Community Healthcare Trust Inc

NYSE:CHCT

Earnings Call Analysis

14.9% Revenue Growth Amid Rate Challenges

The company reported a 14.9% annual growth in total revenue, with a slight quarter-over-quarter FFO dip. Despite headwinds from rising interest rates compressing spreads and affecting AFFO growth, arrangements to increase AFFO focus and yield-driven acquisitions offer an optimistic future outlook with interest rates expected to stabilize.

Steady Progress Amid Acquisitive Slowdown and Bankruptcy Resolution

The last quarter saw a mixture of operational activity and a slight deceleration in acquisitions. Occupancy ticked up marginally to 91.1%, but the average lease term dipped to 6.9 years. The company managed to navigate through the bankruptcy of GenesisCare, successfully expecting to transfer most of the leases, enhance property value, and continue property sales. New acquisitions include medical properties with long lease terms and high anticipated returns, indicating a focused strategy on long-term income generation.

Financial Performance and Growth Trajectory

Financially, the company experienced a commendable revenue growth of 14.9% year-over-year, rising to $29.1 million, albeit it's slightly dampened sequentially due to the GenesisCare Fort Myers property's lost revenue. FFO showed a 9.5% growth year-over-year, but adjusted fund operations (AFFO), an important metric for investors signifying real cash flow, grew only 4.3% yearly, reflecting challenges including the increase in interest expenses owing to higher borrowings. The dividend has been increased, demonstrating a commitment to shareholder returns.

Capital Management and Strategic Outlook

Strategic updates to the company's compensation programs aim to enhance shareholder correlation, adjusting deferral percentages and metrics for incentive plans. With acquisitions on track, the company is well-positioned to grow its asset base, leveraging modest debt and selective asset sales. In terms of capital sourcing, the company holds a strong balance sheet and a sizable credit facility to support growth and has time-specific plans for property closings extending till 2026.

Acquisition Pipeline and Property Portfolio

The firm reported a strong and diverse pipeline of properties centered on medical office buildings and a range of healthcare facilities, maintaining approximately 60% in the MOB space. This keeps the focus on healthcare real estate, a sector known for its stable and long-term returns. Moreover, the transition of GenesisCare properties to new operators, who will use the assets similarly, may strengthen the resilience of the company's portfolio.

Funding Strategies and Interest Rate Hedging

The company plans to utilize its revolving credit facility to fund near-term transactions, keeping a close eye on interest rates which are a challenge industry-wide. Despite no immediate long-term debt needs, management stays vigilant about future debt market conditions. They anticipate a favorable shift in interest rates soon, which could decrease financing costs and provide increased operational leverage.

AFFO Analysis and Long-Term Viability

While AFFO per share has been relatively flat in the face of growing assets, the management team is committed to increasing this key metric. They acknowledge the adversities presented by increased interest rates but remain focused on garnering higher yields from quality asset acquisitions. Confidence remains that with a potential stabilization and decrease in interest rates, the company will see significant growth in AFFO and FFO, indicative of a healthy long-term outlook.

Earnings Call Transcript 2023-Q4

[Operator]

Welcome to the Community Healthcare Trust's 2023 Fourth Quarter Earnings Release Conference Call. On the call today, the company will discuss its 2023 4th quarter financial results. It will also discuss progress made in various aspects of its business.

[Operator Instructions] The company's earnings release was distributed last evening and has also been posted on its website, www.chct.reit.

The company wants to emphasize that some of the information that may be discussed on this call will be based on information as of today, February 14, 2024, and may contain forward-looking statements that involve risk and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's disclosures regarding forward-looking statements in its earnings release as well as its risk factors and MD&A and in its SEC filings. The company undertakes no obligation to update forward-looking statements, whether as the result of new information, future developments or otherwise, except as may be required by law.

During this call, the company will discuss GAAP and non-GAAP financial measures. A reconciliation between the 2 is available in its earnings release, which is posted on its website.

All participants are advised that this conference call is being recorded for playback purposes. An archive of the call will be made available on the company's Investor Relations website for approximately 30 days and is the property of the company. This call may not be recorded or otherwise reproduced or distributed without the company's prior written permission.

Now I would like to turn the conference over to Dave Dupuy, CEO of Community Healthcare Trust.

[David Dupuy, executive]

Great. Thank you very much, and good morning. Thank you for joining us today for our 2023 4th quarter conference call on the call with me today is Bill Monroe, our Chief Financial Officer; Leigh Ann Stach, our Chief Accounting Officer; and Tim Meyer, our EVP of Asset Management.

Our earnings announcement and supplemental data report were released last night and furnished on Form 8-K, along with our annual report on Form 10-K. In addition, an updated investor presentation was posted to our website last night.

The fourth quarter was busy from an operations standpoint, but slowed a bit from an acquisition perspective. Our occupancy increased slightly from 91% to 91.1%, while our weighted average remaining lease term declined slightly to 6.9 years. I am pleased to report that GenesisCare is expected to keep or assigned to buyers, the 7 remaining leases with the company, with no material changes to the lease terms. The effective date of the plan of reorganization is expected to be during the first quarter of 2024.

To date, GenesisCare has closed on the assignment of 2 of the 7 leases with 2 separate buyers, and we expect the remaining assignments and assumptions to occur in the first quarter. GenesisCare has met substantially all its lease payment obligations due to the company through February 2024.

As it relates to the 2 vacant GenesisCare properties, Fort Myers is under definitive sale agreement and the sale agreement is for a price above its carrying value, allowing us to recycle that capital into new income-producing properties. The Asheville MOB continues to be for lease or sale and we are seeing good activity at that facility. While the GenesisCare bankruptcy process was protracted, we are proud with how our team managed our properties to these successful outcomes.

During the fourth quarter, we acquired 2 properties and 1 transaction with a total of approximately 48,000 square feet, for a purchase price of approximately $7.1 million. The properties were 97.5% leased, with leases running through 2031, with anticipated aggregate annual return of approximately 9.6%.

For the year, we acquired 19 properties and 1 land parcel with a total of 463,000 square feet for an aggregate purchase price of $97.8 million, which were approximately 99.2% leased with leases running through 2038 and annual returns of 9.1% to 10.6%.

Subsequent to December 31, we acquired 1 long-term acute care hospital for a purchase price of $6.5 million. We entered into a new lease with a lease expiration in 2039 and anticipated annual returns of approximately 9.8%.

The company has 3 properties under definitive purchase agreements for an aggregate expected purchase price of $27.9 million, and expected aggregate returns of 9.1% to 9.2%, the company is currently performing due diligence and expects to close on these properties in the next few months.

We also have signed definitive purchase and sale agreements for 7 properties to be acquired after completion and occupancy for an aggregate expected investment of $166.5 million. The expected return on these investments should range from 9.1% to 9.75%.

To provide an update on the timing of these 7 transactions, we expect to close on 2 of these properties in 2024, with the remaining 5 properties closing throughout 2025 and 2026.

We are seeing very good acquisition activity and continue to have many properties under review and have term sheets out on several properties with indicative returns of 9% to 10%. Given our modest leverage levels, we anticipate having enough availability on our credit facilities and through our banking relationships to fund our acquisitions, and we expect to opportunistically utilize the ATM to strategically access the equity markets.

These traditional capital sources combined with proceeds from selected asset sales like the Fort Myers property I mentioned earlier, will provide sufficient capital for continued growth at attractive yields throughout 2024.

On another topic, the Compensation Committee and Board approved updates to the company's compensation programs, details of which were filed under Form 8-K on January 4, 2024. These updates were designed to address issues raised during last year's say-on-pay advisory vote while maintaining the company's strong alignment with shareholders.

Under the company's alignment of interest program, changes included a maximum deferral percentage of 50% of compensation from 100% previously and a limit on the duration of the restriction period based on retirement eligibility. Updates were also made to annual incentive metrics such that 70% will be based on specific company metrics from 50% previously, and 30% will be based on individual metrics.

Finally, we transitioned our long-term incentive plan to a 3-year forward-looking measurement period with performance-based RSU grants representing 65% and time-based RSU grants representing 35% of the Executive Officers' targeted long-term incentive compensation, all of which utilize threshold, target and maximum performance levels. Our proxy statement, which will be filed in March, will provide a detailed review of our compensation program.

To wrap up, I am excited about the opportunities we see for CHCT in 2024 and beyond. We declared our dividend for the fourth quarter and raised it to $0.4575 per common share. This equates to an annualized ______ dividend of $1.83 per share and we are proud to have raised our dividend every quarter since our IPO. ____ That takes care of the items I wanted to cover.

So I will hand things off to Bill to discuss the numbers.

[William Monroe, executive]

Thank you, Dave. I will now provide more details on our fourth quarter financial performance. I'm pleased to report that total revenue grew from $25.3 million in the fourth quarter of 2022 to $29.1 million in the fourth quarter of 2023, representing 14.9% annual growth over the same period last year.

When compared to our $28.7 million of total revenue in the third quarter of 2023, we achieved 1.4% total revenue growth quarter-over-quarter, although our growth was negatively impacted by the loss of GenesisCare Fort Myers revenue in the fourth quarter after receiving 2 months of rent and operating expense reimbursement in the third quarter.

From an expense perspective, property operating expenses increased by approximately $142,000 quarter-over-quarter to $5.6 million, primarily as a result of properties acquired during the periods.

General and administrative expenses increased by approximately $110,000 quarter-over-quarter to $3.7 million, driven by slightly higher noncash deferred compensation expense and professional fees associated with the compensation plan design changes Dave discussed earlier. Interest expense increased from $4.6 million in the third quarter of 2023 to $5 million in the fourth quarter of 2023 due to the increase in borrowings under our revolving credit facility to fund acquisitions.

Moving to funds from operations. FFO increased from $13.6 million in the fourth quarter of 2022 to $14.9 million in the fourth quarter of 2023, or 9.5% growth year-over-year. On a quarter-over-quarter basis, FFO decreased slightly from $15 million in the third quarter of 2023. And on a per diluted common share basis over these periods, FFO declined from $0.58 to $0.57 per share.

Adjusted funds from operations, or AFFO, which adjusts for straight-line rent and stock-based compensation, totaled $16.1 million in the fourth quarter of 2023 which compares to $15.4 million in the fourth quarter of 2022 or 4.3% growth year-over-year. On a quarter-over-quarter basis, AFFO decreased by 2.1%, from $16.4 million in the third quarter of 2023. And on a per diluted common share basis over these periods, AFFO declined from $0.63 to $0.61 per share.

I'll note that revenue loss from GenesisCare Fort Myers in the fourth quarter did impact both FFO and AFFO sequentially.

That concludes our prepared remarks. Operator, we are now ready to begin the question-and-answer session.

[Operator]

[Operator Instructions] Our first question comes from Alexander Goldfarb.

[Alexander Goldfarb, analyst]

Dave, just quickly, on the Genesis, did you say the remaining office lease, not the office lease, the MOB lease. Did you say that's being in the process of being taken by someone else or that's the final piece that needs to be resolved?

[David Dupuy, executive]

So the MOB, the Asheville property, we are continuing -- that property continues to be for sale or lease, and we've got good traffic at that facility. And so we're hopeful that we have something to report on here soon. But that continues to remain for sale or lease. And so we're talking to both buyers as well as folks interested in leasing that space.

[Alexander Goldfarb, analyst]

Okay. And then just sort of in keeping -- because you guys have dealt with a number of these credit issues over time as any other landlord would. But it sounds like you guys were made whole here, like there's no loss to shareholders. There's no real economic downside, like it sounds like everything worked out the way you guys anticipate. Is that the case? Or is there something missing where there is some economic impact?

[David Dupuy, executive]

Well, I mean, obviously, we don't like it when we get 2 of those leases rejected as what happened with the GenesisCare situation. So 2 of our 9 leases with GenesisCare were rejected as part of the bankruptcy process. But as we talked about, I'm proud of the way the team sort of handled the situation, it was a protracted bankruptcy process, as you can tell, we've got a number of different buyers of these assets.

And so what I would say is the 7 leases are transitioning over. We're happy about that. The 2 that aren't, that were rejected as part of the process, one is an asset held for sale, which is essentially at a level that we aren't having to take a write-off on at this point. And so we look to recycle that capital into new income-producing properties for us.

So look, we lost some ABR as part of this process, but we're in the process of dealing with the outcome. And I think overall, this is a great situation for CHCT.

[Alexander Goldfarb, analyst]

Okay. And then just second, you guys did issue some ATM around $28. I think you said you used some line of credit. Historically, obviously, you issued ATM higher, everyone wants to issue ATM higher. But as we think about you guys funding acquisitions over the next year, it sounds like you're comfortable issuing around these levels? Or how are you thinking about funding and sort of maintaining that low leveraged balance sheet if the stock is still where it is?

[David Dupuy, executive]

Yes. Look, I think we certainly would love it if we could issue shares at a higher share price. And what I will tell you in that average share price that we sold shares at last quarter, those are still accretive transactions for us, in investing those proceeds into new acquisitions, but we're very mindful of where our share price is.

And so as we are consistently, if the share price goes down, we're not going to be very active in the ATM. As the share price goes up, we're going to be more active in the ATM. And the good news is, is we've got capacity under our revolving credit facility so that we aren't forced to use the ATM when the share price isn't where we like it. So I would just say that, as always, we're going to be mindful of where the share price is, and we're going to issue shares strategically based on that.

And the other thing I would mention is we've got the Fort Myers property that we're going to sell. We've got another asset held for sale that we will be looking to sell. And so some of these asset sales will also contribute to the capital that we have available to us, and we'll take that into consideration as we're issuing shares under the ATM.

[Operator]

Next question comes from Rob Stevenson with Janney.

[Robert Stevenson, analyst]

Just a follow-up on Alex's question. Can you talk a little bit about the disposition market today, I mean, obviously, Fort Myers is vacant. But is there an opportunity here for you guys to sell more than the 2 assets that are currently held for sale given your cost of equity to fund acquisitions? Is that market sort of frozen given the bank issues and cost of debt, how would you guys characterize the disposition market right now?

[David Dupuy, executive]

Look, I don't think the market for selling properties is frozen by any stretch of the imagination. I think the Fort Myers situation sort of is indicative of where the market is. And so we're happy about that. And we do get questions from time to time and people will ask us if we want to sell buildings. And so we have taken -- we've listened to those things. We -- up to this point, we haven't considered doing any asset sales, but certainly, that is an option that we have, and it's something that we can consider.

Again, our preference is to grow our assets based on nice, attractive 9% to 10% yields. And so we're going to look at -- I think primarily raising funds through the credit facility and through our ATM, but we always have the option of looking at asset sales, and that's certainly an option that we have to consider. It's not anything that we're looking to consider at this point, but it's certainly an option we have.

[Robert Stevenson, analyst]

Okay. And then can you talk about where you guys are viewing the operator strength on the 2 GenesisCare signed properties and potentially where the others might fall out as well versus where GenesisCare was a year ago before bankruptcy. Are you likely to be sort of flat in terms of operator strength, a little bit of a hit to where GenesisCare was before it hit the wall, a little bit better? How are you guys thinking about when this is all said and done in 90 days, where those assets are going to be operator strength-wise versus what they were a year or 18 months ago?

[David Dupuy, executive]

Look, we feel very good about the operators that are coming in to operate these facilities. And we also -- 2 of the leases are going to stay with GenesisCare. So we think that GenesisCare is viable as they move into the new GenesisCare and sort of deleverage. So I would say on balance, based on what we've seen the operators are going to be just as strong, if not stronger, and we're excited about diversifying that portfolio away from a single operator. We've got now operators that are strong in their existing markets, and we think that bodes really well for the individual properties.

[Robert Stevenson, analyst]

Okay. And then the last one for me. On the -- you talked in the prepared comments about the 2 properties among the $167 million that are expected to close in 2024.

From a capital needs and modeling perspective, are these going to be later in '24, 1 earlier, 1 later, both back end weighted. And I guess from a pricing standpoint, are -- most of the 7 roughly more or less in line with the $25 million average price that's the $167 million divided by 7 or there's some couple of much larger ones within those 7 that we have to be aware of from a capital needs perspective?

[David Dupuy, executive]

No. So that's a great question. So one of those hospitals is going to close. One of those inpatient rehab facilities is going to close in early on this year. The other one is going to be later this year, call it, late third quarter, I would estimate. And those dollars are right around that. Consider that $24 million per unit is a good average.

[Operator]

Next question comes from Jim Kammert with Evercore.

[James Kammert, analyst]

David, I think you mentioned or alluded to kind of the shadow pipeline of activity perhaps. And I was just curious, you said 9% to 10%-type returns. Would those -- could you just put more color around, are those some existing relationships or new opportunities. And I'm wondering, second part of that is, are more tenants/owners calling CHCT given the lingering challenges in the credit markets? I mean is your opportunity said, widening, in other words?

[David Dupuy, executive]

What I would say is we are seeing an expanded opportunity set, and we're using that to obviously, to try to push on yield as best we can but also get higher-quality assets, and so we're -- I would say that it's a mix. We're talking to folks where we have relationships, and we're -- so that part of the business is -- I think, is yielding really good dialogue and good opportunities. We've got -- as everybody knows, we have about 5 client-type relationships. And we have been wanting those client relationships to get more active, and we've got some good dialogue and prospects for additional deals through those client relationships.

And we're also talking to a couple of new potential client relationships. Those haven't gotten to a point where we can talk more specifically about them. But we're encouraged certainly by folks looking to partner with us. And so we're excited about the prospects of the types of facilities that we like and getting pricing and yields that are attractive to us on that side.

But in terms of mix, I would say it's sort of consistent with what we've seen in the past. What we're seeing is just a higher volume of those types of opportunities, both in the broker market, but also in the client market. So we think that, that will, over time, yield more opportunities for us from an acquisition standpoint.

[James Kammert, analyst]

Very helpful. And not to dwell upon, one second question. Back to Genesis, just for my own edification, please. You talked about the 7 remaining deals going to be assigned, you're pleased with the new operators. But does that imply then that the operators are going to use the assets for a very similar purposes? Just trying to think about the fungibility and reusing of the properties? Or are they -- change in the business that would be undertaken within? I'm just curious how that might play out if you have any insight?

[David Dupuy, executive]

Yes. No. They're all going to be essentially operating consistent with radiation oncology type of purpose. And so the actual use of the facilities is not changing at all. And so to me, that sort of indicates that you've got a good business there and an attractive business, it just was not in the right hands. And so if anything, we're excited about it because you've got now regional operators that are strong in these current markets that are going to be operating a similar radiation oncology-type practice and business.

[Operator]

Next question comes from Wes Golladay with Baird.

[Wesley Golladay, analyst]

Can you talk about how you look to fund the business from a debt perspective? Would it be the line of credit? Or do you have any interest in another term loan at the moment?

[David Dupuy, executive]

We are focused on using our revolving credit facility. We have over $100 million available on that facility. We have great support from our banks for that facility. Certainly, we stay current on the state of all debt markets. And so looking at term loans, looking at other debt financing facilities. But for our current needs, the flexibility that the revolver provides is kind of what we're utilizing today. And obviously, the cost is a little bit higher than where it was a year ago. But hopefully, we're at least in the interest rate environment, that's flat to stable and maybe later this year starting to decline, which we'll benefit from.

[Wesley Golladay, analyst]

Okay. And then I believe you called out reimbursement being a little bit lower to the GenesisCare, do you happen to have that number for you, either the GenesisCare component or the total reimbursement you had in the quarter?

[David Dupuy, executive]

Yes. What you can do is you can look obviously at our supplemental and look at the Fort Myers property and kind of come up with what is a monthly rent number. So we received 2 months of rent in the third quarter, which we obviously did not receive in the fourth quarter, you can kind of call that $130,000, $140,000. There was also some expense reimbursement that isn't as visible, but that obviously impacted the loss of that reimbursement in the fourth quarter. And then obviously, in the fourth quarter, we also now, we're paying for some of those expenses ourselves as opposed to having at least a couple of months ______ reimbursed in the third quarter.

So all those added _____ up to -- as you look at the quarter-over-quarter sequential impact, you can kind of see where that 10 year or so came from.

[Operator]

The next question comes from Barry Oxford with Colliers.

[Barry Oxford, analyst]

Real quick one. You guys are talking about long-term debt. Have you kind of talked to any of the banks where 5- or 10-year money might be priced for you guys at this particular juncture?

[David Dupuy, executive]

Barry, where we are right now with the availability we have under our revolver and not having any near-term maturities. Our next maturity is not until March of 2026. We continue to monitor those markets and where pricing is. But since we don't have an immediate need, it's not a focus of ours.

Again, I think as we look at the interest rate outlook, we feel like some of the headwinds that everyone has experienced over the last 12, 18 months have at least subsided and we seem to be in a more stable interest rate environment. And look, we hope later this year and into next year, it's a more favorable interest rate environment. And I think at that point, that is when we would maybe be more interested in taking a harder look at some of the different financing environments.

[Barry Oxford, analyst]

Right, take a closer look at that point. That makes sense for the other management teams to kind of echo the same thing. In your acquisition pipeline, what type of assets are in there? Is it the MOBs or acute care, long-term care facilities. Is there a particular weight to one of those asset classes? Or is it, look, it's kind of across the board of what we normally buy?

[David Dupuy, executive]

It's really kind of across, Barry -- So but I would characterize our pipeline is really being similar to what it's been roughly half or a little bit more around the physician clinic, MOB side of things. And maybe that's, you can call it, 60% plus or minus. And then the other side of the pipeline is more of the client single-tenant type of opportunity set, which includes everything from behavioral and patient rehab to a variety of -- and actually dialysis too.

So that's kind of the mix today that we're seeing. And so we like that mix. We think it's a good mix of property type, and we expect that, that sort of mix in general will continue into 2024.

[Operator]

The next question comes from Ethan Brown with Cox Capital Markets.

[Ethan Brown, analyst]

I wanted to ask just more of a high-level question about AFFO. I mean, when I -- when we look at that on a per share basis, we're coming up on kind of our third year of that metric being relatively flat at a time when the asset base has continued to grow at a pretty moderate rate. So at what point do you regain some of that operational leverage to drive AFFO per share? And just how do you internally think about driving that metric?

[David Dupuy, executive]

What I would tell you is if you take a step back and look at the environment that we've been operating in over the last couple of years, it's been in an increasing interest rate environment. And so unfortunately, during that same period of time, even though we've been acquiring assets, our spread has compressed rather meaningfully. We're very focused on AFFO. That's how we're all rewarded internally, and we're laser focused on growing that number.

But unfortunately, interest rates have gone up pretty significantly during that 18- to 24-month period of time. And so a lot of that acquisition growth that would have flown -- that would have moved through our AFFO and FFO lines have been impacted as a result of that.

So look, we're going to continue to look to push yields and to find attractive acquisition opportunities because, again, we're looking on the long term. We're going to own these assets for a long period of time, and those yields, I think, are very attractive long-term yields that we're excited about. And I think over time, as Bill referenced, interest rates are going to stabilize, we feel like they are. And then as they start declining, you're going to see an incredible leveraging of the asset base and growth of AFFO and FFO. But we're very focused on trying to maximize those returns and look at that very closely on an acquisition-by-acquisition basis.

Bill, I don't know if there's anything you wanted to mention there.

[William Monroe, executive]

No, I think that covers it.

[Operator]

The next question comes from Michael Lewis with Truist Securities.

[Michael Lewis, analyst]

My first question goes back to this idea of selling some assets. I realize the vacant building is sort of a special case, but you talked about potential asset sales as a source of capital. I'm just wondering what the characteristics are of an asset that you might sell a strategic reason to sell? And then maybe this isn't an either or, but should we think of asset sales maybe as a replacement for equity capital that would have been from the ATM if the price was better?

In other words, if your stock price is soft, and I think you just issued some equity right around consensus NAV. If your stock price is soft, are you more apt to sell assets that can make up that equity piece as you continue to make acquisitions? And vice versa acquisitions, or I'm sorry, dispositions are not attractive if your cost of equity for the ATM is good.

[David Dupuy, executive]

We are very focused on growing our book of business. Now that said, there's always a handful of properties that for whatever reason, aren't -- may not be strategic for us, and we would certainly evaluate whether it makes sense to sell properties that are no longer strategic or where we feel are a focus for us.

But I think in general, we don't have a plan in place to sort of say, if we don't find it very attractive from an ATM perspective. We don't have a specific plan in place, but we are evaluating our portfolio. And to the extent, there are noncore properties that we think would be an option to sell, we may consider that. I think at the end of the day, with a $100 million of availability under our revolver, and being strategic with our ATM, I think we're going to be more focused there. But we're certainly open to the opportunity to sell assets to the extent that's ultimately what we need to do.

But again, I think we've got good resources and good capital alternatives before we look very closely at asset sales beyond what we've already identified.

[Michael Lewis, analyst]

Okay. Got it. And then just to confirm the timing pushback on a couple of these development acquisitions. I just want to confirm your acquisition yield is kind of locked in, the timing, whether it gets pushed back a quarter or not? Is it a big deal? And just confirm there's nothing, no issues or anything on those projects.

[David Dupuy, executive]

No. There are no issues on the projects other than they have been pushed back a little bit for a variety of reasons. Those projects are now being simultaneously closed with another operator. And so coordinating that closing has added a little bit of time. And then the -- what we found is coming out of COVID, and Michael, you and I have talked about this before. These development projects take a little bit longer to come to market than they did pre-COVID. And so that's unfortunate, but that's kind of the reality of what we're seeing.

[Michael Lewis, analyst]

Okay. Got it. And then lastly for me, we talked about this before, but I just wanted to make sure, as far as the comp structure change, it sounds like there's not going to be any real significant impact on the income statement or the cash flow, right? It will be a change in investing schedule and you'll be expensing the cash portion, but maybe the total comp is a little low and more of it is...

I guess the question is, is there any material impact on the income statement from this change -- in the comp structure this year?

[William Monroe, executive]

Michael, what I would point you to is there's a couple of things at play here, right? As Dave mentioned, we're focused on continuing to align executive officer compensation with the value of our common stock. And so continuing to have stock compensation being a large part of the executive officer compensation. But the reduction in the matching, our alignment of interest program, will reduce our salary and annual incentive compensation.

Now accounting doesn't always work exactly as compensation does. And so because some of that compensation is now being paid in cash, that part of the compensation will be expensed kind of immediately and during the year. And so you will see less of an add back to AFFO with cash compensation, obviously, compared to stock compensation, right? So that will have an impact. It's something you'll see on the income statement. It's being offset by the reduction in total compensation, again, because of the reduced matching of the alignment of interest program. So they offset each other, but you will see some movements on the income statement.

We don't believe it's going to be material to overall AFFO or FFO, but it's something that we'll obviously explain in more detail in our proxy, which gets filed in March. And it's also something we can go into more detail on our first quarter conference call as well.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Dave Dupuy for any closing remarks.

[David Dupuy, executive]

I just want to thank everybody for joining us. And we appreciate everyone's support, and I hope everyone has a great day.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.