Universal Health Realty Income Trust Reports Decline in Net Income and FFO for Q4 and Full Year 2023
Net Income: Q4 net income decreased to $3.6 million from $5.6 million in Q4 2022, and full-year net income dropped to $15.4 million from $21.1 million in 2022.
Adjusted Net Income: Adjusted for a loss on divestiture, Q4 adjusted net income was $3.8 million, down from $5.6 million in the prior year's quarter.
Funds from Operations (FFO): Q4 FFO fell to $11.4 million from $12.4 million in Q4 2022, and full-year FFO decreased to $44.6 million from $48.8 million in 2022.
Dividends: The Q4 dividend was $.725 per share, with a total payout of $10.0 million.
Property Transactions: Sold a vacant specialty facility in Corpus Christi, Texas, for $3.9 million, and acquired McAllen Doctor's Center in McAllen, Texas, for $7.6 million.
Capital Resources: As of December 31, 2023, UHT had $326.6 million in borrowings with $45.3 million of available borrowing capacity.
On February 27, 2024, Universal Health Realty Income Trust (NYSE:UHT) released its 8-K filing, reporting its financial results for the fourth quarter and full year ended December 31, 2023. The healthcare REIT, which invests in a variety of healthcare and human service facilities, experienced a decrease in net income and funds from operations (FFO) both for the quarter and the year, compared to the same periods in 2022.
Financial Performance Overview
The company reported a Q4 net income of $3.6 million, or $.26 per diluted share, a decrease from $5.6 million, or $.41 per diluted share, in the fourth quarter of 2022. After adjusting for a loss on divestiture, the adjusted net income for Q4 was $3.8 million, or $.28 per diluted share. For the full year, net income was $15.4 million, or $1.11 per diluted share, down from $21.1 million, or $1.53 per diluted share, in 2022. The adjusted net income for the year was $15.6 million, or $1.13 per diluted share.
The decrease in adjusted net income was attributed to several factors, including an increase in interest expense due to higher average borrowing rates and outstanding borrowings, and a decrease related to a one-time settlement in 2022. However, these were partially offset by an increase in income generated at various properties.
FFO for Q4 decreased to $11.4 million, or $.82 per diluted share, from $12.4 million, or $.90 per diluted share, in the prior year's quarter. The full-year FFO also saw a decrease to $44.6 million, or $3.23 per diluted share, from $48.8 million, or $3.54 per diluted share, in 2022. The decline in FFO was primarily due to the decrease in adjusted net income, partially offset by an increase in depreciation and amortization expense.
Property Transactions and Dividend Information
In December 2023, UHT divested a vacant specialty facility in Corpus Christi, Texas, resulting in a loss of approximately $232,000. This move is expected to eliminate the operating expenses associated with the facility, which totaled $254,000 in 2023. Additionally, the company acquired the McAllen Doctor's Center in Texas for approximately $7.6 million, which is fully leased to a subsidiary of UHS.
The company also completed construction on the Sierra Medical Plaza I in Reno, Nevada, with an estimated aggregate cost of $35 million, of which approximately $29 million was incurred as of December 31, 2023.
The fourth quarter dividend was declared at $.725 per share, totaling $10.0 million, and was paid on December 29, 2023.
Capital Resources and Outlook
As of the end of 2023, UHT had $326.6 million of borrowings outstanding and $45.3 million of available borrowing capacity. Despite the challenges faced in 2023, CEO and President Alan B. Miller expressed pride in the company's strong portfolio and optimism for the future, emphasizing the goal of providing a reliable dividend stream to shareholders.
Universal Health Realty Income Trust's performance in 2023 reflects the impact of increased borrowing costs and nonrecurring items related to property transactions. The company's strategic divestitures and acquisitions, along with the completion of construction projects, position it to navigate the challenges ahead and continue its focus on delivering value to shareholders.
Explore the complete 8-K earnings release (here) from Universal Health Realty Income Trust for further details.
This article first appeared on GuruFocus.
