Welcome to Community Healthcare Trust 2022 Q1 release conference call. On the call today, the company will discuss its 2022 Q1 Financial Results. It will also discuss progress made in various aspects of its businesses. Following the remarks, the phone lines will be open for a question-and-answer session. The company's earnings release was distributed last evening and has also been posted on its website, www.chct.reit.
The company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today, 4 May 2022 and may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements.
For a discussion of these risks and uncertainties, you should review the company's disclosures regarding forward-looking statements in its earnings release, as well as its risk factors and MD&A in its SEC filings. The company undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law. During this call, the company will discuss GAAP and non-GAAP financial measures.
A reconciliation between the two is available in its earnings release, which is posted on its website. Call participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the company's investor relations website for approximately 30 days and is the property of the company. This call may not be recorded or otherwise reproduced or distributed without the company's prior written permission.
Now, I would like to turn the call over to Tim Wallace, CEO of Community Healthcare Trust, Incorporated.
Good morning, everyone and thank you for joining us today for our 2022 Q1 conference call. On the call with me today is Dave Dupuy, our Chief Financial Officer, Leanne Stach, our Chief Accounting Officer, and Tim Meyer, our EVP, Asset Management. As is our normal process, our earnings announcement and supplemental data report were released last night and filed with an 8-K, and our quarterly report on Form 10-Q was also filed last night.
The Q1 was again busy from an operations standpoint and a little slow from an acquisition standpoint. Again, we have five different properties or significant portions of them that are undergoing redevelopment or significant renovations with long-term tenants in place when the renovations or redevelopment is done. Our occupancy is still right around 90%, and we have seen a continued pickup in leasing activity.
We are encouraged by the activity we see on the part of healthcare providers. Our asset managers have been busy attempting to control expenses while maintaining tenant satisfaction. Our weighted average remaining lease term was relatively stable at just less than eight years. During the Q1 , we acquired 2 properties with a total of approximately 30,000 sq. ft. For purchase price of approximately $5.8 million.
These properties were 100% leased, with leases running through 2028 and anticipated annual returns of approximately 9%-9.51%. The company signed a couple of additional purchase and sale agreements this quarter and now has signed agreements for 6 properties to be acquired after completion and occupancy for an aggregate expected investment of $141 million.
The expected return on these investments should range up to 10.25%. We expect to close on one of these properties in the Q2 of 2022 and the other five through 2022 into 2023. In addition, we still have the signed term sheet for another 10 new properties and up to approximately $60 million of new investment. It is anticipated that these investments will be made over the next approximately 24 months.
The exciting update on this client is that they finalized an agreement with a private equity firm and were funded last week. Therefore, we are hopeful that they can turn their attention to growth and development. We continue to have many properties under review and have term sheets on several properties with anticipated returns of 9%-10%.
We anticipate having enough availability on our credit facilities to fund our acquisitions and we expect to continue to opportunistically utilize the ATM to strategically access the equity markets. On another front, we declared our dividend for the Q1 and raised it to $0.44 per common share. This equates to an annualized dividend of $1.76 per share, and I continue to be proud to say we have raised our dividend every quarter since our IPO. I believe that takes care of the items I wanted to cover, so I will hand things off to Dave to cover the numbers.
Great. Thanks, Tim and good morning, everyone. I'm pleased to report that total revenue grew from $21.4 million in the Q1 of 2021 to $23.5 million in the Q1 of 2022, representing 9.7% growth over the same period last year. Revenue for the Q4 of 2021 was $23.2 million, representing 1% growth quarter-over-quarter.
On a pro forma basis, if all the 2022 Q1 acquisitions had occurred on the first day of the Q1 , total revenue would have increased by an additional $132,000 to a pro forma total of $23.6 million in the Q1 . From an expense perspective, property operating expenses increased quarter-over-quarter from $3.5 million to 4.1 million or 15.7%.
The increase in POE was a result of, one, an increase in property taxes, two, seasonal increases, including snow removal at several properties, and three, normal fluctuations we experience in property expenses quarter- to- quarter. G&A increased from $3.2 million to 3.3 million sequentially in the Q1 or 5.1%. Increases in G&A were primarily driven by an increase in deferred compensation expense.
Meanwhile, interest expense decreased from $2.8 million to 2.6 million or 5.8%. This decrease was due to capitalized interest expense on a few construction projects that Tim previously mentioned, as well as two fewer days of interest in the Q1 compared with the Q4 .
I'm pleased to report that funds from operations or FFO for the Q1 of 22 grew to $13.5 million from $12.6 million in the Q1 of 21, representing 7.4% growth over the same period last year. On a per share basis, FFO increased from $0.54 per diluted share in the Q1 of 21 to $0.56 per diluted share in the Q1 of 22, an increase of 3.7%.
Meanwhile, FFO for the Q4 of 21 was $13.8 million, representing a 1.7% decrease sequentially. Adjusted Funds from Operations or AFFO, which adjusts for straight-line rent and stock-based compensation, totaled $14.8 million compared with the $13.3 million in the Q1 of 21 or 11.4% growth year-over-year.
On a per share basis, AFFO increased from $0.57 per diluted share in the Q1 of 21 to $0.61 per diluted share in the Q1 of 22 or 7%. Finally, AFFO for the Q4 of 21 was $14.9 million, representing a 0.5% decrease on a sequential basis and flat on a per share basis of $0.61 per diluted share.
From a pro forma perspective, if all the Q1 acquisitions occurred on the first day of the Q1 , AFFO would have increased by approximately $73,000 to a pro forma total of $14.9 million. That's all I have from a numbers perspective. Betsy, we're ready to start the Q&A session.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Hey, good morning, Tim and Dave. Just a few questions. Tim, can you just talk a little bit more about what's going on in the acquisition environment? You know, in the early years of the company, you guys were, you know, had pretty healthy quarterly acquisition volumes, but that slowed recently. At the same time, you've also built up the presale pipeline, which is a positive.
So is it just that in the pipeline of what you guys saw on a quarter-to-quarter basis, there just wasn't as much available, or was it a function of the stock price trading off that caused you to slow down? Just sort of curious, and then what we should expect for sort of quarterly volumes, you know, heading forward.
Good morning, Alex and thanks for the question. You know, it's a combination of things actually, because the pipeline makes us wanna be pickier because the pipeline is such good assets. You get brand new assets with 15-year leases at good cap rates. It tends to make us be pickier.
We've actually seen less flow through the system for brokered type deals, off market type deals, for the last couple of quarters. I think, you know, maybe that is some of the cash inflow into private equity that's chasing healthcare deals, et cetera. Maybe that's catching up with us a little bit.
You know, we've seen, I think, a little bit of a breakthrough over the last couple of weeks, maybe a month, in deal flow. I think that has to do with the interest rate increases 'cause, you know, as the 10-year rises, then, you know, if 10 years are over 3%, then it makes it a lot more difficult to do some of the deals at the lower cap rates, and we've seen that open up a little bit.
Okay and then t he second question is just bigger industry, and maybe you tapped on it with the private equity comments. You know, there's the public peer drama with HTA, HR, and Welltower.
Sort of curious, are portfolios back in vogue, or is your view of what's going on there something unique to HTA that, you know, you wouldn't expect suddenly a rush of, o f MOB portfolios to start, you know, being you know in the limelight the way like apartments or industrial are.
You know, I think it's an interesting study. I took a couple of hours yesterday and read part of the prospectus that HR and HTA file and it read kinda like a novel, as to how it went back and forth and where company F came into play in the different ways. I'm not sure that you can read anything into an overall.
I mean, what I read into it was that, you know, Welltower is so big now they gotta find large ways to make a difference. I mean, just buying an asset or two doesn't make a difference to Welltower anymore, so they need to buy something big. It was interesting.
It was interesting to see that they weren't interested in HTA, but they were interested in HR. That was an interesting thing because the thing that was for sale, they didn't wanna buy, but the thing that's not for sale, they do wanna buy. I don't know. I think it'll be interesting to see how it plays out. I think it's, you know, a bunch of drama, but I don't think it's an overall type of. I don't think it has any meaning for overall in MOB space.
Okay. Thank you, Tim.
Thanks, Alex.
As a reminder, if you would like to ask a question, please press star then one to join the question queue. The next question comes from Michael Lewis with Truist Securities. Please go ahead.
Thank you. I wanted to ask a little more specifically about the investment yield spreads, right? The two pieces to that. You know, number one, I think on the 2 development deals you announced this quarter, it looked like they were 9.75 yield. I think the first 4 you did similar development deals were 10.25.
It might just be obviously specific to the deals. I was wondering if there was anything changing on that front. Also, you know, do you think differently about how you use your equity given what's happened to the stock price?
Good morning, Michael. Thanks for the question. You know, the change is due basically to the deals in particular. There's nothing I don't think you can read into the overall transactions or shrinking of margins. As you know, we, you know, on a regular basis watch our weighted average cost of capital.
Of course, as the stock price goes down, our weighted average cost of capital goes up. We still have a very favorable spread between what our investment criteria is and what our weighted average cost of capital is. We, you know, we can still invest at these levels and have it make good money. It's just a little less on the spread, so.
You know, we're not shying away from doing investments that we like based upon the stock price at this point. Actually, the stock price would have to go down a lot more before we would be that concerned about it. Obviously, we like the stock price higher when we do it because it means the spread is wider. As you know, I've said for years, you know, basically we're in a spread business, and we try to optimize that spread.
Okay, great. My second question, I wanted to ask about the scalability of your G&A. Because when I look at it over the last few years, you know, as you've grown the company, the percent of G&A as a percent of revenue has actually ticked up a little bit.
Part of that, you know, obviously, we love the stock comp with the long-dated vesting, so, I don't mean to nitpick that, but, you know, the comp for the three top executives has doubled in the past two years. It's, you know, that includes up 30% this past year. I realize that's mostly incentive-based comp, again, so it's great that you're hitting your goals. Maybe talk about, you know, as you grow, you know, what do you think is the opportunity or the ability to kind of scale that G&A?
Well, you know, I think we're probably close to a max on the cost. I mean, you know, a couple quarters ago, we went through and gave additional disclosure in the supplemental data report of what's happening to us. Since some of us are getting close to retirement age, the rules make us amortize stock over the time between now and retirement instead of the 8 years that is the legal vesting.
That's pinching us now on the non-cash portion of G&A. If you look just at the cash portion of G&A, you know, I think it's been relatively stable to down relative to revenue. We would anticipate that continuing to happen. The non-cash will reach a kinda maximum point in the next, I don't know, year or two. After that point, it will level off or go down.
Okay, thanks. If I could just squeeze in one last one.
Sure.
I wanted to ask about, you know, how you view the threat of in-home dialysis, right? You know, a lot of your tenants in your properties, we talk about kind of the need-based nature, and no matter what happens, you know, if you gotta see the doctor, you're going to see the doctor. We've talked a little bit about, you know, Teladoc and things like that. But on the, you know, dialysis has seemed to be, like, the most defensive of the property types. Do you see that changing at all? Does it kinda change the way you look at that area specifically?
Most dialysis facilities over the last few years have started incorporating in-home. If you have in-home dialysis, you still need some office space. What we see mostly is that, you know, a facility will have the in-facility dialysis, and then it'll also have some space designated for the people who do the at-home and supervise the at-home dialysis.
I mean, we see it over the next number of decades as something that's going to be switching from in-facility to in-home. You know, generally speaking, if somebody's getting in-facility dialysis now, they're gonna stick with it. We think it's gonna be a long lead time to move a lot of people into the in-home. We see it as basically a reduction of future need of dialysis facilities, but not a reduction of need for the existing dialysis facilities.
The only other thing I would add to that, Michael, is, you know, one of the reasons we really like the operator that we do a lot of our development projects with, is they specifically have a home part of their dialysis business. It's really central to their strategy. They're strategically mixing a combination of clinics as well as home dialysis as part of their go-to-market strategy, which candidly, we think is the right approach going forward.
There will always be some mix of clinic-based dialysis patients, but you wanna be able to capture those. They're actually working directly with payers on strategizing, partnering with those payers on how to create that best mix and so t hat's one of the reasons we really like the operator that we're working with and excited about their growth plans.
Okay, great. Thank you, guys.
Thanks, Michael.
The next question comes from Sheila McGrath with Evercore. Please go ahead.
Yes, good morning. I was wondering if you could talk a little bit more about the increased backlog of acquisitions. Was that one or more strategic relationships? Any visibility on how this might phase in the $140 million in 22 versus 23.
Good morning, Sheila, and thanks for the question. Yes, I mean, actually, we should have already closed on one. Due to supply chain issues and an overzealous Butler County, Ohio, inspector, the facility is actually open under a partial CO, but their kitchen isn't operable yet because of an exhaust fan issue.
We're waiting until they get a full CO before we close on it. They're actually seeing patients now, t hey have patients in the facility. They're just bringing food in instead of using their kitchen. That one should close relatively soon. We should close on at least one more in 2022, possibly two. Again, a lot of it depends on weather and supply chain issues and then t he remainder three or four will be basically one a quarter through the end of 23.
Okay, great. Just the stock has been under a little bit of pressure this year with other REITs that use equity to grow. Just your thoughts on, you know, your blended cost of capital here, and, you know, your appetite to use a little bit more leverage. How do you think about that?
Well, we're gonna stick to our long-term goal of keeping leverage at, you know, 30% to 35% of our capital base. You know, we've been in the 30 or a little below 30 for a while. We may increase it a little bit, but we're not gonna go too much more. And again, even with the stock price where it is now with our investment spreads, we can make money with where the stock is now.
We're not shying away from making those investments because of where the stock is. I don't know what the yield is currently, but I think it's, you know, it's like 4.75% on the equity current yield. You know, if we're investing at 9-9.5, we've still got a lot of room there to invest.
The other thing I would just add to that, Sheila, is that's why we like the ATM so much.
Okay.
We can be very strategic, pick our spots, in terms of how we raise capital, be very disciplined around that. We have, you know, essentially, I think, about 140 of our $150 million revolver available. We can really be smart in how we tap the equity markets while still keeping our leverage in the profile that, you know, our investors have are used to, so, I think count on us to be nimble as we access the ATM, but having a lot of options from a capital perspective.
Great. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Tim Wallace for any closing remarks.
Again, we'd like to thank everybody for your continued interest in Community Healthcare Trust, and we look forward to talking to you on the Q2 C onference Call. Seeing a lot of y'all in New York in June at Nareit. Thanks so much. Bye.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.