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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 SEPTEMBER 30, 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: 001-37401
Community Healthcare Trust Incorporated
(Exact Name of Registrant as Specified in Its Charter)
Maryland
46-5212033
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
3326 Aspen Grove Drive
Suite 150
Franklin, Tennessee 37067
(Address of Principal Executive Offices) (Zip Code)
(615771-3052
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading SymbolName of each exchange on which registered
Common stock, $0.01 par value per shareCHCTNew 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, a 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
Emerging-growth company
Non-accelerated filer
Smaller reporting 
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 Section13(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
The Registrant had 23,429,998 shares of Common Stock, $0.01 par value per share, outstanding as of October 30, 2020.
1


COMMUNITY HEALTHCARE TRUST INCORPORATED
FORM 10-Q
September 30, 2020
TABLE OF CONTENTS
Page
2


PART I. FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
September 30, 2020December 31, 2019
ASSETS
Real estate properties
Land and land improvements
$80,123 $68,129 
Buildings, improvements, and lease intangibles
586,978 534,503 
Personal property
241 220 
Total real estate properties
667,342 602,852 
Less accumulated depreciation
(95,993)(77,523)
Total real estate properties, net
571,349 525,329 
Cash and cash equivalents
12,158 1,730 
Restricted cash
340 293 
Other assets, net
31,825 35,179 
Total assets
$615,672 $562,531 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net
$179,342 $194,243 
Accounts payable and accrued liabilities
5,800 3,606 
Other liabilities
20,909 11,271 
Total liabilities
206,051 209,120 
Commitments and contingencies


Stockholders' Equity
Preferred stock, $0.01 par value; 50,000,000 shares authorized; none issued and outstanding
  
Common stock, $0.01 par value; 450,000,000 shares authorized; 23,407,498 and 21,410,578 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
234 214 
Additional paid-in capital
526,636 447,916 
Cumulative net income
31,391 17,554 
Accumulated other comprehensive loss
(13,135)(4,808)
Cumulative dividends
(135,505)(107,465)
Total stockholders’ equity
409,621 353,411 
Total liabilities and stockholders' equity
$615,672 $562,531 

See accompanying notes to the condensed consolidated financial statements.
3


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Unaudited; Dollars in thousands, except per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
REVENUES
Rental income
$18,939 $15,718 $54,197 $41,977 
Other operating interest
405 541 1,363 2,039 
19,344 16,259 55,560 44,016 
EXPENSES
Property operating
3,563 3,327 10,129 9,395 
General and administrative
2,211 2,041 6,322 5,602 
Depreciation and amortization
6,295 5,774 18,473 16,319 
12,069 11,142 34,924 31,316 
OTHER INCOME (EXPENSE)
Loss on sale of real estate
  (313) 
Interest expense
(2,064)(2,483)(6,496)(6,788)
Interest and other income, net
 13 10 251 

(2,064)(2,470)(6,799)(6,537)
NET INCOME
$5,211 $2,647 $13,837 $6,163 
NET INCOME PER COMMON SHARE:
Net income per common share – Basic
$0.22 $0.12 $0.59 $0.28 
Net income per common share – Diluted
$0.22 $0.12 $0.59 $0.28 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC
21,866,163 18,832,902 21,290,228 18,347,630 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED
21,866,163 18,832,902 21,290,228 18,347,630 

See accompanying notes to the condensed consolidated financial statements.
4


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Unaudited; Dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
NET INCOME
$5,211 $2,647 $13,837 $6,163 
Other comprehensive income (loss):
Decrease in fair value of cash flow hedges
(99)(2,060)(10,292)(7,305)
Reclassification for amounts recognized as interest expense
933 3 1,965 (154)
Total other comprehensive income (loss)
834 (2,057)(8,327)(7,459)
COMPREHENSIVE INCOME (LOSS)
$6,045 $590 $5,510 $(1,296)

See accompanying notes to the condensed consolidated financial statements.

5


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
(Unaudited; Dollars in thousands, except per share amounts)
Preferred Stock
Common Stock
Additional Paid in Capital
Cumulative Net Income
Accumulated Other Comprehensive (Loss) Income
Cumulative Dividends
Total Stockholders' Equity
Shares
Amount
Shares
Amount
Balance at June 30, 2020— $— 22,726,141 $227 $500,477 $26,180 $(13,969)$(125,812)$387,103 
Issuance of common stock, net of issuance costs— — 536,839 5 24,885 — — — 24,890 
Stock-based compensation— — 144,518 2 1,274 — — — 1,276 
Unrecognized loss on cash flow hedges— — — — — — (99)— (99)
Reclassification adjustment for losses included in net income (interest expense)— — — — — — 933 — 933 
Net income— — — — — 5,211 — — 5,211 
Dividends to common stockholders ($0.4225 per share)
— — — — — — — (9,693)(9,693)
Balance at September 30, 2020— $— 23,407,498 $234 $526,636 $31,391 $(13,135)$(135,505)$409,621 
Balance at December 31, 2019— $— 21,410,578 $214 $447,916 $17,554 $(4,808)$(107,465)$353,411 
Issuance of common stock, net of issuance costs— — 1,726,384 17 75,365 — — — 75,382 
Stock-based compensation— — 270,536 3 3,355 — — — 3,358 
Unrecognized loss on cash flow hedges— — — — — — (10,292)— (10,292)
Reclassification adjustment for losses included in net income (interest expense)— — — — — — 1,965 — 1,965 
Net income— — — — — 13,837 — — 13,837 
Dividends to common stockholders ($1.26 per share)
— — — — — — — (28,040)(28,040)
Balance at September 30, 2020— $— 23,407,498 $234 $526,636 $31,391 $(13,135)$(135,505)$409,621 


See accompanying notes to the condensed consolidated financial statements.














6


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited; Dollars in thousands, except per share amounts)
Preferred Stock
Common Stock
Additional Paid in Capital
Cumulative Net Income
Accumulated Other Comprehensive (Loss) Income
Cumulative Dividends
Total Stockholders' Equity
Shares
Amount
Shares
Amount
Balance at June 30, 2019— — 19,401,244 $194 $361,913 $12,694 $(4,769)$(90,912)$279,120 
Issuance of common stock, net of issuance costs— — 680,309 7 28,333 — — — 28,340 
Stock-based compensation— — 96,140 1 1,001 — — — 1,002 
Unrecognized loss on cash flow hedges— — — — — — (2,060)— (2,060)
Reclassification adjustment for losses included in net income (interest expense)— — — — — — 3 — 3 
Net income— — — — — 2,647 — — 2,647 
Dividends to common stockholders ($0.4125 per share)
— — — — — — — (8,105)(8,105)
Balance at September 30, 2019— $— 20,177,693 $202 $391,247 $15,341 $(6,826)$(99,017)$300,947 
Balance at December 31, 2018— $— 18,634,502 $186 $337,180 $9,178 $633 $(75,518)$271,659 
Issuance of common stock, net of issuance costs— — 1,321,362 14 51,318 — — — 51,332 
Stock-based compensation— — 221,829 2 2,749 — — — 2,751 
Unrecognized loss on cash flow hedges— — — — — — (7,305)— (7,305)
Reclassification adjustment for gain included in net income (interest expense)— — — — — — (154)— (154)
Net income— — — — — 6,163 — — 6,163 
Dividends to common stockholders ($1.23 per share)
— — — — — — — (23,499)(23,499)
Balance at September 30, 2019— $— 20,177,693 $202 $391,247 $15,341 $(6,826)$(99,017)$300,947 


See accompanying notes to the condensed consolidated financial statements.
7


COMMUNITY HEALTHCARE TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
Nine Months Ended September 30,
20202019
OPERATING ACTIVITIES
Net income
$13,837 $6,163 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
18,473 16,319 
Other amortization
(21)412 
Stock-based compensation
3,358 2,751 
Straight-line rent receivable
(2,518)(1,353)
Loss on sale of real estate
313  
Deferred income tax expense
40 9 
Changes in operating assets and liabilities:
Other assets
137 (1,889)
Accounts payable and accrued liabilities
1,420 723 
Other liabilities
764 52 
Net cash provided by operating activities
35,803 23,187 
INVESTING ACTIVITIES
Acquisitions of real estate
(58,945)(115,624)
        Proceeds from sale of real estate
248  
        Net funding of notes receivable
(1,902) 
Proceeds from the repayment of notes receivable
7,760 752 
Capital expenditures on existing real estate properties
(4,706)(3,461)
Net cash used in investing activities
(57,545)(118,333)
FINANCING ACTIVITIES
Net repayments on revolving credit facility
(15,000)(6,750)
Term loan borrowings
 75,000 
Mortgage note repayments
(80)(77)
Dividends paid
(28,040)(23,499)
Proceeds from issuance of common stock
75,516 51,640 
Equity issuance costs
(179)(308)
Debt issuance costs
 (1,304)
Net cash provided by financing activities
32,217 94,702 
Increase in cash and cash equivalents and restricted cash
10,475 (444)
Cash and cash equivalents and restricted cash, beginning of period
2,023 2,392 
Cash and cash equivalents and restricted cash, end of period
$12,498 $1,948 
Supplemental Cash Flow Information:
Interest paid
$6,223 $6,380 
Invoices accrued for construction, tenant improvement and other capitalized costs
$663 $270 
Reclassification between accounts and notes receivable
$ $45 
Reclassification of registration statement costs incurred in prior year to equity issuance costs
$150 $321 
Decrease in fair value of cash flow hedges
$(10,292)$(7,305)
Income taxes paid
$40 $ 
See accompanying notes to the condensed consolidated financial statements.
8


COMMUNITY HEALTHCARE TRUST INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
(Unaudited)

Note 1. Summary of Significant Accounting Policies

Business Overview
Community Healthcare Trust Incorporated (the ‘‘Company’’, ‘‘we’’, ‘‘our’’) was organized in the State of Maryland on March 28, 2014. The Company is a fully-integrated healthcare real estate company that owns and acquires real estate properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers. As of September 30, 2020, the Company had investments of approximately $667.3 million in 131 real estate properties, located in 33 states, totaling approximately 2.8 million square feet in the aggregate. Any references to square footage or occupancy percentages, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm's review.

Basis of Presentation
The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. This interim financial information should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2020. All material intercompany accounts and transactions have been eliminated.

A novel strain of coronavirus (SARS-CoV-2) was first identified in late 2019, and subsequently declared a global pandemic by the World Health Organization ("COVID-19"). The Company considered the impact of the COVID-19 on the assumptions and estimates used for the three and nine months ended September 30, 2020. The full extent of the future impacts of COVID-19 on the Company's operations is uncertain. A prolonged outbreak could have a material adverse impact on the financial results and business operations of the Company. Through the third quarter of 2020, the Company has provided lease concessions to certain tenants in response to the impact of COVID-19, in the form of rent deferrals. The Company has made an election to account for such lease concessions consistent with how those concessions would be accounted for under the current leasing guidance if enforceable rights and obligations for those concessions had already existed in the leases. This election is available for concessions related to the effects of the COVID-19 pandemic that do not result in a substantial increase in our rights as lessor, including concessions that result in the total payments required by the modified lease being substantially the same as or less than total payments required by the original lease. All of the Company’s concessions to date provide for a deferral of payments with no substantive changes to the consideration in the original lease. These deferrals affect the timing, but not the amount, of the lease payments. The Company is accounting for these deferrals as if no changes to the lease were made. Under this accounting, the Company increases its lease receivable as tenant payments accrue and continues to recognize rental income. As of October 31, 2020, the Company has entered into deferral agreements with 18 tenants and anticipates entering into an additional agreement with a tenant, in the aggregate representing less than one percent of our annualized rent. Pursuant to these agreements, the tenants are generally required to repay the deferred amounts in equal monthly installments during the third and fourth quarters of 2020. The Company received substantially all of the installments that were due during the third quarter of 2020.

Use of Estimates in the Condensed Consolidated Financial Statements
Preparation of the Condensed Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates.

9

Notes to Condensed Consolidated Financial Statements - Continued
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash consists of amounts held by the lender of our mortgage note payable to provide for future real estate tax, insurance expenditures and tenant improvements related to one property. The carrying amount approximates fair value due to the short term maturity of these investments. The following table provides a reconciliation of cash and cash equivalents and restricted cash:
 Balance as of September 30,
(Dollars in thousands)20202019
Cash and cash equivalents$12,158 $1,724 
Restricted cash340 224 
Cash, cash equivalents and restricted cash$12,498 $1,948 

Income Taxes
The Company has elected to be taxed as a real estate investment trust ("REIT"), as defined under the Internal Revenue Code of 1986, as amended (the "Code"). The Company and one subsidiary have also elected for that subsidiary to be treated as a taxable REIT subsidiary ("TRS"), which is subject to federal and state income taxes. No provision has been made for federal income taxes for the REIT; however, the Company has recorded income tax expense or benefit for the TRS to the extent applicable. The Company also evaluates the realizability of its deferred tax assets and will record valuation allowances if it is determined that more likely than not the asset will not be recovered. The Company intends at all times to qualify as a REIT under the Code. The Company must distribute at least 90% per annum of its REIT taxable income to its stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with generally accepted accounting principles) and meet other requirements to continue to qualify as a REIT.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES" Act) was enacted into law and was immediately effective. The CARES Act includes several tax provisions that allow for the carryback of net operating losses, provides relief from the taxable income limitation on the use of net operating losses carried forward, increases the business interest limitation from 30% to 50%, makes technical corrections to tax depreciation methods for qualified improvement property, and provides payroll tax credits and for the deferral of employer social security payments. We are not aware of any known material impacts to the Company related to the CARES Act.

New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Financial Instruments-Credit Losses
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies are required to use a new current expected credit loss ("CECL") model that generally results in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, companies are required to measure credit losses in a manner similar to prior guidance, except that the losses are recognized as allowances rather than as reductions in the amortized cost of the securities. In November 2018, the FASB amended the ASU to clarify that receivables arising from leases would not be within the scope of the ASU but rather would be accounted for under the leasing standard. Companies have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Companies must apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company adopted ASU No. 2016-13 on January 1, 2020. The Company did not record an adjustment upon adoption as the impact was determined to be immaterial. However, this standard could impact the Company's financial statements and results of operations in future periods.

10

Notes to Condensed Consolidated Financial Statements - Continued
Recently Issued Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Note 2. Real Estate Leases

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through 2035. The Company’s leases generally require the lessee to pay minimum rent, with fixed rent renewal terms or increases based on a Consumer Price Index and may also include additional rent, which may include the reimbursement of taxes (including property taxes), insurance, maintenance and other operating costs associated with the leased property.

Some leases provide the lessee, during the term of the lease, with an option or right of first refusal to purchase the leased property. Some leases also allow the lessee to renew or extend their lease term or in some cases terminate their lease, based on conditions provided in the lease.

Future minimum lease payments under the non-cancelable operating leases due to Company for the years ending December 31, as of September 30, 2020, are as follows (in thousands):
2020 (three months ending December 31)$15,932 
202161,706 
202258,149 
202353,566 
202450,456 
2025 and thereafter336,051 
$575,860 

Straight-line rental income
Rental income is recognized as earned over the life of the lease agreement on a straight-line basis when collection of rental payments over the term of the lease is probable. Straight-line rent included in rental income was approximately $0.9 million and $0.6 million, respectively, for the three months ended September 30, 2020 and 2019. Straight-line rent included in rental income was approximately $2.5 million and $1.4 million, respectively, for the nine months ended September 30, 2020 and 2019.

Deferred revenue
Income received but not yet earned is deferred until such time it is earned. Deferred revenue, included in other liabilities on the Condensed Consolidated Balance Sheets, was approximately $2.7 million and $2.0 million, respectively, at September 30, 2020 and December 31, 2019.

Security Deposits
As of September 30, 2020 and December 31, 2019, the Company held approximately $4.1 million and $3.5 million, respectively, in security deposits for the benefit of the Company in the event the obligated tenant fails to perform under the terms of its respective lease. Generally, the Company may, at its discretion and upon notification to the tenant, draw upon the security deposits if there are any defaults under the leases.
11

Notes to Condensed Consolidated Financial Statements - Continued

Note 3. Real Estate Acquisitions and Dispositions

2020 Real Estate Acquisitions
During the third quarter of 2020, the Company acquired a land parcel adjacent to one of our existing properties for a purchase price and cash consideration of approximately $1.1 million.

During the second quarter of 2020, the Company acquired seven real estate properties and a land parcel adjacent to one of our existing properties to be used for additional parking. Upon acquisition, the real estate properties were 100% leased in the aggregate with lease expirations through 2035. Amounts reflected in revenues and net income for these properties for the nine months ended September 30, 2020 were approximately $0.5 million and $0.2 million, respectively, and transaction costs totaling approximately $0.4 million were capitalized relating to these property acquisitions.

During the first quarter of 2020, the Company acquired six real estate properties. Upon acquisition, the properties were 98.2% leased in the aggregate with lease expirations through 2035. Amounts reflected in revenues and net income for these properties for the nine months ended September 30, 2020 were approximately $2.6 million and $1.5 million, respectively, and transaction costs totaling approximately $0.2 million were capitalized relating to these property acquisitions.
Location
Property
Type (1)
Date
Acquired
Purchase
Price
Cash
Consideration
Real Estate
Other (2)
Square Footage
(000's)(000's)(000's)(000's)
San Antonio, TXMOB01/27/20$4,003 $4,022 $4,036 $(14)13,500 
San Antonio, TXMOB01/27/201,931 1,955 1,961 (6)6,500 
Decatur, ALMOB02/18/205,784 5,792 5,777 15 35,943 
Ramona, CASC03/13/204,100 4,124 4,143 (19)11,300 
Cuero, TXSC03/18/202,153 2,174 2,207 (33)15,515 
Rogers, ARIRF03/27/2019,000 18,317 19,042 (725)38,817 
Oak Lawn, IL (Land)MOB04/20/20400 403 421 (18) 
Germantown, TNSC04/29/203,900 3,949 3,949  10,600 
Westlake, OHSC06/05/202,443 2,456 2,487 (31)15,057 
Columbus, IN (3)
SC06/05/201,813 1,828 1,787 41 13,969 
Niceville, FLMOB06/15/202,294 2,340 2,344 (4)10,250 
Greensburg, PAMOB06/16/203,389 3,484 3,497 (13)15,650 
Gardendale, ALMOB06/24/202,948 2,935 2,878 57 12,956 
Prattville, ALMOB06/24/204,091 4,111 4,078 33 13,319 
Jensen Beach, FL (Land)MOB09/18/201,050 1,055 1,075 (20) 
$59,299 $58,945 $59,682 $(737)213,376 
(1) MOB - Medical Office Building; SC - Specialty Center; IRF - Inpatient Rehabilitation Facility
(2) Includes, but is not limited to, above- and below-market lease intangibles, liabilities assumed, and security deposits.
(3) The Company assumed a ground lease in connection with this acquisition that is classified as an operating lease. The present value of future lease payments and the right-of-use asset, each totaling approximately $0.2 million, are included in other liabilities and other assets, respectively, on the Company's Condensed Consolidated Balance Sheets.
12

Notes to Condensed Consolidated Financial Statements - Continued
The following table summarizes the relative fair values of the assets acquired and liabilities assumed in the property acquisitions for the nine months ended September 30, 2020.
Relative
Fair Value
Estimated
Useful Life
(in thousands)(in years)
Land and land improvements$12,398 8.5
Building and building improvements41,709 30.2
Intangibles:
At-market lease intangibles5,575 5.4
Above-market lease intangibles292 4.8
Below-market lease intangibles(111)3.1
Total intangibles5,756 
Accounts receivable and other assets acquired247 
Accounts payable, accrued liabilities and other liabilities assumed(827)
Prorated rent, interest and operating expense reimbursement amounts collected(338)
Total cash consideration$58,945 

2020 Real Estate Disposition
During the second quarter of 2020, the Company sold a land parcel related to one of its properties for approximately $0.3 million and recognized a loss on sale of approximately $0.3 million.

Note 4. Debt, net

The table below details the Company's debt as of September 30, 2020 and December 31, 2019.
Balance as of
(Dollars in thousands)September 30, 2020December 31, 2019Maturity Dates
Revolving Credit Facility$ $15,000 3/23
A-1 Term Loan, net49,889 49,833 3/22
A-2 Term Loan, net49,815 49,775 3/24
A-3 Term Loan, net74,502 74,433 3/26
Mortgage Note Payable, net5,136 5,202 5/24
$179,342 $194,243 

The Company's second amended and restated credit facility (the "Credit Facility") is by and among Community Healthcare OP, LP, the Company, and a syndicate of lenders with Truist Bank (formerly SunTrust Bank) serving as Administrative Agent. The Company’s material subsidiaries are guarantors of the obligations under the Credit Facility.

The Credit Facility, as amended, provides for a $150.0 million Revolving Credit Facility and $175.0 million in term loans (the "Term Loans"). The Credit Facility, through the accordion feature, allows borrowings up to a total of $525.0 million including the ability to add and fund additional term loans. The Revolving Credit Facility matures on March 29, 2023 and includes one 12-month option to extend the maturity date of the Revolving Credit Facility, subject to the satisfaction of certain conditions. The Term Loans include a five-year term loan facility in the aggregate principal amount of $50.0 million (the "A-1 Term Loan"), which matures on March 29, 2022, a seven-
13

Notes to Condensed Consolidated Financial Statements - Continued
year term loan facility in the aggregate principal amount of $50.0 million (the "A-2 Term Loan"), which matures on March 29, 2024, and a seven-year, term loan facility in the aggregate principal amount of $75.0 million (the "A-3 Term Loan"), which matures on March 29, 2026.

Amounts outstanding under the Revolving Credit Facility, as amended, bear annual interest at a floating rate that is based, at the Company’s option, on either: (i) LIBOR plus 1.25% to 1.90% or (ii) a base rate plus 0.25% to 0.90% in each case, depending upon the Company’s leverage ratio. In addition, the Company is obligated to pay an annual fee equal to 0.25% of the amount of the unused portion of the Revolving Credit Facility if amounts borrowed are greater than 33.3% of the borrowing capacity under the Revolving Credit Facility and 0.35% of the unused portion of the Revolving Credit Facility if amounts borrowed are less than or equal to 33.3% of the borrowing capacity under the Revolving Credit Facility. The Company had no amounts outstanding under the Revolving Credit Facility at September 30, 2020, and had a borrowing capacity remaining of $150.0 million at September 30, 2020.

Amounts outstanding under the Term Loans, as amended, bear annual interest at a floating rate that is based, at the Company’s option, on either: (i) LIBOR plus 1.25% to 2.30% or (ii) a base rate plus 0.25% to 1.30%, in each case, depending upon the Company’s leverage ratio. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. See Note 5 for more details on the interest rate swaps. At September 30, 2020, the Company had $175.0 million under the Term Loans which had a fixed weighted average interest rate under the swaps of approximately 3.881%.

The Company’s ability to borrow under the Credit Facility is subject to its ongoing compliance with a number of customary affirmative and negative covenants, including limitations with respect to liens, indebtedness, distributions, mergers, consolidations, investments, restricted payments and asset sales, as well as financial maintenance covenants. The Company was in compliance with its financial covenants under its Credit Facility as of September 30, 2020.

Note 5. Derivative Financial Instruments

Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate on the contract.


14

Notes to Condensed Consolidated Financial Statements - Continued
As of September 30, 2020, the Company had seven outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk for notional amounts totaling $175.0 million. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019.
Asset Derivatives Fair Value atLiability Derivatives Fair Value at
(Dollars in thousands)September 30, 2020December 31, 2019Balance Sheet ClassificationSeptember 30, 2020December 31, 2019Balance Sheet Classification
Interest rate swaps$ $ Other assets$13,135 $4,808 Other Liabilities

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive loss ("AOCI") and are subsequently reclassified to interest expense in the period that the hedged forecasted transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s Term Loans. During the next twelve months, the Company estimates that an additional $3.7 million will be reclassified from AOCI as an increase to interest expense.

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and nine months ended September 30, 2020 and 2019.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in thousands)2020201920202019
Amount of unrealized loss recognized in OCI on derivatives$(99)$(2,060)$(10,292)$(7,305)
Amount of loss (gain) reclassified from AOCI into interest expense$933 $3 $1,965 $(154)
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded$2,064 $2,483 $6,496 $6,788 

Credit-risk-related Contingent Features
As of September 30, 2020, the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $13.6 million. As of September 30, 2020, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value of approximately $13.6 million at September 30, 2020.

Note 6. Stockholders’ Equity

Common Stock
The following table provides a reconciliation of the beginning and ending common stock balances for the nine months ended September 30, 2020 and for the year ended December 31, 2019:
Nine Months Ended
September 30, 2020
Year Ended
December 31, 2019
Balance, beginning of period21,410,578 18,634,502 
Issuance of common stock
1,726,384 2,554,247
Restricted stock-based awards
270,536 221,829 
Balance, end of period23,407,498 21,410,578


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Notes to Condensed Consolidated Financial Statements - Continued
ATM Program
On November 3, 2020, the Company entered into Amendment No. 1 (the “Amendment”), to the Amended and Restated Sales Agency Agreement, dated November 5, 2019 (as amended, the “Sales Agreement”) for its at-the-market offering program ("ATM Program"), by and among the Company and Piper Sandler & Co. (f/k/a Sandler O’Neill & Partners, L.P.), Evercore Group L.L.C., Truist Securities, Inc. (f/k/a SunTrust Robinson Humphrey, Inc.), Regions Securities LLC, Robert W. Baird & Co. Incorporated, Fifth Third Securities, Inc. and Janney Montgomery Scott LLC., as sales agents (collectively, the “Agents”). Pursuant to the Amendment, Regions Securities LLC and Robert W. Baird & Co. Incorporated were added as additional sales agents under the Sales Agreement. Under the ATM Program, the Company may issue and sell shares of its common stock, having an aggregate gross sales price of up to $360.0 million. The shares of common stock may be sold from time to time through or to one or more of the Agents, as may be determined by the Company in its sole discretion, subject to the terms and conditions of the agreement and applicable law.

The Company's activity under the ATM Program for the three and nine months ended September 30, 2020 is detailed in the table below. As of September 30, 2020, the Company had approximately $226.2 million remaining that may be issued under the ATM Program.
Three Months Ended
September 30, 2020
Nine Months Ended
September 30, 2020
Shares issued536,839 1,726,384 
Net proceeds received (in millions)
$24.9 $75.5 
Average gross sales price per share$47.40 $44.64 

Note 7. Net Income Per Common Share

The following table sets forth the computation of basic and diluted net income per common share for the three and nine months ended September 30, 2020 and 2019, respectively.

Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in thousands, except per share data)2020201920202019
Net income$5,211 $2,647 $13,837 $6,163 
          Participating securities' share in earnings(491)(373)(1,346)(1,024)
Net income, less participating securities' share in earnings$4,720 $2,274 $12,491 $5,139 
Weighted average Common Shares outstanding
Weighted average Common Shares outstanding
22,965,540 19,697,574 22,330,172 19,166,309 
Unvested restricted shares
(1,099,377)(864,672)(1,039,944)(818,679)
Weighted average Common Shares outstanding–Basic
21,866,163 18,832,902 21,290,228 18,347,630 
Dilutive potential common shares
    
Weighted average Common Shares outstanding –Diluted
21,866,163 18,832,902 21,290,228 18,347,630 
Basic Net Income per Common Share$0.22 $0.12 $0.59 $0.28 
Diluted Net Income per Common Share$0.22 $0.12 $0.59 $0.28 


16


Note 8. Incentive Plan

A summary of the activity under the Company's 2014 Incentive Plan, as amended, for the three and nine months ended September 30, 2020 and 2019 is included in the table below, as well as compensation expense recognized from the amortization of the value of shares over the applicable vesting periods.
Three Months Ended
September 30,
Nine Months Ended
September 30,
(Dollars in thousands)2020201920202019
Stock-based awards, beginning of period1,020,000 813,752 909,892 709,487 
Stock in lieu of compensation36,349 14,862 92,104 72,391 
Stock awards108,169 81,278 178,432 149,438 
   Total stock granted144,518 96,140 270,536 221,829 
Vested shares  (15,910)(21,424)
Stock-based awards, end of period1,164,518 909,892 1,164,518 909,892 
Amortization expense$1,284 $1,007 $3,373 $2,759 

Note 9. Other Assets, net

Other assets, net on the Company's Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 are detailed in the table below.
Balance as of
(Dollars in thousands)September 30, 2020December 31, 2019
Notes receivable$17,642 $23,500 
Lease and interest receivables2,266 3,021 
Straight-line rent receivables7,796 5,267 
Prepaid assets787 488