UNIVERSAL HEALTH REALTY INCOME TRUST REPORTS 2023 FIRST QUARTER FINANCIAL RESULTS

UNIVERSAL HEALTH REALTY INCOME TRUST REPORTS 2023 FIRST QUARTER FINANCIAL RESULTS

Consolidated Results of Operations – Three-Month Periods Ended March 31, 2023 and 2022:

KING OF PRUSSIA, Pa., April 25, 2023 /PRNewswire/ — Universal Health Realty Income Trust (NYSE:UHT) announced today that for the three-month period ended March 31, 2023, net income was $4.5 million, or $.32 per diluted share, as compared to $5.4 million, or $.39 per diluted share, during the first quarter of 2022.

The decrease in our net income of $946,000, or $.07 per diluted share, during the first quarter of 2023, as compared to the comparable quarter of 2022, consisted of the following: (i) a decrease of $1.5 million, or $.11 per diluted share, resulting from an increase in interest expense due primarily to an increase in our average borrowing rate as well as an increase in our average outstanding borrowings; (ii) a decrease of $265,000, or $.02 per diluted share, from demolition expenses incurred during the first quarter of 2023 related to a vacant facility located in Chicago, Illinois, partially offset by; (iii) an increase of $794,000, or $.06 per diluted share, resulting from an aggregate net increase in the income generated at various properties, including a reduction of $342,000, or $.02 per diluted share, in the building expenses related to the above-mentioned vacant facility located in Chicago. 

As calculated on the attached Schedule of Non-GAAP Supplemental Information (“Supplemental Schedule”), our funds from operations (“FFO”) were $11.4 million, or $.82 per diluted share, during the first quarter of 2023, as compared to $12.4 million, or $.90 per diluted share during the first quarter of 2022. The decrease of $1.0 million, or $.08 per diluted share, was due to the above-mentioned $946,000, or $.07 per diluted share, decrease in our net income during the first quarter of 2023, as compared to the first quarter of 2022, as well as a $93,000, or $.01 per diluted share, decrease in depreciation and amortization expense incurred on our consolidated and unconsolidated investments. 

Dividend Information:

The first quarter dividend of $.715 per share, or $9.9 million in the aggregate, was declared on March 8, 2023 and paid on March 31, 2023.

Capital Resources Information:

At March 31, 2023, we had $308.4 million of borrowings outstanding pursuant to the terms of our $375 million revolving credit agreement and $63.5 million of available borrowing capacity as of that date, net of outstanding borrowings and letters of credit.

New Construction Project – Sierra Medical Plaza I: 

In January 2022, we entered into a ground lease and master flex-lease agreement with a wholly-owned subsidiary of Universal Health Services, Inc. (“UHS”) to develop, construct and own the real property of Sierra Medical Plaza I, a medical office building (“MOB”) located in Reno, Nevada, consisting of approximately 86,000 rentable square feet. This MOB is located on the campus of the Northern Nevada Sierra Medical Center, a newly constructed hospital that is owned and operated by a wholly-owned subsidiary of UHS, which was completed and opened during April of 2022. Construction of this MOB, for which we engaged a non-related third party to act as construction manager, commenced in January, 2022, and was substantially completed in March, 2023. The cost of the MOB is estimated to be approximately $34.6 million, approximately $22.3 million of which was incurred as of March 31, 2023. The master flex lease agreement in connection with this building, which commenced in March, 2023, is for approximately 68% of the rentable square feet of the MOB at an initial minimum rent of $1.3 million annually, and is subject to reduction based upon the execution of third-party leases.

Vacant Specialty Facilities: 

As previously disclosed, after evaluation of the most suitable future uses for a vacant specialty hospital located in Chicago, Illinois, as well as an effort to reduce its ongoing operating and maintenance expenses, we decided to raze the building. Demolition, which commenced during the fourth quarter of 2022 and is expected to be completed during the second quarter of 2023, is expected to cost approximately $1.4 million. Approximately $265,000 of demolition costs were incurred during the first quarter of 2023, and are included in our other operating expenses in our consolidated statements of income. As of March 31, 2023, an aggregate of $597,000 of demolition expenses have been incurred related to this project.     

Including the above-mentioned demolition costs incurred during the first quarter of 2023, the operating expenses incurred by us in connection with the property located in Chicago, Illinois, were $417,000 during the three months ended March 31, 2023 (or $152,000 excluding the $265,000 of demolition costs) as compared to $494,000 of operating expenses during the three month period ended March 31, 2022.

In addition, the aggregate operating expenses for the two vacant specialty facilities located in Evansville, Indiana, and Corpus Christi, Texas, were approximately $187,000 and $175,000 during the three-month periods ended March 31, 2023 and 2022, respectively.

We continue to market the three above-mentioned properties to third parties. Future operating expenses related to these properties, which are estimated to be approximately $1.3 million in the aggregate during the full year of 2023 (excluding the demolition costs to be incurred in connection with the property in Chicago, Illinois), will be incurred by us during the time they remain owned and unleased. Should these properties continue to remain owned and unleased for an extended period of time, or should we incur substantial renovation or additional demolition costs to make the properties suitable for other operators/tenants/buyers, our future results of operations could be materially unfavorably impacted.  

General Information, Forward-Looking Statements and Risk Factors and Non-GAAP Financial Measures:

Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human-service related facilities including acute care hospitals, behavioral health care hospitals, specialty facilities, medical/office buildings, free-standing emergency departments and childcare centers. We have investments or commitments in seventy-six properties located in twenty-one states.

This press release contains forward-looking statements based on current management expectations. Numerous factors, including those disclosed herein, as well as the operations and financial results of each of our tenants, those related to healthcare industry trends and those detailed in our filings with the Securities and Exchange Commission (as set forth in Item 1ARisk Factors and in Item 7-Forward-Looking Statements in our Form 10-K for the year ended December 31, 2022), may cause the results to differ materially from those anticipated in the forward-looking statements. Readers should not place undue reliance on such forward-looking statements which reflect management’s view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. 

Many of the factors that could affect our future results are beyond our control or ability to predict, including the impact of the COVID-19 pandemic. Future operations and financial results of our tenants, and in turn ours, could be materially impacted by various developments including those related to COVID-19. Such developments include, but are not limited to, decreases in staffing availability and related increases to wage expense experienced by our tenants resulting from the nationwide shortage of nurses and other clinical staff and support personnel, the impact of government and administrative regulation of the health care industry; declining patient volumes and unfavorable changes in payer mix caused by deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients as the result of business closings and layoffs); potential disruptions related to supplies required for our tenants’ employees and patients; and potential increases to other expenditures.

In addition, the increase in interest rates has substantially increased our borrowings costs and reduced our ability to access the capital markets on favorable terms. Additional increases in interest rates could have a significant unfavorable impact on our future results of operations and the resulting effect on the capital markets could adversely affect our ability to carry out our strategy.

We believe that, if and when applicable, adjusted net income and adjusted net income per diluted share (as reflected on the Supplemental Schedule), which are non-GAAP financial measures (“GAAP” is Generally Accepted Accounting Principles in the United States of America), are helpful to our investors as measures of our operating performance. In addition, we believe that, when applicable, comparing and discussing our financial results based on these measures, as calculated, is helpful to our investors since it neutralizes the effect in each year of material items that are non-recurring or non-operational in nature including items such as, but not limited to, gains on transactions.

Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO, as reflected on the attached Supplemental Schedules, in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we interpret the definition. FFO adjusts for the effects of certain items, such as gains on transactions that occurred during the periods presented. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP. In addition, FFO should not be used as: (i) an indication of our financial performance determined in accordance with GAAP; (ii) an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) a measure of our liquidity, or; (iv) an indicator of funds available for our cash needs, including our ability to make cash distributions to shareholders. A reconciliation of our reported net income to FFO is reflected on the Supplemental Schedules included below.

To obtain a complete understanding of our financial performance these measures should be examined in connection with net income, determined in accordance with GAAP, as presented in the condensed consolidated financial statements and notes thereto in this report or in our other filings with the Securities and Exchange Commission including our Report on Form 10-K for the year ended December 31, 2022. Since the items included or excluded from these measures are significant components in understanding and assessing financial performance under GAAP, these measures should not be considered to be alternatives to net income as a measure of our operating performance or profitability. Since these measures, as presented, are not determined in accordance with GAAP and are thus susceptible to varying calculations, they may not be comparable to other similarly titled measures of other companies. Investors are encouraged to use GAAP measures when evaluating our financial performance.

Universal Health Realty Income Trust

Consolidated Statements of Income

For the Three Months Ended March 31, 2023 and 2022

(amounts in thousands, except share information)

(unaudited)






Three Months Ended




March 31,




2023



2022


Revenues:







  Lease revenue – UHS facilities (a.)


$

7,787



$

7,426


  Lease revenue – Non-related parties



13,361




12,895


  Other revenue – UHS facilities



231




229


  Other revenue – Non-related parties



481




255


  Interest income on financing leases – UHS facilities



1,366




1,370





23,226




22,175


Expenses:







  Depreciation and amortization



6,618




6,709


  Advisory fees to UHS



1,302




1,224


  Other operating expenses



7,521




6,867





15,441




14,800


Income before equity in income of unconsolidated limited liability companies
(“LLCs”) and interest expense



7,785




7,375


  Equity in income of unconsolidated LLCs



371




252


Interest expense, net



(3,697)




(2,222)


Net income


$

4,459



$

5,405


Basic earnings per share


$

0.32



$

0.39


Diluted earnings per share


$

0.32



$

0.39









Weighted average number of shares outstanding – Basic



13,778




13,764


Weighted average number of shares outstanding – Diluted



13,803




13,785









(a.) Includes bonus rental on McAllen Medical Center, a UHS acute care hospital facility of $764 and $678 for the three-
month periods ended March 31, 2023 and 2022, respectively.


Universal Health Realty Income Trust

Schedule of Non-GAAP Supplemental Information (“Supplemental Schedule”)

For the Three Months Ended March 31, 2023 and 2022

 (amounts in thousands, except share information)

(unaudited)




Calculation of Adjusted Net Income






Three Months Ended



Three Months Ended




March 31, 2023



March 31, 2022




Amount



Per
Diluted Share



Amount



Per
Diluted Share


Net income


$

4,459



$

0.32



$

5,405



$

0.39


Adjustments













Subtotal adjustments to net income













Adjusted net income


$

4,459



$

0.32



$

5,405



$

0.39




Calculation of Funds From Operations (“FFO”)






Three Months Ended



Three Months Ended




March 31, 2023



March 31, 2022




Amount



Per
Diluted Share



Amount



Per
Diluted Share


Net income


$

4,459



$

0.32



$

5,405



$

0.39


Plus: Depreciation and amortization expense:













Consolidated investments



6,618




0.48




6,709




0.49


Unconsolidated affiliates



293




0.02




295




0.02


FFO


$

11,370



$

0.82



$

12,409



$

0.90


Dividend paid per share





$

0.715






$

0.705


Universal Health Realty Income Trust

Consolidated Balance Sheets

(amounts in thousands, except share information)

(unaudited)






March 31,



December 31,




2023



2022


Assets:







Real Estate Investments:







Buildings and improvements and construction in progress


$

645,509



$

641,338


Accumulated depreciation



(254,590)




(248,772)





390,919




392,566


Land



56,631




56,631


               Net Real Estate Investments



447,550




449,197


Financing receivable from UHS



83,525




83,603


               Net Real Estate Investments and Financing receivable



531,075




532,800


Investments in and advances to limited liability companies (“LLCs”)



9,599




9,282


Other Assets:







Cash and cash equivalents



8,120




7,614


Lease and other receivables from UHS



5,755




5,388


Lease receivable – other



8,611




8,445


Intangible assets (net of accumulated amortization of $14.1 million and
   $15.4 million, respectively)



8,877




9,447


Right-of-use land assets, net



11,836




11,457


Deferred charges and other assets, net



20,439




23,107


               Total Assets


$

604,312



$

607,540


Liabilities:







Line of credit borrowings


$

308,400



$

298,100


Mortgage notes payable, non-recourse to us, net



40,119




44,725


Accrued interest



337




373


Accrued expenses and other liabilities



10,360




12,873


Ground lease liabilities, net



11,836




11,457


Tenant reserves, deposits and deferred and prepaid rents



11,090




10,911


               Total Liabilities



382,142




378,439


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: 2023 – 13,804,142;
   2022 – 13,803,335



138




138


Capital in excess of par value



269,698




269,472


Cumulative net income



815,120




810,661


Cumulative dividends



(873,050)




(863,181)


Accumulated other comprehensive income



10,264




12,011


     Total Equity



222,170




229,101


               Total Liabilities and Equity


$

604,312



$

607,540


SOURCE Universal Health Realty Income Trust

Originally published at https://www.prnewswire.com/news-releases/universal-health-realty-income-trust-reports-2023-first-quarter-financial-results-301807366.html

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