirements, 2023 was only the fourth year management met the required
thresholds for a CPA bonus.
In 2023, the Compensation Committee approved the payment of cash CPA to the Company's executive officers in the
aggregate of approximately $1,104,783. The executive officers each elected to acquire restricted shares of common
stock in lieu of the cash bonuses, which based on their elections are subject to an eight-year cliff vesting schedule.
Based on the eight-year restriction period elected, the executive officers acquired an aggregate of 31,052 shares of
restricted stock in lieu of their cash bonuses and were granted 31,051 additional shares based on the restriction
period elected.
2023 LONG TERM EQUITY INCENTIVE AWARDS
Total Shareholder Return Awards
Total Shareholder Return Awards ("TSRA") are designed to be long term incentive awards based on the Company's
total shareholder return, as measured against the Peer Group. The criteria for awarding TSRAs are the Company's
relative total shareholder return performance measured as a percentile, as compared to the total shareholder returns
of the companies in the Peer Group. The current measurement period is 12 and 20 consecutive quarters ending
June 30 of each year.
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Community Healthcare Trust | 2024 PROXY STATEMENT
The Compensation Committee generally targets a maximum TSRA for each executive officer of up to 200% of such
executive officer's base salary. Prior to 2021, executive officers had the opportunity to earn TSRAs each year based on
1-year total shareholder return and 3-year total shareholder return. Beginning in 2021, 3-year and 5-year shareholder
return metrics were used.
TSRAs are in the form of restricted stock with an eight-year cliff vesting period and are not available for the Second
Amended and Restated Alignment of Interest Program. The TSRA percentages range from 0% up to 100% of base
salary depending on the relative total shareholder return versus the members of the Peer Group. The number of shares
are determined as of June 30th by dividing the total of the executive officer's TSRA by the average closing price of the
common stock for the 10 trading days immediately preceding June 30.
In 2023, the Company ranked ninth in the 3-year total shareholder return, which placed it in the greater than 25%
range, and ranked fourth in the 5-year total shareholder return, which placed it in the 75% range, versus the members
of the Peer Group.
LEVEL
>25%
>50%
>75%
=100%
2023 Total Shareholder Return
3-Year TSR
5-Year TSR
x
x
Total
(%)
25
75
100
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The following table illustrates the value of the TSR equity incentive awards granted to each named executive officer
for 2023.
EXECUTIVE OFFICER
David Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
Performance Metric
(%)
Base Salary
($)
Long Term Incentive Award
($)
100
100
100
100
647,250
480,000
446,214
339,579
647,251
480,000
446,215
339,579
The Company granted TSRAs in the form of restricted stock under the Amended and Restated Executive Officer
Incentive Program to our executive officers in 2023 in the aggregate of 57,778 shares of common stock which will cliff
vest in eight years.
Perquisites
The Company provides its executive officers with perquisites that it believes are reasonable, competitive and
consistent with the Company's compensation program for all employees. The Company believes that such perquisites
help the Company to retain its personnel. These perquisites included, as applicable, matching contributions in each
participating executive's 401(k) and a contribution for each participating executive's health savings account (HSA),
calculated in the same manner as for all employees, as well as temporary living expenses for Mr. Monroe.
Community Healthcare Trust | 2024 PROXY STATEMENT
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Retirement Benefits
All named executive officers are eligible to participate in the Company's 401(k) plan, pursuant to which each
participant may contribute up to the annual maximum allowed under IRS regulations ($22,500 for 2023). All eligible
participants over the age of 50 may also contribute an additional $7,500 per year to the plan in the form of catch-up
contributions. The Company provides a matching contribution of up to an annual maximum of three and one-half
percent for the first six percent of base salary contributed to the plan by the employee.
COMPENSATION GOVERNANCE PRACTICES
Anti-Hedging, Margin or Hypothecation Policy
The Company prohibits the hedging, margining or hypothecation of Company securities by its executive officers and
directors. None of the executive officers or directors have entered into any arrangements to hedge, margin or
hypothecate the Company's securities. In addition, restricted stock may not be sold, assigned, pledged or otherwise
transferred.
At Risk Compensation
Since the Company's initial public offering or joining the Company, as applicable, all named executive officers through
the alignment of interest program, as amended, have elected through December 31, 2023 to take 100% of their
compensation in restricted stock of the Company that cliff-vests in 8-years. Until such time that those shares vest, each
named executive officer is at risk of forfeiting those shares, as well as losing value of the shares should events occur,
including management errors, that negatively impact the financial results or performance of the Company.
We believe this compensation program aligns executive management with our stockholders, encourages appropriate
long-term decision-making and effectively rewards or punishes executive management for their decisions made.
Policy For The Recovery Of Erroneously Awarded Compensation (Clawback Policy)
The Board of Directors has adopted a recovery policy which complies with the NYSE’s listing standards and the SEC’s
Exchange Act Rule 10-D and Rule 10-D-1 to provide for the recovery of incentive-based compensation from executive
officers due to the material noncompliance of the Company with any financial reporting requirement under the
securities laws for the preceding three fiscal years, including an accounting restatement to correct an error in
previously issued financial statements that is material to the previously issued financial statements, or that would
result in a material misstatement if the error were corrected in the current period or left uncorrected in the current
period.
Stock Ownership Guidelines
We believe that it is in the best interests of our stockholders to encourage all executive officers and directors to
increase their equity position in the Company to promote share ownership and further align stockholder interests with
executive officers and directors. Accordingly, as set forth in the table below, we have adopted stock ownership
guidelines applicable to our executive officers and directors requiring each to hold common stock with a fair market
value equal to a multiple of each officer's then current base salary or each non-employee director's then current
annual retainer, as applicable:
POSITION
Chief Executive Officer
Executive Vice President
Non-Employee Director
Common Stock Ownership Multiple
5x Current Base Salary
3x Current Base Salary
3x Current Base Annual Retainer
The guidelines provide that all owned stock, both restricted and unrestricted, counts toward the ownership guidelines.
Executive officers and directors have five years from the date that such executive officer or director first becomes
subject to the stock ownership guidelines to comply with the guidelines. All of our executive officers and directors
were in compliance with these guidelines as of February 29, 2024.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for
compensation over $1 million paid to a corporation's chief executive officer and the three other most highly
compensated executive officers (excluding the chief financial officer). In 2017 and prior tax years, qualifying
performance-based compensation was not subject to the deduction limit if certain requirements were met. Effective
for tax years beginning on January 1, 2018, the tax reform legislation informally known as the Tax Cuts and Jobs Act of
2017 repeals the performance-based compensation exception to the Section 162(m) $1 million deduction limit. The
Company's tax deduction for compensation expense in 2023 will be limited pursuant to Section 162(m), but that
limitation will not result in an increase to our federal income taxes. As a qualifying REIT, the Company does not pay
federal income tax; therefore, the future unavailability of the Section 162(m) compensation deduction is not expected
to result in any increase in the Company's federal income tax obligations.
CEO PAY RATIO
Pursuant to rules adopted by the SEC under the Dodd-Frank Act, the Company is required to disclose the ratio of the
annual total compensation for its CEO to the median annual total compensation for its employees other than the
CEO. The Company identified the median employee by examining its payroll records for 2023 for all individuals other
than the CEO that were employed by the Company at December 31, 2023. Compensation for employees that began
employment during the year was annualized based on rate of pay applied to a full year.
At December 31, 2023, the Company had 37 employees. These employees are all employed and work out of the
corporate office in Franklin, Tennessee. Our employees are comprised of Company officers, accountants, asset
management, and employees with various other roles and responsibilities. At December 31, 2023, the Company
identified its median employee as one making $112,280 per year. At December 31, 2023, the Company's CEO,
Mr. Dupuy, had an annual total compensation of $3,533,747. This amount is comprised of several components, as
reflected in the Summary Compensation Table beginning on page 41. Additional information concerning Mr. Dupuy's
total compensation is provided in the Compensation Discussion and Analysis section beginning on page 19.
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The ratio of CEO pay to median employee pay at December 31, 2023 was 31:1. The table below illustrates the details
of the calculation.
PAY
Salary
Cash
Salary stock
Bonus
Cash
Bonus stock
Alignment of Interest Stock
3-Year Total Shareholder Return Stock
5-Year Total Shareholder Return Stock
Non-Executive Restricted Stock Award
All Other Compensation
Total
CEO to Median Employee Pay Ratio
CEO to Median Employee Pay Ratio
Chief Executive Officer and President
($)
Median Employee
($)
—
617,834
80,000
—
—
20,000
776,700
1,478,662
161,813
485,438
—
13,300
—
733
—
—
8,000
3,547
3,533,747
112,280
31:1
Community Healthcare Trust | 2024 PROXY STATEMENT
31
EMPLOYMENT AGREEMENTS OF NAMED EXECUTIVE OFFICERS AS OF DECEMBER 31, 2023
We entered into employment agreements with each of Mr. Dupuy, Mr. Monroe, Ms. Stach, and Mr. Meyer, which
became effective on May 1, 2019 for Mr. Dupuy, on June 1, 2023 for Mr. Monroe, on May 28, 2015 for Ms. Stach, and on
October 1, 2021 for Mr. Meyer. The initial terms of each employment agreement were through December 31 of each
year the agreements became effective. On April 1, 2023, the Company entered into an amended and restated
employment agreement with Mr. Dupuy in connection with his new role as Chief Executive Officer that became
effective on April 1, 2023. Mr. Dupuy's amended and restated employment agreement increased Mr. Dupuy's base
salary for 2023 from $529,586 to $647,250, granted Mr. Dupuy additional vacation time, increased the term of his
severance compensation in the event of a termination other than for cause and increased the multipliers included in
the calculations of his severance compensation. On June 1, 2023, the Company entered into an employment
agreement with Mr, Monroe upon joining the Company and in connection with his role as Chief Financial Officer that
became effective on June 1, 2023 with an annual base salary of $480,0000. On May 1, 2019, the Company entered into
an amended and restated employment agreement with Ms. Stach in connection with her new role as Executive Vice
President that became effective on May 1, 2019. Other than related to Ms. Stach's change in role, the compensation
terms and other material terms of Ms. Stach's employment with the Company remained unchanged. The term of
each respective employment agreement automatically renews for successive one-year terms on December 31 of each
calendar year. As amended on January 4, 2023, the annual base salary of each of Ms. Stach and Mr. Meyer under each
of their employment agreements was increased for fiscal year 2023 from $410,500 to $446,214, and from $312,400 to
$339,579, respectively. In addition, Mr. Dupuy was awarded a grant of 5,000 shares of restricted common stock per
year for three years, which began on May 1, 2019, vesting equally in 2027, 2028, and 2029 and Mr. Monroe is to be
awarded a grant of 7.000 shares of restricted common stock per year for three years, which began on June 1, 2023,
vesting equally in 2028, 2029 and 2030.
The base salaries are subject to annual increases as the Compensation Committee may approve in their discretion and
other benefits generally available to other employees and our other executive officers, and each will be eligible for an
annual bonus for each calendar year during his or her respective employment based on a combination of his or her
respective continued employment with the Company and the achievement of certain performance goals established
by our Board of Directors and our Compensation Committee.
If employment is terminated for any reason other than for cause, change-in-control or death or disability, each
executive officer is entitled to receive all accrued salary, bonus compensation, if any, to the extent earned, whether or
not vested without regard to such termination (other than defined contribution plan or profit sharing plan benefits (or
benefits under tax-qualified retirement or health and welfare plans in the case of Mr. Meyer) which will be paid in
accordance with the applicable plan), any benefits under any plans of the Company in which the executive officer is a
participant to the full extent of the executive officer's rights under such plans, full vesting of all awards granted to the
named executive officer under the 2014 Incentive Plan, accrued vacation pay and any appropriate business expenses
incurred by the named executive officer in connection with his or her duties set forth in each of his or her respective
employment agreements, all to the date of termination.
In addition, the executive officer will receive as severance compensation his or her base salary (at the rate payable at
the time of such termination), for a period of 36 months, with respect to Mr. Dupuy, and 12 months, with respect to
Mr. Monroe, Ms. Stach, and Mr. Meyer, from the date of such termination; provided, however, that if the executive
officer is employed by a new employer during such period, the severance compensation payable to the executive
officer during such period will be reduced by the amount of compensation that the executive officer is receiving from
the new employer. However, Mr. Dupuy, Mr. Monroe, and Ms. Stach are under no obligation to mitigate the amount
owed to the respective executive officer by seeking other employment or otherwise, and Mr. Meyer is required to notify
the Company of any employment during the period that severance is being paid.
In addition to the severance payment, the executive officer will be paid an amount equal to the greater of: (i) two
times the average annual cash bonus, if any, earned by the executive officer in the two years immediately preceding
the date of termination, without regard to any elective income deferral or conversion of such bonus into stock or any
other non-cash consideration; and (ii) two times the product of the executive officer's base salary and 0.67 with respect
to Mr. Dupuy, and 0.33 with respect to Mr. Monroe, Ms. Stach, and Mr. Meyer. Each executive officer will be entitled to
accelerated vesting of any accrued benefit under each deferred compensation plan.
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Community Healthcare Trust | 2024 PROXY STATEMENT
If Mr. Dupuy, Mr. Monroe, or Ms. Stach are terminated for disability, the terminated executive officer will receive the
benefits described above, all to the date of termination, with the exception of medical and dental benefits, if any,
which shall continue at the Company's expense through the then current one-year term of the employment
agreement. If Mr. Meyer is terminated for disability, he will receive the benefits described above, all to the date of
termination; provided, however, that the Company will pay his premiums associated with any medical, dental, and/or
vision insurance plans in which he and his dependents were enrolled as of the date of termination through the last
day of the then-current one-year term of the employment agreement, so long as Mr. Meyer timely elects continued
coverage under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"). If an executive officer's employment
terminates due to death, the terminated executive officer's estate will receive the benefits described above.
The severance payment in the event of a change in control will consist of: (1) three times the terminated executive
officer's annual base salary (at the rate payable at the time of such termination), and (2) an amount equal to the
greater of: (i) two times the average annual cash bonus, if any, earned by the terminated executive officer in the two
years immediately preceding the date of termination, without regard to any elective income deferral or conversion of
such bonus into stock or any other non-cash consideration; and (ii) two times the product of the terminated executive
officer's base salary and 0.67 with respect to Mr. Dupuy, and 0.33 with respect to Mr. Monroe, Ms. Stach, and Mr. Meyer.
Such severance compensation shall be paid in a lump sum (i) promptly after the date of such termination in the case
of Mr. Dupuy, Mr. Monroe and Ms. Stach, and (ii) on the first payroll period following the effective date of Mr. Meyer's
termination date and his execution of the release and expiration of any revocation period, and in all cases, in no event
later than two and a half months after the end of the year in which such termination occurs. If the payments due to
the change-in-control result in an excise tax to the terminated executive officer, under Section 4999 of the Code, all
change-in-control payments to the terminated officer may be limited to an amount that is less than 300% of his or her
average annual compensation. This limit would not apply in the event that the terminated executive officer's net after-
tax benefits are greater after considering the effect of the excise tax.
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Each employment agreement contains customary non-competition and non-solicitation covenants that apply during
the term and for 12 months following a termination upon a change in control, so long as the payments to which the
terminated officer is entitled as a result of his or her termination upon a change of control are made on a timely basis.
NEW 2024 NAMED EXECUTIVE OFFICER COMPENSATION PROGRAM
On January 2, 2024 the Board and the Compensation Committee approved a new named executive officer
compensation program, as described below. The Board and Compensation Committee updated the Company’s
compensation programs to conform with industry standards and market practices for the purpose of attracting and
retaining the best candidates for the Company’s management team. The Board and the Compensation Committee
believe that the new named executive officer compensation program described below continues to reward long-term
performance and align the Company’s executive officers’ interests with the Company’s stockholders.
2024 Program Highlights
ü Majority (70%) of annual incentive rewards are based on the
achievement of specific company performance goals
ü Majority of equity granted is forward-looking, performance-based
RSUs (65% of program)
ü Long-term performance is based 100% on relative and absolute
TSR goals, aligning compensation with shareholder interests
ü Relative TSR goals target above the median at the 55th percentile
ü Ability to elect to receive 50% of base salary and annual incentive
rewards in equity
Community Healthcare Trust | 2024 PROXY STATEMENT
33
COMPENSATION TYPE
Pay Element
2024 Executive Compensation Plan Design
Fixed Pay
Cash
Compensation
Base Salary
• Base salaries are as follows: Mr. Dupuy—$666,668; Mr. Monroe
—$494,400; Ms. Stach—$459,600; and Mr. Meyer—$349,766
At Risk
Annual Incentive
Rewards
• Eligibility will be based on the following: (i) AFFO per share (30%
weighting); (ii) Dividend payout coverage (20% weighting); (iii)
Debt to total capitalization (20% weighting); and (iv) Individual
performance (30% weighting)
• Bonus targets (as a percentage of base salary) are as follows: Mr.
Dupuy—125%; Mr. Monroe—100%; Ms. Stach—100%; and Mr.
Meyer—100%
Equity
Compensation
Long Term Equity
Incentive Awards
• 65% of the award will be in the form of performance-based
restricted stock units (“RSUs”) and 35% in time-based RSUs
• Performance component will be based on 3-year relative TSR
performance as measured against select peer companies (35%
weighting) and 3-year absolute TSR performance (30%
weighting)
• 3-year Time-based awards (35% weighting) have a vesting
schedule of one-third of the RSUs awarded on each June 30
over the three year service period
• Long term equity incentive award targets (as a percentage of
base salary) are as follows: Mr. Dupuy—150%; Mr. Monroe—125%;
Ms. Stach—125%; and Mr. Meyer—110%
• Allows the named executive officers to elect to acquire
restricted stock in lieu of compensation that would otherwise be
payable in cash for up to 50% of their annual base salary and up
to 50% of their 2024 annual incentive reward for the annual
incentive reward performance period beginning July 1, 2024
• Each named executive officer who makes this election will
receive an award of restricted stock based on their choice of
restriction period and subject to the amount of time until their
Retirement Eligibility date in their Employment Agreement
Elective Deferral
Awards
2024 ANNUAL BASE SALARY
For 2024, the Compensation Committee approved an increase of 3% to the 2023 base salaries for its named executive
officers based on peer company benchmarking. The annual base salaries of our named executive officers for 2024,
before any elective deferral of cash for restricted stock, are set forth below:
NAMED EXECUTIVE OFFICER
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
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Community Healthcare Trust | 2024 PROXY STATEMENT
2024 Base Salary
($)
666,668
494,400
459,600
349,766
2024 ANNUAL INCENTIVE REWARDS
The Company maintains an annual incentive reward performance period from July 1 through the following June 30
each year. Because the July 1, 2023 through June 30, 2024 annual incentive reward performance period was already
in process at the time of the Board and Compensation Committee’s approval of a new named executive officer
compensation program on January 2, 2024, no changes will be made to the annual incentive rewards until July 1,
2024.
Beginning July 1, 2024 the named executive officers’ annual incentive reward target compensation will be calculated
70% upon the achievement of company performance goals and 30% upon the assessment of individual performance
goals. The corporate performance goals will be based on the following metrics:
WEIGHTING
Corporate Performance Metric
Rationale
30%
AFFO per share
Promotes a key driver of growth
20%
Dividend payout coverage
Measures the security of a growing
dividend
20%
Debt to total capitalization
Reflects the importance of a
conservative balance sheet
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The Compensation Committee will set a threshold level, target level and maximum level for each company
performance metric corresponding to a payout ratio of 50%, 100%, and 150%, respectively with the payout ratio
determined using straight line linear interpolation, although performance below the threshold level will result in 0%
payout. The individual performance goals shall be based on a subjective assessment of individual performance goals
established at the beginning of each year to reward and retain the named executive officer based on their individual
efforts and skill sets with a payout ratio ranging from 0% to 150% of target.
Finally, the Compensation Committee has set the following target-level annual incentive reward opportunities for
each named executive officer for the performance period beginning July 1, 2024:
NAMED EXECUTIVE OFFICER
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
2024 Annual Incentive Reward
Target-Level Opportunity
125% of Base Salary
100% of Base Salary
100% of Base Salary
100% of Base Salary
2024 ELECTIVE DEFERRAL AWARDS
To maintain strong alignment between named executive officer and stockholder interests, the Company’s Third
Amended and Restated Alignment of Interest Program allows the named executive officers to elect to acquire
restricted stock in lieu of compensation that would otherwise be payable in cash for up to 50% of their 2024 annual
base salary and up to 50% of their 2024 annual incentive reward for the annual incentive reward performance period
beginning July 1, 2024. Each named executive officer who makes this election will receive an award of restricted
stock based on their choice of restriction period with the corresponding restriction multiple, according to the
following multiple-based formula and subject to the amount of time until their Retirement Eligibility date in their
Employment Agreement.
Community Healthcare Trust | 2024 PROXY STATEMENT
35
70%CompanyPerformance Time until Retirement Eligibility
Duration of Restriction Period
Restriction Multiple
3 years or less
Greater than 3 years (1)
Greater than 5 years (2)
3 years
5 years
8 years
0.3x
0.5x
1.0x
(1) The named executive officer may also choose the 3-year restriction period.
(2) The named executive officer may also choose the 3-year or 5-year restriction periods.
The restriction period subjects the shares acquired by the named executive officer and the additional shares awarded
by the Company to market risk and the risk of forfeiture in the event that the named executive officer voluntarily
terminates employment or is terminated for cause from employment with the Company prior to the vesting of the
shares.
Note that the modification made to the Third Amended and Restated Alignment of Interest Program to reduce to
50% the amount of base salary and annual incentive reward available to be elected to acquire restricted stock from
100% under the previous Second Amended and Restated Alignment of Interest Program will reduce the amount of
available elective deferral awards to the named executive officers. Further, the modification made to the Third
Amended and Restated Alignment of Interest Program to limit the available restriction period(s) the named executive
officers may choose based on the amount of time until their Retirement Eligibility date in their Employment
Agreement will also reduce the amount of available elective deferral awards to the named executive officers as they
reach 5 years or less and 3 years or less until their Retirement Eligibility date. Both of these changes are expected to
reduce total NEO base salary and annual incentive compensation amounts; however, the total expense reflected on
our financial statements from this NEO compensation is expected to increase due to the compensation being
expensed over a shorter amortization period given at least 50% will be paid in cash and expensed as paid.
2024 Alignment of Interest
Program Change Highlights(1)
2024 NEO Base Salary
Compensation Amount is
Expected to be
$1.15M or
29% lower
By reducing the amount of restricted
stock that can be acquired and by
reducing the available restriction periods,
2024 NEO base salary compensation
amount is reduced by approximately $1.15
million or 29%(2)
2024 NEO Base Salary
Expense per GAAP is
Expected to be
$0.5M higher
The reduced 2024 NEO base salary
compensation amount is now expensed
over a shorter amortization period given
the cash portion of base salaries is
expensed as paid(3)
(1) Compared to the prior Alignment of Interest Program. Changes to NEO annual incentive compensation are not included in
these calculations given 2024 Alignment of Interest Program annual incentive reward elections are not effective until July 1,
2024 to align with the start of the next annual incentive performance period.
(2) Combined 2024 NEO Salaries are $1.97 million before any elective deferral of cash for restricted stock, and $2.79 million after
elective deferrals under the new 2024 Alignment of Interest Program. This $2.79 million of combined 2024 NEO salary
compensation is $1.15 million less than the $3.94 million of combined NEO salary compensation that would have been elected
under the prior Alignment of Interest Program (calculated by using combined 2024 NEO salaries of $1.97 million with an
additional $1.97 million award based on 100% elective deferral with an 8-year restriction period and 1.0x restriction multiple).
(3) The portion of salary acquired and awarded in restricted stock is expensed over approx. 2-years to 8-years based on each NEO's
retirement eligibility, whereas the portion of salary paid in cash is expensed as paid.
36
Community Healthcare Trust | 2024 PROXY STATEMENT
2024 LONG TERM EQUITY INCENTIVE AWARDS
The named executive officers’ long term equity incentive award target compensation consists of 65% performance-
based restricted stock units (“RSUs”) and 35% time-based RSUs. The performance-based RSUs will be based on the
following performance:
65%
3-Year Performance Based RSUs
35% Relative TSR vs. Peer Group
RESULTS
Threshold (50%)
Target (100%)
Maximum (200%)
30% Absolute TSR
RESULTS
Threshold (50%)
Target (100%)
Maximum (200%)
HURDLES
25th Percentile
55th Percentile
80th Percentile
HURDLES
4% Annualized
8% Annualized
12% Annualized
IF EARNED, CLIFF VEST AT THE END OF THE PERFORMANCE
PERIOD
35%
3-Year Time-Based RSUs
ONE-THIRD OF THE RSUs AWARDED VEST ON EACH JUNE 30
OVER THE THREE-YEAR SERVICE PERIOD
The Compensation Committee has set the above threshold level, target level and maximum level for each
performance-based RSU corresponding to a payout ratio of 50%, 100%, and 200%, respectively with the payout ratio
determined using straight line linear interpolation, although performance below the threshold level will result in 0%
payout. The performance-based RSUs’ three-year performance period is forward-looking and began on July 1, 2023
with an end date of June 30, 2026 at which time the Compensation Committee will review the actual performance
and the RSUs will vest accordingly. The Peer Group Companies for determining the Relative Total Shareholder Return
performance are Global Medical REIT Inc. - NYSE: GMRE, Healthcare Realty Trust Incorporated - NYSE: HR, Healthpeak
Properties Inc. - NYSE: PEAK, Medical Properties Trust - NYSE: MPW, and Universal Health Realty Income Trust - NYSE:
UHT subject to the Performance-Based Restricted Stock Unit Agreement. The Absolute Total Shareholder Return
performance is calculated using the compounded annual growth rate in the value per share due to appreciation in
price per share plus dividends declared during the performance period. The performance-based RSUs entitle the
named executive officer to receive dividend equivalents, equal to the amount of the dividends paid on each share of
Common Stock underlying the performance-based RSU that vests, payable only upon the vesting of the performance-
based RSU.
The time-based RSUs’ service period began on July 1, 2023 with a vesting schedule of one-third of the RSUs awarded
on each June 30 over the three year service period. The time-based RSUs entitle the named executive officer to
receive divided equivalents, equal to the amount of the dividends paid on each share of Common Stock underlying
the time-based RSU, payable no later than thirty days following the applicable dividend payment date.
The table below sets forth information with respect to time-based and performance-based RSU awards granted, at
the target level, under the 2014 Incentive Plan since December 31, 2023.
y
x
o
r
P
Community Healthcare Trust | 2024 PROXY STATEMENT
37
NAME
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
Performance-Based Awards (1)
Time-Based Awards (1)
(#)
Threshold
(#)
13,046
8,062
7,495
5,020
19,399
11,989
11,145
7,464
Target
(#)
38,798
23,978
22,290
14,928
Maximum
(#)
77,596
47,956
44,580
29,856
(1)
The fair value of the performance-based RSUs is calculated by a third-party specialist who utilizes a Monte Carlo simulation
as of the grant date, whereas the fair value of the time-based RSUs is calculated using the average closing price of the
Company common stock for the 10 trading days immediately preceding the grant date.
Finally, the Compensation Committee has set the following target-level opportunities for each named executive
officer for their 2024 long term equity incentive award:
NAMED EXECUTIVE OFFICER
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
2024 Long Term Equity Incentive
Award Target-Level Opportunity
150% of Base Salary
125% of Base Salary
125% of Base Salary
110% of Base Salary
Compensation Committee Report
The following Compensation Committee Report does not constitute soliciting material and should not be deemed
filed or incorporated by reference into any other Company filing under the Securities Act or the Exchange Act,
except to the extent the Company specifically incorporates this Report by reference therein.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in
this Proxy Statement with management of the Company and, based on such review and discussions, the
Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement.
Members of the Compensation Committee:
Claire Gulmi (Chair)
Robert Hensley
Lawrence Van Horn
Compensation Committee Interlocks and Insider
Participation
The members of the Compensation Committee during 2023 were Claire Gulmi (Chair), Alan Gardner, and Lawrence
Van Horn prior to the 2023 annual meeting of stockholders, and Claire Gulmi (Chair), Robert Hensley, and Lawrence
Van Horn following the 2023 annual meeting of stockholders. In 2023, no member of the Compensation Committee
was an officer or employee of the Company or any of its subsidiaries or was formerly an officer of the Company or any
of its subsidiaries, and no member had any relationship requiring disclosure as a related person transaction under
applicable SEC regulations.
38
Community Healthcare Trust | 2024 PROXY STATEMENT
Executive Officers
The names, ages, positions and business experience of our executive officers, except for Mr. Dupuy, are listed below.
Because he is also a member of our Board, information about Mr. Dupuy appeared previously under Proposal 1—
Election of Directors beginning on page 4. All of our executive officers serve at the discretion of the Board and are
parties to employment agreements.
William G.
Monroe IV
Age: 45
Leigh Ann
Stach
Age: 57
Mr. Monroe has served as our Executive Vice President and Chief Financial Officer since
June 2023. Previously Mr. Monroe served as Managing Director of the Healthcare
Investment Banking Group at Truist Securities, Inc. in Atlanta. Mr. Monroe was
responsible for buy- and sell-side advisory services as well as debt and equity capital
markets origination for healthcare services segments including acute hospital, post-
acute, alternate site, and healthcare REITs. He joined Truist Securities, Inc. as a Vice
President in 2011 via its predecessor firm SunTrust Robinson Humphrey, Inc. Mr.
Monroe began his investment banking career at J.P. Morgan Securities LLC in New
York where he was an Associate in the Syndicated & Leveraged Finance Group from
2006 to 2009 with responsibilities for structuring and executing pro rata bank,
leveraged loan, and high yield bond transactions. Other positions Mr. Monroe has held
include Vice President of Private Equity Placement at Fortress Group, Inc. from 2010 to
2011, and prior to business school Commercial Banking Associate at SunTrust Bank
from 2003 to 2004 and Consulting Analyst at Accenture from 2000 to 2003.
Mr. Monroe holds a Bachelor of Science from Davidson College
and a Master of Business Administration from the Tuck School of
Business at Dartmouth.
y
x
o
r
P
Ms. Stach has served as our Chief Accounting Officer since the formation of our
company in March 2014 and as Executive Vice President since May 2019. Prior to her
appointment as Executive Vice President in May 2020, Ms. Stach served as our Vice
President—Financial Reporting, and Chief Accounting Officer. From 2005 to 2013,
Ms. Stach served as Vice President—Financial Reporting at Healthcare Realty ("HR")
where she had responsibility for financial reporting and coordinating due diligence
materials for debt and equity offerings. In addition, she brought EDGAR and XBRL
filings in-house and provided oversight of HR's compliance function and internal audit.
Prior to that, from 1997 to 2005, Ms. Stach served as Vice President—Controller at HR.
From 1994 to 1997, Ms. Stach served as Assistant Controller at HR. Prior to HR, from
1991 to 1994, Ms. Stach was a senior accountant—financial reporting at Hospital
Corporation of America ("HCA"). She began her career with HCA in 1988 as an internal
auditor.
Ms. Stach holds a Bachelor of Science in Accounting from
Western Kentucky University and is a licensed CPA.
Community Healthcare Trust | 2024 PROXY STATEMENT
39
Timothy L.
Meyer
Age: 48
Mr. Meyer has served as Executive Vice President-Asset Management since October
2021. Prior to his appointment as Executive Vice President, Mr. Meyer served as our
Senior Vice President-Asset Management since July 2019. From 2018 to 2019, Mr.
Meyer served as Senior Vice President, Field Services and from 2014 to 2018 served as
Vice President, Field Services at Altisource Portfolio Services where he had
responsibility for product management, client performance and relationship
management, business development and sales, product and brand strategy, and
performance oversight of operations and client controls and reporting. Prior to that,
from 2013 to 2014, Mr. Meyer served as Counsel at Nelson Mullins Riley & Scarborough
LLP where he provided legal counsel in the areas of real estate, mergers and
acquisitions, and corporate and loan transactions. Prior to that, from 2007 to 2013, Mr.
Meyer served as Counsel at Welltower, where he served as lead counsel for Welltower's
Medical Facilities Group. Prior to that, from 2006 to 2007, Mr. Meyer served as an
Associate at Stites & Harbison PLLC and from 2003 to 2006 as Associate Counsel at
Windrose Medical Properties Trust.
Mr. Meyer holds a Bachelor of Arts in Economics from University
of Illinois at Urbana-Champaign, and MBA and JD degrees from
Vanderbilt University.
40
Community Healthcare Trust | 2024 PROXY STATEMENT
Compensation Tables
SUMMARY COMPENSATION TABLE
The table below sets forth the compensation paid in fiscal years 2023, 2022, and 2021 to our principal executive
officers and the three most highly compensated executive officers. Mr. Wallace, Mr. Dupuy, Mr. Monroe, Ms. Stach, and
Mr. Meyer are referred to in this proxy statement as our named executive officers.
Each of our named executive officers took 100% of his or her salary, bonus and long-term incentive compensation in
the form of restricted common stock under our 2014 Incentive Plan since such officers began their tenure with the
Company through December 31, 2023. In compliance with the terms of the Second Amended and Restated
Alignment of Interest Program described above, the election to acquire stock, otherwise payable in cash, caused the
named executive officers to be eligible to receive additional stock awards based upon a multiple described on page
26 of this proxy statement.
All shares of restricted stock issued in lieu of cash compensation and any shares of restricted stock issued under the
Second Amended and Restated Alignment of Interest Program are subject to a vesting schedule whereby no shares
vest until the third, fifth or eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock
will vest, subject to continued employment.
The following table sets forth the compensation of our named executive officers for the fiscal years 2023, 2022, and
2021.
Salary
Bonus
NAME & PRINCIPAL
POSITION
Year
Compensation
Paid in Cash(1)
($)
Compensation
Paid in Stock(2)
($)
Compensation
Paid in Cash
($)
Compensation
Paid in Stock(3)
($)
Stock
Awards(4)
($)
All Other
Compensation(5)
($)
Total(10)
($)
y
x
o
r
P
Timothy G. Wallace(6)
Former Chief
Executive Officer and
President
David H. Dupuy(7)
Chief Executive
Officer and President
William G. Monroe(8)
Chief Financial
Officer and Executive
Vice President
Leigh Ann Stach
Chief Accounting
Officer and Executive
Vice President
Timothy L. Meyer(9)
Executive Vice
President - Asset
Management
2023
2022
2021
2023
2022
2021
—
—
—
—
—
—
863,295
794,200
750,000
617,834
487,200
460,000
—
—
—
—
—
—
—
1,015,989
22,913,954 24,793,238
913,330
2,820,373
12,425
4,540,328
862,500
3,164,711
11,650
4,788,861
776,700
2,125,913
13,300
3,533,747
560,280
1,730,216
7,487
2,785,183
529,000
2,191,229
3,112
3,183,341
2023
—
280,000
—
48,000
1,063,678
13,025
1,404,703
2023
2022
2021
2023
2022
2021
—
—
—
—
—
—
446,214
410,500
387,600
339,579
312,400
280,000
—
—
—
—
—
—
535,457
1,500,298
13,300
2,495,269
472,075
1,457,816
1,750
2,342,141
445,740
1,635,525
3,648
2,472,513
407,495
1,141,776
7,532
1,896,382
359,260
1,109,474
4,311
1,785,445
165,000
469,890
2,312
917,202
(1) All of our named executive officers agreed to acquire shares of restricted common stock in lieu of any cash compensation for the
fiscal years ended December 31, 2023, 2022, and 2021, as applicable.
(2) The amounts represent the annual base salary of each named executive officer set forth in the table pursuant to their
employment agreements, 100% of which was paid in shares of our restricted common stock in lieu of cash. The number of
Community Healthcare Trust | 2024 PROXY STATEMENT
41
shares of common stock issued in 2023 was based on $37.32, which was the average price of our common stock for the 10 days
preceding January 16, 2023, the determination date. Mr. Dupuy was promoted in 2023 upon Mr. Wallace's passing and received
an additional 4,864 shares, based on $36.29, which was the average price of our common stock for the 10 days preceding April
21, 2023, the determination date. Mr. Monroe joined the Company in June 2023 and received 16,322 shares, based on $34.31,
which was the average price of our common stock for the 10 days preceding June 15, 2023, the determination date. The
number of shares of common stock issued in 2022 was based on $47.12, which was the average price of our common stock for
the 10 days preceding January 14, 2022, the determination date. The number of shares of common stock issued in 2021 was
based on $46.21, which was the average price of our common stock for the 10 days preceding January 15, 2021, the
determination date. Mr. Meyer received a promotion in October 2021 and received an additional 219 shares, based on $45.84,
which was the average price of our common stock for the 10 days preceding October 15, 2021, the determination date. All of
the shares of our restricted common stock issued in lieu of cash compensation are subject to an eight-year cliff vesting schedule
whereby no shares vest until the eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock will
vest, subject to continued employment.
(3) The bonus amounts paid in each of the years 2023, 2022 and 2021 represent the annual bonus of each named executive officer
set forth in the table pursuant to their employment agreements, 100% of which was paid in shares of our restricted common
stock in lieu of cash. The number of shares of common stock issued in 2023 was based on $35.58, which was the average price
of our common stock for the 10 days preceding August 10, 2023, the determination date. The number of shares of common
stock issued in 2022 was based on $39.90, which was the average price of our common stock for the 10 days preceding August
11, 2022, the determination date. The number of shares of common stock issued in 2021 was based on $49.32, which was the
average price of our common stock for the 10 days preceding August 12, 2021, the determination date. All of the shares of our
restricted common stock issued in lieu of cash compensation are subject to an eight-year cliff vesting schedule whereby no
shares vest until the eighth anniversary of the date of grant, at which time 100% of the shares of restricted stock will vest, subject
to continued employment.
(4) Represents the aggregate fair value computed in accordance with FASB ASC Topic 718 of awards of restricted common stock to
the named executive officers for the years ended December 31, 2023, 2022, and 2021 under the 2014 Incentive Plan, as
amended. The dollar values of the awards related to base salaries and bonuses for 2023, 2022, and 2021 are based on the grant
date value of such awards and the restriction multiples for cash compensation deferrals outlined in our Restated Alignment
Program. Awards granted to our named executive officers in connection with their base salaries for 2023, 2022, and 2021, were
based on grant date values of such awards of $40.62 per share, $46.63 per share, and $47.99 per share, respectively. Awards
granted to our named executive officers in connection with their bonuses for 2023, 2022, and 2021 were based on grant date
values of such awards of $34.62 per share, $40.32 per share, and $47.93 per share, respectively. The dollar values of the awards
related to the Company's total stockholder return performance, relative to its peer group, for the years ended December 31,
2023, 2022, and 2021, as outlined in the Executive Officer Incentive Program, are based on the grant date value of such awards
of $34.77 per share, $38.68 per share, and $49.90 per share, respectively. The 5,000 restricted share award granted to Mr. Dupuy
in 2021 was based on a grant date value of $50.03 per share and the 7,000 restricted share award granted to Mr. Monroe upon
becoming a named executive officer in 2023 was based on a grant date value $32.73 per share. Mr. Meyer received an award of
260 restricted shares granted in 2021 under the Non-Executive Officer Incentive Plan, which was based on a grant date value of
$47.99 per share.
(5) Generally includes employer contributions to the executive officer's health savings account (HSA) and 401(k). Mr. Wallace's other
compensation for 2023 also includes the full vesting of his restricted shares upon his death totaling approximately $22.9 million.
Mr. Monroe's other compensation for 2023 includes temporary living expenses.
(6) Mr. Wallace passed away on March 6, 2023.
(7)
Joined the Company as a named executive officer on May 1, 2019 and was awarded 5,000 shares of restricted stock in the years
2021. During the years presented in the Summary Compensation Table, Mr. Dupuy served as the Company's Executive Vice
President and Chief Financial Officer. On March 6, 2023, our Board of Directors appointed Mr. Dupuy to serve as Chief Executive
Officer and President following the death of Mr. Wallace.
(8)
Joined the Company as a named executive officer on June 1, 2023 and was awarded 7,000 shares of restricted stock.
(9) Mr. Meyer was promoted to Executive Vice President - Asset Management on October 1, 2021. Prior to that, Mr. Meyer served as
Senior Vice President - Asset Management since joining the Company in July 2019.
42
Community Healthcare Trust | 2024 PROXY STATEMENT
(10) A significant portion of the named executive officer's compensation is performance based, as set forth in the following table:
NAME
Year
Total
Compensation
($)
Bonus
Stock(1)
($)
Alignment
of Interest
Stock(2)
($)
3-Year Total
Shareholder
Return Stock
($)
5-Year Total
Shareholder
Return Stock
($)
Total
Performance
Based Incentive
Compensation
($)
Percent of
Total
Compensation
(%)
Performance Based Incentive Compensation
2023
24,793,238
—
1,015,989
—
—
1,015,989
4.1
Timothy G. Wallace(3)
2022
4,540,328
913,330
1,827,623
198,550
794,200
3,733,703
82.2
2021
4,788,861
862,500
1,664,710
750,000
750,000
4,027,210
84.1
2023
3,533,747
776,700
1,478,662
161,813
485,438
2,902,613
82.1
David H. Dupuy(4)
2022
2,785,183
560,280
1,121,216
121,800
487,200
2,290,496
82.2
2021
3,183,341
529,000
1,021,079
460,000
460,000
2,470,079
77.6
William G. Monroe IV(5)
2023
1,404,703
48,000
354,568
120,000
360,000
882,568
62.8
2023
2,495,269
535,457
1,054,083
111,554
334,661
2,035,755
81.6
Leigh Ann Stach
2022
2,342,141
472,075
944,691
102,625
410,500
1,929,891
82.4
y
x
o
r
P
2021
2,472,513
445,740
860,325
387,600
387,600
2,081,265
84.2
2023
1,896,382
407,495
802,197
84,895
254,684
1,549,271
81.7
Timothy L. Meyer(6)
2022
1,785,445
359,260
718,974
78,100
312,400
1,468,734
82.3
2021
917,202
165,000
442,413
—
—
607,413
66.2
(1) Each executive officer has elected to take 100% of his or her salary and cash bonus in deferred stock with an 8-year cliff
vesting.
(2) Alignment of interest stock grants per the Second Amended and Restated Alignment of Interest Program which is part of
the Company's Incentive Plan.
(3) Mr. Wallace passed away on March 3, 2023.
(4) Mr. Dupuy was promoted to Chief Executive Officer and President on March 6, 2023.
(5) Mr. Monroe joined the Company on June 1, 2023 as Executive Vice President and Chief Financial Officer.
(6) Mr. Meyer was promoted to Executive Vice President on October 1, 2021.
Community Healthcare Trust | 2024 PROXY STATEMENT
43
GRANTS OF PLAN-BASED AWARDS
The following table provides additional information relating to grants of plan-based awards made to our named
executive officers during 2023.
NAME
Timothy G. Wallace
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L Meyer
All other stock
awards: Number of
shares of stock
(#)(1)
Grant date fair
value of stock
awards
($)
23,133
14,191
2,432
19,548
21,830
7,000
8,161
14,497
1,349
11,957
13,477
15,049
9,100
10,256
11,453
939,662
576,438
88,209
679,684
755,755
229,110
282,534
504,061
46,702
485,693
468,595
520,996
369,642
356,601
396,503
Grant date
1/16/2023
1/16/2023
4/21/2023
7/27/2023
8/10/2023
6/1/2023
6/15/2023
7/27/2023
8/10/2023
1/16/2023
7/27/2023
8/10/2023
1/16/2023
7/27/2023
8/10/2023
(1) The table below shows the number of restricted shares of common stock awarded to the named executive officers in 2023
pursuant to the 2014 Incentive Plan.
Incentive Awards
NAME
Company
Match Salary
(#)
Company
Match Bonus
(#)
3 Year Total
Shareholder
Return Stock
(#)
5 Year Total
Shareholder
Return Stock
(#)
CFO Grant
(#)
Total Stock
Awards
(#)
Timothy G. Wallace
23,133
—
David H. Dupuy
16,623
21,830
William G. Monroe IV
8,161
1,349
Leigh Ann Stach
11,957
15,049
Timothy L. Meyer
9,100
11,453
—
4,887
3,624
3,369
2,564
—
14,661
23,133
58,001
10,873
7,000
31,007
10,108
7,692
40,483
30,809
44
Community Healthcare Trust | 2024 PROXY STATEMENT
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2023
The following table sets forth all outstanding equity awards held by each of our named executive officers at
December 31, 2023.
NAME
Timothy G. Wallace(3)
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
Number of Shares or
Units of Stock That
Have Not Vested
(#)(1)
Market Value of Shares
or Units of Stock That
Have Not Vested
($)(2)
—
209,523
31,007
222,799
78,895
—
5,581,693
826,026
5,935,365
2,101,763
(1) These shares of restricted common stock are subject to five-year or eight-year cliff vesting through 2031, subject to continued
employment with the Company on the vesting date.
(2) The market value of unvested restricted common stock is calculated by multiplying the number of unvested shares of restricted
common stock held by the applicable named executive officer by the closing price of our common stock on December 31,
2023, which was $26.64.
(3)
In accordance with the provisions in Mr. Wallace's employment agreement, as amended, his shares vested upon his death.
y
x
o
r
P
STOCK AWARDS VESTED DURING THE YEAR ENDED DECEMBER 31, 2023
The following table sets forth all stock awards vested by each of our named executive officers during the year ended
December 31, 2023.
NAME
Timothy G. Wallace(2)
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach(2)
Timothy L. Meyer
Number of Shares
Acquired on Vesting
(#)
Value Realized
on Vesting
($)(1)
394,223
14,452,215
—
—
3,927
—
127,628
(1) The value realized on vesting is calculated by multiplying the number of vested awards of restricted common stock held by the
applicable named executive officer by the average price of our common stock on the day of vesting, or the next trading day if
the day of vesting is not a trading day.
(2) Mr. Wallace's and Ms. Stach's value realized on vesting amounts were based on average prices at vesting of $36.66 and $32.50,
respectively.
Community Healthcare Trust | 2024 PROXY STATEMENT
45
POST-EMPLOYMENT COMPENSATION
The tables below illustrate the compensation that would have been received by each of the named executive officers
assuming the officer had been terminated or had been eligible to retire and had elected to retire on December 31,
2023, and that any additional conditions to vesting of restricted stock awards under restricted stock award
agreements had been met. Please see "Compensation Discussion and Analysis- Employment Agreements of Named
Executive Officers as of December 31, 2023" for a more detailed discussion regarding the acceleration and treatment
of such equity awards.
DAVID H. DUPUY
Cash Severance Benefit(1)
Accelerated Vesting Of Restricted Stock(3)
Total Value of Payments
Voluntary
Termination
($)
Not for Cause
Termination
($)
Change-in-
Control
($)
Death or
Disability
($)
Retirement
($)
—
—
—
3,278,730
3,278,730
—
—
8,417,388
8,417,388
8,417,388
8,417,388
11,696,118
11,696,118
8,417,388
8,417,388
WILLIAM G. MONROE IV
Cash Severance Benefit(2)
Accelerated Vesting Of Restricted Stock(3)
Total Value of Payments
Voluntary
Termination
($)
Not for Cause
Termination
($)
Change-in-
Control
($)
Death or
Disability
($)
Retirement
($)
—
—
—
796,800
1,756,800
—
—
1,079,400
1,079,400
1,079,400
1,079,400
1,876,200
2,836,200
1,079,400
1,079,400
LEIGH ANN STACH
Cash Severance Benefit(2)
Accelerated Vesting Of Restricted Stock(3)
Total Value of Payments
Voluntary
Termination
($)
Not for Cause
Termination
($)
Change-in-
Control
($)
Death or
Disability
($)
Retirement
($)
—
—
—
1,453,746
2,346,174
—
—
9,340,117
9,340,117
9,340,117
9,340,117
10,793,863
11,686,291
9,340,117
9,340,117
TIMOTHY L. MEYER
Cash Severance Benefit(2)
Accelerated Vesting Of Restricted Stock(3)
Total Value of Payments
Voluntary
Termination
($)
Not for Cause
Termination
($)
Change-in-
Control
($)
Death or
Disability
($)
Retirement
($)
—
—
—
1,106,334
1,785,492
—
—
3,615,208
3,615,208
3,615,208
3,615,208
4,721,542
5,400,700
3,615,208
3,615,208
(1) Represents the annual base salary at December 31, 2023 for a period of 36-months plus the greater of (1) two times the annual
base salary times 0.67 at December 31, 2023 or (2) the average cash bonus for the last two years times two from the date of such
termination, payable in monthly installments.
(2) Represents the annual base salary at December 31, 2023 for a period of 12-months plus the greater of (1) two times the annual
base salary times 0.33 at December 31, 2023 or (2) the average cash bonus for the last two years times two from the date of such
termination, payable in monthly installments.
(3) Based upon the closing price of a share of the Company's Common Stock on the New York Stock Exchange on December 31,
2023 of $26.64.
46
Community Healthcare Trust | 2024 PROXY STATEMENT
PAY VERSUS PERFORMANCE TABLE
The table below sets forth executive compensation information and financial performance measures for each of the
fiscal years 2023, 2022, 2021, and 2020 for our principal executive officers ("PEOs") and, as an average, for our other
named executive officers ("NEOs").
Summary
Compensation Table
Total for PEO(1)
Compensation
Actually Paid
to PEO(2)
Value of Initial Fixed
$100 Investment
Based On:
Timothy G.
Wallace
($)
David H.
Dupuy
($)
Timothy G.
Wallace
($)
David H.
Dupuy
($)
Year
Average Summary
Compensation
Table Total for
Non-PEO NEOs(3)
($)
Average
Compensation
Actually Paid
to Non-PEO
NEOs(4)
($)
NAREIT All
Equity
REIT Index
TSR(6)
($)
Company
TSR(5)
($)
Net
Income(7)
($)
2023
24,793,238
3,533,747
24,959,265
2,076,455
1,932,118
1,170,765
114.62
144.16
7,714,000
2022
4,540,328
n/a
1,654,573
2021
4,788,861
n/a
5,472,517
2020
3,737,563
n/a
5,082,204
n/a
n/a
n/a
2,304,256
1,356,528
158.89
124.22
22,019,000
2,191,019
2,374,549
200.40
165.51
22,492,000
2,165,944
2,732,964
192.54
117.14
19,077,000
Company
Selected
Measure
Targeted
Dividend
Payout
Ratio(8)
(%)
74
74
78
87
(1) Represents total compensation as calculated on the Summary Compensation Table ("SCT") for Timothy G. Wallace, who was our
CEO and President until his passing on March 3, 2023 and David H. Dupuy, who was appointed as CEO and President on March
6, 2023.
(2) Adjustments to Determine Compensation Actually Paid to Timothy G. Wallace (PEO) for the years 2023, 2022, 2021 and 2020
y
x
o
r
P
and to David H. Dupuy (PEO) for the year 2023 are shown in the table below.
Timothy G.
Wallace
David H.
Dupuy
Timothy G. Wallace
2023
($)
2023
($)
2022
($)
2021
($)
2020
($)
Summary Compensation Table Total
24,793,238
3,533,747
4,540,328
4,788,861
3,737,563
Deduction for Amounts Reported under the
"Stock Awards" Column in the SCT
Increase for Fair Value of Awards Granted during
year that Remain Unvested as of Year End
Increase (Deduction) for Change in Fair Value
from Prior Year End to Current Year End of
Awards Granted in Prior Years that were
Outstanding and Unvested as of Year End
Fair Value as of the Vesting Date of Awards
Granted and Vested in the Same Year
Increase (Deduction) in Fair Value from the
Vesting Date to Prior Year End for Awards
Granted in Prior Years that Vested during the
Year
Deduction for the Fair Value as of Prior Year End
of Awards Forfeited or Cancelled during the
Current Year
Increase based on Dividends or Other Earnings
Paid during the year prior to Vesting Date of
Award
(1,015,989)
(2,125,913)
(2,820,373)
(3,164,711)
(2,530,931)
—
1,545,147
2,450,331
3,055,580
2,504,933
—
(1,387,942)
(3,471,338)
38,081
785,536
848,056
319,137
(264,741)
—
—
—
—
—
—
—
—
—
—
—
—
279,564
511,416
955,625
754,706
585,103
Total Adjustments
166,027
(1,457,292)
(2,885,755)
683,656
1,344,641
Compensation Actually Paid
24,959,265
2,076,455
1,654,573
5,472,517
5,082,204
Community Healthcare Trust | 2024 PROXY STATEMENT
47
(3) Average Summary Compensation for Year 2023, as calculated on the SCT includes William G. Monroe IV, who served as Chief
Financial Officer and Executive Vice President, Leigh Ann Stach, who served as Chief Accounting Officer and Executive Vice
President, and Timothy Meyer, who served as Executive Vice President-Asset Management. Average Summary Compensation for
Years 2022 and 2021 as calculated on the SCT includes David Dupuy, who served as Chief Financial Officer and Executive Vice
President, Leigh Ann Stach, who served as Chief Accounting Officer and Executive Vice President, and Timothy Meyer, who
served as Executive Vice President-Asset Management. Average Summary Compensation for Year 2020 as calculated on the SCT
includes David Dupuy, who served as Chief Financial Officer and Executive Vice President, Leigh Ann Stach, who served as Chief
Accounting Officer and Executive Vice President, and Page Barnes, who served as our Chief Operating Officer and Executive Vice
President.
(4) Adjustments to Determine Average Compensation Actually Paid to Non-PEO NEOs are shown in the table below.
2023
($)
2022
($)
2021
($)
2020
($)
Summary Compensation Table Total
1,932,118
2,304,256
2,191,019
2,165,944
Deduction for Amounts Reported under the "Stock Awards"
Column in the SCT
Increase for Fair Value of Awards Granted during year that
Remain Unvested as of Year End
Increase (Deduction) for Change in Fair Value from Prior Year
End to Current Year End of Awards Granted in Prior Years that
were Outstanding and Unvested as of Year End
Increase (Deduction) in Fair Value from the Vesting Date to
Current Year End for Awards Granted in Prior Years that Vested
during the Year
Deduction for the Fair Value as of Prior Year End of Awards
Forfeited or Cancelled during the Current Year
Increase based on Dividends or Other Earnings Paid during the
year prior to Vesting Date of Award
(1,235,251)
(1,432,502)
(1,432,215)
(1,485,580)
908,424
1,244,515
1,382,175
1,488,488
(703,497)
(1,076,505)
10,338
316,825
(4,320)
(10,955)
—
—
—
—
—
—
284,246
316,764
223,232
247,287
Total Adjustments
(761,353)
(947,728)
183,530
567,020
Average Compensation Actually Paid
1,170,765
1,356,528
2,374,549
2,732,964
(5) Cumulative TSR for the Company is calculated by dividing the sum of the cumulative amount of dividends for the measurement
period (determined in accordance with Item 402(v) of the SEC Regulation S-K), assuming dividend reinvestment, and the
difference between the Company's common share price at the end and the beginning of the measurement period by the
common share price at the beginning of the measurement period.
(6) Cumulative TSR for the Company's Peer Group (NAREIT All Equity REIT Index) is calculated by dividing the sum of the
cumulative amount of dividends for the measurement period (determined in accordance with Item 402(v) of the SEC
Regulation S-K), assuming dividend reinvestment, and the difference between the NAREIT All Equity REIT Index common share
price at the end and the beginning of the measurement period by the common share price at the beginning of the
measurement period.
(7) Represents audited Net Income per our Consolidated Statements of Income included in our Annual Reports on Form 10-K for
each of the years ended December 31, 2023, 2022, 2021, and 2020.
(8) Targeted dividend payout ratio measured using a target dividend for each year divided by actual AFFO for the trailing four
quarters ended June 30 of each year as discussed in more detail in Compensation Discussion and Analysis.
48
Community Healthcare Trust | 2024 PROXY STATEMENT
FINANCIAL PERFORMANCE MEASURES
As described in greater detail in Compensation Discussion and Analysis, beginning on page 19 of this proxy statement,
the Company's executive compensation program is designed to directly align the interests of our executive officers
with those of the stockholders in a way that encourages prudent decision-making and links compensation to our
overall performance. We use a combination of allowing the acquisition of shares of restricted stock in lieu of cash
salary, as well as grants of restricted stock for incentive compensation as the primary means of delivering short-term
and long-term compensation to our executive officers. We believe that restricted stock with long vesting periods align
the interests of executive officers and stockholders and provide strong incentives to our executive officers to achieve
long-term growth in our business, grow the value of our common stock and maintain or increase our dividends. For
the years 2023, 2022 and 2021, our executive officers elected to receive 100% of their compensation (other than
medical benefits and 401k contributions) in shares of restricted stock that cliff vest in 5 or 8 years. The most important
financial performance measures used by the Company to link the Company's performance to the compensation of
its named executive officers for the most recently completed fiscal year are as follows:
Targeted Dividend
Payout Ratio
3 YEAR
TSR Relative to
our Peer Group
5 YEAR
TSR Relative to
our Peer Group
ANALYSIS OF INFORMATION PRESENTED IN THE PAY VERSUS PERFORMANCE TABLE
While the Company uses various performance measures to align executive compensation to the Company's
performance, not all performance measures used are included in the "Pay versus Performance Table" for 2023.
Moreover, the Company seeks to incentivize long-term performance and our executives have elected to receive
all compensation in shares of restricted stock.
y
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Compensation Actually Paid and Cumulative TSR
Company TSR and NAREIT All Equity REIT Index TSR are computed in accordance with Item 402(v) of Regulation S-K.
These metrics are based on dividends and stock prices for each period presented. While the Company's cumulative
TSR was (20)%, 28%, 21%, and 64%, respectively, (lower)higher for the years 2023, 2022, 2021 and 2020 than the
cumulative TSR for the NAREIT All Equity REIT Index, the Company does not use this metric in determining executive
compensation.
Compensation Actually Paid and Net Income
The amount of compensation actually paid to our executive officers is not directly linked to net income. The Company
is a growing real estate company with its real estate portfolio as its largest asset. Though real estate over the long-term
generally increases in value, the assets are depreciated over the useful life of each asset on our consolidated
statements of income in accordance with generally accepted accounting principles. Consequently, depreciation
expense continues to grow as our real estate portfolio grows which significantly reduces the Company's net income.
Compensation Actually Paid and Targeted Dividend Payout Ratio
As described in more detail in Compensation Discussion and Analysis, the Company's Performance Award is
measured using a targeted dividend for each year divided by actual AFFO for the trailing four quarters ended June 30
of each year. The CPA provides for a payment of a range from 0% to 150% of base salary based on decreasing
calculated targeted dividend payout ratios moving from 95% to 80%. The targeted dividend payout ratios resulted in
award percentages of 150% for each of the years 2023, 2022 and 2021 and 90% for 2020. Since the CPA targets 50%
of each executive officer's base pay, the CPA resulted in bonus payments of 75%, 75%, 75% and 45%, respectively, for
the years 2023, 2022, 2021 and 2020. Each of the executive officers elected to take these bonus payments in shares of
restricted stock, through the Company's Alignment of Interest Program, that cliff vest in 8 years.
Community Healthcare Trust | 2024 PROXY STATEMENT
49
Compensation Actually Paid and 3-Year TSR Relative to our Peer Group
As described in more detail in Compensation Discussion and Analysis, the Company's 3-year Total Shareholder Return
Award is designed to be a long term incentive award based on the Company's total shareholder return, as measured
against our peer group for that year. The measurement period for this award is 12 consecutive quarters ended June 30
for each of the years 2023, 2022, 2021, and 2020. The maximum payout for the award is 100% of base salary each year,
but ranges from 0% to 100% of base salary. For 2023, 2022, 2021 and 2020, the payout as a percentage of base salary
was 25%, 25%, 100% and 100%, respectively, to the Company's PEO and other named executive officers. Awards
under this program are issued in shares of restricted stock.
Compensation Actually Paid and 5-Year TSR Relative to our Peer Group
As described in more detail in Compensation Discussion and Analysis, the Company's 5-year Total Shareholder Return
Award (1-year Total Shareholder Return Award for the year 2020) is designed to be a long term incentive award based
on the Company's total shareholder return, as measured against our peer group for that year. The measurement
period for this award is 20 consecutive quarters ended June 30 for each of the years 2023, 2022 and 2021, and 4
consecutive quarters ended June 30 for the year 2020. The maximum payout for the award is 100% of base salary
each year, but ranges from 0% to 100% of base salary. For 2023, 2022 and 2021, the 5-year TSR payout as a percentage
of base salary was 75%, 100%, and 100%, respectively, to the Company's PEO and other named executive officers. For
2020, the 1-year TSR payout as a percentage of base salary was 75% to the Company's PEO and other named
executive officers. Awards under this program are issued in shares of restricted stock.
50
Community Healthcare Trust | 2024 PROXY STATEMENT
Equity Compensation Plan Information
The following table gives information about shares of our common stock that may be issued under our 2014 Incentive
Plan as of December 31, 2023.
PLAN CATEGORY
Equity compensation plans approved
by stockholders(1)
Equity compensation plans not
approved by stockholders
Total
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(#)
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(#)
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation Plans
(Excluding Securities Reflected in
First Column)
(#)
—
—
—
—
—
—
315,617
(2)
333,665
(3)
649,282
(1) Our 2014 Incentive Plan automatically increases, on an annual basis, the number of shares of common stock available for
issuance under the 2014 Incentive Plan to an amount equal to 7% of the total number of shares of common stock outstanding
on December 31 of the immediately preceding year. These annual increases are required because of the level of restricted stock,
versus cash, we utilize in our compensation methodology and was approved by a vote of our shareholders in 2017.
(2) These 315,617 shares will no longer be available for future issuance upon the termination of the 2014 Incentive Plan on March
31, 2024. After this date, the shares available for future issuance will be 1,150,000 shares under the 2024 Incentive Plan, if such
plan is approved by our stockholders at our annual meeting.
(3) These 333,665 shares are reserved under our Alignment of Interest Program for purchase by our employees and directors in
exchange for the cash compensation. See "2014 Incentive Plan" beginning on page 25.
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Community Healthcare Trust | 2024 PROXY STATEMENT
51
PROPOSAL 2
Approval of Community Healthcare Trust
Incorporated 2024 Incentive Plan
Our Board of
Directors
unanimously
recommends a
vote "FOR" the
approval of the
2024 Incentive Plan
On March 4, 2024, each of the Board of Directors and the Compensation Committee of
our Board of Directors adopted and approved the 2024 Incentive Plan, which is
subject to approval by our stockholders at the annual meeting, to adopt a new equity
incentive plan due to the expiration of the 2014 Incentive Plan. The 2024 Incentive
Plan implements the following material changes to the previous 2014 Incentive Plan:
• Freezes all awards under the 2014 Incentive Plan as of March 31, 2024, the
expiration date of the plan
• Removes the “evergreen provision” which allowed for the incremental, automatic
increase in the number of shares of common stock reserved in the Plan Pool
• Restricts the reloading of authorized shares except for those arising from
forfeitures of awards
• Maintains the amended change in control definition which removed the original
2014 Incentive Plan's liberal change in control definition
• Increases the number of shares of common stock authorized for issuance under
the 2024 Incentive Plan to 1,150,000 shares
• Increases the number of shares that may be awarded in any calendar year to any
eligible person from 150,000 shares to 300,000 shares
• Expands the types of awards that may be granted under the 2024 Incentive Plan
to include stock options and stock appreciation rights (SARs)
• Extends the right to grant awards under the 2024 Incentive Plan through March
4, 2034
The Board of Directors and the Compensation Committee determined that it was in
the best interest of the Company and our stockholders to adopt the 2024 Incentive
Plan in light of (1) our Alignment of Interest Program which utilizes restricted stock
with long vesting periods to provide strong incentives to our executive officers to
achieve long-term growth in our business, (2) our continued desire to utilize our
equity to obtain, attract, retain and incentivize qualified employees and directors,
and (3) our 2014 Incentive Plan terminates on March 31, 2024 and without approval
of the 2024 Incentive Plan we would lose an important element of our
compensation program.
REASONABLE PLAN COSTS
In its determination to recommend that the Board approve the 2024 Incentive Plan, the Compensation Committee
considered a number of factors, including the following:
• The 1,150,000 shares being requested is reasonable based on our burn rate for the past three years, as shown
below
• The overall plan size would not have a substantially dilutive effect, as shown below
• The stockholder-friendly features of the 2024 Incentive Plan, as described further below
52
Community Healthcare Trust | 2024 PROXY STATEMENT
BURN RATE
The following table sets forth information regarding historical awards granted and earned for the 2021 through 2023
period, and the corresponding burn rate, which is defined as the number of shares subject to awards granted in a
fiscal year divided by the weighted-average common shares outstanding for the last three fiscal years:
Restricted Shares Granted
($)
Weighted Average Common
Shares Outstanding - Basic
($)
216,662
201,016
175,901
197,860
25,202,448
23,630,978
23,263,218
24,032,215
Burn Rate
(%)
0.86
0.85
0.76
0.82
YEAR
2023
2022
2021
Three Year Average
SHARE DILUTION
The table below shows our weighted average common shares outstanding - basic as of December 31, 2023 and
estimated dilution calculation:
New Shares Requested
Existing Shares Available
Weighted Average Common Shares Outstanding - Basic (1)
Dilution (Basic) (2)
1,150,000
0
25,202,448
4.6%
y
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(1) Excludes the 1,446,685 unvested restricted shares as shown in Note 8 to our Consolidated Financial Statements in our Annual
Report on Form 10-K for the year ended December 31, 2023. Of the 1,446,685 unvested restricted shares, 898,017 are award
shares and 548,668 are shares that employees acquired in lieu of cash compensation for base salary and annual incentive
awards.
(2) Reflects New Shares Requested plus Existing Shares Available divided by weighted average common shares outstanding-basic
as of December 31, 2023.
SUMMARY OF THE 2024 INCENTIVE PLAN
The following description is only a summary of the material features of the 2024 Incentive Plan and does not describe
all of its provisions. A copy of the 2024 Incentive Plan is included in this Proxy Statement as Appendix A.
General
The 2024 Incentive Plan freezes all future awards under the 2014 Incentive Plan and permits the grant of stock
options (including both incentive stock options (ISOs) and nonqualified stock options), stock appreciation rights
(SARs), restricted stock, restricted stock units (RSUs), performance awards, and cash awards.
Shares Subject to the 2024 Incentive Plan
The aggregate number of shares of common stock that may be issued pursuant to awards under the 2024 Incentive
Plan is equal to 1,150,000 shares. No more than 300,000 shares may be awarded in any calendar year to any
participant. To the extent an award is forfeited, the shares of common stock covered thereby will not be charged
against the maximum shares limitations and may again be made subject to award under the 2024 Incentive Plan.
Community Healthcare Trust | 2024 PROXY STATEMENT
53
Plan Administration
The 2024 Incentive Plan is administered by the Compensation Committee of the Board of Directors. All members of
the Compensation Committee must be "non-employee directors" as that term is defined under Rule 16b-3
promulgated under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and "outside
directors" as defined in Section 162(m) and the regulations promulgated thereunder. The Compensation Committee,
acting as the administrator of the 2014 Incentive Plan (in such role the Compensation Committee will be referred to
as the "administrator"), will have the discretionary authority, subject to the express limitations of the 2024 Incentive
Plan, to grant and determine the terms of awards, interpret plan provisions, and make all other determinations
necessary or advisable for plan administration. The administrator may, in its discretion, delegate to one or more
members of the Compensation Committee such of its duties, powers and responsibilities as it may determine.
Eligibility
Persons eligible to participate in the 2024 Incentive Plan are employees of the Company or any of its subsidiaries or
affiliates and any director, consultant, or other independent contractor providing services to the Company or any of its
subsidiaries or affiliates.
Stock Options
A stock option is the right to purchase shares of common stock at a future date at a specified price per share called
the exercise price. An option may be either an ISO or a nonqualified stock option. ISOs and nonqualified stock options
are taxed differently, as described under Federal Income Tax Treatment of Awards Under the Plan. Except in the case
of options granted pursuant to an assumption or substitution for another option, the exercise price of a stock option
may not be less than the fair market value (or in the case of an ISO granted to a ten percent shareholder, 110% of the
fair market value) of a share of common stock on the grant date. As of the record date, the closing price of our
common stock was $27.14. Full payment of the exercise price must be made at the time of such exercise either in
cash or bank check or in another manner approved by the Committee.
Stock Appreciation Rights
A SAR is the right to receive payment of an amount equal to the excess of the fair market value of a share of common
stock on the date of exercise of the SAR over the exercise price. The exercise price of a SAR may not be less than the
fair market value of a share of common stock on the grant date. SARs may be granted alone (”freestanding rights”) or
in tandem with options (”related rights”).
Restricted Stock
A restricted stock award is an award of actual shares of common stock which are subject to certain restrictions for a
period of time determined by the Committee. Restricted stock may be held by the Company in escrow or delivered to
the participant pending the release of the restrictions. Participants who receive restricted stock awards generally have
the rights and privileges of shareholders regarding the shares of restricted stock during the restricted period, including
the right to vote and the right to receive dividends.
Restricted Stock Units
An RSU is an award of hypothetical common stock units having a value equal to the fair market value of an identical
number of shares of common stock, which are subject to certain restrictions for a period of time determined by the
Committee. No shares of common stock are issued at the time an RSU is granted, and the Company is not required to
set aside any funds for the payment of any RSU award. Because no shares are outstanding, the participant does not
have any rights as a shareholder. The Committee may grant RSUs with a deferral feature (deferred stock units or
DSUs), which defers settlement of the RSU beyond the vesting date until a future payment date or event set out in the
participant’s award agreement. RSUs and DSUs are credited with dividend equivalents unless set forth to the contrary
in the award agreement.
Performance Awards
A performance award is an award of shares of common stock or units that are only earned if certain conditions are
met. The Committee has the discretion to determine the number of shares of common stock or stock-denominated
units subject to a performance share award, the applicable performance period, the conditions that must be satisfied
for a participant to earn an award, and any other terms, conditions, and restrictions of the award.
54
Community Healthcare Trust | 2024 PROXY STATEMENT
Cash Awards
The Committee may grant cash awards that are designated performance compensation awards.
Vesting
The Plan allows for awards subject to either time-based vesting or performance-based vesting or both. Awards
subject to time-based vesting have a vesting schedule of one-third of the RSUs awarded on each June 30 over the
three-year service period and awards subject to performance-based vesting have a minimum performance period of 3
years. The Committee has the authority to determine the vesting schedule of each award, and to accelerate the
vesting and exercisability of any award.
Transferability
Awards under the Plan may not be transferred other than by will or the laws of descent and distribution.
Trading Policy Restrictions
Awards under the 2024 Incentive Plan shall be subject to the Company's Insider Trading Policies and Procedures, as
such may be amended and/or restated from time to time.
Termination of Service
In general, unless otherwise provided in a participant's employment agreement or the administrator expressly
provides otherwise in an award agreement, upon termination of a participant's employment or other service
relationship with the Company or its subsidiaries or affiliates for cause or for a reason other than death or disability, an
unvested award will be forfeited without consideration.
Tax Withholding
Upon taxable events with respect to an award, the participant shall pay to the Company the amounts necessary to
satisfy applicable federal, state and local withholding tax requirements or shall otherwise make arrangements
satisfactory to the Company for such requirements. With respect to withholding required upon any taxable event, the
Company may elect in its discretion, and participants may elect, subject to the approval of the Compensation
Committee, to satisfy the withholding requirement, in whole or in part, by withholding or having the Company
withhold shares of common stock having a fair market value on the date the tax is to be determined equal to (and
shall not exceed) the minimum statutory total tax which could be imposed on the transaction.
Amendments and Termination
The Board of Directors may at any time amend or terminate the 2024 Incentive Plan provided that, no amendment
may, without stockholder consent, be made that would (i) change the class of eligible persons under the plan, (ii)
increase the number of shares available for issuance under the 2024 Incentive Plan, (iii) increase the aggregate
number of shares of common stock that can be granted, or (iv) require approval of the Company's stockholders under
the listing requirements of the exchange or trading system through which common stock may be listed or traded at
the time of the amendment. Notwithstanding anything to the contrary, the Board of Directors may amend the 2024
Incentive Plan without further approval to the extent necessary under Section 409A of the Code to effectively defer
compensation in the manner contemplated under each respective award.
Unless terminated earlier as permitted under the 2024 Incentive Plan, the 2024 Incentive Plan shall terminate on
March 4, 2034. No termination of the 2024 Incentive Plan shall adversely affect any award previously granted without
the consent of recipient or its permitted transferee.
Adjustments to Awards
As a result of certain transactions (such as any recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other change or distribution with respect to the shares of common stock), the plan administrator will make
appropriate adjustments to (i) the maximum number and type of shares available for issuance under the 2024
Incentive Plan, (ii) the number and type of shares of common stock, share units or other rights subject to outstanding
awards, (iii) the price for each share or unit or other rights subject to then outstanding awards, (iv) the performance
targets or goals applicable to any outstanding performance awards to the extent such performance targets or goals
are expressed as amounts per share, or (v) any other terms of an award that are affected by such an event.
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Community Healthcare Trust | 2024 PROXY STATEMENT
55
Change in Control Provisions
Except as otherwise provided in an award agreement, in the event of a change in control (defined below) in which the
surviving entity does not assume or substitute outstanding awards, then all such outstanding awards will become
immediately 100% vested. Alternatively, upon a change in control in which the surviving entity does assume or
provide substitute awards, then if a participant's employment is terminated by the Company without Cause (as
defined in the participant's employment agreement, award agreement or the 2024 Incentive Plan, as applicable) or by
the participant for Good Reason (as defined in 2024 Incentive Plan), in either case, within the eighteen (18) month
period following a change in control), then any outstanding awards granted under the 2024 Incentive Plan held by
such participant shall automatically become fully vested to the extent not previously forfeited. For this purpose
"change of control" means a dissolution or liquidation of the Company, a reorganization, merger or consolidation
where the Company is not the surviving entity, the sale of substantially all the assets of the Company, an acquisition
where the stockholders immediately prior to such transaction would not own immediately after such transaction at
least 50% of the voting stock of the surviving corporation. To the extent necessary to satisfy Section 409A of the Code,
an event will not constitute a change or control unless is constitutes a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of assets of the Company, as described in Section 409A of
the Code and the regulations thereunder.
Existing Programs
The compensation programs (as amended) currently underlying our 2014 Incentive Plan, which consist of the
Alignment of Interest Program, Executive Officer Incentive Program, and Non-Executive Officer Incentive Program, will
carryforward and become programs underlying our 2024 Incentive Plan.
New 2024 Incentive Plan Benefits
The future benefits or amounts that would be received under the 2024 Incentive Plan by executive officers, non-
executive officer employees and non-employee directors are discretionary and are therefore not determinable at this
time. Similarly, the benefits or amounts which would have been received by or allocated to such persons for the last
completed fiscal year if the 2024 Incentive Plan had been in effect, as amended, would have been discretionary and
are, therefore, indeterminable.
Registration Statement
If stockholders approve the 2024 Incentive Plan, the Company intends to file a registration statement on Form S-8
under the Securities Act of 1933, as amended, to register the shares of common stock that may be issuable pursuant
to the 2024 Incentive Plan. The registration statement is expected to become effective upon filing.
FEDERAL TAX EFFECTS
The following discussion summarizes certain U.S. federal income tax consequences of transactions under the 2024
Incentive Plan. This discussion does not describe all U.S. federal income tax consequences under the 2024 Incentive
Plan, nor does it describe state, local, foreign tax or all U.S. federal non-income tax consequences. Participants should
consult their own tax advisors about potential tax consequences of participating in the 2024 Incentive Plan.
Nonqualified Stock Options
The grant of a nonqualified stock option will not result in taxable income to the participant. The participant will
recognize ordinary income at the time of exercise equal to the excess of the fair market value of the shares on the
date of exercise over the exercise price and the Company will be entitled to a corresponding deduction for tax
purposes. Gains or losses realized by the participant upon the sale of the shares acquired on exercise will be treated as
capital gains or losses.
Incentive Stock Options (ISOs)
The grant of an ISO will not result in taxable income to the participant. The exercise of an ISO will not result in taxable
income to the participant if at the time of exercise the participant has been employed by the Company or its
subsidiaries at all times beginning on the date the ISO was granted and ending not more than 90 days before the
date of exercise. However, the excess of the fair market value of the shares on the date of exercise over the exercise
price is an adjustment that is included in the calculation of the participant’s alternative minimum tax liability for the
year the shares are sold.
56
Community Healthcare Trust | 2024 PROXY STATEMENT
If the participant does not sell the shares acquired on exercise within two years from the date of grant and one year
from the date of exercise then on the sale of the shares any amount realized in excess of the exercise price will be
taxed as capital gain. If the amount realized in the sale is less than the exercise price, then the participant will
recognize a capital loss.
If these holding requirements are not met, then the participant will generally recognize ordinary income at the time
the shares are sold in an amount equal to the lesser of (a) the excess of the fair market value of the shares on the date
of exercise over the exercise price, or (b) the excess, if any, of the amount realized on the sale of the shares over the
exercise price, and the Company will be entitled to a corresponding deduction.
SARs
The grant of a SAR will not result in taxable income to the participant. The participant will recognize ordinary income
at the time of exercise equal to the amount of cash received or the fair market value of the shares received and the
Company will be entitled to a corresponding deduction for tax purposes. If the SARs are settled in shares, then when
the shares are sold the participant will recognize capital gain or loss on the difference between the sale price and the
amount recognized at exercise. Whether it is a long-term or short-term gain or loss depends on how long the shares
are held.
Restricted Stock and Performance Shares
Unless a participant makes an election to accelerate the recognition of income to the grant date (as described below),
the grant of restricted stock or performance share awards will not result in taxable income to the participant. When
the restrictions (the risk of forfeiture) lapses, a participant generally will have ordinary income equal to the excess of
the fair market value of the shares at that time over the purchase price, if any.
A participant may make an election under Section 83(b) of the Code to be taxed on shares of stock at the time they
are acquired rather than later, when the substantial risk of forfeiture lapses. This so-called "83(b) election" must be
made not later than thirty (30) days after the transfer of the shares to the participant and must satisfy certain other
requirements. If the participant makes an effective 83(b) election, the participant will realize ordinary income equal to
the fair market value of the shares as of the time of such transfer, less any amount paid for the shares. Fair market
value for this purpose is to be determined without regard to the forfeiture restrictions. If the participant makes an
effective 83(b) election, no additional income will result by reason of the lapsing of the restrictions.
For purposes of determining capital gain or loss on a sale of shares awarded under the 2024 Incentive Plan, the
holding period in the shares begins when the participant realizes taxable income with respect to the transfer of such
shares to the participant. However, if the participant makes an effective 83(b) election in connection with an award or
purchase of stock subject to a substantial risk of forfeiture and later forfeits shares, the tax loss realized as a result of
the forfeiture is limited to the excess of the amount paid by the participant to acquire the shares (if any) over the
amount (if any) reimbursed in connection with the forfeiture.
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RSUs and PSUs
The grant of an RSU or PSU will not result in taxable income to the participant. When the RSU is settled, the
participant will recognize ordinary income equal to the fair market value of the shares or the cash provided on
settlement and the Company will be entitled to a corresponding deduction. Any future appreciation will be taxed at
capital gains rates.
Section 409A
Awards under the 2024 Incentive Plan are intended either to be exempt from the rules of Section 409A of the Code or
to satisfy those rules, and shall be construed accordingly. Granted awards may be modified at any time, in the
administrator's discretion, so as to increase the likelihood of exemption from or compliance with the rules of Section
409A. If an award is subject to Section 409A of the Code and a violation occurs, the compensation is includible in
income when no longer subject to a substantial risk of forfeiture and the participant may be subject to a 20% penalty
tax and, in some cases, interest penalties.
Section 162(m) and Limits on the Company's Deductions
Section 162(m) of the Code denies deductions to publicly held corporations for compensation paid to certain senior
executives that exceeds $1,000,000.
Community Healthcare Trust | 2024 PROXY STATEMENT
57
Certain Change in Control Payments
Under the Code, the vesting and payments of awards in connection with a change in control of a corporation may be
required to be valued and taken into account in determining whether participants have received compensatory
payment, contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial
portion of amounts payable to the participant, including some recognized by reason of the granting, vesting or
exercise of awards, may be subject to an additional 20% federal tax and may be non-deductible to the corporation.
REQUIRED VOTE
Approval of the 2024 Incentive Plan requires the affirmative vote of a majority of the shares of common stock cast on
the matter. Abstentions and broker non-votes will have no effect on the outcome of the proposal.
58
Community Healthcare Trust | 2024 PROXY STATEMENT
PROPOSAL 3
Non-Binding Advisory Vote on Executive
Compensation
Our Board of
Directors
unanimously
recommends a
vote "FOR" the
resolution
approving the
compensation of
the Company's
named executive
officers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the
Dodd-Frank Act, enables the Company's stockholders to vote to approve, on a non-
binding advisory basis, the compensation of the Company's named executive officers
as disclosed in this proxy statement in accordance with the SEC's rules.
As discussed in the Compensation Discussion and Analysis section of this proxy
statement beginning on page 19, the Company's executive compensation policies are
designed to align the interests of the named executive officers with the interests of our
shareholders, link executive compensation to the Company's overall performance, and
attract, retain, and motivate our named executive officers. The Board believes that its
executive compensation programs have been effective at appropriately aligning pay
and Company performance, promoting the achievement of the long-term positive
results in its performance criteria, and enabling the Company to attract and retain
talented executives within its industry.
Further, the Board believes it has been responsive to shareholder feedback since last
year's "say-on-pay" vote as seen in the significant changes we made to our executive
officer compensation program in January 2024. These changes are discussed further in
the New 2024 Named Executive Officer Compensation Program section of this Proxy
Statement beginning on page 33.
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The Board is asking stockholders to indicate their support for the named executive
officer compensation described in this proxy statement. This proposal, commonly
known as a "say-on-pay" proposal, gives stockholders the opportunity to express views
on the Company's executive compensation for its named executive officers. This vote is
not intended to address any specific item of compensation, but rather the overall
compensation of the Company's named executive officers and the policies and
procedures described in this proxy statement. Accordingly, the Board asks
stockholders to vote "FOR" the following resolution:
RESOLVED, that the stockholders of Community Healthcare Trust Incorporated
approve, on a non-binding advisory basis, the compensation of the named executive
officers as disclosed pursuant to Item 402 of Regulation S-K in the Company's proxy
statement for the 2024 annual meeting of stockholders.
Although this is an advisory vote that will not be binding on the Compensation
Committee or the Board, the Board will carefully review the results of the vote. The
Compensation Committee will also carefully consider stockholders' concerns when
designing future executive compensation programs.
Required Vote
The affirmative vote of a majority of the shares cast on the matter is required to
approve, on an advisory basis, the say on pay vote. As an advisory vote, this proposal is
not binding upon us. However, the Compensation Committee of our Board of Directors,
which is responsible for designing and administering our executive compensation
program, values the opinions expressed by our stockholders and will consider the
outcome of the vote when making future compensation decisions.
Community Healthcare Trust | 2024 PROXY STATEMENT
59
PROPOSAL 4
Our Board of
Directors
unanimously
recommends a
vote "FOR" the
ratification of BDO
USA, P.C. as our
independent
registered public
accountants for
2024.
Ratification of the Appointment of BDO
USA, P.C. as Our Independent Registered
Public Accountants for 2024
General
We are asking our stockholders to ratify the selection of BDO USA, P.C. as our
independent registered public accountants for 2024. Although current law, rules and
regulations, as well as the charter of the Audit Committee, require the Audit
Committee to engage, retain and supervise our independent registered public
accountants, we view the selection of the independent registered public accountants
as an important matter of stockholder concern and thus are submitting the selection
of BDO USA, P.C. for ratification by stockholders as a matter of good corporate
practice.
The Audit Committee appointed BDO USA, P.C. to serve as our independent registered
public accountants for the 2023 fiscal year and has appointed BDO USA, P.C. to serve
as our independent registered public accountants for the 2024 fiscal year. A
representative of BDO USA, P.C. is expected to attend the annual meeting. If present,
the representative will have the opportunity to make a statement and will be available
to respond to appropriate questions. BDO USA, P.C. has served as our independent
registered public accountants since 2015.
Audit and Non-Audit Services
Fees related to services performed for us by BDO USA, P.C. in fiscal years 2023 and 2022 are as follows:
Audit Fees(1)
Audit-Related Fees
Tax Fees
All Other Fees
Total
2023
($)
2022
($)
717,005
714,456
—
—
—
—
—
—
717,005
714,456
(1) Audit fees include fees and expenses associated with the audit of our financial statements, the reviews of the financial
statements in our quarterly reports on Form 10-Q, and services provided in connection with registration statements and periodic
reports filed with the Securities and Exchange Commission. Audit fees for 2023 include fees associated with registration
statements totaling $91,067 and fees related to auditing our internal control over financial reporting. Audit fees for 2022 include
fees associated with registration statements totaling $122,655 and fees related to auditing our internal control over financial
reporting.
In accordance with the procedures set forth in its charter, the Audit Committee pre-approves all auditing services and
permitted non-audit and tax services (including the fees and terms of those services) to be performed for us by our
independent registered public accountants prior to their engagement with respect to such services, subject to the de
minimis exceptions for non-audit services permitted by the Exchange Act, which are approved by the Audit
Committee prior to the completion of the audit.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Required Vote
The affirmative vote by a majority of the votes cast at the annual meeting is required for the ratification of the
appointment of BDO USA, P.C. as our independent registered public accountants. Abstentions will have no effect on
this proposal. If our stockholders fail to ratify this appointment, the Audit Committee will reconsider whether to retain
BDO USA, P.C. and may retain that firm or another firm without resubmitting the matter to our stockholders. Even if
the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different
independent registered public accountant at any time during the year if it determines that such change would be in
our best interests and in the best interests of our stockholders.
Report of the Audit Committee
The information provided in this section shall not be deemed to be "soliciting material" or to be "filed" with the
SEC or subject to its proxy regulations or to the liabilities of Section 18 of the Exchange Act. The information
provided in this section shall not be deemed to be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Exchange Act.
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors. Management has
the primary responsibility for the preparation, consistency and fair presentation of the financial statements, the
accounting and financial reporting process, the systems of internal control, and the procedures designed to ensure
compliance with accounting standards, applicable laws and regulations. Management is also responsible for its
assessment of the design and effectiveness of our internal control over financial reporting. Our independent registered
public accountants are responsible for performing an audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States), or PCAOB, and expressing an opinion on the conformity of the financial
statements of the Company with U.S. generally accepted accounting principles and expressing an opinion on the
effectiveness of our internal controls over financial reporting. The internal auditors are responsible to the Audit
Committee and the Board of Directors for testing the integrity of the financial accounting and reporting control
systems and such other matters as the Audit Committee and the Board of Directors determine.
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In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited
financial statements of the Company for the year ended December 31, 2023 and management's assessment of the
design and effectiveness of our internal control over financial reporting as of December 31, 2023. The discussion
addressed the quality, and not just the acceptability, of the accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed and discussed with the independent public accountants their judgments as to the
quality of our accounting principles and such other matters as are required to be discussed with the committee under
PCAOB auditing standards including, without limitation, the matters required to be discussed by PCAOB Auditing
Standard No. 1301. In addition, the Audit Committee received the written disclosures and the letter from the
independent registered public accountants required by applicable requirements of the PCAOB regarding the
independent registered public accountants' communications with the Audit Committee concerning independence,
discussed with the independent registered public accountants their independence from management and the
Company, and considered the compatibility of non-audit services with the auditors' independence.
The Audit Committee discussed with our internal and independent registered public accountants the overall scope
and plans for their respective audits. The Audit Committee met with the internal and independent registered public
accountants, with and without management present, to discuss the results of their examinations, their understanding
of our internal controls, and the overall quality of our financial reporting.
In reliance upon the reviews and discussions referred to above, the Audit Committee recommended to the Board of
Directors (and the Board has approved) that the audited financial statements be included in our annual report to
stockholders for filing with the SEC.
Community Healthcare Trust | 2024 PROXY STATEMENT
61
The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and
are not experts in the fields of accounting or auditing, including with respect to auditor independence. Members of
the Audit Committee rely without independent verification on the information provided to them and on the
representations made by management and the independent registered public accounting firm. Accordingly, the
Audit Committee's oversight does not provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles, or appropriate internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations and discussions referred to above do not assure that the audit of the Company's financial
statements has been carried out in accordance with the standards of the PCAOB, that the financial statements are
presented in accordance with generally accepted accounting principles or that BDO USA, P.C. is in fact "independent."
Audit Committee:
Robert Hensley (Chairman)
Cathrine Cotman
Claire Gulmi
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Community Healthcare Trust | 2024 PROXY STATEMENT
Beneficial Ownership of Shares of Common Stock
DIRECTORS, EXECUTIVE OFFICERS AND OTHER STOCKHOLDERS
As of February 29, 2024, we had 45 stockholders of record. Except as otherwise stated in a footnote, the following
table presents certain information regarding the beneficial ownership of our common stock as of February 29, 2024
by: (i) the persons known by us to own beneficially more than 5% of our common stock; (ii) each of our directors,
nominees for director and named executive officers; and (iii) all of our directors, nominees for director, and executive
officers as a group. Each person named in the table has sole voting and investment power with respect to all of the
common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table.
The SEC has defined "beneficial ownership" of a security to mean the possession, directly or indirectly, of voting power
and/or investment power over such security. A stockholder is also deemed to be, as of any date, the beneficial owner
of all securities that such stockholder has the right to acquire within 60 days after that date through (1) the exercise of
any option, warrant or right, (2) the conversion of a security, (3) the power to revoke a trust, discretionary account or
similar arrangement or (4) the automatic termination of a trust, discretionary account or similar arrangement. In
computing the number of shares beneficially owned by a person and the percentage ownership of that person, our
common stock subject to options or other rights (as set forth above) held by that person that are currently exercisable
or will become exercisable within 60 days thereafter, are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated, the business address of all the individuals and entities is c/o Community Healthcare Trust
Incorporated, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. No common stock beneficially owned by
any director or named executive officer has been pledged as security for a loan.
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NAME OF BENEFICIAL OWNER
5% Stockholders
BlackRock, Inc.
The Vanguard Group, Inc.
State Street Corporation
Directors and Director Nominees
Cathrine Cotman
Alan Gardner
Claire Gulmi
Robert Hensley
Lawrence Van Horn
Named Executive Officers
David H. Dupuy
William G. Monroe IV
Leigh Ann Stach
Timothy L. Meyer
Number of Shares
Beneficially Owned
(#)
Percentage of
All Shares
(%)(1)
4,763,930 (2)
2,898,621 (3)
1,673,756 (4)
9,885
58,396
32,189
55,471
39,877
341,570
59,505
364,329
149,138
17.2
10.5
6.0
*
*
*
*
*
1.2
*
1.3
*
Community Healthcare Trust | 2024 PROXY STATEMENT
63
NAME OF BENEFICIAL OWNER
All Directors and Executive Officers as a Group (9 persons total)
Other Officers and Employees
Number of Shares
Beneficially Owned
(#)
Percentage of
All Shares
(%)(1)
1,110,360
409,941
4.0
1.5
*
Less than 1% of the outstanding shares of common stock.
(1) Based on 27,691,036 shares of common stock outstanding on February 29, 2024.
(2) Based on a Schedule 13G/A filed with the SEC on January 19, 2024, BlackRock, Inc. has sole voting power with respect to
4,684,170 shares of common stock and sole dispositive power with respect to 4,763,930 shares of common stock. A subsidiary of
BlackRock, Inc., BlackRock Fund Advisors, beneficially owns 5% or greater of the outstanding shares of common stock reported
on BlackRock's Schedule 13G/A. BlackRock, Inc. is located at 50 Hudson Yards, New York, NY 10001.
(3) Based on a Schedule 13G/A filed with the SEC on February 13, 2024, The Vanguard Group, Inc. has shared voting power with
respect to 59,233 shares of common stock, sole dispositive power with respect to 2,816,507 shares of common stock and shared
dispositive power with respect to 82,114 shares of common stock. The Vanguard Group, Inc. is located at 100 Vanguard
Boulevard, Malvern, PA 19355.
(4) Based on a Schedule 13G/A filed with the SEC on January 30, 2024, State Street Corporation has shared voting power with
respect to 1,360,152 shares of common stock and shared dispositive power with respect to 1,671,356 shares of common stock.
State Street Corporation is located at State Street Financial Center, 1 Congress Street, Suite 1, Boston, MA 02114.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Certain Relationships and Related Party Transactions
POLICIES AND PROCEDURES FOR RELATED PERSON TRANSACTIONS
Our Audit Committee has adopted a written policy governing the approval of related party transactions that complies
with all applicable requirements of the SEC and the NYSE concerning related party transactions. Under our policy, a
related party transaction is a transaction between the Company and a related party (including any transaction
requiring disclosure under Item 404 of Regulation S-K under the Exchange Act), other than transactions available to
all employees generally or involving less than $5,000 when aggregated with similar transactions. "Related parties"
include (i) an officer or director of the Company, (ii) a person who is an immediate family member of an officer or
director; (iii) an entity which is owned or controlled by an officer or director or an immediate family member of an
officer or director, or an entity in which an officer or director or an immediate family member of an officer or director is
deemed to have a substantial ownership interest or control of such entity by virtue of such person owning more than
20% of such entity; and (iv) any person known to be the beneficial owner of more than 5% of any class of the
Company's voting securities. Members of an officer's or director's immediate family include such officer's or director's
spouse, child, stepchild, parent, stepparent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-
in-law or sister-in-law and any other person sharing the household of such officer or director. For purposes of this
policy, officers are defined as "executive officers" under applicable guidelines of the SEC. Additionally, a "Related Party"
may be a person or entity that proposes to enter into a transaction with the Company if the Audit Committee finds
that such transaction would require disclosure under Item 404 of Regulation S-K.
Our related party transaction policy is administered by our Audit Committee. At each fiscal year's first regularly-
scheduled Audit Committee meeting, management or the ESG Committee, as applicable, will provide the Audit
Committee with detailed information concerning all related party transactions, if any, then known by management to
be entered into or to be continued by the Company for the fiscal year. Under the related party transactions policy,
there is a general presumption that a related party transaction with the Company will not be approved by the Audit
Committee. However, the Audit Committee may approve a related party transaction if: (i) the Audit Committee finds
that the transaction is on terms comparable to those that could be obtained in arm's length dealings with an
unrelated third party; and (ii) the Audit Committee finds that it has been fully apprised of all significant conflicts that
may exist or otherwise arise on account of the transaction, and it believes, nonetheless, that the Company is warranted
entering into the related party transaction and has developed an appropriate plan to manage the potential conflicts
of interest. The Audit Committee will consider each proposed related party transaction and may approve the
Company's entering into or continuing such related party transaction if the transaction satisfies the guidelines set
forth above.
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RELATED PARTY TRANSACTIONS
Pursuant to its authority and based on discussions with management and BDO USA, P.C., the Audit Committee has
determined that there have been no related party transactions requiring disclosure under Item 404(a) of Reg. S-K.
LEGAL PROCEEDINGS
We are not aware of any current legal proceedings involving any of our directors, director nominees, or executive
officers and either the Company or any of its subsidiaries.
Community Healthcare Trust | 2024 PROXY STATEMENT
65
Stockholder Proposals for the 2025 Annual Meeting
At the annual meeting each year, the Board of Directors submits to stockholders its nominees for election as directors.
In addition, the Board may submit other matters to the stockholders for action at the annual meeting. Stockholders
may also submit proposals for action at the annual meeting.
Stockholders interested in submitting a proposal for inclusion in our proxy materials for the 2025 annual meeting of
stockholders may do so by following the procedures described in Rule 14a-8 of the Exchange Act. If the 2025 annual
meeting is held within 30 days of May 2, 2025, stockholder proposals must be received by William G. Monroe IV,
Corporate Secretary, at 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee, 37067, no later than 5:00 p.m., Eastern
Time on November 14, 2024 in order for such proposals to be considered for inclusion in the proxy statement and
form of proxy relating to such annual meeting.
Any stockholder proposals (including recommendations of nominees for election to the Board of Directors) intended
to be presented at the Company's 2025 annual meeting of stockholders, other than a stockholder proposal submitted
pursuant to Exchange Act Rule 14a-8, must be received in writing at our principal executive offices no earlier than on
October 15, 2024, nor later than 5:00 p.m., Eastern Time, on November 14, 2024, together with all supporting
documentation required by our Bylaws. For more complete information on these requirements, please refer to our
Bylaws.
To comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees,
other than the Company’s nominees, must provide notice that sets forth the information required by Rule 14a-19
under the Exchange Act no later than March 3, 2025.
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Community Healthcare Trust | 2024 PROXY STATEMENT
Other Matters
As of the date of this proxy statement, management does not know of any other matters to be brought before the
annual meeting other than those set forth herein. However, if any other matters are properly brought before the
annual meeting, the persons named in the enclosed form of proxy will have discretionary authority to vote all proxies
with respect to such matters in accordance with their best judgment.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE COMPANY. PLEASE
SUBMIT A PROXY BY INTERNET, BY PHONE OR, IF YOU REQUEST WRITTEN PROXY MATERIALS BY RETURNING A
COMPLETED, SIGNED AND DATED PROXY CARD OR VOTING INSTRUCTION FORM.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
Upon written request of any record holder or beneficial owner of shares entitled to vote at the annual meeting, we will
provide, without charge, a copy of our Annual Report on Form 10-K. Requests should be mailed to William G. Monroe
IV, Corporate Secretary, 3326 Aspen Grove Drive, Suite 150, Franklin, Tennessee 37067. You may also access our Annual
Report on Form 10-K on the investor relations webpage of our Internet website, http://investors.chct.reit.
By Order of the Board of Directors,
William G. Monroe IV
Secretary
March 14, 2024
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Community Healthcare Trust | 2024 PROXY STATEMENT
67
Appendix A — Community Healthcare Trust Incorporated
2024 Incentive Plan
COMES NOW, Community Healthcare Trust Incorporated (the "Corporation”), this 4th day of March, 2024, to adopt the
Community Healthcare Trust Incorporated 2024 Incentive Plan (the “Plan”) to be effective on the Effective Date as
defined below.
WHEREAS, the Corporation previously established the 2014 Incentive Plan (the “2014 Plan”), which provided for the
award of restricted stock, restricted stock units, and cash bonuses to employees, directors and consultants in order to
advance the interests of the Corporation and its Subsidiaries and Affiliates (together, “CHCT”), by stimulating the efforts
of employees, directors and consultants, increasing their desire to continue in their employment with or services to
CHCT, assisting CHCT in competing effectively with other enterprises for the services of its employees, directors, and
others necessary for the continued improvement of operations, and attracting and retaining the best possible
personnel for service as employees, officers, and directors of the Corporation and its affiliates and subsidiaries;
WHEREAS, the 2014 Plan is set to expire on March 31, 2024, and presently has a small number of shares of Common
Stock available for Award; therefore, the Corporation desires to (i) freeze all future Awards under the 2014 Plan; (ii)
adopt the new Plan; and (iii) authorize 1,150,000 shares to be reserved under the Plan.
NOW, THEREFORE, the Corporation hereby adopts the Plan, as follows:
1. PURPOSE.
The purpose of the Plan is to promote the interests of CHCT and its shareholders by (i) attracting and retaining key
officers, employees, and directors of, and consultants to, the Corporation and its Subsidiaries and Affiliates; (ii)
motivating such individuals by means of performance-related incentives to achieve long-range performance goals; (iii)
enabling such individuals to participate in the long-term growth and financial success of the Corporation; (iv)
encouraging ownership of stock in the Corporation by such individuals; and (v) linking their compensation to the long-
term interests of the Corporation and its shareholders. Toward this objective, the Committee may grant stock options,
SARs, Stock Awards, Units, cash bonuses and other incentive awards to Employees of CHCT on the terms and subject
to the conditions set forth in the Plan. Under the Plan, the Committee shall have the authority (in its sole discretion) to
grant stock options to employees as either “incentive stock options” within the meaning of Code Section 422(b) or
“non-qualified stock options”. In addition, this Plan is intended to enable CHCT to effectively attract, retain, and reward
Outside Directors by providing for grants of Outside Director Awards to Outside Directors. No Award under this Plan
(or modification thereof) shall provide for deferral of compensation that does not comply with Section 409A of the
Code unless the Committee, at the time of grant, specifically provides that the Award is not intended to comply with
Section 409A of the Code. Notwithstanding any provision of this Plan to the contrary, if one or more of the payments
or benefits received or to be received by a Participant pursuant to an Award would cause the Participant to incur any
additional tax or interest under Section 409A of the Code, the Committee may reform such provision to maintain to
the maximum extent practicable the original intent of the applicable provision without violating the provisions of
Section 409A of the Code.
2. DEFINITIONS.
2.1 “Affiliate” means any entity (other than the Corporation and any Subsidiary) that is designated by the Board
as a participating employer under the Plan, provided that the Corporation directly or indirectly owns at least
20% of the combined voting power of all classes of equity of that entity or at least 20% of the ownership
interests in that entity.
2.2 “Award” means any form of Option, SAR, Stock Award, Units, cash bonus, or other incentive award granted
under the Plan, whether singly, in combination, or in tandem, to a Participant by the Committee pursuant to
terms, conditions, restrictions and limitations, if any, as the Committee may establish by the Award
Agreement or otherwise.
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2.3 “Award Agreement” means a written notice from the Corporation to a Participant that establishes the terms,
conditions, restrictions, and limitations applicable to an Award in addition to those established by the Plan
and by the Committee's exercise of its administrative powers. In the event of a conflict between the terms of
the Plan and any Award Agreement, the terms of the Plan shall prevail. The Committee shall, subject to
applicable law, determine the date an Award is deemed to be granted. The Committee or, except to the
extent prohibited under applicable law, its delegate(s) may establish the terms of agreements or other
documents evidencing Awards under this Plan and may, but need not, require as a condition to any such
agreement's or document's effectiveness that such agreement or document be executed by the Participant,
including by electronic signature or other electronic indication of acceptance, and that such Participant
agree to such further terms and conditions as specified in such agreement or document.
2.4 “Board” means the Board of Directors of the Corporation.
2.5 “Cause” unless otherwise set forth in an Employment Agreement, means involuntary termination of a
Participant’s employment or services due to: (i) conviction of a crime of moral turpitude that adversely affects
the reasonable business interests of CHCT, (ii) commission of an act of fraud, embezzlement, or material
dishonesty against CHCT, or (iii) intentional neglect of the responsibilities of employment, and such neglect
remains uncorrected for more than 30 days following written notice from CHCT detailing the acts of neglect.
2.6 “Change In Control” means the first to occur of any of the following:
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any “person” or “group” as those terms are used in Sections 13(d) and 14(d) of the Exchange Act or any
successors thereto is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act or any successor thereto), directly or indirectly, of securities of the Corporation representing 50% or
more of the combined voting power of the Corporation’s then outstanding securities;
at any time during any 24-month period at least a majority of the members of the Board shall cease to
consist of “continuing directors” (meaning directors of the Corporation who either were directors prior
to such 24-month period or who subsequently became directors and whose election, or nomination
for election by the Corporation’s shareholders, was approved by a vote of at least two-thirds of the
directors then still in office who were directors prior to such 24-month period); or
the consummation of a merger or consolidation of the Corporation with any other entity, other than a
merger or consolidation (A) which would result in all or a portion of the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) more than 60% of the
combined voting power of the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation or (B) by which the corporate existence of the
Corporation is not affected and following which the Corporation’s chief executive officer and directors
retain their positions with the Corporation (and constitute at least a majority of the Board); or
the stockholders of the Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation’s
assets.
Notwithstanding the foregoing, (i) to the extent necessary to satisfy Section 409A of the Code, an event
will not constitute a Change in Control unless it constitutes a change in the ownership or effective
control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation ,
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as described in Section 409A of the Code and the regulations thereunder, and (ii) the Board may
determine, if it deems it to be in the best interest of the Corporation and consistent with a good faith
interpretation of this Plan, that an event or events otherwise constituting a Change of Control shall not
be so considered. Such determination shall be effective if it is made by the Board prior to the
occurrence of an event that otherwise would be or probably will lead to a Change in Control or after
such event if made by the Board a majority of which is composed of all directors who were members
of the Board immediately prior to the event that otherwise would be or probably will lead to a Change
in Control. Upon such determination, such event or events shall not be deemed to be a Change in
Control for any purposes under this Plan.
2.7 “Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.8 “Committee” means the Compensation Committee of the Board, or any other committee designated by the
Board, authorized to administer the Plan under Section 3 of this Plan. The Committee shall consist of not
less than 2 members who shall be appointed by, and shall serve at the pleasure of, the Board. The directors
appointed to serve on the Committee shall be: (i) “independent” within the meaning of the listing standards
of any securities exchange or automated quotation system upon which the Common Stock is listed or
quoted; and (ii) “non-employee directors” (within the meaning of Rule 16b-3(b)(3) under the Exchange Act).
However, the mere fact that a Committee member fails to qualify under any of the foregoing requirements
shall not invalidate any Award made by the Committee if the Award is otherwise validly made under the
Plan.
2.9 “Common Stock” means common stock, par value $0.01 per share, of the Corporation.
2.10 “Consultant” shall mean any consultant to the Corporation or its Subsidiaries or Affiliates.
2.11 “Director” means an individual who is a member of the Board.
2.12 “Disability” unless set forth to the contrary in an Employment Agreement, means a Participant: (i) is unable
to engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a continuous period of
not less than twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a continuous period of
not less than twelve (12) months, receiving income replacement benefits for a period of not less than three
(3) months under an accident and health plan covering employees or directors of CHCT. Medical
determination of Disability may be made by either the Social Security Administration or by the provider of an
accident or health plan covering Employees or Directors of CHCT provided that the definition of “disability”
applied under such disability insurance program complies with the requirements of the preceding sentence.
Upon the request of the plan administrator, the Participant must submit proof to the plan administrator of
the Social Security Administration’s or the provider’s determination.
2.13 “Effective Date” is defined in Section 6.
2.14 “Employee” means an employee or prospective employee of the Corporation, a Subsidiary or an Affiliate.
2.15 “Employment Agreement” means a written agreement between CHCT and the Participant which (i) sets
forth the terms and conditions of the Participant's employment with or services to CHCT, or (ii) contains any
restrictive covenants such as confidentiality or non-competition or non-solicitation provisions.
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2.16 “Exchange Act” means the Securities and Exchange Act of 1934, as amended from time to time.
2.17 “Exercise Price” means the purchase price payable to purchase one Share upon the exercise of an Option or
the price by which the value of a SAR shall be determined upon exercise, pursuant to Section 2.30.
2.18 “Fair Market Value” means the closing price of the shares of Stock on a national securities exchange on
which it is principally traded on the day on which such value is to be determined or, if no shares were traded
on such day, on the next preceding day on which shares of Stock were traded, as reported by the National
Quotation Bureau, Inc. or other national quotation service. If the shares are not traded on a national
securities exchange but are traded in the over-the-counter market, Fair Market Value of Stock means the
closing “asked” price of the shares in the over-the-counter market on the day on which such value is to be
determined or, if such “asked” price is not available, the last sales price on such day or, if no shares of Stock
were traded on such day, on the next preceding day on which shares of Stock were traded, as reported by
the National Association of Securities Dealers Automated Quotation System (NASDAQ) or other national
quotation service. If the Stock is traded neither on a national securities exchange nor in the over-the-counter
market, the Fair Market Value of Stock shall be determined based upon such factors as the Board or
Committee, as applicable, shall reasonably deem appropriate, including without limitation prices or values at
which the Stock has most recently been issued to third parties or redeemed or purchased from shareholders,
and which shall be in accordance with Treas. Reg. Section 1.409A-1(b)(5)(iv).
2.19 “Good Reason” means, in the first 18 months following a Change in Control, a Participant’s voluntary
termination of employment or services within the 180 days of the occurrence one or more of the following
conditions, provided, the Participant notified CHCT of such condition within 90 days of its occurrence and
CHCT did not remedy such condition within 30 days:
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b.
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a material diminution in the Participant’s authority, duties, or responsibilities;
a material diminution in the Participant’s base compensation as in effect on the date of the Change in
Control; or
the required relocation of the Participant to a place of work more than 35 miles from the place of work
in effect as of the Change in Control.
2.20 “Grant Date” means the date on which the Committee adopts a resolution, or takes other appropriate action,
expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a
later date is set forth in such resolution, then such date as is set forth in such resolution.
2.21 “Incentive Stock Option” means an option to purchase Common Stock from the Corporation that is granted
under Section 8 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any
successor provision thereto. To the extent the aggregate Fair Market Value (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to which all Incentive Stock Options
are exercisable for the first time by an Employee during any calendar year (under all plans described in
subsection (d) of Section 422 of the Code of the Employee's employer corporation and its parent and
Subsidiaries) exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.
2.22 “Non-Qualified Stock Option” shall mean an option to purchase Common Stock from the Corporation that
is granted under Section 8 or 24 of the Plan and is not intended to be an Incentive Stock Option.
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2.23 “Option” means an Incentive Stock Option or a Non-Qualified Stock Option.
2.24 “Outside Director” means a member of the Board who is not an officer or employee of CHCT.
2.25 “Outside Director Award” means either a Director Option or a Director Stock Award or combination thereof
awarded to an Outside Director under Section 24.
2.26 “Participant” means any individual to whom an Award has been granted by the Committee under this Plan.
2.27 “Performance Goals” means, for a Performance Period, the one or more goals established by the Committee
for the Performance Period based upon business criteria or other performance measures determined by the
Committee in its discretion.
2.28 “Performance Period” means the one or more periods of time not less than one fiscal quarter in duration, as
the Committee may select, over which the attainment of one or more Performance Goals will be measured
for the purpose of determining a Participant’s right to and the payment of a Performance Share Award or a
cash Award.
2.29 “Performance Share Award” means any Award granted pursuant to Section 11 hereof.
2.30 “Performance Share” means the grant of a right to receive a number of actual shares of Common Stock or
share units based upon the performance of the Corporation during a Performance Period, as determined by
the Committee.
2.31 “Restricted Award” means any Award granted pursuant to Plan Section 10.
2.32 “SAR” is an Award that shall entitle the recipient to receive, with respect to each share of Common Stock
encompassed by the exercise of the SAR, a payment equal to the excess of the Fair Market Value on the date
of exercise over the Fair Market Value on the date of grant.
2.33 “Section 16” means Section 16 of the Exchange Act and the rules promulgated thereunder and any
successor provision thereto as in effect from time to time.
2.34 “Section 16 Insider” means a Participant who is subject to the reporting requirements of Section 16 as a
result of the Participant's position with CHCT.
2.35 “Stock Award” means an Award granted pursuant to Section 10 in the form of shares of Common Stock or
restricted shares of Common Stock.
2.36 “Subsidiary” means a corporation or other business entity in which CHCT or any Affiliate, directly or indirectly,
has an ownership interest of 50% or more.
2.37 “Units” means units of Restricted Stock as defined in Section 10.1.
3. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall have the discretionary authority to: (a)
interpret the Plan; (b) establish any rules and regulations it deems necessary for the proper operation and
administration of the Plan; (c) select persons to become Participants and receive Awards under the Plan; (d)
determine the form of an Award, whether an Option, SAR, Stock Award, Unit, cash bonus, or other incentive award
established by the Committee, the number of shares subject to the Award, all the terms, conditions, restrictions and
limitations, if any, of an Award, including the time and conditions of exercise or vesting, and the terms of any Award
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Agreement; (e) determine whether Awards should be granted singly, in combination or in tandem; (f) grant waivers of
Plan terms, conditions, restrictions and limitations; (g) accelerate the vesting, exercise or payment of an Award or the
performance period of an Award in the event of a Participant's termination of employment or when that action or
actions would be in the best interests of CHCT; (h) establish such other types of Awards, besides those specifically
enumerated in Section 2.2, which the Committee determines are consistent with the Plan's purpose; and (i) take all
other action it deems necessary or advisable for the proper operation or administration of the Plan. Subject to Section
21, the Committee also shall have the authority to grant Awards in replacement of Awards previously granted under
the Plan or any other executive compensation plan of CHCT or a Subsidiary. All determinations of the Committee
shall be made by a majority of its members, and its determinations shall be final, binding, and conclusive on all
persons, including CHCT and Participants.
The Committee, in its discretion, may delegate its authority and duties under the Plan to the Chief Executive Officer or
to other senior officers of CHCT under conditions and limitations the Committee may establish; however, only the
Committee may select, grant, and establish the terms of Awards to Section 16 Insiders.
4. ELIGIBILITY.
Any Employee, Director or Consultant shall be eligible to be designated a Participant; provided, however, that Non-
Employee Directors shall only be eligible to receive Awards granted consistent with Section 24.
5. NUMBER OF SHARES AVAILABLE.
Subject to adjustment as provided in Section 16 of the Plan, the maximum number of shares of Common Stock that
shall be available for grant of Awards under the Plan (including Incentive Stock Options) during its term shall not
exceed 1,150,000 shares. Any shares of Common Stock related to Awards that terminate by expiration, forfeiture,
cancellation, or otherwise without the issuance of the related shares or settlement in cash, shall be available again for
grant under the Plan. Notwithstanding anything to the contrary contained herein: shares subject to an Award under
the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares
tendered in payment of an Option, (b) shares delivered or withheld by the Corporation to satisfy any tax withholding
obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued
upon the settlement of the Award. Notwithstanding any provision in the Plan to the contrary, and subject to
adjustment as provided in Section 16 hereof, no Participant may receive Awards, Options, SARs or any combination
thereof during any 12-month period with respect to more than 300,000 shares of Common Stock. For purposes of this
limitation, forfeited, canceled or repriced shares granted to a Participant in any given calendar year shall continue to
be counted against the maximum number of shares that may be granted to that Participant in that calendar year.
The shares of Common Stock available for issuance under the Plan may be authorized and unissued shares, treasury
shares or shares reacquired by the Corporation in any manner.
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6. EFFECTIVE DATE; TERM.
The Plan is effective March 4, 2024 (“Effective Date”), the date on which the Board of CHCT approved the Plan, subject
to the approval of the Plan by at least a majority vote of shareholders voting in person or by proxy at a duly held
shareholders' meeting on May 2, 2024. No Awards may be granted under the Plan after the tenth anniversary of the
Effective Date of the Plan. This Plan shall remain in effect until terminated by action of the Board.
7. PARTICIPATION.
The Committee shall select, from time to time, Participants from those Employees, Directors, and Consultants who, in
the opinion of the Committee, can further the Plan's purposes. Once a Participant is selected, the Committee shall
determine the type or types of Awards to be made to the Participant and shall establish in the related Award
Agreements the terms, conditions, restrictions and limitations, if any, applicable to the Awards in addition to those set
forth in the Plan and the administrative rules and regulations issued by the Committee.
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8. STOCK OPTIONS.
8.1 Grants. Awards may be granted in the form of Options. Options may be Incentive Stock Options, other tax-
qualified stock options, or Non-Qualified Stock Options, or a combination of any of those.
8.2 Terms and Conditions of Options. An Option shall be exercisable in whole or in such installments and at the
times determined by the Committee. The Committee also shall determine the performance or other
conditions, if any, which must be satisfied before all or part of an Option may be exercised. The price at which
Common Stock may be purchased upon exercise of a stock option shall be established by the Committee,
but such price shall not be less than 110% of the Fair Market Value of the Common Stock on the date the
Option is granted in the case of Incentive Stock Options when the Employee to whom the option is to be
granted owns stock possessing more than 10% of the total combined voting power of all classes of stock of
CHCT or of any of its Subsidiaries (a “Ten Percent Owner”), and in the case of all Options other than Incentive
Stock Options, not less than 100% of the Fair Market Value of the Common Stock on the date the Option is
granted. Each Option shall expire not later than 10 years (or, in the case of an Incentive Stock Option granted
to a Ten Percent Owner, not later than 5 years) from its date of grant.
8.3 Restrictions Relating to Incentive Stock Options. Incentive Stock Options shall, in addition to being subject
to all applicable terms, conditions, restrictions and limitations established by the Committee, comply with
Section 422 of the Code. Accordingly, Incentive Stock Options may only be granted to Employees who are
employees of the Corporation or a Subsidiary, and the aggregate market value (determined at the time the
option was granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by a Participant during any calendar year (under the Plan or any other plan of the Corporation
or any of its Subsidiaries) shall not exceed $100,000 (or other limit required by the Code). Except with
respect to Ten Percent Owners, each Incentive Stock Option shall expire not later than 10 years from its date
of grant. No Incentive Stock Option may be exercisable more than three (3) months after a Participant ceases
to be an Employee.
8.4 Additional Terms and Conditions. The Committee may, by way of the Award Agreement or otherwise,
establish other terms, conditions, restrictions, and limitations, if any, on any Option, provided they are not
inconsistent with the Plan. Without limiting the generality of the foregoing, Options may provide for the
automatic granting of new options (“reload options”) at the time of exercise.
8.5 Exercise. The Committee shall determine the methods by which the Exercise Price of an Option may be
paid, the form of payment, including, without limitation, cash, shares of Common Stock, or other property
(including “cashless exercise” arrangements, so long as they do not in any way conflict with the requirements
of applicable law), and the methods by which shares of Common Stock shall be delivered or deemed to be
delivered by Participants. If, however, shares of Common Stock are used to pay the Exercise Price of an
Option, those shares must have been held by the Participant for at least 6 months (or any shorter or longer
period necessary to avoid a charge to CHCT's earnings for financial reporting purposes).
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9. STOCK APPRECIATION RIGHTS.
9.1 Grants. Awards may be granted in the form of SARs. The SAR may be granted in tandem with all or a
portion of a related Option under the Plan (“Tandem SARs”), or may be granted separately (“Freestanding
SARs”). A Tandem SAR may be granted either at the time of the grant of the related Option or at any time
thereafter during the term of the Option. In the case of SARs granted in tandem with Options granted prior
to the grant of the SARs, the appreciation in value is the difference between the option price of the related
stock option and the Fair Market Value of the Common Stock on the date of exercise.
9.2 Terms and Conditions of Tandem SARs. A Tandem SAR shall be exercisable to the extent, and only to the
extent, that the related Option is exercisable, and the “exercise price” of that SAR (the base from which the
value of the SAR is measured at its exercise) shall be the Exercise Price under the related Option. If a related
Option is exercised as to some or all of the shares of Common Stock covered by the Award, the related
Tandem SAR, if any, shall be canceled automatically to the extent of the number of shares of Common Stock
covered by the Option exercise. Upon exercise of a Tandem SAR as to some or all of the shares of Common
Stock covered by the Award, the related Option shall be canceled automatically to the extent of the number
of shares of Common Stock covered by the exercise.
9.3 Terms and Conditions of Freestanding SARs. Freestanding SARs shall be exercisable in whole or in the
installments and at the times determined by the Committee. Freestanding SARs shall have a term specified
by the Committee, in no event to exceed 10 years. The Exercise Price of a Freestanding SAR shall also be
determined by the Committee; however, that price shall not be less than 100% of the Fair Market Value on
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the date of grant of the Freestanding SAR of the number of shares of Common Stock to which the
Freestanding SAR relates. The Committee also shall determine the Qualified Performance Measures or other
conditions, if any, that must be satisfied before all or part of a Freestanding SAR may be exercised.
9.4 Deemed Exercise. The Committee may provide that an SAR shall be deemed to be exercised at the close of
business on the scheduled expiration date of the affected SAR if at that time the SAR by its terms remains
exercisable and, if so exercised, would result in a payment to the holder of the SAR.
9.5 Additional Terms and Conditions. The Committee may, by way of the Award Agreement or otherwise,
determine such other terms, conditions, restrictions and limitations, if any, of any SAR Award, provided they
are not inconsistent with the Plan.
10. RESTRICTED AWARDS.
A Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or hypothetical Common Stock
units (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of
Common Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred
or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any
obligation or for any other purpose for such period (the “Restricted Period”) as the Committee shall determine. Each
Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted Award so
granted shall be subject to the conditions set forth in this Section 10, and to such other conditions not inconsistent
with the Plan as may be reflected in the applicable Award Agreement.
10.1 Restricted Stock and Restricted Stock Units.
a. Each Participant shall be provided an Award Agreement with respect to the Restricted Stock setting
forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the
Committee determines that the Restricted Stock shall be held by the Corporation or in escrow rather
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than delivered to the Participant pending the release of the applicable restrictions, the Committee may
require the Participant to additionally execute and deliver to the Corporation (A) an escrow agreement
satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to
the Restricted Stock covered by such agreement. Unless otherwise stated in the Award Agreement, the
Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock,
including the right to vote such Restricted Stock and the right to receive dividends.
b. The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement.
No shares of Common Stock shall be issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside funds for the payment of any such Award. A Participant shall
have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee may
also grant Restricted Stock Units with a deferral feature, whereby settlement is deferred beyond the
vesting date until the occurrence of a future payment date or event set forth in an Award Agreement
(“Deferred Stock Units”). At the discretion of the Committee or as otherwise set forth in the Award
Agreement, each Restricted Stock Unit or Deferred Stock Unit (representing one share of Common
Stock) may be credited with an amount equal to the cash and stock dividends paid by the Company in
respect of one share of Common Stock (“Dividend Equivalents”). Dividend Equivalents shall be paid as set
forth in the Award Agreement, which date shall not be later than the March 15th of the calendar year
following the year in which the Units vest.
10.2 Award Restrictions.
a. Restricted Stock awarded to a Participant shall be subject to the following restrictions until the
expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the
applicable Award Agreement and/or Employment Agreement: (A) if an escrow arrangement is used, the
Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the
restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject to
forfeiture to the extent provided in the applicable Award Agreement and/or Employment Agreement;
and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a shareholder with respect to such shares shall
terminate without further obligation on the part of the Company.
b. Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A)
forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance
Goals during such period, to the extent provided in the applicable Award Agreement and/or
Employment Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are
forfeited, all rights of the Participant to such Restricted Stock Units or Deferred Stock Units shall
terminate without further obligation on the part of the Company and (B) such other terms and
conditions as may be set forth in the applicable Award Agreement.
c.
The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock,
Restricted Stock Units and Deferred Stock Units whenever it may determine that, by reason of changes
in Applicable Laws or other changes in circumstances arising after the date the Restricted Stock or
Restricted Stock Units or Deferred Stock Units are granted, such action is appropriate.
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10.3 Restricted Period. With respect to Restricted Awards, the Restricted Period shall commence on the Grant
Date and end at the time or times set forth on a schedule established by the Committee in the applicable
Award Agreement.
10.4 Delivery of Restricted Stock and Settlement of Restricted Stock Units. Upon the expiration of the
Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 10.2 and
the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as
set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the
Corporation shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate
evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the
Restricted Period has expired (to the nearest full share). Upon the expiration of the Restricted Period with
respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to
any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary,
without charge, one share of Common Stock for each such outstanding vested Restricted Stock Unit or
Deferred Stock Unit (“Vested Unit”); provided, however, that, if explicitly provided in the applicable Award
Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Stock
in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made in lieu of
delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of
the Common Stock as of the date on which the Restricted Period lapsed in the case of Restricted Stock
Units, or the delivery date in the case of Deferred Stock Units, with respect to each Vested Unit.
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10.5 Stock Restrictions. Each certificate representing Restricted Stock awarded under the Plan shall bear a
legend in such form as the Corporation deems appropriate.
10.6 Compliance with Law. Notwithstanding any other provision of this Section 10, Stock Awards may be issued
only after there has been compliance with all applicable federal and state securities laws, and such issuance
will be subject to this overriding condition. CHCT may include shares of Restricted Stock in a registration, but
will not be required to register or qualify Restricted Stock with the SEC or any state agency.
11. PERFORMANCE SHARE AWARDS.
Each Performance Share Award granted under the Plan shall be evidenced by an Award Agreement. Each
Performance Share Award so granted shall be subject to the conditions set forth in this Section 11, and to such other
conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. The Committee
shall have the discretion to determine: (i) the number of shares of Common Stock or stock-denominated units subject
to a Performance Share Award granted to any Participant; (ii) the Performance Period applicable to any Award; (iii) the
conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and
restrictions of the Award.
11.1 Earning Performance Share Awards. The number of Performance Shares earned by a Participant will
depend on the extent to which the performance goals established by the Committee are attained within the
applicable Performance Period, as determined by the Committee.
Community Healthcare Trust | 2024 PROXY STATEMENT
77
12. PLAN CASH BONUSES.
While cash bonuses may be granted at any time outside this Plan, cash awards may also be granted in addition to
other Awards granted under the Plan and in addition to cash awards made outside of the Plan. Subject to the
provisions of the Plan, the Committee shall have authority to determine the persons to whom cash bonuses under the
Plan shall be granted and the amount, terms, and conditions of those cash bonuses. Notwithstanding anything to the
contrary in this Plan, no cash bonus awarded pursuant to the Plan shall be paid later than 2 ½ months after the end of
the calendar year in which such bonus was earned.
13. PAYMENT OF AWARDS.
At the discretion of the Committee, payment of Awards may be made in cash, Common Stock, a combination of cash
and Common Stock, or any other form of property the Committee shall determine. In addition, payment of Awards
may include terms, conditions, restrictions, and limitations, if any, the Committee deems appropriate, including, in the
case of Awards paid in the form of Common Stock, restrictions on transfer and forfeiture provisions.
14. TERMINATION OF EMPLOYMENT.
If a Participant's employment with CHCT terminates for Cause or for a reason other than death or Disability, or any
other approved reason, then, to the maximum extent allowed by applicable law, all unexercised, unvested, unearned,
and unpaid Awards, including without limitation, Awards earned but not yet paid, shall be canceled or forfeited, as the
case may be, unless the Participant's Award Agreement or Employment Agreement provides otherwise. The
Committee shall have the authority to promulgate rules and regulations to (i) determine what events constitute
Disability, or termination for an approved reason for purposes of the Plan, and (ii) determine the treatment of a
Participant under the Plan in the event of a Participant's death, Disability, or termination for an approved reason.
15. NO ASSIGNMENT.
No Awards (other than unrestricted Stock Awards) or any other payment under the Plan shall be subject in any
manner to alienation, anticipation, sale, transfer (except by will or the laws of descent and distribution), assignment,
pledge, or encumbrance; however, the Committee may (but need not) permit other transfers where the Committee
concludes that transferability (i) does not result in accelerated taxation, (ii) does not cause any option intended to be
an incentive stock option to fail to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any state or federal securities laws applicable to transferable Awards. During the lifetime
of the Participant, no Award shall be payable to or exercisable by anyone other than the Participant to whom it was
granted, other than (a) the duly appointed conservator or other lawfully designated representative of the Participant in
the case of a permanent Disability involving a mental incapacity or (b) the transferee in the case of an Award
transferred in accordance with the preceding sentence.
16. CAPITAL ADJUSTMENTS.
The number and price of shares of Common Stock covered by each Award and Outside Director Award and the total
number of shares of Common Stock that may be awarded under the Plan shall be proportionately adjusted to reflect
any stock dividend, stock split or share combination of the Common Stock, or any recapitalization of CHCT. In the
event of any merger, consolidation, reorganization, liquidation, or dissolution of CHCT, or any exchange of shares
involving the Common Stock, any Award or Outside Director Award granted under the Plan shall automatically be
deemed to pertain to the securities and other property to which a holder of the number of shares of Common Stock
covered by the Award or Outside Director Award would have been entitled to receive in connection with any such
event. The Committee shall have the sole discretion to make all interpretations and determinations required under
this Section 16 to the extent it deems equitable and appropriate. It is the intent of any such adjustment that the value
of the Awards or Outside Director Awards held by the Participants or Outside Directors, as the case may be,
immediately following the change is the same as that value immediately prior to the change.
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Community Healthcare Trust | 2024 PROXY STATEMENT
17. WITHHOLDING TAXES.
CHCT shall have the power and the right to deduct or withhold, or require a Participant to remit to CHCT, an amount
sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of this Plan. With respect to withholding required upon
any taxable event, CHCT may elect in its discretion, and Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by withholding or having CHCT withhold
shares of Common Stock having a Fair Market Value on the date the tax is to be determined equal to (and shall not
exceed) the minimum statutory total tax which could be imposed on the transaction. All elections by Participants
shall be irrevocable, made in writing, and signed by the Participant.
18. NONCOMPETITION; CONFIDENTIALITY.
Unless otherwise provided in an Employment Agreement, the restrictive covenants of this Section 18 shall apply to all
Awards. For purposes of this Section 18, “CHCT” shall include any Subsidiary or Affiliate employing the Participant. A
Participant will not, without the written consent of CHCT, either during or after his or her employment by CHCT,
disclose to anyone or make use of any confidential information which he or she has acquired during his or her
employment relating to any of the business of CHCT, except as such disclosure or use may be required in connection
with his or her work as an employee of CHCT, or as demanded by a subpoena issued by a court of competent
jurisdiction, if the Participant gives notice of the demand to CHCT as soon as reasonably possible after receipt of the
subpoena. The confidential information of CHCT includes, but is not limited to, all technology, recipes, business
systems and styles, customer lists, and all other CHCT proprietary information not generally known to the public.
During Participant's employment by CHCT, he or she will not, either as principal, agent, consultant, employee, or
otherwise, engage in any work or other activity in competition with CHCT in the field or fields in which he or she has
worked for CHCT. Unless the Award Agreement specifies otherwise, a Participant shall forfeit all rights under this Plan
to any unexercised or unpaid Awards if, in the determination of the Committee, the Participant has violated the
restrictive covenants (confidentiality, non-competition, and/or non-solicitation) set forth in this Section 18, and in that
event any further payment or other action with respect to any Award shall be made or taken, if at all, in the sole
discretion of the Committee.
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19. REGULATORY APPROVALS AND LISTINGS.
Notwithstanding anything contained in the Plan to the contrary, CHCT shall have no obligation to issue or deliver
certificates of Common Stock evidencing Stock Awards or any other Award resulting in the payment of shares of
Common Stock prior to (a) the obtaining of any approval from any governmental agency which CHCT shall, in its sole
discretion, determine to be necessary or advisable, (b) the admission of the shares to quotation or listing on the
automated quotation system or stock exchange on which the Common Stock may be listed, and (c) the completion
of any registration or other qualification of the shares under any State or Federal law or ruling of any governmental
body that CHCT shall, in its sole discretion, determine to be necessary or advisable.
20. PLAN AMENDMENT.
Except as provided in Section 23, the Board or the Committee may, at any time and from time to time, suspend,
amend, modify, or terminate the Plan without shareholder approval; however, if an amendment to the Plan would, in
the reasonable opinion of the Board or the Committee, either (i) result in repricing Options or otherwise increase the
benefits accruing to Participants or Outside Directors, (ii) increase the number of shares of Common Stock issuable
under the Plan, or (iii) modify the requirements for eligibility, then that amendment shall be subject to shareholder
approval; and, the Board or Committee may condition any amendment or modification on the approval of
shareholders of CHCT if that approval is necessary or deemed advisable to (i) permit Awards to be exempt from
liability under Section 16(b), (ii) to comply with the listing or other requirements of an automated quotation system or
stock exchange, or (iii) to satisfy any other tax, securities or other applicable laws, policies or regulations.
Community Healthcare Trust | 2024 PROXY STATEMENT
79
21. AWARD AMENDMENTS.
Except as provided in Section 23, the Committee may amend, modify, or terminate any outstanding Award or Outside
Director Award without approval of the Participant or Outside Director, as applicable; however:
a.
b.
c.
d.
except as otherwise provided in Section 20, subject to the terms of the applicable Award Agreement,
an amendment, modification, or termination shall not, without the Participant's or Outside Director's
consent, as applicable, reduce or diminish the value of the Award or Outside Director Award
determined as if the Award or Outside Director Award had been exercised, vested, cashed in (at the
spread value in the case of stock options or SARs), or otherwise settled on the date of that amendment
or termination;
the original term of any Option, SAR, or Unit may not be extended without the prior approval of the
shareholders of CHCT;
except as otherwise provided in Section 16 of the Plan, the exercise price of any Option or SAR may not
be reduced, directly or indirectly, without the prior approval of the shareholders of CHCT; and
no termination, amendment, or modification of the Plan shall adversely affect any Award or Outside
Director Awards previously granted under the Plan, without the written consent of the affected
Participant or Outside Director.
22. GOVERNING LAW.
This Plan shall be governed by and construed in accordance with the laws of the State of Maryland, except as
superseded by applicable Federal law.
23. CHANGE IN CONTROL.
Unless stated otherwise in an Award Agreement or Employment Agreement, the provisions of this Section 23 will
apply to outstanding Awards at the time of a Change in Control to the extent of rights under such Awards that have
not been previously forfeited. The surviving corporation or entity or acquiring corporation or entity, or affiliate of such
corporation or entity, may assume any Awards outstanding under the Plan or substitute similar equity and incentive
awards (including an award to acquire the same consideration paid to the stockholders in the transaction described
in this Section 23.1) for those outstanding under the Plan.
23.1 No Assumption of Awards. In the event that any surviving corporation or entity or acquiring corporation or
entity in a Change in Control, or affiliate of such corporation or entity, does not assume such Awards and
does not substitute similar awards for those outstanding under the Plan, then all Awards outstanding shall,
immediately prior to the Change in Control event, become fully vested to the extent not previously forfeited.
23.2 Assumption of Awards. In the event that any surviving corporation or entity or acquiring corporation or
entity in a Change in Control, or affiliate of such corporation or entity, assumes Awards outstanding under the
Plan at the time of the Change in Control, or substitutes Awards with similar stock awards (including an
award to acquire the same consideration paid to the stockholders in the transaction described in this Article
23 for those outstanding under the Plan), and the employment or service of a Participant is terminated
without Cause or by the Participant for Good Reason within eighteen (18) months after the effective date of
the Change in Control event, all Awards held by such Participant shall become fully vested to the extent not
previously forfeited.
80
Community Healthcare Trust | 2024 PROXY STATEMENT
23.3 Miscellaneous. Upon a Change in Control, no action, including, without limitation, the amendment,
suspension or termination of the Plan, shall be taken that would adversely affect the rights of any Participant
or the operation of the Plan with respect to any Option to which a Participant may have become entitled
hereunder on or prior to the date of the Change in Control or to which such Participant may become entitled
as a result of such Change in Control.
24. AWARDS TO OUTSIDE DIRECTORS.
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24.1 Other Payments. The Board may provide that all or a portion of an Outside Director's annual retainer,
meeting fees, and/or other awards or compensation as determined by the Board, be payable (either
automatically or at the election of an Outside Director) in the form of Non-Qualified Stock Options, Stock
Awards, Units, and/or Other Stock-Based Awards, including unrestricted Shares. The Board shall determine
the terms and conditions of any such Awards, including the terms and conditions which shall apply upon a
termination of the Non-Employee Director's service as a member of the Board, and shall have full power and
authority in its discretion to administer such Awards, subject to the terms of the Plan and applicable law.
24.2 Awards Under Plan. The Board may also grant Awards to Outside Directors pursuant to the terms of the
Plan, including any Award described in Sections 8, 9, 10, and 11 above. With respect to such Awards, all
references in the Plan to the Committee shall be deemed to be references to the Board.
25. NO RIGHT TO EMPLOYMENT OR PARTICIPATION.
The grant of an Award under this Plan shall not confer any rights upon the Participant holding such Award other than
such terms, and subject to such conditions, as are specified in this Plan as being applicable to such type of Award (or
to all Awards) or as are expressly set forth in the Award Agreement or other document evidencing such Award.
Participation in the Plan shall not give any Participant any right to remain in the employ or service, or to serve as a
director, of the Corporation or any Subsidiary or Affiliate. The Corporation or, in the case of employment with a
Subsidiary or Affiliate, the Subsidiary or Affiliate, reserves the right to terminate the employment or service of any
Participant at any time. Further, the adoption of this Plan shall not be deemed to give any Employee or any other
individual any right to be selected as a Participant or to be granted an Award.
26. NO RIGHT, TITLE, OR INTEREST IN CORPORATION ASSETS.
The Plan is intended to constitute an “unfunded” plan for incentive compensation. No Participant shall have any rights
as a shareholder as a result of participation in the Plan until the date of issuance of a stock certificate in the
Participant's name, and, in the case of restricted shares of Common Stock or Units, such rights are granted to the
Participant under Section 10.3 hereof. To the extent any person acquires a right to receive payments from the
Corporation under the Plan, those rights shall be no greater than the rights of an unsecured creditor of the
Corporation. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Common Stock or to make payments in lieu of, or with respect to,
Plan Awards. However, unless the Committee determines otherwise with the express consent of the affected
Participant, the existence of any such trusts or other arrangements is consistent with this “unfunded” status of the
Plan.
27. SECURITIES LAWS.
With respect to Section 16 Insiders, transactions under this Plan are intended to comply with all applicable conditions
of Rule 16b-3 or its successors under the Exchange Act, if applicable. To the extent any provision of the Plan or action
by the Committee fails so to comply, if applicable, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.
Community Healthcare Trust | 2024 PROXY STATEMENT
81
28. REQUIRED WRITTEN REPRESENTATIONS.
The Committee may require each person purchasing shares pursuant to an Option or other Award under the Plan to
represent to and agree with the Corporation in writing that the optionee or Participant is acquiring any shares of
Common Stock without a view to their distribution. The certificates for shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer. All certificates for shares of Common Stock or
other securities delivered under the Plan shall be subject to stop transfer orders and other restrictions the Committee
deems advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, and any applicable Federal or state securities laws,
and the Committee may cause a legend or legends to be put on any certificates to make appropriate reference to the
applicable restrictions. Each Participant is responsible for fully complying with all applicable state and federal
securities laws and rules and CHCT assumes no responsibility for compliance with any such laws or rules pertaining to
a Participant's resale of any shares of Common Stock acquired pursuant to this Plan.
29. NON-EXCLUSIVE ARRANGEMENT.
Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if required; and those arrangements may be either generally applicable
or applicable only in specific cases.
30. LIMITS ON LIABILITY AND INDEMNIFICATION.
The members of the Committee and the Board shall not be liable to any employee or other person with respect to
any determination made under the Plan in a manner that is not inconsistent with their legal obligations as members
of the Board. In addition to all other rights of indemnification they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the Corporation against reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of them may be a party because of any
action taken or failure to act under or in connection with the Plan or any Award granted under it, and against all
amounts paid by them in settlement (provided the settlement is approved by independent legal counsel selected by
the Corporation) or paid to them in satisfaction of a judgment in that action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in the action, suit or proceeding that the Committee member is liable for
negligence or misconduct in the performance of his or her duties. Within 60 days after institution of any action, suit or
proceeding covered by this Section, the Committee member must inform the Corporation in writing of the claim and
offer the Corporation the opportunity, at its own expense, to handle and defend the matter.
82
Community Healthcare Trust | 2024 PROXY STATEMENT
Appendix B — Reconciliation of Non-GAAP Financial
Measures
Funds from operations, ("FFO"), as defined by NAREIT, and adjusted funds from operations ("AFFO"), are important non-
GAAP supplemental measures of operating performance for a REIT. Because the historical cost accounting convention
used for real estate assets requires straight-line depreciation except on land, such accounting presentation implies
that the value of real estate assets diminishes predictably over time. However, since real estate values have historically
risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical cost
accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of
operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from
net income, as defined by GAAP.
NAREIT defines FFO as the most commonly accepted and reported measure of a REIT's operating performance equal
to net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property and
impairments of real estate, 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.
The Company's AFFO is defined as FFO, excluding non-cash income and expenses, such as amortization of stock-
based compensation, the effects of straight-line rent, and other non-cash items from time to time. The Company
considers AFFO to be a useful supplemental measure to evaluate the Company's operating results excluding these
income and expense items to help investors, analysts and other interested parties compare the operating
performance of the Company between periods or as compared to other companies on a more consistent basis.
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Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However,
management believes FFO and FFO per share to be supplemental measures of a REIT's performance because they
provide an understanding of the operating performance of the Company's properties without giving effect to certain
significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate
assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time.
However, real estate values instead have historically risen or fallen with market conditions.
Net operating income ("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 losses on the sale of real estate properties or
other investments, interest expense, deferred income tax expense, and interest and other income, net. 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 Company believes that by excluding the effect of depreciation, amortization, gains or losses from sales of real
estate, impairment of real estate, and gains, losses and impairment of incidental assets, straight-line rent and
amortization of stock-based compensation, all of which are based on historical costs and which may be of limited
relevance in evaluating current performance, FFO and AFFO can facilitate comparisons of operating performance
between periods. The Company reports FFO and AFFO per share because these measures are observed by
management to be some of the predominant measures used by the REIT industry and by industry analysts to evaluate
REITs and because FFO per share, as defined by NAREIT, is consistently reported, discussed, and compared by research
analysts in their notes and publications about REITs. For these reasons, management has deemed it appropriate to
disclose and discuss FFO and AFFO per share. However, neither FFO or AFFO represents cash generated from
operating activities determined in accordance with GAAP and are not necessarily indicative of cash available to fund
cash needs. FFO and AFFO should not be considered alternatives to net income attributable to common stockholders
or as indicators of the Company's operating performance or as alternatives to cash flow from operating activities as
measures of liquidity. The table below reconciles net income to FFO and AFFO.
Community Healthcare Trust | 2024 PROXY STATEMENT
83
COMMUNITY HEALTHCARE TRUST INCORPORATED RECONCILIATION OF FFO and AFFO
(Unaudited; Dollars and shares in thousands, except per share amounts)
Net income
Year Ended December 31,
2023
($)
2022
($)
2021
($)
7,714
22,019
22,492
Real estate depreciation and amortization
40,103
32,602
30,624
Gain on sale of depreciable real estate
Impairment of real estate asset
Total adjustments
Funds from Operations (FFO)
Straight-line rent
Stock-based compensation
Accelerated amortization of stock-based compensation (1)
Net gain from insurance recovery on casualty loss
—
102
—
—
(237)
—
40,103
32,602
30,387
47,817
54,621
52,879
(3,052)
(3,444)
(3,569)
8,166
9,415
7,164
11,799
(706)
—
—
—
—
Adjusted Funds from Operations (AFFO)
64,024
60,592
56,474
FFO per Diluted Common Share
AFFO Per Diluted Common Share
1.86
2.49
2.24
2.49
2.20
2.35
Weighted Average Common Shares Outstanding-Diluted (2)
25,752
24,379
24,012
(1) Upon the passing of our former CEO and President in the first quarter of 2023, the Company accelerated the amortization of
stock-based compensation totaling $11.8 million, impacting FFO per diluted share by $0.46 for the year ended December 31,
2023 .
(2) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-
class method used to calculate earnings per share.
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Community Healthcare Trust | 2024 PROXY STATEMENT
COMMUNITY HEALTHCARE TRUST INCORPORATED RECONCILIATION OF NOI
(Unaudited; Dollars and shares in thousands)
Net income
Year Ended December 31,
2023
($)
2022
($)
2021
($)
7,714
22,019
22,492
General and administrative (1)
15,539
14,837
12,113
Accelerated amortization of deferred compensation
11,799
—
—
Depreciation and amortization
39,693
32,339
30,401
Gain on sale of depreciable real estate
Impairment of real estate asset
Interest expense
Deferred income taxes
Interest and other income, net
NOI
—
102
—
—
(237)
—
17,792
11,873
10,542
306
(813)
41
(66)
167
(57)
92,132
81,043
75,421
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(1) 2023 excludes accelerated amortization of stock-based compensation shown as a separate line in the reconciliation above.
Community Healthcare Trust | 2024 PROXY STATEMENT
85
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
Commission file number: 001-37401
Community Healthcare Trust Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or Other Jurisdiction of
Incorporation or Organization)
46-5212033
(I.R.S. Employer
Identification No.)
3326 Aspen Grove Drive
Suite 150
Franklin, Tennessee 37067
(Address of Principal Executive Offices) (Zip Code)
(615) 771-3052
(Registrant’s Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common stock, $0.01 par value per share
Trading Symbol(s) Name of Each Exchange on Which Registered
CHCT
New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
__________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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 ☐
K
-
0
1
m
r
o
F
1
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
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth 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 Section 13(a) of the
Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the shares of common stock (based upon the closing price of these shares on the New
York Stock Exchange, Inc. on June 30, 2023) of the Registrant held by non-affiliates (for purposes of this calculation, all of
the Registrant's directors and executive officers are deemed affiliates of the Registrant) on June 30, 2023 was approximately
$847.1 million.
The Registrant had 27,681,163 shares of common stock, $0.01 par value per share, outstanding as of February 8, 2024.
________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to its 2024 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Report. The Registrant expects to file its Definitive Proxy Statement with the
Securities and Exchange Commission within 120 days after December 31, 2023.
2
COMMUNITY HEALTHCARE TRUST INCORPORATED
FORM 10-K
December 31, 2023
TABLE OF CONTENTS
Part I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 1C.
Cybersecurity
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Part IV
Item 15.
Exhibit and Financial Statement Schedules
Item 16.
Form 10-K Summary
Signatures
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We make statements in this Annual Report on Form 10-K that are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)). All statements other than statements of historical facts may be forward-looking statements. In
particular, statements pertaining to our capital resources, property performance and results of operations contain
forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from
operations and anticipated market conditions, demographics and results of operations are forward-looking
statements. When we use the words “may,” “should,” “will,” “could,” “would,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “seeks,” “assumes,” “projects,”
“forecast,” “goal” or similar expressions or their negatives, as well as statements in future tense, we intend to
identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy,
plans or intentions.
Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as
predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be
incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events
described will happen as described (or that they will happen at all). The following factors, among others, could
cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking
statements:
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effects on global and national markets as well as businesses resulting from increased inflation, rising
interest rates, supply chain disruptions, labor conditions, the conflict between Russia and Ukraine, and/
or new and ongoing hostilities between Israel and Hamas;
defaults on or non-renewal of leases by tenants;
adverse economic or real estate developments, either nationally or in the markets in which our
properties are located;
decreased rental rates or increased vacancy rates;
difficulties in identifying healthcare properties to acquire and completing acquisitions;
our ability to make distributions on our shares of stock;
our dependence upon key personnel whose continued service is not guaranteed;
our ability to identify, hire and retain highly qualified personnel in the future;
the degree and nature of our competition;
general economic conditions;
the availability, terms and deployment of debt and equity capital;
general volatility of the market price of our common stock;
changes in our business or strategy;
changes in governmental regulations, tax rates and similar matters;
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new laws or regulations or changes in existing laws and regulations that may adversely affect the
healthcare industry;
trends or developments in the healthcare industry that may adversely affect our tenants;
competition for acquisition opportunities;
our failure to successfully develop, integrate and operate acquired properties and operations;
our ability to operate as a public company;
changes in accounting principles generally accepted in the United States of America (“GAAP”);
our failure to generate sufficient cash flows to service our outstanding indebtedness;
fluctuations in interest rates and increased operating costs;
our increased vulnerability economically due to the concentration of our investments in healthcare
properties;
a substantial portion of our revenue is derived from our largest tenants and thus, the bankruptcy,
insolvency or weakened financial position of any one of them could seriously harm our operating
results and financial condition;
geographic concentrations in Texas, Ohio, and Illinois cause us to be particularly exposed to
downturns in these local economies or other changes in local real estate market conditions;
lack of or insufficient amounts of insurance;
acts of God, earthquakes, hurricanes, climate change and other natural disasters, acts of war, and acts
of terrorism (any of which may result in uninsured losses);
other factors affecting the real estate industry generally;
our failure to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal
income tax purposes;
limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain
our status as a REIT for U.S. federal income tax purposes; and
changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and
increases in real property tax rates and taxation of REITs.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. You
should not place undue reliance on any forward-looking statements, which speak only as of the date of this report.
We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in
underlying assumptions or factors, of new information, data or methods, future events or other changes after the date
of this Annual Report on Form 10-K, except as required by applicable law. For a further discussion of these and
other factors that could impact our future results, performance or transactions, see “Part I, Item 1A. Risk Factors."
Unless the context otherwise requires or indicates, references above or in this report to "we," "us," "our," "the
Company," "our Company," and "Community Healthcare Trust" refer to Community Healthcare Trust Incorporated,
a Maryland corporation organized to qualify as a REIT for U.S. federal income tax purposes, together with its
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consolidated subsidiaries, including Community Healthcare OP, LP, a Delaware limited partnership, or our
"operating partnership" or our "OP," of which we are the sole general partner and own 100% of its interests.
ITEM 1. BUSINESS
PART I.
We are a fully-integrated healthcare real estate company organized as a corporation in the State of Maryland on
March 28, 2014. We own and acquire real estate properties that are leased to hospitals, doctors, healthcare systems
or other healthcare service providers.
Real Estate Investments
As of December 31, 2023, we had gross investments of approximately $1.1 billion in 193 real estate properties
(including a portion of one property accounted for as a sales-type lease with a gross amount totaling approximately
$3.0 million and two properties classified as held for sale with an aggregate amount totaling approximately
$7.5 million). The properties are located in 34 states, totaling approximately 4.3 million square feet in the aggregate
and were approximately 91.1% leased, excluding real estate assets held for sale, at December 31, 2023 with a
weighted average remaining lease term of approximately 6.9 years. The Company’s real estate investments by
property type, geographic area, and customer are detailed in Note 2 – Real Estate Investments to the Consolidated
Financial Statements. The following table shows the diversification by property types based on annualized rent.
Medical Office Building (MOB)
Inpatient Rehabilitation Facilities (IRF)
Acute Inpatient Behavioral (AIB)
Specialty Centers (SC)
Physician Clinics (PC)
Behavioral Specialty Facilities (BSF)
Surgical Centers and Hospitals (SCH)
Long-term Acute Care Hospitals (LTACH)
Total real estate investments
Customer Concentrations
Number of
Properties
Annualized
Rent (%)
93
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5
37
30
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37.0 %
18.8 %
14.2 %
11.2 %
7.8 %
5.1 %
4.3 %
1.6 %
193
100.0 %
The Company's real estate portfolio is leased to a diverse tenant base. Our tenants include many nationally
recognized healthcare providers, such as Adventist HealthCare, Inc., Hospital Corporation of America, Fresenius
Medical Care AG & Co, Davita, Inc., Tenet Healthcare Corporation, Catholic Healthcare Initiatives, and Lifepoint
Health. Lifepoint Health accounted for 11.9% of annualized revenues as of December 31, 2023. We have no control
over the success or failure of our tenants' businesses and, at any time, any of our tenants may experience a downturn
in their businesses that may weaken their financial condition.
Geographic Concentrations
The Company's portfolio is currently located in 34 states with 39.6% of our annualized rent as of December 31,
2023 derived from properties located in Texas (16.5%), Illinois (11.9%), and Ohio (11.2%). Such geographic
concentrations could expose the Company to certain downturns in the economies of those states or other changes in
such states' respective real estate market conditions. Any material change in the current payment programs or
regulatory, economic, environmental or competitive conditions in any of these areas could have an effect on our
overall business results. In the event of negative economic or other changes in any of these markets, our business,
financial condition and results of operations, our ability to make distributions to our shareholders and the trading
price of our common shares may be adversely affected. See each of the discussions under Item 1A, "Risk Factors,"
under the captions "Adverse economic or other conditions in the geographic markets in which we conduct business
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could negatively affect our occupancy levels and rental rates and have a material adverse effect on our operating
results," and "A large percentage of our properties are located in Texas, Ohio, and Illinois, and changes in these
markets may materially adversely affect us."
2023 Real Estate Investments
During the year ended December 31, 2023, the Company acquired 19 real estate properties and one land parcel
adjacent to an existing property in our portfolio, in fourteen separate transactions, as detailed in Note 4 – Real Estate
Acquisitions and Dispositions to the Consolidated Financial Statements. Upon acquisition, the properties were
99.2% leased in the aggregate with lease expirations through 2038.
Human Capital Resource Management
As of December 31, 2023, we had 37 employees. All of our employees work at our corporate office in Franklin,
Tennessee. Our employees are not members of any labor union, and we consider our relations with our employees to
be excellent. We have a stable, but growing workforce with an average tenure of 3.7 years and voluntary employee
turnover of approximately 15% during the year ended December 31, 2023. At December 31, 2023, 35% of our
employees, 33% of our management team, and 33% of our board of directors were female.
The success of our employees drives the success of the business and supports our goal of long-term value creation
for our shareholders. We offer competitive benefits and training programs to develop employees’ expertise and
skillsets, use training, communication, appropriate investments and clear corporate policies to strive to provide a
safe, harassment-free work environment guided by principles of fair and equal treatment, and prioritize employee
engagement. As a result, we believe our employees are committed to building strong, innovative and long-term
relationships with each other and with our tenants.
Compensation of our board and management team is structured to closely align their interest with those of our
stockholders. From our initial public offering, or IPO, in May 2015 through 2023, our executive officers elected
each year to take 100% of their total compensation in restricted stock, subject to an eight-year cliff-vesting period.
Beginning in 2024, our executive officers are permitted to take up to 50% of their total compensation in restricted
stock. Our board has elected to take the majority of their total compensation in restricted stock, subject to a three-
year cliff-vesting period. Also, all of our employees are shareholders in the Company, further aligning their interest
with those of our stockholders.
We have adopted a Human Capital Support and Development Policy and a Human Rights Policy to support our
employees and tenants with a safe and healthy environment. These policies are posted on the Investor Relations tab
of the Company’s website (www.chct.reit).
Competitive Strengths
We believe our management team's significant healthcare, real estate and public REIT management experience
distinguishes us from other REITs and real estate operators, both public and private. Specifically, our Company's
competitive strengths include, among others:
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Strong, Diversified Portfolio. Our focus is on investing in properties where we can develop strategic
alliances with financially sound healthcare providers that offer need-based healthcare services in our target
markets. Our tenant base includes many nationally recognized healthcare providers (or their affiliates) and
our property portfolio has significant diversification with respect to healthcare provider, industry segment,
and facility type.
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Attractive and Disciplined Investment Focus. We focus on healthcare facilities in our target submarkets
which are off-market or lightly marketed transactions at purchase prices generally between $3 million and
$30 million. We believe there is significantly less competition from existing REITs and institutional buyers
for assets in these target submarkets than for comparable urban assets, thereby increasing the potential for
more attractive risk-adjusted returns. In addition, we believe that healthcare-related real estate rents and
valuations are less susceptible to changes in the general economy than many other types of commercial real
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estate due to favorable demographic trends and the need-based rise in healthcare expenditures, even during
economic downturns.
Extensive Relationships with Healthcare Providers, Intermediaries and Property Owners. We believe that
our management team has a strong reputation among, and a deep understanding of the real estate needs of,
healthcare providers in our target submarkets. In addition, we have strategic relationships which we believe
gives us the ability to meet the needs of healthcare providers by structuring transactions that are mutually
advantageous to sellers, our tenants and us. We believe this ability has led to, and will continue to lead to,
strategic acquisition opportunities, which will, in turn, produce attractive risk-adjusted returns. None of our
properties to date were acquired pursuant to "calls for offers" or other auction style bidding situations. We
believe our relationships provide us with additional off-market or lightly marketed acquisition
opportunities, thus providing us the opportunity to continue to purchase assets outside a competitive
bidding process.
Experienced Management Team. Our executive management team averages over 25 years of healthcare,
real estate and/or public REIT management experience on average. Led by David H. Dupuy, Chief
Executive Officer and President, William G. Monroe IV, our Executive Vice President and Chief Financial
Officer, Leigh Ann Stach, our Executive Vice President and Chief Accounting Officer, and Timothy L.
Meyer, our Executive Vice President, Asset Management, our management team has significant experience
in acquiring, owning, operating and managing healthcare facilities and providing full service real estate
solutions for the healthcare industry. Prior to joining the Company, Mr. Dupuy was a Managing Director at
SunTrust Robinson Humphrey (Truist Securities) where he led investment banking coverage of healthcare
facilities and REITs and held positions in healthcare banking at Bank of America. Mr. Monroe has
experience in healthcare investment banking. Ms. Stach has experience in public healthcare REIT
accounting and financial reporting. Mr. Meyer has experience in real estate and asset management in public
healthcare REITs.
Growth Oriented Capital Structure. At December 31, 2023, we had $50.0 million outstanding on our
revolving credit facility and had $350.0 million outstanding on our term loans under our first amendment to
the third amended and restated credit agreement, dated as of December 14, 2022, 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 (collectively, our "Credit Facility") with a
36.1% debt-to-total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation). In
the future, in addition to equity and debt issuances, we may also use OP units of our operating partnership
as currency to acquire additional properties from owners seeking to defer their potential taxable gain and
diversify their holdings. We believe that the borrowing capacity under our Credit Facility, combined with
our ability to use OP units as acquisition currency, provides us with significant financial flexibility to make
opportunistic investments and fund future growth.
Significant Alignment of Interests. We have structured the compensation of our board and management
team to closely align their interests with the interests of our stockholders. From our IPO in May 2015
through 2023, our executive officers elected each year to take 100% of their total compensation in restricted
stock, subject to an eight-year cliff-vesting period. Beginning in 2024, our executive officers are permitted
to take up to 50% of their total compensation in restricted stock. The Company's board of directors have
elected to take 91% of their total compensation in restricted stock since the Company's IPO, subject to a
three-year cliff-vesting period. We believe that our board and management team receiving restricted stock
subject to long-term cliff-vesting periods as a material component of their total compensation effectively
aligns the interests of our board and management with those of our stockholders, creating significant
incentives to maximize returns for our stockholders. Finally, each executive officer and director has met
stock ownership guidelines that require our executive officers and directors to continuously own an amount
of our common stock based on a multiple of such officer's annual base salary or such director's annual
retainer, as applicable.
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Business Objective
Our principal business objective is to provide attractive risk-adjusted returns to our stockholders through a
combination of (i) sustainable and increasing rental income and cash flow that generates reliable, increasing
dividends and (ii) potential long-term appreciation in the value of our properties and common stock. Our primary
strategies to achieve our business objective are to invest in, own and proactively manage a diversified portfolio of
healthcare properties, which we believe will drive reliable, increasing rental revenue and cash flow.
Growth Strategy
We intend to continue to grow our portfolio of healthcare properties primarily through acquisitions of healthcare
facilities in our target submarkets that provide stable revenue growth and predictable long-term cash flows. We
generally focus on individual acquisition opportunities between $3 million and $30 million in off-market or lightly
marketed transactions and do not intend to participate in competitive bidding or auctions of properties. We believe
that there are abundant opportunities to acquire attractive healthcare properties in our target markets either from
third-party owners of existing healthcare facilities or directly with healthcare providers through sale-leaseback
transactions. We believe there is significantly less competition from existing REITs and institutional buyers for
assets in these target submarkets than for comparable urban assets, thereby increasing the potential for attractive
risk-adjusted returns. Furthermore, we may acquire healthcare properties on a non-cash basis in a tax efficient
manner through the issuance of OP units as consideration for the transaction.
We intend for our investment portfolio to be diversified among healthcare facility type and segments such as
medical office buildings, physician clinics, surgical centers and hospitals, specialty centers, behavioral facilities,
inpatient rehabilitation facilities and long-term acute care hospitals, as well as being diverse both geographically and
with respect to our tenant base. We seek to invest in properties where we can develop strategic alliances with
financially-sound healthcare providers that offer need-based healthcare services in our target markets.
In connection with our review and consideration of healthcare real estate acquisition opportunities, we generally take
into account a variety of considerations, including but not limited to:
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whether the property will be leased to a financially-sound healthcare tenant;
the historical performance of the market and its future prospects;
property location, with an emphasis on proximity to a population base;
demand for healthcare related services and facilities;
current and future supply of competing properties;
occupancy and rental rates in the market;
population density and growth potential;
anticipated capital expenditures;
anticipated future acquisition opportunities; and
existing and potential competition from other healthcare real estate owners and tenants.
We currently have no intention to invest in companies that provide healthcare services structured to comply with the
REIT Investment Diversification and Empowerment Act of 2007, or RIDEA.
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We operate so as to maintain our status as a REIT for federal income tax purposes. As a REIT, we are not subject to
corporate federal income tax with respect to taxable income distributed to our stockholders. We have also elected
two subsidiaries to be treated as taxable REIT subsidiaries ("TRSs"), which are subject to federal and state income
taxes.
Tax Status
We have qualified as a REIT for U.S. federal income tax purposes since 2015, the year we began operations, and we
expect that we will remain qualified as a REIT for U.S. federal income tax purposes for the year ending December
31, 2024. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, through actual
investment and operating results, various complex requirements under the Internal Revenue Code of 1986, as
amended, or the Code, relating to, among other things, the sources of our gross income, the composition and values
of our assets, our distribution levels and the diversity of ownership of our capital stock. We believe that we are
organized in conformity with the requirements for qualification as a REIT under the Code and that our manner of
operations will enable us to continue to meet the requirements for qualification and taxation as a REIT for U.S.
federal income tax purposes for the year ending December 31, 2024.
As a REIT, we generally will not be subject to U.S. federal income tax on our taxable income that we distribute
currently to our stockholders. Under the Code, REITs are subject to numerous organizational and operational
requirements, including a requirement that they distribute on an annual basis at least 90% of their REIT taxable
income, determined without regard to the deduction for dividends paid and excluding any net capital gains. If we fail
to qualify for taxation as a REIT in any taxable year and do not qualify for certain statutory relief provisions, our
income for that year will be subject to tax at regular corporate income tax rates, and we would be disqualified from
taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. Even
if we qualify as a REIT for U.S. federal income tax purposes, we may still be subject to state and local taxes on our
income and assets and to U.S. federal income and excise taxes on our undistributed income. Additionally, any
income earned by Community Healthcare Trust Services, Inc. and CHCT Holdings, Inc., our TRSs, and any other
TRSs that we form or acquire in the future will be fully subject to U.S. federal, state and local corporate income tax.
See Government Regulation and Legislative Developments below for a discussion of the Patient Protection and
Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable
Care Act” or "ACA") for a discussion of the Tax Cuts and Jobs Act ("TCJA"), enacted on December 22, 2017,
which reduced the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018.
Government Regulation
Our healthcare tenants and their operators are subject to extensive federal, state and local government legislation and
regulation. Federal laws, including but not limited to the Affordable Care Act; laws intended to combat fraud and
waste such as the Anti-Kickback Statute, Stark Physician Self-Referral Law, False Claims Act; Medicare and
Medicaid laws and regulations; and the Health Insurance Portability and Accountability Act of 1996 may limit our
tenants operational flexibility and compensation arrangements. Many states have analogous laws which may be
broader than their federal counterparts, including state licensure laws, fraud and abuse laws, privacy rules, and
Medicaid requirements. Compliance with these regulatory requirements can increase operating costs and, thereby,
adversely affect the financial viability of our tenants’ businesses. Our tenants’ failure to comply with these laws and
regulations could adversely affect their ability to successfully operate our properties, which could negatively impact
their ability to satisfy their contractual obligations to us. As a landlord, we intend for all of our business activities
and operations to conform in all material respects with all applicable laws and regulations, including healthcare laws
and regulations. Our leases require the tenants and operators to comply with all applicable laws, including healthcare
laws. However, we do not have any ability to audit nor do we independently verify such compliance.
These laws subject tenant healthcare facilities and practices to requirements related to reimbursement, licensing and
certification policies, ownership of facilities, addition or expansion of facilities and services, pricing and billing for
services, compliance obligations (including those governing the security, use and disclosure of confidential patient
information) and fraud and abuse laws. These laws and regulations are wide-ranging and complex, may vary or
overlap from jurisdiction to jurisdiction, and are subject frequently to change. Healthcare facilities may also be
affected by changes in accreditation standards or in the procedures of the accrediting agencies that are recognized by
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governments in the certification process. In addition, expansion (including the addition of new beds or services or
the acquisition of medical equipment) and occasionally the discontinuation of services of healthcare facilities may be
subject to state regulatory approval through certificate of need programs. This may impact the ability of our tenants
to expand their businesses. Different tenants may be more or less subject to certain types of regulation, some of
which are specific to the type of facility or provider. We cannot predict the degree to which these changes, or
changes to the federal healthcare programs in general, may affect the economic performance of some or all of our
tenants, positively or negatively. We expect healthcare providers to continue to adjust to new operating and
reimbursement challenges, as they have in the past, by increasing operating efficiency and modifying their strategies
to profitably grow operations.
There are various state and federal laws that may apply to investors including U.S. federal and state anti-kickback,
self-referral, and fee-splitting statutes, which limit physician referrals to entities in which the physician has a
financial relationship and otherwise govern financial arrangements with healthcare providers. States vary in the
types of entities, if any, that their laws cover. Investment interests in those facilities may, in certain instances,
prohibit referrals to the entity by physician investors. Physician investors may also face disciplinary action from
licensure boards for referrals to entities in which the physician has an investment interest. Some states require
disclosure of the financial relationship before referral by any physician investors, while others prohibit referrals
entirely. These state laws and regulations may be broader than their federal counterparts and are the subject of state
enforcement. Many state laws contain exemptions for investments in publicly traded companies provided certain
requirements are met. These exemption requirements may include listing on a national stock exchange or
maintaining a minimum asset value. Meeting some of these requirements may be dependent on market forces or
otherwise outside our control.
Changes in laws and regulations, reimbursement enforcement activity and regulatory non-compliance by our tenants
and operators can all have a significant effect on their operations and financial condition, which in turn may
adversely impact us, as detailed below and set forth under Item 1A, “Risk Factors,” under the caption “The
healthcare industry is heavily regulated and new laws or regulations, changes to existing laws or regulations,
changes to reimbursement models or structure, loss of licensure or failure to obtain licensure could adversely impact
our company and result in the inability of our tenants to make rent payments to us.” We highlight below several of
the more complex laws; however, this is an overview, as the complexities of the laws impacting tenants are varied
and extensive.
The Affordable Care Act has continued to change how healthcare services are covered, delivered and reimbursed.
The Affordable Care Act includes payment reform provisions intended to drive Medicare towards more value-based
purchasing which, in turn, increases accountability for healthcare providers for the quality and costs of the
healthcare services they provide. While more individuals now carry healthcare coverage as a result of the Affordable
Care Act, the full effects of the changes to reimbursement models for both public and commercial coverage continue
to evolve. Each kind of healthcare provider tenant has a different and complex set of laws related to reimbursement
and reimbursement models, which may affect the tenant’s ability to collect revenues and meet the terms of their
leases. Such varying reimbursement models and laws impact each kind of provider as well as the healthcare system
as a whole. For example, for physicians, the Centers for Medicare and Medicaid Services ("CMS") issues annual
updates to the physician fee schedule that can have a material impact (either positive or negative) on the amount of
reimbursement that physicians earn; for ambulatory surgery centers, the Affordable Care Act introduced provisions
that reduce the annual inflation update for payment rates by a “productivity adjustment,” which may result in a
decrease in Medicare payment rates for the same procedures in a given year compared to the prior year. Other
changes brought about by the Affordable Care Act could negatively impact reimbursement for any one of the kind of
provider tenants as outlined below.
The Affordable Care Act also altered reimbursement from private insurers and managed care organizations.
Networks continue to readjust, and all providers must ensure adequate market share in their respective areas to
remain in the network created by many of the managed care organizations. Under the Affordable Care Act prior to
the Trump Administration, individuals were required to obtain coverage or pay a penalty resulting in millions of
more Americans obtaining coverage, usually through the healthcare exchanges (called the Marketplace) established
to provide coverage in each state. The Trump Administration and Congress removed this mandate beginning in
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2019. The Trump Administration had also loosened rules to allow greater flexibility among insurers in the benefits
offered, both lowering the costs of some plans but also limiting the coverage such plans offer. It is unclear at this
time if increased competition from low-cost plans will damage the Marketplace, and how these changes will affect
coverage rates in any particular state or locale. While the Trump Administration had decreased its focus on repealing
the Affordable Care Act, a December 2018 federal court ruled the law unconstitutional. This decision was appealed
to the U.S. Court of Appeals for the 5th Circuit, which issued a decision in December 2019 finding the insurance
mandate unconstitutional and remanded the case to the District Court to consider the constitutionality of the rest of
the law. The case was appealed to the U.S. Supreme Court, which heard oral arguments in November 2020. The
Court issued a decision in June 2021 dismissing the case for lack of standing. The decision did not address the
merits of the lawsuit and the legality of the ACA, but the decision effectively ends the case. Through Executive
Orders issued January 28, 2021, the Biden Administration signaled its strong support for the Affordable Care Act by
taking steps to reverse various actions by the Trump Administration and to strengthen Medicaid and the Affordable
Care Act. Both the Biden Administration and Congress are considering ways to strengthen coverage under the
Affordable Care Act by increasing the subsidies available to purchasers of health plans through the insurance
exchanges created by the Affordable Care Act. These efforts have resulted in more than 16 million Americans
enrolling in ACA health plans and an additional 14 million low-income Americans being enrolled in the ACA’s
Medicaid expansion coverage from a pre-ACA baseline. Other Biden Administration legislative initiatives and
policies have been implemented in an attempt to expand access to health care coverage. For example, on August 22,
2022, the Inflation Reduction Act of 2022 was signed into law and extended increased premium subsidies available
in the ACA marketplaces through 2025, which prevents an estimated 2 million individuals from losing coverage. In
addition, on October 11, 2022, the IRS issued a final rule changing how affordability of coverage and minimum
value is determined for an employee’s relatives under the ACA. Specifically, the new rule provides for a separate
affordability test where an eligible employer-sponsored plan is affordable for an employee’s relative if the
employee’s required contribution for family coverage under the plan does not exceed 9.5% of the employee’s
household income. Previously, health coverage affordability and adequacy had been measured solely for the
employee, but not for coverage of the employee’s family. The Biden Administration estimates that this policy
change will provide coverage for an additional 200,000 individuals, and nearly 1 million people will have access to
lower premiums. The U.S. Department of Health and Human Services' data shows continued growth in access to
care under the ACA, with over 20 million people selecting an ACA Marketplace plan in the 2024 Open Enrollment
Period, including over 3.7 million people who were new to ACA Marketplace plans. While we expect that the Biden
Administration will continue efforts to expand access to healthcare, we cannot predict the effect on us and/or our
tenants of any future action by the Biden Administration and/or Congress with respect to the Affordable Care Act
and other aspects of the healthcare system.
Section 603 of the Bipartisan Budget Act of 2015 lowered Medicare rates, effective January 1, 2017, for services
provided in off-campus, provider-based outpatient departments, to the same level of rates for physician-office
settings. Section 603 does not apply to facilities that billed at the lower Medicare rates on or before November 2,
2015 (the "grandfather clause") or that had a binding written agreement in place for the construction of the off-
campus site before November 2, 2015 (the "mid-build exemption"). Section 603 reflects movement by the Congress
and CMS toward “site-neutral reimbursement” where Medicare rates across different facility-type settings are
equalized. CMS implemented these changes beginning January 1, 2017. Beginning January 1, 2019, CMS also
implemented site neutral changes in Medicare reimbursement for clinic visits provided in off-campus locations that
were previously exempted from payment reductions. While such site neutral changes are expected to lower overall
Medicare spending, our medical office buildings located on hospital campuses could become more valuable as
hospital tenants keep their higher Medicare rates for on-campus outpatient services. However, other laws may limit
the extent to which higher rents may be charged based on proximity to a hospital. Ultimately, we cannot predict the
amount of benefit from these measures or if future legislation will ultimately require similar site neutral changes in
Medicare reimbursement rates for services provided in other facility-type settings.
Legislative Developments
Each year, legislative proposals for health policy are introduced in Congress and state legislatures, and regulatory
changes are enacted by government agencies. These proposals, individually or in the aggregate, could significantly
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change the delivery of healthcare services, either nationally or at the state level, if implemented. Examples of
significant legislation currently under consideration, recently enacted or in the process of implementation, include:
•
•
the Affordable Care Act and proposed amendments and any further repeal measures and related actions at
the federal and state level;
the 2019 repeal of a portion of the Affordable Care Act for the mandate that all individuals purchase health
insurance or pay a tax penalty;
• mandatory expansion of healthcare services and increased access to individual healthcare insurance through
legislative initiatives, including the Inflation Reduction Act of 2022;
•
•
•
•
•
•
•
•
•
•
•
quality control, cost containment, and payment system reforms for Medicaid, Medicare and other public
funding, such as expansion of pay-for-performance criteria and value-based purchasing programs, bundled
provider payments, accountable care organizations, increased patient cost-sharing, geographic payment
variations, comparative effectiveness research, and lower payments for hospital readmissions;
implementation of health insurance exchanges and regulations governing their operation, whether run by
the state or by the federal government, whereby individuals and small businesses purchase health insurance,
including government-funded plans, many assisted by federal subsidies that are under ongoing legal
challenges;
equalization of Medicare payment rates across different facility-type settings (i.e., the Bipartisan Budget
Act of 2015, Section 603, lowered Medicare payment rates, effective January 1, 2017, for services provided
in off-campus, provider-based outpatient departments to the same level of rates for physician-office settings
for those facilities not grandfathered-in under the current Medicare rates as of the law’s date of enactment,
November 2, 2015 and beginning January 1, 2019, CMS implemented site neutral changes in Medicare
reimbursement for clinic visits provided in off-campus locations that were previously exempted from
payment reductions);
the continued adoption by providers of federal standards for, and the associated audits of, the meaningful-
use of electronic health records and the transition to ICD-10 coding;
the continued effort to expand the utilization of telehealth services;
implementation of federal rules requiring healthcare providers and third party payors to comply with
electronic health system interoperability rules intended to allow for more efficient sharing of healthcare
data;
changes made by the Biden Administration to reverse actions taken by the Trump Administration that
impacted enrollment in health insurance exchanges and Medicaid;
a continuing trend of provider consolidation and associated antitrust scrutiny;
tax law changes affecting non-profit providers, including the Tax Cuts and Jobs Act of 2017's effect on
charitable contributions;
regulatory changes designed to address health equity and disparities as a critical aspect of health and health
care; and
regulatory and legislative changes related to the use of artificial intelligence in healthcare.
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Environmental Matters
As an owner of real estate, we are subject to various federal, state and local environmental laws, regulations and
ordinances and also could be liable to third parties as a result of environmental contamination or noncompliance at
our properties even if we no longer own such properties. See the discussion under Item 1A, “Risk Factors,” under
the caption “Environmental compliance costs and liabilities associated with owning and leasing our properties may
affect our results of operations.”
We have adopted a Corporate Environmental Policy, which sets forth our commitment to implementing
environmentally sustainable best practices for our own operations, and to assist our tenants in their efforts to address
their environmental concerns. Implementation of our Corporate Environmental Policy is the responsibility of our
executive management and is overseen by our Board of Directors. As an owner of real estate, we recognize the
physical risk to our assets stemming from climate change. We cannot predict the rate at which climate change will
progress. However, the physical effects of climate change could have a material adverse effect on our properties,
operations, and business. To the extent that climate change impacts weather patterns, our markets could experience
severe weather, including hurricanes, severe winter storms, wildfires, droughts, and tornadoes due to increases in
storm intensity and unpredictable weather patterns. Over time, these conditions could result in declining demand for
space at our properties, delays in construction and resulting increased construction costs, or in our inability to
operate the buildings at all. Climate change and severe weather may also have indirect effects on our business by
increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable, and by
increasing the costs of energy, maintenance, repair of water and/or wind damage, and snow removal at our
properties. We continue to evaluate our asset base for potential exposure to the following climate-related risks:
increases in heavy rain, flood, drought, extreme heat, tornadoes and wildfire. As a part of our risk management
program, we purchase property insurance to mitigate the risk of extreme weather events and natural disasters.
However, our insurance may not adequately cover all of our potential losses. As a result, there can be no assurance
that climate change and severe weather will not have a material adverse effect on our properties, operations, or
business. As such, executive management reports to the Board of Directors on a regular basis, addressing policy and
disclosure changes including environmental and climate-related risks and opportunities. Our Corporate
Environmental Policy is posted on the Investor Relations tab of our website (www.chct.reit).
Competition
We compete with many other entities engaged in real estate investment activities for acquisitions of healthcare
properties, including national, regional and local operators, acquirers and developers of healthcare-related real estate
properties. The competition for healthcare-related real estate properties may significantly increase the price that we
must pay for healthcare properties or other assets that we seek to acquire, and our competitors may succeed in
acquiring those properties or assets themselves. In addition, our potential acquisition targets may find our
competitors to be more attractive because they may have greater resources, may be willing to pay more for the
properties or may have a more compatible operating philosophy. In particular, larger REITs that target healthcare
properties may enjoy significant competitive advantages that result from, among other things, a lower cost of capital,
enhanced operating efficiencies, more personnel and market penetration and familiarity with markets. In addition,
the number of entities and the amount of funds competing for suitable investment properties may increase. Increased
competition would result in increased demand for the same assets and therefore increase prices paid for them. Those
higher prices for healthcare properties or other assets may adversely affect our returns from our investments.
Insurance
We carry comprehensive liability insurance and property insurance covering our properties. In addition, tenants
under long-term single-tenant net leases are required to carry property insurance covering our interest in the
buildings.
Seasonality
Our business has not been, and we do not expect it to become, subject to material seasonal fluctuations.
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Available Information
The Company makes available to the public free of charge through its internet website the Company’s Definitive
Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended, as soon as reasonably practicable after the Company electronically files such reports with, or
furnishes such reports to, the Securities and Exchange Commission ("SEC"). The Company’s internet website
address is www.chct.reit.
Corporate Governance Guidelines
The Company has adopted Corporate Governance Guidelines relating to the conduct and operations of the Board of
Directors. The Corporate Governance Guidelines are posted on the Company’s website (www.chct.reit) and are
available in print to any stockholder who requests a copy.
Committee Charters
The Board of Directors has an Audit Committee, Compensation Committee and Environmental, Social, and
Governance Committee. The Board of Directors has adopted written charters for each committee which are posted
on the Company’s website (www.chct.reit) and are available in print to any stockholder who requests a copy.
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. To that end, the
Company modified its Governance Committee to be the Environmental, Social, and Governance (“ESG”)
Committee with a revised charter 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 Board of Directors has adopted a revised Code of Ethics and Business Conduct that not only applies
to its 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 year ended December 31, 2023, the whistleblower officer received no whistleblower complaints.
ITEM 1A. RISK FACTORS
Risk Factor Summary
Investing in our common stock involves a degree of risk. You should carefully consider all information in this
Annual Report on Form 10-K prior to investing in our common stock. These risks are discussed more fully below in
the section titled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following:
•
General economic conditions can have a material adverse effect on our business, financial conditions and
results of operations.
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Failure to implement strategies to enhance our performance could have a material adverse effect on our
business, results of operations and financial conditions.
Our success depends, in part, on our ability to continue to make successful real estate acquisitions at fair
prices and to integrate these acquisitions into our operations, and the failure to do so can have a material
adverse effect on our business, financial conditions and results of operations.
If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect
our cash flows.
Our ability to perform depends on keeping and hiring exceptionally talented management and employees,
and our failure to do so could have a material adverse effect on our business, revenues, results of operations
and financial condition.
Risks associated with a pandemic, epidemic or outbreak of a contagious disease, such as the COVID-19
pandemic's impact on global markets, may adversely affect our revenues, results of operations and financial
condition.
Our tenants are subject to significant regulatory oversight, and changes in any of the laws and regulations
applicable to their business could adversely impact our tenants’ ability to make rent payments to us, which,
in turn, could have a material adverse effect on our business, revenues, results of operations and financial
conditions.
Climate change may adversely affect our business due to new weather patterns or the occurrence of
significant weather events which could impact economic activity or the value of our properties in specific
markets.
Our properties generate rent revenue, and any adverse impacts on our properties, including, but not limited
to, inability to secure funds for future tenant or other capital improvements or payment of leasing
commissions, a requirement to make rent or other concessions and significant capital expenditures to
improve our properties in order to retain and attract tenants, property vacancies, increases in property taxes,
uninsured damages to or total losses of our properties, or health and safety or environmental violations,
could have a material adverse effect on our properties, revenues, results of operations and financial
condition.
• We primarily fund our acquisitions through our Credit Facility and equity offerings, and any inability to
utilize our Credit Facility or access capital markets at favorable terms and rates could have a material
adverse effect on our business, results of operations and financial conditions.
• We qualify as a REIT under the Code, and the failure to remain qualified as a REIT would have a material
adverse effect on our business, cash flows, ability to pay distributions and the market price of our common
stock.
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to
understanding other statements in this Annual Report on Form 10-K, and we direct you to read our statement about
forward-looking statements under the title “Cautionary Statements Regarding Forward-Looking Statements” in this
Annual Report on Form 10-K. The following information should be read in conjunction with Part II, Item 7,
“Management’s Discussion And Analysis of Financial Condition and Results of Operations” and the consolidated
financial statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this
Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we face. Additional
risk and uncertainties not presently known to us or that we presently deem less significant may also impair our
business operations. If any of the events or circumstances described in the following risk factors actually occur, our
business, operating results, financial condition, cash flows, and prospects could be materially and adversely affected.
In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
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The business, financial condition and operating results of the Company can be affected by a number of factors,
whether currently known or unknown, including but not limited to those described below, any one or more of which
could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially
from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in
part, could materially and adversely affect the Company’s business, financial condition, operating results and stock
price.
Because of the following factors, as well as other factors affecting the Company’s financial condition and operating
results, past financial performance should not be considered to be a reliable indicator of future performance, and
investors should not use historical trends to anticipate results or trends in future periods.
Risks Related to Our Business
Inflation and the U.S. government’s response thereto could adversely impact our tenants and our operations.
Inflation, both real or anticipated, could adversely affect the economy and the costs of labor, goods and services to
our tenants. Increased operating costs resulting from inflation could have an adverse impact on our tenants if
increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’
ability to pay rent or other obligations owed to us. In response to inflationary pressures, the Federal Reserve raised
interest rates in 2022 and 2023, and these increases may continue in 2024 and beyond. Increases in interest rates will
increase interest cost on existing variable rate debt, including our Credit Facility. Such increases in the cost of
capital could adversely impact our ability to finance operations and acquire properties. Increased interest rates may
also result in less liquid property markets, limiting our ability to sell existing assets.
Our real estate investments are concentrated in healthcare properties, making us more vulnerable economically
than if our investments were diversified in other segments of the economy.
We acquire, own, manage, operate and selectively develop properties for lease primarily to physicians and
healthcare delivery systems. We are subject to risks inherent in concentrating investments in real estate, and the risks
resulting from a lack of diversification is even greater as a result of our business strategy to concentrate our
investments in the healthcare sector. Any adverse effects that result from these risks could be more pronounced than
if we diversified our investments outside of healthcare properties. Given our concentration in this sector, our tenant
base is especially concentrated and dependent upon the healthcare industry generally, and any industry downturn
could adversely affect the ability of our tenants to make lease payments and our ability to maintain current rental and
occupancy rates. Our tenant mix could become even more concentrated if a significant portion of our tenants
practice in a particular medical field or are reliant upon a particular healthcare delivery system. Accordingly, a
downturn in the healthcare industry generally, or in the healthcare related facility specifically, could adversely affect
our business, financial condition and results of operations, our ability to make distributions to our shareholders and
the market price of our common shares.
Given our dependence on rental revenue, failure by our major tenants to make rental payments to us, because of
a deterioration of their financial condition, a termination of their leases, a non-renewal of their leases or
otherwise, could have a material adverse effect on our results of operations.
Our income is derived from rental revenue from real property. As a result, our performance depends on our ability to
collect rents from tenants. At any time, our tenants may experience a downturn in their businesses that may
significantly weaken their financial condition, whether as a result of general economic conditions or otherwise. As a
result, our tenants may fail to make rental payments when due, delay lease commencements, decline to extend or
renew leases upon expiration or declare bankruptcy or be subject to involuntary insolvency proceedings. Any of
these actions could result in the termination of the tenants’ leases or the failure to renew a lease and the loss of rental
income attributable to the terminated leases. The occurrence of any of the situations described above could have a
material adverse effect on our financial condition, results of operations, cash flows, or the market price of our
common stock.
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We may be unable to source off-market or lightly marketed deal flow in the future, which may have a material
adverse effect on our growth.
A key component of our investment strategy is to acquire additional healthcare properties in off-market or lightly
marketed transactions, relying on our officers’ relationships with healthcare providers and real estate brokers. We
seek to acquire properties before they are widely marketed by real estate brokers. As we expect to compete with
many national, regional and local acquirers of healthcare properties, properties that are acquired in off-market or
lightly marketed transactions are typically more attractive to us as a purchaser because of the absence of a formal
sales process, which could lead to higher prices. In the formal sales process, our potential acquisition targets may
find our competitors to be more attractive because they may have greater resources, may be willing to pay more for
the properties or may have a more compatible operating philosophy. In particular, larger REITs, including publicly
traded and privately held REITs, private equity investors or institutional investment funds who are targeting
healthcare properties may enjoy significant competitive advantages that result from, among other things, a lower
cost of capital, enhanced operating efficiencies, more risk tolerance, more personnel and market penetration and
familiarity with markets. As such, if we do not have access to off-market or lightly marketed deal flow in the future,
our ability to locate and acquire additional properties in our target submarkets at attractive prices could be materially
and adversely affected, which could materially impede our growth, and, as a result, adversely affect our operating
results.
We depend on the continued services and performance of our senior management and other key employees, the
loss of any of whom could adversely affect our business, operating results, financial condition, and stock price.
Our success depends, to a significant extent, on the continued services of Mr. David H. Dupuy, our Chief Executive
Officer and President, Mr. William G. Monroe IV, our Executive Vice President and Chief Financial Officer,
Ms. Leigh Ann Stach, our Executive Vice President and Chief Accounting Officer, and Mr. Timothy L. Meyer, our
Executive Vice President, Asset Management. Each executive officer has significant experience in the healthcare
and/or real estate industry and have all developed significant relationships with various healthcare providers and real
estate brokers throughout the United States. Our ability to continue to acquire and develop healthcare properties in
off-market or lightly marketed transactions depends upon the significant relationships that our senior management
team has developed over many years. The loss of services of our senior management or other key employees for any
reason or for any amount of time could significantly delay or prevent the achievement of our strategic objectives and
negatively impact our business, financial condition, results of operations, and stock price.
Although we have entered into employment agreements with Messrs. Dupuy, Monroe and Meyer and Ms. Stach, we
cannot provide any assurance that any of them will remain employed by us. Our ability to retain our executive
officers, or to attract suitable replacements should any member of the senior management team leave, is dependent
on the competitive nature of the employment market. The loss of services of, or the failure to successfully integrate
one or more new members of, our senior management team could adversely affect our business and our prospects.
In addition, we have recently observed an overall tightening and increasingly competitive labor market. Our
business could be adversely affected by an inability to retain personnel or upward pressure on wages as a result of
the competitive labor market.
We may be unable to complete any pending acquisitions, which would adversely affect our ability to make
distributions to our stockholders and could have a material adverse impact on our results of operations, earnings
and cash flow, and even if acquisitions are completed, we may fail to successfully operate acquired properties.
We cannot assure you that we will complete any pending acquisitions on the terms described in this report or other
reports the Company may file or furnish in future SEC filings, because these transactions are subject to a variety of
conditions, including, in the case of properties under contract, the execution of a mutually agreed-upon lease
between us and the proposed tenant, our satisfactory completion of due diligence and the satisfaction of customary
closing conditions. We may determine through due diligence that the prospective facility does not meet our
investment standards and there is no assurance that we will successfully close an acquisition once a purchase
agreement has been signed. These transactions, whether or not successful, require substantial time and attention
from management. Furthermore, the pending acquisitions require significant expense, including expenses for due
diligence, legal and accounting fees and other costs. If we are unable to complete any potential acquisitions, we
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would still incur the costs associated with pursuing those investments but would not generate the revenues and net
operating income that we currently anticipate, which would adversely affect our ability to make distributions to our
stockholders and could have a material adverse impact on our financial condition, results of operations and the
market price of our common shares. Additionally, failure to close acquisitions under contract or in our investment
pipeline could restrict our growth opportunities.
In addition, there is no assurance that we will fully realize the potential benefits of any past or future acquisition or
strategic transaction. We are exposed to the risk that our future acquisitions may not prove to be successful. We
could encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent
liabilities, and newly acquired properties might require significant attention of the Company's management that
would otherwise be devoted to our existing business.
We may obtain only limited warranties when we purchase a property, which, in turn, would only provide us with
limited recourse against the seller if issues arise after our purchase of a property.
The seller of a property often sells such property in its “as is” condition on a “where is” basis and “with all faults,”
without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase and sale
agreements may contain only limited warranties, representations and indemnifications that will only survive for a
limited period after the closing. The purchase of properties with limited warranties increases the risk of having little
or no recourse against a seller if issues were to arise at such property. This, in turn, could cause us to have to write
off our investment in the property, which could negatively affect our business, results of operations, our ability to
pay distributions to our stockholders and the trading price of our common stock.
We may be unable to successfully acquire properties and expand our operations into new or existing target
submarkets.
A component of our strategy is to pursue acquisitions of properties in new and existing target submarkets. These
acquisitions could divert our officers’ attention from other pending and/or potential acquisitions, and we may be
unable to retain key employees or attract highly qualified new employees in those markets. In addition, we may not
possess familiarity with the dynamics and prevailing conditions of any new target submarkets, which could
adversely affect our ability to successfully expand into or operate within those markets. For example, new target
submarkets may have different insurance practices, reimbursement rates and local real estate zoning regulations than
those with which we are familiar. We may find ourselves more dependent on third parties in new target submarkets
because our physical distance could hinder our ability to directly and efficiently manage and otherwise monitor new
properties in new target submarkets. In addition, our expansion into new target submarkets could result in
unexpected costs or delays as well as lower occupancy rates and other adverse consequences. We may not be
successful in identifying suitable properties or other assets that meet our acquisition criteria or in consummating
acquisitions on satisfactory terms or at all for a number of reasons, including, among other things, significant
competition from other prospective purchasers in new target submarkets, unsatisfactory results of our due diligence
investigations, including potential negative impacts of climate change and extreme weather conditions on the
property, failure to obtain financing for the acquisition on favorable terms or at all, and our misjudgment of the
value of the opportunities. We may also be unable to successfully integrate the operations of acquired properties,
maintain consistent standards, controls, policies and procedures, or realize the anticipated benefits of the acquisitions
within the anticipated timeframe or at all. If we are unsuccessful in expanding into new or our existing target
submarkets, it could materially and adversely affect our business, financial condition and results of operations, our
ability to make distributions to our stockholders and the market price of our common stock.
A pandemic, epidemic, outbreak of a contagious disease, or other health crisis may adversely affect our tenants'
financial condition and the profitability of our properties.
Our business and the businesses of our tenants could be materially and adversely affected by the risks, or the public
perception of the risks, related to another pandemic or other health crisis, similar to the prior novel coronavirus
(COVID-19) pandemic. Such events could result in the complete or partial closure of one or more of our tenants'
facilities, severely disrupt our tenants' operations, and have a material adverse effect on our business, financial
condition and results of operations. In addition, if such events lead to a significant or prolonged impact on capital or
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credit markets or economic growth, then our business, financial condition and results of operations could be
adversely affected.
The bankruptcy, insolvency or weakened financial position of our tenants, and particularly our largest tenants,
could materially and adversely affect our operating results and financial condition.
We receive substantially all of our revenue from rent payments from tenants under leases of space in our healthcare
properties. We have no control over the success or failure of our tenants’ businesses and, at any time, any of our
tenants may experience a downturn in its business that may weaken its financial condition. Additionally, private or
governmental payers may lower the reimbursement rates paid to our tenants for their healthcare services. For
example, the Affordable Care Act provides for significant reductions to Medicare and Medicaid payments. As a
result, our tenants may delay lease commencement or renewal, fail to make rent payments when due or declare
bankruptcy. Any leasing delays, tenant failures to make rent payments when due or tenant bankruptcies could result
in the termination of the tenant’s lease and, particularly in the case of a large tenant, or a significant number of
tenants, may have a material adverse effect on our business, financial condition and results of operations, our ability
to make distributions to our stockholders and the market price of our common stock. In addition, to the extent a
tenant vacates specialized space in one of our properties (such as imaging space, ambulatory surgical space, or
inpatient hospital space), re-leasing the vacated space could be more difficult than re-leasing less specialized office
space, as there are fewer users for such specialized healthcare space in a typical market than for more traditional
office space.
Any bankruptcy filings by or relating to one of our tenants could bar all efforts by us to collect pre-bankruptcy debts
from that tenant or seize its property, unless we receive an order permitting us to do so from a bankruptcy court,
which we may be unable to obtain. A tenant bankruptcy could also delay our efforts to collect past due balances
under the relevant leases and could ultimately preclude full collection of these sums. Furthermore, if a tenant rejects
the lease while in bankruptcy, we would have only a general unsecured claim for pre-petition damages. Any
unsecured claim that we hold may be paid only to the extent that funds are available and only in the same percentage
as is paid to all other holders of unsecured claims. It is possible that we may recover substantially less than the full
value of any unsecured claims that we hold, if any, which may have a material adverse effect on our business,
financial condition and results of operations, our ability to make distributions to our stockholders and the market
price of our common stock. Furthermore, dealing with a tenant bankruptcy or other default may divert
management’s attention and cause us to incur substantial legal and other costs, which could adversely affect our
ability to execute our business strategies, financial condition, and results of operations, as well as our ability to make
distributions to our stockholders and the market price of our common stock.
For example, in June 2023, one of our tenants, GenesisCare and certain of its affiliates ("GenesisCare") filed a
voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Two of GenesisCare's leases
with the Company's subsidiaries were rejected pursuant to requests to reject such leases that were approved by the
U.S. Bankruptcy Court for the Southern District of Texas during 2023. At December 31, 2023, GenesisCare was the
sole tenant in five of our properties and a tenant in two of our multi-tenanted properties, representing approximately
1.9% of our gross real estate properties, or approximately 62,000 square feet.
We cannot predict whether our tenants will renew existing leases beyond their current terms. At December 31, 2023,
we had 69 leases scheduled to expire in 2024 and 54 leases scheduled to expire in 2025, which represent 6.9% and
9.2% of our total annualized lease revenue, respectively, for the year ended December 31, 2023. If any of our leases
are not renewed, or are terminated prior to the contractual expiration date, we would attempt to lease those
properties to another tenant at then-current market rates. However, following expiration of a lease term or if we
exercise our right to replace a tenant in default, rental payments on the related properties could decline or cease
altogether while we reposition the properties with a suitable replacement tenant. As such, we may be required to
fund certain expenses and obligations (e.g., real estate taxes, debt costs and maintenance expenses) to preserve the
value of, and avoid the imposition of liens on, our properties while they are being repositioned. Furthermore, our
ability to reposition our properties with a suitable tenant could be significantly delayed or limited by state licensing,
receivership, certificate of need, or CON, or other laws, as well as by the Medicare and Medicaid change-of-
ownership rules. We could also incur substantial additional expenses in connection with any licensing, receivership
or change-of-ownership proceedings. In addition, our ability to locate suitable replacement tenants could be
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impaired by the specialized healthcare uses or contractual restrictions on use of the properties, and we may be
required to spend substantial amounts to adapt the properties to other uses. Any such delays, limitations and
expenses could adversely impact our ability to collect rent, obtain possession of leased properties or otherwise
exercise remedies for tenant default and could have a material adverse effect on our business, financial condition and
results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
All of these risks may be greater in the target submarkets on which we focus, where there may be fewer potential
replacement tenants, making it more difficult to replace tenants, especially for specialized space, like hospital or
outpatient treatment facilities located in our properties, and could have a material adverse effect on our business,
financial condition and results of operations, our ability to make distributions to our stockholders and the market
price of our common stock.
We may be unable to secure funds for future tenant or other capital improvements or payment of leasing
commissions, which could limit our ability to attract or replace tenants and adversely impact our ability to make
cash distributions to our stockholders.
When tenants do not renew their leases or otherwise vacate their space, it is common that, in order to attract
replacement tenants, we will be required to expend funds for tenant improvements, payment of leasing commissions
and other concessions related to the vacated space. Such tenant improvements may require us to incur substantial
capital expenditures. We may not be able to fund capital expenditures solely from cash provided from our operating
activities because we must distribute at least 90% of our REIT taxable income, determined without regard to the
deduction for dividends paid and excluding net capital gains, each year to qualify as a REIT. As a result, our ability
to fund tenant and other capital improvements or payment of leasing commissions through retained earnings may be
limited. If we have insufficient capital reserves, we will have to obtain financing from other sources. We may also
have future financing needs for other capital improvements to refurbish or renovate our properties. If we are unable
to secure financing on terms that we believe are acceptable or at all, we may be unable to make tenant and other
capital improvements, payment of leasing commissions or we may be required to defer such improvements. If this
happens, it may result in fewer potential tenants being attracted to the property or existing tenants not renewing their
leases, causing one or more of our properties to suffer from a greater risk of obsolescence or a decline in value. If we
do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to
our properties, pay leasing commissions or other expenses or pay distributions to our stockholders.
We may be required to make rent or other concessions and significant capital expenditures to improve our
properties in order to retain and attract tenants, which could adversely affect our financial condition, results of
operations and cash flow.
In order to retain existing tenants and attract new tenants, we may be required to offer more substantial rent
abatements, tenant improvement allowances and early termination rights, provide options to purchase our properties
within the lease term or accommodate requests for renovations, build-to-suit remodeling and other improvements or
provide additional services to our tenants. As a result, we may have to make significant capital or other expenditures
in order to retain tenants whose leases expire and to attract new tenants in sufficient numbers, which could adversely
affect our results of operations and cash flow. Additionally, if we need to raise capital to make such expenditures
and are unable to do so, or such capital is otherwise unavailable, we may be unable to make the required
expenditures. This could result in non-renewals by tenants upon expiration of their leases, which could adversely
affect our financial condition, results of operations, cash flows, or the market price of our common stock or
preferred stock.
Supply chain disruptions and unexpected construction expenses and delays could impact our ability to timely
deliver spaces to tenants and/or our ability to achieve the expected value of a construction project or lease,
thereby adversely affecting our profitability.
The construction and building industry, similar to many other industries, is experiencing worldwide supply chain
disruptions due to a multitude of factors that are beyond our control. Materials, parts and labor have also increased
in cost over the past year or earlier, sometimes significantly and over a short period of time. Although we are
generally not engaged in large-scale development projects, small-scale construction projects, such as building
renovations and maintenance and tenant improvements required under leases are a routine and necessary part of our
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business. We may incur costs for a property renovation or tenant buildout that exceeds our original estimates due to
increased costs for materials or labor or other costs that are unexpected. We also may be unable to complete
renovation of a property or tenant space on schedule due to supply chain disruptions or labor shortages, which could
result in increased debt service expense or construction costs. The time frame required to recoup our renovation and
construction costs and to realize a return on such costs may be significant and materially adversely affect our
profitability.
Some of the leases at our properties contain “early termination” provisions which, if triggered, may allow tenants
to terminate their leases without further payment to us, which could adversely affect our financial condition and
results of operations and the value of the applicable property.
Certain tenants have a right to terminate their leases prior to the termination date stated in their lease upon payment
of a penalty, but others are not required to pay any penalty associated with an early termination. There can be no
assurance that tenants will continue their activities and continue occupancy of the premises. Any cessation of
occupancy by tenants may have an adverse effect on our operations.
Adverse economic or other conditions in the geographic markets in which we conduct business could negatively
affect our occupancy levels and rental rates and have a material adverse effect on our operating results.
Our operating results depend upon our ability to maintain and improve the anticipated occupancy levels and rental
rates at our properties. Adverse economic or other conditions in the geographic markets in which we operate,
including periods of economic slowdown or recession, industry slowdowns, periods of deflation, relocation of
businesses, changing demographics, water pollution, earthquakes and other natural disasters, fires, terrorist acts,
epidemics, pandemics, vandalism, civil disturbances or acts of war and other man-made disasters which may result
in uninsured or underinsured losses, and changes in tax, real estate, zoning and other laws and regulations, may
lower our tenants' businesses, occupancy levels and limit our ability to increase rents or require us to offer rental
concessions. The failure of our properties to generate revenues sufficient to meet our cash requirements, including
operating and other expenses, debt service and capital expenditures, may have an adverse effect on our business,
financial condition and results of operations, our ability to make distributions to our stockholders and the market
price of our common stock.
Climate change may adversely affect our business.
We cannot predict the rate at which climate change will progress. However, the physical effects of climate change
could have a material adverse effect on our properties, operations, and business. To the extent that climate change
impacts changes in weather patterns, our markets could experience severe weather, including hurricanes, severe
winter storms, and tornadoes due to increases in storm intensity and unpredictable weather patterns. Over time, these
weather conditions could result in declining demand for space at our properties, delays in construction, resulting in
increased construction costs, or in our inability to operate the buildings at all. Climate change and severe weather
may also have indirect effects on our business by increasing the cost of, or decreasing the availability of, property
insurance on terms we find acceptable, by increasing the costs of energy, maintenance, repair of water and/or wind
damage, and snow removal at our properties.
In recent years, the assessment of the potential impact of climate change has begun to impact the activities of
government authorities and other areas that impact the business environment in the U.S., including, but not limited
to, energy-efficiency measures, water use measures and land-use practices.
Various federal, state and local laws and regulations have been implemented or are under consideration to mitigate
the effects of climate change caused by greenhouse gas emissions. Although these laws and regulations have not had
any known material adverse effects on our business to date, changes in federal, state, and local legislation and
regulation based on concerns about climate change could result in increased capital expenditures on our existing
properties and our new development properties (for example, to improve their energy efficiency and/or resistance to
severe weather) without a corresponding increase in revenue, which may result in adverse impacts to our net
income. The impact of climate change on weather patterns or the occurrence of significant weather events could
impact economic activity or the value of our properties in specific markets.
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We rely on a limited number of vendors to provide key services, including, but not limited to, utilities and
construction services, at certain of our properties. Our business and property operations may be adversely affected if
these vendors fail to adequately provide key services at our properties as a result of unanticipated events, including
those resulting from climate change. If a vendor fails to adequately provide utilities, construction, or other important
services, we may experience significant interruptions in service and disruptions to business operations at our
properties, incur remediation costs, and become subject to claims and damage to our reputation.
The occurrence of any of these events or conditions may result in physical damage to our properties and adversely
impact our ability to lease our properties, including our or our tenants’ ability to obtain property insurance on
acceptable terms, which would materially and adversely affect us.
Environmental, social and governance matters may cause us to incur additional costs, make personnel changes,
and affect the attractiveness of our stock to investors.
Shareholder, public and governmental expectations have been increasing with respect to corporate responsibility,
sustainability, diversity and inclusion and related ESG matters. Shareholder advisory services and other
organizations have developed and publish, and others may in the future develop and publish, rating systems and
other scoring and reporting mechanisms to evaluate and compare the ESG performance of our Company and others.
These ratings systems frequently change, and scores are often based on a relative ranking which may cause a
company’s score to deteriorate if peer companies’ rankings improve. Keeping up with such changes may divert
management’s time and attention from other business priorities. These force us to incur additional costs for staff,
systems, and board members. In addition, current shareholders and prospective investors may use these ratings and/
or their own internal ESG benchmarks to determine whether and to what extent they may choose to invest in our
securities, engage with us to advocate for improved ESG performance or disclosure, make voting decisions as
shareholders, or take other actions to hold us and our board of directors accountable with respect to ESG matters.
Some legislatures, government agencies and listing exchanges have mandated or proposed, and others may in the
future further mandate, certain ESG disclosure or performance. For example, board diversity and inclusion is an
ESG topic that is receiving heightened attention from lawmakers and listing exchanges. As an example, in 2021, the
SEC approved Nasdaq Stock Market LLC's proposal that requires most Nasdaq-listed companies to meet specified
board diversity requirements within a defined compliance period and face potential delisting if they do not explain
any failure to meet the requirements. If we are unable to recruit, attract and/or retain qualified members of our board
of directors to maintain compliance with the diversity requirements of applicable mandates within the prescribed
timelines, we could be exposed to costly fines and penalties. We may also face reputational damage in the event our
corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards
or expectations of shareholders, prospective investors, lawmakers, listing exchanges or other constituencies, or if we
are unable to achieve acceptable ESG ratings from third party rating services. Failure to comply with ESG-related
laws, exchange policies or stakeholder expectations could materially and adversely impact the value of our stock and
related cost of capital, and limit our ability to fund future growth.
A large percentage of our properties are located in Texas, Illinois, and Ohio, and changes in these markets may
materially adversely impact our business and financial condition.
Of our investments in 193 properties, the properties located in Texas, Illinois, and Ohio provide, in the aggregate,
approximately 39.6% of our annualized rent as of December 31, 2023. As a result of this geographic concentration,
we are particularly exposed to downturns in the economies of those states or other changes in such states’ respective
real estate market conditions. Any material change in the current payment programs or regulatory, economic,
environmental or competitive conditions in these states could have a disproportionate effect on our overall business
results. In the event of negative economic or other changes in these markets, our business, financial condition and
results of operations, our ability to make distributions to our stockholders and the market price of our common stock
may be materially and adversely affected.
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We will rely upon external sources of capital to fund future capital needs, and, if we encounter difficulty in
obtaining such capital, we may not be able to make future acquisitions necessary to grow our business or meet
maturing obligations.
In order to maintain our status as a REIT under the Code, we are required, among other things, to distribute each
year to our stockholders at least 90% of our REIT taxable income, without regard to the deduction for dividends paid
and excluding net capital gains. In addition, we are subject to income tax at regular corporate rates to the extent we
distribute less than 100% of our REIT taxable income, including any net capital gains. Because of this distribution
requirement, we will not likely be able to fund all of our future capital needs from cash retained from operations,
including capital needed to make investments and to satisfy or refinance maturing obligations. As a result, we expect
to rely upon external sources of capital, including debt and equity financing, to fund future capital needs. If we are
unable to obtain needed capital on satisfactory terms or at all, we may not be able to make the investments needed to
expand our business or to meet our obligations and commitments as they mature. Our access to capital will depend
upon a number of factors over which we have little or no control, including general market conditions, the market’s
perception of our current and potential future earnings and cash distributions and the market price of our common
stock. We may not be in a position to take advantage of attractive acquisition opportunities for growth if we are
unable to access the capital markets on a timely basis on favorable terms.
The capital and credit markets have experienced extreme volatility and disruption as a result of the conflict between
Russia and Ukraine, new and ongoing hostilities between Israel and Hamas, and the recent rise in inflation, as well
as the resulting governmental policies. We believe that such volatility and disruption are likely to continue into the
foreseeable future. Market volatility and disruption could hinder our ability to obtain new debt financing or
refinance our maturing debt on favorable terms or at all or to raise debt and equity capital.
Covenants related to our indebtedness could limit our operations.
The terms of our current indebtedness as well as debt instruments that we entered into in the future are subject to
customary financial and operational covenants. These include limitations with respect to liens, indebtedness,
distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial
maintenance covenants. We may be unable to maintain compliance with these covenants and, if we fail to do so, we
may be unable to obtain waivers and/or amend the covenants. If some or all of our debt is accelerated and becomes
immediately due and payable, we may be unable to repay or refinance the debt. Our continued ability to incur debt
and operate our business is subject to compliance with these covenants, which could limit operational flexibility.
We may not be able to control our expenses or our expenses may remain constant or increase, even if our
revenue does not increase, which could cause our results of operations to be adversely affected.
There are factors beyond our control that may adversely affect our ability to control our expenses. Certain costs
associated with real estate investments (e.g., real estate taxes, debt costs, increases in costs to address environmental
impacts related to climate change or natural disasters, and maintenance expenses) required to preserve the value of
the property may not be reduced even if a healthcare related facility is not occupied or other circumstances cause our
revenues to decrease. If our expenses increase as a result of any of the aforementioned factors, our results of
operations may be adversely affected.
Our ability to issue equity to expand our business will depend, in part, upon the market price of our common
stock, and our failure to meet market expectations with respect to our business could adversely affect the market
price of our common stock and thereby limit our ability to raise capital.
The availability of equity capital to us will depend, in part, upon the market price of our common stock, which, in
turn, will depend upon various market conditions and other factors that may change from time to time, including:
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the extent of investor interest in our Company and our assets;
our ability to satisfy the distribution requirements applicable to REITs;
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the general reputation of REITs and the attractiveness of their equity securities in comparison to other
equity securities, including securities issued by other real estate-based companies;
our financial performance and that of our tenants;
analyst reports about us and the REIT industry;
• macroeconomic conditions generally and conditions affecting the healthcare and real estate industry in
particular;
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general stock and bond market conditions, including changes in interest rates on fixed income
securities, which may lead prospective purchasers of our common stock to demand a higher annual
yield from future distributions;
a failure to maintain or increase our dividend which is dependent, in large part, upon funds from
operations, or FFO, which, in turn, depends upon increased revenue from additional acquisitions and
rental increases; and
other factors such as governmental regulatory action and changes in REIT tax laws.
Our failure to meet the market’s expectations with regard to future earnings and cash distributions could materially
and adversely affect the market price of our common stock and, as a result, the cost and availability of equity capital
to us.
We have now, and may have in the future, exposure to contingent rent escalators, which can hinder our growth
and profitability.
We receive a significant portion of our revenues by acquiring and leasing our assets under long-term net leases in
which the rental rate is generally fixed with annual fixed rate rental rate escalations or rental rate escalators based
upon changes in the Consumer Price Index, or CPI. Properties which we acquire in the future may contain CPI
escalators or escalators that are contingent upon our tenant’s achievement of specified revenue parameters. If, as a
result of weak economic conditions or other factors, the revenues generated by our net leased properties do not meet
the specified parameters or CPI does not increase, our growth and profitability may be adversely affected.
Our investments in development projects may not yield anticipated returns which could directly affect our
operating results and reduce the amount of funds available for distributions.
A component of our growth strategy is exploring development opportunities, some of which may arise through
strategic joint ventures. In deciding whether to make an investment in a particular development, we make certain
assumptions regarding the expected future performance of that property. To the extent that we consummate
development opportunities, our investment in these projects could be subject to the following risks:
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we may be unable to obtain financing for development projects on favorable terms or at all;
we may not complete development projects on schedule or within budgeted amounts;
we may encounter delays in obtaining or fail to obtain all necessary zoning, land use, building,
occupancy, environmental and other governmental permits and authorizations, or underestimate the
costs necessary to develop the property to market standards;
development or construction delays may provide tenants the right to terminate preconstruction leases
or cause us to incur additional costs;
volatility in the price of construction materials or labor may increase our development costs;
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hospitals or health systems may maintain significant decision-making authority with respect to the
development schedule;
we may incorrectly forecast risks associated with development in new geographic regions;
tenants may not lease space at the quantity or rental rate levels projected;
demand for our development project may decrease prior to completion, including due to competition
from other developments; and
lease rates and rents at newly developed properties may fluctuate based on factors beyond our control,
including market and economic conditions.
If our investments in development projects do not yield anticipated returns for any reason, including those set forth
above, our business, financial condition and results of operations, our ability to make distributions to our
shareholders and the market price of our common shares may be adversely affected.
Mortgage notes in which we may invest in may be impacted by unfavorable real estate market conditions, which
could decrease their value.
Investments in mortgage notes involve special risks relating to the particular borrower, and we could be at risk of
loss on that investment, including losses as a result of a default on the mortgage note. These losses may be caused by
many conditions beyond our control, including economic conditions affecting real estate values, tenant defaults and
lease expirations, interest rate levels, adverse rulings of bankruptcy courts, and the other economic and liability risks
associated with real estate. We do not know whether the values of the property securing any of our real estate related
investments will remain at the levels existing on the dates we initially make the related investment. If the values of
the underlying properties drop, our risk will increase and the values of our interests may decrease.
Delays in liquidating defaulted mortgage note investments could reduce our investment returns.
Delays in liquidating defaulted mortgage note investments could reduce our investment returns. If there are defaults
under mortgage note investments, we may not be able to foreclose on or obtain a suitable remedy with respect to
such investments. Specifically, we may not be able to repossess and sell the underlying properties quickly, which
could reduce the value of our investment. For example, an action to foreclose on a property securing a mortgage
note is regulated by state statutes and rules and is subject to many of the delays and expenses of lawsuits if the
defendant raises defenses or counterclaims. Additionally, in the event of default by a mortgagor, these restrictions,
among other things, may impede our ability to foreclose on or sell the mortgaged property or to obtain proceeds
sufficient to repay all amounts due to us on the mortgage note.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or
security failure of that technology could harm our business.
We rely on information technology networks and systems, including the internet, to process, transmit and store
electronic information, and to manage or support our business processes, including financial transactions and
records, and maintaining personal information and tenant and lease data. We purchase some of our information
technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools
and monitoring to provide security for the processing, transmission and storage of confidential tenant and customer
data, including financial account information. While we have taken steps to protect the security of our information
systems, we have, from time to time, experienced security incidents of varying degrees, although none of these
security incidents have had a material adverse impact on our business, financial condition or results of operations. It
is possible that in the future our safety and security measures will not prevent the systems’ improper functioning or
damage, or the improper access or disclosure of personally identifiable or proprietary information and any such
event could materially and adversely impact our business, financial condition or results of operations.
Due to the fast pace and unpredictability of cyber threats, measures for addressing cybersecurity risks may become
obsolete quickly. Security breaches, including physical or electronic break-ins, computer viruses, malware, phishing
attacks, worms, attacks by hackers or foreign governments, disruptions from unauthorized access and tampering
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(including through social engineering such as phishing attacks), coordinated denial-of-service attacks, impersonation
of authorized users and similar incidents, can create system disruptions, shutdowns or result in a loss of company
assets or unauthorized disclosure of confidential information. The risk of security incidents has generally increased
as the number, intensity and sophistication of attacks and intrusions from around the world have increased. In some
cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. In addition,
our technology infrastructure and information systems are vulnerable to damage or interruption from natural
disasters, power loss and telecommunications failures. Failure to maintain proper function, security and availability
of our information systems and the data maintained in those systems could interrupt our operations, damage our
reputation, subject us to liability claims or regulatory penalties and could have a material adverse effect on our
business, financial condition and results of operations.
Cybersecurity incidents could disrupt our business and result in the unavailability or compromise of confidential
information.
Our business is at risk from and may be impacted by information security incidents, including attempts to gain
unauthorized access to our confidential data, ransomware, malware, and other electronic security events. Such
incidents can range from individual attempts to gain unauthorized access to our information technology systems to
more sophisticated security threats. They can also result from internal compromises, such as human error or
malicious acts. While we employ a number of measures to prevent, detect and mitigate these threats, there is no
guarantee such efforts will be successful in preventing a cyber event. Cybersecurity incidents could disrupt our
business and compromise confidential information of ours and third parties, including our tenants.
Risks Related to the Healthcare Industry
The healthcare industry is heavily regulated and new laws or regulations, changes to existing laws or regulations,
changes to reimbursement models or structure, loss of licensure or failure to obtain licensure could adversely
impact our company and result in the inability of our tenants to make rent payments to us.
The healthcare industry is heavily regulated by U.S. federal, state and local governmental authorities. As has been
the trend in recent years, it is reasonable to assume that there will continue to be increased government oversight and
regulation of the healthcare industry in the future. Our tenants generally will be subject to laws and regulations
covering, among other things, licensure, certification for participation in government programs, billing for services,
breaches of privacy and security of health information and relationships with physicians and other referral sources.
In addition, new laws and regulations, changes in existing laws and regulations or changes in the interpretation of
such laws or regulations could negatively affect our financial condition and the financial condition of our tenants.
These changes, in some cases, could apply retroactively. The enactment, timing or effect of legislative or regulatory
changes cannot be predicted.
The Affordable Care Act's passage changed how healthcare services are covered, delivered and reimbursed through
expanded coverage of uninsured individuals and reduced Medicare program spending. The law reformed certain
aspects of health insurance, expanded existing efforts to tie Medicare and Medicaid payments to performance and
quality and contained provisions intended to strengthen fraud and abuse enforcement. In addition, the law requires
skilled nursing facilities and nursing facilities to implement a compliance and ethics program for all employees and
agents. The complexities and ramifications of the Affordable Care Act continue to unfold within our industry. Our
revenues and financial condition, and those of our tenants, could be impacted by the current law’s complexity, lack
of implementing regulations or interpretive guidance, gradual implementation and possible additional changes to the
law. Further, we are unable to foresee how individuals and businesses will respond to the uncertain landscape or that
landscape's effect on the reimbursement rates received by our tenants, the financial success of our tenants and
strategic partners, and consequently the effect on us.
While the Trump Administration had decreased its focus on a legislative repeal of the Affordable Care Act, efforts
in the courts are ongoing. In December 2018, a federal court ruled the law unconstitutional. This decision was
appealed to the U.S. Court of Appeals for the 5th Circuit, which issued a decision in December 2019 finding the
insurance mandate unconstitutional and remanded the case to the District Court to consider the constitutionality of
the rest of the law. The case was appealed to the U.S. Supreme Court, which heard oral arguments in November
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2020. The Court issued a decision in June 2021 dismissing the case for lack of standing. The decision did not
address the merits of the lawsuit and the legality of the ACA, but the decision effectively ends the case. While it is
not entirely clear exactly what actions the Biden Administration may take relative to the Affordable Care Act, the
Biden Administration has signaled its strong support for the Affordable Care Act by taking steps to reverse various
actions by the Trump Administration and to strengthen Medicaid and the Affordable Care Act through an Executive
Orders issued January 28, 2021. The Biden Administration and Congress strengthened coverage under the
Affordable Care Act by increasing the subsidies available to purchasers of health plans through the insurance
exchanges created by the Affordable Care Act and otherwise expanding individual access to health insurance and
additional healthcare services as part of the Inflation Reduction Act of 2022.
We cannot predict the ultimate content, timing or effect of any further healthcare reform legislation related to
increasing access to healthcare or the impact of potential legislation on us. We expect that additional state and
federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal
and state governments will pay for healthcare products and services, which could result in reduced demand for
medical products once approved or additional pricing pressures, and may adversely affect our operating results.
Many states also regulate the construction of healthcare facilities, the expansion of healthcare facilities, the
construction or expansion of certain services, including by way of example specific bed types and medical
equipment, as well as certain capital expenditures through CON laws. Under such laws, the applicable state
regulatory body must determine a need exists for a project before the project can be undertaken. If one of our tenants
seeks to undertake a CON-regulated project, but is not authorized by the applicable regulatory body to proceed with
the project, the tenant would be prevented from operating in its intended manner.
Failure to comply with these laws and regulations could adversely affect us directly and our tenants’ ability to make
rent payments to us which may have an adverse effect on our business, financial condition and results of operations,
our ability to make distributions to our stockholders and the market price of our common stock.
Adverse trends in healthcare provider operations may negatively affect our lease revenues and our ability to make
distributions to our stockholders.
The healthcare industry is currently experiencing, among other things:
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changes in the demand for and methods of delivering healthcare services;
changes in third party reimbursement methods and policies;
increased attention to compliance with regulations designed to safeguard protected health information
and cyber-attacks on entities;
consolidation and pressure to integrate within the healthcare industry through acquisitions and joint
ventures; and
increased scrutiny of billing, referral and other practices by U.S. federal and state authorities.
These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our lease
revenues, which may have a material adverse effect on our business, financial condition and results of operations,
our ability to make distributions to our stockholders and the market price of our common stock.
Reductions in reimbursement from third-party payers, including Medicare and Medicaid, could adversely affect
the profitability of our tenants and hinder their ability to make rent payments to us or renew their lease.
Sources of revenue for our tenants typically include Medicare, Medicaid, private insurance payers and health
maintenance organizations. Healthcare providers continue to face increased government and private payer pressure
to control or reduce healthcare costs and significant reductions in healthcare reimbursement, including reduced
reimbursements and changes to payment methodologies under the Affordable Care Act. In some cases, private
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insurers rely upon all or portions of the Medicare payment systems to determine payment rates which may result in
decreased reimbursement from private insurers. The Affordable Care Act and associated regulations continue to
encourage increasing enrollment in plans offered by private insurers who choose to participate in state-run
exchanges, but recent changes by the Trump Administration affecting Medicaid and the availability of lower cost,
lower coverage plans creates uncertainty around private insurer costs and, thereby, payment rates to providers.
Through Executive Orders issued January 28, 2021, the Biden Administration has taken steps to create a special
enrollment period for the Affordable Care Act and other steps to support Medicaid and the Affordable Care Act.
Both the Biden Administration and Congress strengthened coverage under the ACA by increasing the subsidies
available to purchasers of health plans through the insurance Exchanges created by the ACA.
Efforts by payers to reduce healthcare costs will likely continue which may result in reductions or slower growth in
reimbursement for certain services provided by some of our tenants. A reduction in reimbursements to our tenants
from third-party payers for any reason could adversely affect our tenants’ ability to make rent payments to us which
may have a material adverse effect on our businesses, financial condition and results of operations, our ability to
make distributions to our stockholders and the market price of our common stock.
Our tenants and our Company are subject to fraud and abuse laws, the violation of which by a tenant may
jeopardize the tenant’s ability to make rent payments to us.
There are various federal laws prohibiting fraudulent and abusive business practices by healthcare providers who
participate in, receive payments from or are in a position to make referrals in connection with government-sponsored
healthcare programs, including the Medicare and Medicaid programs. Many states have analogous laws which may
be broader than their federal counterparts. Our lease arrangements with certain tenants may also be subject to these
fraud and abuse laws.
These laws include without limitation:
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the federal Anti-Kickback Statute, which prohibits, among other things, the offer, payment, solicitation
or receipt of any form of remuneration in return for, or to induce, the referral of any federal or state
healthcare program patients;
the Stark Law, which, subject to specific exceptions, restricts physicians who have financial
relationships with healthcare providers from making referrals for designated health services for which
payment may be made under Medicare or Medicaid programs to an entity with which the physician, or
an immediate family member, has a financial relationship;
the federal False Claims Act, which prohibits any person from knowingly presenting false or fraudulent
claims for payment to the federal government, including under the Medicare and Medicaid programs;
the federal Civil Monetary Penalties Law, which authorizes the Department of Health and Human
Services, or HHS, to impose monetary penalties for certain fraudulent acts;
state anti-kickback, anti-inducement, fee-splitting, anti-referral and insurance fraud laws which may be
generally similar to, and potentially more expansive than, the federal laws set forth above; and
federal and state laws governing confidentiality, maintenance, and security issues associated with
health-related information and medical records.
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Other laws that impact how our tenants conduct their operations include: state and local licensure laws; laws
protecting consumers against deceptive practices; laws generally affecting our tenants’ management of property and
equipment and how our tenants generally conduct their operations, such as fire, health and safety and environmental
laws (including medical waste disposal); federal and state laws affecting various types of facilities, including
assisted living facilities mandating quality of services and care, mandatory reporting requirements regarding the
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quality of care and quality of food service; resident rights (including abuse and neglect laws); and health standards
set by the federal Occupational Safety and Health Administration.
Violations of these laws may result in criminal and/or civil penalties that range from punitive sanctions, damage
assessments, penalties, imprisonment, denial of Medicare and Medicaid payments and/or exclusion from federal
healthcare programs including the Medicare and Medicaid programs. In addition, the Affordable Care Act clarifies
that the submission of claims for items or services generated in violation of the Anti-Kickback Statute constitutes a
false or fraudulent claim under the False Claims Act. The federal government has taken the position, and some
courts have held that violations of other laws, such as the Stark Law, can also be a violation of the False Claims Act.
Additionally, certain laws, such as the False Claims Act, allow for individuals to bring whistleblower actions on
behalf of the government for violations thereof. Imposition of any of these penalties upon one of our tenants or
strategic partners could jeopardize that tenant’s ability to operate or to make rent payments or affect the level of
occupancy in our healthcare properties, which may have a material adverse effect on our business, financial
condition and results of operations, our ability to make distributions to our stockholders and the market price of our
common stock. Further, we enter into leases and other financial relationships with healthcare delivery systems that
are subject to or impacted by these laws.
Our tenants may be subject to compliance issues and cyber-attack associated with the protection of personal
information.
Security incidents and data breaches of personal information can result from deliberate attacks or unintentional
events. More recently, there has been an increased level of attention on security incidents and cyber-attacks focused
on healthcare providers because of the vast amount of personally identifiable information and protected health
information that they process and maintain. Public awareness of privacy and security issues is increasing and focus
of legislators and regulators has also increased. Most healthcare providers, including all who accept commercial
insurance, Medicare and Medicaid, must comply with the Health Insurance Portability and Accountability Act, as
amended, (HIPAA) regulations regarding the privacy and security of protected health information. The HIPAA
regulations impose significant requirements on our tenants and their business associate vendors with regard to how
such protected health information may be used and disclosed. Further, the regulations include extensive and
complex requirements for providers to establish reasonable and appropriate administrative, technical and physical
safeguards to ensure the confidentiality, integrity and availability of protected health information. The HIPAA
regulations generally require notification to individuals and the Office for Civil Rights in the event of a breach
affecting protected health information. HIPAA also directs the Secretary of HHS to provide for periodic audits to
ensure covered entities (and their business associates, as that term is defined under HIPAA) comply with the
applicable HIPAA requirements.
Additionally, all 50 states also maintain laws focused on the privacy, security and notification requirements with
regard to personally identifiable information; some states include health and medical information in the definition of
personally identifiable information. Providers may be obligated under state breach notification laws to notify
individuals and regulators if personally identifiable information is compromised as defined by the respective law. In
addition to federal regulators, state attorneys general are also enforcing information security breaches. Further,
several states are now focused on expanding state privacy laws regarding personal information. For example,
California maintains one of the more extensive laws in this area. California recently enacted the California
Consumer Privacy Act, whose effects on our tenant's businesses vary and add to the risk profiles of those in
California or who otherwise meet the law's requirements regarding revenue or California personal information
metrics. Additionally, the California Privacy Rights Act passed in November 2020, with the majority of its
provisions becoming operative January 1, 2023. These laws require our tenants to safeguard personal information,
and potentially other information, against reasonably anticipated threats or hazards to the information.
Violations of these various privacy and security laws can result in significant civil monetary penalties, as well as the
potential for criminal penalties. In addition to state data breach notification requirements, HIPAA authorizes state
attorneys general to bring civil actions on behalf of affected state residents against entities that violate HIPAA
privacy and security regulations or their respective state laws. These penalties could be in addition to any penalties
assessed by a state for a breach which would be considered reportable under the state’s data breach notification laws.
Further there are significant costs associated with a breach including investigation costs, remediation and mitigation
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costs, notification costs, attorney fees and the potential for reputational harm and lost revenues due to a loss in
confidence in the provider. Plaintiff attorneys are increasingly developing class action litigation strategies designed
to obtain settlements from healthcare providers. We cannot predict the effect of additional costs on tenants to
comply with these laws nor the costs associated with a potential breach of protected health information or personally
identifiable information by a tenant and what effect they might have on the expenses of our tenants and their ability
to meet their obligations to us, which in turn could have a material adverse effect on our business, financial
condition and results of operations, our ability to pay distributions to our stockholders and the market price of our
common stock.
Our healthcare-related tenants may be subject to significant legal actions that could subject them to increased
operating costs and substantial uninsured liabilities, which may affect their ability to pay their rent payments to
us, and we could be subject to healthcare industry violations.
As is typical in the healthcare industry, our tenants may often become subject to claims that their services have
resulted in patient injury or other adverse effects. Many of these tenants may have experienced an increasing trend in
the frequency and severity of professional liability and general liability insurance claims and litigation asserted
against them. The insurance coverage maintained by these tenants may not cover all claims made against them nor
continue to be available at a reasonable cost, if at all. In some states, insurance coverage for the risk of punitive
damages arising from professional liability and general liability claims and/or litigation may not, in certain cases, be
available to these tenants due to state law prohibitions or limitations of availability. As a result, these types of
tenants of our healthcare properties and healthcare-related facilities operating in these states may be liable for
punitive damage awards that are either not covered or are in excess of their insurance policy limits.
We also believe that there has been, and will continue to be, an increase in governmental investigations of certain
healthcare providers, particularly in the areas of Medicare/Medicaid false claims and meaningful-use of electronic
health records, as well as an increase in enforcement actions resulting from these investigations. Insurance is not
available to cover all such losses. Any adverse determination in a legal proceeding or governmental investigation,
any settlements of such proceedings or investigations in excess of insurance coverage, whether currently asserted or
arising in the future, could have a material adverse effect on a tenant’s financial condition. If a tenant is unable to
obtain or maintain insurance coverage, if judgments are obtained or settlements reached in excess of the insurance
coverage, if a tenant is required to pay uninsured punitive damages, or if a tenant is subject to an uninsurable cost of
a government enforcement action or investigation, the tenant could be exposed to substantial additional liabilities,
which may affect the tenant’s ability to pay rent, which in turn could have a material adverse effect on our business,
financial condition and results of operations, our ability to pay distributions to our stockholders and the market price
of our common stock.
Risks Related to the Real Estate Industry
Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the
performance of our properties.
Because real estate investments are relatively illiquid, our ability to promptly sell one or more of our properties in
response to changing economic, financial and investment conditions is limited. The real estate market is affected by
many factors, such as general economic conditions, availability of financing, interest rates and other factors,
including supply and demand, that are beyond our control. In the event we decide to sell any of our properties, we
cannot predict whether we will be able to sell such properties for the price or on the terms set by us or whether any
price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length
of time needed to find a willing purchaser and to close the sale of any of our properties. The fact that we own
properties in our target submarkets may lengthen the time required to sell our properties. We may be required to
expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that
we will have funds available to correct those defects or to make those improvements.
In acquiring a property, we may agree to transfer restrictions that materially restrict us from selling that property for
a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid
on that property. These transfer restrictions would impede our ability to sell a property even if we deem it necessary
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or appropriate. These facts and any others that would impede our ability to respond to adverse changes in the
performance of our properties may have an adverse effect on our business, financial condition, results of operations,
or ability to make distributions to our stockholders and the market price of our common stock.
Moreover, the Code imposes restrictions on a REIT’s ability to dispose of properties that are not applicable to other
types of real estate companies. In particular, the tax laws applicable to REITs require that we hold our properties for
investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer
sales of properties that otherwise would be in our best interests. Therefore, we may not be able to vary our portfolio
promptly in response to economic or other conditions or on favorable terms, which may adversely affect our cash
flows, our ability to make distributions to our stockholders and the market price of our common stock.
We may suffer reduced or delayed revenues for, or have difficulty selling, properties with vacancies.
We anticipate that the majority of the properties we acquire will have some level of vacancy at the time of closing
either because the property is in the process of being developed and constructed, it is newly constructed and in the
process of obtaining tenants, or because of economic or competitive or other factors. Shortly after a new property is
opened, during a time of development and construction, or because of economic or competitive or other factors, we
may suffer reduced revenues resulting in lower cash distributions to you due to a lack of an optimum level of
tenants. In addition, the resale value of the real property could be diminished because the market value may depend
principally upon the value of the leases of such real property. In addition, because properties’ market values depend
principally upon the occupancy rates, the resale value of properties with prolonged low occupancy rates could suffer,
which could further reduce your return.
Uncertain market conditions could cause us to sell our healthcare properties at a loss in the future.
We intend to hold our various real estate investments until such time as we determine that a sale or other disposition
appears to be advantageous to achieve our investment objectives. However, we also may be purchasing our
properties at a time when capitalization rates are at historically low levels and purchase prices are high. Therefore,
the value of our properties may not increase over time, which may restrict our ability to sell our properties, or in the
event we are able to sell such property, may lead to a sale price less than the price that we paid to purchase the
properties.
Our senior management team and our board of directors may exercise their discretion as to whether and when to sell
one of our healthcare properties, and we will have no obligation to sell our buildings at any particular time. We
generally intend to hold our healthcare properties for an extended period of time, and we cannot predict with any
certainty the various market conditions affecting real estate investments that will exist at any particular time in the
future. Because of the uncertainty of market conditions that may affect the future disposition of our healthcare
properties, we may not be able to sell our buildings at a profit in the future or at all. We may incur prepayment
penalties in the event that we sell a property subject to a mortgage earlier than we otherwise had planned.
Additionally, we could be forced to sell healthcare properties at inopportune times which could result in us selling
the affected building at a substantial loss. Accordingly, the extent to which you will receive cash distributions and
realize potential appreciation on our real estate investments will, among other things, be dependent upon fluctuating
market conditions. Because of the uncertainty of market conditions that may affect the future disposition of our
properties, and the potential payment of prepayment penalties upon such disposition, we cannot assure you that we
will be able to sell our properties at a profit in the future, which could materially adversely affect our business,
financial condition and results of operations and our ability to make distributions to our stockholders.
If we sell properties by providing financing to purchasers, defaults by the purchasers would adversely affect our
cash flows.
If we decide to sell any of our properties, we intend to use our best efforts to sell them for cash. However, in some
instances we may sell our properties by providing financing to purchasers. When we provide financing to
purchasers, we will bear the risk that the purchaser may default, which could negatively impact our cash
distributions to stockholders. Even in the absence of a purchaser default, the distribution of the proceeds of sales to
our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property
we may accept upon the sale are actually paid, sold, refinanced, or otherwise disposed of. In some cases, we may
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receive initial down payments in cash and other property in the year of sale in an amount less than the selling price
and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing
arrangement with us, it could negatively impact our ability to make distributions to you.
Uninsured losses relating to real property may adversely affect your returns.
We evaluate our insurance coverage annually in light of current industry practice through an analysis prepared by
outside consultants and attempt to ensure that all of our properties are adequately insured to cover casualty losses.
However, there are certain losses, including losses from floods, earthquakes, wildfires, acts of war, acts of terrorism
or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed
economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose
us to uninsured casualty losses. Inflation, changes in tort liability laws, changes in building codes and ordinances,
environmental considerations, and other factors also might make it infeasible to use insurance proceeds to protect a
tenant in a liability claim or replace a property after such property has been damaged or destroyed. In the event that
any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be
reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and
potential revenue in these properties and could potentially remain obligated under any recourse debt associated with
the property. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we
cannot assure you that any such sources of funding will be available to us for such purposes in the future.
We have obtained title insurance policies for each of our properties typically in an amount equal to its original price.
However, these policies may be for amounts less than the current or future values of our properties. In such an event,
if there is a title defect relating to any of our properties, we could lose some of our investment in and anticipated
profits from such property.
If one of our tenants experiences a material general or professional liability loss that is uninsured or exceeds policy
coverage limits, it may be unable to satisfy its lease payment obligations to us. If one of our properties experiences a
loss that is uninsured or that exceeds policy coverage limits, we could lose the capital invested in the damaged
property as well as the anticipated future cash flows from the property.
Furthermore, we, as the general partner of our operating partnership, generally will be liable for all of our operating
partnership’s unsatisfied recourse obligations. Any such losses could materially adversely affect our financial
condition, results of operations, cash flows and ability to pay distributions, and the market price of our common
stock.
Rising expenses could reduce cash flow and funds available for future acquisitions.
If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating
expenses, we could be required to expend funds for that property’s operating expenses. Our properties will be
subject to increases in tax rates, utility costs, operating expenses, insurance costs, repairs, and maintenance and
administrative expenses.
If we are unable to offset such cost increases through rent increases, we could be required to fund those increases in
operating costs which could adversely affect funds available for future acquisitions or cash available for distribution.
Our property taxes could increase due to property tax rate changes or reassessments, which could materially
adversely impact our cash flows.
Even if we qualify as a REIT for federal income tax purposes, we will be required to pay some state and local taxes
on our properties. The real property taxes on our properties may increase as property tax rates change or as our
properties are assessed or reassessed by taxing authorities. The amount of property taxes we pay in the future may
increase substantially from what we have paid in the past. If the property taxes we pay increase, our cash flow would
be adversely impacted to the extent that we are not reimbursed by tenants for those taxes, and our ability to pay any
expected dividends to our stockholders could be materially adversely affected.
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Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to
liability for adverse health effects and costs of remediation.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if
the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce
airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical
contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and
bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of
adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant
mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation
program to contain or remove the mold or other airborne contaminants from the affected property or increase indoor
ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability
from our tenants, employees of our tenants or others if property damage or personal injury is alleged to have
occurred.
We may incur significant costs complying with various federal, state and local laws, regulations and covenants
that are applicable to our properties.
The properties in our portfolio are subject to various covenants and federal, state and local laws and regulatory
requirements, including permitting and licensing requirements. Local regulations, including municipal or local
ordinances and zoning restrictions may restrict our use of our properties and may require us to obtain approval from
local officials or restrict our use of our properties and may require us to obtain approval from local officials of
community standards organizations at any time with respect to our properties, including prior to acquiring a property
or when undertaking renovations of any of our properties. Among other things, these restrictions may relate to fire
and safety, seismic or hazardous material abatement requirements. There can be no assurance that existing laws and
regulatory policies will not adversely affect us or the timing or cost of any future acquisitions or renovations, or that
additional regulations will not be adopted that increase such delays or result in additional costs. Our growth strategy
may be adversely affected by our ability to obtain permits, licenses and zoning relief. Our failure to obtain such
permits, licenses and zoning relief or to comply with applicable laws could have an adverse effect on our financial
condition, results of operations, cash flows and our ability to pay distributions, and the market price of our common
stock.
In addition, federal and state laws and regulations, including laws such as the Americans with Disabilities Act, or
ADA, and the Fair Housing Amendment Act of 1988, or FHAA, impose further restrictions on our properties and
operations. Under the ADA and the FHAA, all public accommodations must meet federal requirements related to
access and use by disabled persons. Some of our properties may currently be in non-compliance with the ADA or
the FHAA. If one or more of our properties is not in compliance with the ADA, the FHAA or any other regulatory
requirements, we may be required to incur additional costs to bring the property into compliance, including the
removal of access barriers, and we might incur governmental fines or the award of damages to private litigants. In
addition, we do not know whether existing requirements will change or whether future requirements will require us
to make significant unanticipated expenditures that will adversely impact our financial condition, results of
operations, cash flows and our ability to pay distributions, and the market price of our common stock.
Environmental compliance costs and liabilities associated with owning and leasing our properties may affect our
results of operations.
Under various U.S. federal, state and local laws, ordinances and regulations, current and prior owners and tenants of
real estate may be jointly and severally liable for the costs of investigating, remediating and monitoring certain
hazardous substances or other regulated materials on or in such property. In addition to these costs, the past or
present owner or tenant of a property from which a release emanates could be liable for any personal injury or
property damage that results from such release, including for the unauthorized release of asbestos-containing
materials and other hazardous substances into the air, as well as any damages to natural resources or the
environment that arise from such release. These environmental laws often impose such liability without regard to
whether the current or prior owner or tenant knew of, or was responsible for, the presence or release of such
substances or materials. Moreover, the release of hazardous substances or materials, or the failure to properly
remediate such substances or materials, may adversely affect the owner’s or tenant’s ability to lease, sell, develop or
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rent such property or to borrow by using such property as collateral. Persons who transport or arrange for the
disposal or treatment of hazardous substances or other regulated materials may be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, regardless of whether or not such facility is owned
or operated by such person.
We perform a Phase I environmental site assessment at any property we are considering acquiring. However, Phase I
environmental site assessments are limited in scope and do not involve sampling of soil, soil vapor, or groundwater,
and these assessments may not include or identify all potential environmental liabilities or risks associated with the
property. Even where subsurface investigation is performed, it can be very difficult to ascertain the full extent of
environmental contamination or the costs that are likely to flow from such contamination. We cannot assure you that
the Phase I environmental site assessment or other environmental studies identified all potential environmental
liabilities, or that we will not face significant remediation costs or other environmental contamination that makes it
difficult to sell any affected properties. As a result, we could potentially incur material liability for these issues,
which could adversely impact our financial condition, results of operations, cash flows and ability to pay
distributions, and the market price of our common stock.
Certain environmental laws impose compliance obligations on owners and tenants of real property with respect to
the management of hazardous substances and other regulated materials. For example, environmental laws govern the
management and removal of asbestos-containing materials and lead-based paint. Failure to comply with these laws
can result in penalties or other sanctions. If we incur substantial costs to comply with these environmental laws or
we are held liable under these laws, our business, financial condition and results of operations, our ability to make
distributions to our stockholders and the market price of our common stock may be adversely affected.
Some of the properties we acquire may be subject to ground lease or other restrictions on the use of the space. If
we are required to undertake significant capital expenditures to procure new tenants, then our business and
results of operations may suffer.
Properties we acquire may be subject to ground leases that contain certain restrictions. These restrictions could
include limits on our ability to re-let these properties to tenants not affiliated with the healthcare provider or other
owner that owns the underlying property, rights of purchase and rights of first offer and refusal with respect to sales
of the property and limits on the types of medical procedures that may be performed. If we are unable to promptly
re-let our properties, if the rates upon such re-letting are significantly lower than expected or if we are required to
undertake significant capital expenditures in connection with re-letting, our business, financial condition and results
of operations, our ability to make distributions to our stockholders and the market price of our common stock may
be adversely affected.
Our assets may be subject to impairment charges.
We will periodically evaluate our real estate investments and other assets for impairment indicators. The judgment
regarding the existence of impairment indicators is based upon factors such as market conditions, tenant
performance and legal structure. For example, the termination of a lease by a major tenant, or extended vacancies in
a building may lead to an impairment charge. If we determine that an impairment has occurred, we would be
required to make an adjustment to the net carrying value of the asset which could have an adverse effect on our
results of operations in the period in which the impairment charge is recorded.
Risks Related to our Corporate Structure and the Acquisition of Properties
Conflicts of interest could arise in the future between the interests of our stockholders and the interests of holders
of OP units, which may impede business decisions that could benefit our stockholders.
Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one
hand, and our operating partnership or any limited partner thereof, on the other. Our directors and officers have
duties to our company under Maryland law in connection with the management of our company. At the same time,
we, as the general partner of our operating partnership, have fiduciary duties and obligations to our operating
partnership and its limited partners, if any, under Delaware law and our partnership agreement in connection with
the management of our operating partnership. Our fiduciary duties and obligations as the general partner of our
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operating partnership may come into conflict with the duties of our directors and officers to our company. There are
currently no limited partners of our operating partnership other than a wholly-owned subsidiary of the Company.
Under Delaware law, a general partner of a Delaware limited partnership has fiduciary duties of loyalty and care to
the partnership and its limited partners and must discharge its duties and exercise its rights as general partner
consistent with the obligation of good faith and fair dealing. Our partnership agreement provides that, in the event of
a conflict between the interests of our operating partnership or any limited partner, on the one hand, and the
company or our stockholders, on the other hand, we, as the general partner of our operating partnership, may give
priority to the separate interests of the company or our stockholders (including with respect to tax consequences).
Further, any action or failure to act on our part or on the part of our directors that gives priority to the interests of the
company or our stockholders and does not result in a violation of our partnership agreement does not violate the
duty of loyalty or any other duty that we, in our capacity as the general partner of our operating partnership, owe to
our operating partnership and its limited partners or violate the obligation of good faith and fair dealing.
Additionally, our partnership agreement provides that we generally will not be liable to our operating partnership or
any limited partner for any action or omission taken in our capacity as general partner, for the debts or liabilities of
our operating partnership or for the obligations of our operating partnership under the partnership agreement, except
for liability for our fraud, willful misconduct or gross negligence, pursuant to any express indemnity we may give to
our operating partnership or in connection with a redemption. Our operating partnership must indemnify us, our
directors and officers, officers of our operating partnership and our designees from and against any and all claims
that relate to the operations of our operating partnership, unless (1) an act or omission of the person was material to
the matter giving rise to the action and either was committed in bad faith or was the result of active and deliberate
dishonesty, (2) the person actually received an improper personal benefit in violation or breach of the partnership
agreement or (3) in the case of a criminal proceeding, the indemnified person had reasonable cause to believe that
the act or omission was unlawful. Our operating partnership must also pay or reimburse the reasonable expenses of
any such person in advance of a final disposition of the proceeding upon its receipt of a written affirmation of the
person’s good faith belief that the standard of conduct necessary for indemnification has been met and a written
undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the
standard of conduct for indemnification.
We are subject to the requirements of the Sarbanes-Oxley Act and are obligated to obtain an audit opinion on the
effectiveness of internal control over financial reporting. These internal controls may not be determined to be
effective, and our business could be adversely impacted if there are deficiencies in our disclosure controls and
procedures or internal control over financial reporting.
The Sarbanes-Oxley Act requires our auditors to deliver an attestation report on the effectiveness of our internal
control over financial reporting in conjunction with their opinion on our audited financial statements. Substantial
work on our part is required to implement appropriate processes, document the system of internal control over key
processes, assess their design, remediate any deficiencies identified and test their operation. This process is both
costly and challenging. We cannot give any assurances that material weaknesses will not be identified in the future
in connection with our compliance with the provisions of the Sarbanes-Oxley Act. The existence of any material
weakness would preclude a conclusion by management and our independent auditors that we maintained effective
internal control over financial reporting. Our management may be required to devote significant time and expense to
remediate any material weaknesses that may be discovered and may not be able to remediate any material weakness
in a timely manner. The existence of any material weakness in our internal control over financial reporting could
also result in errors in our financial statements that could require us to restate our financial statements, cause us to
fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all
of which could lead to a decline in the market price of our common stock.
We may have assumed unknown liabilities in connection with our acquisitions which could result in unexpected
liabilities and expenses.
As part of our acquisitions, we (through our operating partnership) received certain assets or interests in certain
assets subject to existing liabilities, some of which may be unknown to us. Unknown liabilities might include
liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other
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persons dealing with the entities prior to this report (including those that had not been asserted or threatened prior to
this report), tax liabilities, and accrued but unpaid liabilities incurred in the ordinary course of business. Our
recourse with respect to such liabilities may be limited. Depending upon the amount or nature of such liabilities, our
business, financial condition and results of operations, our ability to make distributions to our shareholders and the
market price of our shares may be adversely affected.
Required payments of principal and interest on our Credit Facility may leave us with insufficient cash to operate
our properties or to pay the distributions currently contemplated or necessary to qualify as a REIT and may
expose us to the risk of default under our debt obligations.
As of December 31, 2023, we had $400.0 million outstanding under our Credit Facility, including our term loans.
We do not anticipate that our internally generated cash flow will be adequate to repay our anticipated indebtedness
upon maturity and, therefore, we expect to repay indebtedness through refinancings and future offerings of equity
and debt securities, either of which we may be unable to secure on favorable terms or at all. Our level of debt and
any limitations imposed upon us by our debt agreements could have adverse consequences, including the following:
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our cash flow may be insufficient to meet required principal and interest payments;
we may be unable to borrow additional funds as needed or on favorable terms, including to make
acquisitions;
we may be unable to refinance indebtedness at maturity or the refinancing terms may be less favorable
than the terms of the original indebtedness;
because a portion of our debt bears interest at variable rates, an increase in interest rates could
materially increase our interest expense;
we may fail to effectively hedge against interest rate volatility;
we may be forced to dispose of properties, possibly on disadvantageous terms if we are able to do so at
all, in order to repay indebtedness;
after debt service, the amount available for distributions to our stockholders may be reduced;
we may default on our debt obligations, which could restrict our ability to make any distributions to
our stockholders;
our ability to make distributions to our stockholders could be restricted by our debt agreements;
our leverage could place us at a competitive disadvantage compared to our competitors who have less
debt;
we may experience increased vulnerability to economic and industry downturns, reducing our ability to
respond to changing business and economic conditions;
we may default on our obligations and the lenders may foreclose on properties that secure their loans
and receive an assignment of rents and leases;
we may violate financial covenants, which would cause a default on our obligations and result in the
acceleration of our payment obligations;
we may inadvertently violate non-financial restrictive covenants in our loan documents, such as
covenants that require us to maintain the existence of entities, maintain insurance policies and provide
financial statements, which would entitle the lenders to accelerate our debt obligations; and
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our default under any loan with cross-default or cross-collateralization provisions could result in
default on other indebtedness or result in the foreclosures of other properties.
The realization of any or all of these risks may have an adverse effect on our business, financial condition and
results of operations, our ability to make distributions to our stockholders and the market price of our common stock.
We could become highly leveraged in the future because our organizational documents contain no limitations on
the amount of debt that we may incur.
At December 31, 2023, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated
depreciation) was approximately 36.1%. Our 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.
However, this debt limitation policy can be changed by our board of directors without stockholder approval and
there are no provisions in our bylaws that limit our ability to incur indebtedness. We could alter the balance between
our total outstanding indebtedness and the value of our properties at any time. If we become more highly leveraged,
the resulting increase in outstanding debt could adversely affect our ability to make debt service payments, to pay
our anticipated distributions and to make the distributions required to qualify as a REIT. The occurrence of any of
the foregoing risks could adversely affect our business, financial condition and results of operations, our ability to
make distributions to our stockholders and the market price of our common stock.
Increases in interest rates may increase our interest expense and adversely affect our cash flows and our ability to
service our indebtedness and to make distributions to our shareholders.
As of December 31, 2023, we had $50.0 million of variable-rate indebtedness outstanding that had not been
swapped for a fixed interest rate. We expect that more of our indebtedness in the future, including borrowings under
our Credit Facility, may be subject to variable interest rates. Increases in interest rates on any variable rate
indebtedness will increase our interest expense, which could adversely affect our cash flow and our ability to pay
distributions.
The Company may enter into swap agreements from time to time that may not effectively reduce its exposure to
changes in interest rates.
The Company may enter into swap agreements from time to time that may not effectively reduce its exposure to
changes in interest rates. As of December 31, 2023, the Company had 17 outstanding interest rate derivatives that
were designated as cash flow hedges of interest rate risk for notional amounts totaling $350.0 million. The Company
may enter into additional swap agreements in the future to manage some of its exposure to interest rate volatility.
These swap agreements involve risks, such as the risk that counterparties may fail to honor their obligations under
these arrangements. In addition, these arrangements may not be effective in reducing the Company's exposure to
changes in interest rates and no hedging activity can completely insulate us from the risks associated with changes in
interest rates. Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other
things:
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available interest rate hedging may not correspond directly with the interest rate risk for which we seek
protection;
the duration of the hedge may not match the duration of the related liability;
the party owing money in the hedging transaction may default on its obligation to pay;
the credit quality of the party owing money on the hedge may be downgraded to such an extent that it
impairs our ability to sell or assign our side of the hedging transaction; and
the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting
rules to reflect changes in fair value, such as downward adjustments, or “mark-to-market losses,” which
would reduce our stockholders’ equity.
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In addition, we may be limited in the type and amount of hedging transactions that we may use in the future by our
need to satisfy the REIT income tests under the Code. Failure to hedge effectively against interest rate changes may
have an adverse effect on our business, financial condition, results of operations, our ability to make distributions to
our shareholders and the market price of our common shares.
Our use of OP units in our operating partnership as currency to acquire properties could result in stockholder
dilution and/or limit our ability to sell such properties, which could have a material adverse effect on us.
In the future, we may acquire properties or portfolios of properties through tax deferred contribution transactions in
exchange for OP units in our operating partnership, which may result in stockholder dilution. This acquisition
structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct over
the tax life of the acquired properties, and may require that we agree to protect the contributors’ ability to defer
recognition of taxable gain through restrictions on our ability to dispose of the acquired properties or the allocation
of partnership debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell
properties at a time, or on terms, that would be favorable absent such restrictions.
Our charter restricts the ownership and transfer of our outstanding shares which may have the effect of delaying,
deferring or preventing a transaction or change of control of our Company.
In order for us to maintain our status as a REIT, no more than 50% of the value of our outstanding shares may be
owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable
year other than our initial REIT taxable year. Subject to certain exceptions, our charter prohibits any stockholder
from beneficially or constructively owning more than 9.8% of the outstanding shares of our capital stock, in value or
number of shares, whichever is more restrictive. The constructive ownership rules under the Code are complex and
may cause the outstanding shares owned by a group of related individuals or entities to be deemed to be
constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding
shares or of our common stock by an individual or entity could cause that individual or entity to own constructively
more than 9.8% of the outstanding shares of such stock and to be subject to our charter’s ownership limit. Our
charter also prohibits, among other prohibitions, any person from owning our shares that would result in our being
“closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT. Any attempt to
own or transfer shares in violation of these restrictions may result in the shares being automatically transferred to a
charitable trust or may be void. These restrictions may also have the effect of delaying, deferring, or preventing a
change in control of us, including an extraordinary transaction (such as a merger, tender offer, or sale of all or
substantially all of our assets) that might provide a premium price for holders of our common stock.
Certain provisions of Maryland law could inhibit changes of control, which may discourage third parties from
conducting a tender offer or seeking other change of control transactions that could involve a premium price for
our common stock or that our stockholders otherwise believe to be in their best interests.
Certain provisions of the Maryland General Corporation Law, or MGCL, applicable to Maryland corporations may
have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control
under circumstances that otherwise could provide our common stockholders with the opportunity to realize a
premium over the then-prevailing market price of our shares, including:
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“business combination” provisions that, subject to limitations, prohibit certain business combinations
between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or
more of the voting power of our shares or an affiliate or associate of ours who was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of our shares at any time within the two-year
period immediately prior to the date in question) or an affiliate thereof for five years after the most recent
date on which the stockholder becomes an interested stockholder, and thereafter imposes certain minimum
price and/or supermajority stockholder voting requirements on these combinations; and
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“control share” provisions that provide that holders of “control shares” of our company (defined as shares
that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise
one of three increasing ranges of voting power in electing directors) acquired in a “control share
acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding
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“control shares,” subject to certain exceptions) have no voting rights with respect to their control shares,
except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the
votes entitled to be cast on the matter, excluding all interested shares.
Our bylaws, however, contain provisions exempting us from the business combination and control share acquisition
provisions of the MGCL and we will not be permitted to opt into either of these provisions in the future without the
affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote. Our board of directors
may not amend or eliminate either of these provisions at any time in the future without the affirmative vote of a
majority of the votes cast on the matter by stockholders entitled to vote.
Certain provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what
is currently provided in our charter or bylaws, to implement certain corporate governance provisions, some of which
are not currently applicable to us. If implemented, these provisions may have the effect of limiting or precluding a
third party from making an unsolicited acquisition proposal for us or of delaying, deferring or preventing a change in
control of us under circumstances that otherwise could provide our common stockholders with the opportunity to
realize a premium over the then current market price. Our charter contains a provision whereby the Company has
elected to not be subject to the provisions of Title 3, Subtitle 8 of the MGCL without the affirmative consent of the
shares cast on the matter by stockholders entitled to vote.
We could increase the number of authorized shares, classify and reclassify unissued shares and issue shares
without stockholder approval.
Our board of directors, without stockholder approval, has the power under our charter to amend our charter to
increase or decrease the aggregate number of shares or the number of shares of any class or series that we are
authorized to issue, and to authorize us to issue authorized but unissued common stock or preferred stock. In
addition, under our charter, our board of directors has the power to classify or reclassify any unissued common or
preferred shares into one or more classes or series of shares and set or change the preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or terms or
conditions of redemption for such newly classified or reclassified shares. As a result, we may issue series or classes
of common stock or preferred stock with preferences, dividends, powers and rights, voting or otherwise, that are
senior to, or otherwise conflict with, the rights of holders of our common stock. Although our board of directors has
no such intention at the present time, it could establish a class or series of preferred shares that could, depending on
the terms of such class or series, delay, defer or prevent a transaction or a change of control that might involve a
premium price for our common stock or that our stockholders otherwise believe to be in their best interests.
Certain provisions in the partnership agreement of our operating partnership may delay or prevent unsolicited
acquisitions of us.
Provisions of the partnership agreement of our operating partnership may delay or make more difficult unsolicited
acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals
involving an unsolicited acquisition of us or change of our control, although some stockholders or limited partners
might consider such proposals, if made, desirable. These provisions include, among others:
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redemption rights of qualifying parties;
a requirement that we may not be removed as the general partner of our operating partnership without our
consent;
transfer restrictions on OP units; and
our ability, as general partner, in some cases, to amend the partnership agreement and to cause our
operating partnership to issue additional partnership interests with terms that could delay, defer or prevent a
merger or other change of control of us or our operating partnership without the consent of our stockholders
or the limited partners.
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Our charter and bylaws, the partnership agreement of our operating partnership and Maryland law also contain other
provisions that may delay, defer or prevent a transaction or a change of control that might involve a premium price
for our common stock or that our stockholders otherwise believe to be in their best interest.
We may change our business, investment and financing strategies without stockholder approval.
We may change our business, investment and financing strategies without a vote of, or notice to, our stockholders,
which could result in our making investments and engaging in business activities that are different from, and
possibly riskier than, the investments and businesses described in this report. In particular, a change in our
investment strategy, including the manner in which we allocate our resources across our portfolio or the types of
assets in which we seek to invest, may increase our exposure to real estate market fluctuations. In addition, we may
in the future increase the use of leverage at times and in amounts that we, in our discretion, deem prudent and such
decision would not be subject to stockholder approval. Furthermore, our board of directors may determine that
healthcare properties do not offer the potential for attractive risk-adjusted returns for an investment strategy.
Changes to our strategies with regards to the foregoing could adversely affect our financial condition, results of
operations and our ability to make distributions to our stockholders.
Our rights and the rights of our stockholders to take action against our directors and officers are limited, which
could limit your recourse in the event that we take certain actions which are not in your best interests.
Our charter eliminates the liability of our directors and officers to us and our stockholders for money damages,
except for liability resulting from:
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actual receipt of an improper benefit or profit in money, property or services; or
active and deliberate dishonesty by the director or officer that was established by a final judgment as
being material to the cause of action adjudicated.
Our charter authorizes us to indemnify our present and former directors and officers for actions taken by them in
those and other capacities to the maximum extent permitted by Maryland present and former law. Our bylaws
obligate us to indemnify each present and former director or officer, to the maximum extent permitted by Maryland
law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his
or her service to us. In addition, we may be obligated to advance the defense costs incurred by our director and
officers. We have entered into indemnification agreements with our officers and directors, granting them express
indemnification rights. As a result, we and our stockholders may have more limited rights against our directors and
officers than might otherwise exist absent the current provisions in our charter, bylaws and indemnification
agreements or that might exist with other companies.
Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our
stockholders to effect changes to our management and may prevent a change in control of our company that is in the
best interests of our stockholders. Our charter provides that a director may only be removed for cause upon the
affirmative vote of holders of two-thirds of all the votes entitled to be cast generally in the election of directors.
Vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. These
requirements make it more difficult to change our management by removing and replacing directors and may
prevent a change in control of our company that is in the best interests of our stockholders.
We are a holding company with no direct operations and, as such, we will rely on funds received from our
subsidiaries to pay liabilities, and the interests of our stockholders will be structurally subordinated to all
liabilities and obligations of our subsidiaries.
We are a holding company and conduct substantially all of our operations through our subsidiaries. We do not have,
apart from an interest in our subsidiaries, any independent operations. As a result, we will rely on distributions from
our subsidiaries to pay any dividends we might declare on shares of our common stock. We will also rely on
distributions from our subsidiaries to meet any of our obligations, including any tax liability on taxable income
allocated to us from our subsidiaries. In addition, because we are a holding company, your claims as stockholders
will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed
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money) of our subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and
those of our subsidiaries will be available to satisfy the claims of our stockholders only after all of our and our
subsidiaries’ liabilities and obligations have been paid in full.
Our operating partnership may issue additional OP units to third parties without the consent of our stockholders,
which would reduce our ownership percentage in our operating partnership and would have a dilutive effect on
the amount of distributions made to us by our operating partnership and, therefore, the amount of distributions
we can make to our stockholders.
We own 100% of the outstanding OP units and we may, in connection with our acquisition of properties or
otherwise, cause our operating partnership to issue additional OP units to third parties. Such issuances would reduce
our ownership percentage in our operating partnership and affect the amounts of distributions made to us by our
operating partnership and, therefore, the amounts of distributions we can make to our stockholders. Because you will
not directly own OP units, you will not have any voting rights with respect to any such issuances or other
partnership level activities of our operating partnership.
Risks Related to Our Qualification and Operation as a REIT
Failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would
adversely affect the value of our shares and substantially reduce funds available for distributions to our
stockholders.
Our organization and proposed method of operation have enabled us to meet the requirements for qualification and
taxation as a REIT commencing with our taxable year ended December 31, 2015. However, we cannot assure you
that we will remain qualified as a REIT. Qualification as a REIT involves the application of highly technical and
complex Code provisions for which there are only limited judicial and administrative interpretations. The
complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the
Code, or the Treasury Regulations, is greater in the case of a REIT that, like us, holds its assets through a
partnership. The determination of various factual matters and circumstances not entirely within our control may
affect our ability to qualify as a REIT. In order to qualify as a REIT, we must satisfy a number of requirements,
including requirements regarding the ownership of our stock, the composition of our assets and the composition of
our income. In addition, we must distribute to stockholders annually at least 90% of our REIT taxable income,
determined without regard to the dividends paid deduction and excluding net capital gains. Legislation, new
Treasury Regulations, administrative interpretations or court decisions may materially and adversely affect our
ability to qualify as a REIT for U.S. federal income tax purposes.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially
reduce the funds available for distribution to our stockholders because:
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we would not be allowed a deduction for dividends paid to stockholders in computing our taxable
income and would be subject to U.S. federal income tax at regular corporate rates;
we could be subject to the federal alternative minimum tax and increased state and local taxes; and
unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT
status until the fifth calendar year after the year in which we failed to qualify as a REIT.
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all
these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it
would adversely affect the market price of our common shares.
If our operating partnership failed to qualify as a “partnership” for U.S. federal income tax purposes, we would
cease to qualify as a REIT and suffer other adverse consequences.
We believe that our operating partnership should be treated either as an entity disregarded from us or, after the
admission of additional partners, if any, as a “partnership” for U.S. federal income tax purposes. As a disregarded
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entity or a partnership, our operating partnership will not be subject to U.S. federal income tax on its income.
Instead, each of its partners will be allocated, and may be required to pay tax with respect to, its share of our
operating partnership’s income. We cannot assure you that the IRS will not challenge the status of our operating
partnership, or that a court would not sustain such a challenge. If the Internal Revenue Service, or IRS, were
successful in treating our operating partnership as an entity taxable as a corporation, our operating partnership would
be liable for U.S. federal and state corporate income taxes on its taxable income and we would fail to meet the gross
income tests and certain of the asset tests applicable to REITs under the Code and cease to qualify as a REIT.
We may face other tax liabilities that reduce our cash flows.
We may be subject to certain federal, state and local taxes on our income and assets, including taxes on any
undistributed income, tax on income from some activities conducted as a result of a foreclosure, taxes on income
from certain “prohibited transactions” and state or local income, property and transfer taxes. In addition, any TRS
that we may form or in which we may invest will be subject to regular corporate federal, state and local taxes. Any
of these taxes would decrease cash available for distributions to our stockholders.
To maintain our status as a REIT and avoid the payment of U.S. federal income and excise taxes, we may be
forced to borrow funds, use proceeds from the issuance of securities, pay taxable dividends of our stock or debt
securities or sell assets to make distributions, in each case during unfavorable market conditions and which may
result in our distributing amounts that would otherwise be used for our operations.
To maintain our status as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable
income each year, determined without regard to the dividends paid deduction and excluding net capital gains, and
we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our REIT
taxable income (determined without regard to the deduction for dividends paid) each year. In addition, we will be
subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar
year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our
undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise
would be spent on operations, the acquisitions of properties and the service of our debt. It is possible that we could
be required to borrow funds, use proceeds from the issuance of securities, pay taxable dividends of our stock or debt
securities or sell assets in order to distribute enough of our taxable income to qualify or maintain our qualification as
a REIT and to avoid the payment of U.S. federal income and excise taxes. We cannot assure you that a sufficient
amount of capital will be available to us on favorable terms, or at all, when needed for the foregoing purposes,
which would materially and adversely affect our financial condition, results of operations, cash flows and ability to
pay distributions, and the market price of our common stock.
Complying with the REIT requirements may cause us to forego otherwise attractive opportunities or liquidate
otherwise attractive investments.
To maintain our status as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning,
among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute
to our stockholders and the ownership of our shares. In order to meet these tests, we may be required to forego
investments we might otherwise make or liquidate otherwise attractive investments. Compliance with the REIT
requirements may reduce our income and amounts available for distribution to our stockholders and otherwise
hinder our performance.
The “prohibited transactions” tax may limit our ability to dispose of our properties.
A REIT’s net gain or income from “prohibited transactions” is subject to a 100% penalty tax. In general, prohibited
transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to
customers in the ordinary course of business. Although a safe harbor regarding the characterization of the sale of
real property by a REIT as a prohibited transaction is available, we cannot assure you that we will be able to comply
with the safe harbor with respect to any sale of our properties or that we will avoid owning property that may be
characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may
choose not to engage in an otherwise attractive sale of property or may conduct such a sale through a TRS, which
would subject such sale to federal and state income taxation.
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Any ownership of a TRS will be subject to limitations, and our transactions with a TRS cause us to be subject to a
100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
We have two TRSs, and in the future, may form other TRSs for various reasons, including for the purpose of leasing
“qualified healthcare properties” from us pursuant to the provisions of the REIT Investment Diversification and
Empowerment Act of 2007, or RIDEA, although we currently have no intention of investing in companies that
provide healthcare services structured to comply with RIDEA. Overall, no more than 20% of the value of a REIT’s
assets may consist of stock or securities of one or more TRSs. The Code also imposes a 100% excise tax on certain
transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor
the value of our respective investments in our TRSs for the purpose of ensuring compliance with the TRS ownership
limitation and will structure any future transactions with any TRS on terms that we believe are arm’s length to avoid
incurring the 100% excise tax described above. However, there can be no assurance that we will be able to comply
with such TRS ownership limitation or to avoid application of the 100% excise tax.
TRSs will be subject to federal and state income taxes.
Our two TRSs, and any TRSs that we may form or acquire in the future, including a TRS formed or acquired to
lease “qualified healthcare properties” from us under the provisions of RIDEA, will be subject to federal and state
income tax on its taxable income. Accordingly, although our ownership of a TRS may allow us to participate in
income we otherwise could not receive directly as a REIT, such income would be fully subject to federal and state
income tax.
If a TRS tenant failed to qualify as a TRS, or the operator of a facility engaged by a TRS tenant did not qualify as
an “eligible independent contractor,” we could fail to qualify as a REIT and could be subject to higher taxes and
have less cash available for distribution to our stockholders.
We may, in the future, lease certain of our properties that qualify as “qualified healthcare properties” to a TRS
tenant, although we have no present intention to do so. Rent paid by a tenant that is a “related party tenant” of ours
will not be qualifying income for purposes of the two gross income tests applicable to REITs. However, so long as
any TRS tenant of ours qualifies as a TRS, it will not be treated as a “related party tenant” with respect to our
healthcare properties that are managed by “eligible independent contractors.” We would seek to structure any future
arrangements with a TRS tenant such that the TRS tenant would qualify to be treated as a TRS for U.S. federal
income tax purposes, but there can be no assurance that the IRS would not challenge the status of a TRS or that a
court would not sustain such a challenge. If the IRS were successful in disqualifying a TRS tenant from treatment as
a TRS, it is possible that we would fail to meet the asset tests applicable to REITs and a significant portion of our
income would fail to qualify for the gross income tests. If we failed to meet either the asset or gross income tests, we
would likely lose our REIT qualification for federal income tax purposes.
Additionally, if the operator of a facility engaged by a TRS tenant does not qualify as an “eligible independent
contractor,” we could fail to qualify as a REIT. Any operator of a healthcare facility leased to a TRS tenant must
qualify as an “eligible independent contractor” under the REIT rules in order for the rent paid to us by such TRS
tenant to be qualifying income for purposes of the REIT gross income tests. Among other requirements, in order to
qualify as an eligible independent contractor a facility operator must not own, directly or indirectly, more than 35%
of our outstanding shares and no person or group of persons can own more than 35% of our outstanding shares and
the ownership interests of the facility operator, taking into account certain ownership attribution rules. The
ownership attribution rules that apply for purposes of these 35% thresholds are complex. Although we would
monitor ownership of our shares by any facility operators and their owners, there can be no assurance that these
ownership levels will not be exceeded.
If leases of our properties are not respected as true leases for U.S. federal income tax purposes, we would fail to
qualify as a REIT and would be subject to higher taxes and have less cash available for distribution to our
stockholders.
Rents paid to us by third-party tenants and any TRS tenant that we may form or acquire in the future pursuant to the
leases of our properties will constitute substantially all of our gross income. In order for such rent to qualify as
“rents from real property” for purposes of the gross income tests applicable to REITs, the leases must be respected
as true leases for U.S. federal income tax purposes and not be treated as service contracts, joint ventures or some
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other type of arrangement. If our leases are not respected as true leases for U.S. federal income tax purposes, we
could fail to qualify as a REIT.
You may be restricted from acquiring or transferring certain amounts of our common stock.
The share ownership restrictions of the Code for REITs and the 9.8% share ownership limit and other restrictions on
ownership and transfer of our shares contained in our charter may inhibit market activity in our shares and restrict
our business combination opportunities.
In order to maintain our status as a REIT each taxable year, five or fewer individuals, as defined in the Code, may
not own, beneficially or constructively, more than 50% in value of our issued and outstanding shares at any time
during the last half of each taxable year. Attribution rules in the Code determine if any individual or entity
beneficially or constructively owns our shares under this requirement. Additionally, at least 100 persons must
beneficially own our shares during at least 335 days of a taxable year for each taxable year. To help insure that we
meet these tests, our charter restricts the acquisition and ownership of shares.
Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to
preserve our qualification as a REIT. Unless exempted by our board of directors, our charter prohibits any person
from beneficially or constructively owning more than 9.8% in value of the outstanding shares of our capital stock or
9.8%, in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock.
Our board of directors may not grant an exemption from these restrictions to any proposed transferee whose
ownership in excess of such limits would result in our failing to qualify as a REIT. This, as well as other restrictions
on transferability and ownership, will not apply if our board of directors determines that it is no longer in our best
interests to continue to qualify as a REIT.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at
individual rates is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates on
qualified dividend income. The more favorable rates applicable to regular corporate qualified dividends could cause
investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than
investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the
shares of REITs, including our common stock. However, for tax years beginning after December 31, 2017, but
before January 1, 2026, certain stockholders may be able to deduct up to 20% of "qualified REIT dividends"
pursuant to Section 199A of the Code subject to certain limitations set forth in the Code.
Distributions to tax-exempt stockholders may be classified as unrelated business tax income.
In general, neither ordinary nor capital gain distributions with respect to our common stock, nor gain from the sale
of our common stock, should constitute unrelated business tax income, or UBTI, to a tax-exempt stockholder.
However, under certain limited circumstances, income and gain recognized by certain tax-exempt stockholders
could be treated, in whole or in part, as UBTI.
Non-U.S. stockholders may be subject to FIRPTA taxation upon the sale of their shares of our common stock.
Subject to the exceptions described herein, a non-U.S. person generally is subject to U.S. federal income tax on gain
recognized on a disposition of our stock under the Foreign Investment in Real Property Tax Act, or FIRPTA.
However, such FIRPTA tax will not apply if we are “domestically controlled,” meaning less than 50% of our stock,
by value, has been owned directly or indirectly by non-U.S. persons during a specified look-back period. In addition,
even if we were not domestically controlled, such tax would not apply to such non-U.S. stockholder if our common
stock was traded on an established securities market and such stockholder did not, at any time during the five-year
period prior to a sale of our common stock, directly or indirectly own more than 5% of the value of our outstanding
common stock. We cannot assure you that we will qualify as a “domestically controlled” REIT, although we expect
our stock will be regularly traded on an established securities market.
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Our capital gain distributions to non-U.S. stockholders attributable to our sales of U.S. real property interests
may be subject to tax under FIRPTA.
A non-U.S. stockholder generally is subject to U.S. income tax on our capital gain distributions attributable to our
sales of U.S. real property interests under FIRPTA. However, if our common stock is regularly traded on an
established securities market, such distributions will not be subject to such tax if such stockholder did not, at any
time during the one-year period preceding the distribution, directly or indirectly own more than 5% of the value of
our outstanding common stock. While we expect our stock will be regularly traded on an established securities
market, if it is not so traded, or if we are unable to determine the level of ownership of a particular non-U.S.
stockholder, we may be required to withhold 21% of any distribution to such stockholder that we designate as a
capital gain dividend.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our
common stock.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws
may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative
interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative
interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may
take effect retroactively. We and our stockholders could be adversely affected by any such change in the U.S.
federal income tax laws, regulations or administrative interpretations.
Effective January 1, 2018, among other things, the TCJA reduced the top corporate tax rate from 35% to 21%,
allowed a deduction of up to 20% of qualified business income including qualified REIT dividends, and placed
certain additional limitations on the deductibility of interest expense. Additionally, the TCJA required that taxpayers
using the accrual method for income tax accounting take into account certain items of income for income tax
purposes no later than the time such items are taken into account as revenue for financial accounting purposes on
certain financial statements. The application of this rule may require the accrual of income with respect to certain
debt instruments on mortgage-based securities, such as original issue discount or mortgage discount, earlier than
would be the case under the general tax rules.
Risks Related to our Common Stock
The trading volume of our common stock may be volatile, and you may not be able to resell shares of our
common stock at prices equal to or greater than the price you paid or at all.
Our common stock is listed on the NYSE. In addition, the trading volume in our common stock may fluctuate and
cause significant price variations to occur, and investors in our common stock may from time to time experience a
decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. If the
market price of our common stock declines significantly, you may be unable to resell your shares at or above the
price at which you purchased such shares. We cannot assure you that the market price of our common stock will not
fluctuate or decline significantly in the future.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading
volume of our common stock include:
•
•
•
•
•
actual or anticipated variations in our quarterly operating results or dividends;
changes in our FFO or earnings estimates;
publication of research reports about us or the real estate industry;
increases in market interest rates that lead purchasers of our shares to demand a higher yield;
changes in market valuations of similar companies;
46
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
adverse market reaction to any additional debt we incur in the future;
additions or departures of key management personnel;
actions by institutional stockholders;
speculation in the press or investment community;
the realization of any of the other risk factors presented in this report;
the extent of investor interest in our securities;
the general reputation of REITs and the attractiveness of our equity securities in comparison to other
equity securities, including securities issued by other real estate-based companies;
our underlying asset value;
investor confidence in the stock and bond markets generally;
changes in tax laws;
future equity issuances by us;
failure to meet earnings estimates;
failure to meet and maintain REIT qualification;
changes in our credit ratings;
the impact of a pandemic, epidemic or outbreak of a contagious disease on our business, financial
condition, results of operations, cash flows, and global financial markets; and
general market and economic conditions.
In the past, securities class-action litigation has often been instituted against companies following periods of
volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our
management’s attention and resources, which could have a material adverse effect on us, including our financial
condition, results of operations, cash flow and the market price of our common stock.
Increases in market interest rates may have an adverse effect on the market price of our common stock as
prospective purchasers of our common stock may expect a higher dividend yield and as an increased cost of
borrowing may decrease our funds available for distribution.
One of the factors that will influence the market price of our common stock will be the dividend yield on the
common stock (as a percentage of the price of our common stock) relative to market interest rates. An increase in
market interest rates, may lead prospective purchasers of our common stock to expect a higher dividend yield (with
a resulting decline in the trading prices of our common stock) and higher interest rates would likely increase our
borrowing costs and potentially decrease funds available for distribution. Thus, higher market interest rates could
cause the market price of our common stock to decrease.
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Our issuance of equity securities or the perception that such issuances might occur could materially adversely
affect us, including the per share trading price of our common stock.
Restricted stock or restricted stock units granted to our directors, executive officers and other employees under our
2014 Incentive Plan, as amended, (the "2014 Incentive Plan"), and our various compensation plans, or the issuance
47
of our common stock or OP Units in connection with future property, portfolio or business acquisitions and other
issuances of our common stock could have an adverse effect on the market price of our common stock. Also, the
existence of common stock issuable under our 2014 Incentive Plan may adversely affect the terms upon which we
may be able to obtain additional capital through the sale of equity securities. In addition, future issuances of our
common stock may be dilutive to existing stockholders.
If securities analysts do not publish research or reports about our industry or if they downgrade our common
stock or the healthcare-related real estate sector, the price of our common stock could decline.
The trading market for our common stock relies in part upon the research and reports that industry or financial
analysts publish about us or our industry. We have no control over these analysts. Furthermore, if one or more of the
analysts who do cover us downgrades our shares or our industry, or the stock of any of our competitors, the market
price of our common stock could decline. If one or more of these analysts ceases coverage of our company, we
could lose attention in the market which in turn could cause the market price of our common stock to decline.
Future sales of shares of our common stock, particularly by our executive officers or directors, may cause the per
share trading price of our common stock to decline.
Any sales of a substantial number of shares of our common stock, or the perception that those sales might occur,
may cause the market price of our common stock to decline. After the expiration of any applicable transfer
restrictions imposed by our 2014 Incentive Plan, stock purchase agreements or lockup agreements with us, our
executive officers and directors will have the ability to sell all of any portion of the applicable common stock which
could cause the market price of our common stock to decline.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk management and strategy
The Company recognizes the critical importance of developing, implementing, and maintaining robust cybersecurity
measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
Our policies, standards, processes and practices for assessing, identifying, and managing material risks from
cybersecurity threats are integrated into our overall risk management program and are based on the Center for
Internet Security (CIS) benchmarks. CIS controls map to many established standards and regulatory frameworks,
including the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF) and NIST SP
800-53, the ISO 27000 series of standards, PCI DSS, HIPAA, and others.
Managing Material Risks & Integrated Overall Risk Management
The Company has strategically integrated cybersecurity risk management into our broader risk management
framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that
cybersecurity considerations are an integral part of our decision-making processes at every level. Our risk
management team works closely with our IT department to continuously evaluate and address cybersecurity risks in
alignment with our business objectives and operational needs.
Engage Third-parties on Risk Management
Recognizing the complexity and evolving nature of cybersecurity threats, the Company engages with a range of
external experts, including cybersecurity assessors, consultants, and auditors in evaluating and testing our risk
management systems. These partnerships enable us to leverage specialized knowledge and insights, ensuring our
cybersecurity strategies and processes remain at the forefront of industry best practices. Our collaboration with these
third-parties includes real-time Company endpoint scanning, detection, prevention, and remediation; regular audits;
threat assessments; and consultation on security enhancements.
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Oversee Third-party Risk
Because we are aware of the risks associated with third-party service providers, the Company implements stringent
processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers
before engagement and maintain ongoing review to ensure compliance with our cybersecurity standards. This
approach is designed to mitigate risks related to data breaches or other security incidents originating from third-
parties.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial
standing.
Governance
The Board of Directors is acutely aware of the critical nature of managing risks associated with cybersecurity
threats. The Board has established robust oversight mechanisms to ensure effective governance in managing risks
associated with cybersecurity threats because we recognize the significance of these threats to our operational
integrity and stakeholder confidence.
Board of Directors Oversight
As mentioned above, management has formed an IT Committee consisting of the Chief Executive Officer, Chief
Financial Officer, and the Vice President of Information Technology to review and discuss information security
matters and cyber security risks. The committee meets at least twice a year and reports to the Board of Directors as
needed.
Management’s Role Managing Risk
The Chief Executive Officer and Chief Financial Officer play a pivotal role in serving on the IT Committee, which
meets at least twice a year and discusses a broad range of topics, including:
•
•
•
•
Current cybersecurity landscape and emerging threats;
Status of ongoing cybersecurity initiatives and strategies;
Incident reports and learnings from any cybersecurity events; and
Compliance with regulatory requirements and industry standards.
In addition, the IT Committee and the Board maintain an ongoing dialogue regarding emerging or potential
cybersecurity risks, ensuring the Board’s oversight is proactive and responsive. The IT Committee actively
participates in strategic decisions related to cybersecurity, offering guidance and approval for major initiatives. This
involvement ensures that cybersecurity considerations are integrated into the broader strategic objectives of the
Company.
Risk Management Personnel
Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the Vice President
of Information Technology. Our Vice President of Information Technology has over 25 years of experience in the
information technology field and has been a member of and led numerous teams responsible for cybersecurity
operations. In addition, all Company employees are required to complete mandatory cybersecurity training each
year.
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Monitor Cybersecurity Incidents
The Vice President of Information Technology is continually informed about the latest developments in
cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge
acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents.
The Vice President of Information Technology implements and oversees processes for the regular monitoring of our
information systems. This includes the deployment of advanced security measures and regular system audits to
49
identify potential vulnerabilities. In the event of a cybersecurity incident, the Vice President of Information
Technology is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate
the impact and long-term strategies for remediation and prevention of future incidents.
Reporting to Board of Directors
The Vice President of Information Technology, in his capacity, regularly informs the Chief Executive Officer and
Chief Financial Officer of all aspects related to cybersecurity risks and incidents. This ensures that the highest levels
of management are kept abreast of the cybersecurity posture and potential risks facing the Company. Furthermore,
significant cybersecurity matters, and strategic risk management decisions are escalated to the Board of Directors,
ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues.
ITEM 2. PROPERTIES
In addition to the information provided below, see Item 1, "Business," Note 2 – Real Estate Investments to the
Consolidated Financial Statements in Item 8 "Financial Statements and Supplementary Data," and Schedule III of
Item 15 of this Annual Report on Form 10-K for more detailed information about the Company's properties as of
December 31, 2023.
Scheduled Lease Expirations
As of December 31, 2023, the weighted average remaining years to maturity pursuant to the leases with our tenants
was approximately 6.9 years, with expirations through 2039. The table below details scheduled lease expirations, as
of December 31, 2023, for our properties for the periods indicated.
Year
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Thereafter
Month-to-Month
Totals
Total Leased Square Footage
Annualized Lease Revenue
Number of
Leases Expiring
Amount
(in thousands)
Percent (%)
Amount
(in thousands)
Percent (%)
69
54
65
50
58
25
16
23
11
12
38
10
431
316
338
541
304
327
272
115
347
133
75
1,032
20
3,820
8.3 % $
8.8 %
14.2 %
8.0 %
8.5 %
7.1 %
3.0 %
9.1 %
3.5 %
2.0 %
27.0 %
0.5 %
100.0 % $
6,667
8,910
11,029
6,476
5,938
6,489
3,219
9,331
1,877
1,503
35,059
449
96,947
6.9 %
9.2 %
11.4 %
6.7 %
6.1 %
6.7 %
3.3 %
9.6 %
1.9 %
1.5 %
36.2 %
0.5 %
100.0 %
ITEM 3. 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 4. MINE SAFETY DISCLOSURES
None.
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PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Shares of the Company's common stock are traded on the New York Stock Exchange under the symbol "CHCT." At
February 8, 2024, there were 45 stockholders of record.
Future dividends will be declared and paid at the discretion of the Board of Directors. The Company’s ability to pay
dividends is dependent upon its ability to generate funds from operations and cash flows, and to make accretive new
investments.
Stock Performance Graph
The following graph compares, over a measurement period beginning December 31, 2018 and ending on
December 31, 2023, the cumulative total return on our common stock with the cumulative total return on the stocks
included in (i) the Russell 3000 Index and (ii) the NAREIT All Equity REIT Index. The performance graph assumes
that the value of the investment in our common stock, the Russell 3000 Index and the NAREIT All Equity REIT
Index was $100 at December 31, 2018 and that all dividends were reinvested. There can be no assurance that our
common stock performance will continue in the future with the same or similar trends depicted in the stock
performance graph below. We will not make or endorse any predictions as to future stock performance
Index
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023
Community Healthcare Trust Incorporated
Russell 3000 Index
NAREIT All Equity REIT Index
$
$
$
100.00 $
154.94 $
176.94 $
184.17 $
146.02 $
114.62
100.00 $
131.02 $
158.39 $
199.03 $
160.80 $
202.54
100.00 $
128.66 $
122.07 $
172.49 $
129.45 $
144.16
Period Ending
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The information provided under the heading “Stock Performance Graph” shall not be deemed to be “soliciting
material” or to be “filed” with the SEC or subject to its proxy regulations or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended, other than as provided in Item 201 of Regulation S-K. The
information provided in this section shall not be deemed to be incorporated by reference into any filing under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
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ITEM 6. [RESERVED]
Intentionally omitted.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 liquidity. MD&A is provided as a supplement
to, and should be read in conjunction with, the Company's Consolidated Financial Statements and accompanying
notes.
Overview
We were organized in the State of Maryland in March 2014 and began operations upon the completion of our initial
public offering in May 2015. We are a self-administered, self-managed healthcare 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.
Real estate acquisitions
During the year ended December 31, 2023, the Company acquired 19 real estate properties and one land parcel for
an aggregate purchase price of approximately $97.8 million. Upon acquisition, the properties, totaling approximately
463,000 square feet, were 99.2% leased in the aggregate with lease expirations through 2038.
Subsequent acquisition
Subsequent to December 31, 2023, the Company acquired one long term acute care hospital (LTACH) for a
purchase price of approximately $6.5 million and cash consideration of approximately $6.6 million. Upon
acquisition, the property was 100.0% leased with a lease expiration in 2039.
Acquisition pipeline
The Company has three properties under definitive purchase agreements for an expected aggregate purchase price of
approximately $27.9 million. The Company's expected aggregate return on these investments ranges from
approximately 9.08% to 9.20%. The Company expects to close on these properties during the first half of 2024;
however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will
actually close.
The Company also has seven properties under definitive purchase agreements, to be acquired after completion and
occupancy, for an aggregate expected purchase price of approximately $166.5 million. The Company's expected
returns on these investments are approximately 9.1% to 9.75%. The Company anticipates closing on two of these
properties in 2024 with the remainder throughout 2025 and 2026; however, the Company cannot provide assurance
as to the timing of when, or whether, these transactions will actually close.
Assets Held for Sale
The Company currently has plans to dispose of two properties with an aggregate carrying balance of $7.5 million
during 2024. See Note 4 – Real Estate Acquisitions and Dispositions in the Consolidated Financial Statements for
more details.
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Leased square footage
As of December 31, 2023, our real estate portfolio was approximately 91.1% leased, excluding real estate assets
held for sale. During the year ended December 31, 2023, we had expiring or terminated leases related to
approximately 462,000 square feet, and we leased or renewed leases related to approximately 334,000 square feet.
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.
The Company had an aggregate gross investment of approximately $37.2 million in ten real estate properties as of
December 31, 2023 that were subject to exercisable purchase options.
Lease Expirations
Approximately 6.1% to 11.4% of our leases (based on annualized rent) will expire in each of the next 5 years.
Management expects that many of the tenants will renew their leases, but in cases where they do not renew, the
Company believes it will generally be able to re-lease the space to existing or new tenants without significant loss of
rental income. See "Properties" in Item 2 for a schedule of the Company's lease expirations.
Inflation
Inflation has significantly increased during the past couple of years and a prolonged period of high and persistent
inflation could cause an increase in our expenses, capital expenditures, and cost of our variable-rate borrowings
which could have a material impact on our financial position or results of operations. Many of our lease agreements
contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on
stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in
2022 and 2023, and these increases may continue in 2024 and beyond. Higher interest rates imposed by the Federal
Reserve to address inflation may adversely impact real estate asset values and increase our interest expense on our
variable-rate borrowings under our revolving credit facility.
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Results of Operations
Our results of operations are most significantly impacted each year by our acquisitions in and funding of our real
estate investments, as well as expenses related to our employees, professional fees and other costs related to
operating the REIT and its related subsidiaries.
Year Ended December 31, 2023 Compared to December 31, 2022
The table below shows our results of operations for the year ended December 31, 2023 compared to the same period
in 2022 and the effect of changes in those results from period to period on our net income.
(Dollars in thousands)
REVENUES
Rental income
Other operating interest
EXPENSES
Property operating
General and administrative (1)
Depreciation and amortization
OTHER INCOME (EXPENSE)
Impairment of real estate asset
Interest expense
Deferred income tax expense
Interest and other income, net
For the Year Ended
December 31,
Increase (Decrease) to
Net Income
2023
2022
$
%
$ 108,682 $
94,103 $
14,579
4,163
112,845
20,713
27,338
39,693
87,744
3,576
97,679
16,636
14,837
32,339
63,812
587
15,166
(4,077)
(12,501)
(7,354)
(23,932)
15.5 %
16.4 %
15.5 %
(24.5) %
(84.3) %
(22.7) %
(37.5) %
(102)
—
(102)
n/m
(17,792)
(11,873)
(5,919)
(49.9) %
(306)
813
(41)
66
(265)
747
n/m
n/m
(17,387)
(11,848)
(5,539)
46.8 %
NET INCOME
$
7,714 $
22,019 $
(14,305)
(65.0) %
n/m - not meaningful
_____________________
(1) General and administrative expenses for the year ended December 31, 2023 included the accelerated
amortization of stock-based compensation totaling $11.8 million recognized upon the passing of our former CEO
and President.
Revenues
Rental income increased approximately $14.6 million, or 15.5%, for the year ended December 31, 2023 compared to
the same period in 2022 mainly due to the following:
•
•
Income on properties acquired during 2023 and 2022 increased rental income by approximately $15.4
million;
Lease rejections related to one bankruptcy during 2023 decreased rental income in 2023 compared to 2022
by approximately $0.3 million; and
54
•
During 2023 the Company increased its allowance for bad debts by approximately $0.3 million.
Other operating interest increased approximately $0.6 million, or 16.4%, for the year ended December 31, 2023
compared to the same period in 2022 due to interest earned on our notes receivable, which are discussed in more
detail in Note 10 – Other Assets, net to the Consolidated Financial Statements.
Expenses
Property operating expenses increased approximately $4.1 million, or 24.5%, for the year ended December 31, 2023
compared to the same period in 2022 due mainly to the following:
•
•
•
•
•
Property operating expenses on properties acquired during 2023 and 2022 resulted in an increase of
approximately $3.0 million;
Repairs and maintenance expenses increased approximately $0.4 million;
Security monitoring service expenses increased approximately $0.2 million;
The amortization of leasing commissions increased approximately $0.2 million; and
Property insurance expense increased approximately $0.1 million.
General and administrative expenses increased approximately $12.5 million, or 84.3%, for the year ended December
31, 2023 compared to the same period in 2022 due mainly to the following:
•
•
•
•
Non-cash accelerated amortization of deferred compensation for non-vested restricted common shares held
by former CEO and President Timothy Wallace at the time of his passing in March 2023 accounted for an
increase of approximately $11.8 million;
Compensation-related expenses increased approximately $0.8 million related to new employees and $0.3
million related to the payment of employer taxes due upon the accelerated vesting of Mr. Wallace's shares;
The non-cash amortization of stock-based compensation decreased approximately $1.2 million in 2023
compared to 2022; and
Legal fees increased approximately $0.5 million and accounting and auditing fees increased approximately
$0.2 million in 2023 compared to 2022.
Depreciation and amortization expense increased approximately $7.4 million, or 22.7%, for the year ended
December 31, 2023 compared to the same period in 2022 due mainly to the following:
•
•
•
•
Depreciation and amortization related to properties acquired during 2023 and 2022 accounted for an
increase of approximately $6.6 million;
Real estate intangible assets acquired prior to 2022 that became fully depreciated resulted in a decrease of
approximately $1.8 million;
Accelerated amortization of lease intangibles on the two GenesisCare properties where the leases have been
rejected totaled approximately $1.5 million; and
Depreciation related to tenant and other improvements accounted for an increase of approximately $1.1
million.
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Impairment of real estate asset
During the third quarter of 2023, the Company recorded an impairment on an asset held for sale of approximately
$0.1 million. See Note 4 – Real Estate Acquisitions and Dispositions to the Consolidated Financial Statements.
Interest expense
Interest expense increased approximately $5.9 million, or 49.9%, for the year ended December 31, 2023 compared
to the same period in 2022. Contractual interest due under the Credit Facility increased $5.9 million due to
refinancings in the fourth quarter of 2022, a higher weighted average balance on the Revolving Credit Facility, along
with a rise in interest rates during 2023 as compared to 2022. See Note 5 – Debt, net to the Consolidated Financial
Statements.
Deferred income tax expense
Deferred income tax expense increased approximately $0.3 million for the year ended December 31, 2023 compared
to the same period in 2022. During 2023, the Company fully reserved its deferred tax asset.
Interest and other income
Interest and other income increased approximately $0.7 million for the year ended December 31, 2023 compared to
the same period in 2022. During 2023, the Company recognized a net casualty gain relating to a property totaling
$0.7 million. See Note 4 – Real Estate Acquisitions and Dispositions to the Consolidated Financial Statements.
Year Ended December 31, 2022 Compared to December 31, 2021
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of
Operations” in our 2022 Annual Report on Form 10-K for a comparison of the year ended December 31, 2022
compared to December 31, 2021, which is incorporated by reference.
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, collecting rental income and operating
expense reimbursements based on contractual arrangements with its tenants. These sources of revenue represent our
primary source of liquidity to fund our dividends, general and administrative expenses, property operating expenses,
interest expense on our Credit Facility and other expenses incurred related to managing our existing portfolio and
investing in additional properties. To the extent additional resources are needed, the Company will fund its
investment activity generally through equity or debt issuances, including our at-the-market equity offering program,
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
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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.
Operating Activities
Cash flows provided by operating activities for the years ended December 31, 2023, 2022 and 2021 were
approximately $61.4 million, $60.3 million, and $56.3 million, respectively. Cash flows provided by operating
activities for the years ended December 31, 2023, 2022 and 2021 were generally provided by contractual rents and
interest on notes receivables, 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 years ended December 31, 2023, 2022 and 2021 were approximately
$113.7 million, $113.8 million, and $104.4 million, respectively. During 2023, the Company invested in 19 real
estate properties and one land parcel for cash consideration of approximately $98.9 million. During 2022, the
Company invested in 18 real estate properties for an aggregate cash consideration of approximately $96.7 million.
During 2021, the Company invested in 13 real estate properties for an aggregate cash consideration of
approximately $88.1 million and sold one property for net proceeds of approximately $1.3 million. In addition,
during 2023, 2022 and 2021, the Company funded notes receivable of approximately $2.0 million, $9.7 million, and
$14.4 million, respectively, and received payments in 2023, 2022 and 2021 on notes of approximately $3.9 million,
$3.0 million, and $4.0 million, respectively. Also, during 2023, the Company received insurance proceeds from a
casualty loss of approximately $2.3 million, and the Company funded capital expenditures, including tenant
improvements, during 2023, 2022 and 2021 totaling approximately $19.0 million, $10.4 million, and $7.2 million,
respectively.
Financing Activities
Cash flows provided by financing activities for the years ended December 31, 2023, 2022 and 2021 were
approximately $44.9 million, $62.7 million, and $48.1 million, respectively. During 2023, 2022 and 2021, the
Company paid dividends totaling approximately $48.1 million, $44.5 million and $42.4 million, respectively.
During 2023, 2022 and 2021, the Company completed equity offerings under its at-the-market program, resulting in
net proceeds, net of underwriters' discount and offering costs, of approximately $44.0 million, $20.2 million and
$38.2 million, respectively. During 2023, the Company borrowed, on a net basis, approximately $50.0 million, and
in 2022 and 2021, the Company repaid, on a net basis, approximately $12.0 million and $21.0 million respectively,
on its Revolving Credit Facility. During 2022 and 2021, the Company amended its Credit Facility and borrowed
$150.0 million and $125.0 million, respectively, in Term Loans under its Credit Facility and incurred $0.8 million
and $1.6 million, respectively, in additional debt issuance costs, and in each of 2022 and 2021, repaid $50.0 million
in Term Loans under its Credit Facility. Further in 2023, the Company withheld shares and paid taxes totaling
approximately $1.0 million upon the vesting of stock-based awards for certain employees.
Automatic Shelf Registration Statement
On November 2, 2022, the Company filed an automatic shelf registration statement on Form S-3 with the SEC. 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.
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, Fifth Third Securities, Inc., Janney Montgomery Scott LLC,
and Robert W. Baird & Co. Incorporated, as Sales Agents (each, an “Agent”, and, 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 $500.0 million, exclusive of shares of Common Stock sold under its prior agreements with our Agents.
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
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applicable law. As of December 31, 2023, the Company had approximately $433.9 million remaining that may be
issued under the ATM Program.
Security Deposits
As of December 31, 2023, the Company held approximately $3.7 million in security deposits, included in other
liabilities, on the Consolidated Statement of Income, 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.
Credit Facility
The Company's third amended and restated credit agreement, as amended (the "Credit Facility") provides for a
$150.0 million revolving credit facility (the "Revolving Credit Facility") that matures on March 19, 2026 and
includes one 12-month option to extend the maturity date, and $350.0 million in term loans (the "Term Loans"), as
well as an accordion feature which allows borrowings up to a total of $700.0 million, including the ability to add and
fund additional term loans. The Company has entered into interest rate swaps to fix the interest rates on the Term
Loans. In March 2024, two swaps will mature and will be replaced by two forward-starting swaps currently in place
and will increase the fixed weighted average interest rate under the swaps from approximately 4.3% to
approximately 4.4%. Note 5 – Debt, net to the Consolidated Financial Statements provides more details on the
Credit Facility and Note 6 – Derivative Financial Instruments provides more detail on interest rate swaps entered
into on the Term Loans. At December 31, 2023, the Company had borrowing capacity remaining under the
Revolving Credit Facility of approximately $100.0 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. The Company was in compliance with its financial covenants under its Credit Facility as of
December 31, 2023. 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 December 31,
2023, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was
approximately 36.1%.
Mortgage Note Payable
The Company also had outstanding at December 31, 2023, a $4.8 million mortgage note payable, secured by one of
our properties that had a $7.2 million carrying value at December 31, 2023. The mortgage note amortizes monthly at
a fixed interest rate of 4.98% with a balloon payment of approximately $4.8 million due upon maturity on May 1,
2024. The Company expects to fund the balloon payment with proceeds from the Company's Revolving Credit
Facility or proceeds from the Company's ATM Program.
Ground Leases
At December 31, 2023, the Company was obligated, as the lessee, under four non-prepaid ground leases accounted
for as operating leases with expiration dates through 2076, including renewal options, and two non-prepaid ground
leases accounted for as a financing lease with an expiration date through 2109, including renewal options. Any
rental increases related to the Company's ground leases are generally either stated or based on the Consumer Price
Index. At December 31, 2023, the Company's aggregate obligation under these ground leases was approximately
$8.9 million. See Note 3 – Real Estate Leases to the Consolidated Financial Statements.
Subsequent acquisition
Subsequent to December 31, 2023, the Company acquired one long term acute care hospital (LTACH) for a
purchase price of approximately $6.5 million and cash consideration of approximately $6.6 million. Upon
acquisition, the property was 100.0% leased with a lease expiration in 2039. The acquisition was funded with
proceeds from the Company's Revolving Credit Facility.
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Acquisition Pipeline
The Company has three properties under definitive purchase agreements for an expected aggregate purchase price of
approximately $27.9 million. The Company's expected aggregate return on these investments ranges from
approximately 9.08% to 9.20%. The Company expects to close on these properties during the first half of 2024;
however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will
actually close.
The Company also has seven properties under definitive purchase agreements, to be acquired after completion and
occupancy, for an aggregate expected purchase price of approximately $166.5 million. The Company's expected
returns on these investments are approximately 9.1% to 9.75%. The Company anticipates closing on two of these
properties in 2024 with the remainder throughout 2025 and 2026; however, the Company cannot provide assurance
as to the timing of when, or whether, these transactions will actually close.
The Company anticipates funding these investments with cash from operations, through proceeds from its Credit
Facility or from net proceeds from additional debt or equity offerings.
Tenant Improvements and Capital Improvements
The Company may provide tenant improvement allowances in new or renewal leases for the purpose of refurbishing
or renovating tenant space. The Company may also assume tenant improvement obligations included in leases
acquired in its real estate acquisitions. As of December 31, 2023, the Company had approximately $10.9 million in
commitments for tenant improvements.
The Company has entered into contracts with various vendors for various capital improvement projects related to its
portfolio. As of December 31, 2023, the Company had approximately $5.8 million in commitments for capital
improvement projects.
Six of the projects included above, with remaining obligations totaling $3.5 million as of December 31, 2023,
represent redevelopment projects of the buildings into different healthcare uses backed by long term leases. The
Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility
or from net proceeds from additional debt or equity offerings.
Note Receivable
The Company had entered into a note with a tenant with a maximum commitment remaining to fund totaling
approximately $5.0 million at December 31, 2023. See Note 10 – Other Assets, net to the Consolidated Financial
Statements.
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.
During 2023, 2022 and 2021, the Company paid cash dividends in the amounts of $1.805 per share, $1.765 per share
and $1.725 per share, respectively.
On February 8, 2024, the Company’s Board of Directors declared a quarterly common stock dividend in the amount
of $0.4575 per share. The dividend is payable on March 1, 2024 to stockholders of record on February 20, 2024.
The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make
accretive new investments.
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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 Consolidated Financial Statements and other financial data included elsewhere in this
Annual Report on Form 10-K.
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO")
FFO is an operating performance measure 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,
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.
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The table below reconciles net income to FFO and AFFO for the years ended December 31, 2023, 2022, and 2021.
(Amounts in thousands, except per share amounts)
Net income
Real estate depreciation and amortization
Gain on sale of depreciable real estate
Impairment of real estate asset
Total adjustments
FFO
Straight-line rent
Stock-based compensation
Accelerated amortization of stock-based compensation (1)
Net gain from insurance recovery on casualty loss
AFFO
FFO per diluted common share
AFFO per diluted common share
Weighted Average Common Shares Outstanding-Diluted (2)
Year Ended December 31,
2023
2022
2021
$
7,714 $
22,019 $
40,103
32,602
—
102
—
—
40,205
32,602
$
47,919 $
54,621 $
(3,052)
8,166
11,799
(706)
(3,444)
9,415
—
—
22,492
30,624
(237)
—
30,387
52,879
(3,569)
7,164
—
—
$
$
$
64,126 $
60,592 $
56,474
1.86 $
2.49 $
2.24 $
2.49 $
2.20
2.35
25,752
24,379
24,012
____________________________
(1) Upon the passing of our former CEO and President in the first quarter of 2023, the Company accelerated the amortization of stock-based
compensation totaling $11.8 million, impacting FFO per diluted share by $0.46 for the year ended December 31, 2023 .
(2) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method
used to calculate earnings per share.
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 losses on the sale of real estate properties or other investments,
interest expense, deferred income tax expense, and interest and other income, net. 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.
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The table below reconciles net income to NOI for the years ended December 31, 2023, 2022, and 2021.
(In thousands)
Net income
General and administrative (1)
Accelerated amortization of deferred compensation
Depreciation and amortization
Gain on sale of depreciable real estate
Impairment of real estate asset
Interest expense
Deferred income taxes
Interest and other income, net
Year Ended December 31,
2023
2022
2021
$
7,714 $
22,019 $
15,539
11,799
39,693
—
102
17,792
306
(813)
14,837
—
32,339
—
—
11,873
41
(66)
22,492
12,113
—
30,401
(237)
—
10,542
167
(57)
NOI
____________________________
(1) 2023 excludes accelerated amortization of stock-based compensation shown separately below.
$
92,132 $
81,043 $
75,421
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
items, such as stock-based compensation expense and other such items.
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.
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The table below reconciles net income to EBITDAre and Adjusted EBITDAre for the years ended December 31,
2023, 2022, and 2021.
(In thousands)
Net income
Interest expense
Depreciation and amortization
Deferred income tax expense
Gain on sale of depreciable real estate
Impairment of real estate asset
Year Ended December 31,
2023
2022
2021
$
7,714 $
22,019 $
17,792
39,693
306
—
102
11,873
32,339
41
—
—
22,492
10,542
30,401
167
(237)
—
63,365
7,164
—
—
EBITDAre
$
65,607 $
66,272 $
Non-cash stock-based compensation expense (1)
Accelerated amortization of deferred compensation
Net gain from insurance recovery on casualty loss
8,166
11,799
(706)
9,415
—
—
Adjusted EBITDAre
____________________________
(1) 2023 excludes accelerated amortization of stock-based compensation shown separately below.
$
84,866 $
75,687 $
70,529
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements are prepared in conformity with GAAP and the rules and regulations of the
SEC. In preparing the Consolidated Financial Statements, management is required to exercise judgment and make
assumptions and estimates that may impact the carrying value of assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those estimates. Set forth below is a summary of our
accounting policies and estimates that we believe are critical to the preparation of our Consolidated Financial
Statements. Our accounting policies are more fully discussed in Note 1 – Summary of Significant Accounting
Policies to the Consolidated Financial Statements.
Principles of Consolidation
Our Consolidated Financial Statements may include the accounts of the Company, its wholly owned subsidiaries,
joint ventures, partnerships and variable interest entities, or VIEs, where the Company controls the operating
activities. All material intercompany accounts, transactions, and balances have been eliminated.
Management must make judgments regarding the Company's level of influence or control over an entity and whether
or not the Company is the primary beneficiary of a variable interest entity. Consideration of various factors include,
but is not limited to, the Company's ability to direct the activities that most significantly impact the entity's
governing body, the size and seniority of the Company's investment, the Company's ability and the rights of other
investors to participate in policy making decisions, the Company's ability to replace the manager and/or liquidate the
entity. Management's ability to correctly assess its influence or control over an entity when determining the primary
beneficiary of a VIE affects the presentation of these entities in the Company's Consolidated Financial Statements. If
it is determined that the Company is the primary beneficiary of a VIE, the Company's Consolidated Financial
Statements would consolidate the VIE rather than the Company's pro rata results of its variable interest in the VIE.
The Company would depend on the VIE to provide timely financial information and would rely on the interest
control of the VIE to provide accurate financial information. Untimely or inaccurate financial information provided
to the Company or deficiencies in the VIE's internal controls over financial reporting could impact the Company's
Consolidated Financial Statements and its internal control over financial reporting.
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Accounting for Acquisitions of Real Estate Properties
Real estate property acquisitions are accounted for as a business combination or an asset acquisition. An acquisition
accounted for as a business combination is recorded at fair value and related closing costs are expensed as incurred.
An acquisition accounted for as an asset acquisition is recorded at its purchase price, inclusive of acquisition costs,
which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date
of acquisition. The Company expects that substantially all of its acquisitions will be accounted for as asset
acquisitions.
The acquisition date fair values of the tangible and intangible assets and acquired liabilities are estimated based on
information obtained from multiple sources as a result of pre-acquisition due diligence, tax records, and other
sources, including third-party valuations. Based on these estimates, we recognize the acquired assets and liabilities
based on their estimated fair values. We expense transaction costs associated with business combinations in the
period incurred. The fair value of tangible property assets acquired considers the value of the property as if vacant
determined by a combination of comparable sales, replacement cost, income valuation approach and other relevant
data. The determination of fair value involves the use of significant judgment and estimation. We value land based
on various inputs, which may include internal analysis of recently acquired properties, existing comparable
properties within our portfolio, or third party appraisals or valuations based on comparable sales.
In recognizing identified intangible assets and liabilities of an acquired property, the value of above- or below-
market leases is estimated based on the present value (using a discount rate which reflects the risks associated with
the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and
management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the
lease. In the case of a below-market lease, we also evaluate any renewal options associated with that lease to
determine if the intangible should include those periods. The capitalized above-market or below-market lease
intangibles are amortized as a reduction from or an addition to rental income over the estimated remaining term of
the respective leases.
In determining the value of in-place leases and tenant relationships, we consider current market conditions and costs
to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from
vacant to existing occupancy. In estimating carrying costs, we include real estate taxes, insurance, other property
operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute
similar leases, including leasing commissions. The values assigned to in-place leases and tenant relationships are
amortized over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all
unamortized costs related to that lease are written off.
Long-lived Asset Impairments
The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived
assets, including real estate properties, whenever events occur or a change in circumstances indicates that the
carrying value might not be fully recoverable. Indicators of impairment may include significant under-performance
of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or
the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a
significant portion of leases in a property; or significant negative economic trends or negative industry trends for the
Company or its operators. In addition, the Company’s review for possible impairment may include those assets
subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes.
In addition, the Company assesses whether there were other indicators, including property operating performance,
occupancy, changes in holding periods, and other market conditions, that would suggest that the value of the
Company's investment may have been impaired.
If management determines that the carrying value of the Company’s assets may not be fully recoverable based on
the existence of any of the factors above, or others, management would measure and record an impairment charge
based on the estimated fair value of the property or the estimated fair value less costs to sell the property.
64
Revenue Recognition
The primary source of revenue for the Company is generated through its leasing arrangements with its tenants which
is accounted for under Accounting Standards Codification Topic 842 ("ASC Topic 842"), or through notes with its
borrowers which is covered under ASC 310. The Company's rental income and interest income are recognized based
on contractual arrangements with its tenants and borrowers. From the inception of a lease, if collection of
substantially all of the lease payments is probable for a tenant, then rental income is recognized as earned over the
life of the lease agreement on a straight-line basis. Management's judgement is necessary if or when it determines
that collection of substantially all of a lessee’s payments is not probable, upon which time, the Company will revert
to recognizing such lease payments on a cash basis and will reverse any recorded receivables related to that lease. In
the event that management subsequently determines collection of substantially all of that lease’s receivable is
probable, management will reinstate and record all such receivables for the lease in accordance with the lease.
Allowance for Credit Losses
Credit losses on financial instruments are measured using an expected credit loss ("CECL") model in evaluating the
collectability of notes receivable and other financial instruments. The CECL impairment model requires an estimate
of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future
economic conditions in addition to information about past events and current conditions. Under the CECL model,
the Company estimates credit losses over the entire contractual term of the instrument from the date of initial
recognition of that instrument and is required to record a credit loss expense (or reversal) in each reporting period.
The Company evaluates factors such as its historical credit loss experience with the borrower or similar financial
assets, current economic conditions, current and expected future financial condition of the borrower as well as
payment history of the borrower, along with other relevant factors for each borrower or similar instruments.
Use of Estimates in the Consolidated Financial Statements
Preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make
estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying
notes. Actual results may materially differ from those estimates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk in the form of changing interest rates on its debt and mortgage note
receivable. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.
Management uses regular monitoring of market conditions and analysis techniques to manage this risk.
As of December 31, 2023, the Company's Revolving Credit Facility and Term Loans were based on variable interest
rates while its notes receivable and mortgage note payable bore interest at fixed rates. The Company has entered into
interest rate swaps to fix the interest rates on its Term Loans.
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The following table provides information regarding the sensitivity of certain of the Company’s financial
instruments, as described above, to market conditions and changes resulting from changes in interest rates. For
purposes of this analysis, sensitivity is demonstrated based on hypothetical 10% changes in the underlying market
interest rates.
Outstanding
Principal Balance at
December 31, 2023
Calculated
Annual
Interest Expense
Impact on Earnings and
Cash Flows
Assuming 10%
Increase in
Market Interest
Rates
Assuming 10%
Decrease in
Market Interest
Rates
$
$
$
$
50,000 $
75,000 $
125,000 $
150,000 $
3,534 $
3,218 $
4,181 $
7,661 $
(353) $
— $
— $
— $
353
—
—
—
(Dollars in thousands)
Variable Rate Debt:
Revolving Credit Facility
A-3 Term Loan (1)
A-4 Term Loan (1)
A-5 Term Loan (1)
___________
(1) The Company has interest rate swaps that fix the interest rates of the A-3 Term Loan, the A-4 Term Loan, and the A-5 Term Loan;
therefore, changes in the interest rates will not impact our earnings or cash flows.
Fair Value
Outstanding
Principal Balance at
December 31, 2023
December 31,
2023
Assuming 10%
Increase in
Market Interest
Rates
Assuming 10%
Decrease in
Market Interest
Rates
December 31,
2022
(Dollars in thousands)
Fixed Rate Receivables/Payable:
Notes Receivable (1)
Mortgage Note Payable (1)
___________
(1) Level 2 - Fair value based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which significant inputs and significant value drivers are observable in active
markets.
30,775 $
31,199 $
30,893 $
31,511 $
4,821 $
4,791 $
4,801 $
4,782 $
$
$
32,716
4,761
On December 14, 2022, the Company amended its Credit Facility to replace LIBOR as a benchmark interest rate for
loans under the Credit Facility with SOFR. The Company's Credit Facility debt shown in the table above and
discussed in Note 5 – Debt, net to the Consolidated Financial Statements was transitioned from being indexed to
USD LIBOR to SOFR effective December 14, 2022 for Term Loan A-5 and Revolving Credit Facility, and effective
December 30, 2022 for Term Loans A-3 and A-4. In January 2023, the Company transitioned its interest rate swaps
from LIBOR to SOFR rates. See the discussion under Item 1A, "Risk Factors," under the caption "The replacement
of LIBOR with SOFR may adversely affect interest expense related to outstanding debt."
Inflation
Inflation has significantly increased during the past couple of years and a prolonged period of high and persistent
inflation could cause an increase in our expenses, capital expenditures, and cost of our variable-rate borrowings
which could have a material impact on our financial position or results of operations. Many of our lease agreements
contain provisions designed to mitigate the adverse impact of inflation, including annual rent increases based on
stated increases or CPI increases. In response to inflationary pressures, the Federal Reserve raised interest rates in
2022 and 2023, and these increases may continue in 2024 and beyond. Higher interest rates imposed by the Federal
Reserve to address inflation may adversely impact real estate asset values and increase our interest expense on our
variable-rate borrowings under our revolving credit facility.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of
Stockholders and Board of Directors
Community Healthcare Trust Incorporated
Franklin, Tennessee
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Community Healthcare Trust Incorporated (the
“Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related
notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally
accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) and our report dated February 13, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to
accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
K
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67
Asset Impairment – Identification of Triggering Events and Assessment of Recoverability for Real Estate Properties
The Company recorded total real estate properties, net of accumulated depreciation, of approximately $849 million as of
December 31, 2023. As described in Note 1 – Summary of Significant Accounting Policies to the consolidated financial
statements, the Company assesses the potential for impairment of long-lived assets, including real estate properties,
whenever events occur or a change in circumstances indicates that the carrying value might not be fully recoverable
("triggering events"). A real estate property is tested for impairment when management’s estimate of current and
projected, undiscounted and unleveraged, operating cash flows of the property is less than the net carrying value of the
property. In determining these cash flows, the Company estimates market rent, capitalization rates, expected holding
periods, and other relevant inputs.
We identified management's evaluation of triggering events and the assessment of recoverability for certain real estate
properties as a critical audit matter. Identification of triggering events requires judgement in evaluating the existence of
potential impairment indicators including casualties such as natural disasters, sustained changes to property occupancy,
and underperformance of a property relative to expected operating results. Additionally, determination of the operating
cash flows used in recoverability tests requires the estimation of certain assumptions including market rents and terminal
capitalization rates. Auditing management’s judgments was especially challenging and required increased auditor effort
including the use of a specialist.
The primary procedures we performed to address this critical audit matter included:
•
•
Evaluating management's identification and assessment of potential triggering events, including impacts of
natural disasters, sustained changes to property occupancy, and under performance of a property relative to
expected operating results.
Testing the assumptions used by management in their recoverability test, specifically market rent and terminal
capitalization rates, which included utilizing professionals with specialized knowledge and skills in valuation to
assist in testing these assumptions.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2015.
Nashville, Tennessee
February 13, 2024
68
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Dollars and shares in thousands, except per share amounts)
ASSETS
Real estate properties
Land and land improvements
Buildings, improvements, and lease intangibles
Personal property
Total real estate properties
Less accumulated depreciation
Total real estate properties, net
Cash and cash equivalents
Restricted cash
Real estate properties held for sale
Other assets, net
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net
Accounts payable and accrued liabilities
Other liabilities, net
Total liabilities
Commitments and contingencies
Stockholders' Equity
December 31,
2023
2022
$
136,532 $
117,657
913,416
825,257
299
253
1,050,247
943,167
(200,810)
(165,341)
849,437
3,491
1,142
7,466
83,876
777,826
11,233
835
—
86,531
$
945,412 $
876,425
$
403,256 $
352,997
12,032
16,868
432,156
11,377
15,237
379,611
Preferred stock, $0.01 par value; 50,000 shares authorized; none issued and
outstanding
Common stock, $0.01 par value; 450,000 shares authorized; 27,613 and 25,897
shares issued and outstanding at December 31, 2023 and December 31, 2022,
respectively
Additional paid-in capital
Cumulative net income
Accumulated other comprehensive income
Cumulative dividends
Total stockholders’ equity
—
—
276
688,156
88,856
16,417
259
625,136
81,142
22,667
(280,449)
(232,390)
513,256
496,814
K
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Total liabilities and stockholders' equity
$
945,412 $
876,425
See accompanying notes to the consolidated financial statements.
69
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars and shares in thousands, except per share amounts)
REVENUES
Rental income
Other operating interest
EXPENSES
Property operating
General and administrative
Depreciation and amortization
OTHER INCOME (EXPENSE)
Gain on sale of real estate
Impairment of real estate asset
Interest expense
Deferred income tax expense
Interest and other income, net
Year Ended December 31,
2023
2022
2021
$
108,682 $
94,103 $
87,661
4,163
112,845
3,576
97,679
2,918
90,579
20,713
27,338
39,693
87,744
16,636
14,837
32,339
63,812
15,158
12,113
30,401
57,672
—
(102)
—
—
237
—
(17,792)
(11,873)
(10,542)
(306)
813
(41)
66
(167)
57
(17,387)
(11,848)
(10,415)
NET INCOME
$
7,714 $
22,019 $
22,492
NET INCOME PER COMMON SHARE
Net Income per common share - Basic
Net Income per common share - Diluted
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-
DILUTED
DIVIDENDS DECLARED, PER COMMON SHARE, DURING THE
PERIOD
$
$
0.20 $
0.20 $
0.81 $
0.81 $
25,202
23,631
0.87
0.87
23,263
25,202
23,631
23,263
$
1.805 $
1.765
1.725
See accompanying notes to the consolidated financial statements.
70
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Year Ended December 31,
2023
2022
2021
NET INCOME
$
7,714 $
22,019 $ 22,492
Other comprehensive (loss) income:
Increase in fair value of cash flow hedges
Reclassification of amounts recognized as interest expense
Total other comprehensive (loss) income
COMPREHENSIVE INCOME
3,803
27,380
(10,053)
267
(6,250)
27,647
2,410
4,456
6,866
$
1,464 $
49,666 $ 29,358
See accompanying notes to the consolidated financial statements.
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72
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the Year Ended December 31,
2022
2021
2023
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
7,714 $
22,019 $
22,492
Depreciation and amortization
Other amortization
Stock-based compensation
Accelerated amortization of stock-based compensation
Straight-line rent receivables
Impairment of real estate asset
Gain on sale of real estate
Net gain from insurance recovery on casualty loss
Deferred income tax expense
Changes in operating assets and liabilities:
Other assets
Accounts payable and accrued liabilities
Other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Acquisitions of real estate
Proceeds from the sale of real estate
Funding of notes receivable
Proceeds from repayments on notes receivable
Insurance proceeds from casualty loss
Capital expenditures on existing real estate properties
Net cash used in investing activities
FINANCING ACTIVITIES
Net borrowings (repayments) on revolving credit facility
Term loan borrowings
Term loan repayments
Mortgage note repayments
Dividends paid
Proceeds from issuance of common stock
Taxes paid on behalf of employees and shares withheld upon shares vesting
Equity issuance costs
Debt issuance costs
Net cash provided by financing activities
(Decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
$
$
39,693
746
8,166
11,799
(3,052)
102
—
(706)
306
(2,950)
859
(1,294)
61,383
(98,897)
—
(1,985)
3,915
2,273
(18,981)
(113,675)
50,000
—
—
(126)
(48,059)
44,232
(963)
(227)
—
44,857
(7,435) $
12,068
32,339
853
9,415
—
(3,444)
—
—
—
41
(1,783)
1,419
(579)
60,280
(96,691)
—
(9,705)
3,000
—
(10,376)
(113,772)
(12,000)
150,000
(50,000)
(130)
(44,485)
20,544
—
(392)
(844)
62,693
9,201 $
2,867
30,401
824
7,164
—
(3,569)
—
(237)
—
167
(1,285)
(438)
829
56,348
(88,099)
1,263
(14,350)
3,978
—
(7,219)
(104,427)
(21,000)
125,000
(50,000)
(104)
(42,406)
38,426
—
(216)
(1,646)
48,054
(25)
2,892
4,633 $
12,068 $
2,867
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For the Year Ended December 31,
2022
2021
2023
Supplemental Cash Flow Information:
Interest paid
Invoices accrued for construction, tenant improvement and other capitalized costs
Reclassification of registration statement costs incurred in prior year to equity
issuance costs
Increase in fair value of cash flow hedges
Capitalized interest
$
$
$
$
$
17,114 $
3,940 $
11,237 $
4,359 $
197 $
3,803 $
611 $
362 $
27,380 $
672 $
9,972
2,382
346
2,410
279
See accompanying notes to the consolidated financial statements.
74
COMMUNITY HEALTHCARE TRUST INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023
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
December 31, 2023, we had gross investments of approximately $1.1 billion in 193 real estate properties (including
a portion of one property accounted for as a sales-type lease with a gross amount totaling approximately $3.0 million
and two properties classified as held for sale with an aggregate amount totaling approximately $7.5 million). The
properties are located in 34 states, totaling approximately 4.3 million square feet in the aggregate and were
approximately 91.1% leased, excluding real estate assets held for sale, at December 31, 2023 with a weighted
average remaining lease term of approximately 6.9 years. Any references to square footage, property count, or
occupancy percentages, and any amounts derived from these values in these notes to the consolidated financial
statements are unaudited.
Principles of Consolidation
Our Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, and
may also include joint ventures, partnerships and variable interest entities, or VIEs, where the Company controls the
operating activities. Management must make judgments regarding the Company's level of influence or control over
an entity and whether or not the Company is the primary beneficiary of a VIE. Consideration of various factors
include, but is not limited to, the Company's ability to direct the activities that most significantly impact the entity's
governing body, the size and seniority of the Company's investment, and the Company's ability to replace the
manager and/or liquidate the entity. Management's ability to correctly assess its influence or control over an entity
when determining the primary beneficiary of a VIE affects the presentation of these entities in the Company's
Consolidated Financial Statements. If it is determined that the Company is the primary beneficiary of a VIE, the
Company's Consolidated Financial Statements would consolidate the VIE rather than the Company's pro rata results
of its variable interest in the VIE. Untimely or inaccurate financial information provided to the Company or
deficiencies in the VIE's internal control over financial reporting could impact the Company's Consolidated
Financial Statements and its own internal control over financial reporting. See Note 10 – Other Assets, net regarding
VIEs identified by the Company related to its notes receivable.
All material intercompany accounts, transactions, and balances have been eliminated in the presentation of the
Company's Consolidated Financial Statements.
Use of Estimates in the Consolidated Financial Statements
Preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make
estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying
notes, including, among others, estimates related to impairment assessments, purchase price allocations, valuation of
properties held for sale, and valuation of financial instruments. Actual results may materially differ from those
estimates.
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Segment Reporting
The Company acquires and owns, or finances, healthcare-related real estate properties that are leased to hospitals,
doctors, healthcare systems or other healthcare service providers. The Company is managed as one reporting unit,
rather than multiple reporting units, for internal reporting purposes and for internal decision-making. Therefore, the
Company discloses its operating results in a single segment.
75
Notes to Consolidated Financial Statements - Continued
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents includes short-term investments with original maturities of three months or less when
purchased. Restricted cash consists of amounts held by the lender of our mortgage note payable to provide for future
real estate tax, insurance expenditures and tenant improvements related to one property. The carrying amount
approximates fair value due to the short-term maturity of these investments. The following table provides a
reconciliation of cash and cash equivalents and restricted cash reported within the Company's Consolidated Balance
Sheets and Consolidated Statements of Cash Flows:
(Dollars in thousands)
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash
Real Estate Properties
December 31,
2023
2022
3,491
$
11,233
1,142
835
4,633
$
12,068
$
$
Real estate property acquisitions are accounted for as a business combination or an asset acquisition. An acquisition
accounted for as a business combination is recorded at fair value and related closing costs are expensed as incurred.
An acquisition accounted for as an asset acquisition is recorded at its purchase price, inclusive of acquisition costs,
which is allocated among the acquired assets and assumed liabilities based upon their relative fair values at the date
of acquisition. The Company expects that substantially all of its acquisitions will be accounted for as asset
acquisitions.
The allocation of real estate property acquisitions may include land and land improvements, building and building
improvements, and identified intangible assets and liabilities ( which can include above- and below-market leases,
in-place leases, and tenant relationships) based on the evaluation of information and estimates available at that date,
and we allocate the purchase price based on these assessments. We make estimates of the acquisition date fair value
of the acquired tangible and intangible assets and assumed liabilities using information obtained from multiple
sources as a result of pre-acquisition due diligence, tax records, and other sources, including third-party valuations.
Based on these estimates, we recognize the acquired assets and assumed liabilities at their relative fair values for
asset acquisitions. The fair value of tangible property assets acquired considers the value of the property as if vacant
determined by a combination of comparable sales, replacement cost, income valuation approach and other relevant
data. The determination of fair value involves the use of significant judgment and estimation. We value land based
on various inputs, which may include internal analysis of recently acquired properties, existing comparable
properties within our portfolio, or third party appraisals or valuations based on comparable sales.
In recognizing identified intangible assets and liabilities of an acquired property, the value of above- or below-
market leases is estimated based on the present value (using a discount rate which reflects the risks associated with
the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and an
estimate of market lease rates measured over the remaining term of the lease. In the case of a below-market lease,
renewal options associated with that lease are evaluated to determine if the intangible should include those periods.
The capitalized above-market or below-market lease intangibles are amortized as a reduction from or an addition to
rental income over the estimated remaining term of the respective leases.
In determining the value of in-place leases and tenant improvements, current market conditions and costs to execute
similar leases to arrive at an estimate of the carrying costs during the expected lease-up period from vacant to
existing occupancy are considered. Estimated carrying costs include real estate taxes, insurance, other property
operating expenses, estimates of lost rental revenue during the expected lease-up periods, and costs to execute
similar leases, including leasing commissions. The values assigned to in-place leases and tenant relationships are
amortized over the estimated remaining term of the lease. If a lease terminates prior to its scheduled expiration, all
unamortized costs related to that lease are written off.
76
Notes to Consolidated Financial Statements - Continued
The Company may capitalize direct costs, including costs such as construction costs and professional services, and
indirect costs, including capitalized interest and overhead costs, associated with the development and construction of
real estate assets while substantive activities are ongoing to prepare the assets for their intended use. Capitalized
interest cost is calculated using the weighted average interest rate of the revolving credit facility debt.
Long-lived Asset Impairments
The Company assesses the potential for impairment of identifiable, definite-lived, intangible assets and long-lived
assets, including real estate properties, whenever events occur or a change in circumstances indicates that the
carrying value might not be fully recoverable. Indicators of impairment may include significant under-performance
of an asset relative to historical or expected operating results; significant changes in the Company’s use of assets or
the strategy for its overall business; plans to sell an asset before its depreciable life has ended; the expiration of a
significant portion of leases in a property; or significant negative economic trends or negative industry trends for the
Company or its operators. In addition, the Company’s review for possible impairment may include those assets
subject to purchase options and those impacted by casualties, such as tornadoes and hurricanes or sustained changes
to property occupancy. A long-lived asset is tested for impairment when management's estimate of current and
projected, undiscounted and unleveraged, operating cash flows of the property is less than the net carrying value of
the property. In determining these cash flows, the Company estimates market rent, capitalization rates, expected
holding periods, and other relevant inputs. If management determines that the carrying value of the Company’s
assets may not be fully recoverable based on the existence of any of the factors above, or others, management would
measure and record an impairment charge based on the estimated fair value of the property or the estimated fair
value less costs to sell the property. During the year ended December 31, 2023, the Company recorded an
impairment on an asset held for sale totaling approximately $0.1 million. No impairments on long-lived assets were
recorded during the year ended December 31, 2022 or 2021.
Assets Held for Sale
The Company may sell properties from time to time for various reasons, including the exercise of purchase options
by our tenants. The Company classifies long-lived assets as held for sale once certain criteria have been met. The
Company classifies a real estate property, or portfolio, as held for sale when: (i) management has approved the
disposal, (ii) the property is available for sale in its present condition, (iii) an active program to locate a buyer has
been initiated, (iv) it is probable that the property will be disposed of within one year, (v) the property is being
marketed at a reasonable price relative to its fair value, and (vi) it is unlikely that the disposal plan will significantly
change or be withdrawn. Following the classification of a property as “held for sale,” no further depreciation or
amortization is recorded on the assets and the assets are recorded at the lower of carrying value or fair market value,
less cost to sell. The Company had two properties classified as held for sale at December 31, 2023. There were no
properties classified as held for sale at December 31, 2022.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly
transaction between market participants. In calculating fair value, a company must maximize the use of observable
market inputs, minimize the use of unobservable market inputs and disclose in the form of an outlined hierarchy the
details of such fair value measurements.
A hierarchy of valuation techniques is defined to determine whether the inputs to a fair value measurement are
considered to be observable or unobservable in a marketplace. Observable inputs reflect market data obtained from
independent sources, while unobservable inputs reflect the Company’s market assumptions. This hierarchy requires
the use of observable market data when available. These inputs have created the following fair value hierarchy:
•
•
Level 1 – quoted prices for identical instruments in active markets.
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which significant inputs and
significant value drivers are observable in active markets; and
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Notes to Consolidated Financial Statements - Continued
•
Level 3 – fair value measurements derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
Our interest rate swaps are valued in the market using discounted cash flow techniques. These techniques
incorporate Level 1 and 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.
Lease Accounting
As a lessor, we make a determination with respect to each of our leases whether they should be accounted for as
sales-type, direct-financing, or operating lease. Additionally, for each of our real estate transactions involving the
leaseback of the related property to the seller or affiliates of the seller, we determine whether these transactions
qualify as sale and leaseback transactions under the accounting guidance in Accounting Standards Codification
("ASC") 842, Leases. For these transactions, we consider various inputs and assumptions including, but not
necessarily limited to, lease terms, renewal options, discount rates, and other rights and provisions in the purchase
and sale agreement, lease and other documentation to determine whether control has been transferred to the
Company or remains with the lessee. A transaction involving a sale leaseback will be treated as a purchase of a real
estate property if it is considered to transfer control of the underlying asset from the lessee to the Company. Criteria
in determining the lease classification includes estimates and assumptions regarding the fair value of the leased
facilities, minimum lease payments, effective cost of funds, the economic useful life of the facilities, the existence of
a purchase option, and certain other terms in the lease agreements, as well as the amounts we expect to derive from
the underlying property at the end of each lease which equals our purchase price. The lease accounting guidance
requires that a sale leaseback with an option to purchase the property from the landlord at the tenant's option be
accounted for as a financing or sales-type lease. We expect that most of our leases will be accounted for as operating
leases. The Company has a portion of one property accounted for as a sales-type lease at December 31, 2023 and
2022 included in other assets on the Consolidated Balance Sheets.
Payments received under operating leases are accounted for in the Consolidated Statements of Income as rental
income for actual cash rent collected plus or minus straight-line adjustments, such as lease escalators. The Company
has elected not to separate lease and nonlease components, such as common area maintenance, unless certain
conditions are not met. As such, tenant reimbursements are combined with rental income on the Consolidated
Statements of Income.
The Company is the lessee under four non-prepaid ground leases accounted for as operating leases and two non-
prepaid ground lease accounted for as financing leases. The Company has elected not to separate lease and nonlease
components, such as common area maintenance, unless certain conditions are not met. Discount rates are determined
using Company specific incremental borrowing rates, which represent the rate of interest that it would pay to borrow
on a fully collateralized basis over a similar term. Right-of-use lease assets are included in other assets, net and lease
liabilities are included in other liabilities, net on the Company's Consolidated Balance Sheets.
Revenue Recognition
The primary source of revenue for the Company is generated through its leasing arrangements with its tenants which
is accounted for under ASC Topic 842, or through notes with its borrowers which is covered under ASC 310. The
Company's rental income and interest income are recognized based on contractual arrangements with its tenants and
borrowers. From the inception of a lease, if collection of substantially all of the lease payments is probable for a
tenant, then rental income is recognized as earned over the life of the lease agreement on a straight-line basis.
Recognizing rental revenue on a straight-line basis for leases may result in recognizing revenue in amounts more or
less than amounts currently due from tenants. If management determines that collection of substantially all of a
lease’s payments is not probable, it will revert to recognizing such lease payments at the lesser of cash collected,
lease income reflected on a straight-line basis, or another systematic basis plus variable rent when it becomes
accruable and will reverse any recorded receivables related to that lease. In the event that management subsequently
determines collection of substantially all of that lease’s receivable is probable, management will reinstate and record
78
Notes to Consolidated Financial Statements - Continued
all such receivables for the lease in accordance with the lease terms. The Company maintains a general allowance
for its lease receivables that the Company has determined are probable of collection. During December 31, 2023 and
2022, the Company had a general allowance for lease receivables of $0.3 million and $0.1 million, respectively.
The Company recognizes operating expense recoveries in the period that applicable expenses are incurred. Other
variable payments, such as late fees and sales tax are recognized based on the contractual terms of its leases. Income
received but not yet earned is deferred until such time it is earned.
Allowance for Credit Losses
Credit losses on financial instruments are measured using an expected credit loss ("CECL") model in evaluating the
collectability of notes receivable and other financial instruments. The CECL impairment model requires an estimate
of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future
economic conditions in addition to information about past events and current conditions. Under the CECL model,
the Company will estimate credit losses over the entire contractual term of the instrument from the date of initial
recognition of that instrument and is required to record a credit loss expense (or reversal) in each reporting period.
The Company evaluates factors such as its historical credit loss experience with the borrower or similar financial
assets, current economic conditions, current and expected future financial condition of the borrower as well as
payment history of the borrower, along with other relevant factors for each borrower or similar instruments. At
December 31, 2023 and 2022, the Company did not have any material expected credit losses and, therefore, did not
record any credit losses.
Stock-Based Compensation
The Company's 2014 Incentive Plan, as amended (the "2014 Incentive Plan") is intended to attract and retain
qualified persons upon whom, in large measure, our sustained progress, growth and profitability depend, to motivate
the participants to achieve long-term company goals and to more closely align the participants’ interests with those
of our other stockholders by providing them with a proprietary interest in our growth and performance. The three
distinct programs under the 2014 Incentive Plan are the Second Amended and Restated Alignment of Interest
Program, the Second Amended and Restated Executive Officer Incentive Program and the Amended and Restated
Non-Executive Officer Incentive Program. Our executive officers, officers, employees, consultants and non-
employee directors are eligible to participate in the 2014 Incentive Plan. The 2014 Incentive Plan increases, on an
annual basis, the number of shares of common stock available for issuance to an amount equal to 7% of the total
number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year.
The 2014 Incentive Plan is administered by the Company’s compensation committee, which interprets the 2014
Incentive Plan and has broad discretion to select the eligible persons to whom awards will be granted, as well as the
type, size and terms and conditions of each award, including the number of shares subject to awards and the
expiration date of, and the vesting schedule or other restrictions (including, without limitation, restrictive covenants)
applicable to, awards. The Company recognizes share-based payments to its directors and employees in its
Consolidated Statements of Income on a straight-line basis over the shorter of the requisite service period, retirement
eligibility date, or other period as deemed appropriate based on the fair value of the award on the grant date. In the
event of a forfeiture, the previously recognized expense would be reversed. The Company amended its 2014
Incentive Plan and certain of its compensation programs in January 2024. See Note 16 – Subsequent Events.
Intangible Assets
Intangible assets with finite lives are amortized over their respective lives to their estimated residual values and are
reviewed for impairment only when impairment indicators are present. Identifiable intangible assets of the Company
are generally comprised of in-place and above-market lease intangible assets and below-market lease intangible
liabilities, as well as deferred financing costs. In-place lease intangible assets are amortized to depreciation expense
on a straight-line basis over the applicable lives of the leases. Above- and below-market lease intangibles are
amortized to rental income on a straight-line basis over the applicable lives of the leases. Deferred financing costs
are amortized to interest expense over the term of the related credit facility or other debt instrument using the
straight-line method, which approximates amortization under the effective interest method.
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Notes to Consolidated Financial Statements - Continued
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.
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. See further discussion in Note 15 – Other Data.
The Company classifies interest and penalties related to uncertain tax positions, if any, in the Consolidated
Statements of Income as a component of general and administrative expenses. No such amounts were recognized
during 2023, 2022 or 2021.
The Company is subject to audit by the Internal Revenue Service and by state taxing authorities for the years ended
December 31, 2022, 2021, and 2020.
Sales and Use Taxes
The Company must pay sales and use taxes to certain state tax authorities based on rental income collected from
tenants in properties located in those states. The Company is generally reimbursed for those taxes by those tenants.
The Company accounts for the payments to the taxing authority and subsequent reimbursement from the tenant on a
net basis, included in rental income on the Company’s Consolidated Statements of Income.
Concentration of Credit Risks
Our credit risks primarily relate to cash and cash equivalents, mortgage notes, if any, other notes receivable and our
interest rate swaps, which are discussed below. Cash and cash equivalents are primarily held in bank accounts and
overnight investments. We maintain our bank deposit accounts with large financial institutions in amounts that often
exceed federally-insured limits. We have not experienced any losses in such accounts.
Derivative Financial Instruments
In the normal course of business, we are subject to risk from adverse fluctuations in interest rates. We have chosen
to manage this risk through the use of derivative financial instruments, primarily with interest rate swaps.
Counterparties to these contracts are major financial institutions. We are exposed to credit loss in the event of
nonperformance by these counterparties. We do not use derivative instruments for trading or speculative purposes.
Our objective in managing exposure to market risk is to limit the impact on cash flows relating to interest payments
on the Company's variable rate debt. To qualify for hedge accounting, our interest rate swaps must effectively
reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging
relationship, the underlying transaction or transactions must be, and are expected to remain, probable of occurring in
accordance with our related assertions. All of our hedges are cash flow hedges and are recognized at their fair value
in the Consolidated Balance Sheets. Changes in the fair value of the derivatives are recognized in accumulated other
comprehensive income.
Earnings per Share
Basic earnings per common share is computed by dividing net income by the weighted average common shares
outstanding less issued and outstanding non-vested shares of common stock. Diluted earnings per common share is
calculated by including the effect of dilutive securities.
Our unvested restricted common stock outstanding contains non-forfeitable rights to dividends, and accordingly,
these awards are deemed to be participating securities. These participating securities, under the 2-class method, are
excluded in the earnings allocation in computing both basic and diluted earnings per common share.
80
Notes to Consolidated Financial Statements - Continued
NOTE 2. REAL ESTATE INVESTMENTS
As of December 31, 2023, we had gross real estate investments of approximately $1.1 billion in 193 real estate
properties (including 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 on the Consolidated Balance Sheets, and two properties
classified as held for sale with an aggregate amount totaling approximately $7.5 million). The Company's real estate
investments are diversified by property type, geographic location, and tenant as shown in the following tables.
Property Type
Medical Office Building
Inpatient Rehabilitation Hospitals
Acute Inpatient Behavioral
Specialty Centers
Physician Clinics
Surgical Centers and Hospitals
Behavioral Specialty Facilities
Long-term Acute Care Hospitals
Total
State
Texas
Illinois
Ohio
Florida
Pennsylvania
All Others
Total
Primary Tenant
Lifepoint Health
US HealthVest
All Others (less than 4%)
Total
# of Properties
Gross Investment
(in thousands)
93
8
5
37
30
10
9
1
193
# of Properties
17
18
26
25
15
92
193
# of Properties
6
3
184
193
$
$
$
$
$
$
436,962
174,772
130,528
117,718
87,311
53,449
45,051
14,937
1,060,728
Gross Investment
(in thousands)
162,706
131,416
113,837
108,631
58,458
485,680
1,060,728
Gross Investment
(in thousands)
105,895
77,964
876,869
1,060,728
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Notes to Consolidated Financial Statements - Continued
Depreciation and amortization expense was $39.7 million, $32.3 million and $30.4 million, respectively, for the
years ended December 31, 2023, 2022 and 2021, which is included on the Company's Consolidated Statements of
Income. Depreciation and amortization is recognized on a straight-line basis over the estimated useful lives of the
assets. The estimated useful lives of our real estate properties at December 31, 2023 are as follows:
Land improvements
Buildings
Building improvements
Tenant improvements
Lease intangibles
Personal property
GenesisCare Bankruptcy
1 - 20 years
7 - 50 years
4.4 - 39.8 years
1.4 - 15.1 years
0.8 - 13.7 years
3 -10 years
On June 1, 2023, GenesisCare and certain of its affiliates ("GenesisCare") filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. During the second quarter of 2023, the U.S.
Bankruptcy Court for the Southern District of Texas approved GenesisCare’s request to reject a lease of
approximately 11,000 square feet with CHCT North Carolina, LLC, a subsidiary of the Company and during the
third quarter of 2023, GenesisCare's request to reject an additional unexpired real property lease of approximately
46,000 square feet with CHCT Florida, LLC, a subsidiary of the Company, was approved.
After rejecting the two leases noted above, GenesisCare was the sole tenant in five of our properties and a tenant in
two of our multi-tenanted properties, representing approximately 1.9% of our gross real estate properties, or
approximately 62,000 square feet. On November 22, 2023, the U.S. Bankruptcy Court approved GenesisCare's
disclosure statement and plan of reorganization. As part of their plan of reorganization, GenesisCare is expected to
assume or assign to buyers all of the Company's remaining leases with no material changes to the lease terms. The
effective date of the plan of reorganization is expected to be during the first quarter of 2024; however, GenesisCare
already closed on the assignment of two of the Company's leases during January 2024 with two separate buyers.
GenesisCare has met substantially all of its lease payment obligations due to the Company through February 2024.
The Company has engaged counsel to monitor the GenesisCare bankruptcy progress and any additional potential
impacts to the Company.
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 taxes (including property taxes), insurance, maintenance and other operating costs associated with the leased
property. The real estate properties were 91.1% leased, excluding real estate assets held for sale, at December 31,
2023 with a weighted average remaining lease term of approximately 6.9 years.
82
Notes to Consolidated Financial Statements - Continued
Future Minimum Lease Payments
Future minimum lease payments under the non-cancelable operating leases due the Company for the years ending
December 31, as of December 31, 2023, are as follows (in thousands):
2024
2025
2026
2027
2028
2029 and thereafter
$
$
95,134
88,670
78,548
71,150
66,347
340,896
740,745
Customer Concentrations
The Company's real estate portfolio is leased to a diverse tenant base. See Note 2 – Real Estate Investments. For the
years ended December 31, 2023, 2022 and 2021, the Company had no customers that accounted for more than 10%
of its consolidated total revenues.
Geographic Concentrations
The Company's portfolio was located in 34 states at December 31, 2023. For the year ended December 31, 2023,
39.9% of our consolidated rental income was derived from properties located in Texas (15.3%), Ohio (13.2%), and
Illinois (11.4%). For the year ended December 31, 2022, 42.0% of our consolidated rental income was derived from
properties located in Texas (16.4%), Ohio (12.9%) and Illinois (12.7%). For the year ended December 31, 2021,
29.5% of our consolidated rental income was derived from properties located in Texas (16.1%) and Illinois (13.4%).
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.
Since the Company's initial public offering, two of the Company's tenants have exercised their purchase option.
These two properties were sold in 2018 and 2021. Related to the sale of the building in 2021, the Company recorded
a gain of approximately $0.2 million.
The Company had an aggregate gross investment of approximately $37.2 million in ten real estate properties as of
December 31, 2023 that were subject to exercisable purchase options.
Straight-line rental income
Rental income is recognized as earned over the life of the lease agreement on a straight-line basis when collection of
rental payments over the term of the lease is probable. Straight-line rent included in rental income was
approximately $3.1 million, $3.4 million, and $3.6 million, respectively, for the years ended December 31, 2023,
2022 and 2021.
Prepaid rent
Income received but not yet earned is deferred until such time it is earned. Prepaid rent, included in other liabilities,
net on the Consolidated Balance Sheets, was approximately $5.2 million and $3.9 million, respectively, at December
31, 2023 and 2022.
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Notes to Consolidated Financial Statements - Continued
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 Consolidated Balance Sheet. Future lease
payments due to the Company under this lease for the years ending December 31, as of December 31, 2023, are as
follows (in thousands):
2024
2025
2026
2027
2028
2029 and thereafter
Total undiscounted lease receivable
Discount
Lease receivable
$
$
346
356
367
378
389
4,821
6,657
(3,629)
3,028
During the year ended December 31, 2023, the Company recognized interest income of approximately $0.3 million
related to this lease which is included in other operating interest on the Company's Consolidated Statement of
Income.
Lessee Accounting
At December 31, 2023, the Company was obligated, as the lessee, under four non-prepaid ground leases accounted
for as operating leases with expiration dates through 2076, including renewal options, and two non-prepaid ground
lease accounted for as a financing lease with an expiration date through 2109, 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
2024
2025
2026
2027
2028
2029 and thereafter
Total undiscounted lease payments
Discount
Lease liabilities
$
$
43 $
44
44
45
46
1,102
1,324
(549)
775 $
154
154
154
154
154
6,802
7,572
(4,295)
3,277
84
Notes to Consolidated Financial Statements - Continued
Other information regarding our ground leases are disclosed in the following tables.
(Dollars in thousands)
Operating lease costs:
Fixed rent expense
Financing lease costs:
Amortization of right of use asset
Interest expense
Net lease costs
Net lease costs and location in the accompanying consolidated
statements of income:
Property operating expense
Depreciation and amortization
Interest expense
Net lease costs
Cash paid for amounts included in the measurement of lease
liabilities:
Operating leases
Finance leases
Supplemental non-cash information on lease liabilities resulting
from obtaining right of use assets:
Right of use assets obtained in exchange for finance lease
obligations
$
$
$
$
$
$
$
For the Year Ended December 31,
2023
2022
2021
179 $
177 $
59
122
53
122
360 $
352 $
179 $
177 $
59
122
53
122
360 $
352 $
42 $
141
183 $
41 $
130
171 $
127
28
71
226
127
28
71
226
31
70
101
—
— $
728
728 $
1,898
1,898
Year Ended December 31,
2023
2022
Operating leases:
Weighted-average remaining lease term in years (including renewal options)
Weighted-average discount rate
Financing leases:
Weighted-average remaining lease term in years (including renewal options)
Weighted-average discount rate
35.1
4.0 %
39.8
4.2 %
36.3
4.0 %
40.8
4.2 %
K
-
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85
Notes to Consolidated Financial Statements - Continued
NOTE 4. REAL ESTATE ACQUISITIONS AND DISPOSITIONS
2023 Real Estate Acquisitions
During the year ended December 31, 2023, the Company acquired 19 real estate properties and one land parcel
adjacent to an existing property in our portfolio, in fourteen separate transactions, as detailed in the table below.
Upon acquisition, the properties were 99.2% leased in the aggregate with lease expirations through 2038. Amounts
recorded in revenues and net income for these properties were approximately $6.7 million and $2.0 million,
respectively, and transaction costs totaling approximately $1.6 million were capitalized for the year ended
December 31, 2023 relating to these property acquisitions.
Location
Property
Type (1)
Date
Acquired
Purchase
Price
(000's)
Cash
Consideration Real Estate Other (2)
(000's)
(000's)
(000's)
Square
Footage
(Unaudited)
LaGrange, GA
West Point, GA
Canton, OH
Scranton, PA
Scranton, PA
LaGrange, GA
LaGrange, GA
Lakeland, FL
Hermitage, PA
San Antonio, TX
Clinton, MD
Ft. Myers, FL
Ft. Myers, FL
Immokalee, FL
El Paso, TX
Beaver, PA
Westlake, OH
Newcastle, PA
Crystal Lake, IL
Crystal Lake, IL
MOB
MOB
MOB
MOB
MOB
MOB
MOB
Land
MOB
MOB
MOB
MOB
MOB
MOB
IRF
MOB
MOB
MOB
MOB
MOB
01/18/23 $
8,007 $
8,087 $
8,118 $
01/18/23
01/30/23
02/23/23
02/23/23
03/06/23
03/06/23
04/03/23
05/04/23
05/22/23
06/21/23
811
3,669
1,957
2,207
6,469
249
838
4,218
2,772
7,850
819
3,706
2,165
2,366
6,458
294
845
4,382
2,783
7,807
822
4,287
2,317
2,340
6,622
300
846
4,529
3,031
7,867
07/28/23
10,646
10,739
10,952
07/28/23
07/28/23
582
847
588
863
497
881
07/31/23
23,500
23,538
23,538
08/24/23
08/25/23
3,330
2,425
3,496
2,444
3,581
2,535
09/15/23
10,375
10,613
11,239
10/06/23
10/06/23
4,049
3,044
2,964
3,940
3,160
4,394
(31)
(3)
(581)
(152)
26
(164)
(6)
(1)
(147)
(248)
(60)
(213)
91
(18)
—
(85)
(91)
(626)
(196)
(454)
55,310
5,600
27,920
22,743
15,768
31,473
2,972
—
25,982
12,376
37,344
43,322
3,200
6,757
37,992
15,878
14,100
56,003
17,543
30,718
$
97,845 $
98,897 $ 101,856 $
(2,959)
463,001
(1) MOB - Medical Office Building; IRF - Inpatient Rehabilitation Facility
(2) Includes items including, but not limited to, other assets, liabilities assumed, and security deposits.
86
Notes to Consolidated Financial Statements - Continued
The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the
property acquisitions for the year ended December 31, 2023.
Land and land improvements
Building and building improvements
Intangibles:
At-market lease intangibles
Above-market lease intangibles
Below-market lease intangibles
Total intangibles
Accounts receivable and other assets acquired
Accounts payable, accrued liabilities and other liabilities acquired
Prorated rent, interest and operating expense reimbursement amounts collected
Estimated Fair
Value
(In thousands)
Weighted Average
Useful Life
(In years)
8.6
30.4
4.4
5.1
5.1
$
19,443
70,496
11,917
976
(3,135)
9,758
304
(798)
(306)
Total cash consideration
$
98,897
Assets Held for Sale
During 2023, the Company committed to plans to dispose of two properties with an aggregate carrying balance of
$7.5 million, consisting of $1.5 million of land and land improvements and $6.0 million of buildings and building
improvements, and classified those properties as Real estate properties held for sale on the Company's Consolidated
Balance Sheet.
•
•
In the second quarter of 2023, the Company committed to a plan to dispose of a property in Houston, Texas
with a carrying balance of $1.1 million at December 31, 2023. The Company had incurred property damage
due to vandalism at this property which was covered by our insurance policies. The Company estimated the
fair value of the damaged property and recorded a casualty loss for the difference between the estimated
fair value less costs to sell and the insurance proceeds received. The Company determined that the
estimated amount of casualty loss was approximately $1.6 million and received insurance proceeds totaling
$2.3 million, resulting in a net casualty gain of approximately $0.7 million which is included in Interest and
other income on the Consolidated Statements of Income. The Company had a contract to sell the property
and recorded a $0.1 million impairment on the property during the third quarter as the carrying value of the
property was less than the estimated fair value of the property less costs to sell. The contract to sell the
property was terminated during the fourth quarter of 2023, and the Company is continuing to market this
property for sale during the first half of 2024.
In the fourth quarter of 2023, the Company committed to a plan to dispose of a property in Ft. Myers,
Florida with a carrying balance of $6.4 million at December 31, 2023. The lease had been rejected during
the third quarter of 2023 by Genesis Care who filed a voluntary petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code in June 2023. The Company entered into a sales contract in January 2024
and estimated that, as of December 31, 2023, the sales price less estimated costs to sell exceeded the
carrying value of the property. The Company anticipates closing on the sale of this property during the
second or third quarter of 2024.
K
-
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1
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87
Notes to Consolidated Financial Statements - Continued
2022 Real Estate Acquisitions
During the year ended December 31, 2022, the Company acquired 18 real estate properties as detailed in the table
below. Upon acquisition, the properties were 98.9% leased in the aggregate with lease expirations through 2037.
Amounts recorded in revenues and net income for these properties were approximately $3.2 million and $1.9
million, respectively, and transaction costs totaling approximately $1.4 million were capitalized for the year ended
December 31, 2022 relating to these property acquisitions.
Location
Property
Type (1)
Date
Acquired
Purchase
Price
Cash
Consideration Real Estate Other (2)
Square
Footage
(000's)
(000's)
(000's)
(000's)
(Unaudited)
Toledo, OH
Fremont, NE
Cincinnati, OH
Marne, MI
Des Moines, IA
Brook Park, OH
Rockville, MD
Cape Coral, FL
Cape Coral, FL
Cape Coral, FL
Fort Myers, FL
Fort Myers, FL
Fort Myers, FL
Fort Myers, FL
Fort Myers, FL
Show Low, AZ
Show Low, AZ
Show Low, AZ
MOB
MOB
IRF
BSF
PC
MOB
MOB
03/09/22 $
2,606 $
2,621 $
2,735 $
03/09/22
3,232
3,224
3,443
05/12/22
23,500
22,826
23,558
09/01/22
13,238
12,986
13,415
09/20/22
11/21/22
4,272
2,200
4,313
2,187
3,818
2,256
12/12/22
13,937
14,180
14,133
SC
12/13/22
4,635
4,683
4,563
MOB
MOB
MOB
MOB
SC
SC
MOB
MOB
MOB
MOB
12/13/22
12/13/22
12/13/22
12/13/22
12/13/22
12/13/22
12/13/22
12/23/22
12/23/22
12/23/22
400
990
6,520
3,325
4,510
4,265
133
840
4,122
4,347
410
998
6,583
3,360
4,556
4,308
139
841
4,105
4,371
394
1,039
6,143
3,246
4,578
4,142
141
844
4,170
4,111
(114)
(219)
(732)
(429)
495
(69)
47
120
16
(41)
440
114
(22)
166
(2)
(3)
(65)
260
17,465
12,850
37,720
96,886
17,318
16,802
94,491
12,130
2,023
6,379
22,104
16,000
10,832
9,376
1,201
4,437
22,410
22,400
$
97,072 $
96,691 $
96,729 $
(38)
422,824
(1) PC - Physician Clinic; BSF - Behavioral Specialty Facility; IRF - Inpatient Rehabilitation Facility; MOB - Medical Office Building; SC -
Specialty Center
(2) Includes items including, but not limited to, other assets, above and below market intangibles, liabilities assumed, and security deposits.
88
Notes to Consolidated Financial Statements - Continued
The following table summarizes the estimated relative fair values of the assets acquired and liabilities assumed in the
property acquisitions for the year ended December 31, 2022.
Land and land improvements
Building and building improvements
Intangibles:
At-market lease intangibles
Above-market lease intangibles
Below-market lease intangibles
Total intangibles
Accounts receivable and other assets acquired
Accounts payable, accrued liabilities and other liabilities acquired
Financing right-of-use lease asset acquired
Financing lease liability acquired
Prorated rent, interest and operating expense reimbursement amounts collected
Total cash consideration
Estimated Fair
Value
(In thousands)
Weighted Average
Useful Life
(In years)
10.1
34.5
6.6
6.3
5.3
$
$
19,405
68,268
9,056
1,977
(649)
10,384
800
(2,015)
728
(308)
(571)
96,691
NOTE 5. DEBT, NET
The table below details the Company's debt, net as of December 31, 2023 and December 31, 2022.
(Dollars in thousands)
Credit Facility:
Revolving Credit Facility
A-3 Term Loan, net
A-4 Term Loan, net
A-5 Term Loan, net
Mortgage Note Payable, net
Credit Facility
Balance as of December 31,
2023
2022
Maturity
Dates
$
50,000 $
—
74,730
124,522
149,189
4,815
74,609
124,409
149,059
4,920
$
403,256 $
352,997
3/26
3/26
3/28
3/30
5/24
The Company's third amended and restated credit agreement, as amended (the "Credit Facility") is 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 provides for a $150.0 million revolving credit facility (the "Revolving Credit Facility") and
$350.0 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 of the Revolving Credit Facility, subject to the satisfaction
of certain conditions. The Term Loans include 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, 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, and a
seven-year and three-month term loan facility in the aggregate principal amount of $150.0 million (the "A-5 Term
Loan) which matures on March 14, 2030. Loans under the Credit Facility are interest only with principal amounts
due as of each facility's applicable maturity date.
K
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89
Notes to Consolidated Financial Statements - Continued
Amounts outstanding under the Revolving Credit Facility bear interest at a floating rate based on the Company's
option, on either: (i) adjusted term SOFR or adjusted daily simple SOFR 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 (7.06% at December 31, 2023). 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 $50.0
million outstanding under the Revolving Credit Facility with a borrowing capacity remaining of approximately
$100.0 million at December 31, 2023.
Amounts outstanding under the Term Loans bear interest at a floating rate that is based, at the Company's option, on
either (i) adjusted term SOFR or adjusted daily SOFR plus 1.65% to 2.30%, plus a simple SOFR adjustment equal to
0.10% per annum, or (ii) a base rate plus 0.65% 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 –
Derivative Financial Instruments for more details on the interest rate swaps. At December 31, 2023, the Company
had $350.0 million outstanding under the Term Loans which had a fixed weighted average interest rate under the
swaps of approximately 4.3%. In March 2024, two swaps will mature and will be replaced by two forward-starting
swaps currently in place and will increase the fixed weighted average interest rate under the swaps to approximately
4.4%. See Note 6 – Derivative Financial Instruments for more details on the interest rate swaps.
The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of
customary affirmative and negative covenants, including limitations with respect to liens, indebtedness,
distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial
maintenance covenants. The Company was in compliance with its financial covenants under its Credit Facility as of
December 31, 2023.
Mortgage Note Payable
In 2018, we acquired a building and assumed a $5.4 million mortgage note payable, secured by the building. The
building had a $7.2 million carrying value at December 31, 2023. The mortgage note amortizes monthly at a fixed
interest rate of 4.98% with a balloon payment upon maturity on May 1, 2024. Principal repayments due on the
mortgage note are approximately $4.8 million for the year ending December 31, 2024. The Company's unamortized
loan costs related to the mortgage note were approximately $6,000 and $27,000 at December 31, 2023 and 2022,
respectively.
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
90
Notes to Consolidated Financial Statements - Continued
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 December 31, 2023, the Company had seventeen outstanding interest rate derivatives that were designated as
cash flow hedges of interest rate risk for notional amounts totaling $350.0 million, which mature between 2024 and
2030, at the maturity dates of the associated term loans (see Note 5 – Debt, net for additional details). Two forward-
starting interest rate swaps for notional amounts totaling $50.0 million, will become effective March 29, 2024, when
two currently active swaps for notional amounts totaling $50.0 million mature.
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 Consolidated Balance Sheets as of December 31, 2023 and 2022.
Asset Derivatives Fair Value
at December 31,
Liability Derivatives Fair Value
at December 31,
(in thousands)
2023
2022
Balance Sheet
Classification
2023
2022
Balance Sheet
Classification
Interest rate swaps
$
16,417 $
22,667 Other assets, net
$
— $
— 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 income ("AOCI") and are subsequently reclassified to interest expense in the
period that the hedged forecasted transaction affects earnings.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are
made on the Company’s Term Loans. During the next twelve months, the Company estimates that an additional $8.4
million will be reclassified from AOCI as a decrease to interest expense.
Tabular Disclosure of the Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive 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 years ended December 31, 2023 and 2022.
(Dollars in thousands)
Amount of unrealized gain recognized in OCI on derivative
Amount of (gain) loss reclassified from AOCI into interest expense
Total interest expense presented in the Consolidated Statements of Income in which the
effects of the cash flow hedges are recorded
For the Year Ended December 31,
2023
2022
3,803 $
(10,053) $
27,380
267
17,792 $
11,873
$
$
$
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 December 31, 2023 and December 31, 2022. 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 Consolidated Balance Sheets.
Offsetting of Derivative Assets (as of December 31, 2023)
K
-
0
1
m
r
o
F
(in thousands)
Derivatives
Gross Amounts
of Recognized
Assets
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of
Assets in the
Consolidated
Balance Sheets
Financial
Instruments
Cash
Collateral
Received
Net Amount
$
16,417 $
— $
16,417 $
— $
— $
16,417
Gross Amounts Not Offset in the
Consolidated Balance Sheets
91
Notes to Consolidated Financial Statements - Continued
Offsetting of Derivative Liabilities (as of December 31, 2023)
(in thousands)
Derivatives
Gross Amounts
of Recognized
Liabilities
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of
Liabilities in the
Consolidated
Balance Sheets
Financial
Instruments
Cash
Collateral
Received
Net Amount
$
— $
— $
— $
— $
— $
—
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Offsetting of Derivative Assets (as of December 31, 2022)
(in thousands)
Derivatives
Gross Amounts
of Recognized
Assets
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of
Assets in the
Consolidated
Balance Sheets
Financial
Instruments
Cash
Collateral
Received
Net Amount
$
22,667 $
— $
22,667 $
— $
— $
22,667
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Offsetting of Derivative Liabilities (as of December 31, 2022)
(in thousands)
Derivatives
Gross Amounts
of Recognized
Liabilities
Gross Amounts
Offset in the
Consolidated
Balance Sheet
Net Amounts of
Liabilities in the
Consolidated
Balance Sheets
Financial
Instruments
Cash
Collateral
Received
Net Amount
$
— $
— $
— $
— $
— $
—
Gross Amounts Not Offset in the
Consolidated Balance Sheets
Credit-risk-related Contingent Features
As of December 31, 2023, the Company did not have any derivatives in a net liability position, and 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 years
ended December 31, 2023, 2022 and 2021:
(Amounts in thousands)
Balance, beginning of period
Issuance of common stock
Restricted stock issued
Restricted stock withheld and forfeited
Balance, end of period
ATM Program
For the Year Ended December 31,
2023
2022
2021
25,897
1,385
361
(30)
27,613
24,983
600
318
(4)
25,897
23,888
823
273
(1)
24,983
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, Fifth Third Securities, Inc., Janney Montgomery Scott LLC,
and Robert W. Baird & Co. Incorporated, as Sales Agents (each, an “Agent”, and, collectively, the “Agents”). Under
the ATM Program, the Company may issue and sell shares of its common stock, having an aggregate gross sales
92
Notes to Consolidated Financial Statements - Continued
price of up to $500.0 million, exclusive of shares of Common Stock sold under its prior agreements with our Agents.
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's activity under the ATM Program for the years ended December 31, 2023, 2022, and 2021 is detailed
in the table below. As of December 31, 2023, the Company had approximately $433.9 million remaining that may
be issued under the ATM Program.
(Shares in thousands, except per share amounts)
Shares issued
Net proceeds received (in millions)
Average gross sales price per share
Automatic Shelf Registration Statement
For the Year Ended December 31,
2023
2022
2021
1,385
$44.2
$32.56
600
$20.5
$34.94
823
$38.4
$47.68
On November 2, 2022, the Company filed an automatic shelf registration statement on Form S-3 with the SEC. 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.
Dividends Declared
During 2023, the Company declared and paid dividends totaling $1.805 per common share as shown in the table
below.
Declaration Date
February 9, 2023
April 27, 2023
July 27, 2023
October 26, 2023
Record Date
February 21, 2023
May 12, 2023
August 11, 2023
November 9, 2023
Date Paid
March 1, 2023
May 26, 2023
August 25, 2023
November 24, 2023
Amount Per Share
$0.4475
$0.4500
$0.4525
$0.4550
During 2022, the Company declared and paid dividends totaling $1.765 per common share as shown in the table
below.
Declaration Date
February 10, 2022
April 28, 2022
July 28, 2022
Record Date
February 22, 2022
May 13, 2022
August 12, 2022
Date Paid
March 1, 2022
May 27, 2022
August 26, 2022
October 27, 2022
November 10, 2022
November 25, 2022
Amount Per Share
$0.4375
$0.4400
$0.4425
$0.4450
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Notes to Consolidated Financial Statements - Continued
NOTE 8. INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted income per common share.
(Dollars and shares in thousands, except per share data)
Net income
Participating securities' share in earnings
Net income, less participating securities' share in earnings
Weighted Average Common Shares Outstanding
Weighted average common shares outstanding
Unvested restricted shares
Weighted average common shares outstanding–Basic
Weighted average common shares–Basic
Dilutive potential common shares
Weighted average common shares outstanding –Diluted
Basic Income per Common Share
Diluted Income per Common Share
NOTE 9. STOCK INCENTIVE PLANS
2014 Incentive Plan
Year Ended December 31,
2022
2021
2023
7,714
(2,619)
5,095
$
$
22,019 $
(2,847)
19,172 $
22,492
(2,314)
20,178
26,649
(1,447)
25,202
25,202
—
25,202
25,218
(1,587)
23,631
23,631
—
23,631
0.20
0.20
$
$
0.81 $
0.81 $
24,583
(1,320)
23,263
23,263
—
23,263
0.87
0.87
$
$
$
$
The 2014 Incentive Plan authorizes the Company to award shares equal to 7% of the total number of shares of the
Company’s common stock outstanding on December 31 of the immediately preceding year, or 1,812,822 shares of
common stock (the "Plan Pool"), for 2023, to its employees and directors. The 2014 Incentive Plan will continue
until terminated by the Company's Board of Directors (the "Board") or March 31, 2024. As of December 31, 2023,
the Company had issued a total of 1,497,205 restricted shares under the Incentive Pool for compensation-related
awards to its employees and directors, with 315,617 authorized shares remaining which had not been issued. Shares
issued under the 2014 Incentive Plan are generally subject to long-term, fixed vesting periods of 3 to 8 years. If an
employee or director voluntarily terminates his or her relationship with the Company or is terminated for cause
before the end of the vesting period, the shares are forfeited, at no cost to the Company. Once the shares have been
granted, the recipient of the shares has the right to receive dividends and the right to vote the shares.
Alignment of Interest Program
The Second Amended and Restated Alignment of Interest Program (the “Second Alignment of Interest Program”)
authorizes the Company to issue 1,000,000 shares of the Company’s common stock to its employees and directors in
lieu of the employee's or director's cash compensation (the "Program Pool"), at their election. As of December 31,
2023, the Company had issued a total of 666,335 restricted shares under the Program Pool in lieu of cash
compensation to its employees and directors, with 333,665 authorized shares remaining which had not been issued.
The Company's Second Alignment of Interest Program is designed to provide the Company's employees and
directors with an incentive to remain with the Company and to incentivize long-term growth and profitability. Under
the Second Alignment of Interest Program, employees may elect to defer up to 100% of their base salary and other
compensation and directors may elect to defer up to 100% of their director fee. The number of shares granted will be
increased through a Company match depending on the length of the vesting period selected by the employee or
director. Employees may select vesting periods of 3 years, 5 years, or 8 years, with a 30%, 50%, and 100%
Company match, respectively. Directors may select vesting periods of 1 year, 2 years, or 3 years, with a 20%, 40%,
or 60% Company match, respectively.
94
Notes to Consolidated Financial Statements - Continued
Officer Incentive Programs
The Company has a Second Amended and Restated Executive Officer Incentive Program and an Amended and
Restated Non-Executive Officer Incentive Program (the "Officer Incentive Programs") under the Incentive Plan
which are designed to provide incentives to the Company's officers that are designed to reward its officers for
individual, as well as Company performance in the form of cash or restricted stock. Company performance will be
based on performance targets, which may include targets such as funds from operations ("FFO"), dividend payout
percentages, as well as the Company's relative total stockholder return performance over three-year and five-year
periods, measured against the Company's peer group, as determined by the Company's Board of Directors each year.
The officers may elect, in the year prior to an award, to receive awards under the Officer Incentive Programs in cash
or restricted stock, as allowed within the applicable Officer Incentive Programs, as well as a vesting period as
discussed under the Second Alignment of Interest Program above. Shares of common stock issued under the Officer
Incentive Programs are issued under either the Plan Pool or Program Pool.
The 2014 Incentive Plan and certain of the programs discussed above were amended in January 2024. See Note 16 –
Subsequent Events.
Summary
A summary of the activity under the Incentive Plan and related information for the years ended December 31, 2023,
2022, and 2021 is included in the table below.
(dollars and shares in thousands, except per share amounts)
2023
2022
2021
Year Ended December 31,
96
177
273
(20)
(1)
1,416
31.04
48.48
26.52
49.81
33.89
Stock-based awards, beginning of year
Stock in lieu of compensation
Stock awards
Total Granted
Vested (1)
Forfeited
1,708
1,416
1,164
141
220
361
(692)
(3)
116
202
318
(22)
(4)
Stock-based awards, end of year
___________
(1) Vested shares for the twelve months ended December 31, 2023 included the accelerated vesting of 625 shares upon the
passing of our former CEO and President.
1,374
1,708
Weighted average grant date fair value, per share, of:
Stock-based awards, beginning of year
Stock-based awards granted during the year
Stock-based awards vested during the year
Stock-based awards forfeited during the year
Stock-based awards, end of year
Grant date fair value of shares granted during the year
$
$
$
$
$
$
37.43 $
36.78 $
35.38 $
43.83 $
36.45 $
33.89 $
41.45 $
23.54 $
41.87 $
37.43 $
13,220 $
13,232 $
13,251
The Company had nonvested stock-based compensation that had not yet been recognized of approximately $26.8
million and $33.7 million, respectively, at December 31, 2023 and 2022. The vesting periods for the non-vested
shares granted during 2023 ranged from 3 to 8 years with a weighted-average amortization period remaining as of
December 31, 2023 of approximately 5.82 years. Compensation expense recognized during the years ended
December 31, 2023, 2022, and 2021 from the amortization of the value of shares over the vesting period was
approximately $20.0 million, $9.4 million and $7.2 million, respectively, which are included in general and
administrative expenses on the consolidated statements of income.
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Accelerated Amortization and Vesting of Restricted Stock
The Company's former CEO and President, Timothy Wallace, passed away in March 2023. At the time of his
passing, Mr. Wallace had 624,725 shares of restricted stock that had not vested or been fully amortized. In
accordance with the terms of his employment agreement, the Company accelerated the vesting of these shares and
accelerated the unamortized remaining balance of deferred compensation related to these unvested shares,
recognizing an additional $11.8 million of amortization expense in 2023.
401(k) Plan
The Company maintains a 401(k) plan that allows eligible employees to defer salary, subject to certain limitations
imposed by the Internal Revenue Code. The Company provides a matching contribution of up to 3.5% of each
eligible employee’s salary, subject to certain limitations. The Company’s matching contributions were
approximately $0.2 million for the year ended December 31, 2023, and $0.1 million for each of the years ended
December 31, 2022 and 2021.
NOTE 10. OTHER ASSETS, NET
Other assets on the Company's Consolidated Balance Sheets as of December 31, 2023 and 2022 are detailed in the
table below.
(Dollars in thousands)
Notes receivable
Straight-line rent receivables
Fair value of interest rate swaps
Accounts receivable
Sales-type lessor receivable
Above-market intangible assets, net
Financing lease right-of-use assets
Leasing commissions, net
Prepaid assets
Operating lease right of use assets
Other
Deferred financing costs, net
Deferred tax asset
December 31,
2023
2022
$
30,775 $
18,481
16,417
4,645
3,028
2,645
2,486
2,312
1,203
729
684
471
—
32,705
15,429
22,667
2,679
3,035
2,399
2,545
1,848
980
759
496
683
306
$
83,876 $
86,531
The Company's notes receivable include the following notes receivable. Interest on these notes is included in Other
operating interest on the Company's Consolidated Statements of Income.
•
At December 31, 2023, notes receivable included a term loan with an original balance of $15.0 million,
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, which had a carrying value of $6.0 million at December 31, 2023, is
being repaid in equal monthly installments of $250,000 through the maturity date of December 31, 2025 and bears
interest at 9% per annum.
•
At December 31, 2023, notes receivable also included a $17.0 million term loan and a $5.4 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 March
96
Notes to Consolidated Financial Statements - Continued
31, 2024. The term loan facility matures on December 31, 2032. 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 3% non-cash interest that is due and payable upon the earlier of the repayment or
maturity of each note.
•
At December 31, 2023, notes receivable also included a $2.3 million revolving credit facility with a
borrower. The revolving credit facility will be repaid in equal monthly installments of $40,000 through the maturity
date of April 1, 2027. The revolving credit facility bears interest at 9% per annum, as well as 3% non-cash interest
that is due and payable upon the earlier of the repayment or maturity of the note.
The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management
determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through
related parties any material impact in the activities that impact the borrowers' economic performance. We are not
obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum
exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The
VIEs that we have identified at December 31, 2023 are summarized in the table below.
Classification
Note receivable (term loan)
Note receivable (term loan)
Note receivable (revolving credit facility)
Note receivable (revolving credit facility)
NOTE 11. OTHER LIABILITIES, NET
Carrying Amount
(in thousands)
Maximum Exposure
to Loss
(in thousands)
$6,000
$17,000
$5,435
$2,340
$6,000
$17,000
$5,435
$2,340
Other liabilities on the Company's Consolidated Balance Sheets as of December 31, 2023 and 2022 are detailed in
the table below.
(Dollars in thousands)
Prepaid rent
Security deposits
Below-market lease intangibles, net
Financing lease liability
Operating lease liability
Other
December 31,
2023
2022
$
5,378 $
3,765
3,188
3,277
775
485
3,853
5,766
1,075
3,279
786
478
$
16,868 $
15,237
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Notes to Consolidated Financial Statements - Continued
NOTE 12. INTANGIBLE ASSETS AND LIABILITIES
The Company has deferred financing costs and various real estate acquisition lease intangibles included in its
Consolidated Balance Sheets as of December 31, 2023 and 2022 as detailed in the table below. The Company did
not have any indefinite lived intangible assets or liabilities as of December 31, 2023 and 2022.
Gross Balance at
December 31,
Accumulated
Amortization at
December 31,
(Dollars in thousands)
2023
2022
2023
2022
Deferred financing costs-Revolving Credit Facility $ 3,042 $ 3,042 $ 2,571 $ 2,359
Deferred financing costs-Term Loans
2,551 2,551
Deferred financing costs-Mortgage Note Payable
108
108
993
101
Above-market lease intangibles
Below-market lease intangibles
At-market lease intangibles
Total intangibles
3,913 2,938 1,268
(5,521) (2,779) (2,333) (1,703)
102,870 93,618 74,865 66,320
$ 106,963 $ 99,478 $ 77,465 $ 68,223
Weighted
Average
Remaining
Life
(Years)
2.3
5.0
0.3
4.9
4.7
4.2
4.6
Balance Sheet
Classification
Other assets, net
Debt, net
Debt, net
Other assets, net
Other liabilities, net
Real estate properties
627
81
539
For the years ended December 31, 2023, 2022 and 2021, the Company recognized approximately $11.5 million, $9.0
million, and $9.4 million, respectively, of net intangible amortization expense. Net intangible amortization expense
for the year ended December 31, 2023 included the write-off of intangibles related to the two Genesis Care leases
rejected during 2023 totaling $1.5 million.
Expected future amortization, net, for the next five years of the Company's intangible assets and liabilities, in place
as of December 31, 2023 are included in the table below.
(in thousands)
2024
2025
2026
2027
2028
Amortization, net
$
$
$
$
$
9,891
7,968
4,718
2,322
1,516
NOTE 13. COMMITMENTS AND CONTINGENCIES
Tenant Improvements
The Company may provide tenant improvement allowances in new or renewal leases for the purpose of refurbishing
or renovating tenant space. The Company may also assume tenant improvement obligations included in leases
acquired in its real estate acquisitions. As of December 31, 2023 and 2022, the Company had approximately $10.9
million and $12.0 million, respectively, in commitments for tenant improvements. At December 31, 2023 six of
these projects, totaling $3.5 million, represented redevelopment projects of the buildings into different healthcare
uses backed by long term leases. At December 31, 2022 five of these projects, totaling $2.9 million, represented
redevelopment projects of the buildings into different healthcare uses backed by long term leases.
Capital Improvements
The Company has entered into contracts with various vendors for various capital improvement projects related to its
portfolio. As of December 31, 2023 and 2022, the Company had commitments of approximately $5.8 million and
$4.2 million, respectively, in commitments for capital improvement projects.
98
Notes to Consolidated Financial Statements - Continued
Legal Proceedings
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 Statements.
NOTE 14. 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 which are based on an assumed market rate
of interest 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. The fair value estimates were determined using Level 2 inputs.
Derivative financial instruments (Interest Rate Swaps) - The fair value is estimated using discounted cash flow
techniques. These techniques incorporate primarily Level 2 inputs. The market inputs are utilized in the discounted
cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant
inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as
Level 2 in the hierarchy.
Mortgage note payable - The fair value is estimated using cash flow analyses which are based on an assumed market
rate of interest or at a rate consistent with the rates on mortgage notes assumed by the Company and are classified as
Level 2 in the hierarchy.
The table below details the fair values and carrying values for our mortgage note and notes receivable and interest
rate swaps at December 31, 2023 and 2022 using Level 2 inputs.
December 31, 2023
December 31, 2022
Carrying Value
Fair Value
Carrying Value
Fair Value
$
$
$
30,775 $
16,417 $
4,821 $
31,199 $
16,417 $
4,791 $
32,705 $
22,667 $
4,947 $
32,716
22,667
4,761
(Dollars in thousands)
Notes receivable
Interest rate swap asset
Mortgage note payable
NOTE 15. OTHER DATA
Taxable Income
The Company has elected to be taxed as a REIT, as defined under the Code. To qualify as a REIT, the Company
must meet a number of organizational and operational requirements, including a requirement that it currently
distribute at least 90% of its taxable income to its stockholders. The Company has also elected that two of its
subsidiaries be treated as a TRS, which are subject to federal and state income taxes. All entities other than the TRS
subsidiaries are collectively referred to as "the REIT" within this Note 15 – Other Data.
The REIT generally will not be subject to federal income tax on taxable income it distributes currently to its
stockholders. Accordingly, no provision for federal income taxes for the REIT has been made in the accompanying
Consolidated Financial Statements; however, the Company may record income tax expense or benefit for its TRSs
to the extent applicable. If the REIT fails to qualify as a REIT for any taxable year, then it will be subject to federal
income taxes at regular corporate rates, including any applicable alternative minimum tax, and may not be able to
qualify as a REIT for four subsequent taxable years. Even if the REIT continues to qualify as a REIT, it may be
subject to certain state and local taxes on its income and property and to federal income and excise tax on its
undistributed taxable income.
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Notes to Consolidated Financial Statements - Continued
Income tax expense and state income tax payments, net of refunds, are as follows for the years ended December 31,
2023, 2022, and 2021.
(Dollars in thousands)
Current
Deferred
Total income tax expense
Income tax payments, net of refunds
Year Ended December 31,
2022
2021
2023
$
$
$
106 $
306
412 $
80 $
97 $
41
138 $
120 $
129
167
296
109
Income tax expense primarily relates to permanent differences between federal, state and local taxable income
resulting from certain state and local jurisdictions wholly or partially disallowing the deduction for dividends paid
allowed at the federal level and temporary differences resulting from the bases of assets and liabilities of the
Company's TRSs for financial reporting purposes and the bases of those assets and liabilities for income tax
purposes.
The tax effect of temporary differences included in the net deferred tax assets at December 31, 2023 and 2022 are as
follows:
(Dollars in thousands)
Deferred tax assets
Deferred stock-based compensation
Net operating losses
Depreciation and amortization
Prepaid expenses
Total deferred tax assets
Valuation allowance
Deferred tax assets, net
Deferred tax liabilities
Deferred administrative services fee
Other
Deferred tax liabilities
Net Deferred tax assets
December 31,
2023
2022
$
5,709 $
1,987
45
15
7,756
(2,141)
5,615
(5,613)
(2)
(5,615)
$
— $
7,008
1,349
35
22
8,414
(1,406)
7,008
(6,702)
—
(6,702)
306
The Company has federal net operating loss carryforwards in the aggregate amount of $0.3 million that expire in
2036 and 2037 and in the aggregate amount of $7.3 million that do not expire. Additionally, the Company has state
net operating loss carryforwards in the aggregate amount of $7.7 million that expire from 2031 to 2038.
100
Notes to Consolidated Financial Statements - Continued
The following table reconciles the Company’s net income to taxable income for the years ended December 31, 2023,
2022 and 2021.
(Dollars in thousands)
Net income
Reconciling items to taxable income:
Depreciation and amortization
Gain on sale of real estate
Straight-line rent
Receivable allowance
Stock-based compensation
Sec. 162(m) compensation disallowance
Deferred rent
Deferred income taxes
Other
Taxable income (1)
Dividends paid (2)
__________
(1) Before REIT dividends paid deduction.
(2) Net of dividends paid on restricted stock included as a reconciling item.
$
$
Year Ended December 31,
2022
2021
2023
$
7,714 $
22,019 $
22,492
15,773
(647)
(3,157)
250
(7,801)
22,199
1,351
306
(135)
28,139
35,853 $
45,439 $
11,493
—
(3,265)
—
5,681
—
61
41
(17)
13,994
36,013 $
41,642 $
11,121
36
(3,522)
(25)
3,872
—
1,196
166
(68)
12,776
35,268
40,092
Characterization of Distributions (unaudited)
Earnings and profits (as defined under the Code), the current and accumulated amounts of which determine the
taxability of distributions to stockholders, vary from net income attributable to common stockholders and taxable
income because of different depreciation recovery periods, depreciation methods, and other items. Distributions in
excess of earnings and profits generally constitute a return of capital. The following table shows the characterization
of the distributions on the Company's common stock for the years ended December 31, 2023, 2022 and 2021. No
preferred shares have been issued by the Company and no dividends have been paid to date relating to preferred
shares.
2023
2022
2021
Per Share
%
Per Share
%
Per Share
%
Common stock:
Ordinary income
Return of capital
Capital gain
Common stock distributions
$
$
$
$
1.569469
0.235531
—
1.805000
87.0 % $
13.0 % $
— % $
100.0 % $
1.575094
0.189906
—
1.765000
89.2 % $
10.8 % $
— % $
100.0 % $
1.537982
0.175047
0.011971
1.725000
89.2 %
10.1 %
0.7 %
100.0 %
NOTE 16. SUBSEQUENT EVENTS
Dividend Declared
On February 8, 2024, the Company’s Board of Directors declared a quarterly common stock dividend in the amount
of $0.4575 per share. The dividend is payable on March 1, 2024 to stockholders of record on February 20, 2024.
Subsequent Acquisition
Subsequent to December 31, 2023, the Company acquired one long term acute care hospital (LTACH) for a
purchase price of approximately $6.5 million and cash consideration of approximately $6.6 million. Upon
acquisition, the property was 100.0% leased with a lease expiration in 2039.
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101
Notes to Consolidated Financial Statements - Continued
Adoption of New 2024 Compensation Plans and RSU Issuances
On January 2, 2024, the Company's Board adopted a fourth amendment to the 2014 Incentive Plan to provide for the
award of restricted stock units ("RSUs").
The Board also approved and adopted the Third Amended and Restated Alignment of Interest Program (the “Third
Alignment of Interest Program”), which supersedes the Company’s Second Amended and Restated Alignment of
Interest Program. The Third Alignment of Interest Program implements (i) a maximum elective deferral percentage
amount of 50% of compensation allowed to be deferred and applied to the acquisition of restricted stock for certain
participants in the program who have written employment agreements (“Affected Participants”), and (ii) a limit on
the duration of the restriction period selected by the Affected Participants in relation to their Retirement Eligibility
(as defined in their employment agreements). The changes under the Third Alignment of Interest Program are
effective (i) beginning January 1, 2024 for salary and other compensation deferrals and (ii) starting with
performance periods commencing on and after July 1, 2024 for cash bonus deferrals.
Further, the Board approved and adopted the Third Amended and Restated Executive Officer Incentive Program (the
“Third Executive Officer Incentive Program”), which supersedes the Company’s Second Amended and Restated
Executive Officer Incentive Program (other than with respect to individual performance awards (“IPA”) and
company performance awards (“CPA”) for the performance period running from July 1, 2023 to June 30, 2024). The
Third Executive Officer Incentive Program provides for IPA, CPA, and three-year long term incentive plan
(“LTIP”) awards consisting of RSUs.
On January 4, 2024, the Company granted the following performance-based and time-based RSU's to its executive
officers under the Third Executive Officer Incentive Program:
Absolute TSR
Performance-based
RSUs (1)
Relative TSR
Performance-based
RSUs (1)
Time-based
RSUs (2)
Number of RSUs granted
__________
(1) The number of Performance-based RSUs granted were based on target levels. Actual number of shares granted will be based
on performance at the end of the performance period which is June 30, 2026.
(2) The number of Time-based RSUs granted were based on target levels. One-third of these RSUs will vest on each of June 30,
2024, 2025 and 2026.
56,561
43,433
33,623
Restricted Stock Issuances
On January 12, 2024, pursuant to the 2014 Incentive Plan and the Third Alignment of Interest Program, the
Company granted 79,533 shares of restricted common stock to its employees, in lieu of salary, that will cliff vest
between 3 and 8 years. Of the shares granted, 43,292 shares of restricted stock were granted in lieu of compensation
from the Program Pool and 36,241 shares of restricted stock were awards granted from the Plan Pool. Also, on
January 12, 2024, pursuant to the 2014 Incentive Plan and the Non-Executive Officer Incentive Program, the
Company granted 10,159 shares of restricted stock to certain employees that will cliff vest in 5 years.
102
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures designed to ensure that information required to be
disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These
disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the
information required to be disclosed is accumulated and communicated to management, including the principal
executive officer and principal financial officer, to allow for timely decisions regarding required disclosure.
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) under the Exchange Act) as of the end of the period covered by this
Annual Report on Form 10-K. Based on such 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 are effective.
Limitations on the Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that
there are resource constraints and that management is required to apply judgment in evaluating the benefits of
possible controls and procedures relative to their costs.
Changes in Internal Control over Financial Reporting
There have been 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 December 31, 2023 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management's Annual Report on Internal Control Over Financial Reporting
The management of Community Healthcare Trust Incorporated is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America. The Company’s internal control over
financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the United States of America, and that
receipts and expenditures of the Company are being made only in accordance with authorizations of management
and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
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inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December
31, 2023 using the principles and other criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on that assessment,
management concluded that the Company’s internal control over financial reporting was effective as of December
31, 2023. The Company’s independent registered public accounting firm, BDO USA, P.C., has also issued an
attestation report on the effectiveness of the Company’s internal control over financial reporting included herein.
104
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of
Stockholders and Board of Directors
Community Healthcare Trust Incorporated
Franklin, Tennessee
Opinion on Internal Control over Financial Reporting
We have audited Community Healthcare Trust Incorporated’s (the “Company’s”) internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related
consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the
three years in the period ended December 31, 2023, and the related notes and financial statement schedules and our
report dated February 13, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ BDO USA, P.C.
Nashville, Tennessee
February 13, 2024
ITEM 9B. OTHER INFORMATION
During the quarter ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the
Exchange Act) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading
arrangement (as such terms are defined in Item 408 of Regulation S-K).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
106
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item will be contained in the Company's Definitive Proxy Statement for its 2024
Annual Stockholders Meeting, to be filed with the SEC within 120 days after December 31, 2023, and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Company's Definitive Proxy Statement for its 2024
Annual Stockholders Meeting, to be filed with the SEC within 120 days after December 31, 2023, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The information required by this item will be contained in the Company's Definitive Proxy Statement for its 2024
Annual Stockholders Meeting, to be filed with the SEC within 120 days after December 31, 2023, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this items will be contained in the Company's Definitive Proxy Statement for its 2024
Annual Stockholders Meeting, to be filed with the SEC within 120 days after December 31, 2023, and is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this items will be contained in the Company's Definitive Proxy Statement for its 2024
Annual Stockholders Meeting, to be filed with the SEC within 120 days after December 31, 2023, and is
incorporated herein by reference.
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ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
PART IV.
The following documents of Community Healthcare Trust Incorporated are included in this Annual Report on Form
10-K.
(a) Financial Statements:
Report of Independent Registered Public Accounting Firm (BDO USA, P.C., Nashville, TN, PCAOB ID#243)
Consolidated Balance Sheets at December 31, 2023 and 2022
Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021
Notes to the Consolidated Financial Statements
(b) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2023, 2022 and 2021
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2023
113
114
All other schedules are omitted because they are either not applicable, not required or because the information is
included in the Consolidated Financial Statements or notes included in this Annual Report on Form 10-K.
(c) Exhibits
Exhibit
Number
1.1
3.1
3.2
4.1
4.2
10.1
10.2
10.3 †
10.4 †
10.5 †
10.6 †
10.7 †
10.8 †
10.9 †
10.10 †
10.11 †
10.12 †
10.13 †
Description
Underwriting Agreement, dated as of July 20, 2017, among the Company, Community Healthcare OP, LP,
Sandler O'Neill & Partners, L.P., Evercore Group L.L.C., SunTrust Robinson Humphrey, Inc. and each of the
Underwriters party thereto (1)
Corporate Charter of Community Healthcare Trust Incorporated, as amended (2)
Amended and Restated Corporate Bylaws of Community Healthcare Trust Incorporated (3)
Description of Common Stock of Community Healthcare Trust Incorporated (4)
Form of Certificate of Common Stock of Community Healthcare Trust Incorporated (5)
Agreement of Limited Partnership of Community Healthcare OP, LP (6)
Form of Indemnification Agreement (7)
Community Healthcare Trust Incorporated 2014 Incentive Plan, as amended (8)
Second Amended and Restated Community Healthcare Trust Incorporated Alignment of Interest Program (9)
Third Amended and Restated Community Healthcare Trust Incorporated Alignment of Interest Program (10)
Second Amended and Restated Community Healthcare Trust Incorporated Executive Officer Incentive Program
(11)
Third Amended and Restated Community Healthcare Trust Incorporated Executive Officer Incentive Program
(12)
Community Healthcare Trust Incorporated Amended and Restated Non-Executive Officer Incentive Program (13)
Amended and Restated Employment Agreement between Community Healthcare Trust Incorporated and David
H. Dupuy (14)
First Amendment to Amended and Restated Employment Agreement between Community Healthcare Trust
Incorporated and David H. Dupuy (15)
Employment Agreement between Community Healthcare Trust Incorporated and William G. Monroe IV (16)
First Amendment to Employment Agreement between Community Healthcare Trust Incorporated and William G.
Monroe IV (17)
Amended and Restated Employment Agreement, dated May 1, 2019, between Community Healthcare Trust
Incorporated and Leigh Ann Stach (18)
108
10.14 †
10.15 †
10.16 †
10.17 †
10.18 †
10.19 †
10.20 †
10.21 †
10.22 †
10.23 †
10.24 †
10.25 †
10.26 †
10.27 †
10.28
10.29
10.30
21 *
23 *
31.1 *
31.2 *
32.1 **
97.1 *
101.INS *
101.SCH *
101.CAL *
101.LAB *
101.DEF *
101.PRE *
104*
First Amendment to Amended and Restated Employment Agreement between Community Healthcare Trust
Incorporated and Leigh Ann Stach (19)
Second Amendment to Amended and Restated Employment Agreement between Community Healthcare Trust
Incorporated and Leigh Ann Stach (20)
Third Amendment to Amended and Restated Employment Agreement between Community Healthcare Trust
Incorporated and Leigh Ann Stach (21)
Fourth Amendment to Amended and Restated Employment Agreement between Community Healthcare Trust
Incorporated and Leigh Ann Stach (22)
Fifth Amendment to Amended and Restated Employment Agreement between Community Healthcare Trust
Incorporated and Leigh Ann Stach (23)
Employment Agreement between Community Healthcare Trust Incorporated and Timothy L. Meyer (24)
First Amendment to Employment Agreement between Community Healthcare Trust Incorporated and Timothy L.
Meyer (25)
Second Amendment to Employment Agreement between Community Healthcare Trust Incorporated and Timothy
L. Meyer (26)
Third Amendment to Employment Agreement between Community Healthcare Trust Incorporated and Timothy
L. Meyer (27)
Form of Restricted Stock Agreement (28)
Form of Performance-Based Restricted Stock Unit Agreement (29)
Form of Time-Based Restricted Stock Unit Agreement (30)
Form of Officer Compensation Reduction Election Form (31)
Form of Director Compensation Reduction Election Form (32)
Third Amended and Restated Credit Agreement, dated as of March 19, 2021, 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 (33)
First Amendment, dated as of December 14, 2022, to Third Amended and Restated Credit Agreement, dated as of
March 19, 2021, 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 (34)
Second Amended and Restated Sales Agency Agreement, dated November 2, 2022, by and among Community
Healthcare Trust Incorporated and 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 (35)
Subsidiaries of the Registrant
Consent of BDO USA, P.C., independent registered public accounting firm
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
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
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
Policy for the Recovery of Erroneously Awarded Compensation
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Labels Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
(1) Filed as Exhibit 1.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on July 26, 2017
(File No. 001-37401) and incorporated herein by reference.
(2) 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.
(3) 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 (Registration No. 333-203210) and incorporated herein by reference.
109
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(4)
Included under the heading "Description of Capital Stock" in the prospectus forming part of the Company's Registration
Statement on Form S-11 of the Company, initially filed with the Securities and Exchange Commission on April 2, 2015
(Registration No. 333-203210) and incorporated herein by reference.
(5) Filed as Exhibit 4.1 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange
Commission on April 2, 2015 (Registration No. 333-203210) and incorporated herein by reference.
(6) Filed as Exhibit 10.1 to Amendment No. 1 to the Registration Statement on Form S-11 of the Company filed with the
Securities and Exchange Commission on April 28, 2015 (Registration No. 333-203210) and incorporated herein by
reference.
(7) Filed as Exhibit 10.2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange
Commission on April 2, 2015 (Registration No. 333-203210) and incorporated herein by reference.
(8) The 2014 Incentive Plan filed as Exhibit 10.3 to the Registration Statement on Form S-11 of the Company filed with the
Securities and Exchange Commission on April 2, 2015 (Registration No. 333-203210), and, as to Amendment No. 1 to the
2014 Incentive Plan, as Exhibit 10.12 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, as to Amendment
No. 2 to the 2014 Incentive Plan, as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange
Commission on July 17, 2017, and, as to the Amendment No. 3 to the 2014 Incentive Plan, as Exhibit 10.2 to the Form 8-K
of the Company filed with the Securities and Exchange Commission on July 17, 2017, and, as to Amendment No. 4 to the
2014 Incentive Plan, as Exhibit 10.3 to the Form 8-K of the Company filed with the Securities and Exchange Commission
on January 4, 2024, each of which is incorporated herein by reference.
(9) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on May 5, 2022
(File No. 001-37401) and incorporated herein by reference.
(10) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2024 (File No. 001-37401) and incorporated herein by reference.
(11) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on February 16,
2021 (File No. 001-37401) and incorporated herein by reference.
(12) Filed as Exhibit 10.2 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2024 (File No. 001-37401) and incorporated herein by reference.
(13) Filed as Exhibit 10.6 to the Annual Report on Form 10-K of the Company filed with the Securities and Exchange
Commission on February 25, 2020 (File No. 001-37401) and incorporated herein by reference.
(14) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on April 10,
2023 (File No. 001-37401) and incorporated herein by reference.
(15) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 3,
2024 (File No. 001-37401) and incorporated herein by reference.
(16) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on May 17, 2023
(File No. 001-37401) and incorporated herein by reference.
(17) Filed as Exhibit 10.2 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 3,
2024 (File No. 001-37401) and incorporated herein by reference.
(18) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on May 3, 2019
(File No. 001-37401) and incorporated herein by reference.
(19) Filed as Exhibit 10.4 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 3,
2020 (File No. 001-37401) and incorporated herein by reference.
(20) Filed as Exhibit 10.3 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2021 (File No. 001-37401) and incorporated herein by reference.
(21) 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.
(22) Filed as Exhibit 10.3 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2023 (File No. 001-37401) and incorporated herein by reference.
(23) Filed as Exhibit 10.3 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 3,
2024 (File No. 001-37401) and incorporated herein by reference.
(24) Filed as Exhibit 10.1 to the Quarter Report on Form 10-Q of the Company filed with the Securities and Exchange
Commission on November 2, 2021 (File No. 001-37401) and incorporated herein by reference.
(25) 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.
(26) Filed as Exhibit 10.4 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2023 (File No. 001-37401) and incorporated herein by reference.
(27) Filed as Exhibit 10.4 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 3,
2024 (File No. 001-37401) and incorporated herein by reference.
(28) Filed as Exhibit 10.9 to Amendment No. 1 to the Registration Statement on Form S-11 of the Company filed with the
Securities and Exchange Commission on April 28, 2015 (Registration No. 333-203210) and incorporated herein by
reference.
110
(29) Filed as Exhibit 10.4 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2024 (File No. 001-37401) and incorporated herein by reference.
(30) Filed as Exhibit 10.5 to the Form 8-K of the Company filed with the Securities and Exchange Commission on January 4,
2024 (File No. 001-37401) and incorporated herein by reference.
(31) Filed as Exhibit 10.10 to Amendment No. 1 to the Registration Statement on Form S-11 of the Company filed with the
Securities and Exchange Commission on April 28, 2015 (Registration No. 333-203210) and incorporated herein by
reference.
(32) Filed as Exhibit 10.11 to Amendment No. 1 to the Registration Statement on Form S-11 of the Company filed with the
Securities and Exchange Commission on April 28, 2015 (Registration No. 333-203210) and incorporated herein by
reference.
(33) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on March 19,
2021 (File No. 001-37401) and incorporated herein by reference.
(34) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on December 15,
2022 (File No. 001-37401) and incorporated herein by reference.
(35) Filed as Exhibit 10.1 to the Form 8-K of the Company filed with the Securities and Exchange Commission on November 2,
2022 (File No. 001-37401) and incorporated herein by reference.
_________
*
Filed herewith.
** Furnished herewith.
† Denotes executive compensation plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 13, 2024
COMMUNITY HEALTHCARE TRUST INCORPORATED
By:
/s/ David H. Dupuy
David H. Dupuy
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the
following persons on behalf of the Company and in the capacities and on the date indicated.
Signature
Title
Date
/s/ David H. Dupuy
David H. Dupuy
Chief Executive Officer and President
February 13, 2024
(Principal Executive Officer)
/s/ William G. Monroe IV
Executive Vice President and Chief Financial Officer
February 13, 2024
William G. Monroe IV
(Principal Financial Officer)
/s/ Leigh Ann Stach
Executive Vice President and Chief Accounting Officer
February 13, 2024
Leigh Ann Stach
(Principal Accounting Officer)
/s/ Cathrine Cotman
Cathrine Cotman
/s/ Alan Gardner
Alan Gardner
/s/ Claire Gulmi
Claire Gulmi
/s/ Robert Hensley
Robert Hensley
/s/ R. Lawrence Van Horn
R. Lawrence Van Horn
February 13, 2024
February 13, 2024
February 13, 2024
February 13, 2024
February 13, 2024
Director
Director
Director
Director
Director
112
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2023, 2022 and 2021
(Dollars in thousands)
Additions
Description
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Uncollectible
Accounts
Written-off
Balance at
End of
Period
2023 Accounts receivable allowance
2022 Accounts receivable allowance
2021 Accounts receivable allowance
$
$
$
75 $
75 $
100 $
250 $
9 $
(25) $
— $
— $
— $
— $
(9) $
— $
325
75
75
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(
SHAREHOLDER(cid:3)INFORMATION(cid:3)
CORPORATE(cid:3)ADDRESS(cid:3)
Community(cid:3)Healthcare(cid:3)Trust(cid:3)Incorporated(cid:3)
3326(cid:3)Aspen(cid:3)Grove(cid:3)Drive,(cid:3)Suite(cid:3)150(cid:3)
Franklin,(cid:3)Tennessee(cid:3)(cid:3)37067(cid:3)
(615)(cid:3)771(cid:882)3052(cid:3)
Email:(cid:3)Investorrelations@chct.reit(cid:3)
Website:(cid:3)www.chct.reit(cid:3)
(cid:3)
(cid:3)
STOCK(cid:3)EXCHANGE(cid:3)INFORMATION(cid:3)
The(cid:3)Common(cid:3)Stock(cid:3)of(cid:3)the(cid:3)Company(cid:3)is(cid:3)listed(cid:3)on(cid:3)the(cid:3)New(cid:3)York(cid:3)
Stock(cid:3)Exchange(cid:3)under(cid:3)the(cid:3)symbol(cid:3)“CHCT”.(cid:3)
(cid:3)
(cid:3)
INDEPENDENT(cid:3)REGISTERED(cid:3)PUBLIC(cid:3)ACCOUNTING(cid:3)FIRM(cid:3)
BDO(cid:3)USA,(cid:3)P.C.(cid:3)
501(cid:3)Commerce(cid:3)Street,(cid:3)Suite(cid:3)1400(cid:3)
Nashville,(cid:3)Tennessee(cid:3)(cid:3)37203(cid:3)
(cid:3)
(cid:3)
BOARD(cid:3)OF(cid:3)DIRECTORS(cid:3)
Alan(cid:3)Gardner(cid:3)
Chairman of the Board
(cid:3)
Retired
Former Senior Relationship Manager
in healthcare corporate banking
(cid:3)
(cid:3)
at Wells Fargo
(cid:3)
Robert(cid:3)Hensley(cid:3)
Audit(cid:3)Committee(cid:3)Chair
Senior Advisor at Alvarez and Marsal, LLC(cid:3)
(cid:3)
C
laire Gulmi
(cid:3)
Com nnssaatioonn CCoommmmiitteeee CChhaaiirr
Comppee
Former Executive Vice President and Chief Financial Officer at
Envision Healthcare
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R.(cid:3)Lawrence(cid:3)Van(cid:3)Horn(cid:3)
Environmental, Social and Governance(cid:3)Committee(cid:3)Chair(cid:3)
Chief Executive Officer of Preverity
Inc.
TRANSFER(cid:3)AGENT
Equiniti Trust Company, LLC(cid:3)
Operations(cid:3)Center(cid:3)
6201(cid:3)15th(cid:3)Avenue(cid:3)
Brooklyn,(cid:3)NY(cid:3)(cid:3)11219(cid:3)
1(cid:882)800(cid:882)937(cid:882)5449(cid:3)
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Cathrine Cotman
Board Member
Senior Vice President, Corporate Real Estate of LPL Financial
David H. Dupuy
Board Member
Chief Executive Officer and President of
Community Healthcare Trust Incorporated
ANNUAL(cid:3)SHAREHOLDERS(cid:3)MEETING(cid:3)
The(cid:3)Annual(cid:3)Meeting(cid:3)of(cid:3)the(cid:3)Shareholders(cid:3)will(cid:3)be(cid:3)held(cid:3)at(cid:3)8:00
a.m.,(cid:3)May(cid:3)2,(cid:3)2024,(cid:3)at(cid:3)the(cid:3)Company’s(cid:3)corporate(cid:3)offices(cid:3)in(cid:3)
Franklin,(cid:3)Tennessee.(cid:3)
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EXECUTIVE OFFICERS
David H. Dupuy
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ChiefEx ecutiv eOfficer
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and President
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William G. Monroe IV
(cid:3)Executive Vice President and Chief Financial Officer
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Leigh(cid:3)Ann(cid:3)Stach(cid:3)
Executive Vice(cid:3)President(cid:3)and(cid:3)Chief(cid:3)Accounting Officer(cid:3)
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Timothy (cid:3)L.(cid:3)Meyer(cid:3)
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Executive Vice President - Asset Management
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BR20369C-0324-COMBO