Welcome to Community Healthcare Trust 2022 third quarter earnings release conference call. On the call today, the company will discuss its 2022 third quarter financial results. We'll also discuss progress made in various aspects of its business. 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, November 2nd, 2022, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements.
For a discussion of these risks and uncertainties, you should review the company's disclosure regarding forward-looking statements in its earnings release, as well as its risk factors at 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. All participants are advised that this conference call is being re-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.
Good morning, everyone, and thank you for joining us today for our 2022 third quarter conference call. On the call with me today is Dave Dupuy, our Chief Financial Officer, Leigh Ann 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. In addition, an updated investor presentation was posted to our website last night. The third quarter was busy from both an operations standpoint and from an acquisition standpoint. Our occupancy has risen to 90.8%, and we have seen a continued pickup in leasing activity. We continue to be encouraged by the activity we see on the part of healthcare providers.
Our weighted average remaining lease term remains about the same at slightly less than eight years. Our asset managers have been very busy controlling expenses while maintaining tenant satisfaction. As I have indicated for the last several quarters, we continue to 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 redevelopments are done. During the third quarter, we acquired two properties with a total of approximately 114,200 sq ft for a purchase price of approximately $17.5 million. The properties are 100% leased with leases running through 2037 and anticipated annual returns of approximately 9%-9.72%.
The company currently has 20 properties under definitive purchase agreements for an aggregate expected purchase price of approximately $71.6 million and expected returns of approximately 9%-10.17%. The company is currently performing due diligence on these properties and expects to close these properties in the fourth quarter of this year. The company continues to have signed purchase and sale agreements for five properties to be acquired after completion and occupancy for an aggregate expected investment of $117.5 million. The expected return on these investments should range up to 10.25%. We expect to close on these properties throughout 2023 and possibly into 2024. We continue to have many properties under review and have term sheets out on several properties with anticipated returns of 9%-10%.
We anticipate having enough availability on our credit facilities and through our banking relationships to fund our acquisitions, and we expect to opportunistically utilize the ATM to strategically access the equity markets. On another front, we declared our dividend for the third quarter and raised it to $0.445 per common share. This equates to an annualized dividend of $1.78 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'll hand things off to Dave to cover the numbers.
Great. Thanks, Tim, and good morning, everybody. I'm pleased to report that total revenue grew from $23.3 million in the third quarter of 2021 to $24.8 million in the third quarter of 2022, representing 6.7% growth over the same period last year. Revenue for the second quarter of 2022 was $24 million, representing 3.2% growth quarter-over-quarter. On a pro forma basis, if the 2022 third quarter acquisition had occurred on the first day of the third quarter, total revenue would have increased by an additional $308 thousand to a pro forma total of $25.1 million in the third quarter.
From an expense perspective, property operating expenses grew from $4.1 million in the second quarter to $4.3 million in the third quarter, or 6.5%. The increase was due in part to seasonal increases in utilities expense caused by the hot summer months, along with increased property tax assessments on some of our properties. G&A increased from $3.6 million in the second quarter to $3.8 million in the third quarter, or 4.2%. Increases in G&A were driven by increases in non-cash amortization of stock-based compensation. Meanwhile, cash G&A expense decreased from approximately $1.4 million in the second quarter to $1.3 million in the third quarter. Interest expense increased from $2.8 million in the second quarter to $3 million in the third quarter, or 9.9%.
This increase was due to increased borrowings under our revolving credit facility to fund acquisitions, as well as an increase in floating interest rates. Funds from operations, or FFO, for the third quarter of 2022 was flat quarter-over-quarter at $13.8 million. Likewise, on a per-share basis, FFO remained flat at $0.57 per diluted share. As discussed, FFO was impacted by the increase in non-cash amortization of stock-based compensation experienced quarter-over-quarter. I am pleased to report that adjusted funds from operations, or AFFO, which adjusts for straight-line rent and non-cash amortization of stock-based compensation, totaled $15.4 million in the third quarter of 2022, compared with $14.3 million in the third quarter of 2021, or 7.2% growth year-over-year.
On a per-share basis, AFFO increased from $0.59 per diluted share in the third quarter of 2021 to $0.63 per diluted share in the third quarter of 2022, or 6.8%. Finally, AFFO grew quarter-over-quarter from $15 million in the second quarter to $15.4 million, representing a 2.5% increase. On a per-share basis, AFFO increased from $0.62 per diluted share in the second quarter of 2022 to $0.63 per diluted share in the third quarter. On a pro forma basis, if the third quarter acquisitions had occurred on the first day of the third quarter, AFFO would have increased by approximately $304,000 to a pro forma total of $15.7 million or $0.64 per diluted share. That's all I have from a numbers perspective.
Jason, we're ready to start the Q&A session.
Thank you. We'll now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Connor Mitchell from Piper Sandler. Please go ahead.
Hey, good morning. I have two questions. First, you guys have a good relationship with developers, building out specialty spaces. Has the weakening macro had any impact on the propensity for these types of deals?
Good morning, Connor. No, we have not seen any effect yet from the weakening macro. I mean, as you can tell by our acquisition pipeline and our activity in the leasing side, everything is looking very good right now and we're excited about what we're seeing out in the environment.
Okay, great. My second question regarded the acquisition pipeline. Touched on it briefly in your opening remarks, but could you just provide a little bit more color on how you guys are thinking about funding of the pipeline and expected acquisitions between use of the ATM debt or the line of credit?
We are anticipating, and this isn't a change from what we've said over the last few quarters. We've historically maintained our leverage level at extremely low levels. We anticipate taking that up a little bit, probably into the mid-30% debt-to-book cap and then looking to utilize the ATM to pull it down. We have and our banks have indicated a willingness to fund our acquisitions and are excited to do that. We're looking to utilize the bank lines and then utilize the ATM to reduce the bank lines. Kind of our normal stuff.
All right. Very helpful. Thank you.
Thank you, Connor.
The next question comes from Rob Stevenson from Janney. Please go ahead.
Good morning, guys. Tim, which assets drove the 50 basis points quarter-over-quarter occupancy pickup to just under 91%? How much additional occupancy pickup are you expecting over the next few quarters in the portfolio?
I think it's pretty much across the portfolio. I'm looking at Tim Meyer now. Was there anything special, any special type of assets that did it? Or, I mean, mostly it's MOBs.
Yeah, mostly MOBs, but really it was across our entire portfolio and use type, and we're continuing to see a strong pipeline going forward.
I mean.
Okay.
I would anticipate seeing that increase still, so.
All right. How much upward pressure are you seeing on cap rates and sellers willing to adjust at this point, to current market conditions, or is there still a substantial lag, for that for you guys?
No, I think we've seen. It was almost like a switch sometime, like after the first or maybe the second 75 basis point increases. It was like a flip was switched, a switch was flipped. It went back to normal type of stuff. I mean, what we've determined is that things had gotten kind of crazy, you know, in the first quarter, second quarter that we couldn't find our types of properties. It's just that people who had our types of properties all of a sudden back in the first and second quarter thought they really had six caps and nobody was buying them at six caps.
Once they figured that out and that environment had gone away, then, you know, they were a lot more interested in selling.
Okay, that's helpful. Then last one for me. Dave, the utilities cost, because of the hot summer and the property taxes, is this just a timing issue before you get reimbursed, or is this stuff that you're not gonna get reimbursed for?
Most of that issue, you know, we have various lease agreements, and so we don't get 100% of those increases, but most of those get reimbursed, you know, I'd say 80% plus. Most of that is just a timing difference.
Okay. Thanks, guys, appreciate the time.
Thanks, Rob.
Okay. If you have a question, please press star then one. Our next question comes from Wendy Ma from Evercore. Please go ahead.
Thank you, everyone. Thank you for taking my question. I just have one question about these five properties under the purchase and sale agreements about the timing. I think in last quarter's conference call, you mentioned the timing, expected timing will be one in 4Q 2022 and the other four throughout 2023, and now it's more like throughout 2023 and maybe into early 2024. Is there any like reason there could be a delay of this completion and occupancy for this five properties or. And should we assume for the timing it will be more leaning forward to the second half of 2023 instead of-
Uh-
Like more evenly spread of the four quarters?
Good morning, Wendy Ma. I've almost got to where I've stopped trying to estimate when construction jobs would be complete, and it's basically the supply chain issues. For inpatient hospitals, you need double compressor HVAC units, and you need specialty generators, and various items like that and even elevators. For that matter, even doors. I mean, some specialty doors have extremely long lead times now, and the manufacturers are not giving true estimated dates as to when they can be delivered. It's really tough to determine when a construction project can be done if you can't determine when you're gonna be getting the HVAC units for it or the generator for it or again, even the specialty doors for it.
I mean, that's why it's been pushed back, why we didn't end up closing one in, why we don't think we'll end up closing one in the fourth quarter, and why they've been pushed back. You know, my best estimate is probably somewhat pro rata, one a quarter for 2023 and then one that gets pushed into 2024. That's a best guess, but it's all depending upon the supply chain.
Okay, thank you. That's very helpful.
Again, if you have a question, please press star then one. The next question comes from David Rodgers from Baird. Please go ahead.
Yeah, good morning, guys. Tim, I wanted to go back to the acquisitions that you're set to close here in the fourth quarter. The pipeline for this quarter was about $20-$25 million on average for assets, and this quarter kind of shrinks down to three. I'm wondering if you've sourced all those as individual transactions, if there are one or multiple portfolios in there, and maybe talk a little bit about, you know, credit on something like that you're considering in these smaller sized assets.
Good morning, Dave. Basically these are our types of assets. They're our bread and butter assets that you know, we've invested in for the last seven or eight years, however long it is that we've been public. There's one group of multiple properties, and there's a couple of them that have two different properties. I think all total, if there's eight or nine transactions that make up the 20 properties. So there's not a single large portfolio. Basically, they are just kind of our bread and butter acquisitions. I think all of them are medical office buildings or physician clinics. But there's nothing that really stands out or makes them unique.
Again, they're our basic bread and butter, that we've invested in.
Just really the market coming back to you. That's helpful. Maybe the other one on redevelopment, and I know redevelopment is something we talked about last quarter. Maybe two questions on the five properties you mentioned with tenants in place. Maybe you have this somewhere, I didn't see it or hear it. Sq ft of this bucket of five properties, I guess would be the first question. Second is, does that show up in your occupancy stat today, or is that kind of future occupancy relative to your occupancy number today?
I'll look at Tim first. Do you know the square footage? I mean, I don't think we've disclosed that, but there's nothing against it, so.
No, we have not, but it is leased occupancy, so it is included in our occupancy figures.
Okay. How many square feet would you estimate?
Anywhere between, you know, 50,000-70,000 sq ft, roughly.
Great. Well, that's helpful. I appreciate it, guys. Thank you.
Okay.
This concludes our question and answer session. I would like to turn the conference back over to Tim Wallace for any closing remarks.
Well, we appreciate everyone being with us today, and look forward to having a good fourth quarter and talking to you all after the first of the year. I mean, seeing some of you out in Nareit. Thanks so much. Bye.
Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.