Universal Health Realty Income Trust Reports 2008 Second Quarter Financial Results

Funds from operations ("FFO") remained relatively unchanged at $7.5 million and $7.4 million for the three month periods ended June 30, 2008 and 2007, respectively, or $.63 per diluted share during each period. FFO were $14.8 million, or $1.24 per diluted share, during the six-month period ended June 30, 2008 as compared to $14.8 million, or $1.25 per diluted share, during the comparable six-month period of the prior year.

Included in our financial results during the three and six-month periods of 2008 was: (i) a decrease in our equity in income of unconsolidated LLCs as a result of increased depreciation expense recorded by certain of our unconsolidated limited liability companies ("LLC") in connection with newly constructed medical office buildings ("MOBs") which opened during the fourth quarter of 2007, and; (ii) depreciation expense recorded on the replacement assets received from Universal Health Services, Inc. ("UHS") in connection with the previously disclosed Chalmette Medical Center ("Chalmette") asset exchange and substitution transaction. As a result, on a combined basis, our net income was unfavorably impacted by $187,000, or $.02 per diluted share, during the second quarter of 2008 and by $516,000, or $.04 per diluted share, during the six-month period ended June 30, 2008. In addition, our equity in income of unconsolidated LLCs during the three and six-month periods ended June 30, 2008 were each unfavorably impacted by $329,000, or $.03 per diluted share, from the recording of the following by two of our unconsolidated LLCs that own MOBs inLas Vegas, Nevada: (i) reserves established for certain tenant receivables in connection with the leases which are in default resulting from the licensure revocation and closure of physician-owned gastroenterology and endoscopy clinics, and; (ii) higher than anticipated building maintenance and repairs expense.

Favorably impacting net income during the quarter ended June 30, 2007 was a combined gain of $3.2 million, or $.27 per diluted share, consisting of: (i) a gain of $2.3 million, or $.19 per diluted share, realized on the sale of a medical office building (included in income from discontinued operations), and; (ii) a gain of $939,000, or $.08 per diluted share, related to the recovery of replacement real estate assets in connection with the Chalmette asset exchange and substitution agreement. Favorably impacting net income during the six-month period ended June 30, 2007 was a combined gain of $4.3 million, or $.36 per diluted share, consisting of: (i) a gain of $2.3 million, or $.19 per diluted share, realized on the sale of a medical office building (included in income from discontinued operations); (ii) a gain of $1.7 million, or $.15 per diluted share, related to the recovery of replacement real estate assets in connection with the Chalmette asset exchange and substitution agreement, and; (iii) a gain of $252,000, or $.02 per diluted share, resulting from the sale of real property by an unconsolidated LLC.

As of June 30, 2008, construction continues on three new MOBs, which are owned by LLCs, as follows: (i) Palmdale Medical Plaza located inPalmdale, California, which is substantially completed and scheduled to open soon; (ii) Summerlin Hospital Medical Office Building III located inLas Vegas, Nevada, which is scheduled to be completed and opened during the fourth quarter of 2008, and; (iii) Deer Valley Medical Office Building III located inPhoenix, Arizona, which is scheduled to be completed and opened during the second quarter of 2009.

The second quarter dividend of $.585 per share was paid on June 30, 2008. At June 30, 2008, our shareholders' equity was $155.2 million and our liabilities for borrowed funds were $54.7 million, including mortgage debt of consolidated entities, which is non-recourse to us, totaling $23.3 million.

Universal Health Realty Income Trust, a real estate investment trust, invests in healthcare and human service related facilities including acute care hospitals, behavioral healthcare facilities, rehabilitation hospitals, sub-acute care facilities, surgery centers, childcare centers and medical office buildings. We have forty-seven real estate investments in fourteen states.

Funds from operations, is a widely recognized measure of REIT performance. Although FFO is a non-GAAP financial measure, we believe that information regarding FFO is helpful to shareholders and potential investors. 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. To facilitate a clear understanding of our historical operating results, FFO should be examined in conjunction with net income determined in accordance with GAAP. 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) as an alternative to cash flow from operating activities determined in accordance with GAAP; (iii) as a measure of our liquidity; (iv) nor is FFO an indicator of funds available for our cash needs, including our ability to make cash distributions to shareholders. A reconciliation of our reported net income to FFO is shown below.

The matters discussed in this report, as well as the news releases issued from time to time by us, include certain statements containing the words "believes", "anticipates", "intends", "expects" and words of similar import, which constitute "forward-looking statements" within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers should not place undue reliance on such forward-looking statements which reflect management's view only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

                     Universal Health Realty Income Trust
                      Consolidated Statements of Income
          For the Three and Six Months Ended June 30, 2008 and 2007
               (amounts in thousands, except per share amounts)
                                 (unaudited)

                                            Three Months         Six Months
                                           Ended June 30,      Ended June 30,
                                           2008      2007     2008       2007
    Revenues:
      Base rental - UHS facilities       $3,096    $3,053   $6,158     $6,115
      Base rental - Non-related parties   2,443     2,374    4,840      4,709
      Bonus rental - UHS facilities       1,063     1,035    2,071      2,072
      Tenant reimbursements and other -
       Non-related parties                  597       564    1,085      1,149
      Tenant reimbursements and other -
       UHS facilities                        38        53       62         77
                                          7,237     7,079   14,216     14,122

    Expenses:
      Depreciation and amortization       1,449     1,254    2,855      2,509
      Advisory fees to UHS                  376       356      743        707
      Other operating expenses            1,170     1,075    2,305      2,216
                                          2,995     2,685    5,903      5,432

    Income before equity in income of
     unconsolidated limited liability
     companies ("LLCs"), property
     damage recovered from UHS
     (Chalmette) and interest expense     4,242     4,394    8,313      8,690


      Equity in income of unconsolidated
       LLCs (including recognition of
       gain on sale of real property of
       $252 during the six months
       ended June 30, 2007)                 429       701    1,041      1,648

    Replacement property recovered from
     UHS - Chalmette                          -       939        -      1,728

    Interest expense                       (512)     (428)  (1,037)      (795)

    Income from continuing operations     4,159     5,606    8,317     11,271

    Income from discontinued operations,
     net (including gain on sale of real
     property of $2,270 during the three
     and six months ending June 30, 2007)     -     2,365        -      2,511

    Net income                           $4,159    $7,971   $8,317    $13,782

    Basic earnings per share:
      From continuing operations          $0.35     $0.48    $0.70      $0.96
      From discontinued operations        $0.00     $0.20    $0.00      $0.21
        Total basic earnings per share    $0.35     $0.68    $0.70      $1.17

    Diluted earnings per share:
      From continuing operations          $0.35     $0.47    $0.70      $0.95
      From discontinued operations        $0.00     $0.20    $0.00      $0.21
        Total diluted earnings per
         share                            $0.35     $0.67    $0.70      $1.16

    Weighted average number of shares
     outstanding - Basic                 11,849    11,807   11,846     11,800
    Weighted average number of share
     equivalents                             36        38       37         75
    Weighted average number of shares
     and equivalents outstanding -
     Diluted                             11,885    11,845   11,883     11,875



    Calculation of Funds From Operations
     ("FFO"):
                                            Three Months        Six Months
                                           Ended June 30,      Ended June 30,
                                           2008      2007     2008       2007
    Net income                           $4,159    $7,971   $8,317    $13,782

    Plus: Depreciation and amortization
     expense:
      Consolidated investments            1,429     1,215    2,817      2,490
      Unconsolidated affiliates           1,863     1,440    3,650      2,790
    Less: Gain on sale of real property
     - discontinued operations                -    (2,270)       -     (2,270)
      Gain on LLC's sale of real
       property                               -         -        -       (252)
      Gain on asset exchange and
       substitution agreement with
       UHS - Chalmette                        -      (939)       -     (1,728)
      Funds from operations (FFO)        $7,451    $7,417  $14,784    $14,812

      Funds from operations (FFO)
       per share - Basic                  $0.63     $0.63    $1.25      $1.26
      Funds from operations (FFO)
       per share - Diluted                $0.63     $0.63    $1.24      $1.25

      Dividend paid per share            $0.585    $0.575   $1.165     $1.145



                     Universal Health Realty Income Trust
                         Consolidated Balance Sheets
                        (dollar amounts in thousands)
                                 (unaudited)

                                                  June 30,       December 31,
    Assets:                                         2008               2007

    Real Estate Investments:
      Buildings and improvements                 $184,414           $178,655
      Accumulated depreciation                    (63,393)           (60,627)
                                                  121,021            118,028
      Land                                         19,362             18,258
      Construction in progress                      9,567              7,511
        Net Real Estate Investments               149,950            143,797

      Investments in and advances to
       limited liability companies ("LLCs")        52,447             52,030

    Other Assets:
      Cash and cash equivalents                     1,531              1,131
      Bonus rent receivable from UHS                1,063                960
      Rent receivable - other                       1,604                746
      Deferred charges, notes
       receivable and intangible and
       other assets, net                            6,440              1,085
        Total Assets                             $213,035           $199,749

    Liabilities and Shareholders' Equity:

    Liabilities:
      Line of credit borrowings                   $31,400            $16,800
      Mortgage note payable,
       non-recourse to us                           6,992              3,717
      Mortgage and construction loans
       payable of consolidated LLCs,
       non-recourse to us                          16,339             16,100
      Accrued interest                                111                125
      Accrued expenses and other liabilities        1,906              1,874
      Tenant reserves, escrows,
       deposits and prepaid rents                     971                741
        Total Liabilities                          57,719             39,357

      Minority interests                              106                 87

    Shareholders' Equity:
      Preferred shares of beneficial interest,
       $.01 par value; 5,000,000 shares
       authorized; none issued and outstanding          -                  -
      Common shares, $.01 par value;
       95,000,000 shares authorized; issued
       and outstanding: 2008 - 11,854,494;
       2007 -11,834,805                               119                118
      Capital in excess of par value              189,028            188,638
      Cumulative net income                       335,382            327,065
      Cumulative dividends                       (369,319)          (355,516)
          Total Shareholders' Equity              155,210            160,305
        Total Liabilities and
         Shareholders' Equity                    $213,035           $199,749

SOURCE Universal Health Realty Income Trust

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