UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, ~~2019~~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~~Incorporated

(Exact Name of Registrant as Specified in Its Charter)



Maryland		46-5212033
(State or Other Jurisdiction of Incorporation or Organization)		~~46-5212033~~ (I.R.S. Employer Identification No.)

3326 Aspen Grove Drive

Suite 150

Franklin, Tennessee37067

(Address of Principal Executive Offices) (Zip Code)

~~(615)~~ (615) 771-3052

(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 Class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.01 par value per share	CHCT	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 x☒ 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 x☒ 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~~ ¨ Filer	☒	Accelerated ~~filer~~ xFiler	☐	Emerging-growth companyx	☐	Non-accelerated filer¨	☐	Smaller reporting companyx	☐

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. x☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨☐ No x☒

The Registrant had ~~19,406,780~~22,726,373 shares of Common Stock, $0.01 par value per share, outstanding as of July 31, ~~2019.~~2020.

COMMUNITY HEALTHCARE TRUST INCORPORATED

FORM 10-Q

June 30, ~~2019~~2020

TABLE OF CONTENTS



		Page
PART I.—FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	~~Notes to Condensed Consolidated Financial Statements~~	8
	~~Item 2.~~Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2928
Item 4.	Controls and Procedures	2928

PART II.—OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3129
Item 3.	Defaults Upon Senior Securities	3129
Item 4.	Mine Safety Disclosures	3129
Item 5.	Other Information	3129
Item 6.	Exhibits	3129

SIGNATURES		3331

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)


	(Unaudited)						(Unaudited)
	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
ASSETS
Real estate properties
Land and land improvements	$	57,388		$	50,270		$	78,999		$	68,129
Buildings, improvements, and lease intangibles	454,050			394,527			585,454			534,503
Personal property	143			133			234			220
Total real estate properties	511,581			444,930			664,687			602,852
Less accumulated depreciation	(65,843		)	(55,298		)	(89,698		)	(77,523		)
Total real estate properties, net	445,738			389,632			574,989			525,329
Cash and cash equivalents	9,031			2,007			4,896			1,730
Restricted cash	234			385			351			293
Other assets, net	35,497			34,546			32,068			35,179
Total assets	$	490,500		$	426,570		$	612,304		$	562,531

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Debt, net	$	198,176		$	147,766		$	197,309		$	194,243
Accounts payable and accrued liabilities	3,395			3,196			5,497			3,606
Other liabilities	9,809			3,949			22,395			11,271
Total liabilities	211,380			154,911			225,201			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; 19,401,244 and 18,634,502 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	194			186
Common stock, $0.01 par value; 450,000,000 shares authorized; 22,726,141 and 21,410,578 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively							227			214
Additional paid-in capital	361,913			337,180			500,477			447,916
Cumulative net income	12,694			9,178			26,180			17,554
Accumulated other comprehensive (loss) income	(4,769		)	633
Accumulated other comprehensive loss							(13,969		)	(4,808		)
Cumulative dividends	(90,912		)	(75,518		)	(125,812		)	(107,465		)
Total stockholders’ equity	279,120			271,659			387,103			353,411
Total liabilities and stockholders' equity	$	490,500		$	426,570		$	612,304		$	562,531

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2019~~2020 AND ~~2018~~2019

(Unaudited; Dollars in thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
REVENUES
Rental income	$	13,361		$	11,810		$	26,259		$	22,885		$	17,830		$	13,361		$	35,258		$	26,259
Other operating interest	955			592			1,498			946			450			955			958			1,498
	14,316			12,402			27,757			23,831			18,280			14,316			36,216			27,757

EXPENSES
Property operating	2,993			2,506			6,068			4,870			3,223			2,993			6,566			6,068
General and administrative	1,776			1,504			3,561			2,697			1,919			1,776			4,111			3,561
Depreciation and amortization	5,299			4,630			10,545			9,546			6,119			5,299			12,178			10,545
	10,068			8,640			20,174			17,113			11,261			10,068			22,855			20,174

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS	4,248			3,762			7,583			6,718
OTHER INCOME (EXPENSE)
Loss on sale of real estate													(313		)	—			(313		)	—
Interest expense	(2,251		)	(1,571		)	(4,305		)	(2,839		)	(2,183		)	(2,251		)	(4,432		)	(4,305		)
Interest and other income, net	69			226			238			410			3			69			10			238
INCOME FROM CONTINUING OPERATIONS	2,066			2,417			3,516			4,289
													(2,493		)	(2,182		)	(4,735		)	(4,067		)
NET INCOME	$	2,066		$	2,417		$	3,516		$	4,289		$	4,526		$	2,066		$	8,626		$	3,516

NET INCOME PER COMMON SHARE:
Net income per common share – Basic	$	0.09		$	0.12		$	0.16		$	0.22		$	0.19		$	0.09		$	0.37		$	0.16
Net income per common share – Diluted	$	0.09		$	0.12		$	0.16		$	0.22		$	0.19		$	0.09		$	0.37		$	0.16
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-BASIC	18,245,668			17,573,683			18,100,973			17,573,683			21,263,575			18,245,668			20,999,097			18,100,973
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-DILUTED	18,245,668			17,573,683			18,100,973			17,573,683			21,263,575			18,245,668			20,999,097			18,100,973

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2019~~2020 AND ~~2018~~2019

(Unaudited; Dollars in thousands)


			Three Months Ended June 30,					Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
			2019			2018		2019			2018				2020			2019			2020			2019

NET INCOME	NET INCOME		$	2,066		$	2,417	$	3,516		$	4,289	NET INCOME		$	4,526		$	2,066		$	8,626		$	3,516
	Other comprehensive (loss) income:												Other comprehensive (loss) income:
		(Decrease) increase in fair value of cash flow hedges	(4,032		)	720		(5,245		)	1,626			Decrease in fair value of cash flow hedges	(1,317		)	(4,032		)	(10,193		)	(5,245		)
		Reclassification for amounts recognized as interest expense	(95		)	87		(157		)	155			Reclassification for amounts recognized as interest expense	774			(95		)	1,032			(157		)
	Total other comprehensive (loss) income		(4,127		)	807		(5,402		)	1,781		Total other comprehensive loss		(543		)	(4,127		)	(9,161		)	(5,402		)
COMPREHENSIVE (LOSS) INCOME			$	(2,061	)	$	3,224	$	(1,886	)	$	6,070
COMPREHENSIVE INCOME (LOSS)													COMPREHENSIVE INCOME (LOSS)		$	3,983		$	(2,061	)	$	(535	)	$	(1,886	)

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 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 March 31, 2019 —
$ —
18,862,792
$ 189
$ 342,654
$ 10,628
$ (642 ) $ (83,146 ) $ 269,683
Issuance of common stock, net of issuance costs —
—
497,453
$ 5
$ 18,363
$ —
$ —
$ —
$ 18,368
Stock-based compensation —
—
40,999
—
896
—
—
—
896
Unrecognized loss on cash flow hedges —
—
—
—
—
—
(4,032 ) —
(4,032 )
Reclassification adj for gain included in net income (interest expense) —
—
—
—
—
—
(95 ) —
(95 )
Net income —
—
—
—
—
2,066
—
—
2,066
Dividends to common stockholders ($0.41 per share) —
—
—
—
—
—
—
(7,766 ) (7,766 )
Balance at June 30, 2019 —
$ —
19,401,244
$ 194
$ 361,913
$ 12,694
$ (4,769 ) $ (90,912 ) $ 279,120

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 —
—
641,053
7
22,985
—
—
—
22,992
Stock-based compensation —
—
125,689
1
1,748
—
—
—
1,749
Unrecognized loss on cash flow hedges —
—
—
—
—
—
(5,245 ) —
(5,245 )
Reclassification adj for gain included in net income (interest expense) —
—
—
—
—
—
(157 ) —
(157 )
Net income —
—
—
—
—
3,516
—
—
3,516
Dividends to common stockholders ($0.8175 per share) —
—
—
—
—
—
—
(15,394 ) (15,394 )
Balance at June 30, 2019 —
$ —
19,401,244
$ 194
$ 361,913
$ 12,694
$ (4,769 ) $ (90,912 ) $ 279,120

Balance at March 31, 2018 —
—
18,179,799
182
324,918
6,647
1,232
(53,369 ) 279,610
Stock-based compensation —
—
20,176
—
801
—
—
—
801
Unrecognized gain on cash flow hedges —
—
—
—
—
—
720
—
720
Reclassification adj for loss included in net income (interest expense) —
—
—
—
—
—
87
—
87
Net income —
—
—
—
—
2,417
$ —
—
2,417
Dividends to common stockholders ($0.40 per share) —
—
—
—
—
—
—
(7,277 ) (7,277 )
Balance at June 30, 2018 —
$ —
18,199,975
182
325,719
9,064
2,039
(60,646 ) 276,358

Balance at December 31, 2017 —
$ —
18,085,798
$ 181
$ 324,303
$ 4,775
$ 258
$ (46,143 ) $ 283,374
Stock-based compensation —
—
114,177
1
1,416
—
—
—
1,417
Unrecognized gain on cash flow hedges —
—
—
—
—
—
1,626
—
1,626
Reclassification adj for loss included in net income (interest expense) —
—
—
—
—
—
155
—
155
Net income —
—
—
—
—
4,289
—
—
4,289
Dividends to common stockholders ($0.7975 per share) —
—
—
—
—
—
—
(14,503 ) (14,503 )
Balance at June 30, 2018 —
$ —
18,199,975
$ 182
$ 325,719
$ 9,064
$ 2,039
$ (60,646 ) $ 276,358



	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		Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive (Loss) Income			Cumulative Dividends			Total Stockholders' Equity
Balance at March 31, 2020	—	$	—	22,125,269	$	221	$	475,824	$	21,654	$	(13,426	)	$	(116,498	)	$	367,775
Issuance of common stock, net of issuance costs	—	—		578,759	6		23,584		—		—			—			23,590
Stock-based compensation	—	—		22,113	—		1,069		—		—			—			1,069
Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(1,317		)	—			(1,317		)
Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		774			—			774
Net income	—	—		—	—		—		4,526		—			—			4,526
Dividends to common stockholders ($0.42 per share)	—	—		—	—		—		—		—			(9,314		)	(9,314		)
Balance at June 30, 2020	—	$	—	22,726,141	$	227	$	500,477	$	26,180	$	(13,969	)	$	(125,812	)	$	387,103

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	—	—		1,189,545	12		50,480		—		—			—			50,492
Stock-based compensation	—	—		126,018	1		2,081		—		—			—			2,082
Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(10,193		)	—			(10,193		)
Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		1,032			—			1,032
Net income	—	—		—	—		—		8,626		—			—			8,626
Dividends to common stockholders ($0.8375 per share)	—	—		—	—		—		—		—			(18,347		)	(18,347		)
Balance at June 30, 2020	—	$	—	22,726,141	$	227	$	500,477	$	26,180	$	(13,969	)	$	(125,812	)	$	387,103

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 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		Additional Paid in Capital		Cumulative Net Income		Accumulated Other Comprehensive (Loss) Income			Cumulative Dividends			Total Stockholders' Equity
Balance at March 31, 2019	—	—		18,862,792	$	189	$	342,654	$	10,628	$	(642	)	$	(83,146	)	$	269,683
Issuance of common stock, net of issuance costs	—	—		497,453	5		18,363		—		—			—			18,368
Stock-based compensation	—	—		40,999	—		896		—		—			—			896
Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(4,032		)	—			(4,032		)
Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		(95		)	—			(95		)
Net income	—	—		—	—		—		2,066		—			—			2,066
Dividends to common stockholders ($0.41 per share)	—	—		—	—		—		—		—			(7,766		)	(7,766		)
Balance at June 30, 2019	—	$	—	19,401,244	$	194	$	361,913	$	12,694	$	(4,769	)	$	(90,912	)	$	279,120

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	—	—		641,053	7		22,985		—		—			—			22,992
Stock-based compensation	—	—		125,689	1		1,748		—		—			—			1,749
Unrecognized loss on cash flow hedges	—	—		—	—		—		—		(5,245		)	—			(5,245		)
Reclassification adjustment for losses included in net income (interest expense)	—	—		—	—		—		—		(157		)	—			(157		)
Net income	—	—		—	—		—		3,516		—			—			3,516
Dividends to common stockholders ($0.8175 per share)	—	—		—	—		—		—		—			(15,394		)	(15,394		)
Balance at June 30, 2019	—	$	—	19,401,244	$	194	$	361,913	$	12,694	$	(4,769	)	$	(90,912	)	$	279,120

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; Dollars in thousands)


	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
OPERATING ACTIVITIES
Net income	$	3,516		$	4,289		$	8,626		$	3,516
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,839			10,002			12,178			10,545
Other amortization							(224		)	294
Stock-based compensation	1,749			1,417			2,082			1,749
Straight-line rent receivable	(749		)	(807		)	(1,604		)	(749		)
Deferred income tax expense (benefit)	27			(112		)
Loss on sale of real estate							313			—
Deferred income tax expense							20			27
Changes in operating assets and liabilities:
Other assets	(1,087		)	(1,309		)	(119		)	(1,087		)
Accounts payable and accrued liabilities	114			287			1,089			114
Other liabilities	(26		)	(739		)	1,386			(26		)
Net cash provided by operating activities	14,383			13,028			23,747			14,383

INVESTING ACTIVITIES
Acquisitions of real estate	(63,449		)	(20,082		)	(57,890		)	(63,449		)
Acquisitions of notes receivable	—			(2,201		)
Funding of notes receivable	—			(4,833		)
Proceeds from sale of real estate							248			—
Acquisition of note receivable							(1,750		)	—
Proceeds from the repayment of notes receivable	320			34			6,910			320
Capital expenditures on existing real estate properties	(1,654		)	(3,571		)	(3,081		)	(1,654		)
Net cash used in investing activities	(64,783		)	(30,653		)	(55,563		)	(64,783		)

FINANCING ACTIVITIES
Net repayments on revolving credit facility	(24,000		)	(8,000		)
Net borrowings (repayments) on revolving credit facility							3,000			(24,000		)
Term loan borrowings	75,000			40,000			—			75,000
Mortgage note repayments	(52		)	—			(53		)	(52		)
Dividends paid	(15,394		)	(14,503		)	(18,347		)	(15,394		)
Proceeds from issuance of common stock	23,172			—			50,579			23,172
Equity issuance costs	(180		)	—			(139		)	(180		)
Debt issuance costs	(1,273		)	(218		)	—			(1,273		)
Net cash provided by financing activities	57,273			17,279			35,040			57,273
Increase in cash and cash equivalents and restricted cash	6,873			(346		)	3,224			6,873
Cash and cash equivalents and restricted cash, beginning of period	2,392			2,130			2,023			2,392
Cash and cash equivalents and restricted cash, end of period	$	9,265		$	1,784		$	5,247		$	9,265

Supplemental Cash Flow Information:
Interest paid	$	2,781		$	2,555		$	3,110		$	2,781
Invoices accrued for construction, tenant improvement and other capitalized costs	$	29		$	265		$	707		$	29
Reclassification between accounts and notes receivable	$	45		$	—		$	—		$	45
Reclassification of registration statement costs incurred in prior year to equity issuance costs	$	187		$	—		$	95		$	187
(Decrease) increase in fair value of cash flow hedges	$	(5,245	)	$	1,626
Fair value of property received in foreclosure	$	—		$	4,541
Notes and mortgage receivable repayments utilized to originate note receivable	$	—		$	18,167
Decrease in fair value of cash flow hedges							$	(10,193	)	$	(5,245	)
Income taxes paid							$	31		$	—

See accompanying notes to the condensed consolidated financial statements.

COMMUNITY HEALTHCARE TRUST INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~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 in our target submarkets.~~providers. As of June 30, ~~2019,~~2020, the Company had investments of approximately ~~$511.6~~$664.7 million in ~~108~~131 real estate properties, located in 3033 states, totaling approximately ~~2.4~~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, ~~2018.~~

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, ~~2019.~~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 six months ended June 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.

During the second 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 July 31, 2020, the Company has entered into, or anticipates entering into, deferral agreements with up to approximately 20 tenants representing less than 1 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.

Notes to Condensed Consolidated Financial Statements - Continued

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.

~~Reclassifications~~Cash, Cash Equivalents and Restricted Cash

~~Tenant reimbursements totaling $1.6 million~~Cash and ~~$3.0 million, respectively, on~~cash equivalents includes short-term investments with original maturities of three months or less when purchased. Restricted cash consists of amounts held by the ~~Company's Condensed Consolidated Statements~~lender of ~~Income~~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 ~~three~~short term maturity of these investments. The following table provides a reconciliation of cash and ~~six months ended June 30, 2018 were reclassified into rental income.~~cash equivalents and restricted cash:



	Balance as of June 30,
(Dollars in thousands)	2020		2019
Cash and cash equivalents	$	4,896	$	9,031
Restricted cash	351		234
Cash, cash equivalents and restricted cash	$	5,247	$	9,265

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 ~~GAAP)~~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. The Company does not believe that there have been or will be material impacts to its income taxes related to the CARES Act. The Company will continue to evaluate the tax impact of the CARES Act and any guidance provided by the U.S. Treasury and Internal Revenue Service.

~~Notes to Condensed Consolidated Financial Statements - Continued~~

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~Lease Accounting~~Financial Instruments-Credit Losses

In ~~February~~June 2016, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB") issued Accounting Standards Update ("ASU") ~~2016-02, Leases; in January 2018, the FASB issued ASU 2018-01, Leases -~~ ~~Land Easement Practical Expedient for Transition to Topic 842;~~ ~~in July 2018, the FASB issued ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~ and ASU 2018-11, Leases - Targeted Improvements; and in December 2018, the FASB issued ASU 2018-20, Narrow-Scope Improvements for Lessors. The Company adopted this group of ASUs, collectively referred to as Topic 842, on January 1, 2019. Topic 842 superseded the existing standard for lease accounting (Topic 840, Leases).

~~The Company elected to utilize the following practical expedients provided by Topic 842:~~

• the package of practical expedients that allows an entity not to reassess upon adoption (i) whether an expired or existing contract contains a lease, (ii) whether a lease classification related to expired or existing lease arrangements, and (iii) whether costs incurred on expired or existing leases qualify as initial direct costs, and

• as a lessor, the practical expedient not to separate certain non-lease components, such as common area maintenance, from the lease component if (i) the timing and pattern of transfer are the same for the nonlease component and associated lease component, and (ii) the lease component would be classified as an operating lease if accounted for separately.

Topic 842 requires lessees to record most leases on their balance sheet through a right-of-use ("ROU") model, in which a lessee records a ROU asset and a lease liability on their balance sheet. Leases with terms that are 12 months or less or leases that are clearly insignificant have not been accounted for under the ROU model. Lessees will account for leases as financing or operating leases, with the classification affecting the timing and pattern of expense recognition in the income statement. Lease expense will be recognized based on the effective interest method for leases accounted for as finance leases and on a straight-line basis over the term of the lease for leases accounted for as operating leases.

The accounting by a lessor under Topic 842 is largely unchanged from that of Topic 840. Under Topic 842, lessors will continue to account for leases as a sales-type, direct-financing, or operating. A lease will be treated as a sale if it is considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease. Topic 842 requires accounting for a transaction as a financing in a sale leaseback when the seller-lessee is provided an option to purchase the property from the landlord at the tenant's option. The Company expects that this provision could change the accounting for these types of leases in the future. Topic 842 also includes the concept of separating lease and nonlease components. Under Topic 842, nonlease components, such as common area maintenance, would be accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor practical expedient allowing the Company to not separate these components when certain conditions are met. With this election, the Company combined tenant reimbursements with rental income on its Condensed Consolidated Statements of Income. Additionally, we will recognize a charge to rental income for amounts deemed uncollectible. Further, the Company has historically only capitalized direct leasing costs, such as leasing commissions. While the new standard revises the treatment of indirect leasing costs and permits the capitalization and amortization only of direct leasing costs, the Company does not expect an impact to its financial statements related to the capitalization of leasing costs. Also, the Narrow-Scope Improvements for Lessors under ASU 2018-20 allows the Company to continue to exclude from revenue costs paid by our tenants on our behalf directly to third parties, such as property taxes and insurance.

Topic 842 provided two transition alternatives. The Company adopted the standard based on the prospective optional transition method, in which leases for comparative periods continue to be accounted for in accordance with Topic 840.

~~Notes to Condensed Consolidated Financial Statements - Continued~~

Upon adoption, where the Company is the lessee, we recorded a ROU asset and a related operating lease liability, each totaling approximately $0.1 million, related to one ground lease which will have minimal impact on the recognition of future ground lease expense. The ROU lease asset is included in other assets and the operating lease liability is included in other liabilities on the Company's Condensed Consolidated Balance Sheet.

~~Derivatives and Hedge Accounting~~

~~In October 2018, the FASB issued an update, ASU 2018-16,~~ ~~Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~ to ASC Topic 815, Derivatives and Hedging. ASU 2018-16 expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting by adding the OIS rate based on SOFR as an eligible benchmark interest rate. ASU 2018-16 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2018. We adopted this update effective January 1, 2019. The adoption of this update did not have an impact on our Condensed Consolidated Financial Statements.

~~Recently Issued Accounting Pronouncements~~

~~Financial Instruments-Credit Losses~~

~~In June 2016, the FASB issued ASU~~ No. 2016-13, Measurement of Credit Losses on Financial ~~Instruments-Credit Losses,~~ 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 ~~will be~~are required to use a new current expected credit loss ("CECL") model that generally ~~will result~~results in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, companies ~~will~~are required to measure credit losses in a manner similar to ~~what they do today,~~prior guidance, except that the losses ~~will be~~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

Notes to Condensed Consolidated Financial Statements - Continued

the ASU but rather would be accounted for under the leasing standard. Companies ~~will~~ have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. Companies ~~will~~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. ~~This standard is effective for the~~The Company adopted ASU No. 2016-13 on January 1, ~~2020 with early~~2020. The Company did not record an adjustment upon adoption ~~permitted.~~ 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.

Recently Issued Accounting Pronouncements

Reference Rate Reform

In ~~August 2018,~~March 2020, the FASB issued ~~a proposal~~ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that ~~would amend~~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 ~~ASU~~first quarter of 2020, the Company elected to ~~clarify~~apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that ~~receivables arising from leases would not~~the index upon which future hedged transactions will be ~~within~~based matches the ~~scope~~index on the corresponding derivatives. Application of these expedients preserves the ~~ASU but rather would be accounted for under the leasing standard.~~presentation of derivatives consistent with past presentation. The Company continues to ~~monitor~~evaluate the ~~FASB's activity relating to this ASU~~impact of the guidance and may apply other elections as applicable as additional changes in the ~~effects that it could have on our Consolidated Financial Statements.~~market occur.

~~Note 2. Real Estate Investments~~

~~At June 30, 2019, the Company had investments of approximately $511.6 million in 108 real estate properties. The following table summarizes the Company's real estate investments.~~

(Dollars in thousands)
Number of Facilities
Land and
Land Improvements
Buildings, Improvements, and Lease Intangibles

Personal
Property

Total

Accumulated Depreciation
Medical office buildings:
Florida 5
$ 4,608
$ 29,349
$ —
$ 33,957
$ 4,921
Ohio 6
3,638
26,517
—
30,155
5,855
Texas 3
3,115
15,591
—
18,706
4,659
Illinois 3
1,877
15,014
—
16,891
2,905
Kansas 3
2,455
14,933
—
17,388
4,335
Iowa 1
2,241
9,062
—
11,303
2,734
Other states 15
4,356
35,925
—
40,281
5,196
36
22,290
146,391
—
168,681
30,605
Physician clinics:
Kansas 2
610
6,921
—
7,531
1,587
Illinois 6
2,888
9,539
—
12,427
688
Florida 5
506
10,322
—
10,828
998
Other states 9
2,903
21,646
—
24,549
3,721
22
6,907
48,428
—
55,335
6,994
Surgical centers and hospitals:
Louisiana 1
1,683
21,353
—
23,036
1,377
Michigan 2
637
8,286
—
8,923
2,529
Illinois 2
2,349
8,222
—
10,571
1,604
Florida 1
271
7,069
—
7,340
926
Arizona 2
576
5,389
—
5,965
1,689
Other states 7
2,130
17,917
—
20,047
4,303
15
7,646
68,236
—
75,882
12,428
Specialty centers:
Illinois 3
3,489
24,733
—
28,222
2,516
Other states 22
5,207
38,396
—
43,603
7,857
25
8,696
63,129
—
71,825
10,373
Behavioral facilities:
Massachusetts 1
3,835
23,302
—
27,137
—
West Virginia 1
2,138
22,897
—
25,035
1,026
Illinois 1
1,300
18,803
—
20,103
1,450
Indiana 2
1,126
6,040
—
7,166
390
Other states 3
1,412
12,840
—
14,252
583
8
9,811
83,882
—
93,693
3,449
Inpatient rehabilitation facilities:
Texas 1
1,515
27,001
—
28,516
272
1
1,515
27,001
—
28,516
272
Long-term acute care hospitals:
Indiana 1
523
14,405
—
14,928
1,394
1
523
14,405
—
14,928
1,394
Corporate property —
—
2,578
143
2,721
328
Total real estate investments 108
$ 57,388
$ 454,050
$ 143
$ 511,581
$ 65,843

~~Notes to Condensed Consolidated Financial Statements - Continued~~

Note 3.2. Real Estate Leases

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases with expiration dates through ~~2034.~~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 ~~and~~ may also include additional rent, which may include 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 the Company for the years ending December 31, as of June 30, ~~2019,~~2020, are as follows (in thousands):



2020 (six months ending December 31)	$	30,417
2021	58,659
2022	55,024
2023	49,996
2024	46,867
2025 and thereafter	299,485
	$	540,448

2019 (six months ending December 31) $ 23,457
2020 44,779
2021 41,619
2022 38,168
2023 33,579
2024 and thereafter 189,870
$ 371,472

Straight-line rental income

Rental income is recognized as earned over the life of the lease agreement on a straight-line ~~basis.~~basis when collection of rental payments over the term of the lease is probable. Straight-line rent included in rental income was approximately ~~$0.4~~$0.7 million and $0.4 million, respectively, for the three months ended June 30, ~~2019~~2020 and ~~2018 and~~2019. Straight-line rent included in rental income was approximately ~~$0.7~~$1.6 million and ~~$0.8~~$0.7 million, respectively, for the six months ended June 30, ~~2019~~2020 and ~~2018.~~2019.

Notes to Condensed Consolidated Financial Statements - Continued

Deferred revenue

~~Rent~~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 Sheet, was approximately ~~$1.7~~$2.1 million and ~~$1.6~~$2.0 million, respectively, at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Security Deposits

As of June 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.

Note 4.3. Real Estate Acquisitions and Dispositions

2020 Real Estate Acquisitions

During the second quarter of ~~2019,~~2020, the Company acquired ~~three~~7 real estate properties ~~totaling approximately 110,000 square feet~~and a land parcel adjacent to one of our existing properties to be used for ~~an aggregate purchase price of approximately $31.9 million and cash consideration of approximately $30.7 million.~~additional parking. Upon acquisition, the properties were approximately 97.1% leased in the aggregate with lease expirations through 2034. Amounts reflected in revenues and net income for the six months ended June 30, 2019 for these properties were approximately $0.5 million and $0.5 million, respectively. Due to the original structuring of one of the acquisitions in April 2019, the Company recorded interest income for May and June of 2019 totaling approximately $0.4 million, included in other operating interest on the Condensed Consolidated Statements of Income, rather than rental income. Transaction costs totaling approximately $0.2 million related to these asset acquisitions were capitalized in the period and included in real estate ~~assets.~~

During the first quarter of 2019, the Company acquired two real estate properties totaling approximately 83,000 square feet for an aggregate purchase price and cash consideration of approximately $32.7 million. Upon acquisition, the properties were 100% leased in the aggregate with lease expirations ~~in 2029.~~through 2035. Amounts reflected in revenues and net income for these properties for the three months ended June 30, 2020 were approximately $0.1 million and 4000 dollars, 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 6 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 six months ended June 30, ~~2019 for these properties~~2020 were approximately ~~$1.2~~$1.4 million and ~~$0.9~~$0.8 million, ~~respectively. Transaction~~respectively, and transaction costs totaling approximately ~~$0.1~~$0.2 million ~~related~~were capitalized relating to these ~~asset acquisitions were capitalized in the period and included in real estate assets.~~

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, TX	MOB	01/27/20	$	4,003	$	4,022	$	4,036	$	(14	)	13,500
San Antonio, TX	MOB	01/27/20	1,931		1,955		1,961		(6		)	6,500
Decatur, AL	MOB	02/18/20	5,784		5,792		5,777		15			35,943
Ramona, CA	SC	03/13/20	4,100		4,124		4,143		(19		)	11,300
Cuero, TX	SC	03/18/20	2,153		2,174		2,207		(33		)	15,515
Rogers, AR	IRF	03/27/20	19,000		18,317		19,042		(725		)	38,817
Oak Lawn, IL (land)	MOB	04/20/20	400		403		421		(18		)	—
Germantown, TN	SC	04/29/20	3,900		3,949		3,949		—			10,600
Westlake, OH	SC	06/05/20	2,443		2,456		2,487		(31		)	15,057
Columbus, IN ⁽³⁾	SC	06/05/20	1,813		1,828		1,787		41			13,969
Niceville, FL	MOB	06/15/20	2,294		2,340		2,344		(4		)	10,250
Greensburg, PA	MOB	06/16/20	3,389		3,484		3,497		(13		)	15,650
Gardendale, AL	MOB	06/24/20	2,948		2,935		2,878		57			12,956
Prattville, AL	MOB	06/24/20	4,091		4,111		4,078		33			13,319
			$	58,249	$	57,890	$	58,607	$	(717	)	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.

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 six months ended June 30, ~~2019.~~2020.



			Relative Fair Value			Estimated Useful Life
			(in thousands)			(in years)
Land and land improvements			$	11,323		8.5
Building and building improvements			41,709			30.2
Intangibles:
	At-market lease intangibles		5,575			5.4
	Above-market lease intangibles		292			4.8
	Below-market lease intangibles		(111		)	3.1
		Total intangibles	5,756
Accounts receivable and other assets assumed			247
Accounts payable, accrued liabilities and other liabilities assumed			(807		)
Prorated rent, interest and operating expense reimbursement amounts collected			(338		)
	Total cash consideration		$	57,890

Relative Fair Value Estimated Useful Life
(in thousands) (In years)
Land and land improvements $ 7,061
4.7-13.9
Building and building improvements 56,655
20-40
Intangibles:
At-market lease intangibles 1,281
3.8-10.8
Below-market lease intangibles (44 ) 8.3
Total intangibles 1,237

Accounts receivable and other assets assumed 14

Accounts payable, accrued liabilities and other liabilities assumed (1,430 )
Prorated rent, interest and operating expense reimbursement amounts collected (88 )
Total cash consideration $ 63,449

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 5.4. Debt, net

The table below details the Company's debt as of June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.



	Balance as of
(Dollars in thousands)	June 30, 2020		December 31, 2019		Maturity Dates

Revolving Credit Facility	$	18,000	$	15,000	3/23
A-1 Term Loan, net	49,871		49,833		3/22
A-2 Term Loan, net	49,801		49,775		3/24
A-3 Term Loan, net	74,479		74,433		3/26
Mortgage Note Payable, net	5,158		5,202		5/24
	$	197,309	$	194,243

Balance as of
(Dollars in thousands) June 30, 2019 December 31, 2018 Maturity Dates

Revolving Credit Facility $ 19,000
$ 43,000
3/23
A-1 Term Loan, net 49,796
49,759
3/22
A-2 Term Loan, net 49,748
49,722
3/24
A-3 Term Loan, net 74,388
—
3/26
Mortgage Note Payable 5,244
5,285
5/24
$ 198,176
$ 147,766

The Company's second amended and restated credit facility (the "Credit Facility") is by and among Community Healthcare OP, LP, the Company, ~~the~~and a syndicate of lenders ~~from time to time party thereto, and~~with Truist Bank (formerly SunTrust ~~Bank,~~Bank) serving as Administrative Agent. The Company’s material subsidiaries are guarantors of the obligations under the Credit Facility. The Company entered into a third amendment to its Credit Facility (the "Third Amendment") on March 29, 2019, which added a $75.0 million term loan (the "A-3 Term Loan"), which matures on March 29, 2026, extended the maturity of the revolving credit facility (the "Revolving Credit Facility") to March 29, 2023, improved pricing on the Credit Facility, and adjusted certain financial covenants. The Company paid approximately $1.3 million in fees and expenses related to the Third Amendment, of which $0.7 million was related to the Revolving Credit Facility and was recorded as deferred financing costs, included in Other Assets, and $0.6 million was related to the A-3 Term Loan and was recorded as deferred financing costs, included in Debt, net, on the Company's Condensed Consolidated Balance Sheet.

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~~1 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

~~Notes to Condensed Consolidated Financial Statements - Continued~~

aggregate principal amount of $50.0 million (the "A-1 Term Loan"), which matures on March 29, 2022, a seven-year

Notes to Condensed Consolidated Financial Statements - Continued

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 ~~new seven-year,~~aggregate principal amount of $75.0 million ~~A-3~~(the "A-3 Term ~~Loan,~~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 ~~$19.0~~$18.0 million outstanding under the Revolving Credit Facility with a 2.06% weighted average interest rate at June 30, 2020, and a borrowing capacity remaining of approximately ~~$131.0~~$132.0 million at June 30, ~~2019.~~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. In addition, the Company is obligated to pay an annual fee equal to 0.35% of the amount of the unused portion of the Term Loans. The Company has entered into interest rate swaps to fix the interest rates on the Term Loans. See Note 65 for more details on the interest rate swaps. At June 30, ~~2019,~~2020, the Company had drawn the full $175.0 million under the Term Loans which had a fixed weighted average interest rate under the swaps of approximately 4.569%.

Note 6.5. 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.

As of June 30, ~~2019,~~2020, the Company had ~~seven~~7 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

Notes to Condensed Consolidated Financial Statements - Continued

the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of June 30, ~~2019~~2020 and December 31, ~~2018.~~

2019.



	Asset Derivatives Fair Value at					Liability Derivatives Fair Value at
	June 30, 2020		December 31, 2019		Balance Sheet Classification	June 30, 2020		December 31, 2019		Balance Sheet Classification
Interest rate swaps	$	—	$	—	Other assets	$	13,969	$	4,808	Other Liabilities

~~Notes to Condensed Consolidated Financial Statements - Continued~~

Asset Derivatives Fair Value at Liability Derivatives Fair Value at
June 30, 2019 December 31, 2018 Balance Sheet Classification June 30, 2019 December 31, 2018 Balance Sheet Classification
Interest rate swaps $ —
$ 902
Other assets $ 4,769
$ 98
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) income~~loss ("AOCI") and are subsequently reclassified to interest expense in the period that the hedged forecasted transaction affects earnings.

Amounts reported in ~~accumulated other comprehensive (loss) income~~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 ~~$0.7~~$3.7 million will be reclassified from ~~other comprehensive (loss) income ("OCI")~~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 six months ended June 30, ~~2019~~2020 and ~~2018.~~2019.



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2020			2019			2020			2019
Amount of unrealized loss recognized in OCI on derivative	$	(1,317	)	$	(4,032	)	$	(10,193	)	$	(5,245	)
Amount of loss (gain) reclassified from AOCI into interest expense	$	774		$	(95	)	$	1,032		$	(157	)
Total interest expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded	$	2,183		$	2,251		$	4,432		$	4,305

Three Months Ended June 30, Six Months Ended
June 30,
(Dollars in thousands) 2019 2018 2019 2018
Amount of unrealized (loss) gain recognized in OCI on derivative $ (4,032 ) $ 720
$ (5,245 ) $ 1,626
Amount of (gain) loss reclassified from accumulated OCI into interest expense $ (95 ) $ 87
$ (157 ) $ 155
Total Interest Expense presented in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded $ 2,251
$ 1,571
$ 4,305
$ 2,839

Credit-risk-related Contingent Features

As of June 30, ~~2019,~~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 ~~$5.0~~$14.5 million. As of June 30, ~~2019,~~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 ~~$5.0~~$14.5 million at June 30, ~~2019.~~2020.

Note 7.6. Stockholders’ Equity

Common Stock

The following table provides a reconciliation of the beginning and ending common stock balances for the six months ended June 30, ~~2019~~2020 and for the year ended December 31, ~~2018:~~2019:



	Six Months Ended June 30, 2020	Year Ended December 31, 2019
Balance, beginning of period	21,410,578	18,634,502
Issuance of common stock	1,189,545	2,554,247
Restricted stock-based awards	126,018	221,829
Balance, end of period	22,726,141	21,410,578

Six Months Ended
June 30, 2019
Year Ended
December 31, 2018
Balance, beginning of period 18,634,502
18,085,798
Issuance of common stock 641,053
334,700
Restricted stock-based awards 125,689
214,004
Balance, end of period 19,401,244
18,634,502

~~Notes to Condensed Consolidated Financial Statements - Continued~~

ATM Program

On ~~August 7, 2018,~~November 5, 2019, the Company entered into an Amended and Restated Sales Agency Agreement ("Amended and Restated Sales Agreement") for its at-the-market offering program ("ATM Program") with Sandler O’Neill & Partners, L.P., Evercore Group L.L.C., SunTrust Robinson Humphrey, Inc., BB&T Capital Markets, a division of

Notes to Condensed Consolidated Financial Statements - Continued

BB&T Securities, LLC, Fifth Third Securities, Inc. and Janney Montgomery Scott LLC, as sales agents (collectively, the “Agents”), under which the Company may issue and sell shares of its common stock, ~~par value $0.01 per share (the “Common Stock”),~~ having an aggregate gross sales price of up to ~~$100.0 million (the “Shares”)~~$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~~agreement and applicable law.

The Company's activity under the ATM ~~program~~Program for the three and six months ended June 30, ~~2019~~2020 is detailed in the table below. As of June 30, ~~2019,~~2020, the Company had approximately ~~$66.0~~$251.6 million remaining that may be issued under the ATM Program.



	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Shares issued	578,759		1,189,545
Net proceeds received (in millions)	$	23.7	$	50.6
Average gross sales price per share	$	41.70	$	43.39

Three Months Ended
June 30, 2019 Six Months Ended
June 30, 2019
Shares issued 497,453
641,053
Proceeds received (in millions)
$ 18.5
$ 23.2
Average gross sales price per share ($)
$ 37.85
$ 36.89

Note 8.7. Net Income Per Common Share

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



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands, except per share data)	2020			2019			2020			2019
Net income	$	4,526		$	2,066		$	8,626		$	3,516
Participating securities' share in earnings	(432		)	(351		)	(855		)	(652		)
Net income, less participating securities' share in earnings	$	4,094		$	1,715		$	7,771		$	2,864

Weighted average Common Shares outstanding
Weighted average Common Shares outstanding	22,285,565			19,055,110			22,008,998			18,896,274
Unvested restricted shares	(1,021,990		)	(809,442		)	(1,009,901		)	(795,301		)
Weighted average Common Shares outstanding–Basic	21,263,575			18,245,668			20,999,097			18,100,973
Dilutive potential common shares	—			—			—			—
Weighted average Common Shares outstanding –Diluted	21,263,575			18,245,668			20,999,097			18,100,973

Basic Net Income per Common Share	$	0.19		$	0.09		$	0.37		$	0.16

Diluted Net Income per Common Share	$	0.19		$	0.09		$	0.37		$	0.16

Three Months Ended
June 30, Six Months Ended
June 30,
(Dollars in thousands, except per share data) 2019 2018 2019 2018
Net income $ 2,066
$ 2,417
$ 3,516
$ 4,289
Participating securities' share in earnings (351 ) (241 ) (652 ) (481 )
Net income, less participating securities' share in earnings $ 1,715
$ 2,176
$ 2,864
$ 3,808

Weighted average Common Shares outstanding
Weighted average Common Shares outstanding 19,055,110
18,187,718
18,896,274
18,175,990
Unvested restricted shares (809,442 ) (614,035 ) (795,301 ) (602,307 )
Weighted average Common Shares outstanding–Basic 18,245,668
17,573,683
18,100,973
17,573,683
Dilutive potential common shares —
—
—
—
Weighted average Common Shares outstanding –Diluted 18,245,668
17,573,683
18,100,973
17,573,683

Basic Net Income per Common Share $ 0.09
$ 0.12
$ 0.16
$ 0.22

Diluted Net Income per Common Share $ 0.09
$ 0.12
$ 0.16
$ 0.22

Note 9.8. Incentive Plan

~~Under~~A summary of the activity under the Company's 2014 Incentive Plan, as amended, ~~awards may be made~~for the three and six months ended June 30, 2020 and 2019 is included in the ~~form of restricted stock, cash or a combination of both. Compensation~~table below, as well as compensation expense recognized from the amortization of the value of ~~the Company's officer, employee and director~~ shares over the applicable vesting periods during the three months ended June 30, 2019 and 2018 was approximately $0.9 million and $0.8 million, respectively, and during the six months ended June 30, 2019 and 2018 was approximately $1.8 million and $1.4 million, respectively. Included in general and administrative expense for the second quarter of 2018 was approximately $0.2 million related to fully amortized shares previously granted to a board member who did not stand for re-election to the Company's board. A summary

~~of the activity under the 2014 Incentive Plan for the three and six months ended June 30, 2019 and 2018 is included in the table below.~~periods.



		Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)		2020			2019			2020			2019
Stock-based awards, beginning of period		1,013,797			794,177			909,892			709,487
	Stock in lieu of compensation	5,510			15,004			55,755			57,529
	Stock awards	16,603			25,995			70,263			68,160
	Total stock granted	22,113			40,999			126,018			125,689
	Vested shares	(15,910		)	(21,424		)	(15,910		)	(21,424		)
Stock-based awards, end of period		1,020,000			813,752			1,020,000			813,752
Amortization expense		$	1,070		$	899		$	2,090		$	1,752

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
Stock-based awards, beginning of period 794,177
606,116
709,487
512,115
Stock in lieu of compensation 15,004
5,320
57,529
52,347
Stock awards 25,995
14,856
68,160
61,830
Total stock granted 40,999
20,176
125,689
114,177
Vested shares (21,424 ) —
(21,424 ) —
Stock-based awards, end of period 813,752
626,292
813,752
626,292

Note ~~10.~~9. Other Assets, net

~~Items included in~~ Other assets, net on the Company's Condensed Consolidated Balance Sheets as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are detailed in the table below.



	Balance as of
(Dollars in thousands)	June 30, 2020		December 31, 2019
Notes receivable	$	18,340	$	23,500
Lease and interest receivables	2,821		3,021
Straight-line rent receivables	6,885		5,267
Prepaid assets	602		488
Deferred financing costs, net	586		693
Leasing commissions, net	980		875
Deferred tax asset	575		595
Above-market intangible assets, net	414		144
Right-of-use leased asset	385		139
Other	480		457
	$	32,068	$	35,179

Balance as of
(Dollars in thousands) June 30, 2019 December 31, 2018
Notes receivable $ 23,835
$ 24,110
Accounts and interest receivables 2,773
2,158
Straight-line rent receivables 4,006
3,254
Prepaid assets 659
487
Deferred financing costs, net 771
318
Leasing commissions, net 900
790
Deferred tax asset 1,998
2,024
Fair value of interest rate swaps —
902
Above-market intangible assets, net 156
168
Right of use leased asset 141
—
Other 258
335
$ 35,497
$ 34,546

The Company's ~~$23.8 million in~~ notes receivable at June 30, ~~2019 include mainly the following notes. Interest related to these notes~~2020 included:

a loan with a borrower totaling $17.8 million which is ~~included in Other Operating Interest on the Company's Condensed Consolidated Statements of Income.~~

~~On April 25, 2018, the Company provided a $23.0 million loan to a newly formed company (Newco),~~ secured by all assets and ownership interests in ~~seven~~the operations of 7 long-term acute care hospitals and ~~one~~1 inpatient rehabilitation ~~hospital.~~hospital owned by the borrower. The ~~loan, which~~note matures on ~~May 1, 2031, currently bears interest at 9% per annum, with principal payments beginning in May 2021.~~

On December 31, ~~2018, the Company entered into notes with a tenant totaling $0.9 million. The notes~~2025 and bear interest at 9% per ~~annum~~annum. The Company also has a $3.0 million revolving credit facility with the borrower that they can draw on which matures on January 1, 2026.

a $2.5 million loan, acquired by the Company for $1.75 million, to help facilitate the bankruptcy filing of a borrower. The Company subsequently received a payment of $1.2 million on the note and ~~mature~~had a carrying balance of $0.6 million at June 30, 2020 which is secured by all assets and personal property of the borrower. The note is due on ~~December 31, 2019.~~demand and bears interest at 10% per annum.

The Company identified the borrowers of these notes as variable interest entities ("VIEs"), but management determined that the Company was not the primary beneficiary of the VIEs because we lack either directly or through

related parties any material impact in the activities that impact the borrowers' economic performance. We are not obligated to provide support beyond our stated commitment to the borrowers, and accordingly our maximum exposure to loss as a result of this relationship is limited to the amount of our outstanding notes receivable. The VIEs that we have identified at June 30, ~~2019~~2020 are summarized in the table below.



Classification	Carrying Amount (in millions)		Maximum Exposure to Loss (in millions)
Note receivable	$	17.8	$	17.8
Note receivable	$	0.6	$	0.6

Classification
Carrying Amount
(in millions)
Maximum Exposure to Loss
(in millions)
Notes receivable $ 861
$ 861
Note receivable $ 22,962
$ 22,962

Note ~~11.~~10. Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate the fair value.

Cash and cash equivalents and restricted cash - The carrying amount approximates the fair value.

Notes receivable - The fair value is estimated using cash flow analyses, based on an assumed market rate of interest or at a rate consistent with the rates on notes carried by the Company and are classified as level 2 in the hierarchy.

Borrowings under our Credit Facility - The carrying amount approximates the fair value because the borrowings are based on variable market interest rates.

Derivative financial instruments - The fair value is estimated using discounted cash flow techniques. These techniques incorporate primarily level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as level 2 in the hierarchy.

Mortgage note payable - The fair value is estimated using cash flow analyses which are based on an assumed market rate of interest or at a rate consistent with the rates on mortgage notes assumed by the Company and are classified as level 2 in the hierarchy.

The table below details the fair values and carrying values for our notes receivable, interest rate swaps, and mortgage note payable at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, using level 2 inputs.



	June 30, 2020				December 31, 2019
(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Notes receivable	$	18,340	$	17,940	$	23,500	$	23,399
Interest rate swap liability	$	13,969	$	13,969	$	4,808	$	4,808
Mortgage note payable	$	5,235	$	5,524	$	5,288	$	5,351

June 30, 2019 December 31, 2018
(Dollars in thousands) Carrying Value Fair Value Carrying Value Fair Value
Notes receivable $ 23,835
$ 23,935
$ 24,110
$ 23,936
Interest rate swap asset $ —
$ —
$ 902
$ 902
Interest rate swap liability $ 4,769
$ 4,769
$ 269
$ 269
Mortgage note payable $ 5,340
$ 5,262
$ 5,391
$ 5,307

~~Notes to Condensed Consolidated Financial Statements - Continued~~

Note ~~12.~~11. Subsequent Events

Dividend Declared

On August ~~1, 2019,~~3, 2020, the Company’s Board of Directors declared a quarterly common stock dividend in the amount of ~~$0.4125~~$0.4225 per share. The dividend is payable on August ~~30, 2019~~28, 2020 to stockholders of record on August ~~16, 2019.~~17, 2020.

~~Subsequent Acquisitions~~

Notes to Condensed Consolidated Financial Statements - Continued

~~Subsequent~~

Highland Update

On July 1, 2020, the bankruptcy sale of Highland Hospital was completed and the operator who had been managing the facility acquired its operations and entered into a lease with the Company.

The Company provided debtor in possession financing (the “DIP”) to ~~June 30, 2019,~~facilitate the sale and, as of the closing of the sale, had an approximately $1.2 million net payable. In addition, the Company ~~acquired three real estate properties, including one that was previously under construction, totaling approximately 130,000 square feet for~~continued to have a ~~purchase price~~net investment of $550,000 in a separate note (the “Note”), secured by all assets of Highland Hospital.

As of the date of this filing, the DIP and the Note have been combined into a single net receivable balance of approximately ~~$52.6 million and cash consideration of approximately $52.2~~$1.4 million. Upon acquisition, the properties were 100.0% leased in the aggregate with lease expiration through 2034. The Company funded the acquisitions with cash from operations and proceeds from the Company's Revolving Credit Facility.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Disclosure Regarding Forward-Looking Statements

This report and other materials that Community Healthcare Trust Incorporated (the "Company") has filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by management of the Company, contain, or will contain, contains statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “believes”, “expects”, “may”, “should”, “seeks”, “approximately”, “intends”, “plans”, “estimates”, “anticipates” or other similar words or expressions, including the negative thereof. Forward-looking statements are based on certain assumptions and can include future expectations, future plans and strategies, financial and operating projections or other forward-looking information. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Because forward-looking statements relate to future events, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. Thus, the Company’s actual results and financial condition may differ materially from those indicated in such forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, changes in the real estate industry in general, interest rates or the general economy, adverse developments related to the healthcare industry, the degree and nature of the Company’s competition, the ability to consummate acquisitions under contract, effects on global and national markets as well as businesses resulting from the COVID-19 pandemic, and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, in Item 1A of this Quarterly Report on Form 10-Q, and the Company’s other filings with the Securities and Exchange Commission from time to time. Readers are therefore cautioned not to place undue reliance on the forward-looking statements contained herein which speak only as of the date hereof. The Company intends these forward-looking statements to speak only as of the time of this report and the Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future developments, or otherwise, except as may be required by law.

The purpose of this Management's Discussion and Analysis ("MD&A") is to provide an understanding of the Company's consolidated financial condition, results of operations and cash. MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Condensed Consolidated Financial Statements and accompanying notes.

Overview

References such as "we," "us," "our," and "the Company" mean Community Healthcare Trust Incorporated, a Maryland corporation, and its consolidated subsidiaries.

We were organized in the State of Maryland on March 28, 2014. We are a self-administered, self-managed healthcare real estate investment trust, or REIT, that acquires and owns properties that are leased to hospitals, doctors, healthcare systems or other healthcare service ~~providers in our target submarkets.~~providers.

Trends and Matters Impacting Operating Results

Management monitors factors and trends that it believes are important to the Company and the REIT industry in order to gauge their potential impact on the operations of the Company. Certain of the factors and trends that management believes may impact the operations of the Company are discussed below.

COVID-19 pandemic

Many healthcare providers have been impacted by the COVID-19 pandemic. Some of them were unable to see patients for a period of time; others have seen a reduced number of elective procedures and/or patient visits; while others have experienced limited impact, or have even seen improved cash flows from either increases in census or from government funding.

As of July 31, 2020, the Company has entered into, or anticipates entering into, deferral agreements with up to approximately 20 tenants 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.

Real estate acquisitions

During the ~~second quarter~~first six months of ~~2019,~~2020, the Company acquired ~~three~~13 real estate properties totaling approximately ~~110,000~~213,000 square feet and acquired a land parcel adjacent to one of our existing properties to be used for additional parking for an aggregate purchase price of approximately ~~$31.9~~$58.2 million and cash consideration of approximately ~~$30.7~~$57.9 million. Upon acquisition, the properties were ~~approximately 97.1%~~99.0% leased in the aggregate with lease expirations through ~~2034.~~

2035. See Note 43 to the Condensed Consolidated Financial Statements for more details on these acquisitions.

~~3rd Quarter 2019 Acquisitions~~

Subsequent to June 30, 2019, the Company acquired three real estate properties, including one that was previously under construction, totaling approximately 130,000 square feet for a purchase price of approximately $52.6 million and cash consideration of approximately $52.2 million. Upon acquisition, the properties were 100.0% leased in the aggregate with lease expiration through 2034. The Company funded the acquisitions with cash from operations and proceeds from the Company's Revolving Credit Facility.

Acquisition Pipeline

The Company has ~~five~~two properties under definitive purchase agreements for an aggregate expected purchase price of approximately ~~$15.8 million. The Company's~~$2.6 million and expected aggregate returns ~~on these investments range from~~of approximately ~~9.2% to 10.1%~~9.3%. The Company ~~anticipates the~~expects to close on these properties ~~will close during~~in the third quarter of ~~2019. However,~~2020; however, the Company ~~is currently performing due diligence procedures customary for these types of transactions and~~ cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

The Company ~~also~~ has ~~four~~three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately ~~$87.0~~$68.0 million. The Company's expected aggregate returns on these investments range ~~rom~~from approximately 9.5% to 11.0%. The Company expects to close on one of these properties in the fourth quarter and the other two through ~~2020;~~the middle of 2021; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

~~The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings.~~

Leased square footage

As of June 30, ~~2019,~~2020, our real estate portfolio was approximately ~~90.1%~~89.5% leased. During the first six months of ~~2019,~~2020, we had expiring or terminated leases related to approximately ~~73,000~~74,000 square feet, and we leased or renewed leases relating to approximately ~~101,000~~107,000 square feet.

~~Highlands Transition~~Highland Update

~~A new~~On July 1, 2020, the bankruptcy sale of Highland Hospital was completed and the operator ~~is currently~~who had been managing ~~Highlands Hospital pursuant to~~the facility acquired its operations and entered into a ~~management agreement, continues to perform due diligence, and is in the process of preparing for transfer of licenses and other assets.~~

~~The Company's~~ lease with the ~~new operator will become effective upon the transfer of the licenses to the new operator, which is anticipated to happen in the second half of 2019.~~

Company.

The Company ~~has received~~provided debtor in possession financing (the “DIP”) to facilitate the sale and, ~~anticipates continuing~~as of the closing of the sale, had an approximately $1.2 million net payable. In addition, the Company continued to ~~receive monthly payments~~have a net investment of $550,000 in a separate note (the “Note”), secured by all assets of Highland Hospital.

As of the date of this filing, the DIP and the Note have been combined into a single net receivable balance of approximately ~~$0.3~~$1.4 million.

~~Though~~The Company expects this receivable to be repaid in the Company has experienced some short-term effects from the timing of receipts or reimbursement of expenses, the Company does not anticipate any material adverse long-term effect to its cash flows or net income relatednext few months, as well as other amounts previously owed to the ~~transition or subsequent leasing of this facility.~~

~~The~~Company. However, the Company cannot provide assurance as to the timing or whether ~~this transaction~~the receivable and other amounts will ~~actually close.~~

be received.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a material effect on the Company's consolidated financial condition, results of operations or liquidity.

Inflation

We believe inflation will have a minimal impact on the operating performance of our properties. Many of our lease agreements contain provisions designed to mitigate the adverse impact of inflation. These provisions include clauses that enable us to receive payment of increased rent pursuant to escalation clauses which generally increase rental rates during the terms of the leases. These escalation clauses often provide for fixed rent increases or indexed escalations (based upon the Consumer Price Index or other measures). However, some of these contractual rent increases may be less than the actual rate of inflation. Generally, our lease agreements require the tenant to pay property operating expenses, including maintenance costs, real estate taxes and insurance. This requirement reduces our exposure to increases in these costs and property operating expenses resulting from inflation.

Seasonality

We do not expect our business to be subject to material seasonal fluctuations.

New Accounting Pronouncements

See Note 1 to the Company’s Condensed Consolidated Financial Statements accompanying this report for information on new accounting standards recently adopted and not yet adopted.

Results of Operations

The Company's results of operations for the three and six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 have most significantly been impacted by its real estate acquisitions. As of June 30, ~~2019~~2020 and ~~2018,~~2019, the Company had investments in real estate properties totaling approximately ~~$511.6~~$664.7 million and ~~$416.8~~$511.6 million, respectively.

Three Months Ended June 30, ~~2019~~2020 Compared to Three Months Ended June 30, ~~2018~~2019

The table below shows our results of operations for the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 and the effect of changes in those results from period to period on our net income.


	Three Months Ended June 30,						Increase (Decrease) to Net Income					Three Months Ended June 30,						Increase (decrease) to Net income
(dollars in thousands)	2019			2018			$			%		2020			2019			$			%
REVENUES
Rental income	$	13,361		$	11,810		$	1,551		13.1	%	$	17,830		$	13,361		$	4,469		33.4	%
Other operating interest	955			592			363			61.3	%	450			955			(505		)	(52.9	)%
	14,316			12,402			1,914			15.4	%	18,280			14,316			3,964			27.7	%
EXPENSES
Property operating	2,993			2,506			(487		)	(19.4	)%	3,223			2,993			(230		)	(7.7	)%
General and administrative	1,776			1,504			(272		)	(18.1	)%	1,919			1,776			(143		)	(8.1	)%
Depreciation and amortization	5,299			4,630			(669		)	(14.4	)%	6,119			5,299			(820		)	(15.5	)%
	10,068			8,640			(1,428		)	(16.5	)%	11,261			10,068			(1,193		)	(11.8	)%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS	4,248			3,762			486			12.9	%
OTHER INCOME (EXPENSE)
Loss on sale of real estate												(313		)	—			(313		)	n/m
Interest expense	(2,251		)	(1,571		)	(680		)	(43.3	)%	(2,183		)	(2,251		)	68			3.0	%
Other income	69			226			(157		)	(69.5	)%	3			69			(66		)	(95.7	)%
INCOME FROM CONTINUING OPERATIONS	2,066			2,417			(351		)	(14.5	)%
												(2,493		)	(2,182		)	(311		)	(14.3	)%
NET INCOME	$	2,066		$	2,417		$	(351	)	(14.5	)%	$	4,526		$	2,066		$	2,460		119.1	%

n/m - not meaningful

Revenues

Revenues increased approximately ~~$1.9~~$4.0 million, or ~~15.4%~~27.7%, for the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 mainly due to acquisitions of real ~~estate. Due to the original structuring of an acquisition in April 2019, the Company recorded~~estate, offset partially by reduced interest income ~~of approximately $0.4 million, included in other operating interest, rather than rental income, for May and June of 2019.~~from repayments on certain notes receivable.

Expenses

Property operating expenses increased approximately ~~$0.5~~$0.2 million, or ~~19.4%~~7.7%, for the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 mainly due to acquisitions of real estate.

General and administrative expenses increased approximately ~~$0.3~~$0.1 million, or ~~18.1%~~8.1%, for the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018. Compensation-related expenses and occupancy costs related~~2019 due mainly to ~~our employees, including the amortization of non-vested restricted common shares issued under our 2014 Incentive Plan and~~compensation-related expenses related to the addition of employees, ~~increased~~including the non-cash amortization of non-vested restricted common shares, of approximately ~~$0.3 million~~$0.4 million. These increases were offset partially by a reduction in professional fees, including the ~~second quarter~~reduction in and reimbursement of ~~2019 compared~~legal fees related to the ~~same period~~Highland Hospital bankruptcy, of approximately $0.2 million and a reduction in ~~2018.~~state income and other taxes of approximately $0.1 million.

Depreciation and amortization expense increased approximately ~~$0.7~~$0.8 million, or ~~14.4%~~15.5%, for the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018.~~2019. Acquisitions accounted for an increase of approximately ~~$1.1~~$1.3 million, offset by a decrease of approximately ~~$0.6~~$0.5 million in amortization due to fully ~~depreciated~~amortized real estate lease

intangibles which generally have a shorter depreciable life than a building. ~~Also,~~

Loss on sale of real estate

During the second quarter of 2020, the Company sold a land ~~building~~parcel related to one of its properties for approximately $0.3 million and ~~tenant improvements accounted for an increase~~recognized a loss on sale of approximately ~~$0.2~~$0.3 million.

Interest expense

Interest expense ~~increased~~decreased approximately ~~$0.7~~$0.1 million, or ~~43.3%~~3.0%, for the three months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 due mainly to ~~additional Term Loan borrowings under its Credit Facility in the first quarters of 2018 and 2019, as well as~~ a ~~higher weighted average debt balance and~~lower weighted average interest rate on the Revolving Credit Facility in the second quarter of ~~2019~~2020, offset partially by a higher weighted average debt balance in the second quarter of 2020 compared to the same period in ~~2018.~~2019.

Six Months Ended June 30, ~~2019~~2020 Compared to Six Months Ended June 30, ~~2018~~2019

The table below shows our results of operations for the six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 and the effect of changes in those results from period to period on our net income.


	Six Months Ended June 30,						Increase (Decrease) to Net Income					Six Months Ended June 30,						Increase (decrease) to Net income
(dollars in thousands)	2019			2018			$			%		2020			2019			$			%
REVENUES
Rental income	$	26,259		$	22,885		$	3,374		14.7	%	$	35,258		$	26,259		$	8,999		34.3	%
Other operating interest	1,498			946			552			58.4	%	958			1,498			(540		)	(36.0	)%
	27,757			23,831			3,926			16.5	%	36,216			27,757			8,459			30.5	%
EXPENSES
Property operating	6,068			4,870			(1,198		)	(24.6	)%	6,566			6,068			(498		)	(8.2	)%
General and administrative	3,561			2,697			(864		)	(32.0	)%	4,111			3,561			(550		)	(15.4	)%
Depreciation and amortization	10,545			9,546			(999		)	(10.5	)%	12,178			10,545			(1,633		)	(15.5	)%
	20,174			17,113			(3,061		)	(17.9	)%	22,855			20,174			(2,681		)	(13.3	)%
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND OTHER ITEMS	7,583			6,718			865			12.9	%
OTHER INCOME (EXPENSE)
Loss on sale of real estate												(313		)	—			(313		)	n/m
Interest expense	(4,305		)	(2,839		)	(1,466		)	51.6	%	(4,432		)	(4,305		)	(127		)	(3.0	)%
Other income	238			410			(172		)	(42.0	)%	10			238			(228		)	(95.8	)%
INCOME FROM CONTINUING OPERATIONS	3,516			4,289			(773		)	(18.0	)%
												(4,735		)	(4,067		)	(668		)	(16.4	)%
NET INCOME	$	3,516		$	4,289		$	(773	)	(18.0	)%	$	8,626		$	3,516		$	5,110		145.3	%

n/m - not meaningful

Revenues

Revenues increased approximately ~~$3.9~~$8.5 million, or ~~16.5%~~30.5%, for the six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 mainly due to acquisitions of real ~~estate. Due to the original structuring of an acquisition in April 2019, the Company recorded~~estate, offset partially by reduced interest income ~~of approximately $0.4 million, included in other operating interest, rather than rental income, for May and June of 2019.~~from repayments on certain notes receivable.

Expenses

Property operating expenses increased approximately ~~$1.2~~$0.5 million, or ~~24.6%~~8.2%, for the six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 mainly due to acquisitions of real estate.

General and administrative expenses increased approximately ~~$0.9~~$0.6 million, or ~~32.0%~~15.4%, for the six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018. Compensation-related~~2019 due mainly to compensation-related expenses and occupancy costs related to ~~our~~the addition of employees, including the non-cash amortization of non-vested restricted common shares, ~~issued under our 2014 Incentive Plan~~of approximately $0.9 million. These increases were offset partially by a reduction in professional fees, including the reduction in and ~~expenses~~reimbursement of legal fees related to the ~~addition~~Highland Hospital bankruptcy, of ~~employees increased~~ approximately ~~$0.6 million;~~$0.1 million and a reduction in state income and ~~federal income~~other taxes ~~and franchise taxes increased~~of approximately ~~$0.3~~$0.2 million.

Depreciation and amortization expense increased approximately ~~$1.0~~$1.6 million, or ~~10.5%~~15.5%, for the six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018.~~2019. Acquisitions accounted for an increase of approximately ~~$2.1~~$2.5 million, offset by a decrease of approximately ~~$1.4~~$1.0 million in amortization due to fully ~~depreciated~~amortized real estate lease intangibles which generally have a shorter depreciable life than a building. ~~Also,~~

Loss on sale of real estate

Interest expense

Interest expense increased approximately ~~$1.5~~$0.1 million, or ~~51.6%~~3.0%, for the six months ended June 30, ~~2019~~2020 compared to the same period in ~~2018~~2019 due mainly to ~~additional Term Loan borrowings under its Credit Facility in the first quarters of 2018 and 2019, as well as~~ a higher weighted average debt balance ~~and~~in the first six months of 2020 compared to the same period in 2019, offset partially by a lower weighted average interest rate on the Revolving Credit Facility in the first six months of ~~2019~~2020 compared to the same period in ~~2018.~~2019.

Funds from Operations

Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to net income ~~(calculated~~(computed in accordance with GAAP), excluding gains ~~or losses~~(or losses) from ~~the sale~~sales of ~~certain~~property and impairments of real estate, ~~assets and gains or losses from change in control,~~ plus depreciation and amortization related to real estate plus impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity,properties, and after adjustments for unconsolidated partnerships and joint ~~ventures, as well as other items discussed in NAREIT's Funds From Operations White Paper - 2018 Restatement.~~ventures. NAREIT also provides REITs with an option to exclude gains, losses and impairments of assets that are incidental to the main business of the REIT from the calculation of FFO.

Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement. However, management believes FFO and FFO per share to be supplemental measures of a REIT’s performance because they provide an understanding of the operating performance of the Company’s properties without giving effect to certain significant non-cash items, primarily depreciation and amortization expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. The Company believes that by excluding the effect of depreciation, amortization, ~~and~~ gains or losses from sales of real estate, impairment of real estate, and gains, losses and impairment of incidental assets, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO and FFO per share can facilitate comparisons of operating performance between periods. The Company reports FFO and FFO per share because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share is consistently reported, discussed, and compared by research analysts in their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share. However, FFO does not represent cash generated from operating activities determined in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income attributable to common stockholders as an indicator of the Company’s operating performance or as an alternative to cash flow from operating activities as a measure of liquidity.

The table below reconciles ~~FFO to~~ net income ~~for the three and six months ended June 30, 2019 and 2018, respectively.~~to FFO.


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, excepts per share amounts)	2019		2018		2019		2018		2020		2019		2020		2019
Net income	$	2,066	$	2,417	3,516		$	4,289	$	4,526	$	2,066	$	8,626	$	3,516
Real estate depreciation and amortization	5,340		4,624		10,622		9,535		6,168		5,340		12,277		10,622
Loss on sale of real estate									313		—		313		—
Total adjustments	5,340		4,624		10,622		9,535		6,481		5,340		12,590		10,622
Funds from Operations	$	7,406	$	7,041	$	14,138	$	13,824	$	11,007	$	7,406	$	21,216	$	14,138
Funds from Operations per Common Share-Basic	$	0.41	$	0.40	$	0.78	$	0.79	$	0.52	$	0.41	$	1.01	$	0.78
Funds from Operations per Common Share-Diluted	$	0.40	$	0.40	$	0.76	$	0.78	$	0.51	$	0.40	$	0.98	$	0.76
Weighted Average Common Shares Outstanding-Basic	18,245,668		17,573,683		18,100,973		17,573,683		21,263,575		18,245,668		20,999,097		18,100,973
Weighted Average Common Shares Outstanding-Diluted ⁽¹⁾	18,684,916		17,799,823		18,530,138		17,812,408		21,749,994		18,684,916		21,557,798		18,530,138

___________________

(1) Diluted weighted average common shares outstanding for FFO are calculated based on the treasury method, rather than the 2-class method used to calculate earnings per share.

Liquidity and Capital Resources

The Company monitors its liquidity and capital resources and relies on several key indicators in its assessment of capital markets for financing acquisitions and other operating activities as needed, including the following:

Leverage ratios and financial covenants included in our Credit Facility;

Dividend payout percentage; and

Interest rates, underlying treasury rates, debt market spreads and equity markets.

The Company uses these indicators and others to compare its operations to its peers and to help identify areas in which the Company may need to focus its attention.

Sources and Uses of Cash

The Company derives most of its revenues from its real estate ~~property and notes portfolio, collecting~~properties. Our rental income ~~operating expense reimbursements and interest based on contractual arrangements with its tenants and borrowers. These sources of revenue represent~~represents our primary source of liquidity to fund our dividends, general and administrative expenses, property operating expenses, interest expense on our Credit Facility, and other expenses incurred related to managing our existing ~~portfolio and investing in additional properties.~~portfolio. To the extent additional resources are needed, the Company will fund its investment activity generally through equity or debt issuances either in the public or private markets or through proceeds from our Credit Facility.

The Company expects to meet its liquidity needs through cash on hand, cash flows from operations and cash flows from sources discussed above. The Company believes that its liquidity and sources of capital are adequate to satisfy its cash requirements. The Company cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet its liquidity needs.

The Company's Credit Facility, as amended, ~~on March 29, 2019,~~ provides for a $150.0 million Revolving Credit Facility and $175.0 million in Term Loans, as well as an accordion feature which allows borrowings up to a total of $525.0 million, including the ability to add and fund additional term loans. Note 54 to the Condensed Consolidated Financial Statements provides more details on the Company's Credit ~~Facility and the amendment on March 29, 2019.~~Facility. At June 30, ~~2019,~~2020, the Company had borrowed $175.0 million in Term Loans and had borrowing capacity remaining under the Revolving Credit Facility of approximately ~~$131.0~~$132.0 million. ~~At June 30, 2019, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 36.5%.~~

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. Also, the Company’s current financing policy prohibits aggregate debt (secured or unsecured) in excess of 40% of the Company's total capitalization, except for short-term, transitory periods. At June 30, 2020, our debt to total capitalization ratio (debt plus stockholders' equity plus accumulated depreciation) was approximately 29.3%. The Company was in compliance with its financial covenants under its Credit Facility as of June 30, ~~2019.~~2020.

~~3rd Quarter 2019 Acquisitions~~

Acquisition Pipeline

The Company ~~also~~ has ~~four~~three properties under definitive purchase agreements, to be acquired after completion and occupancy, for an aggregate expected purchase price of approximately ~~$87.0~~$68.0 million. The Company's expected aggregate returns on these investments isrange from approximately 9.5% to 11.0%. The Company expects to close on one of these properties in the fourth quarter and the other two through ~~2020;~~the middle of 2021; however, the Company cannot provide assurance as to the timing of when, or whether, these transactions will actually close.

The Company anticipates funding these investments with cash from operations, through proceeds from its Credit Facility or from net proceeds from additional debt or equity offerings.

~~Universal Shelf S-3 Registration Statement~~Other Contractual Obligations

Subject to Company approval, we may fund or reimburse tenants for tenant improvements, which are allowed for in certain leases, of up to approximately $3.2 million as of June 30, 2020.

The Company has also entered into contracts regarding certain capital expenditures totaling approximately ~~$601.4~~$1.5 million ~~remaining~~as of June 30, 2020. Reimbursement of these expenditures by our tenants will be determined by each tenant's lease.

The Company has ground lease obligations relating to ~~be issued under its~~two properties, with total obligations of approximately $0.6 million with maturities through 2054.

Automatic Shelf Registration Statement

On November 5, 2019, the Company filed an automatic shelf registration statement on Form S-3 ~~registration statement filed on September 13, 2016~~ with the ~~Securities and Exchange Commission, and declared effective on September 26, 2016.~~SEC. The registration statement ~~allows us~~is for an indeterminate number of securities and is effective for three years. Under this registration statement, the Company has the capacity to offer ~~debt or equity securities (or a combination thereof)~~and sell from time to ~~time.~~

~~ATM Program~~

~~During the first six months~~time various types of ~~2019, the Company issued, through its ATM Program, 641,053 shares of~~securities, including common stock, ~~at an average gross sales price of $36.89 per share~~preferred stock, depository shares, rights, debt securities, warrants and received proceeds of approximately $23.2 million, as discussed in more detail in Note 7 to the Condensed Consolidated Financial Statements. The proceeds were used for additional acquisitions, to repay outstanding balances under the Company's Credit Facility and for general corporate purposes.units.

Operating Activities

Cash flows provided by operating activities for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were approximately ~~$14.4~~$23.7 million and ~~$13.0~~$14.4 million, respectively. Cash flows provided by operating activities were generally provided by contractual rents, net of expenses, on our real estate property portfolio.

Investing Activities

Cash flows used in investing activities for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were approximately $55.6 million and $64.8 million, respectively. During the six months ended June 30, 2020, the Company invested in 13 properties for an aggregate cash consideration of approximately $57.9 million and ~~$30.7~~acquired a $2.5 million ~~respectively.~~ note for $1.8 million. Also, during the six months ended June 30, 2020, the Company received payments on its notes receivable totaling $6.9 million and funded capital expenditures on its existing portfolio totaling approximately $3.1 million.

During the six months ended June 30, 2019, the Company invested in five properties for an aggregate cash consideration of approximately $63.4 ~~million. During the six months ended June 30, 2018, the Company invested in six properties for an aggregate cash consideration of approximately $20.1~~million, received payments on its notes receivable totaling $0.3 million, and ~~$4.5 million fair value of real estate received in foreclosure. In addition, the Company acquired or~~ funded ~~$7.0 million of certain promissory notes during the six months ended June 30, 2018.~~capital expenditures on its existing portfolio totaling approximately $1.7 million.

Financing Activities

Cash flows provided by financing activities for the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 were approximately $35.0 million and $57.3 million, respectively. During the six months ended June 30, 2020, the Company borrowed $3.0 million under its Credit Facility, sold shares under its ATM Program and ~~$17.3~~received proceeds of approximately $50.6 million, ~~respectively.~~ and paid dividends totaling $18.3 million.

During the six months ended June 30, 2019, the Company amended its Credit Facility which provided an additional $75.0 million Term Loan. The ~~Company used the net~~ proceeds from the Term Loan were used to ~~repay~~pay down the outstanding ~~balances~~balance under ~~its~~the Company's Revolving Credit Facility, contributing to the net $24.0 million repayment on the Revolving Credit Facility. The Company also sold shares under its ATM Program and received proceeds of approximately $23.2 million, and paid dividends totaling $15.4 million. Dividends paid for the six months ended June 30, 2019 exceeded cash flows from operations by approximately $1.0 million which was funded from proceeds under the Company's Revolving Credit Facility. During the six months ended June 30, 2018, the Company borrowed $40.0 million under its Term Loans, which was used to repay outstanding amounts on its Revolving Credit Facility, and paid dividends totaling $14.5 million.

Security Deposits

As of June 30, ~~2019,~~2020, the Company held approximately ~~$2.4~~$4.1 million 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.

Dividends

The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to maintain its qualification as a REIT.

The ability of the Company to pay dividends is dependent upon its ability to generate cash flows and to make accretive new investments.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We may use certain derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings. We will not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. An interest rate swap is a contractual agreement entered into by two counterparties under which each agrees to make periodic payments to the other for an agreed period of time based on a notional amount of principal. Under the most common form of interest rate swap, known from our perspective as a floating-to-fixed interest rate swap, a series of floating, or variable, rate payments on a notional amount of principal is exchanged for a series of fixed interest rate payments on such notional amount. During the six months ended June 30, 2020, there were no material changes in the quantitative and qualitative disclosures about market risks presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules ~~13a-15(b)~~13a-15(e) and ~~15d-15(b)~~15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based on this evaluation, Company’s management has concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files or submits under the Exchange Act.

Changes In Internal Control Over Financial Reporting

There were no changes in our system of internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company may, from time to time, be involved in litigation arising in the ordinary course of business or which may be expected to be covered by insurance. The Company is not aware of any pending or threatened litigation that, if resolved against the Company, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, an investor should consider the risk factors included in its Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, its Quarterly Report on Form 10-Q for the three months ended March 31, 2020, and other reports that may be filed by the Company. ~~Investors should also consider the following risk factors:~~

~~We will no longer qualify as an “emerging growth company” after December 31, 2019, and as a result, we will have to comply with increased disclosure and compliance requirements.~~

~~We are currently an “emerging growth company” as defined in the JOBS Act,~~ ~~but, based on the market value of our common stock held by non-affiliates exceeding $700 million as of the last business day of our second fiscal quarter~~

~~of 2019,~~ ~~we will no longer qualify as an “emerging growth company” but instead will be deemed a large accelerated filer as of December 31, 2019.~~

As a large accelerated filer, we will be subject to certain disclosure and compliance requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company. These requirements include, but are not limited to:

the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002;

compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

~~the requirement that we provide full and more detailed disclosures regarding executive compensation; and~~

~~the requirement that we hold a non-binding advisory vote on executive compensation and obtain stockholder approval of any golden parachute payments not previously approved.~~

An emerging growth company may also elect to delay the adoption of new accounting standards to when they become applicable to private companies, rather than when public companies must adopt them. However, the Company elected to adopt new accounting standards at the same time as applicable to other public companies.

We expect that the loss of emerging growth company status and compliance with the additional requirements of being a large accelerated filer will increase our legal and financial compliance costs and cause management and other personnel to divert attention from operational and other business matters to devote substantial time to public company reporting requirements. In addition, if we are not able to comply with changing requirements in a timely manner, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the Securities and Exchange Commission, (the "SEC"), or other regulatory authorities, which would require additional financial and management resources.

If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors' views of us and, as a result, the value of our common stock.

Pursuant to Section 404 of the Sarbanes-Oxley Act, management of our Company was required to report upon the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ended December 31, 2016. However, since we will be deemed a large accelerated filer beginning with our Annual Report of Form 10-K for the year ended December 31, 2019, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.

The rules governing the standards that must be met for management and our independent registered public accounting firm to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. In connection with our and our independent registered public accounting firm’s evaluations of our internal control over financial reporting, we may need to upgrade systems, including information technology; implement additional financial and management controls, reporting systems, and procedures; and hire additional accounting and finance staff.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us or our independent registered public accounting firm conducted in connection with Section 404 of the Sarbanes-Oxley Act may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial

information, which could have a negative effect on the trading price of our common stock. Internal control deficiencies could also result in a restatement of our financial results in the future. We could become subject to stockholder or other third-party litigation, as well as investigations by the SEC, the New York Stock Exchange, or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions, payment of damages or other remedies. Further, any delay in compliance with the auditor attestation provisions of Section 404 could subject us to a variety of administrative sanctions, including ineligibility for short-form resale registration, action by the SEC and the suspension or delisting of our common stock, which could reduce the trading price of our common stock and could harm our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits required by Item 601 of Regulation S-X which are filed with this report are listed in the Exhibit Index and are hereby incorporated in by reference.

EXHIBIT INDEX



Exhibit Number		Description
3.1		Corporate Charter of Community Healthcare Trust Incorporated, as amended (1)
3.2		Bylaws of Community Healthcare Trust Incorporated, as amended (2)
~~10.1~~		~~Amended and Restated Employment Agreement, dated May 1, 2019, between the Company and Leigh Ann Stach (3)~~
31.1 *		Certification of the Chief Executive Officer of Community Healthcare Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Rule 302 of the Sarbanes-Oxley Act of 2002
31.2 *		Certification of the Chief Financial Officer of Community Healthcare Trust Incorporated pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Rule 302 of the Sarbanes-Oxley Act of 2002
32.1 **		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


(1)	Filed as Exhibit 3.1 to Amendment No. 2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on May 6, 2015 (Registration No. 333-203210)and incorporated herein by reference.


(2)	Filed as Exhibit 3.2 to the Registration Statement on Form S-11 of the Company filed with the Securities and Exchange Commission on April 2, 2015 (Registration No. 333-203210)and incorporated herein by reference.


~~(3)~~	~~Filed as Exhibit 10.1 to to the Form 8-K of the Company filed with the Securities and Exchange Commission on May 3, 2019 (File No. 001-37401) and incorporated herein by reference.~~

_________


*	Filed herewith.


**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August ~~6, 2019~~4, 2020



	COMMUNITY HEALTHCARE TRUST INCORPORATED

	By:	/s/ Timothy G. Wallace
		Timothy G. Wallace
		Chief Executive Officer and President

	By:	/s/ David H. Dupuy
		David H. Dupuy
		Executive Vice President and Chief Financial Officer

3331



(Dollars in thousands)	Number of Facilities	Land and Land Improvements		Buildings, Improvements, and Lease Intangibles		Personal Property		Total		Accumulated Depreciation
Medical office buildings:
Florida	5	$	4,608	$	29,349	$	—	$	33,957	$	4,921
Ohio	6	3,638		26,517		—		30,155		5,855
Texas	3	3,115		15,591		—		18,706		4,659
Illinois	3	1,877		15,014		—		16,891		2,905
Kansas	3	2,455		14,933		—		17,388		4,335
Iowa	1	2,241		9,062		—		11,303		2,734
Other states	15	4,356		35,925		—		40,281		5,196
	36	22,290		146,391		—		168,681		30,605
Physician clinics:
Kansas	2	610		6,921		—		7,531		1,587
Illinois	6	2,888		9,539		—		12,427		688
Florida	5	506		10,322		—		10,828		998
Other states	9	2,903		21,646		—		24,549		3,721
	22	6,907		48,428		—		55,335		6,994
Surgical centers and hospitals:
Louisiana	1	1,683		21,353		—		23,036		1,377
Michigan	2	637		8,286		—		8,923		2,529
Illinois	2	2,349		8,222		—		10,571		1,604
Florida	1	271		7,069		—		7,340		926
Arizona	2	576		5,389		—		5,965		1,689
Other states	7	2,130		17,917		—		20,047		4,303
	15	7,646		68,236		—		75,882		12,428
Specialty centers:
Illinois	3	3,489		24,733		—		28,222		2,516
Other states	22	5,207		38,396		—		43,603		7,857
	25	8,696		63,129		—		71,825		10,373
Behavioral facilities:
Massachusetts	1	3,835		23,302		—		27,137		—
West Virginia	1	2,138		22,897		—		25,035		1,026
Illinois	1	1,300		18,803		—		20,103		1,450
Indiana	2	1,126		6,040		—		7,166		390
Other states	3	1,412		12,840		—		14,252		583
	8	9,811		83,882		—		93,693		3,449
Inpatient rehabilitation facilities:
Texas	1	1,515		27,001		—		28,516		272
	1	1,515		27,001		—		28,516		272
Long-term acute care hospitals:
Indiana	1	523		14,405		—		14,928		1,394
	1	523		14,405		—		14,928		1,394
Corporate property	—	—		2,578		143		2,721		328
Total real estate investments	108	$	57,388	$	454,050	$	143	$	511,581	$	65,843



2019 (six months ending December 31)	$	23,457
2020	44,779
2021	41,619
2022	38,168
2023	33,579
2024 and thereafter	189,870
	$	371,472



			Relative Fair Value			Estimated Useful Life
			(in thousands)			(In years)
Land and land improvements			$	7,061		4.7-13.9
Building and building improvements			56,655			20-40
Intangibles:
	At-market lease intangibles		1,281			3.8-10.8
	Below-market lease intangibles		(44		)	8.3
		Total intangibles	1,237
Accounts receivable and other assets assumed			14
Accounts payable, accrued liabilities and other liabilities assumed			(1,430		)
Prorated rent, interest and operating expense reimbursement amounts collected			(88		)
	Total cash consideration		$	63,449



	Six Months Ended June 30, 2019	Year Ended December 31, 2018
Balance, beginning of period	18,634,502	18,085,798
Issuance of common stock	641,053	334,700
Restricted stock-based awards	125,689	214,004
Balance, end of period	19,401,244	18,634,502



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Shares issued	497,453		641,053
Proceeds received (in millions)	$	18.5	$	23.2
Average gross sales price per share ($)	$	37.85	$	36.89