UNIVERSAL HEALTH REALTY INCOME TRUST REPORTS 2024 FIRST QUARTER FINANCIAL RESULTS
- Net income increased to $5.3 million in Q1 2024 from $4.5 million in Q1 2023.
- FFO rose to $12.4 million in Q1 2024 from $11.4 million in Q1 2023.
- The first quarter dividend was $.725 per share.
- Outstanding borrowings totaled $333.7 million at March 31, 2024.
- Increase in interest expense due to rising borrowing rates.
- Demolition expenses in Chicago offset some gains.
- Operating expenses for vacant properties incurred during Q1 2024.
Insights
The reported increase in net income and funds from operations (FFO) for Universal Health Realty Income Trust, coupled with a dividend payment, signifies a positive performance trajectory. The growth in net income from $4.5 million to $5.3 million reflects an improved operational efficiency. Investors should note the increase in interest expenses which may be attributed to higher borrowing costs and could indicate a leveraged position. Additionally, the FFO rise from $11.4 million to $12.4 million, representing an industry-standard metric for real estate investment trusts (REITs), suggests healthy cash flow generation.
Considering the dividend of $.725 per share, this yields an indication of the company's commitment to shareholder returns, harmonized with the REIT's objective to distribute income. The current capital resources information, showing a strong available borrowing capacity, signals liquidity to potentially cover future investments or obligations. This financial stability, however, should be weighed against the cost of borrowing and overall debt levels.
The operational details regarding the Sierra Medical Plaza I indicate a strategic alignment with hospital operations, potentially driving stable, long-term lease income. The 68% occupancy rate at commencement, under a ten-year term, suggests confidence in the property's future revenue stream. However, the master flex lease agreement subject to reduction upon third-party leases is worth noting, as it could impact future earnings predictability.
With the demolition of an underperforming property and disposal of another, the trust is actively managing its portfolio, which may enhance its operational focus and reduce carrying costs in the long term. The reduction in operating expenses year-over-year, even when excluding demolition costs, evidences disciplined cost management and operational streamlining, a positive signal for profitability.
For investors, the ongoing efforts to market remaining vacant properties indicate proactive asset management but also suggest potential future liabilities if these efforts prolong. The investor should monitor these developments to gauge their impact on the trust's profitability and asset utilization.
Consolidated Results of Operations - Three-Month Periods Ended March 31, 2024 and 2023:
The increase in our net income of
As calculated on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our funds from operations ("FFO") were
Dividend Information:
The first quarter dividend of
Capital Resources Information:
At March 31, 2024, we had
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
Vacant Land/Specialty Facility:
Demolition of the former specialty hospital located in
Operating expenses incurred by us in connection with the above two properties, as well as a vacant specialty facility 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. 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 Months Ended March 31, 2024 and 2023 (amounts in thousands, except share information) (unaudited) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2024 | 2023 | |||||||
Revenues: | ||||||||
Lease revenue - UHS facilities (a.) | $ | 8,664 | $ | 7,787 | ||||
Lease revenue - Non-related parties | 14,487 | 13,361 | ||||||
Other revenue - UHS facilities | 220 | 231 | ||||||
Other revenue - Non-related parties | 409 | 481 | ||||||
Interest income on financing leases - UHS facilities | 1,361 | 1,366 | ||||||
25,141 | 23,226 | |||||||
Expenses: | ||||||||
Depreciation and amortization | 6,809 | 6,618 | ||||||
Advisory fees to UHS | 1,338 | 1,302 | ||||||
Other operating expenses | 7,531 | 7,521 | ||||||
15,678 | 15,441 | |||||||
Income before equity in income of unconsolidated limited liability companies ("LLCs") and interest expense | 9,463 | 7,785 | ||||||
Equity in income of unconsolidated LLCs | 384 | 371 | ||||||
Interest expense, net | (4,547) | (3,697) | ||||||
Net income | $ | 5,300 | $ | 4,459 | ||||
Basic earnings per share | $ | 0.38 | $ | 0.32 | ||||
Diluted earnings per share | $ | 0.38 | $ | 0.32 | ||||
Weighted average number of shares outstanding - Basic | 13,792 | 13,778 | ||||||
Weighted average number of shares outstanding - Diluted | 13,824 | 13,803 | ||||||
(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 March 31, 2024 and 2023 (amounts in thousands, except share information) (unaudited) | ||||||||||||||||
Calculation of Adjusted Net Income | ||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
March 31, 2024 | March 31, 2023 | |||||||||||||||
Amount | Per | Amount | Per | |||||||||||||
Net income | $ | 5,300 | $ | 0.38 | $ | 4,459 | $ | 0.32 | ||||||||
Adjustments | - | - | - | - | ||||||||||||
Subtotal adjustments to net income | - | - | - | - | ||||||||||||
Adjusted net income | $ | 5,300 | $ | 0.38 | $ | 4,459 | $ | 0.32 | ||||||||
Calculation of Funds From Operations ("FFO") | ||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||
March 31, 2024 | March 31, 2023 | |||||||||||||||
Amount | Per | Amount | Per | |||||||||||||
Net income | $ | 5,300 | $ | 0.38 | $ | 4,459 | $ | 0.32 | ||||||||
Plus: Depreciation and amortization expense: | ||||||||||||||||
Consolidated investments | 6,809 | 0.50 | 6,618 | 0.48 | ||||||||||||
Unconsolidated affiliates | 304 | 0.02 | 293 | 0.02 | ||||||||||||
FFO | $ | 12,413 | $ | 0.90 | $ | 11,370 | $ | 0.82 | ||||||||
Dividend paid per share | $ | 0.725 | $ | 0.715 | ||||||||||||
Universal Health Realty Income Trust Consolidated Balance Sheets (amounts in thousands, except share information) (unaudited) | ||||||||
March 31, | December 31, | |||||||
2024 | 2023 | |||||||
Assets: | ||||||||
Real Estate Investments: | ||||||||
Buildings and improvements and construction in progress | $ | 650,622 | $ | 649,374 | ||||
Accumulated depreciation | (268,544) | (262,449) | ||||||
382,078 | 386,925 | |||||||
Land | 56,870 | 56,870 | ||||||
Net Real Estate Investments | 438,948 | 443,795 | ||||||
Financing receivable from UHS | 83,162 | 83,279 | ||||||
Net Real Estate Investments and Financing receivable | 522,110 | 527,074 | ||||||
Investments in and advances to limited liability companies ("LLCs") | 14,632 | 9,102 | ||||||
Other Assets: | ||||||||
Cash and cash equivalents | 7,697 | 8,212 | ||||||
Lease and other receivables from UHS | 6,645 | 6,180 | ||||||
Lease receivable - other | 8,219 | 8,166 | ||||||
Intangible assets (net of accumulated amortization of | 8,653 | 9,110 | ||||||
Right-of-use land assets, net | 10,939 | 10,946 | ||||||
Deferred charges, notes receivable and other assets, net | 17,294 | 17,579 | ||||||
Total Assets | $ | 596,189 | $ | 596,369 | ||||
Liabilities: | ||||||||
Line of credit borrowings | $ | 333,650 | $ | 326,600 | ||||
Mortgage notes payable, non-recourse to us, net | 32,506 | 32,863 | ||||||
Accrued interest | 1,088 | 490 | ||||||
Accrued expenses and other liabilities | 10,189 | 13,500 | ||||||
Ground lease liabilities, net | 10,939 | 10,946 | ||||||
Tenant reserves, deposits and deferred and prepaid rents | 11,359 | 11,036 | ||||||
Total Liabilities | 399,731 | 395,435 | ||||||
Equity: | ||||||||
Preferred shares of beneficial interest, | - | - | ||||||
Common shares, | 138 | 138 | ||||||
Capital in excess of par value | 270,454 | 270,398 | ||||||
Cumulative net income | 831,361 | 826,061 | ||||||
Cumulative dividends | (912,998) | (902,975) | ||||||
Accumulated other comprehensive income | 7,503 | 7,312 | ||||||
Total Equity | 196,458 | 200,934 | ||||||
Total Liabilities and Equity | $ | 596,189 | $ | 596,369 | ||||
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SOURCE Universal Health Realty Income Trust
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