Per Share Net Income of $0.21 and Normalized
FFO of $0.38
$3.1 Billion of Closed and Announced
Investments Year-to-Date
100% of Rent and Interest Collected or
Subject to Definitive Repayment Agreements Since Onset of
COVID-19
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE:
MPW) today announced financial and operating results for the second
quarter ended June 30, 2020 as well as certain events occurring
subsequent to quarter end.
- Net income of $0.21 and Normalized Funds from Operations
(“NFFO”) of $0.38 in the second quarter, both on a per diluted
share basis;
- Expected full-calendar year 2020 cash rent and interest
collections of 98%; deferrals of current rent and interest due will
end by the fourth quarter, and amounts remaining unpaid will be
collected pursuant to defined repayment arrangements;
- Acquired in early July for $200 million the fee simple interest
in Steward’s Davis and Jordan Valley, UT Hospitals previously
subject to a mortgage loan investment from MPT;
- Entered into commitments to acquire real estate of Prime St.
Francis Medical Center in Lynwood, CA for an investment of $300
million; expected to close in the third quarter;
- Closed in mid-May, a $205 million transaction to form a joint
venture to invest in select international hospitals outside of the
scope of existing operator relationships; subsequently committed to
a $100 million investment, expected to close in the fourth quarter,
in a three-hospital portfolio located in Colombia to be managed by
the new platform;
- Entered into binding agreement to acquire real estate of a
MEDIAN inpatient rehab facility in Dahlen, Germany for €12.5
million in the third quarter; separately, commenced construction on
an Ernest post-acute facility in Bakersfield, CA with a total cost
of roughly $48M and placed under various stages of agreement
approximately $210 million of additional investments to be detailed
in future quarters;
- Sold approximately 6.0 million common shares since March 31,
2020 through the Company’s “at-the-market” program at an average
price of $18.16 for net proceeds of approximately $108.2
million.
“As we have previously mentioned, MPT continues to see
tremendous potential for further investment. The pandemic the world
is going through has created even more opportunities for us,” said
Edward K. Aldag, Jr., MPT’s Chairman, President, and Chief
Executive Officer. “During the past three months we have been able
to execute on some of those transactions bringing our total 2020
investments to date to $3.1 billion. Between now and the end of the
year, we expect to be able to capitalize on other opportunities as
well.”
Mr. Aldag continued, “We are immensely proud of our operators
for rapidly reconfiguring, right-sizing, and adjusting their
operations in response to the COVID pandemic such that we expect to
collect 100% of rent and interest contractually due to us,
including 98% to be collected in 2020 with the remaining 2% subject
to payment plans with interest. As we have been indicating since
May, and as has been confirmed by multiple public hospital
corporations, patients are returning to hospitals in scale for
medically necessary elective procedures.”
Included in the financial tables accompanying this press release
is information about the Company’s assets and liabilities, net
income and reconciliations of net income to NFFO, all on a basis
comparable to 2019 results, and a reconciliation of pro forma total
gross assets to total assets.
PORTFOLIO UPDATE
MPT and its operators executed on several accretive growth
initiatives during and subsequent to the second quarter despite the
environment created by the COVID-19 pandemic.
In the third quarter, MPT expects to acquire St. Francis Medical
Center in Los Angeles County, CA for total consideration of $300
million and a GAAP yield near 9% in conjunction with Prime
Healthcare’s purchase of the operations from Verity Health. The
384-bed facility serves as critical infrastructure in the Lynwood
community, accommodating more than 75,000 patients in its emergency
department annually, and is classified as a level II trauma
center.
On July 7, MPT enhanced its overall Steward portfolio through
the conversion of the final two Steward properties subject to
mortgage loans into fee simple property leases for an incremental
investment of $200 million. The entire $950 million investment in
the Jordan Valley and Davis, Utah facilities, two of Steward’s most
profitable, will carry an attractive GAAP yield consistent with the
near-10% on the Steward master lease agreement.
Approximately $171 million of development properties leased to
Surgery Partners and Circle Health were completed and placed in
service during the first half of the year leaving only the $27.5
million NeuroPsychiatric Hospital in Clear Lake, Texas and a
recently-committed $48 million project alongside Ernest Health in
Bakersfield, CA under development at June 30, 2020. MPT has roughly
$210 million of additional development, expansion, acquisition, and
loan investment agreements in process with more detail to be
provided as commitments are executed.
MPT closed in mid-May on a $205 million investment to own 49% of
a joint venture with Steward CEO and Founder Dr. Ralph de la Torre
and members of his management team organized to invest in select
international hospitals. The distinct entity simultaneously
purchased from Steward the rights and existing assets related to
all present and future international opportunities previously owned
by Steward for strategic, regulatory, and risk management purposes.
In a transaction expected to close in the fourth quarter, MPT
expects to invest $100 million in a portfolio of three hospitals in
underserved areas of Colombia to be operated by the new joint
venture.
The Company has pro forma total gross assets of approximately
$17.3 billion, including $14.3 billion in general acute care
hospitals, $1.9 billion in inpatient rehabilitation hospitals, and
$0.3 billion in long-term acute care hospitals. Our portfolio, pro
forma for the transactions herein, includes approximately 390
properties representing roughly 42,000 licensed beds across the
United States and in Germany, the United Kingdom, Switzerland,
Italy, Spain, Portugal, Australia, and Colombia. The properties are
leased to or mortgaged by 45 hospital operating companies. MPT
continues to work with existing and new operators in the U.S. and
abroad on numerous opportunities.
OPERATING RESULTS AND OUTLOOK
Net income for the second quarter of 2020 was $109.5 million (or
$0.21 per diluted share), compared to $79.4 million ($0.20 per
diluted share) in the second quarter of 2019.
NFFO for the second quarter of 2020 was $199.6 million (or $0.38
per diluted share), compared to $120.9 million ($0.31 per diluted
share) in the second quarter of 2019.
Based on year-to-date transactions, along with an assumed
capital structure that results in a net debt to EBITDA ratio of
approximately 5.5 times, MPT expects an annual run-rate of $1.09 to
$1.12 per diluted share for net income and $1.68 to $1.71 per
diluted share for NFFO.
These estimates do not include the effects, if any, of
unexpected real estate operating costs, changes in accounting
pronouncements, litigation costs, debt refinancing costs,
acquisition costs, currency exchange rate movements, interest rate
hedging activities, write-offs of straight-line rent or other
non-recurring or unplanned transactions. Moreover, these estimates
do not provide for the impact on MPT or its tenants and borrowers
or on local and national governments worldwide of the ongoing
global COVID-19 pandemic. These estimates may change if the Company
acquires or sells assets in amounts that are different from
estimates, market interest rates change, debt is refinanced, new
shares are issued, additional debt is incurred, other operating
expenses vary, income from our equity investments vary from
expectations, or existing leases do not perform in accordance with
their terms.
CONFERENCE CALL AND WEBCAST
The Company has scheduled a conference call and webcast for
Thursday, July 30, 2020 at 11:00 a.m. Eastern Time to present the
Company’s financial and operating results for the quarter ended
June 30, 2020. The dial-in numbers for the conference call are
844-535-3969 (U.S. and Canada) and 409-937-8903 (International);
both numbers require passcode 5042744. The conference call will
also be available via webcast in the Investor Relations section of
the Company’s website, www.medicalpropertiestrust.com.
A telephone and webcast replay of the call will be available
beginning shortly after the call’s completion through August 13,
2020. Dial-in numbers for the replay are 855-859-2056 and
404-537-3406 for U.S./Canada and International callers,
respectively. The replay passcode for all callers is 5042744.
The Company’s supplemental information package for the current
period will also be available on the Company’s website in the
Investor Relations section.
About Medical Properties Trust, Inc.
Medical Properties Trust, Inc. is a self-advised real estate
investment trust formed in 2003 to acquire and develop net-leased
hospital facilities. From its inception in Birmingham, Alabama, the
Company has grown to become one of the world’s largest owners of
hospitals with approximately 390 facilities and roughly 42,000
licensed beds in nine countries and across four continents on a pro
forma basis. MPT’s financing model facilitates acquisitions and
recapitalizations and allows operators of hospitals to unlock the
value of their real estate assets to fund facility improvements,
technology upgrades and other investments in operations. For more
information, please visit the Company’s website at
www.medicalpropertiestrust.com.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements can generally be identified by
the use of forward-looking words such as “may”, “will”, “would”,
“could”, “expect”, “intend”, “plan”, “estimate”, “target”,
“anticipate”, “believe”, “objectives”, “outlook”, “guidance” or
other similar words, and include statements regarding our
strategies, objectives, future expansion and development
activities, and expected financial performance. Forward-looking
statements involve known and unknown risks and uncertainties that
may cause our actual results or future events to differ materially
from those expressed in or underlying such forward-looking
statements, including, but not limited to: (i) the economic,
political and social impact of, and uncertainty relating to, the
COVID-19 pandemic, including governmental assistance to hospitals
and healthcare providers, including certain of our tenants; (ii)
the ability of our tenants, operators and borrowers to satisfy
their obligations under their respective contractual arrangements
with us, especially as a result of the adverse economic impact of
the COVID-19 pandemic, and government regulation of hospitals and
healthcare providers in connection with same (as further detailed
in our Current Report on Form 8-K filed with the SEC on April 8,
2020); (iii) our expectations regarding annual run-rate net income
and NFFO per share; (iv) our success in implementing our business
strategy and our ability to identify, underwrite, finance,
consummate and integrate acquisitions and investments; (v) the
nature and extent of our current and future competition; (vi)
macroeconomic conditions, such as a disruption of or lack of access
to the capital markets; (vii) our ability to obtain debt financing
on attractive terms or at all, which may adversely impact our
ability to pursue acquisition and development opportunities and pay
down, refinance, restructure or extend our indebtedness as it
becomes due; (viii) increases in our borrowing costs as a result of
changes in interest rates and other factors, including the
potential phasing out of LIBOR after 2021; (ix) international,
national and local economic, real estate and other market
conditions, which may negatively impact, among other things, the
financial condition of our tenants, lenders and institutions that
hold our cash balances, and may expose us to increased risks of
default by these parties; (x) factors affecting the real estate
industry generally or the healthcare real estate industry in
particular; (xi) our ability to maintain our status as a REIT for
federal and state income tax purposes; (xii) federal and state
healthcare and other regulatory requirements, as well as those in
the foreign jurisdictions where we own properties; (xiii) the value
of our real estate assets, which may limit our ability to dispose
of assets at attractive prices or obtain or maintain equity or debt
financing secured by our properties or on an unsecured basis; (xiv)
the ability of our tenants and operators to comply with applicable
laws, rules and regulations in the operation of the our properties,
to deliver high-quality services, to attract and retain qualified
personnel and to attract residents and patients; and (xv) potential
environmental contingencies and other liabilities.
The risks described above are not exhaustive and additional
factors could adversely affect our business and financial
performance, including the risk factors discussed under the section
captioned “Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2019. Forward-looking statements are
inherently uncertain and actual performance or outcomes may vary
materially from any forward-looking statements and the assumptions
on which those statements are based. Readers are cautioned to not
place undue reliance on forward-looking statements as predictions
of future events. We disclaim any responsibility to update such
forward-looking statements, which speak only as of the date on
which they were made.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except
for per share data) June 30, 2020 December 31, 2019
Assets (Unaudited) (A) Real estate assets
Land, buildings and improvements, intangible lease assets, and
other
$
9,990,860
$
8,102,754
Investment in financing leases
2,078,209
2,060,302
Mortgage loans
1,339,258
1,275,022
Gross investment in real estate assets
13,408,327
11,438,078
Accumulated depreciation and amortization
(684,444
)
(570,042
)
Net investment in real estate assets
12,723,883
10,868,036
Cash and cash equivalents
374,962
1,462,286
Interest and rent receivables
41,321
31,357
Straight-line rent receivables
377,999
334,231
Equity investments
841,098
926,990
Other loans
792,011
544,832
Other assets
296,796
299,599
Total Assets
$
15,448,070
$
14,467,331
Liabilities and Equity Liabilities Debt, net
$
7,795,890
$
7,023,679
Accounts payable and accrued expenses
443,453
291,489
Deferred revenue
18,638
16,098
Obligations to tenants and other lease liabilities
122,812
107,911
Total Liabilities
8,380,793
7,439,177
Equity Preferred stock, $0.001 par value. Authorized 10,000
shares; no shares outstanding
-
-
Common stock, $0.001 par value. Authorized 750,000 shares; issued
and outstanding - 528,641 shares at June 30, 2020 and 517,522
shares at December 31, 2019
529
518
Additional paid-in capital
7,200,203
7,008,199
Retained (deficit) earnings
(19,771
)
83,012
Accumulated other comprehensive loss
(113,013
)
(62,905
)
Treasury shares, at cost
(777
)
(777
)
Total Medical Properties Trust, Inc. Stockholders' Equity
7,067,171
7,028,047
Non-controlling interests
106
107
Total Equity
7,067,277
7,028,154
Total Liabilities and Equity
$
15,448,070
$
14,467,331
(A) Financials have been derived from the prior year audited
financial statements.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(Amounts in
thousands, except for per share data) For the Three Months
Ended For the Six Months Ended June 30, 2020 June 30, 2019 June 30,
2020 June 30, 2019
Revenues Rent billed
$
173,557
$
110,882
$
345,324
$
219,480
Straight-line rent
21,151
25,136
52,572
45,787
Income from financing leases
52,489
17,386
104,925
34,666
Interest and other income
44,645
39,145
83,153
73,070
Total revenues
291,842
192,549
585,974
373,003
Expenses Interest
80,376
52,326
161,275
102,877
Real estate depreciation and amortization
61,463
33,976
122,384
67,328
Property-related
9,985
8,290
15,557
11,356
General and administrative
32,018
22,272
65,403
45,723
Total expenses
183,842
116,864
364,619
227,284
Other income (expense) Loss on sale of real estate
(3,101
)
(147
)
(1,776
)
(147
)
Real estate impairment charges
-
-
(19,006
)
-
Earnings from equity interests
5,291
4,441
9,370
8,161
Unutilized financing fees
-
(914
)
(611
)
(914
)
Other (including mark-to-market adjustments on equity securities)
4,291
581
(9,684
)
785
Total other income (expense)
6,481
3,961
(21,707
)
7,885
Income before income tax
114,481
79,646
199,648
153,604
Income tax (expense) benefit
(4,829
)
274
(8,839
)
2,607
Net income
109,652
79,920
190,809
156,211
Net income attributable to non-controlling interests
(184
)
(482
)
(349
)
(951
)
Net income attributable to MPT common stockholders
$
109,468
$
79,438
$
190,460
$
155,260
Earnings per common share - basic and diluted:
Net income attributable to MPT common stockholders
$
0.21
$
0.20
$
0.36
$
0.40
Weighted average shares outstanding - basic
527,781
394,574
524,428
387,563
Weighted average shares outstanding - diluted
528,880
395,692
525,530
388,683
Dividends declared per common share
$
0.27
$
0.25
$
0.54
$
0.50
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Reconciliation of Net Income to Funds From Operations
(Unaudited)
(Amounts in thousands, except for per
share data) For the Three Months Ended For the Six Months Ended
June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
FFO information: Net income attributable to MPT common
stockholders
$
109,468
$
79,438
$
190,460
$
155,260
Participating securities' share in earnings
(487
)
(446
)
(951
)
(922
)
Net income, less participating securities' share in earnings
$
108,981
$
78,992
$
189,509
$
154,338
Depreciation and amortization
71,823
40,407
142,325
80,261
Loss on sale of real estate
3,101
147
1,776
147
Real estate impairment charges
-
-
19,006
-
Funds from operations
$
183,905
$
119,546
$
352,616
$
234,746
Write-off of straight-line rent and other, net of tax
19,241
406
26,958
3,002
Non-cash fair value adjustments
(3,590
)
-
10,605
-
Unutilized financing fees
-
914
611
914
Normalized funds from operations
$
199,556
$
120,866
$
390,790
$
238,662
Share-based compensation
12,192
6,317
22,228
13,032
Debt costs amortization
3,428
2,188
6,837
4,255
Rent deferral
(7,240
)
-
(7,240
)
-
Straight-line rent revenue and other
(50,860
)
(29,508
)
(100,474
)
(57,558
)
Adjusted funds from operations
$
157,076
$
99,863
$
312,141
$
198,391
Per diluted share data: Net income,
less participating securities' share in earnings
$
0.21
$
0.20
$
0.36
$
0.40
Depreciation and amortization
0.14
0.10
0.27
0.20
Loss on sale of real estate
-
-
-
-
Real estate impairment charges
-
-
0.04
-
Funds from operations
$
0.35
$
0.30
$
0.67
$
0.60
Write-off of straight-line rent and other, net of tax
0.03
-
0.05
0.01
Non-cash fair value adjustments
-
-
0.02
-
Unutilized financing fees
-
0.01
-
-
Normalized funds from operations
$
0.38
$
0.31
$
0.74
$
0.61
Share-based compensation
0.02
0.02
0.04
0.03
Debt costs amortization
-
-
0.01
0.01
Rent deferral
(0.01
)
-
(0.01
)
-
Straight-line rent revenue and other
(0.09
)
(0.08
)
(0.19
)
(0.14
)
Adjusted funds from operations
$
0.30
$
0.25
$
0.59
$
0.51
Notes:
(A)
Certain line items above (such as real estate depreciation) include
our share of such income/expense from unconsolidated joint
ventures. These amounts are included with the activity of all of
our equity interests in the "Earnings from equity interests" line
on the consolidated statements of income.
(B) Investors and analysts following the
real estate industry utilize funds from operations, or FFO, as a
supplemental performance measure. FFO, reflecting the assumption
that real estate asset values rise or fall with market conditions,
principally adjusts for the effects of GAAP depreciation and
amortization of real estate assets, which assumes that the value of
real estate diminishes predictably over time. We compute FFO in
accordance with the definition provided by the National Association
of Real Estate Investment Trusts, or NAREIT, which represents net
income (loss) (computed in accordance with GAAP), excluding gains
(losses) on sales of real estate and impairment charges on real
estate assets, plus real estate depreciation and amortization and
after adjustments for unconsolidated partnerships and joint
ventures.
In addition to presenting FFO in
accordance with the NAREIT definition, we also disclose normalized
FFO, which adjusts FFO for items that relate to unanticipated or
non-core events or activities or accounting changes that, if not
noted, would make comparison to prior period results and market
expectations less meaningful to investors and analysts. We believe
that the use of FFO, combined with the required GAAP presentations,
improves the understanding of our operating results among investors
and the use of normalized FFO makes comparisons of our operating
results with prior periods and other companies more meaningful.
While FFO and normalized FFO are relevant and widely used
supplemental measures of operating and financial performance of
REITs, they should not be viewed as a substitute measure of our
operating performance since the measures do not reflect either
depreciation and amortization costs or the level of capital
expenditures and leasing costs necessary to maintain the operating
performance of our properties, which can be significant economic
costs that could materially impact our results of operations. FFO
and normalized FFO should not be considered an alternative to net
income (loss) (computed in accordance with GAAP) as indicators of
our results of operations or to cash flow from operating activities
(computed in accordance with GAAP) as an indicator of our
liquidity.
We calculate adjusted funds from
operations, or AFFO, by subtracting from or adding to normalized
FFO (i) non-cash revenue, (ii) non-cash share-based compensation
expense, and (iii) amortization of deferred financing costs. AFFO
is an operating measurement that we use to analyze our results of
operations based on the receipt, rather than the accrual, of our
rental revenue and on certain other adjustments. We believe that
this is an important measurement because our leases generally have
significant contractual escalations of base rents and therefore
result in recognition of rental income that is not collected until
future periods, and costs that are deferred or are non-cash
charges. Our calculation of AFFO may not be comparable to AFFO or
similarly titled measures reported by other REITs. AFFO should not
be considered as an alternative to net income (calculated pursuant
to GAAP) as an indicator of our results of operations or to cash
flow from operating activities (calculated pursuant to GAAP) as an
indicator of our liquidity.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Annual
Run-Rate Guidance Reconciliation (Unaudited)
Annual Run-Rate Guidance - Per Share(1) Low High Net
income attributable to MPT common stockholders
$
1.09
$
1.12
Participating securities' share in earnings
-
-
Net income, less participating securities' share in earnings
$
1.09
$
1.12
Depreciation and amortization
0.59
0.59
Funds from operations
$
1.68
$
1.71
Other adjustments
-
-
Normalized funds from operations
$
1.68
$
1.71
(1) The guidance is based on current expectations and
actual results or future events may differ materially from those
expressed in this table, which is a forward-looking
statement within the meaning of
the federal securities laws. Please refer to the forward-looking
statement included in this press release and our filings with the
Securities and Exchange Commission for a discussion of risk factors
that affect our performance.
Pro Forma Total Gross Assets (Unaudited)
(Amounts in thousands) June 30, 2020 Total Assets
$
15,448,070
Add: Binding real estate commitments on new investments(1)
514,042
Unfunded amounts on development deals and commenced capital
improvement projects(2)
154,760
Accumulated depreciation and amortization
684,444
Incremental gross assets of our joint ventures(3)
851,518
Less: Cash used for funding the transactions above
(374,962
)
Pro Forma Total Gross Assets(4)
$
17,277,872
(1)
Reflects our commitment to acquire a facility in the United States
and a facility in Germany, along with an incremental investment to
acquire the fee simple interest of two facilities in the United
States previously subject to a mortgage loan.
(2) Includes $47.8 million unfunded
amounts on ongoing development projects and $107.0 million unfunded
amounts on capital improvement projects and development projects
that have commenced rent.
(3) Adjustment to reflect our share of our
joint ventures' gross assets.
(4) Pro
forma total gross assets is total assets before accumulated
depreciation/amortization and assumes all real estate binding
commitments on new investments and unfunded amounts on development
deals and commenced capital improvement projects are fully funded
using cash on hand. We believe pro forma total gross assets is
useful to investors as it provides a more current view of our
portfolio and allows for a better understanding of our
concentration levels as our binding commitments close and our other
commitments are fully funded.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005501/en/
Drew Babin, CFA Senior Managing Director – Corporate
Communications Medical Properties Trust, Inc. (646) 884-9809
dbabin@medicalpropertiestrust.com
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