Universal Health Realty Income Trust Reports 2020 First Quarter Financial Results
04/27/2020
As calculated on the attached Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule"), our funds from operations ("FFO"), were
Favorably impacting our net income and FFO during the first quarter of 2020, as compared to the first quarter of 2019, was a decrease in our interest expense of
COVID-19
The COVID-19 pandemic began to significantly impact
However, patient volumes at our three acute care hospitals, and likely at our other healthcare properties including the MOBs and ambulatory care centers, were significantly reduced during the second half of March as a result of COVID-19. These significant reductions to patient volumes experienced at our three acute care hospitals, and likely at our other healthcare facilities, have continued into April, 2020. We believe that the adverse impact that COVID-19 will have on the future operations and financial results of our tenants, and in turn ours, will depend upon many factors, most of which are beyond our, or our tenants', ability to control or predict.
Below is information detailing the rentable square feet ("RSF") of our properties based upon property type. This information is being provided as a means of summarizing the underlying nature of the businesses operated in these properties as well as certain other information. The RSF data as presented in the table is as of
Percentage |
Tenants' |
||||
Number |
RSF |
of RSF |
Businesses |
||
of |
Total |
Under |
Under |
Currently |
|
Properties |
RSF |
Lease |
Lease |
Operating? (4) |
|
|
|||||
|
1 |
422,276 |
422,276 |
100% |
Yes |
|
1 |
196,489 |
196,489 |
100% |
Yes |
|
1 |
164,377 |
164,377 |
100% |
Yes |
Kindred Hospital Chicago Central |
1 |
115,554 |
115,554 |
100% |
Yes |
|
1 |
77,440 |
0 |
0% |
N/A |
|
1 |
69,700 |
0 |
0% |
N/A |
Subtotal - hospitals |
6 |
1,045,836 |
898,696 |
86% |
|
Medical Office Buildings aggregate |
55 |
2,590,467 |
2,165,626 |
84% |
Various (2) |
Ambulatory Care Centers aggregate |
4 |
58,551 |
58,551 |
100% |
Yes |
Preschool/Childcare Centers aggregate |
4 |
32,561 |
32,561 |
100% |
No (3) |
Total portfolio |
69 |
3,727,415 |
3,155,434 |
85% |
N/A – Not Applicable. |
|
(1) |
Since the bonus rents earned by us on the three acute care hospitals leased to wholly-owned subsidiaries of Universal Health Services, Inc., are computed based upon a computation that compares each hospital's current quarter revenue to the corresponding quarter in the base year, we expect to experience significant declines in future bonus rental revenue earned on these properties to the extent that each hospital continues to experience significant decline in patient volumes and revenues. These hospitals may be eligible for emergency fund grants as provided for by the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Should the hospitals ultimately be deemed qualified for CARES Act funding, a portion of their expected revenue declines could be offset by such funding, to the extent those grants are classified as revenues by the hospitals. Aggregate bonus rental earned on these three hospitals amounted to approximately |
(2) |
Tenants in our MOBs include, but are not limited to, physician practices, diagnostic centers, laboratories, dental practices, ambulatory surgery centers, oncology centers, physical therapy clinics, eye care and wound care centers. We believe that the underlying businesses operated by certain of these tenants are either temporarily closed entirely or operating at substantially reduced hours. Given the dynamic nature of the impact of COVID-19, state mandates, and practice elections, we are unable to estimate with certainty the portion of the aggregate rentable square feet under lease at our MOBs that have either closed or substantially reduced their operating hours. As of |
(3) |
The pre-school/childcare centers, which are all located in |
(4) |
Since the underlying businesses in each of our properties are operated by the tenants, we can provide no assurance that the businesses will continue to operate in the future. |
Throughout the common areas of many properties in our portfolio, we have implemented COVID-19 risk mitigating actions such as, enhanced cleaning protocols including supplemental cleaning and sanitizing of high-touch points, limiting points of entry at certain facilities, and coordinating with health care providers to assess or screen patients prior to entering certain of our MOBs.
Dividend Information:
The first quarter dividend of
Capital Resources Information:
At
Lease Expirations/Vacancies of Two Hospital Facilities:
As previously disclosed, the tenants in two of our hospital facilities had provided notice to us that they did not intend to renew the leases upon the scheduled expiration of the respective facilities. The leases on these two hospital facilities, located in
The combined lease revenue generated at these facilities amounted to
We continue to market each property for lease to new tenants. However, should these properties continue to remain owned and vacant for an extended period of time, or should we experience decreased lease rates on future leases, as compared to prior/expired lease rates, or incur substantial renovation costs to make the properties suitable for other operators/tenants, our future results of operations could be materially unfavorably impacted.
New Construction Projects:
In late July, 2019, a wholly-owned subsidiary of ours entered into an agreement to build and lease a newly constructed 108-bed behavioral health care hospital located in
Construction of this hospital, for which we have engaged a wholly-owned subsidiary of UHS to act as project manager, is expected to be completed in late 2020 or early 2021. The hospital lease will commence upon issuance of the certificate of occupancy. The approximate cost of the project is estimated at
In September, 2019, we entered into an agreement whereby we will own a 95% ownership interest in
General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:
This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, those related to the anticipated impact of COVID-19 on our financial results, 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
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, will likely be materially impacted by developments related to COVID-19. Such developments include, but are not limited to, the length of time and severity of the spread of the pandemic; the volume of cancelled or rescheduled elective procedures and the volume of COVID-19 patients treated by the operators of our hospitals and other healthcare facilities; measures our tenants are taking to respond to the COVID-19 pandemic; the impact of government and administrative regulation and stimulus on 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 to clinical staffing and shortages and disruptions related to supplies required for our tenants' employees and patients; and potential increases to expenses incurred by our tenants related to staffing, supply chain or other expenditures. There may be significant declines in future bonus rental revenue earned on our hospital properties leased to subsidiaries UHS to the extent that each hospital continues to experience significant decline in patient volumes. We believe that the underlying businesses operated by certain of our other tenants are either temporarily closed entirely or operating at substantially reduced hours These factors may result in the inability or unwillingness on the part of some of our tenants to make timely payment of their rent to us at current levels or to seek to amend or terminate their leases which, in turn, would have an adverse effect on our occupancy levels and our revenue and cash flow and the value of our properties, and potentially, our ability to maintain our dividend at current levels. Due to COVID-19 restrictions and its impact on the economy, we may experience a decrease in prospective tenants which could unfavorably impact the volume of new leases, as well as the renewal rate of existing leases. The COVID-19 pandemic may delay our construction projects which could result in increased costs and delay the timing of opening and rental payments from those projects, although no such delays have yet occurred. The COVID-19 pandemic could also impact our indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the COVID-19 pandemic which could impact us from a financing perspective; and changes in general economic conditions nationally and regionally in the markets our properties are located resulting from the COVID-19 pandemic. We are not able to fully quantify the impact that these factors will have on our financial results during 2020, but developments related to the COVID-19 pandemic are likely to have a material adverse impact on our future financial results.
We believe that adjusted net income and adjusted net income per diluted share (as reflected on the attached Supplemental Schedules), 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
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
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|
||||||||
Three Months Ended |
||||||||
|
||||||||
2020 |
2019 |
|||||||
Revenues: |
||||||||
Lease revenue - UHS facilities (a.) |
$ |
5,881 |
$ |
5,793 |
||||
Lease revenue- Non-related parties |
12,842 |
12,731 |
||||||
Other revenue - UHS facilities |
214 |
213 |
||||||
Other revenue - Non-related parties |
270 |
375 |
||||||
19,207 |
19,112 |
|||||||
Expenses: |
||||||||
Depreciation and amortization |
6,380 |
6,708 |
||||||
Advisory fees to UHS |
1,016 |
970 |
||||||
Other operating expenses |
5,383 |
5,210 |
||||||
12,779 |
12,888 |
|||||||
Income before equity in income of unconsolidated limited liability companies |
6,428 |
6,224 |
||||||
Equity in income of unconsolidated LLCs |
435 |
430 |
||||||
Gain on sale of land |
- |
250 |
||||||
Interest expense, net |
(2,309) |
(2,692) |
||||||
Net income |
$ |
4,554 |
$ |
4,212 |
||||
Basic earnings per share |
$ |
0.33 |
$ |
0.31 |
||||
Diluted earnings per share |
$ |
0.33 |
$ |
0.31 |
||||
Weighted average number of shares outstanding - Basic |
13,736 |
13,728 |
||||||
Weighted average number of shares outstanding - Diluted |
13,758 |
13,728 |
||||||
(a.) Includes bonus rental on UHS hospital facilities of |
|
||||||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||||
|
|
|||||||||||||||
Amount |
Per Diluted Share |
Amount |
Per Diluted Share |
|||||||||||||
Net income |
$ |
4,554 |
$ |
0.33 |
$ |
4,212 |
$ |
0.31 |
||||||||
Adjustments: |
- |
- |
(250) |
(0.02) |
||||||||||||
Subtotal adjustments to net income |
- |
- |
(250) |
(0.02) |
||||||||||||
Adjusted net income |
$ |
4,554 |
$ |
0.33 |
$ |
3,962 |
$ |
0.29 |
Calculation of Funds From Operations ("FFO") |
||||||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||||
|
|
|||||||||||||||
Amount |
Per Diluted Share |
Amount |
Per Diluted Share |
|||||||||||||
Net income |
$ |
4,554 |
$ |
0.33 |
$ |
4,212 |
$ |
0.31 |
||||||||
Plus: Depreciation and amortization expense: |
||||||||||||||||
Consolidated investments |
6,380 |
0.47 |
6,708 |
0.49 |
||||||||||||
Unconsolidated affiliates |
286 |
0.02 |
283 |
0.02 |
||||||||||||
Less: Gain on sale of land |
- |
- |
(250) |
(0.02) |
||||||||||||
FFO |
$ |
11,220 |
$ |
0.82 |
$ |
10,953 |
$ |
0.80 |
||||||||
Dividend paid per share |
$ |
0.685 |
$ |
0.675 |
|
||||||||
|
|
|||||||
2020 |
2019 |
|||||||
Assets: |
||||||||
Real Estate Investments: |
||||||||
Buildings and improvements and construction in progress |
$ |
579,161 |
$ |
572,503 |
||||
Accumulated depreciation |
(200,306) |
(194,888) |
||||||
378,855 |
377,615 |
|||||||
Land |
54,892 |
54,892 |
||||||
Net Real Estate Investments |
433,747 |
432,507 |
||||||
Investments in limited liability companies ("LLCs") |
8,411 |
6,918 |
||||||
Other Assets: |
||||||||
Cash and cash equivalents |
5,667 |
6,110 |
||||||
Lease and other receivables from UHS |
2,954 |
2,963 |
||||||
Lease receivable - other |
7,468 |
7,640 |
||||||
Intangible assets (net of accumulated amortization of |
13,749 |
14,553 |
||||||
Right-of-use land assets, net |
8,937 |
8,944 |
||||||
Deferred charges and other assets, net |
8,201 |
9,154 |
||||||
Total Assets |
$ |
489,134 |
$ |
488,789 |
||||
Liabilities: |
||||||||
Line of credit borrowings |
$ |
219,200 |
$ |
212,950 |
||||
Mortgage notes payable, non-recourse to us, net |
60,326 |
60,744 |
||||||
Accrued interest |
349 |
374 |
||||||
Accrued expenses and other liabilities |
16,662 |
12,888 |
||||||
Ground lease liabilities, net |
8,937 |
8,944 |
||||||
Tenant reserves, deposits and deferred and prepaid rents |
11,220 |
11,155 |
||||||
Total Liabilities |
316,694 |
307,055 |
||||||
Equity: |
||||||||
Preferred shares of beneficial interest, |
- |
- |
||||||
Common shares, |
138 |
138 |
||||||
Capital in excess of par value |
266,970 |
266,723 |
||||||
Cumulative net income |
665,834 |
661,280 |
||||||
Cumulative dividends |
(756,841) |
(747,417) |
||||||
Accumulated other comprehensive (loss)/income |
(3,661) |
1,010 |
||||||
Total Equity |
172,440 |
181,734 |
||||||
Total Liabilities and Equity |
$ |
489,134 |
$ |
488,789 |
View original content:http://www.prnewswire.com/news-releases/universal-health-realty-income-trust-reports-2020-first-quarter-financial-results-301047782.html
SOURCE
Charles Boyle, Chief Financial Officer, (610) 768-3300