UHT Universal Health Realty Income Trust

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

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 1-9321

 

UNIVERSAL HEALTH REALTY INCOME TRUST

(Exact name of registrant as specified in its charter)

 

 

Maryland		23-6858580
(State or other jurisdiction of incorporation or organization)		(I. R. S. Employer Identification No.)
UNIVERSAL CORPORATE CENTER 367 SOUTH GULPH ROAD KING OF PRUSSIA, Pennsylvania		19406-0958
(Address of principal executive offices)		(Zip Code)

(610) 265-0688

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Shares of beneficial interest, $0.01 par value		UHT		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 preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☒	Accelerated Filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of common shares of beneficial interest outstanding at July 31, 2024—13,848,952

 

 

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UNIVERSAL HEALTH REALTY INCOME TRUST

INDEX

				PAGE NO.
PART I. FINANCIAL INFORMATION (unaudited)
Item 1.		Financial Statements
		Condensed Consolidated Statements of Income—Three and Six Months Ended June 30, 2024 and 2023		3
		Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 30, 2024 and 2023		4
		Condensed Consolidated Balance Sheets—June 30, 2024 and December 31, 2023		5
		Condensed Consolidated Statements of Changes in Equity—Three and Six Months Ended June 30, 2024 and 2023		6 through 7
		Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2024 and 2023		8
		Notes to Condensed Consolidated Financial Statements		9 through 19
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		20 through 29
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		30 through 31
Item 4.		Controls and Procedures		31
PART II. OTHER INFORMATION				32
Item 1A.		Risk Factors		32
Item 5.		Other Information		32
Item 6.		Exhibits		32
SIGNATURES				33

This Quarterly Report on Form 10-Q is for the quarter ended June 30, 2024. In this Quarterly Report, “we,” “us,” “our” and the “Trust” refer to Universal Health Realty Income Trust and its subsidiaries.

As disclosed in this Quarterly Report, including in Note 2 to the condensed consolidated financial statements—Relationship with Universal Health Services, Inc. (“UHS”) and Related Party Transactions, a wholly-owned subsidiary of UHS (UHS of Delaware, Inc.) serves as our Advisor pursuant to the terms of an annually renewable Advisory Agreement dated December 24, 1986, and as amended and restated as of January 1, 2019. The Advisory Agreement expires on December 31 of each year, however, it is renewable by us, subject to a determination by our Trustees who are unaffiliated with UHS, that the Advisor’s performance has been satisfactory. The Advisory Agreement was renewed for 2024 with the same terms as the Advisory Agreement in place during 2023 and 2022. Our officers are all employees of UHS through its wholly-owned subsidiary, UHS of Delaware, Inc. In addition, five of our hospital facilities are leased to wholly-owned subsidiaries of UHS, one of our hospital facilities is leased to a joint venture between a wholly-owned subsidiary of UHS and a third party, and subsidiaries of UHS are tenants of twenty-one medical/office buildings or free-standing emergency departments, that are either wholly or jointly-owned by us. Any reference to “UHS” or “UHS facilities” in this report is referring to Universal Health Services, Inc.’s subsidiaries, including UHS of Delaware, Inc.

In this Quarterly Report, the term “revenues” does not include the revenues of the unconsolidated limited liability companies (“LLCs”) in which we have various non-controlling equity interests ranging from 33% to 95%. As of June 30, 2024, we had investments in four jointly-owned LLCs/LPs. We currently account for our share of the income/loss from these investments by the equity method (see Note 5 to the condensed consolidated financial statements included herein).

 

 

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Part I. Financial Information

Item I. Financial Statements

Universal Health Realty Income Trust

Condensed Consolidated Statements of Income

For the Three and Six Months Ended June 30, 2024 and 2023

(amounts in thousands, except per share information)

(unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Revenues:
Lease revenue - UHS facilities (a.)		$	8,454			$	8,236			$	17,118			$	16,023
Lease revenue - Non-related parties			14,359				13,668				28,846				27,029
Other revenue - UHS facilities			220				245				440				476
Other revenue - Non-related parties			342				292				751				773
Interest income on financing leases - UHS facilities			1,359				1,365				2,720				2,731
			24,734				23,806				49,875				47,032
Expenses:
Depreciation and amortization			6,806				6,849				13,615				13,467
Advisory fees to UHS			1,369				1,323				2,707				2,625
Other operating expenses			6,975				8,250				14,506				15,771
			15,150				16,422				30,828				31,863
Income before equity in income of unconsolidated limited liability companies ("LLCs") and interest expense			9,584				7,384				19,047				15,169
Equity in income of unconsolidated LLCs			272				268				656				639
Interest expense, net			(4,580	)			(4,176	)			(9,127	)			(7,873	)
Net income		$	5,276			$	3,476			$	10,576			$	7,935
Basic earnings per share		$	0.38			$	0.25			$	0.77			$	0.58
Diluted earnings per share		$	0.38			$	0.25			$	0.76			$	0.57
Weighted average number of shares outstanding - Basic			13,798				13,784				13,795				13,781
Weighted average number of shares outstanding - Diluted			13,832				13,809				13,828				13,806

(a.) Includes bonus rental on McAllen Medical Center, a UHS acute care hospital facility of $758 and $730 for the three-month periods ended June 30, 2024 and 2023, respectively, and $1,541 and $1,495 for the six-month periods ended June 30, 2024 and 2023, respectively.

See accompanying notes to these condensed consolidated financial statements.

 

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Universal Health Realty Income Trust

Condensed Consolidated Statements of Comprehensive Income

For the Three and Six Months Ended June 30, 2024 and 2023

(amounts in thousands)

(unaudited)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Net income		$	5,276			$	3,476			$	10,576			$	7,935
Other comprehensive gain/(loss):
Unrealized derivative (loss)/gain on cash flow hedges			(1,062	)			715				(871	)			(1,032	)
Total other comprehensive (loss)/gain:			(1,062	)			715				(871	)			(1,032	)
Total comprehensive income		$	4,214			$	4,191			$	9,705			$	6,903

 

See accompanying notes to these condensed consolidated financial statements.

 

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Universal Health Realty Income Trust

Condensed Consolidated Balance Sheets

(amounts in thousands, except share information)

(unaudited)

		June 30,				December 31,
		2024				2023
Assets:
Real Estate Investments:
Buildings and improvements and construction in progress		$	651,638			$	649,374
Accumulated depreciation			(274,622	)			(262,449	)
			377,016				386,925
Land			56,870				56,870
Net Real Estate Investments			433,886				443,795
Financing receivable from UHS			83,043				83,279
Net Real Estate Investments and Financing receivable			516,929				527,074
Investments in limited liability companies ("LLCs")			14,328				9,102
Other Assets:
Cash and cash equivalents			5,577				8,212
Lease and other receivables from UHS			6,816				6,180
Lease receivable - other			7,905				8,166
Intangible assets (net of accumulated amortization of $11.4 million and    $12.5 million, respectively)			8,193				9,110
Right-of-use land assets, net			10,932				10,946
Deferred charges, notes receivable and other assets, net			15,871				17,579
Total Assets		$	586,551			$	596,369
Liabilities:
Line of credit borrowings		$	342,900			$	326,600
Mortgage notes payable, non-recourse to us, net			19,970				32,863
Accrued interest			1,024				490
Accrued expenses and other liabilities			10,145				13,500
Ground lease liabilities, net			10,932				10,946
Tenant reserves, deposits and deferred and prepaid rents			10,879				11,036
Total Liabilities			395,850				395,435
Equity:
Preferred shares of beneficial interest,    $.01 par value; 5,000,000 shares authorized;    none issued and outstanding			-				-
Common shares, $.01 par value;    95,000,000 shares authorized; issued and outstanding: 2024 - 13,848,950;    2023 - 13,823,899			138				138
Capital in excess of par value			270,592				270,398
Cumulative net income			836,637				826,061
Cumulative dividends			(923,107	)			(902,975	)
Accumulated other comprehensive income			6,441				7,312
Total Equity			190,701				200,934
Total Liabilities and Equity		$	586,551			$	596,369

 

See accompanying notes to these condensed consolidated financial statements.

 

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Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2024

(amounts in thousands)

(unaudited)

 

		Common Shares
										Capital in												Accumulated other
		Number								excess of				Cumulative				Cumulative				comprehensive				Total
		of Shares				Amount				par value				net income				dividends				income/(loss)				Equity
January 1, 2024			13,824			$	138			$	270,398			$	826,061			$	(902,975	)		$	7,312			$	200,934
Shares of Beneficial Interest:
Issued, net			26				—				(207	)			—				—				—				(207	)
Repurchased			(1	)							(12	)															(12	)
Restricted stock-based compensation expense			—				—				413				—				—				—				413
Dividends and dividend equivalents ($1.455/share)			—				—				—				—				(20,132	)			—				(20,132	)
Comprehensive income:
Net income			—				—				—				10,576				—				—				10,576
Unrealized net gain on cash flow hedges			—				—				—				—				—				(871	)			(871	)
Subtotal - comprehensive income															10,576								(871	)			9,705
June 30, 2024			13,849			$	138			$	270,592			$	836,637			$	(923,107	)		$	6,441			$	190,701

 

 

 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Six Months Ended June 30, 2023

(amounts in thousands)

(unaudited)

 

		Common Shares
										Capital in												Accumulated other
		Number								excess of				Cumulative				Cumulative				comprehensive				Total
		of Shares				Amount				par value				net income				dividends				income/(loss)				Equity
January 1, 2023			13,803			$	138			$	269,472			$	810,661			$	(863,181	)		$	12,011			$	229,101
Shares of Beneficial Interest:
Issued, net			19				—				75				—				—				—				75
Repurchased											—																-
Restricted stock-based compensation expense			—				—				376				—				—				—				376
Dividends and dividend equivalents ($1.435/share)			—				—				—				—				(19,820	)			—				(19,820	)
Comprehensive income:
Net income			—				—				—				7,935				—				—				7,935
Unrealized net loss on cash flow hedges			—				—				—				—				—				(1,032	)			(1,032	)
Subtotal - comprehensive income															7,935								(1,032	)			6,903
June 30, 2023			13,822			$	138			$	269,923			$	818,596			$	(883,001	)		$	10,979			$	216,635

 

 

 

See accompanying notes to these condensed consolidated financial statements.

 

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Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Three Months Ended June 30, 2024

(amounts in thousands)

(unaudited)

 

		Common Shares
										Capital in												Accumulated other
		Number								excess of				Cumulative				Cumulative				comprehensive				Total
		of Shares				Amount				par value				net income				dividends				income/(loss)				Equity
April 1, 2024			13,825			$	138			$	270,454			$	831,361			$	(912,998	)		$	7,503			$	196,458
Shares of Beneficial Interest:
Issued, net			25				—				(61	)			—				—				—				(61	)
Repurchased			(1	)							(12	)															(12	)
Restricted stock-based compensation expense			—				—				211				—				—				—				211
Dividends and dividend equivalents ($.73/share)			—				—				—				—				(10,109	)			—				(10,109	)
Comprehensive income:
Net income			—				—				—				5,276				—				—				5,276
Unrealized net gain on cash flow hedges			—				—				—				—				—				(1,062	)			(1,062	)
Subtotal - comprehensive income															5,276								(1,062	)			4,214
June 30, 2024			13,849			$	138			$	270,592			$	836,637			$	(923,107	)		$	6,441			$	190,701

 

 

Universal Health Realty Income Trust

Condensed Consolidated Statements of Changes in Equity

For the Three Months Ended June 30, 2023

(amounts in thousands)

(unaudited)

 

		Common Shares
										Capital in												Accumulated other
		Number								excess of				Cumulative				Cumulative				comprehensive				Total
		of Shares				Amount				par value				net income				dividends				income/(loss)				Equity
April 1, 2023			13,804			$	138			$	269,698			$	815,120			$	(873,050	)		$	10,264			$	222,170
Shares of Beneficial Interest:
Issued, net			18				—				37				—				—				—				37
Repurchased											—																-
Restricted stock-based compensation expense			—				—				188				—				—				—				188
Dividends and dividend equivalents ($.72/share)			—				—				—				—				(9,951	)			—				(9,951	)
Comprehensive income:
Net income			—				—				—				3,476				—				—				3,476
Unrealized net gain on cash flow hedges			—				—				—				—				—				715				715
Subtotal - comprehensive income															3,476								715				4,191
June 30, 2023			13,822			$	138			$	269,923			$	818,596			$	(883,001	)		$	10,979			$	216,635

 

See accompanying notes to these condensed consolidated financial statements.

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Universal Health Realty Income Trust

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

		Six months ended June 30,
		2024				2023
Cash flows from operating activities:
Net income		$	10,576			$	7,935
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			13,615				13,467
Amortization related to above/below market leases, net			(89	)			(73	)
Amortization of debt premium			-				(24	)
Amortization of deferred financing costs			383				347
Stock-based compensation expense			413				376
Changes in assets and liabilities:
Lease receivable			(375	)			(490	)
Accrued expenses and other liabilities			(1,309	)			(618	)
Tenant reserves, deposits and deferred and prepaid rents			(157	)			(241	)
Accrued interest			534				(38	)
Leasing costs paid			(764	)			(604	)
Other, net			1,038				2,285
Net cash provided by operating activities