Universal Health Realty Income Trust Reports 2020 Third Quarter Financial Results
10/29/2020
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 third quarter of 2020, as compared to the third quarter of 2019, in addition to a combined aggregate net increase in net income and FFO experienced at various properties, was a decrease in our interest expense of
Consolidated Results of Operations - Nine-Month Periods Ended
For the nine-month period ended
Favorably impacting our net income and FFO during the nine months ended
COVID-19
The COVID-19 pandemic began to significantly impact
Tenants representing approximately 99% of our occupied square footage have paid their rent through
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 medical office buildings.
Dividend Information:
The third quarter dividend of
Capital Resources Information:
At
At-the-market Equity Issuance Program ("ATM Program"):
During the second quarter of 2020, we commenced an at-the-market equity issuance program pursuant to the terms of which we may sell, from time-to-time, common shares of our beneficial interest up to an aggregate sales price of
Lease Expirations/Vacancies of Two Hospital Facilities:
The leases on two hospital facilities, located in
The combined lease revenue generated at these facilities amounted to approximately
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 and the initial annual rent is estimated to be approximately
In September, 2019, we entered into an agreement whereby we will own a 95% ownership interest in
A 10-year master flex lease was executed with the wholly-owned subsidiary of UHS for 40,000 rentable square feet, representing over 50% of the rentable square feet of the MOB. The master flex lease commitment is subject to reduction upon the execution of third-party leases on up to 20,000 rentable square feet of the first and second floors of the three-story MOB, and 20,000 rentable square feet on the third floor. In April, 2020, a new, 122-month lease was fully executed with a third-party tenant for approximately 26,000 rentable square feet on the first floor of the MOB. As a result, the master flex lease commitment was reduced to 20,000 of rentable square feet on the third floor of the MOB. After giving effect to this new lease, 61% of the rentable square feet of the MOB is under lease agreements.
Effective
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, could 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 of 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 have been, at various times, 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 quantify the impact that these factors will have on our future operations, but developments related to the COVID-19 pandemic could 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
|
||||||||||||||||
Consolidated Statements of Income |
||||||||||||||||
For the Three and Nine Months Ended |
||||||||||||||||
(amounts in thousands, except share information) |
||||||||||||||||
(unaudited) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
|
|
|||||||||||||||
2020 |
2019 |
2020 |
2019 |
|||||||||||||
Revenues: |
||||||||||||||||
Lease revenue - UHS facilities (a.) |
$ |
6,381 |
$ |
5,821 |
$ |
18,243 |
$ |
17,265 |
||||||||
Lease revenue - Non-related parties |
12,841 |
13,555 |
38,526 |
39,464 |
||||||||||||
Other revenue - UHS facilities |
232 |
230 |
667 |
652 |
||||||||||||
Other revenue - Non-related parties |
238 |
260 |
744 |
923 |
||||||||||||
19,692 |
19,866 |
58,180 |
58,304 |
|||||||||||||
Expenses: |
||||||||||||||||
Depreciation and amortization |
6,399 |
6,430 |
19,160 |
19,564 |
||||||||||||
Advisory fees to UHS |
1,039 |
1,011 |
3,082 |
2,963 |
||||||||||||
Other operating expenses |
5,614 |
5,566 |
16,573 |
16,106 |
||||||||||||
13,052 |
13,007 |
38,815 |
38,633 |
|||||||||||||
Income before equity in income of unconsolidated limited liability companies ("LLCs"), interest expense and gain on sale |
6,640 |
6,859 |
19,365 |
19,671 |
||||||||||||
Equity in income of unconsolidated LLCs |
517 |
453 |
1,371 |
1,337 |
||||||||||||
Gain on sale of land |
- |
- |
- |
250 |
||||||||||||
Interest expense, net |
(1,964) |
(2,659) |
(6,289) |
(8,132) |
||||||||||||
Net income |
$ |
5,193 |
$ |
4,653 |
$ |
14,447 |
$ |
13,126 |
||||||||
Basic earnings per share |
$ |
0.38 |
$ |
0.34 |
$ |
1.05 |
$ |
0.96 |
||||||||
Diluted earnings per share |
$ |
0.38 |
$ |
0.34 |
$ |
1.05 |
$ |
0.95 |
||||||||
Weighted average number of shares outstanding - Basic |
13,748 |
13,735 |
13,741 |
13,731 |
||||||||||||
Weighted average number of shares outstanding - Diluted |
13,770 |
13,757 |
13,763 |
13,751 |
||||||||||||
(a.) Includes bonus rental on UHS hospital facilities of |
|
||||||||||||||||
Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule") |
||||||||||||||||
For the Three Months Ended |
||||||||||||||||
(amounts in thousands, except share information) |
||||||||||||||||
(unaudited) |
||||||||||||||||
Calculation of Adjusted Net Income |
||||||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||||
|
|
|||||||||||||||
Amount |
Per Diluted Share |
Amount |
Per Diluted Share |
|||||||||||||
Net income |
$ |
5,193 |
$ |
0.38 |
$ |
4,653 |
$ |
0.34 |
||||||||
Adjustments: |
- |
- |
- |
- |
||||||||||||
Subtotal adjustments to net income |
- |
- |
- |
- |
||||||||||||
Adjusted net income |
$ |
5,193 |
$ |
0.38 |
$ |
4,653 |
$ |
0.34 |
||||||||
Calculation of Funds From Operations ("FFO") |
||||||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||||||
|
|
|||||||||||||||
Amount |
Per Diluted Share |
Amount |
Per Diluted Share |
|||||||||||||
Net income |
$ |
5,193 |
$ |
0.38 |
$ |
4,653 |
$ |
0.34 |
||||||||
Plus: Depreciation and amortization expense: |
||||||||||||||||
Consolidated investments |
6,399 |
0.46 |
6,430 |
0.47 |
||||||||||||
Unconsolidated affiliates |
290 |
0.02 |
280 |
0.02 |
||||||||||||
FFO |
$ |
11,882 |
$ |
0.86 |
$ |
11,363 |
$ |
0.83 |
||||||||
Dividend paid per share |
$ |
0.690 |
$ |
0.680 |
|
||||||||||||||||
Schedule of Non-GAAP Supplemental Information ("Supplemental Schedule") |
||||||||||||||||
For the Nine Months Ended |
||||||||||||||||
(amounts in thousands, except share information) |
||||||||||||||||
(unaudited) |
||||||||||||||||
Calculation of Adjusted Net Income |
||||||||||||||||
Nine Months Ended |
Nine Months Ended |
|||||||||||||||
|
|
|||||||||||||||
Amount |
Per Diluted Share |
Amount |
Per Diluted Share |
|||||||||||||
Net income |
$ |
14,447 |
$ |
1.05 |
$ |
13,126 |
$ |
0.95 |
||||||||
Adjustments: |
||||||||||||||||
Less: Gain on sale of land |
- |
- |
(250) |
(0.01) |
||||||||||||
Subtotal adjustments to net income |
- |
- |
(250) |
(0.01) |
||||||||||||
Adjusted net income |
$ |
14,447 |
$ |
1.05 |
$ |
12,876 |
$ |
0.94 |
||||||||
Calculation of Funds From Operations ("FFO") |
||||||||||||||||
Nine Months Ended |
Nine Months Ended |
|||||||||||||||
|
|
|||||||||||||||
Amount |
Per Diluted Share |
Amount |
Per Diluted Share |
|||||||||||||
Net income |
$ |
14,447 |
$ |
1.05 |
$ |
13,126 |
$ |
0.95 |
||||||||
Plus: Depreciation and amortization expense: |
||||||||||||||||
Consolidated investments |
19,160 |
1.39 |
19,564 |
1.42 |
||||||||||||
Unconsolidated affiliates |
869 |
0.06 |
854 |
0.06 |
||||||||||||
Less: Gain on sale of land |
- |
- |
(250) |
(0.01) |
||||||||||||
FFO |
$ |
34,476 |
$ |
2.50 |
$ |
33,294 |
$ |
2.42 |
||||||||
Dividend paid per share |
$ |
2.065 |
$ |
2.035 |
|
||||||||
Consolidated Balance Sheets |
||||||||
(amounts in thousands, except share information) |
||||||||
(unaudited) |
||||||||
|
|
|||||||
2020 |
2019 |
|||||||
Assets: |
||||||||
Real Estate Investments: |
||||||||
Buildings and improvements and construction in progress |
$ |
595,462 |
$ |
572,503 |
||||
Accumulated depreciation |
(211,155) |
(194,888) |
||||||
384,307 |
377,615 |
|||||||
Land |
54,892 |
54,892 |
||||||
Net Real Estate Investments |
439,199 |
432,507 |
||||||
Investments in limited liability companies ("LLCs") |
4,366 |
6,918 |
||||||
Other Assets: |
||||||||
Cash and cash equivalents |
6,320 |
6,110 |
||||||
Lease and other receivables from UHS |
3,270 |
2,963 |
||||||
Lease receivable - other |
7,306 |
7,640 |
||||||
Intangible assets (net of accumulated amortization of |
12,147 |
14,553 |
||||||
Right-of-use land assets, net |
8,922 |
8,944 |
||||||
Deferred charges and other assets, net |
9,091 |
9,154 |
||||||
Total Assets |
$ |
490,621 |
$ |
488,789 |
||||
Liabilities: |
||||||||
Line of credit borrowings |
$ |
227,100 |
$ |
212,950 |
||||
Mortgage notes payable, non-recourse to us, net |
59,387 |
60,744 |
||||||
Accrued interest |
533 |
374 |
||||||
Accrued expenses and other liabilities |
21,316 |
12,888 |
||||||
Ground lease liabilities, net |
8,922 |
8,944 |
||||||
Tenant reserves, deposits and deferred and prepaid rents |
10,969 |
11,155 |
||||||
Total Liabilities |
328,227 |
307,055 |
||||||
Equity: |
||||||||
Preferred shares of beneficial interest, |
- |
- |
||||||
Common shares, |
138 |
138 |
||||||
Capital in excess of par value |
267,071 |
266,723 |
||||||
Cumulative net income |
675,727 |
661,280 |
||||||
Cumulative dividends |
(775,843) |
(747,417) |
||||||
Accumulated other comprehensive (loss)/income |
(4,699) |
1,010 |
||||||
Total Equity |
162,394 |
181,734 |
||||||
Total Liabilities and Equity |
$ |
490,621 |
$ |
488,789 |
View original content:http://www.prnewswire.com/news-releases/universal-health-realty-income-trust-reports-2020-third-quarter-financial-results-301163386.html
SOURCE
Charles Boyle, Chief Financial Officer, (610) 768-3300