uht-10q_20200331.htm
false Q1 0000798783 --12-31 Large Accelerated Filer 3 1 2 us-gaap:ManagementServiceMember us-gaap:ManagementServiceMember 0.0050 1 1 1 1 1 3 1 2 0.0050 1 1 1 1 2019-03-31 1 2019-03-31 P5Y P10Y P10Y 125000000 0.60 0.30 0.60 0.0150 0000798783 2020-01-01 2020-03-31 xbrli:shares 0000798783 2020-04-30 iso4217:USD 0000798783 uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember 2019-01-01 2019-03-31 0000798783 uht:NonRelatedPartyMember 2020-01-01 2020-03-31 0000798783 uht:NonRelatedPartyMember 2019-01-01 2019-03-31 0000798783 us-gaap:ProductAndServiceOtherMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 us-gaap:ProductAndServiceOtherMember uht:UniversalHealthServicesIncMember 2019-01-01 2019-03-31 0000798783 us-gaap:ProductAndServiceOtherMember 2020-01-01 2020-03-31 0000798783 us-gaap:ProductAndServiceOtherMember 2019-01-01 2019-03-31 0000798783 2019-01-01 2019-03-31 0000798783 us-gaap:ManagementServiceMember 2020-01-01 2020-03-31 0000798783 us-gaap:ManagementServiceMember 2019-01-01 2019-03-31 iso4217:USD xbrli:shares 0000798783 uht:UniversalHealthServicesHospitalIncMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesHospitalIncMember 2019-01-01 2019-03-31 0000798783 2020-03-31 0000798783 2019-12-31 0000798783 us-gaap:CommonStockMember 2019-12-31 0000798783 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0000798783 us-gaap:RetainedEarningsMember 2019-12-31 0000798783 uht:CumulativeDividendsMember 2019-12-31 0000798783 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000798783 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0000798783 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0000798783 uht:CumulativeDividendsMember 2020-01-01 2020-03-31 0000798783 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0000798783 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0000798783 us-gaap:CommonStockMember 2020-03-31 0000798783 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0000798783 us-gaap:RetainedEarningsMember 2020-03-31 0000798783 uht:CumulativeDividendsMember 2020-03-31 0000798783 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0000798783 us-gaap:CommonStockMember 2018-12-31 0000798783 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000798783 us-gaap:RetainedEarningsMember 2018-12-31 0000798783 uht:CumulativeDividendsMember 2018-12-31 0000798783 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000798783 2018-12-31 0000798783 us-gaap:CommonStockMember 2019-01-01 2019-03-31 0000798783 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000798783 uht:CumulativeDividendsMember 2019-01-01 2019-03-31 0000798783 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000798783 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000798783 us-gaap:CommonStockMember 2019-03-31 0000798783 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000798783 us-gaap:RetainedEarningsMember 2019-03-31 0000798783 uht:CumulativeDividendsMember 2019-03-31 0000798783 2019-03-31 xbrli:pure 0000798783 srt:MinimumMember uht:UnconsolidatedLimitedLiabilitiesOrLimitedPartnerMember 2020-03-31 0000798783 srt:MaximumMember uht:UnconsolidatedLimitedLiabilitiesOrLimitedPartnerMember 2020-03-31 uht:Property 0000798783 uht:LimitedLiabilityCompanyOrLimitedPartnerMember 2020-03-31 uht:Hospital 0000798783 uht:CoronaVirusDisease2019OutbreakMember 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember srt:MinimumMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember srt:MaximumMember 2020-01-01 2020-03-31 uht:Time 0000798783 uht:UniversalHealthServicesIncMember 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember us-gaap:AssetsLeasedToOthersMember 2020-03-31 0000798783 uht:RevenueMember us-gaap:CustomerConcentrationRiskMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 uht:RevenueMember us-gaap:CustomerConcentrationRiskMember uht:UniversalHealthServicesIncMember 2019-01-01 2019-03-31 0000798783 uht:RevenueMember us-gaap:CustomerConcentrationRiskMember uht:UniversalHealthServicesIncMember uht:TenantsMember 2020-01-01 2020-03-31 0000798783 uht:RevenueMember us-gaap:CustomerConcentrationRiskMember uht:UniversalHealthServicesIncMember uht:TenantsMember 2019-01-01 2019-03-31 0000798783 uht:McAllenMedicalCenterMember uht:UniversalHealthServicesIncMember 2020-03-31 0000798783 uht:WellingtonRegionalMedicalCenterMember uht:UniversalHealthServicesIncMember 2020-03-31 0000798783 uht:SouthwestHealthcareSystemInlandValleyCampusMember uht:UniversalHealthServicesIncMember 2020-03-31 0000798783 uht:McAllenMedicalCenterMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 uht:WellingtonRegionalMedicalCenterMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 uht:SouthwestHealthcareSystemInlandValleyCampusMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 uht:RenewalOption 0000798783 uht:WellingtonRegionalMedicalCenterAndSouthwestHealthcareSystemMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 uht:WellingtonRegionalMedicalCenterAndSouthwestHealthcareSystemMember srt:MinimumMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 0000798783 uht:WellingtonRegionalMedicalCenterAndSouthwestHealthcareSystemMember srt:MaximumMember uht:UniversalHealthServicesIncMember 2020-01-01 2020-03-31 uht:Lease 0000798783 srt:MinimumMember uht:UniversalHealthServicesIncMember 2020-03-31 0000798783 srt:MaximumMember uht:UniversalHealthServicesIncMember 2020-03-31 0000798783 uht:UniversalHealthServicesOfDelawareIncMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesOfDelawareIncMember 2019-01-01 2019-03-31 0000798783 uht:UniversalHealthServicesIncMember 2019-12-31 0000798783 uht:GraysonPropertiesTwoLPMember uht:DenisonTexasMember 2019-09-30 0000798783 uht:UniversalHealthServicesIncMember 2019-09-01 2019-09-30 utr:sqft 0000798783 uht:UniversalHealthServicesIncMember 2019-09-30 0000798783 uht:GraysonPropertiesTwoLPMember srt:MaximumMember uht:MedicalOfficeBuildingsMember 2020-03-31 0000798783 uht:GraysonPropertiesTwoLPMember uht:MedicalOfficeBuildingsMember 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember srt:MaximumMember uht:MedicalOfficeBuildingsFirstAndSecondFloorMember 2019-09-30 0000798783 uht:UniversalHealthServicesIncMember uht:MedicalOfficeBuildingsThirdFloorMember 2019-09-30 0000798783 uht:MedicalOfficeBuildingsFirstFloorMember us-gaap:SubsequentEventMember 2020-04-01 2020-04-30 0000798783 uht:ThirdPartyTenantMember uht:MedicalOfficeBuildingsFirstFloorMember us-gaap:SubsequentEventMember 2020-04-30 0000798783 uht:MedicalOfficeBuildingsThirdFloorMember us-gaap:SubsequentEventMember 2020-04-01 2020-04-30 0000798783 uht:MedicalOfficeBuildingsMember us-gaap:SubsequentEventMember 2020-04-01 2020-04-30 0000798783 uht:UniversalHealthServicesIncAndCatholicHealthInitiativesMember 2019-07-01 2019-07-31 0000798783 uht:UniversalHealthServicesIncAndCatholicHealthInitiativesMember 2019-07-31 0000798783 uht:DesMoinesMedicalPropertiesLLCMember 2020-03-31 uht:Acquisition uht:Disposition 0000798783 uht:LimitedLiabilityCompanyOrLimitedPartnerMember uht:MedicalOfficeBuildingsMember 2020-03-31 0000798783 uht:SuburbanPropertiesMember us-gaap:EquityMethodInvestmentsMember 2020-03-31 0000798783 uht:BrunswickAssociatesMember us-gaap:EquityMethodInvestmentsMember 2020-03-31 0000798783 uht:GraysonPropertiesMember us-gaap:EquityMethodInvestmentsMember 2020-03-31 0000798783 uht:FTXMobPhaseTwoLPMember us-gaap:EquityMethodInvestmentsMember 2020-03-31 0000798783 uht:GraysonPropertiesTwoLPMember us-gaap:EquityMethodInvestmentsMember 2020-03-31 0000798783 uht:SuburbanPropertiesMember us-gaap:EquityMethodInvestmentsMember 2020-01-01 2020-03-31 0000798783 uht:BrunswickAssociatesMember us-gaap:EquityMethodInvestmentsMember 2020-01-01 2020-03-31 0000798783 uht:GraysonPropertiesMember us-gaap:EquityMethodInvestmentsMember 2020-01-01 2020-03-31 0000798783 uht:FTXMobPhaseTwoLPMember us-gaap:EquityMethodInvestmentsMember 2020-01-01 2020-03-31 0000798783 uht:GraysonPropertiesTwoLPMember us-gaap:EquityMethodInvestmentsMember 2020-01-01 2020-03-31 0000798783 uht:BrunswickAssociatesMember 2020-03-31 0000798783 uht:GraysonPropertiesMember 2020-03-31 0000798783 uht:FTXMobPhaseTwoLPMember srt:MaximumMember 2020-03-31 0000798783 uht:FTXMobPhaseTwoLPMember 2020-03-31 0000798783 uht:GraysonPropertiesTwoLPMember uht:DenisonTexasMember 2020-03-31 0000798783 uht:GraysonPropertiesTwoLPMember srt:MaximumMember uht:DenisonTexasMember 2020-03-31 0000798783 us-gaap:EquityMethodInvestmentsMember uht:FTXMobPhaseTwoMember 2020-03-31 0000798783 us-gaap:EquityMethodInvestmentsMember 2020-03-31 0000798783 us-gaap:EquityMethodInvestmentsMember uht:FTXMobPhaseTwoMember 2019-12-31 0000798783 us-gaap:EquityMethodInvestmentsMember uht:GraysonPropertiesMember 2019-12-31 0000798783 us-gaap:EquityMethodInvestmentsMember uht:BrunswickAssociatesMember 2019-12-31 0000798783 us-gaap:EquityMethodInvestmentsMember 2019-12-31 0000798783 us-gaap:EquityMethodInvestmentsMember uht:FTXMobPhaseTwoMember 2020-01-01 2020-03-31 0000798783 uht:FivePointZeroZeroPercentFixedRateMortgageLoanMember uht:FTXMobPhaseTwoMember 2020-03-31 0000798783 uht:FivePointZeroThreeFourPercentFixedRateMortgageLoanMember uht:GraysonPropertiesMember 2020-03-31 0000798783 uht:ThreePointSixFourPercentFixedRateMortgageLoanMember uht:BrunswickAssociatesMember 2020-03-31 0000798783 srt:MinimumMember 2020-01-01 2020-03-31 0000798783 srt:MaximumMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember uht:BaseRentsMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember uht:BaseRentsMember 2019-01-01 2019-03-31 0000798783 uht:UniversalHealthServicesIncMember uht:BonusRentsMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember uht:BonusRentsMember 2019-01-01 2019-03-31 0000798783 uht:UniversalHealthServicesIncMember uht:TenantReimbursementsMember 2020-01-01 2020-03-31 0000798783 uht:UniversalHealthServicesIncMember uht:TenantReimbursementsMember 2019-01-01 2019-03-31 0000798783 uht:NonRelatedPartyMember uht:BaseRentsMember 2020-01-01 2020-03-31 0000798783 uht:NonRelatedPartyMember uht:BaseRentsMember 2019-01-01 2019-03-31 0000798783 uht:NonRelatedPartyMember uht:TenantReimbursementsMember 2020-01-01 2020-03-31 0000798783 uht:NonRelatedPartyMember uht:TenantReimbursementsMember 2019-01-01 2019-03-31 uht:Land 0000798783 us-gaap:RevolvingCreditFacilityMember 2020-03-31 0000798783 uht:RevolvingCreditAgreementMember 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember us-gaap:LetterOfCreditMember 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember us-gaap:ShortTermDebtMember 2018-03-27 uht:Option 0000798783 uht:RevolvingCreditAgreementMember 2020-01-01 2020-03-31 0000798783 uht:RevolvingCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MinimumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember srt:MaximumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember us-gaap:BaseRateMember srt:MinimumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember us-gaap:BaseRateMember srt:MaximumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember uht:FederalFundsEffectiveRateMember srt:MinimumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember srt:MinimumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember srt:MaximumMember 2018-03-27 2018-03-27 0000798783 uht:RevolvingCreditAgreementMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-01-01 2020-03-31 0000798783 uht:RevolvingCreditAgreementMember us-gaap:BaseRateMember 2020-01-01 2020-03-31 0000798783 srt:MaximumMember 2020-03-31 0000798783 uht:SevenHundredShadowLaneAndGoldringMedicalOfficeBuildingFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:BRBMedicalOfficeBuildingFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:DesertValleyMedicalCenterFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:TwoSevenZeroFourNorthTenayaWayFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:SummerlinHospitalMedicalOfficeBuildingThreeFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:TuscanyProfessionalBuildingFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:PhoenixChildrenEastValleyCareCenterFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:RosenbergChildrenMedicalPlazaFixedRateMortgageLoanMember 2020-03-31 0000798783 uht:SevenHundredShadowLaneAndGoldringMedicalOfficeBuildingFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:BRBMedicalOfficeBuildingFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:DesertValleyMedicalCenterFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:TwoSevenZeroFourNorthTenayaWayFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:SummerlinHospitalMedicalOfficeBuildingThreeFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:TuscanyProfessionalBuildingFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:PhoenixChildrenEastValleyCareCenterFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 uht:RosenbergChildrenMedicalPlazaFixedRateMortgageLoanMember 2020-01-01 2020-03-31 0000798783 us-gaap:FairValueInputsLevel2Member 2020-03-31 0000798783 us-gaap:FairValueInputsLevel2Member 2019-12-31 uht:Derivative 0000798783 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2020-03-31 0000798783 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2020-03-01 2020-03-31 0000798783 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2020-01-31 0000798783 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2020-01-01 2020-01-31 0000798783 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2019-09-30 0000798783 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2019-07-01 2019-09-30 0000798783 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member 2020-03-31 0000798783 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member 2020-01-01 2020-03-31 0000798783 us-gaap:FairValueInputsLevel2Member 2020-01-01 2020-03-31 0000798783 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member 2019-10-01 2019-12-31 0000798783 us-gaap:InterestRateCapMember 2016-09-30 0000798783 us-gaap:InterestRateCapMember 2016-06-30 0000798783 us-gaap:InterestRateCapMember 2016-07-01 2016-09-30 0000798783 us-gaap:InterestRateCapMember 2016-04-01 2016-06-30 0000798783 us-gaap:InterestRateCapMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-09-30 0000798783 us-gaap:InterestRateCapMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-06-30 0000798783 us-gaap:InterestRateCapMember 2016-07-01 2019-03-31 0000798783 us-gaap:InterestRateCapMember 2016-04-01 2019-03-31 0000798783 us-gaap:InterestRateCapMember 2019-01-01 2019-03-31 0000798783 us-gaap:InterestRateCapMember 2018-01-01 2018-12-31 uht:Segment

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                      

Commission file number 1-9321

 

UNIVERSAL HEALTH REALTY INCOME TRUST

(Exact name of registrant as specified in its charter)

 

 

Maryland

 

23-6858580

(State or other jurisdiction of

incorporation or organization)

 

(I. R. S. Employer

Identification No.)

 

 

 

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, Pennsylvania

 

19406

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (610265-0688

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

 

Trading Symbol(s)

 

Name of each exchange on which registered

Shares of beneficial interest, $0.01 par value

 

UHT

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated Filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of common shares of beneficial interest outstanding at April 30, 2020—13,758,047

 

 

 

 

 


UNIVERSAL HEALTH REALTY INCOME TRUST

INDEX

 

 

 

 

 

PAGE NO.

PART I. FINANCIAL INFORMATION (unaudited)

 

 

Item 1.

 

Financial Statements

 

 

 

 

Condensed Consolidated Statements of Income—Three Months Ended March 31, 2020 and 2019

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income—Three Months Ended March 31, 2020 and 2019

 

4

 

 

Condensed Consolidated Balance Sheets—March 31, 2020 and December 31, 2019

 

5

 

 

Condensed Consolidated Statements of Changes in Equity—Three Months Ended March 31, 2020 and 2019

 

6

 

 

Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2020 and 2019

 

7

 

 

Notes to Condensed Consolidated Financial Statements

 

8 through 18

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

19 through 31

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

31 through 32

Item 4.

 

Controls and Procedures

 

32 through 33

PART II. OTHER INFORMATION

 

34 through 35

Item 6.

 

Exhibits

 

35

 

 

 

 

 

SIGNATURES

 

36

 

 

 

This Quarterly Report on Form 10-Q is for the quarter ended March 31, 2020. In this Quarterly Report, “we,” “us,” “our” and the “Trust” refer to Universal Health Realty Income Trust and its subsidiaries.

As disclosed in this Quarterly Report, including in Note 2 to the condensed consolidated financial statements—Relationship with Universal Health Services, Inc. (“UHS”) and Related Party Transactions, a wholly-owned subsidiary of UHS (UHS of Delaware, Inc.) serves as our Advisor pursuant to the terms of an annually renewable Advisory Agreement dated December 24, 1986, and as amended and restated as of January 1, 2019. Our officers are all employees of UHS through its wholly-owned subsidiary, UHS of Delaware, Inc. In addition, three of our hospital facilities are leased to subsidiaries of UHS, and subsidiaries of UHS are tenants of seventeen medical office buildings or free-standing emergency departments, that are either wholly or jointly-owned by us (excluding new construction). Any reference to “UHS” or “UHS facilities” in this report is referring to Universal Health Services, Inc.’s subsidiaries, including UHS of Delaware, Inc.

In this Quarterly Report, the term “revenues” does not include the revenues of the unconsolidated limited liability companies (“LLCs”) in which we have various non-controlling equity interests ranging from 33% to 95%.  As of March 31, 2020, we had investments in five jointly-owned LLCs/LPs (including one currently under construction which is scheduled to be completed in late 2020). We currently account for our share of the income/loss from these investments by the equity method (see Note 5 to the condensed consolidated financial statements included herein).

 

 

 

 


 

Part I. Financial Information

Item I. Financial Statements

Universal Health Realty Income Trust

Condensed Consolidated Statements of Income

For the Three Months Ended March 31, 2020 and 2019

(amounts in thousands, except share information)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

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 ("LLCs"), interest expense and gain on sale

 

 

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 $1,380 and $1,394 for the three-month periods ended March 31, 2020 and 2019, respectively.

 

See accompanying notes to these condensed consolidated financial statements.

 

 

3


 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2020 and 2019

(amounts in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

4,554

 

 

$

4,212

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized derivative losses on cash flow hedges

 

 

(4,671

)

 

 

(132

)

Total other comprehensive loss:

 

 

(4,671

)

 

 

(132

)

Total comprehensive (loss)/income

 

$

(117

)

 

$

4,080

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

4


 

Universal Health Realty Income Trust

Condensed Consolidated Balance Sheets

(amounts in thousands, except share information)

(unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

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 $25.0 million and

   $26.5 million, respectively)

 

 

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,

   $.01 par value; 5,000,000 shares authorized;

   none issued and outstanding

 

 

-

 

 

 

-

 

Common shares, $.01 par value;

   95,000,000 shares authorized; issued and outstanding: 2020 - 13,758,038;

   2019 - 13,757,498

 

 

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

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 


 

5


 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Three Months Ended March 31, 2020

(amounts in thousands)

(unaudited)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

Accumulated other

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

excess of

 

 

Cumulative

 

 

Cumulative

 

 

comprehensive

 

 

Total

 

 

 

of Shares

 

 

Amount

 

 

par value

 

 

net income

 

 

dividends

 

 

income/(loss)

 

 

Equity

 

January 1, 2020

 

 

13,757

 

 

$

138

 

 

$

266,723

 

 

$

661,280

 

 

$

(747,417

)

 

$

1,010

 

 

$

181,734

 

Shares of Beneficial Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued

 

 

1

 

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

50

 

Restricted stock-based compensation expense

 

 

 

 

 

 

 

 

197

 

 

 

 

 

 

 

 

 

 

 

 

197

 

Dividends ($.685/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,424

)

 

 

 

 

 

(9,424

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,554

 

 

 

 

 

 

 

 

 

4,554

 

Unrealized loss on cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,671

)

 

 

(4,671

)

Subtotal - comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,554

 

 

 

 

 

 

 

(4,671

)

 

 

(117

)

March 31, 2020

 

 

13,758

 

 

$

138

 

 

$

266,970

 

 

$

665,834

 

 

$

(756,841

)

 

$

(3,661

)

 

$

172,440

 

 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Three Months Ended March 31, 2019

(amounts in thousands)

(unaudited)

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

 

 

Accumulated other

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

excess of

 

 

Cumulative

 

 

Cumulative

 

 

comprehensive

 

 

Total

 

 

 

of Shares

 

 

Amount

 

 

par value

 

 

net income

 

 

dividends

 

 

income/(loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2019

 

 

13,747

 

 

$

137

 

 

$

266,031

 

 

$

642,316

 

 

$

(710,006

)

 

$

132

 

 

$

198,610

 

Shares of Beneficial Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued

 

 

1

 

 

 

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

57

 

Restricted stock-based compensation expense

 

 

 

 

 

 

 

 

159

 

 

 

 

 

 

 

 

 

 

 

 

159

 

Dividends ($.675/share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,279

)

 

 

 

 

 

(9,279

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

4,212

 

 

 

 

 

 

 

 

 

4,212

 

Unrealized loss on cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

(132

)

Subtotal - comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,212

 

 

 

 

 

 

 

(132

)

 

 

4,080

 

March 31, 2019

 

 

13,748

 

 

$

137

 

 

$

266,247

 

 

$

646,528

 

 

$

(719,285

)

 

$

-

 

 

$

193,627

 

 

See accompanying notes to these condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

6


 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

4,554

 

 

$

4,212

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

6,380

 

 

 

6,708

 

Amortization related to above/(below) market leases, net

 

 

(46

)

 

 

(54

)

Amortization of debt premium

 

 

(13

)

 

 

(13

)

Amortization of deferred financing costs

 

 

157

 

 

 

166

 

Stock-based compensation expense

 

 

197

 

 

 

159

 

Cash distributions less than income from LLCs

 

 

(85

)

 

 

 

Gain on sale of land

 

 

 

 

 

(250

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Lease receivable

 

 

181

 

 

 

(968

)

Accrued expenses and other liabilities

 

 

(867

)

 

 

(734

)

Tenant reserves, deposits and deferred and prepaid rents

 

 

65

 

 

 

(537

)

Accrued interest

 

 

(25

)

 

 

38

 

Leasing costs paid

 

 

(182

)

 

 

(299

)

Other, net

 

 

(179

)

 

 

205

 

Net cash provided by operating activities

 

 

10,137

 

 

 

8,633

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Investments in LLCs

 

 

(1,468

)

 

 

(541

)

Cash distributions in excess of income from LLCs

 

 

 

 

 

292

 

Additions to real estate investments, net

 

 

(5,521

)

 

 

(1,834

)

Cash proceeds received from divestiture of property, net

 

 

 

 

 

245

 

Net cash used in investing activities

 

 

(6,989

)

 

 

(1,838

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net borrowings on line of credit

 

 

6,250

 

 

 

3,900

 

Repayments of mortgage notes payable

 

 

(432

)

 

 

(442

)

Financing costs paid

 

 

(35

)

 

 

(35

)

Dividends paid

 

 

(9,424

)

 

 

(9,279

)

Issuance of shares of beneficial interest, net

 

 

50

 

 

 

57

 

Net cash used in financing activities

 

 

(3,591

)

 

 

(5,799

)

(Decrease)/increase in cash and cash equivalents

 

 

(443

)

 

 

996

 

Cash and cash equivalents, beginning of period

 

 

6,110

 

 

 

5,036

 

Cash and cash equivalents, end of period

 

$

5,667

 

 

$

6,032

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

2,190

 

 

$

2,501

 

Invoices accrued for construction and improvements

 

$

3,151

 

 

$

382

 

 

See accompanying notes to these condensed consolidated financial statements.

 

7


 

UNIVERSAL HEALTH REALTY INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(unaudited)

 

(1) General

This Quarterly Report on Form 10-Q is for the quarter ended March 31, 2020. In this Quarterly Report, “we,” “us,” “our” and the “Trust” refer to Universal Health Realty Income Trust and its subsidiaries.

In this Quarterly Report on Form 10-Q, the term “revenues” does not include the revenues of the unconsolidated LLCs in which we have various non-controlling equity interests ranging from 33% to 95%.  As of March 31, 2020, we had investments in five jointly-owned LLCs/LPs (including one under construction which is scheduled to be completed in late 2020). We currently account for our share of the income/loss from these investments by the equity method (see Note 5). These LLCs are included in our consolidated financial statements for all periods presented on an unconsolidated basis since they are not variable interest entities for which we are the primary beneficiary, nor do we hold a controlling voting interest.    

The condensed consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the SEC and reflect all normal and recurring adjustments which, in our opinion, are necessary to fairly present results for the interim periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although we believe that the accompanying disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements, the notes thereto and accounting policies included in our Annual Report on Form 10-K for the year ended December 31, 2019.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the federal government declared COVID-19 a national emergency. 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 through 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.  Such factors and 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, including travel bans and restrictions, shelter-in-place or stay-at-home orders, quarantines, the promotion of social distancing, business shutdowns and limitations on business activity; changes in patient volumes at our tenants’ hospitals and other healthcare facilities due to patients’ general concerns related to the risk of contracting COVID-19 from interacting with the healthcare system; the impact of stimulus on the health care industry and our tenants; changes in patient volumes and 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, including equipment, pharmaceuticals and medical supplies, particularly personal protective equipment, or PPE; potential increases to expenses incurred by our tenants related to staffing, supply chain or other expenditures; the impact of our indebtedness and the ability to refinance such indebtedness on acceptable terms; disruptions in the financial markets and the business of financial institutions as the result of the COVID-19 pandemic which could impact our ability to access capital or increase associated borrowing costs; and changes in general economic conditions nationally and regionally in the markets our properties are located resulting from the COVID-19 pandemic, including increased unemployment and underemployment levels and reduced consumer spending and confidence.  

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 and revenues which continued through April, 2020. 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

8


 

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. Decreases in cash flows and results of operations may have an impact on the inputs and assumptions used in significant accounting estimates, including potential impairments of intangible and long-lived assets.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

 

 

(2) Relationship with Universal Health Services, Inc. (“UHS”) and Related Party Transactions

Leases: We commenced operations in 1986 by purchasing properties from certain subsidiaries of UHS and immediately leasing the properties back to the respective subsidiaries. Most of the leases were entered into at the time we commenced operations and provided for initial terms of 13 to 15 years with up to six additional 5-year renewal terms. The current base rentals and lease and renewal terms for each of the three hospital facilities leased to subsidiaries of UHS are provided below. The base rents are paid monthly and each lease also provides for additional or bonus rents which are computed and paid on a quarterly basis based upon a computation that compares current quarter revenue to a corresponding quarter in the base year. The three hospital leases with subsidiaries of UHS are unconditionally guaranteed by UHS and are cross-defaulted with one another.

The combined revenues generated from the leases on the UHS hospital facilities accounted for approximately 22% of our consolidated revenues for each of the three months ended March 31, 2020 and 2019. In addition, we have seventeen medical office buildings (“MOBs”), or free-standing emergency departments (“FEDs”), that are either wholly or jointly-owned by us (excluding new construction), that include tenants which are subsidiaries of UHS.  The aggregate revenues generated from UHS-related tenants comprised approximately 32% and 31% of our consolidated revenues during the three-month periods ended March 31, 2020 and 2019, respectively.

Pursuant to the Master Lease Document by and among us and certain subsidiaries of UHS, dated December 24, 1986 (the “Master Lease”), which governs the leases of all hospital properties with subsidiaries of UHS, UHS has the option to renew the leases at the lease terms described below by providing notice to us at least 90 days prior to the termination of the then current term. UHS also has the right to purchase the respective leased facilities at the end of the lease terms or any renewal terms at the appraised fair market value. In addition, the Master Lease, as amended in 2006, includes a change of control provision whereby UHS has the right, upon one month’s notice should a change of control of the Trust occur, to purchase any or all of the three leased hospital properties listed below at their appraised fair market value. Additionally, UHS has rights of first refusal to: (i) purchase the respective leased facilities during and for 180 days after the lease terms at the same price, terms and conditions of any third-party offer, or; (ii) renew the lease on the respective leased facility at the end of, and for 180 days after, the lease term at the same terms and conditions pursuant to any third-party offer.

The table below details the existing lease terms and renewal options for our three acute care hospitals operated by wholly-owned subsidiaries of UHS:

 

Hospital Name

 

Annual

Minimum

Rent

 

 

End of

Lease Term

 

Renewal

Term

(years)

 

 

McAllen Medical Center

 

$

5,485,000

 

 

December, 2026

 

 

5

 

(a.)

Wellington Regional Medical Center

 

$

3,030,000

 

 

December, 2021

 

 

10

 

(b.)

Southwest Healthcare System, Inland Valley Campus

 

$

2,648,000

 

 

December, 2021

 

 

10

 

(b.)

 

(a.)

UHS has one 5-year renewal option at the existing lease rate (through 2031).  

(b.)

UHS has two 5-year renewal options at fair market value lease rates (2022 through 2031).

Management cannot predict whether the leases with subsidiaries of UHS, which have renewal options at existing lease rates or fair market value lease rates, or any of our other leases, will be renewed at the end of their lease term. If the leases are not renewed at their current rates or the fair market value lease rates, we would be required to find other operators for those facilities and/or enter into leases on terms potentially less favorable to us than the current leases. In addition, if subsidiaries of UHS exercise their options to purchase the respective leased hospital or FED facilities upon expiration of the lease terms, our future revenues could decrease if we were unable to earn a favorable rate of return on the sale proceeds received, as compared to the lease revenue currently earned pursuant to these leases.  

9


 

 

We are the lessee on eleven ground leases with subsidiaries of UHS (for consolidated and unconsolidated investments). The remaining lease terms on the ground leases with subsidiaries of UHS range from approximately 29 years to approximately 79 years.  The annual aggregate lease payments on these properties are approximately $482,000 for the year ended 2020 and $482,000 for each of the years ended 2021, 2022, 2023 and 2024, and an aggregate of $27.7 million thereafter. See Note 7 for further disclosure around our lease accounting.

 

In late July, 2019 and September, 2019 we entered into two separate agreements with entities that are each related to wholly-owned subsidiaries of UHS in connection with newly constructed properties located in Clive, Iowa and Denison, Texas.   Please see additional disclosure in Note 4, “New Construction, Acquisitions and Dispositions”.

 

Officers and Employees: Our officers are all employees of a wholly-owned subsidiary of UHS and although as of March 31, 2020 we had no salaried employees, our officers do typically receive annual stock-based compensation awards in the form of restricted stock. In special circumstances, if warranted and deemed appropriate by the Compensation Committee of the Board of Trustees, our officers may also receive one-time special compensation awards in the form of restricted stock and/or cash bonuses.

Advisory Agreement:    UHS of Delaware, Inc. (the “Advisor”), a wholly-owned subsidiary of UHS, serves as Advisor to us under an advisory agreement dated December 24, 1986, and as amended and restated as of January 1, 2019 (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Advisor is obligated to present an investment program to us, to use its best efforts to obtain investments suitable for such program (although it is not obligated to present any particular investment opportunity to us), to provide administrative services to us and to conduct our day-to-day affairs. All transactions between us and UHS must be approved by the Trustees who are unaffiliated with UHS (the “Independent Trustees”). In performing its services under the Advisory Agreement, the Advisor may utilize independent professional services, including accounting, legal, tax and other services, for which the Advisor is reimbursed directly by us. The Advisory Agreement may be terminated for any reason upon sixty days written notice by us or the Advisor. The Advisory Agreement expires on December 31 of each year; however, it is renewable by us, subject to a determination by the Independent Trustees, that the Advisor’s performance has been satisfactory.

 Our advisory fee for the three months ended March 31, 2020 and 2019, was computed at 0.70% of our average invested real estate assets, as derived from our condensed consolidated balance sheets.  Based upon a review of our advisory fee and other general and administrative expenses, as compared to an industry peer group, the advisory fee computation remained unchanged for 2020, as compared to the last three years. The average real estate assets for advisory fee calculation purposes exclude certain items from our condensed consolidated balance sheet such as, among other things, accumulated depreciation, cash and cash equivalents, lease receivables, deferred charges and other assets. The advisory fee is payable quarterly, subject to adjustment at year-end based upon our audited financial statements. Advisory fees incurred and paid (or payable) to UHS amounted to approximately $1.0 million  for each of the three months ended March 31, 2020 and 2019 and were based upon average invested real estate assets of $581 million and $554 million, respectively.  

 

Share Ownership: As of March 31, 2020 and December 31, 2019, UHS owned 5.7% of our outstanding shares of beneficial interest.

SEC reporting requirements of UHS: UHS is subject to the reporting requirements of the SEC and is required to file annual reports containing audited financial information and quarterly reports containing unaudited financial information. Since the aggregate revenues generated from the UHS-related tenants comprised 32% and 31% of our consolidated revenues during the three-month periods ended March 31, 2020 and 2019, respectively, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain the publicly available filings for Universal Health Services, Inc. from the SEC’s website. These filings are the sole responsibility of UHS and are not incorporated by reference herein.

(3) Dividends

Dividends:

During the first quarter of 2020, we declared and paid dividends of approximately $9.4 million, or $.685 per share, which were paid on March 31, 2020. We declared and paid dividends of approximately $9.3 million, or $.675 per share, during the first quarter of 2019.

10


 

(4) New Construction, Acquisitions and Dispositions

Three Months Ended March 31, 2020:    

New Construction:

In September, 2019, we entered into an agreement whereby we will own a 95% non-controlling ownership interest in Grayson Properties II L.P., which will develop, construct, own and operate the Texoma Medical Plaza II, an MOB located in Denison, Texas.  This MOB, which is scheduled to be completed in late 2020, will be located on the campus of Texoma Medical Center, a hospital that is owned and operated by a wholly-owned subsidiary of UHS.  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 (including the remaining master lease space).  We have committed to invest up to $17.9 million in equity or member loans on the development and construction of this MOB, which may be reduced if a third-party construction loan is placed on the property, and have invested approximately $4.0 million as of March 31, 2020 (including accrued costs at March 31, 2020).  We account for this LP on an unconsolidated basis pursuant to the equity method since it is not a variable interest entity and we do not have a controlling voting interest.  

 

In July, 2019, Des Moines Medical Properties, LLC, a wholly-owned subsidiary of ours, entered into an agreement to build and lease a newly constructed behavioral health care hospital located in Clive, Iowa.  The lease on this facility, which is triple net and has an initial term of 20-years with five 10-year renewal options, was executed with Clive Behavioral Health, LLC, a joint venture between UHS and Catholic Health Initiatives - Iowa, Corp. (d/b/a Mercy One Des Moines Medical Center). Construction of this hospital, for which we have engaged a wholly-owned subsidiary of UHS to act as project manager for an aggregate fee of approximately $750,000, 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 to be $37.5 million and the initial annual rent is estimated to be approximately $2.7 million.  We have invested approximately $11.5 million for land and the development and construction costs of this hospital as of March 31, 2020 (including accrued costs at March 31, 2020).

Acquisitions:

There were no acquisitions during the first three months of 2020.  

Dispositions:    

There were no dispositions during the first three months of 2020.

Three Months Ended March 31, 2019:

Acquisitions:

There were no acquisitions during the first three months of 2019.

Dispositions:

There were no dispositions during the first three months of 2019.

(5) Summarized Financial Information of Equity Affiliates

In accordance with U.S. GAAP and guidance relating to accounting for investments and real estate ventures, we account for our unconsolidated investments in LLCs/LPs which we do not control using the equity method of accounting.  The third-party members in these investments have equal voting rights with regards to issues such as, but not limited to: (i) divestiture of property; (ii) annual budget approval, and; (iii) financing commitments. These investments, which represent 33% to 95% non-controlling ownership interests, are recorded initially at our cost and subsequently adjusted for our net equity in the net income, cash contributions to, and distributions from, the investments. Pursuant to certain agreements, allocations of sales proceeds and profits and losses of some of the LLC investments may be allocated disproportionately as compared to ownership interests after specified preferred return rate thresholds have been satisfied.

Distributions received from equity method investees in the consolidated statements of cash flows are classified based upon the nature of the distribution. Returns on investments are presented net of equity in income from unconsolidated investments as cash flows from operating activities.  Returns of investments are classified as cash flows from investing activities.

11


 

At March 31, 2020, we have non-controlling equity investments or commitments in five jointly-owned LLCs/LPs which own MOBs (including one currently under construction which is scheduled to be completed in late 2020). As of March 31, 2020, we accounted for these LLCs/LPs on an unconsolidated basis pursuant to the equity method since they are not variable interest entities which we are the primary beneficiary nor do we have a controlling voting interest. The majority of these entities are joint-ventures between us and non-related parties that hold minority ownership interests in the entities. Each entity is generally self-sustained from a cash flow perspective and generates sufficient cash flow to meet its operating cash flow requirements and service the third-party debt (if applicable) that is non-recourse to us. Although there is typically no ongoing financial support required from us to these entities since they are cash-flow sufficient, we may, from time to time, provide funding for certain purposes such as, but not limited to, significant capital expenditures, leasehold improvements and debt financing. Although we are not obligated to do so, if approved by us at our sole discretion, additional cash funding is typically advanced as equity or member loans. These entities maintain property insurance on the properties.

The following property table represents the five LLCs/LPs in which we own a non-controlling interest (including one that is currently under construction) and were accounted for under the equity method as of March 31, 2020:

 

 

 

 

 

 

 

 

Name of LLC/LP

 

Ownership

 

 

Property Owned by LLC/LP

Suburban Properties

 

 

33

%