Q4 2020 Medical Properties Trust Inc Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the Q4 of 2020 Medical Properties Trust Earnings Inc Conference call.
At this time all participants are in a listen only mode. After the speaker presentation there'll be a question answer session to ask the question during the session you'll need the press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star Zero I would now like turn the conference over to your Speaker today, Charles Lambert Vice President. Please go ahead.
Sir.
Good morning, welcome to the medical properties Trust conference call to discuss our fourth quarter and calendar year 2020 financial result.
With me today are Edward K Al that 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 of it is available on our website at Www Dot medical properties Trust Dot com in the Investor Relations section. Additionally, we're hosting a live webcast of todays call, which you can access in the.
The <unk> section.
During the course of this call, we will make projections and certain other statements that may be considered forward looking statements within the meaning the private Securities Litigation Reform Act of 1095. These forward looking statements are subject to known and unknown risks uncertainties and other factors that may cause our financial results and future events.
The to differ materially from those expressed standard 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 <unk>.
Information being provided today is as of this date, only and except as required by federal Securities laws. The company does not undertake a duty to update any such information.
In addition, during the course of the conference call, we will describe 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 has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures 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 at Al Day. Thank.
Thank you Charles and good morning to all of you listening in today to our 2020 recap and insight into what 2021 will look like for MPT.
2020 will be a year that we will all remember for the rest of our lives for those of US at MPT will be remembered not only for the pandemic, but how well MPT was positioned to continue our outperformance.
We outperformed our peers in almost every measurable financial metric, but what makes me the proud of US about that is the fact of the business plan and the groundwork we put in place for the last almost 20 years was absolutely validated and reinforced during the pandemic.
Also wanted to take this opportunity to congratulate the MPT workforce for the incredible job. They did adjusting to the virtual offices and the new norms created by the virus. They did all of this without missing a beat all of them.
Also want to thank the tens of thousands of frontline workers and all of the hundreds of MPT hospitals for literally putting their lives on the line to keep health care available to people all around the world.
MPT hospitals proved the essential and extraordinary and non countries on four continents truly are proud of this moment to date.
And while the year had untold numbers of challenges I want to take just a moment to reflect on the remarkable tops of Smiths of our health care systems of providers worldwide just.
Just like we knew they were all capable of our operators adjusted their operations on a moment's notice they reconfigured their beds added PPE ventilators and learned how to treat of new world disease are operators of world class, They move quickly and amazingly to treat their populations with total.
While not ignoring the COVID-19 non COVID-19 patients I cannot say enough to express my gratitude to each and every one of them for the job they did.
At MPT, we were able to continue our remarkable growth we were able to close on almost $3 6 billion in transactions throughout 2020.
We began 2020 with the announcement of our approximate $2 billion acquisition of BMI in the U K, we entered South America as of the first time with our Columbia transaction, we expanded our ownership of <unk>, the real estate owner of Swiss Medical network, the second largest private operator in Switzerland.
We acquired new and valuable hospital assets with established partners, such as Prime Healthcare Circle, and median and we grew our earnings portfolio via several new Earth developments throughout the U S. We also established new relationships with operators, including the NHS in the UK and cure of her.
Health of U S. Operator of inpatient rehabilitation hospitals, and just like last year. We began 2021 with a major announcement of an approximate 800 pound investment 800 million pound investment to acquire a portfolio of real estate of Priory group, the leading behavioral health provider in the UK.
This acquisition further expands our investment in behavioral health in the area of healthcare that we believe has a tremendous underserved need throughout the world and also offers MPT a major platform for future growth.
We were able to improve our concentration metric to the Priory acquisition now with a total of 50 operators our largest tenant represents 22% of our portfolio.
Most importantly, no single property represents more than two 8% of our overall portfolio. Remember every single hospital serves a distinct local market health care is truly a local business regardless of parent ownership. The most important diversity measure.
Is that the single property level.
Our hospitals performed very well in 2020, despite hospitals across the world being essentially shut down for two to three months.
Let me take a moment to walk you through some amazing statistics as.
As we did last quarter, we want to be very transparent the parent about our coverage ratios. So well first of all provide you with EBITDAR coverages for the trailing 12 months Q3, 2020, with all brands, but still not including any Medicare advances that have been received by our operators.
To date I will then gave you those same ratios without any grants rich.
Remember that we added four properties three international alerts and one of acute care to our same store of reporting and we removed for acute care properties.
Inclusive of the $706 million in grants through the cares Act funds received to date, our same store portfolio EBITDAR coverage for all sectors for the trailing 12 months ending Q3 2020 was $3. One three times this represents.
18, 4% increase year over year.
Same store acute care EBITDA and coverage was 3.51 times, which represents a 20% increase year over the year.
I'll check EBITDAR coverage was $2 three nine times, which represents an almost 50% increase year over year.
Earth EBITDAR coverage was 221 times, which represented a six 6% increase year over year.
Now those same ratios, excluding any grants and remembering all hospitals were essentially shut down for two to three months, our same store portfolio EBITDAR coverage for all sectors for the trailing 12 months ending Q3 2020 declined to 2.02 times again these.
Coverages did not include any cares act and did include the two to three months of these hospital operators were essentially shut down.
Same store of acute care EBITDAR coverage was approximately two times, which represented a 32% decrease <unk> EBITDAR coverage of approximately two points Oh, seven times, which represented almost 30% increase year over year and the Earth's coverage was two one.
Each represented a one 4% increase year over year. So you see that even without any cares Act grant whatsoever. Our operators, we're still very well covered and Furthermore, without any grants comparing the third quarter 2020 to the third quarter 2009.
<unk> all of the operations are very close to or better than they were in 2019, excluding any grants or advances. The total same store portfolio EBITDAR coverage was all just 6% from 2019 levels with the third quarter.
As I previously mentioned and Steve will report on in more detail. We have already had a great start to 2021, we continue to work on strong opportunities both in the U S and abroad. We expect 2021 to be another successful year for MPT, Inc.
MPT has the strongest portfolio of hospitals in the world.
Our operators are at the very top of the class in their regions. We remain committed to quality accretive investments and look forward to seeing MPD continue its role as the leading provider of capital to hospitals worldwide Steve.
Thank you Anne.
This morning, we reported normalized <unk> of <unk> 41 per diluted share for the fourth quarter of 2020.
This represents growth of 17% over last year's fourth quarter results and on a full year basis is an astounding, 21% year over year of growth rate.
During the period in which the entire world was battling a devastating pandemic.
As Ed has just described we expect continued double digit per share of <unk> growth as we go into 'twenty 'twenty one.
All else equal even if we stop the our acquisition activities today and based on the assumptions underlying our updated run rate guidance <unk> per share would be expected to increase by another 10 plus percent and we certainly do not expect to stop our acquisition activities.
I'll make a few points about the financial results, we reported with this morning's press release.
First we recorded $27 $6 million or five cents per share in of debt refinancing charge. During the fourth quarter is this related to our redemption of $800 million of unsecured notes that were due in 2024.
We redeemed these note, which had a weighted average coupon of 6% with proceeds from our recent issuance of new nodes that have of three five per cent coupon.
Generally long term interest savings and a strongly positive net present value.
Second our practice is to deduct from a F F O the unbilled or straight line rent portion of revenue to reflect an amount closer to a cash basis. You will note that the $71 7 million deduction in our reconciliation to net income exceeds the $55 one.
Millions of dollars of straight line rent in the statement of income.
That's because to be more reflective of cash like revenue. We also deduct from a F. F O. The straight line rent that is recognized by our unconsolidated joint venture operations and other non cash revenue.
Finally, total G&A continues to represent about 9% of total revenue and that total revenue. Adjusted Similarly includes unconsolidated joint venture revenue.
It is also helpful to point out that the debt 35% of G&A is for estimated share based compensation a significant portion of which is not actually paid unless we continue to deliver strongly accretive acquisitions dividend growth and market leading returns to us.
Shareholders.
Other items immaterial on both in individual and collective basis included a small fair value adjustment loss on our equity investment in EBIT is the parent of our tenants Swiss medical network of favorable tax adjustment related to our investment in EV in infra core and other one time items.
During the fourth quarter, we closed on roughly $670 million of accretive transactions and five with five different operators.
First in late November we acquired for 50 million pounds. The 999 year ground lease on the Royal Marsden private care, a general acute facility operated by England's National Health service and prominently located in London Scavenger square at the very influence to the world renowned Harley Street complex of Prime.
Mirror, London Hospital providers.
It's been a long term goal of ours to find an opportunity to demonstrate to the NHS. The ease of working with the hospital expert to the MPT and we could not have found a better facility.
Already this has led to other real opportunities that we fully expect to manifest in additional investments with the NHS.
We also acquired in mid December the reading of hospital for 85 million pounds, we actually bid to acquire this hospital several years ago, when an institutional investor paid more than we were willing at the time.
But when it came time to consider the impact of market changes and the Standalone Hospital operations in the very bespoke hospital real estate market, the institutional investors prefer to sell to someone with the long term expertise in that market.
And we ultimately acquired the hospital <unk>.
Reading will be joined to our long term master lease agreement with circle, providing of substantial accretion of value to both the Redding investment and the overall circle relationship.
The United Kingdom, and Central London in particular remain one of the most attractive real estate markets in the world, but even with keen competition, especially for the Premier cabin you square location on an ultra long term lease these investments will yield to us a blended lease rate and spread through our funding cost consist.
With our recent European and UK investments.
We also added to our U S inpatient rehabilitation portfolio in the quarter with the mid December acquisition of two properties in El Paso, Texas in Louisville, Kentucky lease to cure of health for roughly $58 million.
Your of health as an operator of 17 post acute hospitals across 10 states and is sponsored by the respected and experienced healthcare investor Nordic.
In addition, we purchased in earnest facility for $17 million in Elgin, South Carolina and committed to the development of an earnest facility in Stockton, California, and a total projected cost of $48 million.
We also acquired from Ernest for hospitals that we had mortgages as part of our initial 2012 transaction with our interest.
These hospitals, along with the Elgin and Stockton facilities have been joined to an existing master lease agreement with Ernest that now has the remaining initial term of 17 years until 2037.
The cure of health and Ernest leases have a weighted average GAAP lease rate approximating 10%.
Finally at the end of the fourth quarter, we increased our investment in <unk> by approximately 207 million Swiss from.
As Ed mentioned, we kicked off 2021 with the acquisition of four 800 million pounds of about 40, primarily behavioral hospitals that will be leased the uk's largest operator of the Priory group.
The leases will be structured to provide master lease characteristics of our term of up to 45 years and the GAAP basis capitalization rate of about eight 6%.
Simultaneously Priory was acquired by water land private equity the Premier Dutch private equity Investor, who also owns median clinic the largest private operator of German post acute and behavioral hospitals, and our long established and successful tenant.
MPT is a five 1% passive interest in median and will have a nine 9% passive interest in the primary tenant.
Even in the depth of the Covid environment Priory attracted significant interest by competing bidders, but MPT had unique competitive advantages that led to our successful bid with water land.
Of the Priory transaction has the structure similar to our very successful median investments.
As a reminder, with median we originated and then assembled a $1 2 billion euro portfolio of hospitals at very attractive cash returns, we season to that portfolio and validated our underwriting and then recapitalize it with low cost joint venture equity priced at a substantially compressed cap rate.
And while there is no assurance that these results will be replicated with priory, we think the value of our investment in the private real estate will be even further improved as water land executes its planned strategy to combine priory and median creating the largest behavioral platform in Europe.
Ed mentioned already that we did not slow down in 2020, and our recent transaction certainly demonstrate that as.
As we enter 2021, we continue to work on the vibrant pipeline, including expanding our investments in relationships in the U S.
As we negotiate these possible transactions, we see general underwriting in economic terms is unchanged from recent years acquisitions. This includes the bias toward general acute facilities consistent coverage projections and the mostly flat capitalization rate.
I'll.
Summarize what we previously reported about our capital activities in the quarter.
I mentioned a minute ago that we recently issued $1 $3 billion in 10 year unsecured notes at three 5% in part to reduced to redeem $800 million in unsecured notes maturing in 2024 that had a blended coupon of 6% of.
Also on the debt side, we recast our $1 $5 billion credit facility for the first.
<unk> earlier this month extend the extending the duration of the revolver and term loan components to 2024 and 2026, respectively.
On top of that we arrange for an interim credit facility under similar initial terms for up to $900 million about $680 million denominated is 500 million pounds.
Of which was temporarily drawn to fund the priory deal.
On the equity side, we raised a combined $828 million from fourth quarter ATM activity and our early January follow on offering.
As mentioned earlier, we have increased our run rate normalized <unk> guidance range to $1 72, two of $1 76.
Is this based upon fourth quarter annualized normalized <unk> of $1 63, and adjusted for the annualized EBITDA effects of mid quarter and post quarter transactions completion of and billing for development and expansion projects and the effect on interest expense and share count of the assumptions about the capital <unk>.
Actions that would be necessary to generally achieve our target net debt to EBITDA ratio.
It is important for us to reiterate that this is not meant to be a forecast of earnings or <unk> results for any particular quarter or year.
In fact, this calculation will change with each material additional acquisition or disposition of assets capital raising transactions dividend modification debt repayments and other planned changes to our in place EBITDA.
Accordingly, we will maintain our practice of updating this estimate periodically.
What this calculation does show is that based on the economics of our completed and committed investments and our current expectations about future capital transactions. We continued to achieve strongly and immediately positive per share increases in F <unk> and CFO.
Our liquidity remains excellent with roughly $1 $5 billion of cash and immediate borrowing capacity as of today.
With that I will turn the call back to the operator for questions.
Thank you as a reminder, the task a question you'll need the Crestar one of your telecom to withdraw your question press the pound.
Keith Please stand volume from policy.
On the roster.
Our first question comes from Joshua.
I mean with Bank of America. You May proceed with your question.
Hey, good morning, guys and thanks for the question and.
Just sort of follow up on a comment from your opening remarks, you mentioned that the Priory group is gonna be a platform per MPW within behavioral health.
I'm curious is that growth going to be focused on the U K.
Or is it kind of of partnership across Europe.
Yeah, and I didn't I didn't mean to do imply that it was of platform within the prior reorganization more of a of platform for us to invest in more behavioral health is something that we wanted to do for a long time, we felt like it was very much needed and certainly as you know under the Obama care. It was something that was the mandated to have coverage, but it is.
Not hasnt grown in the U S. Like it has outside of the U S. So we're excited to have the priory behavioral health. We think there are other opportunities outside of priory, but we are by having that big investment and Priory gives us the ability to approach of other operators.
Interesting so it sounds like in Europe, it's it's a much bigger sector to investing.
Yes, yes that is correct that is correct.
Awesome and then on the coverage ratios can you remind me of the coverage ratios you quote are trailing 12 months.
So how should we kind of think about the evolution going going forward.
Some of the pre Covid operations rollout and I guess I'm I'm more focused on the.
Our coverage ratio, excluding the cares act grants sure absolutely. They are trailing 12. So what we reported includes the obviously the first quarter, the second quarter, where in which all hospitals were basically shut down and then the third quarter in which they began to come back in the operations does not include any of the fourth quarter because.
Of the reporting that we get from our hospital operators, we do have the.
The unofficial October November numbers from some of our operators and it looks like the can.
<unk> of building back to where they were on a trailing 12 coverage to pre COVID-19 numbers look very very positive I certainly don't want to give the number of where I think we'll be in the fourth quarter, yet, but I think the there'll be substantially higher without any cares act on where we are right now let me just give you a couple of statistics as an example.
Quarter over quarter, our same store admissions for our acute care hospitals alone was up almost 20% 18%.
In addition to that many of the operators as I've mentioned over the last earning call we're able to make a lot of expense.
The expense adjustments, we've seen that with some of the HCA reporting that's the same thing with our operators as well. So I think that as HCA reported I think that the all will come out of this in a much stronger position and we're very excited about where they are operationally and we will continue to see those numbers growth I don't know when we get back to of trailing.
12 above where we were pre COVID-19, but these are very very strong numbers. When you think about it of two times coverage with an entire quarter being shut down that's extremely strong.
Yes.
Appreciate that thanks Ed.
Before.
Thank you. Our next question comes from Congress Seversky with Bloomberg You May proceed with your question.
Good morning, everybody. Thank you for having me on the call today.
The first of all in just the AD to just to add to Josh <unk> question on the investment activity in the U K I'm curious about behavioral health some of the initiatives that have been laid out by the NHS. There I'm wondering if you can provide any color as to what kind of momentum in that space is seeing in the U K in terms of funding from the NHS, absolutely and this actually started.
Well before Covid.
They made a very big push two outs.
Outsource the behavioral health of the NHS is facilities, where we're very old the very dilapidated they didn't build any additional facilities instead closed facilities and decided they were going to use the third party private sector. So they've they of push it in a very big way they've added additional funding and all of this was pre COVID-19.
So during COVID-19.
They actually use some of the behavioral health hospitals in those early months and the the same things that we had saw happened over here in the U S where they use some of those for true acute care facilities.
They didn't need as many as they thought they needed. So they very quickly open them back up to behavioral the.
Behavioral came back in a very very big way without any additional COVID-19 funding from the NHS. So if you look at the just the hospitals that we acquired from Priory and remember the Priory has the 300 plus facilities, but the vast majority of those are educational or autistic very small facilities that don't.
Meet our criteria. So what we bought were of the behavioral health hospitals and when you look at those alone. They actually ended up 2020 about 2% better than they were in 2019 without any additional funding, but the NHS and all of the England.
We've all learned even here in the U S debt mental health behavioral health is the real issue during the pandemic and are they are they are absolutely committed to increase the funding that they committed to prior to COVID-19. So it's in a very strong position right now.
That's great color thanks for that.
Changing gears, a little bit thinking about the raise to distribute the vaccine versus some of the emerging virus variants that we're seeing news flow on is there any commentary about available from your operators whether in the U S or elsewhere in regard to the take up of the vaccinations by the health care workers and how quickly it's they're being distributed through the facilities.
Yeah, It obviously varies from region and how the.
But it would follow the same that you would see at People's attitudes about vaccines in general, but very generally speaking very of generally speaking probably 70% of the hospital of employees have agreed to take the vaccine. We don't have any operators at this point that have made the decision.
The required all of their operators as all of Us know and some of us of had the opportunity to talk to some of the experts, particularly in my case with the people at Pfizer. They think we need only need 40% of the population to take the vaccine along with the roughly 30% of us that have already had COVID-19 too.
Get us to of herd immunity type of situation. So the 70% of the the health care workers that are taking the vaccine is very very strong number in the stronger than what we're seeing throughout the population right now.
Okay. Thanks for that and then one more quick one from me just looking at pro forma leverage ticked up a little bit. So I'm just wondering when you consider the investment pipeline through the end of the year maybe beyond.
If youre going to consider of different financing mix for future acquisitions.
No it wouldn't be accurate to say stay of different because the over the last especially couple of years, we really tapped any number of sources from the traditional common equity issuances to to the long term unsecured notes.
With the joint ventures.
<unk> venture financing of equity financing along with secured financing in those joint ventures.
We use the ATM.
Over the course of those two years, not even including the.
The crinone promoting all joint venture.
A couple of years ago, we've sold several hundred million dollars of assets and Thats provided.
Accretive financing, we've got a handful of more assets debt that.
The right for sale that would allow accretive refinancing and then at today's dividend rate. We you know, we're generating upwards of $200 million of year in routine of F. F. O. So so we will continue to tap all of those.
As as the need of rises and as the circumstances mandate, which of those various alternatives are are better at any particular time.
Okay. Thanks for that that is the all from me I'll yield the floor.
Thanks Connor.
Thank you. Our next question comes from Steven Valiquette with Barclays. You May proceed with your question.
Thanks, Good morning, everybody good morning, Steve.
And when you were commenting in your prepared remarks around the pipeline and you talked about expanding the best.
Since the relationships in the U S.
Just curious if you're able to give more color on the pipeline overall.
Sort of balancing the U S versus the international opportunities now that you've talked a lot of historically about maybe being able to better penetrate the.
<unk> hospitals in the U S.
That portion of the U S pipeline is also accelerating I just wanted to get more color on the overall pipeline. Thanks.
Sure, Steve and it really Hasnt changed from my comment on the on the last earnings call that we had obviously as we all know the acquisitions don't all happen on the same day and we just did a big UK acquisition. So it's a little bit skewed right now, but we continue to see about 60% of the portfolio in the U S and 40% outside that obviously.
It's not a fixed number as we go because of the way acquisitions work out, but we have a number of good large acquisition opportunities that we're actively working in the U S, which we hope to be able to announce over the next couple of quarters.
Still continue to have opportunities outside of the U S. Again, most of what we're doing and continues to be on a dollar basis continues to be general acute care hospitals, but we also as I mentioned earlier have some good opportunities good sized opportunities outside of the U S for behavioral we still have behavioral opportunities in the U S, but theyre not.
Not big opportunities. So the vast majority of what we're looking at in both international and National is general acute care hospitals.
Okay, great. Okay. That's it from me thanks.
Thanks, Dave.
Thank you. Our next question comes from Todd Stender with Wells Fargo. You May proceed with your question.
Thank you.
For the priority deal how many hospitals ended up coming with the portfolio.
So Todd it is approximately somewhere between 35% and 40 hospitals and you remember that as I've said earlier priority as a total of 300 plus facilities, but many of those of very small facilities that don't fit our model. So if you look at their overall EBITDA numbers. The vast majority of that comes from the start.
540 facilities that we acquired.
Alright, Thank you guys.
You've extended the loan.
The cash flowing or is that really just turns into real estate ownership upon consummation of the.
Of the merger or acquisition of the operators.
No its current pain.
And and we'll just convert invisibly to the observers from what will be categorized initially as interest to two lease payments as we actually close each individual hospital.
And what's the rate of the loan right now relative to the GAAP yield of $8 six per cent.
Yeah, Theres no difference of difference okay.
How about the timing of the bridge loan.
Is that consummated in the first half here.
So what happens.
The 250 million pound loan debt, we made to the acquirer.
Was funded at the same time, we closed on the real estate transaction and we expect that to be repaid during 2021.
Got it Okay, and then how about the nine 9% interest has that amount been determined yet or not yet.
That hasnt been disclosed.
Okay got it.
And then just for behavioral health you Yolanda.
Wrote this at a two times EBITDAR.
Is that a fair number for us to kind of think about for the long term of our should that trend a little bit higher end of the tune of half of the times.
Oh, yeah, it will absolutely trend higher that's a very strong going in coverage there in the UK and that will trend higher that does not that is an existing numbers that does not take into consideration the improvements that the new operator will make.
Got it okay. Thank you one last one from me, Steve you mentioned the Ernest transaction.
The South Carolina as it was that.
Alone.
Converted to real estate ownership in Q4.
No that was actually the purchase of a recently completed development.
Understood. Okay. Thank you.
Yeah.
Thank you. Our next question comes from all the Tayo Okusanya with Mitsui.
Missoula you May proceed with your question.
Hi, yes, good morning, congrats on another strong quarter.
Thank you Tayo.
My pleasure. Thank you.
So all of the details in regards to rent coverage and the true.
Bren.
Curious.
You can see the addition to the detail a little bit more on the tenant level around rent coverages, rather than the total portfolio. Even if you don't want to talk specifically about one tenant just to get the all kind of trending the same way is there someone that kind of.
Behind all of the others because of something unique, especially for some of your largest tenants just trying to understand what will be happening at that level.
Absolutely Tayo and you'll notice in my very last part of my prepared remarks, I'll talk about the portfolio of being the strongest group of hospitals in the world and it truly is the these operators all across the board in our portfolio are trending in the same direction. They all have very strong coverages, we don't have any in the large.
Group of operators debt or having any issues whatsoever, you're seeing the same trends across the board. It. It is a very strong position of where they are all right now.
Okay.
And then second question just on I think the valiquette talked one of a little bit.
When you think about U S versus the.
The opportunities I know you kind of thought of this kind of 46 of the balance of kind of where you hope to end up but kind of where you can think about near term what could happen.
We need more of the U S opportunity that kind of lined up or is it more of the European or international opportunity.
No near term, it's more U S.
That's M with more U S. Okay, great yes, okay.
Thank you.
Thanks Tayo.
Thank you. Our next question comes from Jordan Saddler with Keybanc capital markets. You May proceed of your question.
Thanks, Good morning, guys.
Morning, So.
So a little bit.
Deeper on Priory.
So as the partner in median I'm sort of curious about the financing and Steve I think you've touched on it a little bit what was done with median.
Eventually you brought in I think from owning al and I was curious to see if they know if they were invited to participate in the priory deal given that they are a partner and media.
Now we did.
On our own the Priory transaction.
Okay.
I know.
Would it be.
The likely that you would look to execute the similar type of structure around the permanent.
The capital base of Priory.
We have no plans for that as we sit here today.
I made I made the point in my remarks because of it.
The the median transaction with pneumonia was so extraordinarily successful.
It's the smart.
Certainly not impossible that we would want to replicate that but that would be of longer term.
The process because as I mentioned that was several years of I think I think we began assembling that median portfolio in 2013 2014 and it was non until late in 2018 debt that we had completed assembling it we had we had season did we we had allowed median.
To bring it.
Efficiencies to bear and only then did we take it out and recapitalize. It so that's possible that the.
The primary could follow that pattern, but there is certainly no plan or commitment to do that as we sit here today and George just to belabor. The point that Steve is making if we'd abroad priory or anyone else. It on the front end.
Wouldn't have had the ability to realize the gain that we think we could realize later down the road.
If we did it at that time.
Okay.
And then that makes sense.
Then.
As it relates to the dispositions.
During the quarter Olympian medical.
Then Steve you talked about some other potential so one of the Olympia the medical anything you can offer up in terms of the the economics. There I know the 51 million of proceeds but any other details around sort of the yield on sort of the cell and then maybe the scale of the bushnell dispositions or how much.
Helps the have teed up.
So remember Olympia was of mortgage loan for us and.
The operator of lack.
Joe sold it.
The UCLA and as part of our.
The relationship with Alecto that we've been disclosing over the past couple of years. We've had we've had a couple of facilities that we have taken impairment charges on we stopped recognizing.
Current rent.
And so the $51 million.
The proceeds goes not only to repay 100% of the mortgage balance our mortgage balance that was outstanding on on the Olympia facility, but recovered some of those prior charges and provided for profit over and above that on on other cross collateralized and cross default.
The charges, we had taken over the last couple of years.
Okay got it and then other sales.
Just how much of the emptied out.
Where are we.
Relatively minimal.
But when considering combining various.
Sources for.
For capital for recycling.
Meaningful.
A couple of hundred million dollars over the potential force of the next few quarters.
Okay great.
Yes.
I can.
Thank you.
Thanks Jordan.
Thank you. Our next question comes from Mike Mueller with Jpmorgan you May proceed with your question.
Hi, just a quick one.
Is there any updated timing on recognizing the straight line income from Priory.
Well that will start the straight line will start as we close each facility at Ed as Ed mentioned.
And just by way of a little background, we agreed with.
With water land to provide 800 million pounds of real estate financing and it is it is our discretion as to which of the hundreds of facilities.
The priory owns and operate we choose and Thats why it comes up with the 35% to 40 facilities. We are in the process of selecting our facilities that processed and will lead to periodic closings of.
Those facilities and as each facility is closed we'll start recognizing the straight line component of the the master lease agreement.
Got it so that the agility of Lowe's that Mike.
We're hopeful that the all of that is close by by the second quarter of this year.
Got it okay that was it thank you.
Thanks, Mike.
Thank you. Our next question comes from Michael Carroll with RBC Capital markets. You May proceed with your question.
Yes, Thanks, I wanted to touch on the NHS deal that you guys announced and it seems like this is with the I guess the.
The private operator within NHS I guess, how does that work out.
I guess is that with NHS are within our private operators as the southern special segments that they created.
So we acquired of 999 year ground lease on the real estate debt has.
The term used in the U K is an occupational lease with the NHS operator that occupational lease I think has 40 plus potential years running after which just like any other transaction then we would if they don't extend.
We would the.
The real estate would revert to us.
And now is that right is that corporate guarantee or of that lease directly with the NHS or is it a subsidiary of the NHS.
Well the subsidiary is not are not not the right term the NHS is responsible for.
We're funding all NHS trust and operations and so it's effectively.
In our view a government yield so technically all of the trust operate independently of each other but they are recognized as part of the NHS.
Okay, and then I guess, how big of an opportunity is there for you to continue to grow with NHS in the UK and I know that most of the growth has been with with private operators.
There is an opportunity to make a bigger investment with the NHS.
So we think that this opportunity has been there for very long time, but it's always getting that first one in the door. We thought we had an opportunity seven or eight years ago with the Manchester Trust University Hospital, there, but with this one actually closed we expect that there will be others that we can do.
And does the NHS typically sell their real estate I mean, I guess do they own most of their own.
So the again, it's individual with each individual trust and each individual trust has done a lot of different transactions symbols of this not necessarily of sale leaseback type transaction or exact transaction, but the sell leaseback type transactions. So this isn't foreign to them.
Okay, and then can you talk a little bit about the Swiss medical network deal did.
Did I hear that correctly that was into the operator or was there some real estate investing and tied with that yes.
No. It is the it is the real estate portion of it Youll remember that our investment there is with an entity called <unk>, which in our tenant there is the Swiss medical network and we bought out one of the other.
Investors. This was something that we had planned on our hope that we were able to do when we made our original investment and then for core and so when the opportunity came along we were very excited to consummated.
But it is entirely real estate.
Okay, and then I know that there was an opportunity or when you originally did that deal too.
On a consolidated and grow in that market. I mean have you started doing that yet or is there of near term opportunities to kind of start to acquiring new properties and grow that entire venture yes.
Yes, I think we were very close to adding new properties before COVID-19 hit.
It is still the the ultimate plan, but obviously with the Covid everything in Switzerland got put on hold.
Okay. Okay, great. Thanks, guys. Thanks.
Thanks, Mike.
Thank you. Our next question comes from Tom Hennessy with Deutsche Bank. You May proceed with your question.
Hi, Good morning, just going back to the pipeline of real quick could you just discuss the impacts of the pandemic on the pipeline I guess as the year progressed, I mean, I assume getting goods from the ground was a considerable challenge.
But is there any way to quantify this whether it would be lost or delayed deals how much capacity went unused as the year progressed, and then I guess any.
Any challenges carrying over to 'twenty, one and would you anticipate of meaningful acceleration once you get back to normal.
Yeah, Thanks, Tom I think that the.
There weren't any deals that were lost there were a large number of deals that got put on hold and delayed.
<unk> is a perfect example of that we were working on priory, well before Covid hit and obviously when Covid hit it along with everything else got put on hold most everything has opened the backup.
<unk> opportunities that we were just really getting into so I think the pipeline as of total figure is back to where we were on a pre COVID-19 basis. Some of the items still move a little slow you talk about boots on the ground. We were very very fortunate to have our Luxembourg office He goes well.
All of US here in the U S weren't allowed to come to Europe, Our Luxembourg office was still able to travel freely. We also have boots on the ground in Australia. So with some of the expansions most of them were planned there you'll remember when we did the original transaction with help scope in Australia, we had a 300 million dollar per.
<unk> addition to that portfolio of that obviously got put on hold but as I've mentioned in the last earnings call get started back up and again, having our boots on the ground there has been able to be very very beneficial.
In South America and Colombia.
They still let us in and so we've been able to have our team there and the continued debt.
That process.
As I have said to some of the some of the people to the vast over the last few months, that's probably the biggest challenge that we have and going forward in 'twenty, one because it certainly is not going to be back to two.
2019 overnight, but it is our ability to operate in this new environment and I think we've done a very good job of it.
Pride ourselves on building relationships with people face to face we have to have had to do some of that from the zoom standpoint.
But as we get into 'twenty, one and more and more people throughout the world are able to have the vaccine we hope to be able to be excuse me, we hope to be able to travel more freely and obviously hasn't happened yet, but with our offices around the world. It hasnt slowed us down any.
But thats, where we are in the pipeline right now.
Great Thats it from me thanks for the thanks for the additional color.
Thanks, Tom.
Thank you. Our next question comes from Michael Lewis of True Securities. You May proceed with your question.
Great. Thank you.
My first question is about the run rate at the <unk> guidance and our ability to use that as the yardstick and the reason I ask is.
No.
The guidance back in December 2019, and now the full year later or you still haven't quite hit it even.
Millions of dollars of the accretive investments since then.
Youre still above the financial leverage target that was contemplated in that run rate and I assume it's going to presume that you referenced from the.
The higher today had you made no.
No investments from 2020, and Delever the balance sheet by almost a turn.
So.
Are you missing your guidance or is it just a timing related thing where it can take.
A year or however, long it takes to get to that run rate.
So a couple of.
Points would be firstly, we reported.
In 2020 <unk> per share, 21% higher than we did in 2019.
And secondly, I don't think we're lagging.
But more importantly, as I made an attempt earlier.
Earlier in my prepared remarks to explain there's lots of that goes into.
Our run rate guidance.
And when a company is growing very very rapidly like ours I mean over the last almost 10 years at 30 plus percent compounded annually the only way to get to a firm target of <unk> is to stop debt growth because.
Every single transaction that is done.
The impacts the arithmetic the calculation that goes in.
No.
Yeah.
I'm not quite sure I didn't quite hear all of your question, but are we lagging.
I don't think so we're growing almost exponentially accretively and Thats, what the guidance is really meant to show because unless like I say you wanted to stop.
All of the forward looking assumptions, which include further growth, which which include.
The capital.
Which is a very significant part of the guidance is to bring the leverage back down.
From where we are which is slightly above the six times into something between five and six thats. The best the most significant meaningful impact to a straight <unk>.
EBITDA based.
Accretion so.
Again, I'm round to repeating myself, but as long as we continue to grow.
That run rate guidance is going to be a.
Ah.
Okay.
Constantly moving target and the faster we grow the.
The more unpredictable at the comps, but it is important for investors to see that Nonetheless, we are investing accretively and frankly very strongly accretively and I think that that's the evidence given by the 21%.
Year over year per share results.
Okay. So I guess there's no.
There's no time period on when you might fit this this $1 72 to $1 76 for example.
Well.
Yes, yes, if we stopped growing yes, we would expect to hit that in 2021.
But we're not going to stop growing.
Is it because the number you gave in December 2019 was $1 65 per $1 68.
You just reported 41 cents right, which of the annualized would be $1 64.
Yes.
Which is why I asked the question about the.
We could do this offline too.
My second question I wanted to ask about <unk>.
Just one maybe has already been answered but.
As you talk about the trailing 12 months nature of the coverage ratios.
Is it fair again setting expectations I would assume that we probably don't see much movement of night coverage then since <unk> is not going to be a unique comp year over year comp <unk> won't be and really we we may not see real movement in that ratio.
And that coverage ratio until we get the.
This really kind of bizarre to queue.
Out of the trailing equation because that is that a fair way to think about it.
Well, Mike It is but as I said earlier, while I don't want to set any expectations. Because we just have two months unofficial numbers for a number of our tenants for the fourth quarter was the <unk>.
Fourth quarter numbers, even on a trailing 12 looks substantially better than they did even on the third quarter trailing 12. So.
As I've said earlier, if you look at the same store admissions compared to the third quarter were up.
Compared third quarter to the second quarter were up 10% overall and up 18% in the acute care and then if you look at the reporting that we've had for October and November they are very strong numbers. So again, notwithstanding the exact expectations I do expect you to see good movement and the coverage for when we do.
Through the first quarter and reporting fourth quarter numbers, but you're absolutely right until we're through with the second quarter in which case the hub all hospitals were basically shut down youre not going to see numbers back above 2019.
Okay that makes sense and sounds promising.
Thank you. Our next question comes from Jordan Saddler with Keybanc capital markets. You May proceed with your question.
Just a quick follow up.
I was confused a little bit by your answer the next.
Question about.
The rate on the water and loan.
Versus the GAAP yield I think.
And in previous question previous answer you said that they were the same yield but then <unk>.
Straight line rent is supposed to kick in as you close these properties so.
I guess from a.
Modeling perspective are we modeling the 800 million pounds at eight six yield the going in.
So so.
Good point and I didn't mean to imply that we will be earning eight 6%. During this interim period I was really in my own mind, comparing that to the cash rate debt actually yes, so of which of course, we haven't disclosed.
Closed yet.
Okay. So it's the same as it came of the cash so there will be the delta as you close the loans, the GAAP yield or <unk> yield will step up yes.
Yes incrementally throughout the second like through the second quarter basically as you close the that's correct, yes gotcha.
Thank you, Steve and then one other on the refi.
The opportunities ahead of you so I'm going to touch on this a little bit with the prior year earlier, but.
How do you intend to finance.
This portfolio with debt longer term.
So similar to our kind of long term practice <unk>.
Cause of the very very low rates away from the U S and because we naturally want to hedge our our purchase price.
The expectation would be that long.
The long term, we would finance the priory deal with as much.
Unsecured.
Local currency based.
Notice as we can.
Is there along the lines earlier, you did some refi or free refi opportunity of redemption.
Anything else here sort of in the capital structure that looks a little bit above market that can be taken out.
I don't think so theres, a couple of euro issuances, but it's not nearly as attractive at this point.
So we're not expecting that in the near term it will it will be much more likely of the new issuances in the Sterling market.
Okay.
Yeah.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Ed <unk> for any further remarks.
Josh Thank you very much and again, thank all of you for listening in today. Thank you for your interest in medical properties Trust and if you of any additional questions. After the call. Please don't hesitate to reach out to drew or Tim and they will get with the right people. So thank you very much.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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