Universal Health Realty Income Trust (UHT -1.98%), a real estate investment trust (REIT) that owns and invests in healthcare-related facilities, reported its earnings for the second quarter of fiscal 2025 on July 28, 2025. The most significant headline from this release was the year-over-year decline in both net income and FFO per share (non-GAAP), driven by the absence of a prior-year property tax benefit and higher interest costs. Revenue increased slightly compared to the prior year. There was no published Wall Street consensus to compare these results to. Overall, this quarter showed stable but pressured financial performance, with ongoing portfolio diversification and a slight dividend increase (dividend paid per share: $0.74, up from $0.73 a year ago).
| Metric | Q2 2025 | Q2 2024 | Y/Y Change |
|---|---|---|---|
| EPS (GAAP, diluted) | $0.32 | $0.38 | (15.8%) |
| Funds From Operations (FFO) per Share (Non-GAAP, diluted) | $0.85 | $0.90 | (5.6%) |
| Revenue | $24.9 million | $24.7 million | 0.8% |
| Net Income | $4.5 million | $5.3 million | (14.8%) |
| Dividend Paid per Share | $0.74 | $0.73 | 1.4% |
About Universal Health Realty Income Trust: Business Model and Strategic Priorities
Universal Health Realty Income Trust is a healthcare-focused REIT with a portfolio that includes hospitals, medical office buildings (MOBs), behavioral health facilities, and other outpatient centers. It owns 76 properties distributed across 21 states, leasing to both related and third-party healthcare providers. A critical pillar for the business is its longstanding relationship with Universal Health Services, Inc. (UHS), which is both a major tenant and the external advisor to the REIT.
Universal Health Realty Income Trust distributes at least 90% of its taxable income as dividends to maintain compliance with REIT status. Its key success factors include the ability to find and manage high-performing healthcare properties, navigate regulatory changes in healthcare reimbursement, and manage debt efficiently to protect earnings in a rising interest rate environment.
Quarter in Review: Financial and Portfolio Performance
Results showed a decline in net income (GAAP) to $4.5 million and diluted earnings per share to $0.32, both down from the prior-year period. The main causes for this drop in net income were a one-time property tax reduction in Chicago that benefited the prior year's results, a $137,000 rise in interest expenses tied to increased borrowings, and a small decrease in overall income at select properties. Funds from operations (non-GAAP), a commonly used REIT metric that measures cash available for distribution before depreciation and other non-cash charges, also fell year over year to $0.85 per share.
Lease income from UHS facilities totaled $8.4 million, almost unchanged from the prior year, while lease revenue from third-party tenants was $14.57 million. Approximately 40% of revenue came from UHS facilities for the year ended December 31, 2024, representing a steady proportion for the company.
Operating expenses saw upward pressure. Depreciation and amortization increased compared to the prior year. Interest expense also ticked up as higher credit agreement balances led to greater borrowing costs. The company ended the quarter with $354.8 million in credit facility borrowings and maintained $6.6 million in cash. Real estate investments plus financing receivables totaled $499.8 million as of June 30, 2025, a slight decline from the December 31, 2024 balance.
No major property transactions, additions, or divestitures were disclosed. The company continues to express caution regarding the healthcare operating environment, with statements in the release emphasizing tenant risks tied to staffing shortages, government healthcare funding, and patient volumes. These risks are material, as nearly 27% of the company's revenue in both 2024 and 2023 came from tenants highly reliant on federal and state programs like Medicare and Medicaid.
The dividend was $0.74 per share, compared to $0.73 per share a year earlier. This dividend represents a cautious increase despite flat or declining FFO per share (non-GAAP). The payout totaled $10.3 million.
Looking Ahead: Guidance and Priorities for the Coming Quarters
Management did not provide any financial guidance for revenue, net income, or FFO for either the upcoming quarter or the full fiscal year. The company continues to highlight risks tied to interest rates, tenant financial health, and possible changes in government healthcare reimbursement, particularly for tenants relying on Medicaid or Medicare. The release mentioned that any further increases in interest rates could impact future results by raising borrowing costs.
These include the pace of revenue diversification away from UHS, changes in tenant mix, portfolio occupancy, access to capital, cost of debt, and any new property acquisition or sale activity.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
