Shares of Universal Health Realty Income Trust (UHT Quick QuoteUHT - Free Report) have gained 3.3% since the company reported its earnings for the quarter ended Sept. 30, 2025. This compares with the S&P 500 Index’s 0.7% rise during the same period. However, over the past month, the stock declined 3.6%, underperforming the S&P 500’s 2.1% growth.

UHT’s Earnings Snapshot

Universal Health Realty’s third-quarter 2025 results were largely stable compared with the year-ago quarter. Net income came in at $4 million (or $0.29 per diluted share) compared with $3.9 million (or $0.29 per diluted share), up 0.5% year over year. The quarter’s performance included a $275,000 gain (or $0.02 per share) from a one-time settlement related to one of its medical office buildings, which offset a $256,000 aggregate decline (or $0.02 per share) primarily from reduced property-level income and non-recurring depreciation charges of approximately $900,000.

Funds from operations (FFO), a key performance metric for real estate investment trusts, rose 8% year over year to $12.2 million, or $0.88 per diluted share, compared with $11.3 million, or $0.82 per share, in the prior-year quarter.

For the nine months ended Sept. 30, 2025, net income totaled $13.3 million, or $0.96 per diluted share, down 8.8% from $14.6 million, or $1.05 per diluted share, a year earlier. The year-to-date decline reflected lower property-level income, the absence of a property tax reduction recorded in 2024, and higher interest expense due to increased borrowings. FFO for the nine-month period decreased 0.5% to $35.9 million, or $2.59 per share, from $36.1 million, or $2.61 per share, last year.

Universal Health Realty’s Other Key Business Metrics

Total revenues for the third quarter reached $25.3 million, up 3.3% from $24.5 million in the prior year. Growth was mainly driven by higher lease revenues from non-related parties, which rose 3% to $14.8 million from $14.3 million. Lease revenues from facilities leased to Universal Health Services (UHS), UHT’s largest tenant, increased 1.4% to $8.4 million from $8.2 million. Bonus rental income from the McAllen Medical Center facility rose 16.9% to $895,000 from $765,000 a year ago. Other revenues, including those from both UHS and non-UHS sources, totaled $810,000, up 48.1% from $547,000 in the same quarter last year. Interest income from UHS-related financing leases decreased 0.7% year over year to $1.3 million from $1.4 million.

However, total expenses also increased 5.6%, primarily due to higher depreciation and amortization expenses, which climbed 12.8% year over year to $7.9 million from $7 million.

Income before interest and equity in unconsolidated entities was $8.4 million, 1.1% lower than $8.5 million in the previous year, while equity in income from unconsolidated LLCs improved 46% to $438,000 from $300,000.

On the balance sheet, as of Sept. 30, 2025, total assets stood at $568 million, down from $580.9 million as of Dec. 31, 2024, reflecting a slight reduction in net real estate investments to $493.9 million from $508.7 million. Total liabilities rose to $409.5 million as of Sept. 30, 2025, from $401.3 million as of Dec. 31, 2024, mainly on account of higher borrowings under the credit facility. Equity declined to $158.6 million from $179.5 million due to cumulative dividends exceeding retained income.

Management Commentary and Factors Influencing UHT’s Results

Management attributed the steady quarterly performance to stable rental income from its healthcare facilities portfolio and effective management of operating expenses. The quarter’s net income benefited from a one-time settlement gain but was weighed down by non-recurring depreciation expenses. Rising interest rates have also impacted borrowing costs, leading to a slight uptick in interest expense compared to the prior year.

Universal Health Realty continues to face challenges from macroeconomic factors affecting its tenants, including rising wage expenses due to staffing shortages in healthcare, potential reductions in federal Medicaid funding and increased costs for construction materials. Management noted that sustained high interest rates have materially increased borrowing costs and may limit favorable capital market access going forward.

Universal Health Realty’s Capital Resources and Liquidity

As of the quarter’s end, UHT had $67.9 million of available borrowing capacity under its $425 million credit facility, which matures in September 2028. The company can extend the facility for up to two additional six-month periods. Line-of-credit borrowings stood at $357.1 million at the end of the quarter. UHT maintained its dividend payout, declaring a third-quarter dividend of $0.74 per share, up from $0.73 per share last year, which was paid on Sept. 30, 2025.

UHT’s Guidance

Universal Health Realty did not provide specific forward earnings or FFO guidance for upcoming quarters. However, it reaffirmed its commitment to maintaining a stable dividend and prudent balance-sheet management amid a challenging interest rate environment.

Universal Health Realty’s Other Developments

In October 2025, Universal Health Realty entered into a ground lease agreement with a wholly-owned subsidiary of UHS to develop and own Palm Beach Gardens Medical Plaza I, an 80,000-square-foot medical office building in Palm Beach Gardens, FL. Construction, expected to begin in November 2025, will be managed by a UHS subsidiary, with total costs estimated at approximately $34 million. A 10-year master lease covering about 75% of the building’s rentable area has already been executed, providing a visible source of future rental income. The facility will be located on the campus of the Alan B. Miller Medical Center, an acute care hospital scheduled for completion in the third quarter of 2026.