Operations of 17 Former Steward Hospitals
Transitioned to Five New Operators
Approximately $2.9 Billion of Year-to-Date
Liquidity Transactions Completed
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE:
MPW) today announced financial and operating results for the third
quarter ended September 30, 2024, as well as certain events
occurring subsequent to quarter end.
Third Quarter Financial
Highlights
- Net loss of ($1.34) and Normalized Funds from Operations
(“NFFO”) of $0.16 for the 2024 third quarter on a per share basis;
and
- Third quarter net loss included approximately $130 million in
real estate gains, offset by approximately $608 million of
impairment charges, approximately $131 million of net negative fair
value adjustments and $137 million accelerated non-cash
amortization of in-place lease intangibles primarily related to
Steward real estate. Amounts representing the majority of these
totals were previously described in MPT’s September 8-K filing
related to the Steward global settlement.
Corporate Updates During and Subsequent
to the Third Quarter
- Leased in November two additional former Steward facilities in
Arizona with a combined lease base of approximately $140 million to
College Health;
- Sold 18 freestanding emergency department (“FSED”) facilities
as well as one general acute hospital in Arizona and Colorado for
approximately $246 million;
- Received a $100 million mortgage repayment related to the April
sale of five hospitals to Prime Healthcare;
- Settled a property damage insurance claim related to a 2020
storm loss at Norwood Hospital, the expected proceeds of which will
offset previously recorded receivables in their entirety;
- Completed the sales of Watsonville Community Hospital in
Watsonville, California for approximately $40 million and two FSED
properties in Texas for approximately $5 million;
- Reduced balances of the revolving credit facility and GBP term
loan due in 2025 by approximately $300 million and £72 million,
respectively;
- Paid a regular quarterly dividend of $0.08 per share in
October.
Edward K. Aldag, Jr., Chairman, President and Chief Executive
Officer, said, “Across our highly diversified, global portfolio, we
are excited by the positive trends we continue to see in
utilization, acuity mix, and reimbursements. Further, as a result
of our recent global settlement and our team’s tireless efforts, we
successfully re-tenanted 17 Steward hospitals across five states to
ensure continuity of patient care and recover our annual cash flows
associated with these properties. With Steward’s removal from our
portfolio, we look forward to demonstrating the strength and
resilience of our diversified portfolio of hospital real estate and
the importance of our business model to an industry in desperate
need for more capital solutions.”
Included in the financial tables accompanying this press release
is information about the Company’s assets and liabilities,
operating results, and reconciliations of net (loss) income to
NFFO, including per share amounts, all on a basis comparable to
2023 results.
PORTFOLIO UPDATE
Medical Properties Trust has total assets of approximately $15.2
billion, including $9.4 billion of general acute facilities, $2.5
billion of behavioral health facilities and $1.7 billion of
post-acute facilities. As of September 30, 2024, MPT’s portfolio
included 402 properties and approximately 40,000 licensed beds
leased to or mortgaged by 55 hospital operating companies across
the United States as well as in the United Kingdom, Switzerland,
Germany, Spain, Finland, Colombia, Italy and Portugal.
MPT’s European general acute portfolio continues to benefit from
the expanding role of private hospitals in addressing rapidly
growing care needs, particularly in the U.K. with a strong
year-over-year increase in surgical volumes, occupancy rates, and
reimbursement rates. Swiss Medical Network (“SMN”) reported organic
growth as well as meaningful benefit from ongoing cost optimization
efforts. In September, SMN opened its Genolier Innovation Hub which
is expected to serve as a venue for leading industry minds to
collaborate to facilitate continuous improvement of healthcare for
patients and future generations. Behavioral and post-acute
operations have remained consistent, with MEDIAN reporting strong
performance across all key revenue metrics and Priory recording
increases in revenue due to improved reimbursement and acuity
mix.
In the Company’s U.S. portfolio, general acute revenue trends
continue to benefit from increasing admissions, surgeries, and
higher reimbursement rates. Further, coverages in MPT’s behavioral
portfolio continue to improve due to steadily rising volumes,
reduced utilization of contract labor and the ramp-up of expanded
facilities. MPT’s portfolio of general acute hospitals operated by
Lifepoint Health continues to demonstrate accelerating
profitability as the operator’s self-funded expansion of Conemaugh
Memorial Medical Center in Johnstown, Pennsylvania has driven
significantly higher volumes while labor costs have continued to
moderate. Overall performance of the post-acute segment, which
combines inpatient rehabilitation (“IRF”) and long-term acute care
(“LTACH”) facilities, remained stable.
During the third quarter of 2024, Prospect did not pay cash rent
related to the six California properties it leases from MPT.
Prospect’s California properties continue to report improving
facility level EBITDARM coverage trends. However, Prospect’s
operating losses in multiple east coast markets that it is
attempting to exit – including Pennsylvania and Rhode Island (a
state where MPT does not have any real estate investments) – have
adversely impacted overall liquidity. Prospect expects to receive
$100 million of quality assurance fund (“QAF”) payments in the
first quarter of 2025.
STEWARD UPDATE
MPT received approximately $10 million in consolidated cash rent
from Steward in the third quarter prior to finalization of its
global settlement agreement with Steward and its creditors in
September. This global settlement restored MPT’s control over its
real estate, severed its relationship with Steward, and facilitated
the re-tenanting of 17 properties previously leased to Steward.
MPT reached definitive agreements with Healthcare Systems of
America, HonorHealth, Quorum Health, Insight Health and most
recently College Health to lease and operate these 17 facilities.
The five new tenants are in-place and executing on their transition
strategies. Since the global settlement, the Company has provided
approximately $90 million in overall working capital loans to these
operators and is receiving cash interest payments. The short-term
loans will provide liquidity until their facility-level receivables
are sufficient to raise asset-backed loans. This represents a
modest increase versus the $80 million previously disclosed due to
larger than expected legal and professional fees as well as other
costs related to the hospital operations transition process. MPT
expects to begin to receive partial cash rental payments from the
re-tenanted portfolio in the first quarter of 2025.
In October, MPT received approximately $45 million in cash
related to Steward’s sale of three former MPT hospitals on
Florida’s “Space Coast” to Orlando Health for total consideration
of approximately $440 million. As previously disclosed, Steward
retained approximately $395 million of proceeds from the sale as
part of the global settlement agreement. In turn, Steward and its
creditors relinquished all rights to any further allocation of
value from transactions related to any other hospital remaining in
the portfolio and the parties agreed to mutually dismiss claims
against each other and exchange broad general releases.
OPERATING RESULTS
Net loss for the third quarter ended September 30, 2024 was
($801 million), or ($1.34) per share, compared to net income of
$117 million, or $0.19 per share, in the year earlier period. Net
loss for the quarter ended September 30, 2024 included
approximately $130 million in real estate gains resulting from
asset sale transactions, approximately $608 million of impairment
charges, $131 million of net negative fair value adjustments and
$137 million accelerated non-cash amortization of in-place lease
intangibles (included in real estate depreciation and
amortization). These primarily consisted of:
- $425 million impairment of Steward working capital loans;
- $183 million of impairments, including $180 million of value in
three “Space Coast” facilities transferred to Steward pursuant to
the global settlement and certain excess properties, with remaining
charges for property taxes and other obligations (net of
recovery);
- $115 million accelerated non-cash amortization of lease
intangibles related to the termination of the former Steward master
lease; and
- $134 million reduction in the fair value of MPT’s investment in
PHP Holdings based on current market conditions.
NFFO for the third quarter ended September 30, 2024 was $94
million, or $0.16 per share, compared to $226 million, or $0.38 per
share in the year earlier period.
CONFERENCE CALL AND WEBCAST
The Company has scheduled a conference call and webcast for
November 7, 2024 at 11:00 a.m. Eastern Time to present the
Company’s financial and operating results for the quarter ended
September 30, 2024. The dial-in numbers for the conference call are
877-883-0383 (U.S.) and 412-902-6506 (International) along with
passcode 6768920. 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. The telephone replay
will be available through November 21, 2024, using dial-in numbers
877-344-7529 (U.S.), 855-669-9658 (Canada) and 412-317-0088
(International) along with passcode 6635503. The webcast replay
will be available for one year following the call’s completion on
the Investor Relations section of the Company’s website.
The Company’s supplemental information package for the current
period will also be available on the Company’s website in the
Investor Relations section.
The Company uses, and intends to continue to use, the Investor
Relations page of its website, which can be found at
www.medicalpropertiestrust.com, as a means of disclosing
material nonpublic information and of complying with its disclosure
obligations under Regulation FD, including, without limitation,
through the posting of investor presentations that may include
material nonpublic information. Accordingly, investors should
monitor the Investor Relations page, in addition to following our
press releases, SEC filings, public conference calls, presentations
and webcasts. The information contained on, or that may be accessed
through, our website is not incorporated by reference into, and is
not a part of, this document.
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
hospital real estate with 402 facilities and approximately 40,000
licensed beds in nine countries and across three continents as of
September 30, 2024. 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.
Forward-Looking Statements
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, asset sales and other liquidity
transactions (including the use of proceeds thereof), expected
re-tenanting of vacant facilities and any related regulatory
approvals, and expected outcomes from Steward’s Chapter 11
restructuring process, including the terms of the agreement
described in this press release. 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 risk that the outcome and terms of the
bankruptcy restructuring of Steward will not be consistent with
those anticipated by the Company; (ii) the risk that the Company is
unable to successfully re-tenant the Steward portfolio hospitals,
on the terms described herein or at all; (iii) the risk that
previously announced or contemplated property sales, loan
repayments, and other capital recycling transactions do not occur
as anticipated or at all; (iv) the risk that MPT is not able to
attain its leverage, liquidity and cost of capital objectives
within a reasonable time period or at all; (v) MPT’s ability to
obtain debt financing on attractive terms or at all, as a result of
changes in interest rates and other factors, which may adversely
impact its ability to pay down, refinance, restructure or extend
its indebtedness as it becomes due, or pursue acquisition and
development opportunities; (vi) the ability of our tenants,
operators and borrowers to satisfy their obligations under their
respective contractual arrangements with us; (vii) the ability of
our tenants and operators to operate profitably and generate
positive cash flow, remain solvent, comply with applicable laws,
rules and regulations in the operation of our properties, to
deliver high-quality services, to attract and retain qualified
personnel and to attract patients; (viii) the risk that we are
unable to monetize our investments in certain tenants at full value
within a reasonable time period or at all, (ix) our success in
implementing our business strategy and our ability to identify,
underwrite, finance, consummate and integrate acquisitions and
investments; and (x) the risks and uncertainties of litigation or
other regulatory proceedings.
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 most recent Annual Report on Form
10-K and our Form 10-Q, and as may be updated in our other filings
with the SEC. 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) September 30, 2024 December 31, 2023
Assets (Unaudited) (A) Real estate assets
Land, buildings and improvements, intangible lease assets, and
other
$
11,653,954
$
13,237,187
Investment in financing leases
1,184,992
1,231,630
Real estate held for sale
85,000
-
Mortgage loans
298,221
309,315
Gross investment in real estate assets
13,222,167
14,778,132
Accumulated depreciation and amortization
(1,423,702
)
(1,407,971
)
Net investment in real estate assets
11,798,465
13,370,161
Cash and cash equivalents
275,616
250,016
Interest and rent receivables
35,142
45,059
Straight-line rent receivables
685,742
635,987
Investments in unconsolidated real estate joint ventures
1,242,772
1,474,455
Investments in unconsolidated operating entities
508,227
1,778,640
Other loans
155,889
292,615
Other assets
534,303
457,911
Total Assets
$
15,236,156
$
18,304,844
Liabilities and Equity Liabilities Debt, net
$
9,215,751
$
10,064,236
Accounts payable and accrued expenses
418,339
412,178
Deferred revenue
24,332
37,962
Obligations to tenants and other lease liabilities
136,635
156,603
Total Liabilities
9,795,057
10,670,979
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 - 600,229 shares at
September 30, 2024 and 598,991 shares at December 31, 2023
600
599
Additional paid-in capital
8,578,355
8,560,309
Retained deficit
(3,197,505
)
(971,809
)
Accumulated other comprehensive income
57,114
42,501
Total Medical Properties Trust, Inc. Stockholders' Equity
5,438,564
7,631,600
Non-controlling interests
2,535
2,265
Total Equity
5,441,099
7,633,865
Total Liabilities and Equity
$
15,236,156
$
18,304,844
(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 Nine Months Ended
September 30, 2024 September 30, 2023 September 30, 2024 September
30, 2023
Revenues Rent billed
$
169,721
$
229,306
$
552,784
$
724,954
Straight-line rent
36,602
21,511
119,719
38,875
Income from financing leases
9,798
26,066
53,832
107,729
Interest and other income
9,706
29,693
37,368
122,624
Total revenues
225,827
306,576
763,703
994,182
Expenses Interest
106,243
106,709
316,358
308,833
Real estate depreciation and amortization
204,875
77,802
382,701
526,065
Property-related (A)
4,994
6,483
17,475
38,269
General and administrative
36,625
38,110
105,300
115,438
Total expenses
352,737
229,104
821,834
988,605
Other (expense) income Gain (loss) on sale of real
estate
91,795
(20
)
475,196
209
Real estate and other impairment charges, net
(607,922
)
(3,750
)
(1,438,429
)
(93,288
)
Earnings (loss) from equity interests
21,643
11,264
(369,565
)
34,840
Debt refinancing and unutilized financing (costs) benefit
(713
)
862
(3,677
)
46
Other (including fair value adjustments on securities)
(169,790
)
41,125
(566,821
)
25,447
Total other (expense) income
(664,987
)
49,481
(1,903,296
)
(32,746
)
(Loss) income before income tax
(791,897
)
126,953
(1,961,427
)
(27,169
)
Income tax (expense) benefit
(9,032
)
(10,058
)
(34,538
)
134,661
Net (loss) income
(800,929
)
116,895
(1,995,965
)
107,492
Net income attributable to non-controlling interests
(234
)
(185
)
(1,458
)
(25
)
Net (loss) income attributable to MPT common stockholders
$
(801,163
)
$
116,710
$
(1,997,423
)
$
107,467
Earnings per common share - basic and diluted: Net
(loss) income attributable to MPT common stockholders
$
(1.34
)
$
0.19
$
(3.33
)
$
0.18
Weighted average shares outstanding - basic
600,229
598,444
600,197
598,363
Weighted average shares outstanding - diluted
600,229
598,553
600,197
598,406
Dividends declared per common share
$
0.08
$
0.15
$
0.38
$
0.73
(A) Includes $2.6 million and $3.3 million of ground lease
and other expenses (such as property taxes and insurance) paid
directly by us and reimbursed by our tenants for the three months
ended September 30, 2024 and 2023, respectively, and $9.8 million
and $28.6 million for the nine months ended September 30, 2024 and
2023, respectively.
MEDICAL PROPERTIES TRUST, INC. AND
SUBSIDIARIES Reconciliation of Net (Loss) Income to
Funds From Operations (Unaudited)
(Amounts in thousands,
except for per share data) For the Three Months Ended For the
Nine Months Ended September 30, 2024 September 30, 2023 September
30, 2024 September 30, 2023
FFO information: Net
(loss) income attributable to MPT common stockholders
$
(801,163
)
$
116,710
$
(1,997,423
)
$
107,467
Participating securities' share in earnings
(153
)
(311
)
(807
)
(1,295
)
Net (loss) income, less participating securities' share in earnings
$
(801,316
)
$
116,399
$
(1,998,230
)
$
106,172
Depreciation and amortization
218,646
96,280
430,128
580,484
(Gain) loss on sale of real estate
(91,795
)
20
(475,196
)
(209
)
Real estate impairment charges
179,952
3,750
679,276
55,854
Funds from operations
$
(494,513
)
$
216,449
$
(1,364,022
)
$
742,301
Write-off of billed and unbilled rent and other
(159
)
52,742
2,846
150,576
Other impairment charges, net
427,970
-
1,169,943
37,434
Litigation and other
28,899
2,759
46,507
12,987
Share-based compensation adjustments
-
1,243
-
(3,120
)
Non-cash fair value adjustments
130,949
(46,815
)
511,472
(42,562
)
Tax rate changes and other
8
-
4,596
(164,535
)
Debt refinancing and unutilized financing costs (benefit)
713
(862
)
3,677
(46
)
Normalized funds from operations
$
93,867
$
225,516
$
375,019
$
733,035
Certain non-cash and related recovery information:
Share-based compensation
$
14,427
$
10,210
$
30,581
$
32,839
Debt costs amortization
$
4,994
$
5,016
$
14,769
$
15,340
Non-cash rent and interest revenue (A)
$
-
$
(31,323
)
$
-
$
(181,680
)
Cash recoveries of non-cash rent and interest revenue (B)
$
552
$
2,351
$
6,840
$
36,087
Straight-line rent revenue from operating and finance leases
$
(41,363
)
$
(61,003
)
$
(129,395
)
$
(184,417
)
Per diluted share data: Net (loss) income,
less participating securities' share in earnings
$
(1.34
)
$
0.19
$
(3.33
)
$
0.18
Depreciation and amortization
0.37
0.16
0.72
0.97
(Gain) loss on sale of real estate
(0.15
)
-
(0.79
)
-
Real estate impairment charges
0.30
0.01
1.13
0.09
Funds from operations
$
(0.82
)
$
0.36
$
(2.27
)
$
1.24
Write-off of billed and unbilled rent and other
-
0.09
-
0.25
Other impairment charges, net
0.71
-
1.94
0.06
Litigation and other
0.05
0.01
0.08
0.02
Share-based compensation adjustments
-
-
-
(0.01
)
Non-cash fair value adjustments
0.22
(0.08
)
0.85
(0.07
)
Tax rate changes and other
-
-
0.01
(0.27
)
Debt refinancing and unutilized financing costs (benefit)
-
-
0.01
-
Normalized funds from operations
$
0.16
$
0.38
$
0.62
$
1.22
Certain non-cash and related recovery information:
Share-based compensation
$
0.02
$
0.02
$
0.05
$
0.06
Debt costs amortization
$
0.01
$
0.01
$
0.02
$
0.03
Non-cash rent and interest revenue (A)
$
-
$
(0.05
)
$
-
$
(0.30
)
Cash recoveries of non-cash rent and interest revenue (B)
$
-
$
-
$
0.01
$
0.06
Straight-line rent revenue from operating and finance leases
$
(0.07
)
$
(0.11
)
$
(0.22
)
$
(0.31
)
Notes:
Investors and analysts following the real estate industry
utilize funds from operations ("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, including
amortization related to in-place lease intangibles, and after
adjustments for unconsolidated partnerships and joint ventures.
In addition to presenting FFO in accordance with the Nareit
definition, we 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 (if any not paid by
our tenants) 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.
Certain line items above (such as depreciation and amortization)
include our share of such income/expense from unconsolidated joint
ventures. These amounts are included with all activity of our
equity interests in the "Earnings (loss) from equity interests"
line on the consolidated statements of income.
(A) Includes revenue accrued during the period but not received
in cash, such as deferred rent, payment-in-kind ("PIK") interest or
other accruals.
(B) Includes cash received to satisfy previously accrued
non-cash revenue, such as the cash receipt of previously deferred
rent or PIK interest.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241106301374/en/
Drew Babin, CFA, CMA Head of Financial Strategy and Investor
Relations Medical Properties Trust, Inc. (646) 884-9809
dbabin@medicalpropertiestrust.com
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