Community Healthcare Trust (CHCT) completed $20M in property sales during Q4 2025 at a 7.9% capitalization rate, part of a systematic divestiture program funding higher-yield acquisitions. The healthcare-focused REIT has signed definitive agreements to acquire five properties totaling $122.5M with expected returns between 9.1% and 9.75%.
CFO David H. Dupuy said CHCT did not issue shares under its at-the-market program during Q4, instead relying on asset sales and revolver capacity to fund near-term deals. The company's weighted average lease term extended from 6.7 to 7 years during the quarter.
The acquisitions return CHCT toward its historical pace of $120M to $150M annually. Dupuy noted the company previously added $50M-$60M per year through direct client relationships, plus similar amounts from brokered transactions and redevelopment projects. That pace depends on stock prices supporting accretive capital raises.
CHCT is also finalizing sale of geriatric behavioral hospital operations, though the buyer is still completing legal and business due diligence. Dupuy could not provide specific timing or certainty the transaction will close.
The portfolio reshaping comes as institutional investors adjust to MSCI's February 2026 index rebalancing, which added or removed 340+ constituents across global indices. Public Storage simultaneously announced executive succession planning, with CEO Joseph D. Russell Jr. transitioning leadership while the REIT maintains its market position.
CHCT's strategy of selling at 7.9% cap rates while buying at 9.1-9.75% returns captures spread between stabilized assets and new healthcare properties. The 120-190 basis point differential reflects investor appetite for healthcare real estate with longer lease terms and specialized operators.
Index rebalancing by MSCI redirects capital flows across real estate investment trusts as passive funds tracking indices execute mandatory trades. The changes affect institutional exposure to REITs alongside broader market sectors, influencing pricing dynamics for property transactions.
Healthcare REITs face distinct fundamentals from retail or office properties, with medical facilities offering longer leases and operator-dependent performance. CHCT's 7-year average lease term provides revenue stability while the company recycles capital into properties offering 115-200 basis points above its sale cap rates.