Welcome to the Community Healthcare Trust’s 2016 Fourth Quarter and Year End Earnings Release Conference Call. On the call today, the company will discuss its 2016 fourth quarter and year end financial results. It will also discuss progress made in various aspects of its business.

Following the remarks, the phone lines will be opened for a question-and-answer session. The company’s earnings release was distributed last evening and has also been posted on its website, www.chct.reit.

The company wants to emphasize that some of the information that maybe discussed in this call will be based on information as of today, February 24, 2017 and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements.

For a discussion of these risks and uncertainties, you should review the company’s disclosures regarding forward-looking statements in its earnings release as well as its risk factors and MD&A in its SEC filings.

The company undertakes no obligation to update forward-looking statements whether as the result of new information, future developments or otherwise, except as maybe required by law. During this call, the company will discuss GAAP and non-GAAP financial measures.

A reconciliation between the two is available in its earnings release, which is posted on its website. Call participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the company’s Investor Relations website for approximately 30 days and is the property of the company.

This call may not be recorded or otherwise reproduced or distributed without the company’s prior written permission. Now, I would like to turn the call over to Timothy Wallace, Chairman, Chief Executive Officer and the President of Community Healthcare Trust Incorporated..

Thanks. Good morning, everyone and thank you for joining us today. With me on the call today is Page Barnes, our Executive Vice President and Chief Financial Officer. As is our normal process, our earnings announcement and supplemental data report were released last night and filed with an 8-K.

And our annual report on Form 10-K was also filed last night. Once again, we had a very productive quarter. We acquired 6 properties in 5 states during the quarter, with a total of approximately 187,000 square feet for a total purchase price of approximately $45.6 million.

These properties were approximately 98.1% leased, with leases running through 2031 and anticipated annual returns of 9% to 9.7%. We have already acquired 2 properties in the first quarter, with a total of approximately 48,800 square feet for a total purchase price of approximately $7.9 million.

The expected return on these investments range from approximately 9.2% to 9.3%. The properties were approximately 94% leased with lease expirations through 2022. In addition, we have 9 properties under definitive purchase agreements for an aggregate expected purchase price of approximately $25.7 million.

The expected return on these investments range from approximately 9% to 9.6% and we anticipate that substantially all of these will close during the first quarter. As it relates to the pipeline, our properties under review continue to increase.

We currently have several properties under signed term sheets and several more with term sheets being actively negotiated and that we expect back to sign soon. In addition to our acquisition activity in the fourth quarter, we also declared our dividend and raised it to $0.3875 per common share.

This equates to an annualized dividend of $1.55 per share and I continue to be proud to say, we have raised our dividend every quarter since our IPO. As announced last year, ahead an active 10b-5 plan, to acquire shares of the company’s stock. During the fourth quarter, our acquired percentage of the plan 74,854 shares of the company’s common stock.

Pursuant to the plan, I acquired almost $3 million of the company’s common stock last year. And in total, considering all sources, I acquired almost $5 million of the company’s common stock in 2016.

A little off script, but a couple of things people have already shot us questions about, I do not currently have anything to announce about a replacement 10b-5 program, the one that I had last year expired as of 12/31.

However, with my history of buying stock at the IPO, at the fellow on in pursuant to playing in the market, in addition to taking all of my compensation in stock. If I were you I would not be surprised if a new program was announced over the next few weeks.

Also, as it relates to the property we are buying adjacent to our corporate headquarters, it is for future expansion and currently hesitated in it paying around and we anticipate leaving that status quo for some period of time. We will be getting a return on our investment albeit a little less than our normal return.

I believe I’ve taken care of all the items I wanted to cover, so I will hand the things off to Page to cover the numbers..

Thank you, Tim. I am pleased to review the company’s financial performance for the fourth quarter and year ended December 31, 2016. Total revenues for the fourth quarter were $7.4 million versus $4.6 million for the same period 2015. Total revenues for the year were $25.2 million versus $8.6 million for the partial year 2015.

Rental and mortgage interest revenues were $5.8 million and $19 million for the quarter and year respectively versus $3.1 million and $6.4 million for the same periods in 2015. The real estate portfolio was over 93% leased.

On a pro forma basis, if all the 2016 fourth quarter acquisitions had occurred on the first day of fourth quarter, rental and mortgage interest revenues would have increased by an additional $762,000 to a pro forma total of over $6.6 million. Total expenses for the fourth quarter of 2016 were approximately $6 million.

Total expenses for the year were $21.3 million. General and administrative expenses for the fourth quarter were $856,000. And off this amount, transaction expenses totaled $200,000. Depreciation and amortization expense was $3.6 million for the quarter and $13.2 million for the year.

On a pro forma basis, if all the 2016 fourth quarter acquisitions occurred on the first day of the fourth quarter, depreciation and amortization expense would have increased by $330,000 to a pro forma total of approximately $3.9 million. The company reported net income of over $1 million for the fourth quarter and over $2.7 million for the year.

Funds from operations for the fourth quarter of 2016 consist of net income plus $3.6 million in depreciation and amortization for a total of over $4.6 million. AFFO, which adds back acquisition expenses and adjusts for straight line rents and deferred compensation increases the total to $4.8 million or $0.38 per share diluted.

Again, on a pro forma basis, adjusting for debt outstanding for the entire quarter, if all of the 2016 fourth quarter acquisitions occurred on the first day of the fourth quarter, AFFO would have increased by approximately $650,000 to a pro forma total of over $5.4 million and increasing AFFO by $0.05 to $0.43 per share diluted.

That’s all I have from a number standpoint, operator. I believe we are ready to start the question-and-answer session..

Thank you. [Operator Instructions] And our first question comes from Daniel Santos with Sandler O’Neill. Please go ahead..

Hey, good morning. Thanks for taking my questions..

Good morning Daniel..

Thanks.

My first question is on the corporate expansion, I recognized you said that it was for future expansion, but just one question there, is that something you envision to be more of like a back office function expansion or is it something you envisioned more of a platform expansion and picking up – potentially picking up acquisition pace?.

No. We view it as something that we will naturally grow into. I mean as we are growing, we went from zero properties, 2 years ago to where we have got I guess it’s 60 properties now. We are adding as we need them property accountant [ph] and other functions like that.

So we anticipate that over the next few years adding I don’t know two to four a year probably as we grow. We don’t anticipate changing our pace of growth and this is just kind of protective for the future so that we have it..

Got it. Thanks. That’s helpful.

My second question is on your sort of capital markets roadmap, given where rates have leveled out recently, has your roadmap changed as far as debt or equity raises?.

We are modifying them slightly. We are still anticipating doing a term loan here towards the end of the first quarter, end of the second quarter and said that for probably a year now, that that’s kind of what we were anticipating doing. And we would have another equity raise probably in the fall.

One of the things that’s adjusted our thinking this understanding has been pointed out to us that we are not currently ending RMZ and the anticipation is that it would take a capitalization somewhere around – a market capital of somewhere around $380 million. I think it’s probably end of August to get there.

So we will probably look at increasing the size of the equity offering that we are finding as well slightly and maybe moving it out a month or two months from what would normally be the case, so that we make sure that we get into the RMZ by the end of the year..

Prefect. Thanks guys..

Our next question comes from Rob Stevenson with Janney. Please go ahead..

Good morning guys..

Good morning Bobby..

Good morning.

Are you seeing any property types, where you are getting better deals than expected these days?.

Based upon what we are looking at, I think there probably is pretty much what we have been expecting. There has been quite a few of some different properties actually been put on the market because the market kind of looked at negatively.

I mean LTAC is one that comes as an example, where some of our peers were trying to reduce their exposure to and where the operators were trying to get others involved in it. And we like this space.

We haven’t anything else here, we have got one LTAC that we did and kept it as mortgage, but other than that, we have Page, can you think of anything that is unusual or I guess a good standpoint..

You are right [indiscernible] that we would say but we have been optimistic more than property type I think we have had some opportunities within property types which is stable..

Okay, alright.

And then I guess another question would wind up being today as your acquisition volume sort of limited by the number of deals, the capital etcetera, I guess because to your point, if you increase the size that bring an equity issuance forward, does that allow you to do more acquisitions earlier in the year or basically are you guys running sort of that given your current overhead that you guys running it sort of close to 100% capacity in terms of getting the deals in approved and closed these days?.

[Indiscernible] I have quite looked at it like that Rob. We wanted to kick it up to $50 million to $60 million. I think we probably have the people and the relationships to do it.

We just feel a lot more comfortable doing it on the $25 million, $30 million in the fourth quarter $45 million, the first quarter maybe $35 million, but by the third quarter it maybe $15 million because third quarter seems to be a low in our acquisition process for the last couple of years.

So we feel very comfortable at doing $120 million, it’s kind of like if we want to do, we can do more. We thought it would – if we thought it would be more profitable to do more, we would. But we think in the range that we are at in the property types that we are, we feel very comfortable with it and it’s kind of like what we do.

So we are – I have never viewed it as a capacity type issue from that standpoint, it’s more of how do we do this and have to make the most money for everybody..

Okay.

And then Page, what’s the – given what you have completed year-to-date and what you have under contract, what’s your sort of, what you get that stuff closed, what’s your sort of remaining, sort of dry powder for acquisitions before you really do have to think about doing something once you get this term loan done and these acquisitions closed?.

Once we get the term loan done and with – are you speaking to before the equity offering?.

Yes.

I mean what basically could you acquire between now including the stuff that you have under contract between now and when you need to raise equity, I mean what’s that level of dry powder looking like today, is that giving you the ability to close another $30 million, $40 million or…?.

No. It’s a lot more than that. I mean once we do the term loan, the revolver will be empty again. So I mean theoretically, we won’t have to do another equity offering until sometime next year.

One of the reasons that we probably are going to move it up and look at it sometime in the first quarter is again the RMZ, it’s not we will be in a position to where we do not need to do the equity offering, but it will – we think it will make a lot of sense from a liquidity standpoint, etcetera, for our existing shareholders..

Okay.

And that would still keep you within whatever leverage levels that you really want to be in?.

We can do another 50 to 75 and still be under our 40% I believe..

Okay, that was what I was looking for. Alright, perfect. Thanks guys. I appreciate it. Have a great weekend..

[Operator Instructions] Our next question comes from Sheila McGrath with Evercore. Please go ahead..

Yes. Thank you. Good morning.

Could you update us Tim or Page on the cost of that, if you term out the loan around what coupon do you expect for the term loan?.

We are still in negotiations over that and basically what we are looking at now we think is something we are comfortably in the four angle range for 7-year type and may be set for 5 years..

Okay.

And also if – just on the under contract and pipeline that is in the release, would – do you expect most of that to close in first quarter or is that – some of that could slip into second quarter?.

The way you asked the question, of course some of it’s slipping into the second quarter. We anticipate that it will all close in the first quarter, but this is real estate and it is not separate property. So is it profitable that one or two have slips into second quarter, absolutely..

Okay.

And then I apologize because I am on like two calls at the same time, but on G&A, are you able to give us any kind of broad stroke metrics how that should look versus 2016?.

Look and I am going to do something I am looking at Page on doing this, but to make sure. But I think G&A for 2016 was about $3.2 million. And the kind of the way I will look at that I will break it into three different pieces.

One of them is the transaction costs, which is like $800,000 for 2016 and we acquired close to $120 million, so that’s running 65, 70 bps on the acquisition side.

The other piece of that is compensation that the non-cash compensation piece, which I think last year was about $700,000 of the $3.2 million and that’s going to ramp up on the schedule and hope for everybody is kind of go ramp up schedule and as we go through the years and we add earn more and more of our compensation and stock, that piece of it is going to ramp up.

The great news about that is it’s always non-cash. I mean, there is no cash piece to that one, which leaves, I believe, for 2016 somewhere in the $1.7 million, $1.8 million, which is between $250,000 a quarter of real cash G&A.

And I would anticipate seeing that increase over the years we are going to be adding property accountants, we are going to be adding some other people, so I wouldn’t be surprised to see that bump up $50,000 to $100,000 a quarter by the end of 2017..

Okay, great. That’s very helpful. Thank you..

[Operator Instructions] The next question comes from Eric Fleming with SunTrust. Please go ahead..

Good morning, guys..

Good morning, Eric..

So, it’s a couple of questions.

I know you kind of hit it before on the acquisition question, but really what would it be that would get you to move comfortably out of your $25 million to $35 million a quarter target, like what would put you into that $50 million a quarter target?.

We feel comfortable that we would invest $50 million at the largest thread than what we are currently investing at, I mean, again, we are here just to make money. We are not in it to grow assets.

And we think that we are basically in the spread investment business, so this environment – currently we are investing at 9 to 9.5 and our equity dividend yields 6.8 and our debt is considered the term that I just talked about considered long-term debt being in the, call it, the 4.5 range.

So if something happened to quarter that spread would increase 100 basis points and we should well, gee, this is something that we can take advantage of and we need to do it quickly. Something like that would get us to do it, but other than that, again, we have got our plan, we have got our system, we feel comfortable with it.

The worst thing we can do is accelerate growth and make mistakes. And since all of those – or significant amount of those, 95% of all of the original Founders compensation still being intact in stock and 80% company-wide being taken. So we want to make sure that we have got profitable growth and that we are not making mistakes..

Okay, understood.

And with any of the investments you have made in the fourth quarter and your posts – are any of those kind of moving towards – are there any new of those relationship investments that you are looking to setup like what you have, what’s their Chicago Behavioral Health facility or what you have done with Dallas clinics?.

Yes. Yes, actually one of them, the largest one that we did in the fourth quarter and going into that and we are looking to work towards a relationship with and we are very excited about that.

It’s managed health plans in Louisiana and we feel like they are doing healthcare rising as it’s an insurance company that was valued by doctors and they are asking building their cost curve. Their silver benchmark plan is I think it will what I heard was 17% below Louisiana Blue Cross Blue Shield’s benchmark plan.

So we are very excited about doing the transaction and very excited about working with them on the developing the relationship going forward.

We also bought our first property that was in conjunction with Regional Care in the fourth quarter and obviously Regional Care is headquartered in Franklin and we know they are managing the team well and they have been looking to develop the relationship there. So, we are excited about that.

And several of the others that we have in the kind of list, we have got a signed term sheet on our second one with one of our clients that’s not – that just got [indiscernible] held for an almost $5 million property. We have got a term sheet out for the second property with one of the Dallas’ clinic company. So, we are seeing that come together.

It’s taking a little bit longer than what it would look like, but we are still very good about where we are going with those relationships..

Yes, great. Thanks a lot..

It appears that there are no further questions. So, I would now like to conclude the question-and-answer session and turn the call back over to Timothy Wallace for any closing remarks..

Thank you. And once again, I would like to thank everybody on the phone call for your continued interest and support and we continue to believe that we could be where we are as it wasn’t for you all. So, we are very appreciative of your all support and we are looking forward to a good another year in 2017. Thank you..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..