UHT 10-K & 10-Q changes, risk factors and insider trading
Universal Health Realty Income Trust · NYSE · Real Estate Investment Trusts · CIK 798783 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance (“ESG”) matters, that could expose us to numerous risks.”
Largest changes
“Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance (“ESG”) matters, that could expose us to numerous risks.”see in full comparison
“The impact of the Legislation on hospitals may vary. Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Legislation. …”see in full comparison
“As part of the Consolidated Appropriations Act, 2021 (“CAA”), Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances. The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network facilities, and air ambulance carriers. The legislation prohibits surprise billing when out-of-network emergency services or out-of-network services at an in-network facility are provided, unless informed consent is received. …”see in full comparison
“Recently, there has been growing concern from advocacy groups, government agencies and the general public on ESG matters and increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures. Such governmental, investor and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to manage, assess and report.”see in full comparison
“The Legislation and its implementation have been, and remain, politically controversial. While attempts to repeal the entirety of the Legislation have not been successful to date, a key provision of the Legislation was repealed as part of the Tax Cuts and Jobs Act and on December 14, 2018, a Texas Federal District Court Judge declared the Legislation unconstitutional, reasoning that the individual mandate tax penalty was essential to and not severable from the remainder of the Legislation. The case was appealed to the U.S. Supreme Court which ultimately held in California v. …”see in full comparison
“Initiatives to repeal or modify the Legislation, in whole or in part, have been persistent. While President Trump did not campaign on repeal of the Legislation, executive and legislative efforts to eliminate or reduce the effect of certain Legislation provisions may yet occur. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was an integral part of the original Legislation.”see in full comparison
Full comparison: every changed paragraph (17)
Beginning in Aprilfederal 2025fiscal andyear continuing through 2027,2028, the Medicaid disproportionate share hospital (“DSH”) allotment to the states from federal funds will be reduced. Such reductions have been delayed several times, most recently under the American Relief Act, 2025. During the reduction period, state Medicaid DSH allotments from federal funds will be reduced by $8 billion annually.billion. Reductions are imposed on states based on percentage of uninsured individuals, Medicaid utilization and uncompensated care. There have been proposals to substantially decrease federal funding for state Medicaid Programs in Fiscal Year commencing October 2026. Any significant reduction in federal Medicaid funding to states would likely result in reduced Medicaid payments to the operators of our facilities located in the impacted states, which in turn could have a material adverse effect on us. We cannot predict the effect these payment policies will have on our operators (including UHS), and, thus, our business.
On March 23, 2010 President Obama signed the Legislation into law. The Healthcare and Education Reconciliation Act of 2010 (the “Reconciliation Act”), which contains a number of amendments to the Legislation, was signed into law on March 30, 2010. Two primary goals of the Legislation, combined with the Reconciliation Act (collectively referred to as the “Legislation”), are to provide for increased access to coverage for healthcare and to reduce healthcare-related expenses.
Although it was expected that the Legislation would result in a reduction in uninsured patients in the U.S., which would reduce the operators’ of our facilities’ expense from uncollectible accounts receivable, the Legislation made a number of other changes to Medicare and Medicaid which we believe may have an adverse impact on the operators of our facilities. The Legislation revises reimbursement under the Medicare and Medicaid programs to emphasize the efficient delivery of high quality care and contains a number of incentives and penalties under these programs to achieve these goals. The Legislation implements a value-based purchasing program, which rewards the delivery of efficient care. Conversely, certain facilities receive reduced reimbursement for failing to meet quality parameters; such hospitals will include those with excessive readmission or hospital-acquired condition rates. As a result of the 2024 federal elections and the Braidwood Management v. Becerra litigation currently before the U.S. Supreme Court, it remains unclear what portions of that legislation may remain, or what any replacement or alternative programs may be created by future legislation.
A 2012 U.S. Supreme Court ruling limited the federal government’s ability to expand health insurance coverage by holding unconstitutional sections of the Legislation that sought to withdraw federal funding for state noncompliance with certain Medicaid coverage requirements. Pursuant to that decision, the federal government may not penalize states that choose not to participate in the Medicaid expansion program by reducing their existing Medicaid funding. Therefore, states can choose to accept or not to participate without risking the loss of federal Medicaid funding. As a result, many states, including Texas, have not expanded their Medicaid programs without the threat of loss of federal funding. TheIn Centersthe forpast, MedicareCMS and Medicaid Services (“CMS”) hadhas granted section 1115 demonstration waivers providing for work and community engagement requirements for certain Medicaid eligible individuals. While the Biden Administration had generally expressed disfavor with Medicaid program work requirements, theThe previous Trump Administration’sadministration's section 1115 waiver policy emphasized work requirements, eligibility restrictions on Medicaid, and capped financingfunding. and theThe second Trump administration may, again, take a similar approach.
The various provisions in the Legislation that directly or indirectly affect Medicare and Medicaid reimbursement are scheduled to take effect over a number of years. The impact of the Legislation on healthcare providers will be subject to implementing regulations, interpretive guidance and possible future legislation or legal challenges. Certain Legislation provisions, such as that creating the Medicare Shared Savings Program create uncertainty in how healthcare may be reimbursed by federal programs in the future. Thus, at this time, we cannot predict the impact of the Legislation on the future reimbursement of our hospital operators and we can provide no assurance that the Legislation will not have a material adverse effect on the future results of operations of the tenants/operators of our properties and, thus, our business.
The Legislation also contained provisions aimed at reducing fraud and abuse in healthcare. The Legislation amended several existing laws, including the federal Anti-Kickback Statute and the False Claims Act, making it easier for government agencies and private plaintiffs to prevail in lawsuits brought against healthcare providers. While Congress had previously revised the intent requirement of the Anti-Kickback Statute to provide that a person is not required to “have actual knowledge or specific intent to commit a violation of” the Anti-Kickback Statute in order to be found in violation of such law, the Legislation also provides that any claims for items or services that violate the Anti-Kickback Statute are also considered false claims for purposes of the federal civil False Claims Act. The Legislation provides that a healthcare provider that retains an overpayment in excess of 60 days is subject to the federal civil False Claims Act. The Legislation also expandsexpanded the Recovery Audit Contractor program to Medicaid. These amendments also make it easier for severe fines and penalties to be imposed on healthcare providers that violate applicable laws and regulations.
Initiatives to repeal or modify the Legislation, in whole or in part, have been persistent. While President Trump did not campaign on repeal of the Legislation, executive and legislative efforts to eliminate or reduce the effect of certain Legislation provisions may yet occur. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was an integral part of the original Legislation.
It remains unclear what portions of the Legislation may remain, or whether any replacement or alternative programs may be created by any future legislation. Any such future repeal or replacement may have significant impact on the reimbursement for healthcare services generally, and may create reimbursement for services competing with the services offered by the operators of our hospitals. Accordingly, there can be no assurance that the adoption of any future federal or state healthcare reform legislation will not have a negative financial impact on the operators of our hospitals, including their ability to compete with alternative healthcare services funded by such potential legislation, or for the operators of our hospitals to receive payment for services.
The Legislation and its implementation have been, and remain, politically controversial. While attempts to repeal the entirety of the Legislation have not been successful to date, a key provision of the Legislation was repealed as part of the Tax Cuts and Jobs Act and on December 14, 2018, a Texas Federal District Court Judge declared the Legislation unconstitutional, reasoning that the individual mandate tax penalty was essential to and not severable from the remainder of the Legislation. The case was appealed to the U.S. Supreme Court which ultimately held in California v. Texas that the plaintiffs lacked standing to challenge the Legislation’s requirement to obtain minimum essential health insurance coverage, or the individual mandate. The Court dismissed the case without specifically ruling on the constitutionality of the Legislation. On September 7, 2022, the same Texas Federal District Court judge, in the case of Braidwood Management v. Becerra, ruled that the requirement that certain health plans cover services with an “A” or “B” recommendation from the U.S. Preventive Services Task Force without cost sharing violates the Appointments Clause of the U.S. Constitution and that the coverage of certain HIV prevention medication violates the Religious Freedom Restoration Act. The matter was ultimately appealed before the U.S. Supreme Court, which in its June 2025 Kennedy v. Braidwood Management decision, opined in favor of HIV preventive care coverage. The impact of this decision on our operators and/ or us cannot be predicted.
The impact of the Legislation on hospitals may vary. Initiatives to repeal the Legislation, in whole or in part, to delay elements of implementation or funding, and to offer amendments or supplements to modify its provisions have been persistent. The ultimate outcomes of legislative attempts to repeal or amend the Legislation and legal challenges to the Legislation are unknown. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Legislation. In addition, Congress has considered legislation that would, if enacted, in material part (i) eliminate the large employer mandates to obtain or provide health insurance coverage, respectively; (ii) permit insurers to impose a surcharge up to 30 percent on individuals who go uninsured for more than two months and then purchase coverage; (iii) provide tax credits towards the purchase of health insurance, with a phase-out of tax credits according to income level; (iv) expand health savings accounts; (v) impose a per capita cap on federal funding of state Medicaid programs, or, if elected by a state, transition federal funding to block grants, and; (vi) permit states to seek a waiver of certain federal requirements that would allow such state to define essential health benefits differently from federal standards and that would allow certain commercial health plans to take health status, including pre-existing conditions, into account in setting premiums.
On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”) into law. The ARPA extends eligibility for Legislation health insurance subsidies to people buying their own health coverage on the Marketplace who have household incomes above 400% of the federal poverty level. ARPA also increased the amount of financial assistance for people at lower incomes who were already eligible under the Legislation. The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among other things, allows for CMS to negotiate prices for certain single-source drugs and biologics reimbursed under Medicare Part B and Part D, beginning with 10 high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. The IRA also continued the expandedcertain subsidies for individuals to obtain private health insurance under the Legislation through 2025. TheThese effectenhanced ofsubsidies IRAexpired on hospitalsDecember 31, 2025. The Trump administration has already taken steps to undo certain Biden-era executive orders, including those intended to lower drug costs for beneficiaries, and to freeze funding for federal programs. While the healthcareadministration’s industryinitial freeze has since been rescinded, the administration is likely to make other attempts to reduce federal program expenditures and can generally be expected to oppose increases in generalACA isand notMedicaid yet known.enrollment.
As part of the Consolidated Appropriations Act, 2021 (“CAA”), Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances. The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network facilities, and air ambulance carriers. The legislation prohibits surprise billing when out-of-network emergency services or out-of-network services at an in-network facility are provided, unless informed consent is received. The law provides for a 30-day negotiation period for providers and payers to settle out-of-network claims. If no agreement is reached after this period, either party may opt for a binding independent dispute resolution (“IDR”) process. CMS regulations and guidance implementing the IDR process has been subject to a significant amount of provider-initiated litigation. As a result, portions of those regulations and guidance materials have been vacated by a federal district court, causing CMS to, on several occasions, pause and resume IDR process operations, causing significant delay in the processing of claims. Additionally, arguments made by the plaintiffs in such litigation have included allegations that CMS’s regulations and guidance materials are favorable to payers. For these reasons, there can be no assurances that we will receive timely payments in connection with this process.
As part of the CAA, Congress passed legislation aimed at preventing or limiting patient balance billing in certain circumstances. The CAA addresses surprise medical bills stemming from emergency services, out-of-network ancillary providers at in-network facilities, and air ambulance carriers. The legislation prohibits surprise billing when out-of-network emergency services or out-of-network services at an in-network facility are provided, unless informed consent is received. In these circumstances providers are prohibited from billing the patient for any amounts that exceed in-network cost-sharing requirements. HHS, the Department of Labor and the Department of the Treasury issued interim final rules, that begin to implement this legislation. The rule would limit health care providers' ability to receive payment for services at usually higher out-of-network rates in certain circumstances and prohibit out-of-network payments in other circumstances.
Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance (“ESG”) matters, that could expose us to numerous risks.
Recently, there has been growing concern from advocacy groups, government agencies and the general public on ESG matters and increasingly regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures. Such governmental, investor and societal attention to ESG matters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate change, human capital, labor and risk oversight, could expand the nature, scope, and complexity of matters that we are required to manage, assess and report.
We also face climate-and ESG-related business trends. Investors are increasingly taking into account ESG factors, including climate risks, diversity, equity and inclusion policies, and corporate governance in determining whether to invest in companies. Additionally, our reputation and investor relationships could be damaged as a result of our involvement with certain industries or assets associated with activities perceived to be causing or exacerbating climate change, or other ESG-related issues, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change or other ESG-related issues. Conversely, if we avoid involvement with such industries or activities, we may limit our capital deployment opportunities to an extent that adversely affects our business.
Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from where our tenants import products or raw materials (either directly or through their suppliers) could have an impact on our and our tenants’ competitive position, business operations and financial results. InBeginning in February 2025, the U.S. government has imposed or has threatened to impose new tariffs on imported products from the European Union, Mexico, Canada and China. The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. Significant tariffs or other restrictions imposed on foreign imports by the U.S. and related countermeasures taken by impacted foreign countries may negatively impact our and our tenants’ ability to source products and materials at acceptable prices and other terms that are acceptable to us. Despite recent trade negotiations between the U.S. and the Mexican, Canadian and Chinese governments, givenGiven the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the U.S., the European Union, Mexico, Canada, China or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful.
Management's Discussion & Analysis (MD&A)
Largest changes
“An increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act (the “ACA”). …”see in full comparison
“There are additional legislative changes that are likely to result in major changes in the health care delivery system on a national or state level, including changes in the structure and administration of, and funding for, federal and state agencies and programs. For example, Congress has reduced to $0 the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act (collectively, the “ACA") as part of the Tax Cuts and Jobs Act. …”see in full comparison
see in full comparisonInterestAggregate net interest expense increasedby $1.9 millionslightly during2024,2025, as compared to2023,2024,dueandtoincluded the following: (i) a$2.3$2.7 million increase due to a net decrease in interest rate swap income due to the interest rate swap agreement transactions mentioned above in footnote (a.), substantially all of which was offset by; (ii) a $2.5 million decrease in interest expense on our revolving credit agreement primarily resulting fromincreasesa decrease in our average cost of borrowings (averagetoborrowing rates, including commitment fee, of 6.78%5.85% during20242025 as compared to6.64%6.78% during20232024, excluding the effect of interest rate swaps),andpartially offset by an increase in our average outstanding borrowings (to $347.6 million during 2025 as compared to $336.9 million during 2024),as compared to $309.3 million during 2023); (ii) a $149,000 increase due to a decrease in capitalized interest on a major project that was substantially completed during the first quarter of 2023and; (iii) a$65,000 increase in amortization of financing fees and fair value of debt; (iv) a $49,000 increase due to a decrease in interest rate swap income, partially offset by; (v) a $690,000$181,000 decrease in mortgage interestexpenseexpense,dueand;primarily(iv)toarepaymentsdecrease ofvarious$26,000fixedinrateothermortgagesinterestupon maturity during 2024 and 2023 utilizing borrowings under our revolving credit agreement.expense. Please see Note 5 to the consolidated financial statements - Debt and Financial Instruments, for additional disclosure.
“Government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs. Recent focus has been paid to making significant reductions to federal expenditures, including specific reductions to Medicaid program funds and potential reduction of Medicare funding as well. Any reduction to the overall funding levels for the Medicare and Medicaid programs may negatively impact our tenants’ ability and willingness to make rental payments to us.”see in full comparison
“Our business, results of operations, financial condition, or stock price may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) goals or comply with emerging ESG regulations, or otherwise meet the expectations of our stakeholders with respect to ESG matters.”see in full comparison
“a decrease of $1.9 million resulting from an increase in interest expense due primarily to increases in our average borrowing rate (which gives effect to various interest rate swap agreements) and our average outstanding borrowings pursuant to the terms of our revolving credit agreement.”see in full comparison
Full comparison: every changed paragraph (76)
We are a real estate investment trust (“REIT”) that commenced operations in 1986. We invest in healthcare and human service related facilities currently including acute care hospitals, behavioral health care hospitals, specialty facilities, free-standing emergency departments, childcare centers and medical/office buildings. As of February 26,25, 2025,2026, we have seventy-sixseventy-seven real estate investments or commitments in twenty-one states consisting of:
sixtysixty-one medical/office buildings (“MOBs”), including four owned by unconsolidated limited liability companies (“LLCs”)/limited liability partnerships (“LPs”);
one vacant land investment located in Chicago, Illinois.
Legislation adopted on July 4, 2025 (the One Big Beautiful Bill Act), attaches work and community service requirements to eligibility for Medicaid benefits that will have the effect of limiting Medicaid enrollment and expenditure. That legislation also places limits on provider fees used to increase federal Medicaid funding to states. The legislation prohibits states not previously having expanded Medicaid eligibility to 138% of federal poverty level from increasing the rate of current provider fees which fund certain state supplemental payments or increasing the base of the fee to a class or items of services that the fee did not previously cover. That current provider fee threshold will remain at 6%. For states having expanded Medicaid eligibility under the legislation, the provider fee threshold will be reduced by 0.5% annually between federal fiscal years 2028 and 2032 with the resulting threshold ultimately becoming 3.5%. The legislation also eliminates certain insurance exchange premium tax credits beyond 2025 and exchange enrollment is expected to be adversely impacted. On January 8, 2026, the U.S. House of Representatives passed H.R.1834 to extend for three years the enhanced premium tax credits ("EPTCs") that expired on December 31, 2025, which is currently undergoing review in the Senate. We cannot predict whether these subsidies will ultimately be adopted in federal fiscal year 2026. All of these factors may be expected to reduce the revenues of the operators of our properties and likely increase the level of uncompensated care provided by the operators of our hospital facilities, including UHS. As a result, our results of operations may be unfavorably impacted.
During the past few years, our tenants have experienced inflationary pressures, primarily in personnel and certain other costs. In addition, certain of our tenants have experienced staffing shortages that has, at various times, required the hiring of expensive temporary personnel and/or enhanced wages and benefits to recruit and retain nurses and other clinical staff and support personnel. The impact of inflation and/or staffing shortages, which had a material unfavorable impact on the operating results of certain of our tenants duringin 2022,the past, have moderated to a certain degree duringmore 2023 and 2024.recently. However, the extent of any future impacts from inflation on our tenants’ businesses and results of operations will be dependent upon how long the elevated inflation levels persist and the extent to which the rate of inflation further increases, if at all, neither of which we are able to predict. If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, expenses of our tenants, and our direct operating expenses that are not passed on to our tenants, could increase faster than anticipated and may require utilization of our and our tenants’ capital resources sooner than expected. Further, given the complexities of the reimbursement landscape in which our tenants operate, their payers may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts. This may impact their ability and willingness to make rental payments.
President Biden signed into law fiscal year 2025 appropriations to federal agencies for continuing projects and activities through March 14, 2025. We cannot predict whether or not there will be future legislation averting a federal government shutdown, however, the operating results and results of operations of certain of our tenants, and therefore potentially ours, could be materially unfavorably impacted by a federal government shutdown.
A number of legislative initiatives have recently been passed into law that may result in major changes in the health care delivery system on a national or state level to the operators of our facilities, including UHS. No assurances can be given that the implementation of these new laws will not have a material adverse effect on the business, financial condition or results of operations of our operators.
The potential unfavorable impact on our business of thea deterioration in national, regional and local economic and business conditions, including a worsening of credit and/or capital market conditions, which may adversely affect our ability to obtain capital which may be required to fund the future growth of our business and refinance existing debt with near term maturities.
The outcome and effects of known and unknown litigation, government investigations, and liabilities and other claims asserted against us, UHS or the other operators of our facilities. From time to time, UHS and its subsidiaries are subject to legal actions, purported shareholder class actions, shareholder derivative cases, governmental investigations and regulatory actions and the effects of adverse publicity relating to such matters. Since UHS comprised approximately 40% of our consolidated revenues during the year ended DecemberDecember, 31, 2024,2025, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-Q and 10-K, as publicly filed with the Securities and Exchange Commission. Those filings are the sole responsibility of UHS and are not incorporated by reference herein.
Government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs. Recent focus has been paid to making significant reductions to federal expenditures, including specific reductions to Medicaid program funds and potential reduction of Medicare funding as well. Any reduction to the overall funding levels for the Medicare and Medicaid programs may negatively impact our tenants’ ability and willingness to make rental payments to us.
Government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs. In addition, theThe United States has recently enacted and proposed to enact significant new tariffs, which could adversely impact our and our tenants’ business, financial condition and results of operations as a result of the increased costs on our and their operations and supply chains due to tariffs.
There are additional legislative changes that are likely to result in major changes in the health care delivery system on a national or state level, including changes in the structure and administration of, and funding for, federal and state agencies and programs. For example, Congress has reduced to $0 the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act, as amended by the Health and Education Reconciliation Act (collectively, the “ACA") as part of the Tax Cuts and Jobs Act. The Biden administration had issued executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program. The Inflation Reduction Act of 2022 (“IRA”) was passed on August 16, 2022, which among other things, allows for the Centers for Medicare and Medicaid Services to negotiate prices for certain single-source drugs reimbursed under Medicare Part B and Part D. The American Rescue Plan Act’s expansion of subsidies to purchase coverage through an ACA exchange, which the IRA continued through 2025, had increased insurance exchange enrollment. These enhanced subsidies expired on December 31, 2025.
There have been numerous political and legal efforts to expand, repeal, replace or modify the ACA since its enactment, some of which have been successful, in part, in modifying the ACA, as well as court challenges to the constitutionality of the ACA. The U.S. Supreme Court held in California v. Texas that the plaintiffs lacked standing to challenge the ACA’s requirement to obtain minimum essential health insurance coverage, or the individual mandate. The Court dismissed the case without specifically ruling on the constitutionality of the ACA. The ACA faced its most recent challenge when the Supreme Court, in the June 2025 Kennedy v. Braidwood Management decision, opined in favor of ACA HIV preventive care coverage. The impacts of this decision cannot be predicted. Any future efforts to challenge, replace or replace the ACA or expand or substantially amend its provision is unknown.
An increasing number of legislative initiatives have been passed into law that may result in major changes in the health care delivery system on a national or state level. Legislation has already been enacted that has eliminated the penalty for failing to maintain health coverage that was part of the original Patient Protection and Affordable Care Act (the “ACA”). The Biden administration had undertaken executive actions to strengthen the ACA, including issuing executive orders implementing a special enrollment period permitting individuals to enroll in health plans outside of the annual open enrollment period and reexamining policies that may undermine the ACA or the Medicaid program. The American Rescue Plan Act of 2021's expansion of subsidies to purchase coverage through an exchange, which the Inflation Reduction Act of 2022, passed on August 16, 2022, continues through 2025, has increased exchange enrollment. However, the prior President Trump administration had taken various steps having the effect of reducing enrollment through the exchange, so the likelihood of subsidy extension and other exchange-expansion activities is questionable. While attempts to repeal the entirety of the ACA have not been successful to date, a key provision of the ACA was eliminated as part of the Tax Cuts and Jobs Act and on December 14, 2018, a federal U.S. District Court Judge in Texas ruled the entire ACA is unconstitutional. That ruling was ultimately appealed to the United States Supreme Court, which decided in California v. Texas that the plaintiffs in the matter lacked standing to bring their constitutionality claims. On September 7, 2022, the ACA faced its most recent challenge when a Texas Federal District Court judge, in the case of Braidwood Management v. Becerra, ruled that certain provisions violate the Appointments Clause of the U.S. Constitution and the Religious Freedom Restoration Act. The decision was appealed to the U.S. Court of Appeals for the Fifth Circuit, which on June 21, 2024 affirmed the District Court’s ruling regarding preventive services recommended by United States Preventive Services Task Force being unconstitutional. However, the Fifth Circuit overturned the nationwide injunction imposed by the District Court, preserving access to the majority of preventive services in dispute for now. The U.S. Government appealed and on January 10, 2025, the U.S. Supreme Court agreed to hear the matter. Any future efforts to challenge, replace or replace the ACA or expand or substantially amend its provision is unknown.
Congress has passed and the President has signed a consolidated appropriations package providing fiscal year 2026 funding for the majority of federal agencies, while lawmakers continue to negotiate and consider outstanding appropriations legislation for the Department of Homeland Security. Federal budget delays and federal government shutdowns are unpredictable and may occur in the future. We cannot predict whether or not there will be future appropriations legislation avoiding a federal government shutdown, however, the operating results and results of operations of certain of our tenants, and therefore potentially ours, could be materially unfavorably impacted by the federal government shutdown.
Fluctuations in the value of our common stock, which, among other things could be affected by changes in the current increasing interest rate environment.
Our business, results of operations, financial condition, or stock price may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) goals or comply with emerging ESG regulations, or otherwise meet the expectations of our stakeholders with respect to ESG matters.
For the year ended December 31, 2024,2025, net income was $19.2$17.6 million as compared to $15.4$19.2 million during 2023.2024. The $3.8$1.6 million increasedecrease was primarily attributable to:
ana increasedecrease of $3.5approximately $1.0 million resulting from an aggregate net increasedecrease in the income generated at various propertiesproperties, including nonrecurring depreciation expense of approximately $900,000 recorded during the third quarter of 2025, and;
an increasedecrease of $2.0 million resulting from a reduction in the expenses related to our property located in Chicago, Illinois, including $1.1 million from demolition expenses incurred during 2023, and $610,000 related to a property tax reduction recorded during 2024 which related primarily to prior periods;periods.
Revenues increased by $179,000, or 0.2%, to $99.2 million during 2025, as compared to $99.0 million during 2024. The net increase in revenues during 2025, as compared to 2024, was primarily due to: (i) a $362,000 increase in bonus rental revenue, and; (ii) a net decrease of $183,000 in revenues generated at various properties, including a $545,000 reduction at an MOB located in Amarillo, Texas, which was vacated during the fourth quarter of 2025 upon lease expirations of the two former tenants.
an increase of $232,000 resulting from a loss on divestiture of real estate assets recorded during the fourth quarter of 2023 in connection with the sale of a specialty facility located in Corpus Christ, Texas (see Note 3 to the consolidated financial statements-Purchase and Sale Transaction, Acquisitions, Divestitures and New Construction), and;
a decrease of $1.9 million resulting from an increase in interest expense due primarily to increases in our average borrowing rate (which gives effect to various interest rate swap agreements) and our average outstanding borrowings pursuant to the terms of our revolving credit agreement.
Revenues increased by $3.4 million, or 3.6%, during 2024, as compared to 2023. The increase during 2024, as compared to 2023, was due primarily to an aggregate net increase generated at various properties, including revenues generated at a newly constructed MOB located in Reno Nevada, that opened during the first quarter of 2023, and the revenues generated at an MOB located in McAllen, Texas, that was acquired during the third quarter of 2023.
Our other operating expenses include expenses related to the consolidated MOBs as well as the vacant land and the vacant specialty facility (as discussed herein). Other operating expenses incurred in connection with these properties totaled $26.2 million during 2025 and $25.8 million during 2024 (net of a $610,000 prior period property tax reduction) and $27.8 million (including $1.1 million of demolition expenses) during 2024 and 2023, respectively.. A large portion of the expenses associated with our medical office buildings is passed on directly to the tenants either directly as tenant reimbursements of common area maintenance expenses or included in base rental amounts. Tenant reimbursements for operating expenses are accrued as revenue in the same period during which the related expenses are incurred.
Our FFO increaseddecreased by $3.3$184,000 to $47.7 million during 2024,2025, as compared to 2023, due to: (i) an increase of $3.8$47.9 million during 2024. The $1.6 million decrease in net income,income during 2025, as compared to 2024 (as discussed above,above), partiallywas substantially offset by; (ii) a $232,000$1.4 decreasemillion resulting from the loss on divestiture of real estate assets recorded during 2023, and; (iii) a $299,000 decrease resulting from a decreaseincrease in depreciation and amortization expense incurred byon our consolidated investments and unconsolidated affiliates.
Rental rates, tenant improvement costs and rental concessions vary from property to property based upon factors such as, but not limited to, the current occupancy and age of our buildings, local overall economic conditions, proximity to hospital campuses and the vacancy rates, rental rates and capacity of our competitors in the market. In connection with lease renewals executed during each year, the weighted-average rental rates, as compared to rental rates on the expired leases, increased by approximately 3% and 4% during 2024each of 2025 and 2023, respectively.2024. The weighted-average tenant improvement costs associated with new or renewed leases was approximately $16 and $7 per square foot during each of 20242025 and 2023.2024, respectively. The weighted-average leasing commissions on the new and renewed leases commencing during each year was approximately 3% of base rental revenue over the term of the leases during each of 20242025 and 2023.2024. The average aggregate value of the tenant concessions, generally consisting of rent abatements, provided in connection with new and renewed leases commencing during each year was approximately 0.4% and 0.3% of the future aggregate base rental revenue over the lease terms during each of 20242025 and 2023.2024, respectively. Rent abatements were, or will be, recognized in our results of operations under the straight-line method over the lease term regardless of when payments are due.
InterestAggregate net interest expense increased by $1.9 millionslightly during 2024,2025, as compared to 2023,2024, dueand toincluded the following: (i) a $2.3$2.7 million increase due to a net decrease in interest rate swap income due to the interest rate swap agreement transactions mentioned above in footnote (a.), substantially all of which was offset by; (ii) a $2.5 million decrease in interest expense on our revolving credit agreement primarily resulting from increasesa decrease in our average cost of borrowings (averageto borrowing rates, including commitment fee, of 6.78%5.85% during 20242025 as compared to 6.64%6.78% during 20232024, excluding the effect of interest rate swaps), andpartially offset by an increase in our average outstanding borrowings (to $347.6 million during 2025 as compared to $336.9 million during 2024), as compared to $309.3 million during 2023); (ii) a $149,000 increase due to a decrease in capitalized interest on a major project that was substantially completed during the first quarter of 2023and; (iii) a $65,000 increase in amortization of financing fees and fair value of debt; (iv) a $49,000 increase due to a decrease in interest rate swap income, partially offset by; (v) a $690,000$181,000 decrease in mortgage interest expenseexpense, dueand; primarily(iv) toa repaymentsdecrease of various$26,000 fixedin rateother mortgagesinterest upon maturity during 2024 and 2023 utilizing borrowings under our revolving credit agreement.expense. Please see Note 5 to the consolidated financial statements - Debt and Financial Instruments, for additional disclosure.
The healthcare industry is very labor intensive and salaries and benefits related to the employees of our tenants are subject to inflationary pressures, as are supply costs, construction costs and medical equipment and other costs. In the past, staffing shortages have, at times, required our tenants to hire expensive temporary personnel and/or enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel. Our tenants have also experienced general inflationary cost increases related to certain other operating expenses. Many of these factors, which had a material unfavorable impact on the operating results of certain of our tenants duringin 2022,the past, moderated to a certain degree duringmore 2023 and 2024.recently.
a favorable change of $2.4 million in accrued expenses and other liabilities due primarily to the timing of accrued expense disbursements;
a favorable change of $3.4 million due to an increase in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs, stock-based compensation expense and loss on divestiture of real estate assets), as discussed above;
a favorable change of $500,000 in leasing costs paid;
an unfavorable change of $247,000$619,000 in leaseleasing receivables,costs andpaid;
othera combinedfavorable net unfavorable changeschange of $155,000.$302,000 in lease receivables;
an unfavorable change of $100,000 due to a decrease in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of debt premium, amortization of deferred financing costs and stock-based compensation expense), as discussed above, and;
other combined net unfavorable changes of $607,000.
2025:
During 2025, $15.0 million of net cash was used in investing activities as follows:
spent $8.8 million for additions to real estate investments, including tenant improvements at various MOBs;
spent $6.8 million in equity investments in unconsolidated LLCs, and;
received $683,000 of cash in excess of income from LLCs.
2023:
During 2023, $19.1 million of net cash was used in investing activities as follows:
spent $15.6 million for additions to real estate investments, including construction costs related to the Sierra Medical Plaza I MOB located in Reno, Nevada, that was substantially completed in March, 2023, as well as tenant improvements at various MOBs;
spent $7.6 million, including transaction costs, on the August, 2023 acquisition of the McAllen Doctor's Center medical office building, as discussed in Note 3 to the consolidated financial statements;
spent $4.1 million in equity investments in unconsolidated LLCs;
received $3.9 million of net cash proceeds resulting from the divestiture of a property, as discussed in Note 3 to the consolidated financial statements;
received $757,000 of cash in excess of income from LLCs, and;
received $3.5 million of repayments of an advance we had provided to an unconsolidated LLC during 2021.
2025:
The $34.5 million of cash used in financing activities during 2025 consisted of:
paid $41.0 million of dividends, including $127,000 of previously accrued dividends;
received $7.3 million of net borrowings on our revolving credit agreement;
paid $940,000 on mortgage notes payable that are non-recourse to us, and;
received $156,000 of net cash from the issuance of shares of beneficial interest.
2023:
The $23.2 million of cash used in financing activities during 2023 consisted of:
paid $39.8 million of dividends, including $58,000 of previously accrued dividends;
received $28.5 million of net borrowings on our revolving credit agreement;
paid $11.9 million on mortgage notes payable that are non-recourse to us, including a $6.1 million repayment of a fixed rate mortgage loan that matured during the fourth quarter of 2023 and a $4.2 million repayment of a fixed rate mortgage loan that matured during the first quarter of 2023;
What changed in the latest 10-Q
Risk Factors
Our Annual Report on Form 10-K for the year ended December 31, 2025 includes a listing of risk factors to be considered by investors in our securities. There have been no material changes in our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.
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No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
“Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. …”see in full comparison
“Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. …”see in full comparison
“Interest expense decreased by $486,000 during the six-month period ended June 30, 2026, as compared to the comparable period of 2025, due primarily to: …”see in full comparison
Interest expense decreased bysee in full comparison$217,000$269,000 during the three-month period endedMarchJune31,30, 2026, as compared to the comparable period of 2025, due primarily to: (i) a$264,000 increase due to a net decrease in interest rate swap income pursuant to our various interest rate swap agreements as discussed in (a) above; (ii) a $444,000$498,000 decrease in the interest expense pursuant to our credit agreement resulting primarily from a decrease in our average effective cost of borrowings (to5.280%5.197% during thefirstsecond quarter of 2026 as compared to5.935%5.933% during the comparable quarter of 2025), partially offset by an increase in our average outstanding borrowings (to$353.3$355.8 million during thefirstsecond quarter of 2026 as compared to$344.6$345.3 million during the comparable quarter of 2025); (ii) a $282,000 increase due to a net decrease in interest rate swap income pursuant to our various interest rate swap agreements, as discussed in (a) above, and; (iii) a$28,000 decrease in amortization of financing fees and$53,000 otherinterest,combinedand;net(iv) a decrease of $9,000 in mortgage interest expense.decrease.
“an increase of $269,000 resulting from a decrease in interest expense due primarily to a decrease in our average effective borrowing rate (which gives effect to various interest rate swap agreements), partially offset by an increase in our average borrowings outstanding pursuant to our credit agreement.”see in full comparison
“an increase of $217,000 resulting from a decrease in interest expense due primarily to a decrease in our average effective borrowing rate (which gives effect to various interest rate swap agreements), and;”see in full comparison
Full comparison: every changed paragraph (55)
We are a real estate investment trust (“REIT”) that commenced operations in 1986. We invest in healthcare and human-service related facilities currently including acute care hospitals, behavioral health care hospitals, specialty facilities, free-standing emergency departments, childcare centers and medical/office buildings. As of MarchJune 31,30, 2026, we have seventy-seven real estate investments or commitments in twenty-one states consisting of:
A substantial portion of our revenues are dependent upon one operator, UHS, which comprised approximately 41% and 40% of our consolidated revenues during each of the three-monththree and six-month periods ended MarchJune 31,30, 2026,2026 and 2025, respectively.2025. We cannot assure you that subsidiaries of UHS will renew the leases on the hospital facilities and free-standing emergency departments, upon the scheduled expirations of the existing lease terms. In addition, if subsidiaries of UHS exercise their options to purchase the respective leased hospital facilities and FEDs, and do not enter into a substitution arrangement upon expiration of the lease terms or otherwise, our future revenues and results of operations could decrease if we were unable to earn a favorable rate of return on the sale proceeds received, as compared to the rental revenue currently earned pursuant to these leases.
Although interest rates have moderated recently, theThe increase in interest rates during the past few years has significantly increased our interest expense thereby reducing our net income, cash provided by operating activities and funds from operations, as well as unfavorably impacting our ability to access the capital markets on favorable terms. The increased interest rates on our borrowings and/or the increased costs related to new construction could also affect our ability to make additional attractive investments. The effects of increased interest rates on our borrowings, including the unfavorable impact on the terms of recent and future interest rate swap and/or cap agreements, could unfavorably impact our future rental revenue and expenses, including interest expense, and may potentially have a material unfavorable impact on our future net income, cash provided by operating activities, funds from operations, lease renewal terms, the underlying value of our properties, our ability to grow our portfolio, and the value of our common shares.
Legislation adopted on July 4, 2025 (the One Big Beautiful Bill Act), attaches work and community service requirements to eligibility for Medicaid benefits that will have the effect of limiting Medicaid enrollment and expenditure. That legislation also places limits on provider fees used to increase federal Medicaid funding to states. The legislation prohibits states not previously having expanded Medicaid eligibility to 138% of federal poverty level from increasing the rate of current provider fees which fund certain state supplemental payments or increasing the base of the fee to a class or items of services that the fee did not previously cover. That current provider fee threshold will remain at 6%. For states having expanded Medicaid eligibility under the legislation, the provider fee threshold will be reduced by 0.5% annually between federal fiscal years 2028 and 2032 with the resulting threshold ultimately becoming 3.5%. The legislation also eliminateseliminated certain insurance exchange premium tax credits beyond 2025 and exchange enrollment ishas expectedalready to bebeen adversely impacted. On January 8, 2026, the U.S. House of Representatives passed H.R.1834 to extend for three years the enhanced premium tax credits ("EPTCs") that expired on December 31, 2025. As of early MayAugust 2026, no legislation extending the EPTCs has been enacted, and there can be no assurance regarding the timing or outcome of future legislative action. We cannot predict whether these subsidies will ultimately be adopted in federal fiscal year 2026. All of these factors may be expected to reduce the revenues of the operators of our properties and likely increase the level of uncompensated care provided by the operators of our hospital facilities, including UHS. As a result, our results of operations may be unfavorably impacted.
The outcome and effects of known and unknown litigation, government investigations, and liabilities and other claims asserted against us, UHS or the other operators of our facilities. From time to time, UHS and its subsidiaries are subject to legal actions, purported shareholder class actions, shareholder derivative cases, governmental investigations and regulatory actions and the effects of adverse publicity relating to such matters. Since UHS comprised approximately 41%40% of our consolidated revenues during each of the three-monththree and six-month period ended MarchJune 31,30, 2026, and since a subsidiary of UHS is our Advisor, you are encouraged to obtain and review the disclosures contained in the Legal Proceedings section of Universal Health Services, Inc.’s Forms 10-Q and 10-K, as publicly filed with the Securities and Exchange Commission. Those filings are the sole responsibility of UHS and are not incorporated by reference herein.
As of early MayAugust 2026, Congress has enacted appropriations legislation funding most federal agencies for fiscal year 2026, following a lapse in appropriations affecting certain Department of Homeland Security operations that began on February 14, 2026 and was resolved on April 30, 2026. Federal budget delays and federal government shutdowns are unpredictable and may occur in the future. We cannot predict whether or not there will be future appropriations legislation avoiding a federal government shutdown, however, the operating results and results of operations of certain of our tenants, and therefore potentially ours, could be materially unfavorably impacted by the federal government shutdown.
During the three-month period ended MarchJune 31,30, 2026, net income was $5.0$5.9 million, as compared to $4.8$4.5 million during the firstsecond quarter of 2025. OurThe net$1.4 incomemillion duringincrease thewas first quarter of 2026, as comparedattributable to the first quarter of 2025, included the following:
a gain on sale of land of $724,000;
an increase of $217,000 resulting from a decrease in interest expense due primarily to a decrease in our average effective borrowing rate (which gives effect to various interest rate swap agreements), and;
a net aggregate increase of $25,000$422,000 resulting from increased income generated at various properties.properties, and;
an increase of $269,000 resulting from a decrease in interest expense due primarily to a decrease in our average effective borrowing rate (which gives effect to various interest rate swap agreements), partially offset by an increase in our average borrowings outstanding pursuant to our credit agreement.
During the six-month period ended June 30, 2026, net income was $10.9 million, as compared to $9.3 million during the corresponding six-month period of 2025. The $1.6 million increase was attributable to:
a gain on sale of land of $724,000;
an increase of $486,000 resulting from a decrease in interest expense due primarily to a decrease in our average effective borrowing rate, and;
a net aggregate increase of $447,000 resulting from increased income generated at various properties.
Revenues decreased slightly amounting to $24.5 million during each of the three-month periods ended March 31, 2026 and 2025.
Our other operating expenses include expenses related to the consolidated MOBs as well as the vacant land and the vacant specialty facility (as discussed herein). Other operating expenses incurred in connection with these properties totaled $6.3 million during the first quarter of 2026 and $6.4 million during the first quarter of 2025. A large portion of the expenses associated with our MOBs are passed on directly to the tenants either directly as tenant reimbursements of common area maintenance expenses or included in base rental amounts. Tenant reimbursements for operating expenses are accrued as revenue in the same period during which the related expenses are incurred and are included as lease revenue in our condensed consolidated statements of income.
Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we interpret the definition. FFO adjusts for the effects of certain items, such as gains on transactions that occurred during the periods presented. To the extent a REIT recognizes a gain or loss with respect to the sale of incidental assets, the REIT has the option to exclude or include such gains and losses in the calculation of FFO. We have opted to exclude gains and losses from sales of incidental assets in our calculation of FFO, if and when applicable. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income determined in accordance with GAAP. In addition, FFO should not be used as: (i) an indication of our financial performance determined in accordance with GAAP; (ii) an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) a measure of our liquidity, or; (iv) an indicator of funds available for our cash needs, including our ability to make cash distributions to shareholders.
Below is a reconciliation of our reported net income to FFO for the three-month periods ended March 31, 2026 and 2025 (in thousands):
Our FFORevenues increased by$123,000, $336,000or 4.9%, to $12.3$25.0 million during the firstthree-month quarterperiods ofended June 30, 2026, as compared to $11.9$24.9 million during the firstthree-month quarterperiods ofended June 30, 2025. TheRevenues netincreased increase$104,000, wasor primarily due2.1%, to the$49.5 above-mentioned increase in our net incomemillion during the firstsix-month quarterperiod ofended June 30, 2026, as compared to $49.4 million during the firstsix-month quarterperiod ofended 2025,June as30, well as an increase in depreciation and amortization expense.2025.
Other operating expenses, which amounted to $7.3 million and $7.6 million during the three-month periods ended June 30, 2026 and 2025, respectively, $14.5 million and $14.9 million during the six-month periods ended June 30, 2026 and 2025, respectively, include expenses related to our properties as well as general and administrative expenses. Operating expenses incurred in connection with our properties amounted to $6.4 million and $6.7 million during the three-month periods ended June 30, 2026 and 2025, respectively, $12.7 million and $13.1 million during the six-month periods ended June 30, 2026 and 2025, respectively. A large portion of the property-related expenses are incurred in connection with our MOBs which are allocated to the tenants either directly as tenant reimbursements of common area maintenance expenses or included in base rental amounts. Tenant reimbursements for operating expenses are accrued as revenue in the same period during which the related expenses are incurred and are included as lease revenue in our condensed consolidated statements of income.
Funds from operations (“FFO”) is a widely recognized measure of performance for Real Estate Investment Trusts (“REITs”). We believe that FFO and FFO per diluted share, which are non-GAAP financial measures, are helpful to our investors as measures of our operating performance. We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we interpret the definition. FFO adjusts for the effects of certain items, such as gains on transactions that occurred during the periods presented. To the extent a REIT recognizes a gain or loss with respect to the sale of incidental assets, the REIT has the option to exclude or include such gains and losses in the calculation of FFO. We have opted to exclude gains and losses from sales of incidental assets in our calculation of FFO, if and when applicable. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered an alternative to net income determined in accordance with GAAP. In addition, FFO should not be used as: (i) an indication of our financial performance determined in accordance with GAAP; (ii) an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) a measure of our liquidity, or; (iv) an indicator of funds available for our cash needs, including our ability to make cash distributions to shareholders.
Below is a reconciliation of our reported net income to FFO for the three and six-month periods ended June 30, 2026 and 2025 (in thousands):
Our FFO increased by $714,000 to $12.5 million during the second quarter of 2026, as compared to $11.8 million during the second quarter of 2025. The increase was primarily due to the above-mentioned increase in our net income during the second quarter of 2026, as compared to the second quarter of 2025, excluding the $724,000 gain on sale of land recorded during the second quarter of 2026.
Our FFO increased $1.1 million to $24.8 million during the first six months of 2026, as compared to $23.7 million during the first six months of 2025. The increase was primarily due to the above-mentioned increase in our net income during the first six months of 2026, as compared to the comparable period of 2025 (excluding the $724,000 gain on sale of land recorded during the second quarter of 2026), as well as an increase in depreciation and amortization expense.
As reflected in the schedule below, interest expense was $4.5$4.4 million and $4.7 million during the three-month periods ended MarchJune 31,30, 2026 and 2025, respectively and $8.9 million and $9.4 million during the six-month periods ended June 30, 2026 and 2025, respectively (amounts in thousands):
(a) Includes: (i) a $55 million interest rate swap with a fixed interest rate of 0.5050% that is scheduled to mature in March, 2027; (ii) a $25 million interest rate swap with a fixed interest rate of 3.9495% that is scheduled to mature in December, 2027, and; (iii) an $85 million interest rate swap with a fixed interest rate of 3.2725% that is scheduled to mature in September, 2028. During the three-monththree and six-month periods ended MarchJune 31,30, 2026 and 2025, net interest was paid to us from the counterparties pursuant to the interest rate swaps that were active during each period.
Interest expense decreased by $217,000$269,000 during the three-month period ended MarchJune 31,30, 2026, as compared to the comparable period of 2025, due primarily to: (i) a $264,000 increase due to a net decrease in interest rate swap income pursuant to our various interest rate swap agreements as discussed in (a) above; (ii) a $444,000$498,000 decrease in the interest expense pursuant to our credit agreement resulting primarily from a decrease in our average effective cost of borrowings (to 5.280%5.197% during the firstsecond quarter of 2026 as compared to 5.935%5.933% during the comparable quarter of 2025), partially offset by an increase in our average outstanding borrowings (to $353.3$355.8 million during the firstsecond quarter of 2026 as compared to $344.6$345.3 million during the comparable quarter of 2025); (ii) a $282,000 increase due to a net decrease in interest rate swap income pursuant to our various interest rate swap agreements, as discussed in (a) above, and; (iii) a $28,000 decrease in amortization of financing fees and$53,000 other interest,combined and;net (iv) a decrease of $9,000 in mortgage interest expense.decrease.
Interest expense decreased by $486,000 during the six-month period ended June 30, 2026, as compared to the comparable period of 2025, due primarily to: (i) a $941,000 decrease in the interest expense pursuant to our credit agreement resulting primarily from a decrease in our average effective cost of borrowings (to 5.238% during the first six months of 2026 as compared to 5.934% during the comparable period of 2025), partially offset by an increase in our average outstanding borrowings (to $354.6 million during the first six months of 2026 as compared to $344.9 million during the comparable period of 2025); (ii) a $547,000 increase due to a net decrease in interest rate swap income due to the interest rate swap agreement transitions, as discussed in (a) above, and; (iii) a $90,000 other combined net decrease.
Net cash provided by operating activities was $12.0$24.4 million during the three-monthsix-month period ended MarchJune 31,30, 2026 as compared to $11.6$25.3 million during the comparable period of 2025. The $339,000$941,000 net increasedecrease was attributable to:
an unfavorable change of $896,000$3.1 million in accrued expenses and other liabilities, due primarily to the timing of accrued expenserelated disbursements;
a favorable change of $327,000$1.1 million due to an increase in net income plus/minus the adjustments to reconcile net income to net cash provided by operating activities (depreciation and amortization, amortization related to above/below market leases, amortization of deferred financing costs andcosts, stock-based compensation expense and gain on sale of land);
an unfavorable change of $211,000 in accrued interest;
aan favorableunfavorable change of $161,000$245,000 in tenantaccrued reserves, deposits, and prepaid rents, andinterest;
a favorable change of $199,000 in tenant reserves, deposits, and prepaid rents, and;
Net cash used in investing activities was $4.5$12.3 million during the first threesix months of 2026 as compared to $1.9$10.7 million during the first threesix months of 2025.
During the three-monthsix-month period ended MarchJune 31,30, 20262026, we funded: (i) $4.3$13.1 million in additions to real estate investments, including tenant improvements at various MOBs and the contructionconstruction costs related to the Miller Medical Plaza in Palm Beach Gardens, FL, and; (ii) $191,000 in equity investments in unconsolidated LLCs. In addition, during the six months ended June 30, 2026, we received: (i) $746,000 in net cash proceeds from the sale of land, and; (ii) $273,000 of cash in excess of income from LLCs.
During the six-month period ended June 30, 2025, we funded: (i) $6.8 million in equity investments in unconsolidated LLCs (consisting primarily of our $6.5 million pro rata share of a $6.8 million third-party construction loan that was fully repaid in May, 2025); (ii) $3.7 million in additions to real estate investments, including tenant improvements at various MOBs, and; (iii) a $335,000 net advance made to a third-party partner of an unconsolidated LLC that was be repaid to us, with interest, during the fourth quarter of 2025. In addition, during the six months ended June 30, 2025, we received $167,000 of cash in excess of income from LLCs.
During the three-month period ended March 31, 2025 we funded: (i) $328,000 in equity investments in unconsolidated LLCs, and; (ii) $1.6 million in additions to real estate investments, including tenant improvements at various MOBs.
Net cash used in financing activities was $7.1$11.9 million during the threesix months ended MarchJune 31,30, 2026, as compared to $9.8$15.2 million during the threesix months ended MarchJune 31,30, 2025.
During the three-monthsix-month period ended MarchJune 31,30, 2026, we paid: (i) $10.3$20.8 million of dividends, anddividends; (ii) $148,000$297,000 on mortgage notes payable that are non-recourse to us.us, and; (iii) $172,000 of financing costs related to our Credit Agreement. Additionally, during the threesix months ended MarchJune 31,30, 2026, we received: (i) $3.3$9.4 million of net borrowings pursuant to our Credit Agreement, and; (ii) $38,000$19,000 of net cash from the issuance of shares of beneficial interest.
During the three-monthsix-month period ended MarchJune 31,30, 2025, we paid: (i) $322,000$649,000 on mortgage notes payable that are non-recourse to us, and; (ii) $10.2$20.5 million of dividends, including $100,000 of previously accrued dividends. Additionally, during the threesix months ended MarchJune 31,30, 2025, we received: (i) $600,000$5.9 million of net borrowings pursuant to our Credit Agreement, and; (ii) $35,000$75,000 of net cash from the issuance of shares of beneficial interest.
No shares were issued under the Form S-3 since the effective date of April 30, 2024 through MarchJune 31,30, 2026. As of MarchJune 31,30, 2026, we have paid or incurred approximately $291,000 in various fees and expenses related to the Form S-3. The availability of the potential liquidity under this shelf registration statement depends on investor demand, market conditions and other factors. We make no assurance regarding when, or if, we will issue any securities under this registration statement.
Additional cash flow and dividends paid information for the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025:
As indicated on our condensed consolidated statement of cash flows, we generated net cash provided by operating activities of $12.0$24.4 million and $11.6$25.3 million during the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. As also indicated on our statement of cash flows, non-cash expenses including depreciation and amortization expense, amortization related to above/below market leases, amortization of deferred financing costs and stock-based compensation expense, gain on the sale of land, as well as changes in certain assets and liabilities, are the primary differences between our net income and net cash provided by operating activities during each period.
We declared and paid dividends of $10.3$20.8 million and $10.2$20.5 million during the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025, respectively. During the first threesix months of 2026, the $12.0$24.4 million of net cash provided by operating activities was approximately $1.6$3.5 million greater than the $10.3$20.8 million of dividends paid. During the first threesix months of 2025, the $11.6$25.3 million of net cash provided by operating activities was approximately $1.5$4.8 million greater than the $10.2$20.5 million of dividends paid.
As indicated in the cash flows from investing activities and cash flows from financing activities sections of the statements of cash flows, there were various other sources and uses of cash during the threesix months ended MarchJune 31,30, 2026 and 2025. From time to time, various other sources and uses of cash may include items such as investments and advances made to/from LLCs, additions to real estate investments, acquisitions/divestiture of properties, net borrowings/repayments of debt, and proceeds generated from the issuance of equity. Therefore, in any given period, the funding source for our dividend payments is not wholly dependent on the operating cash flow generated by our properties. Rather, our dividends as well as our capital reinvestments into our existing properties, acquisitions of real property and other investments are funded based upon the aggregate net cash inflows or outflows from all sources and uses of cash from the properties we own either in whole or through LLCs, as outlined above.
We expect to finance all capital expenditures and acquisitions and pay dividends utilizing internally generated and additional funds. Additional funds may be obtained through: (i) borrowings under our Credit Agreement (the borrowings capacity of which was increased to $475 million in April, 2026 (from $425 million previously), and which had $359.5$365.6 million of outstanding borrowings as of MarchJune 31,30, 2026); (ii) borrowings under or refinancing of existing third-party debt pursuant to mortgage loan agreements entered into by our consolidated and unconsolidated LLCs/LPs; (iii) the issuance of other long-term debt, and/or; (iv) the issuance of equity. In April, 2024 we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission pursuant to which we may offer up to $100 million of securities pursuant to supplemental prospectuses which we may file from time to time.
The margins over Adjusted Term SOFR, Base Rate and the facility fee are based upon our total leverage ratio. At MarchJune 31,30, 2026, the applicable margin over the Adjusted Term SOFR rate for revolving loans was 1.20%, the margin over the Base Rate was 0.20% and the facility fee was 0.20%. At MarchJune 31,30, 2025, the applicable margin over the Adjusted Term SOFR rate for term loans was 1.20%, the margin over the Base Rate was 0.20% and the facility fee was 0.20%.
At MarchJune 31,30, 2026, we had $359.5$365.6 million of outstanding borrowings pursuant to the terms of our Credit Agreement.Agreement, and $109.4 million of available borrowing capacity. At December 31, 2025,2025 (prior to the First Amendment), we had $356.2 million of outstanding borrowings pursuant to the terms of our Credit Agreement, and $68.8 million of available borrowing capacity. There are no compensating balance requirements.
The Credit Agreement is structured to allow the Trust to select a one, three or six-month borrowing term for all borrowings on the Term Loan and revolving line of credit, which can be renewed through the commitment period that matures on September 30, 2028. In our consolidated statements of cash flows, we report cash flows pursuant to our Credit Agreement on a net basis, as all borrowings under the Credit Agreement have a term of less than three months as of MarchJune 31,30, 2026 and 2025. Aggregate borrowings under our Credit Agreement were $14.8$19.1 million and $13.0$19.6 million during the quarters ended MarchJune 31,30, 2026 and 2025, respectively, and aggregate repayments were $11.5$13.1 million and $12.4$14.3 million during the quarters ended MarchJune 31,30, 2026 and 2025, respectively. Aggregate borrowings under our Credit Agreement were $33.9 million and $32.6 million during the six-months ended June 30, 2026 and 2025, respectively, and aggregate repayments were $24.6 million and $26.7 million during the six-months ended June 30, 2026 and 2025, respectively.
The Credit Agreement contains customary affirmative and negative covenants, including limitations on certain indebtedness, liens, acquisitions and other investments, fundamental changes, asset dispositions and dividends and other distributions. The Credit Agreement also contains restrictive covenants regarding the Trust’s ratio of total debt to total assets, the fixed charge coverage ratio, the ratio of total secured debt to total asset value, the ratio of total unsecured debt to total unencumbered asset value, and minimum tangible net worth, as well as customary events of default, the occurrence of which may trigger an acceleration of amounts then outstanding under the Credit Agreement. We were in compliance with all of the covenants in the Credit Agreement at each of MarchJune 31,30, 2026 and December 31, 2025. We also believe that we would remain in compliance if, based on the assumption that the majority of the potential new borrowings will be used to fund investments, the full amount of our commitment was borrowed.
As indicated on the following table, we have various mortgages, all of which are non-recourse to us, included on our condensed consolidated balance sheet as of MarchJune 31,30, 2026 (amounts in thousands):
At MarchJune 31,30, 2026 and December 31, 2025, we had various mortgages, all of which were non-recourse to us, included in our condensed consolidated balance sheet. The mortgages are secured by the real property of the buildings as well as property leases and rents. The mortgages outstanding as of MarchJune 31,30, 2026, had a combined carrying value of approximately $18.4$18.3 million and a combined fair value of approximately $17.4$17.1 million. The mortgages outstanding as of December 31, 2025, had a combined carrying value of approximately $18.6 million and a combined fair value of approximately $17.5 million. The fair value of our debt was computed based upon quotes received from financial institutions. We consider these to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosure in connection with debt instruments. Changes in market rates on our fixed rate debt impacts the fair value of debt, but it has no impact on interest incurred or cash flow.
At each of MarchJune 31,30, 2026 and December 31, 2025, we had no off balance sheet arrangements.
UHT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-10 | Ramagano Cheryl K |
Grant/award | 3,631 | — | — |
| 2026-06-10 | Miller Marc D |
Grant/award | 819 | — | — |
| 2026-06-10 | Peterson Karla J |
Grant/award | 1,598 | — | — |
| 2026-06-10 | Boyle Charles F |
Grant/award | 3,631 | — | — |
| 2026-06-10 | Miller Alan B |
Grant/award | 6,247 | — | — |
| 2026-06-10 | Guzman Rebecca A |
Grant/award | 819 | — | — |
| 2026-06-10 | Morey James P |
Grant/award | 819 | — | — |
| 2026-06-10 | Mccadden Robert F |
Grant/award | 819 | — | — |
| 2026-06-10 | Domb Michael Allan |
Grant/award | 819 | — | — |
| 2026-06-10 | Capozzalo Gayle L |
Grant/award | 819 | — | — |
| 2026-06-05 | Peterson Karla J |
Shares withheld for tax | 462 | $40.38 | $18.7K |
Well-known investors holding UHT (13F)
None of the 59 investors we track reported a position in their latest 13F.