UNIVERSAL HEALTH REALTY INCOME TRUST REPORTS 2023 FOURTH QUARTER AND FULL YEAR FINANCIAL RESULTS
- Net income for the three-month and twelve-month periods ended December 31, 2023, decreased compared to 2022.
- Loss on divestiture of a specialty facility in Corpus Christi, Texas impacted financial results.
- Adjusted net income for 2023 was $15.6 million, down from $21.1 million in 2022.
- FFO decreased to $44.6 million in 2023 from $48.8 million in 2022.
- Operating expenses related to vacant properties in Evansville, Indiana, and Corpus Christi, Texas, were incurred.
- Future operating expenses for vacant properties will continue until they are leased or sold.
- Decrease in net income and FFO compared to the previous year.
- Loss on divestiture affecting financial results.
- Operating expenses for vacant properties impacting financials.
Insights
The reported decrease in net income and diluted earnings per share (EPS) for Universal Health Realty Income Trust (UHT) indicates a contraction in profitability year-over-year for both the fourth quarter and the full year. This contraction is primarily attributed to increased interest expenses and a one-time settlement in the previous year. The increase in interest expenses reflects the broader macroeconomic environment, where rising interest rates have elevated borrowing costs for many firms, squeezing margins and impacting bottom lines.
Investors typically monitor Funds from Operations (FFO) closely in real estate investment trusts (REITs) as it provides a clearer picture of cash flow from operations by excluding depreciation and amortization, which are non-cash expenses. The reported decrease in FFO further confirms the downward pressure on earnings. The divestiture of the Corpus Christi property and the acquisition of the McAllen Doctor's Center reflect strategic portfolio realignment, which may have long-term benefits but has resulted in a short-term loss. The construction of Sierra Medical Plaza I represents capital investment aimed at future growth, though it entails significant upfront costs.
UHT's activities, including the sale of a vacant specialty facility and the acquisition of a medical office building, suggest a strategic shift towards optimizing their portfolio. The sale of underperforming or non-core assets like the Corpus Christi facility is a common strategy to improve operational efficiency and reduce carrying costs. Conversely, the acquisition of the McAllen Doctor's Center, with a long-term triple-net lease, indicates a focus on stable, long-term revenue streams—a positive sign for investors seeking consistency in dividends.
The development of Sierra Medical Plaza I on the campus of the Northern Nevada Sierra Medical Center could offer synergistic benefits due to its proximity to the hospital, potentially attracting healthcare providers seeking convenient locations for their practices. The financial commitment to this project, however, must be weighed against the expected future cash flows it may generate.
The maintenance of a dividend, as indicated by the CEO's statement, is an essential factor for income-focused investors. The declaration of a consistent dividend despite a challenging financial year suggests UHT's commitment to returning value to shareholders. However, the sustainability of this dividend policy should be scrutinized in light of the decreased net income and FFO, as these are key indicators of a REIT's ability to maintain or grow dividends. Long-term investors should consider the potential for dividend stability in the context of UHT's operational adjustments and the broader interest rate environment, which could continue to impact borrowing costs and profitability.
Consolidated Results of Operations - Three-Month Periods Ended December 31, 2023 and 2022:
As reflected on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our financial results for the three-month period ended December 31, 2023 included a loss on divestiture of approximately
The decrease in our adjusted net income of
As calculated on the Supplemental Schedule, our funds from operations ("FFO") were
Consolidated Results of Operations - Twelve-Month Periods Ended December 31, 2023 and 2022:
For the twelve-month period ended December 31, 2023, net income was
As reflected on the Supplemental Schedule, our financial results for the year ended December 31, 2023 included the above-mentioned loss on divestiture of real estate assets of approximately
The decrease in our adjusted net income of
As calculated on the Supplemental Schedule, our FFO were
"Despite a challenging year in 2023 as compared to 2022, due, in part, to the nonrecurring items related to our property located in
Property Divestiture:
In December, 2023, we sold the vacant specialty facility in
Property Acquisition:
In August, 2023, we acquired the
Construction Project - Sierra Medical Plaza I:
In March, 2023, construction was substantially completed on the Sierra Medical Plaza I, an 86,000 square foot MOB located in
Dividend Information:
The fourth quarter dividend of
Capital Resources Information:
At December 31, 2023, we had
Vacant Land/Specialty Facilities:
Demolition of the former specialty hospital located in
Including the demolition costs incurred during the twelve-months ended December 31, 2023, the operating expenses incurred by us in connection with this property were
In addition, the aggregate operating expenses for the two vacant specialty facilities located in
We continue to market the two remaining above-mentioned vacant properties to third parties. Future operating expenses related to these properties, will be incurred by us during the time they remain owned and unleased.
General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:
Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human-service related facilities including acute care hospitals, behavioral health care hospitals, specialty facilities, medical/office buildings, free-standing emergency departments and childcare centers. We have investments or commitments in seventy-six properties located in twenty-one states.
This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, as well as the operations and financial results of each of our tenants, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1A-Risk Factors and in Item 7- Forward-Looking Statements in our Form 10-K for the year ended December 31, 2023), may cause the results to differ materially from those anticipated in the forward-looking statements. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Many of the factors that could affect our future results are beyond our control or ability to predict, including the impact of the COVID-19 pandemic. Future operations and financial results of our tenants, and in turn ours, could be materially impacted by various developments including, but not limited to, decreases in staffing availability and related increases to wage expense experienced by our tenants resulting from the nationwide shortage of nurses and other clinical staff and support personnel, the impact of government and administrative regulation of the health care industry; declining patient volumes and unfavorable changes in payer mix caused by deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients as the result of business closings and layoffs); potential disruptions related to supplies required for our tenants' employees and patients; and potential increases to other expenditures.
In addition, the increase in interest rates has substantially increased our borrowings costs and reduced our ability to access the capital markets on favorable terms. Additional increases in interest rates could have a significant unfavorable impact on our future results of operations and the resulting effect on the capital markets could adversely affect our ability to carry out our strategy.
We believe that, if and when applicable, adjusted net income and adjusted net income per diluted share (as reflected on the Supplemental Schedule), which are non-GAAP financial measures ("GAAP" is Generally Accepted Accounting Principles in
Funds from operations ("FFO") is a widely recognized measure of performance for Real Estate Investment Trusts ("REITs"). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO, as reflected on the attached Supplemental Schedules, in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we interpret the definition. FFO adjusts for the effects of certain items, such as gains or losses on transactions that occurred during the periods presented. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP. In addition, FFO should not be used as: (i) an indication of our financial performance determined in accordance with GAAP; (ii) an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) a measure of our liquidity, or; (iv) an indicator of funds available for our cash needs, including our ability to make cash distributions to shareholders. A reconciliation of our reported net income to FFO is reflected on the Supplemental Schedules included below.
To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2023. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.
Universal Health Realty Income Trust Consolidated Statements of Income For the Three and Twelve Months Ended December 31, 2023 and 2022 (amounts in thousands, except share information) (unaudited) | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Revenues: | ||||||||||||||||
Lease revenue - UHS facilities (a.) | $ | 8,326 | $ | 7,663 | $ | 32,623 | $ | 29,954 | ||||||||
Lease revenue - Non-related parties | 14,038 | 13,340 | 54,993 | 52,004 | ||||||||||||
Other revenue - UHS facilities | 216 | 231 | 946 | 948 | ||||||||||||
Other revenue - Non-related parties | 378 | 1,527 | 1,555 | 2,245 | ||||||||||||
Interest income on financing leases - UHS facilities | 1,362 | 1,367 | 5,458 | 5,474 | ||||||||||||
24,320 | 24,128 | 95,575 | 90,625 | |||||||||||||
Expenses: | ||||||||||||||||
Depreciation and amortization | 7,254 | 6,511 | 27,733 | 26,557 | ||||||||||||
Advisory fees to UHS | 1,366 | 1,310 | 5,323 | 5,097 | ||||||||||||
Other operating expenses | 7,545 | 7,577 | 31,170 | 28,305 | ||||||||||||
16,165 | 15,398 | 64,226 | 59,959 | |||||||||||||
Income before equity in income of unconsolidated limited | 8,155 | 8,730 | 31,349 | 30,666 | ||||||||||||
Equity in income of unconsolidated LLCs | 254 | 248 | 1,207 | 1,191 | ||||||||||||
Loss on divestiture of real estate assets | (232) | - | (232) | - | ||||||||||||
Interest expense, net | (4,584) | (3,347) | (16,924) | (10,755) | ||||||||||||
Net income | $ | 3,593 | $ | 5,631 | $ | 15,400 | $ | 21,102 | ||||||||
Basic earnings per share | $ | 0.26 | $ | 0.41 | $ | 1.12 | $ | 1.53 | ||||||||
Diluted earnings per share | $ | 0.26 | $ | 0.41 | $ | 1.11 | $ | 1.53 | ||||||||
Weighted average number of shares outstanding - Basic | 13,791 | 13,777 | 13,786 | 13,771 | ||||||||||||
Weighted average number of shares outstanding - Diluted | 13,823 | 13,802 | 13,814 | 13,795 | ||||||||||||
(a.) Includes bonus rental on McAllen Medical Center, a UHS acute care hospital facility of | ||||||||||||||||
Universal Health Realty Income Trust Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule") For the Three Months Ended December 31, 2023 and 2022 (amounts in thousands, except share information) (unaudited) | ||||||||||||||||
Calculation of Adjusted Net Income | ||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||
Amount | Per | Amount | Per | |||||||||||||
Net income | $ | 3,593 | $ | 0.26 | $ | 5,631 | $ | 0.41 | ||||||||
Adjustment: | ||||||||||||||||
Plus: Loss on divestiture of real estate assets | 232 | 0.02 | - | - | ||||||||||||
Subtotal adjustments to net income | 232 | 0.02 | - | - | ||||||||||||
Adjusted net income | $ | 3,825 | $ | 0.28 | $ | 5,631 | $ | 0.41 | ||||||||
Calculation of Funds From Operations ("FFO") | ||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||
Amount | Per | Amount | Per | |||||||||||||
Net income | $ | 3,593 | $ | 0.26 | $ | 5,631 | $ | 0.41 | ||||||||
Plus: Depreciation and amortization expense: | ||||||||||||||||
Consolidated investments | 7,254 | 0.52 | 6,511 | 0.47 | ||||||||||||
Unconsolidated affiliates | 305 | 0.02 | 299 | 0.02 | ||||||||||||
Plus: Loss on divestiture of real estate assets | 232 | 0.02 | - | - | ||||||||||||
FFO | $ | 11,384 | $ | 0.82 | $ | 12,441 | $ | 0.90 | ||||||||
Dividend paid per share | $ | 0.725 | $ | 0.715 | ||||||||||||
Universal Health Realty Income Trust Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule") For the Twelve Months Ended December 31, 2023 and 2022 (amounts in thousands, except share information) (unaudited) | ||||||||||||||||
Calculation of Adjusted Net Income | ||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||
Amount | Per | Amount | Per | |||||||||||||
Net income | $ | 15,400 | $ | 1.11 | $ | 21,102 | $ | 1.53 | ||||||||
Adjustment: | ||||||||||||||||
Plus: Loss on divestiture of real estate assets | 232 | 0.02 | - | - | ||||||||||||
Subtotal adjustments to net income | 232 | 0.02 | - | - | ||||||||||||
Adjusted net income | $ | 15,632 | $ | 1.13 | $ | 21,102 | $ | 1.53 | ||||||||
Calculation of Funds From Operations ("FFO") | ||||||||||||||||
Twelve Months Ended | Twelve Months Ended | |||||||||||||||
December 31, 2023 | December 31, 2022 | |||||||||||||||
Amount | Per | Amount | Per | |||||||||||||
Net income | $ | 15,400 | $ | 1.11 | $ | 21,102 | $ | 1.53 | ||||||||
Plus: Depreciation and amortization expense: | ||||||||||||||||
Consolidated investments | 27,733 | 2.01 | 26,557 | 1.93 | ||||||||||||
Unconsolidated affiliates | 1,205 | 0.09 | 1,184 | 0.08 | ||||||||||||
Plus: Loss on divestiture of real estate assets | 232 | 0.02 | - | - | ||||||||||||
FFO | $ | 44,570 | $ | 3.23 | $ | 48,843 | $ | 3.54 | ||||||||
Dividend paid per share | $ | 2.880 | $ | 2.840 | ||||||||||||
Universal Health Realty Income Trust Consolidated Balance Sheets (amounts in thousands, except share information) (unaudited) | ||||||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Assets: | ||||||||
Real Estate Investments: | ||||||||
Buildings and improvements and construction in progress | $ | 649,374 | $ | 641,338 | ||||
Accumulated depreciation | (262,449) | (248,772) | ||||||
386,925 | 392,566 | |||||||
Land | 56,870 | 56,631 | ||||||
Net Real Estate Investments | 443,795 | 449,197 | ||||||
Financing receivable from UHS | 83,279 | 83,603 | ||||||
Net Real Estate Investments and Financing receivable | 527,074 | 532,800 | ||||||
Investments in and advances to limited liability companies ("LLCs") | 9,102 | 9,282 | ||||||
Other Assets: | ||||||||
Cash and cash equivalents | 8,212 | 7,614 | ||||||
Lease and other receivables from UHS | 6,180 | 5,388 | ||||||
Lease receivable - other | 8,166 | 8,445 | ||||||
Intangible assets (net of accumulated amortization of | 9,110 | 9,447 | ||||||
Right-of-use land assets, net | 10,946 | 11,457 | ||||||
Deferred charges and other assets, net | 17,579 | 23,107 | ||||||
Total Assets | $ | 596,369 | $ | 607,540 | ||||
Liabilities: | ||||||||
Line of credit borrowings | $ | 326,600 | $ | 298,100 | ||||
Mortgage notes payable, non-recourse to us, net | 32,863 | 44,725 | ||||||
Accrued interest | 490 | 373 | ||||||
Accrued expenses and other liabilities | 13,500 | 12,873 | ||||||
Ground lease liabilities, net | 10,946 | 11,457 | ||||||
Tenant reserves, deposits and deferred and prepaid rents | 11,036 | 10,911 | ||||||
Total Liabilities | 395,435 | 378,439 | ||||||
Equity: | ||||||||
Preferred shares of beneficial interest, | - | - | ||||||
Common shares, | 138 | 138 | ||||||
Capital in excess of par value | 270,398 | 269,472 | ||||||
Cumulative net income | 826,061 | 810,661 | ||||||
Cumulative dividends | (902,975) | (863,181) | ||||||
Accumulated other comprehensive income | 7,312 | 12,011 | ||||||
Total Equity | 200,934 | 229,101 | ||||||
Total Liabilities and Equity | $ | 596,369 | $ | 607,540 | ||||
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SOURCE Universal Health Realty Income Trust
FAQ
What was Universal Health Realty Income Trust's net income for the three-month period ended December 31, 2023?
What was the adjusted net income for the year ended December 31, 2023?
What was the FFO for the twelve-month period of 2023?
What were the operating expenses related to vacant properties in Evansville, Indiana, and Corpus Christi, Texas?
What will happen to future operating expenses for vacant properties?
