Community Healthcare Trust (CHCT) secured definitive agreements for five healthcare properties requiring $122.5M in capital, targeting returns between 9.1% and 9.75%. The acquisitions will close after construction completion and occupancy, funded entirely through selective asset sales and existing revolver capacity.
The REIT issued zero shares under its at-the-market program during Q4 2025, according to CFO David Dupuy. This financing strategy avoids dilution while the company's stock trades below levels that would make equity raises accretive to shareholders.
CHCT extended its weighted average lease term from 6.7 years to 7 years during the quarter, strengthening cash flow predictability. The company maintains a dual acquisition pipeline: $50M to $60M annually from direct client relationships, plus a similar amount from brokered transactions and redevelopment projects, totaling $120M to $150M per year historically.
A pending sale of geriatric behavioral hospital operations remains in legal and business due diligence with the buyer. Management declined to provide closing timelines or certainty guarantees, though the transaction continues progressing. Proceeds from this divestiture and similar selective sales will fund the programmatic acquisition strategy without tapping equity markets.
The capital structure approach contrasts sharply with residential homebuilders facing affordability pressures. While CHCT locks in 9%-plus returns on commercial healthcare properties with long-term leases, homebuilders increasingly offer financing incentives to move inventory as mortgage rates constrain buyer purchasing power.
Healthcare real estate's defensive characteristics—steady occupancy driven by demographic demand rather than economic cycles—allow disciplined capital allocation. CHCT's strategy prioritizes relationship-based deals with existing healthcare operators over competitive brokered auctions, generating proprietary deal flow at attractive yields.
The five properties under contract represent post-construction, stabilized assets with operator commitments, reducing execution risk compared to ground-up development. Returns approaching 10% exceed the company's cost of debt, creating positive leverage even without equity issuance.
If share prices rise sufficiently to make equity accretive, CHCT could accelerate beyond its historical acquisition pace by reactivating the ATM program. Until then, asset recycling and revolver draws provide adequate capital for programmatic growth without shareholder dilution.