Q3 2019 Earnings Call
Good morning, ladies and gentlemen, and welcome to the Q3 2019 Medical properties Trust earnings Conference call.
Sorry, all participants are not listen only mode. Later, we'll conduct a question answer session.
Destructions will follow at that time.
No one should require assistance during the conference. Please press Star then zero, one or Touchtone telephone.
As a reminder, this conference call is being recorded I would now like to turn conference over to your host Mr. Charles numbers.
Managing director. Please go ahead Sir.
Thank you and good morning.
Welcome to the medical properties Trust conference call to discuss our third quarter 2019 financial results.
With me today are Edward K., Aldag Junior Chairman, President and Chief Executive Officer of the company and Steven Hamner Executive Vice President and Chief Financial Officer.
Our press release was distributed this morning and furnished on form 8-K, with the Securities and Exchange Commission.
If you did not receive a copy is available on our website at www Dot medical properties Trust Dot com and the Investor Relations section.
Additionally, we're hosting a live webcast of today's call, which you can access in that same section.
During the course of the call, we will make projections and certain other statements that may be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to known and unknown risks uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward looking statements.
We refer you to the company's reports filed with the Securities and Exchange Commission for a discussion of the factors that could cause the company's actual results or future events to differ materially from those expressed in this call.
The information being provided today is as of this state on lake and except as required by the federal Securities laws. The company does not undertake no duty to update any such information.
In addition, during the course of the conference call. We will describes certain non-GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release Medical properties Trust is reconciled all non-GAAP financial measures to the most directly comparable GAAP measure.
As yours in accordance with Reg G requirements.
You can also refer to our website at Www Dot medical properties Trust Dot com for the most directly comparable financial measures and related reconciliations.
I'll now turn the call over to our Chief Executive Officer, Ed Aldag. Thank you Charles Good morning, and thanks to all of you for joining us on today's third quarter earnings call a year ago. We noted that we anticipated 2019 to be another record year for MPT as we near the close of 2019, we can.
Certainly say, there's been a fantastic here and we may not be done yet.
Year to date, we have close $3.7 billion of transactions 1.55 billion for prospect here in the U.S. 906 million for held scope in Australia 423 million for Ramsey in the UK 284 million, but Swiss medical network in Switzerland 254.
4 million for Bob we're in the U.S. honored and 54 million for St. Luke's in the U.S. 55 million for house in Watsonville in the U.S. 45 million for BMR Harbor Hospital in the UK 28 million for development project would narrow spike in the U.S. and 32 million for additional projects with existing.
Got it tomorrow.
92% of 2019 investment had been with new relationships, we've expanded our investments in the U.S., Germany, and the UK, while making initial investment in Switzerland and Austria.
We continue to see exciting domestic and international opportunities to grow primarily with new operators all across the globe.
Our pipeline remains robust with more than 5 billion in potential transactions that we are actively working.
Let me walk through some of the more recent transactions one of which was an expansion of our longstanding relationship with Bob growth one of the top post acute care operators in the country, we were able to acquire three very stronger Arps, and Kentucky in California for approximately $200 million all alone.
Bruce properties or cross defaulted, but for illustrative purposes. The EBITDARM coverage on these three arps is two times as a part of this group of properties. We acquired seven L. tax for approximately $54 million. These elteks are well priced and have an overall coverage of approximately five.
Times. These profitable facilities are located throughout the U.S. and attractive markets with strong referral networks and have already exceeded our expectations for the year to date.
Another recently closed transaction was with house in healthcare, new operator to MPT for an acute care hospital in Watsonville, California.
The house into executive team is comprised of Veterans' health care executives with an average of 25 plus years of experience, including within the California market. Several of these executives were executives that previously owned MPG facilities, we're delighted to welcome them back.
Additionally, we just closed on a 28 million behavioral health opportunity with neuro psychiatric hospitals for the development of a 92 bed freestanding hospital in the Houston, Texas market.
And be age is a behavioral health company focused on providing best in class care for patients with acute complex medical and psychiatric conditions and is known as the largest neuro psychiatric care organization in the country. They made an underserved need in treating the more severe co morbid cases that.
Additionally, psych hospitals are not equipped to date.
And DH currently operates four facilities with 187 beds in Indiana and is well positioned for near term growth into new markets. In 2020 construction is underway with an estimated opening in the third quarter of 2020.
During the third quarter. We also closed on the previously announced transaction to purchase eight acute care hospitals operated by Ramsey healthcare in the UK Ramsey's listed among the world's largest hospital operators and we're excited to develop this new relationship.
Finally, we completed the previously announced 1.55 billion dollar transaction for the prospect Medical Holdings Hospital portfolio, our prospect hospitals are performing as expected and tracking in accordance with our underwriting.
But continues to benefit from cost reduction strategies, renegotiated payer contracts and greater focus on growth opportunities.
The transactions discussed today as well as the previously announced transactions from the first half of the year. We've already achieved the single largest year of acquisition growth and MPT history, and we still have another quarter to go while I can't predict with certainty when we will be able to announce in close any of the properties. We're worked.
No one in our pipeline, we do expect that we will be able to make such announcements over the next couple of quarters.
Now I'll provide a quick update on our existing portfolio. We added 22 properties to our same store reporting, including 13 nerves 11 facilities in Germany, one in Louisiana and wondering allow aid acute care hospitals, three in Florida to in Pennsylvania, One in Ohio, one in Idaho, and one in Germany.
And one eltek in Texas.
Same store acute care EBITDARM coverage is 3.19 times, which represents a slide 16 basis point decrease year over year, primarily driven by a slight volume declines in a few of our larger general acute hospitals just to note to remind you. We report one quarter in arrears. So this is referring to the SEC.
Third quarter of the year.
A quick update on steward steward made the decision to discontinue operations. It is saying to looks facility in Arizona. They made the strategic decision to transfer some of those operations to other Stewart facilities in close some services rather than competing with a newly renovated banner facility five minutes to the west and a planned one be.
Billion dollar County owned facility five minutes to the East Stuart will continue to pay the full MPT rent as required under their master lease we expect their decision to close side looks to be a positive for their bottom line in doesn't improvement to they're already strong coverage Stuart continues to fine tune this portfolio and expense.
Good to see continued improvement during the remainder of 2019 and their coverage ratios stewards concentration is currently 29%.
Earth EBITDARM coverage is 1.97 times, which is essentially flat compared to 1.98 times year over year.
It is probably important to note that the U.S. arps saw a 9.9% increase in coverage from 2.55 times to 2.81 times.
L. Tagg EBITDARM coverage is 1.5 times, which is essentially flat year over year. This does not include the recently acquired Barbara portfolio, where the Elteks have a combined coverage of approximately five times as a reminder, elteks, including the Bob report Folio, we just acquired.
Currently represents 2.6% of our total portfolio.
No that all our view, we're well aware of the wildfires in California at this time, none of our facilities had been affected and none have been threatened however, many of the people working in these hospitals that had their personal homes affected I would like to take this opportunity to let them all know that our thoughts and prayers go out to them and their families.
At this time I'll, let Steve to go over our specifics on the potential financial performance and help of medical properties Steve.
Thank you Ed. This morning, we reported normalized FFO of 33 cents per diluted share for the third quarter of 2019. These results again exceeded consensus consensus expectations, but more importantly, and as Ed has just described npts growth is continuing even following the 3.4.
Billion dollars that we announced last quarter.
Including the additional $282 million, we invested during and after the third quarter, our year to date investments of $3.7 billion represents 40% growth since the beginning of 2019.
Just as an aside that may only be interesting to us here at MPT. It took US 10 years to acquire our first $3.7 billion in assets. The same amount that we have invested in the last nine months alone.
In any case I will point out a couple of items related to our quarterly results and then focus on the remainder of this year and our near term outlook.
First at various points during the third quarter, we completed acquisitions of the $1.5 billion prospect investment eight hospitals lease to Ramsey and England for about $423 million, a 55 million dollar investment into California Hospital, a $200 million portfolio of three ish.
Patient rehabilitation hospitals and to roughly 54 million dollar acquisition of five long term acute facilities. Most recently, we agreed to fund a 28 million dollar development of Houston acute behavioral facilities for long term lease to a specialty behavioral health operator.
Included in our third quarter, FFO reconciliation or adjustments for financing fees related to the prospect transaction straight line rent other miscellaneous items and the related tax effects that in the aggregate accounts for approximately one cents of normalized FFO.
In addition included in property related expenses is about $2.9 million in certain triple net type expenses that we paid directly primarily to ground lessors, but then recovered from our tenants and such recovery is included in interest and other income Accordingly, there is no impact on FFO.
DNA expenses were approximately $23.3 million in the third quarter at the low end of our previous estimate of between 23 and $25 million per quarter.
This morning, we reaffirmed our current state annualized run rate of between $1.50 600 dollar 58 per share.
This estimate retains our assumptions regarding leverage in the five and a half times range and the expertise and the expected refinancing of our $451 million revolver balance with long term funding.
Our press release and Ed's comments have already made clear that we're very bullish on our near term pipeline of actionable acquisition opportunities.
We believe that MPT in particular, among healthcare Reits has created come a commanding position in the early stages of a rapidly expanding market for acute hospital real estate in the economically developed areas of the world, where we operate this market expansion is being driven by growing recognition and acceptance.
The benefits of long term lease financing core hospital real estate on the part of hospital operators sponsors investors and other market participants.
Because only a small percentage of acute hospitals are leased we have a high level of confidence that asked this market continues to expand MPT will continue to grow at immediately accretive pricing for the foreseeable future.
While we're not prepared today to make any specific announcement, we believe it is not unreasonable to expect meaningful acquisition volume in the near term.
As we underwrite and planned permanent financing for these target acquisitions, we expect capitalization rate and investment spreads similar to our year to date transactions and we intend to remain modestly levered in accordance with our long standing strategies.
And with that we will be happy to take questions operator.
Ladies and gentlemen, if you have a question at this time.
Press Star then the number 100 bastogne telephone.
If your question have been answered all your wish to remove yourself from the Q.
Breadth alky.
Our first question comes from the line of Mr. Chad Vanacore from Stifel.
Your line is open Sir.
Hey, Good morning, this is Seth canetto on for Chad.
First question just in terms of the strong acquisition pipeline is that.
Focused on.
Acute care hospitals bursar L. tax can you kind of break up like the mix of those opportunities and then are you seeing you know opportunities in your existing international markets or looking to expand into new markets.
Yes that is almost exclusively if not exclusively acute care hospitals.
And it is in.
Our previously.
Invested in and previously announced markets not not any new markets at this time.
Okay, great. Thanks, and then just looking at the same store pool and the impact on coverage that you mentioned in her opening remarks.
How should we think about that I know you said that some of the hospitals saw a slight decrease in volume.
And that's a trailing indicator what the recent trends look like and how should we think about those new assets that are in the same store pool.
Well, if you'll remember that the second quarter HC A's announcements on their operations showed the same slight decrease in volumes and there was a lot of panic in the markets. But then you saw HIV AIDS reporting this week and it was a very nice strong rebound rebound, we obviously don't have.
Reporting numbers for all of our operator jetsons there they are just finishing.
Our internal numbers for the past quarter, but what we've seen to date.
While it was what HC eight as reported.
Okay. Thanks, and then you mentioned the Stuart concentration at 29%.
Do you see that concentration going down once you've completed some of these.
And your pipeline.
Well, obviously it will continue to go down because the pipeline does not include.
Any meaningful additional steward properties. So we expect.
And the not too distant future that number to be down in the mid twentys.
All right great. That's it for me thanks for taking my questions.
Our next question comes from the line of Michael Carroll from RBC capital markets.
Got it.
Hey, good morning, guys, Jason on for Mike.
Martin Elteks around the I'll talk to you guys bought.
Trying to get some color around what the negotiations were like for those assets.
How the team was able to achieve such good coverage.
Jason They were tag along basically for the Earth that we wanted and we think we got good pricing for the Arps and we think we've got great pricing for the Elteks.
The majority of those L. tagg have up.
Ben through or just start or or in the initial stages of their final and patient criteria a numbers week, we're comfortable with where all of those are and the coverages on some of these elteks or double digits. So we feel very good about what we got them for on a on a price per bed bases and all.
Usually with the coverage, there's a tremendous amount of room, there fours and flexibility.
Got it okay and.
Just touching on the behavioral health opportunities that you guys are seeing in the market.
So you guys would be interested in developing more of and then also you can touch on what the underwriting is like and what type of coverage you look for.
Yes. It is something that we would like to see more of we've we've been looking at it for a long time, but we've never had enough scale for to make any sense to us we think that this operator that we've just close the transaction on that it won't be the last deal we do with them. So it gives us scale with that operator, and the reason why we did a 28.
$1 drove transaction.
From an underwriting standpoint, it's very similar to what we're seeing on the owner nerf coverage it two and a half to three times type coverage.
Got it Okay, and then last one for me.
Any updates on the prospects of expanding that relationship with them for core in Switzerland.
Oh that.
Certainly from a standpoint.
Our ownership and infer cohort, we certainly expect that that over the medium term term that will increase but even beyond that even at the ownership that we have now we expect that the size of Evercore will continue to grow so that our ownership or investments in Switzerland.
We'll continue to grow even if our ownership doesn't immediately increase.
Got it okay. Thank you guys.
Okay.
Our next question comes from the line of Jordan Sadler from Keybanc capital markets Your line.
Good morning. This is kt on for Jordan thinking about Fourq run rate.
All the acquisitions in place by 930 such that the.
Sure.
Not necessarily.
Katy it should be fairly close but theres still.
Some.
Developments that that will come online that are built into the dollar 56 $1.58 on a pro forma basis.
That has an impact as I mentioned capital has some impact so.
And and as we hope made clear this morning already the ongoing acquisition activity could possibly have a meaningful impact also.
Okay that makes sense and then I think you just touched on this and like many previous answers.
Tax the kind of Tagalong.
Can you just kind of touch upon your.
Appetite incremental exposures.
Yes, right now we're at 2.6 of the total portfolio, we don't expect that to increase.
We don't we don't have any additional elteks that we're looking at if we get an opportunity that has some tag along as we'll certainly look at that but that's that's the appetite that this there.
Great. Thank you guys.
Our next question comes from the line of Derrick Johnson from Deutsche Bank. Your line is open.
Hi, everybody how you doing.
Fine there.
Right. So I look here in general acute EBITDARM coverage declined in the quarter. When you think about how to cover comfortable EBITDARM coverage range for general acute care. So first what would you say that is and then secondly, you know the new acquisitions not include.
And the same store how will they impact the current coverage ratios.
Yes, if you think about it as a whole Derek every time, we make it acquisition the coverage is going to the naturally come down our underwriting coverage for general acute care hospitals in the two and a half times and above range, but obviously when we are acquiring new hospitals at that rate and we've been running hospitals that we've owned.
For 10, plus years with coverages in the three and a half to four times. It brings down the total leverage so as I have stated on numerous earnings calls, it's it's a little bit confusing because we've been in such a rapid.
Growth mode on the coverage. So so when you see the cover just go down is not always because of just a softening. We added 22 total properties to the same store. This year. So those being new properties. You remember same store means they've been in our portfolio for 24 months. So they haven't had the same sees.
Turning that some of the older properties of AD. So there's a natural decline there, but there was some softening in the volumes in the in the second quarter that we saw along with the rest of the nation.
Okay, Great can we touch on the dividend and the path to growing or possibly accelerating the dividend growth rate I mean, given the extent of the already accretive acquisitions, and we're modeling and Pwc show sub sector, leading fat and dividend growth. So I just wanted to get your thought.
And maybe when you talk to the board, but their thoughts are on the dividend trajectory.
So very very good question and one that gets a lot of attention, especially.
In periods, where we are growing at 40% per year. Our board has been in my personal view, particularly careful and conservative too.
To grow the dividend asked the cash grows not necessarily as our pro forma.
Look grows so.
For example.
Under current dividend policy right now.
The.
The the run rate guidance is about in the 80% of a fo cash cash FFO.
Run rate and we believe that that's.
That's probably the right number.
We have a fairly healthy component of straight line rent and so we really do look at a FFO much more.
Focus than we do just FFO.
The thing that 80% payout ratio on an AFFO basis gives us room.
As as these properties continue to to be acquired and.
Generate results for full quarters.
And then as as we continue to execute on what we've described as a 5 billion dollar pipeline.
Thank you.
Your perception that we should be able to grow at fairly rapidly.
We agree with that.
I'll, just reiterate that we'll wait until we actually not only.
An ounce acquisitions, but actually close them and integrate.
On a full quarter.
Receipt of of the NOI.
Excellent. Thank you.
Our next question comes from Atlanta, Steven Valiquette from Barclays. Your line is open.
Great. Thanks, Good morning, Orange to thanks for taking the question.
I guess I was kind of curious that comment you made about the a roughly 9% 10% improvement in the U.S.
Coverage.
Yeah, I was curious to hear more about whether you think thats related to operator specific initiatives or.
Are there maybe some industry wide tailwinds for the year sector.
Anymore.
Yes, Thats industrywide, Ed that's across the board on all of our operators.
Ernest has been doing very well in their portfolio for long time encompass.
As as you saw in the recent announcements they they've been performing very well so it's been across all across the board.
Okay.
The other quick one just around the 5 billion pipeline theres been some little bit of discussion around.
Are there additional deals.
Maybe in COVID-19.
More of that happened.
Under 20, I'm just curious.
I mean.
Yeah.
I believe.
After doing this for 30 plus years of learn never dugout magellan's before they hedge but we're very optimistic about the pipeline that we're working on.
Okay, great appreciate it thanks.
Our next question comes from the line.
Okay from Mizuho Your line is open.
Good morning, everyone I'm wondering as.
Welcome back Dahlia. Thank you I appreciate that it's the TV that.
I just wanted to talk about two particular thing. The first one is a vibrant transaction I appreciate the color on the L. piece of it.
Just curious if let's open it up about one that cap rate on the transaction is particularly if the delivers it done I think about it up cap rate on asbestos cap rates on the L. time.
And then on top of that just wondering at by a pro was a very large tenant of your of yours years ago. The kind of moved away because the kind of thought that to get better cost of capital and that kind of interesting that they're working with you again, so I'm just kind of trying to understand whether it.
What's kind of change where that their cost of capital whether you guys have now offering more competitive cost of capital versus alternative just kind of curious whats kind of happening there.
Oh, you remember that Brad Hollinger and I have been working together since 1986, so we have up very very long and in healthy relationship.
Remember that Brad was offered we were offered from one of our competitors to acquire most of his portfolio from us at very nice gains for US. It was at a time that we were trying to have some examples to the market of just how valuable our properties, where as though it would.
It was literally just opportunistic for both office for us and for Brad We have maintained our relationship as as you know he and a one equity bulk the operations for the Ernest transaction. So we've been working with Brad continuously.
Literally since the start of MPT is just fluctuated in the total amount that we that Ed with them I think that.
Where cap rates have been on par with everybody else's cap rates at different times, obviously, when we did those original transactions with Brad They were in the early days when interest rates were much higher than they were and so when interest rates came down and he had the opportunity to to reprice it with a competitor and we had the opportunity.
Take some gains just made sense.
From the standpoint of what the cap rates are on this particular portfolio. It's all under a master lease so it's kind of hard to to look at it on an individual basis, but from our underwriting standpoint.
We underwrote the herbs at.
It good market rate.
Cap rates, we think we got above market cap rates for the small eltek portion of it we think that these particular l. tagg store performing exceptionally well and are well positioned in the.
You payment.
Require unmet patient pay payment requirements and think that were well protected for them.
Gotcha, Okay. That's helpful.
Then just second of all the 5 billion dollar pipeline in front of you again, whether it's 2 billion you put into by 4 billion. What have you I'm just kind of thinking how you kind of think about funding that on a going forward basis in regards to.
Trying to get nice spread the versa again the idea of.
In leverage neutral if you're okay going up a little bit higher under leveraged back just kind of curious how you're thinking about that.
Yes. So so we don't really see a need to plan to go up on our leverage now obviously with with again, 40% type growth and these big numbers. There there will be temporary spikes up and spikes down, but we absolutely feel confident and being able to continue to to manage the balance sheet the way.
We've been doing.
So far we've been very successful with accessing capital in the traditional forms you saw the great success, we had.
With the equity offering back in July after we announced the prospect and other transactions.
Record setting low rates on on long term U.S. dollar debt.
Subsequent to that we.
We issued another $250 million under the ATM.
At even.
Better pricing than than we got on on the underwritten offering.
So.
Not that it is without not without challenge when you're growing so rapidly but.
We don't see any issue with continuing to to fund in our our traditional ways and maintain.
The leverage disciplined at that we've demonstrated.
Gotcha.
Great. Thank you.
Thanks Tycho.
Our next question comes from a line of drew Babin from Baird.
Lets open.
Hey, good morning.
Hi, Andrew.
I wanted to ask about the nursing reactor development that you announced if you could talk about maybe the economics on their thus far.
The cap rate as well as whether this.
Within real help might be a growth opportunity youre or whether this is sort of a segment that we can expect the gonna grow within the context for U.S. healthcare going forward.
So the last part of that question first drew I'm not sure how big it will be I think theres, a real opportunity for it.
There aren't that many operators that do this specific type of care in the in the behavioral section. This is this is for the severe psychiatric patients a lot of criminally insane patient and obviously needs a specialized operator to handle that that type of activity from a cap rate standpoint its.
Probably in the the upper range of our market cap rates.
It's.
Product line that we think is well received in the market it's needed from a from the standpoint that acute care hospitals generally aren't able to handle this type of patient. So they're very supportive the courts systems are very supportive and the payers have been very supportive of it. So so we'll see we'll see how big it gives us is.
A very small most small investment at this point.
But we have high hopes for this particular, operator in and some other operators that we're looking at.
Thanks for the color there and then.
Knowing how to master leases work and how the economic Supercom NPW at the end of the day.
It was a surprise toward his closing this hospital in Arizona and might we see kind of more of these announcements.
Going forward about individual facility.
So it wasn't a total surprise for us we knew that which banners.
Additional route newly built towered and renovated the art and some other.
Issues I mean, some other.
Additions that they've done at their particular hospital that there was going to be added competition. What we were prepared for was the $1 billion New hospital that the county is planning for as you know Stewart has other hospitals in the area. It just made a lot more strategic sense for them to take the services that they were providing their insane.
Lucent and move them out to some of their other facilities and the cost savings there will be really dramatic for for them.
May recall that there was at least one other hospital that when they made their original acquisitions from CHS that they had planned on selling.
Thats, a particular sale fell through they havent made strategic decisions about what they're going to do with that particular hospital long term I don't think you'll see a large number of these but but I think that things like that particular hospital. The that we had expected from the very beginning today would sell you may see something like that.
But overall the steward hospitals are doing very well, we're very happy with where they are from a total coverage standpoint, and very happy with where the Haas, where the company is on a total integration of all the new hospitals.
Great and just one more for me.
<unk>.
The slight drop in coverage ratio on the.
General acute master leases in the quarter, which you mentioned the kind of the seasonal weakness.
About in same store pool composition changes things like that I.
I guess in a more general sense.
Does that mean over you receive given all the transparency from the operators to go in and really kind of make your own calculations adjustments to kind of gets too.
EBITDA arm number that you're very comfortable with as far as calculated coverages.
Or is there sort of an opportunity sometimes are credits that could make adjustments based on one time items are things that may be won't be from their perspective from one year to another.
Kind of a general question about transparency and how comfortable you feel.
Drew we get a tremendous amount of transparency not only do we get statistical operational information on a daily weekly monthly basis, but obviously, we get financial information on a monthly and quarterly basis. So I think that our insight into our operators is.
Makes us probably have one of the best databases for hospital operators in the world.
Obviously, HC, a and other big operators have a tremendous database, but they only have their own data to analyze we have eight of the top 10 hospital operators in the United States. So we have data from a big diverse group of hospitals in a real diverse geographic and an operator standpoint, so I think the transparency that we.
I have is exceptionally strong.
We all know that generally speaking in the third quarter is the weakest quarter for hospital.
Operations in volumes so the decline in the second quarter and then the positive.
Rebound in the third quarter for HCV and even.
Community Health systems announcement last couple of weeks has really been a little bit surprising. So so we'll see when our when are we when we get the full transparency in the next couple of weeks from our operators on the third quarter, but the initial trends are as I said earlier are essentially the same thing that.
So more inline with the community volumes, maybe not necessarily with the made CA volumes drew I would I would just very briefly add that with respect to an operator's ability to kind of.
Lack of a better term game the system, our definition of EBITDAR is contractual and the lease and it is highly detailed and highly constrained as to what can go in and come out of net income in calculating that.
That EBIT dollar amount. So so I don't think generally that that has been or could be an issue for us either.
Great appreciate over the pill adultery.
Our next question comes from a line of Conor suffers from Berenberg. Your line is open.
Hi, Alan Thank you for taking my question you mentioned that a lot of your investments. This year involves some new relationships do you see this trend continuing as you address your acquisition pipeline and then is there a level of tenant diversification that you'd be comfortable with an along Ron.
We do expect that youre going to see even knew.
Many new operators in this next tranche of the pipeline that we're working on.
We do think that the trend will continue.
It obviously is a is a purposeful trend on our part because it is the way that we reduce stewards exposure.
We have always said that on a go forward basis, if we could have a fixed point in time that we were comfortable with an operator, representing roughly 25% of our overall portfolio, but but let me back up just a second and remind everyone that right now our largest proper.
That is less than 3% of our total portfolio and we underwrite on an individual property basis, so even though still where did this particular point represents 29% of our total overall portfolio. We still look at it on an individual property based is it and as I said I believe this time last year I talked about.
Fluid in particular, and now you divide Stuart up into really seven different regions and its if someone were to ever happened to the parent company you would have many different operators looking at those individual region. So yes, we understand that the the concern that people get with an exposure of anyway.
One tenant being a large number we think that the comfort zone there should be in the mid twentys, but we also think that everyone should get covered on our individual property underwriting basis, and the diverse geographic standpoint of somebody like steward.
Alright, great. Thanks for that and then one small one from me as well do you see any significant cap rate movement for your target assets in any of your current markets or then.
Any new budding competition in maybe Europe or the U.S.
So I think in the U.S. the cap rates had been fairly stable for the last 12 months maybe.
Slight.
Tick upward with that would only be slight.
In Europe , I think that theres been a fairly significant tick upward.
I think that.
The people have realized while there's a lot a lot more money chasing.
Properties in Europe than there is here in the us that nobody can move as fast as we can and the the sovereign wealth funds and some of the other pension funds that are chasing the same properties that we are literally can take up to a year to finish their underwriting so while.
They may have a cheaper cost of capital the opportunity cost.
Do away with any of that that potential economic benefit.
Great. That's all from me thank you.
I'm showing no further questions at this time I would now like turn the conference over back to the CEO Ed Aldag.
Jason Thank you very much and as always thank all of you for your interest in your time today. If you have any additional questions that develop after the call. Please don't hesitate to reach out to us. Thank you very much.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day.
Give me all disconnect.
Yeah.
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