Q4 2023 Medical Properties Trust Inc Earnings Call

February 21, 2024

Pressing the star key followed by zero.

After today's presentation.

There will be opportunity to ask questions and please note that today's presentation will only last 60 minutes.

And to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Charles Lambert Vice President. Please go ahead.

Good day and welcome to the medical properties Trust incorporated fourth quarter 2023 conference call.

Thank you good morning.

Welcome to the medical properties Trust conference call to discuss our fourth quarter and full year 2023 financial results.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

With me today are Edward K out AG Junior Chairman, President and Chief Executive Officer of the company.

After today's presentation.

There will be a opportunity to ask questions and please note that today's presentation will only last 60 minutes.

Steven Hamner Executive Vice President and Chief Financial Officer, Kevin Hannah Senior Vice President Controller, and Chief Accounting Officer, and Rosa Hooper Senior Vice President of operations and Secretary.

To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now.

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 it is available on our website at medical properties Trust's Dot com in the Investor Relations section.

I'd like to turn the conference over to Charles Lambert Vice President. Please go ahead.

Charles Reynolds Lambert: Thank you good morning.

Charles Reynolds Lambert: Welcome to the medical properties Trust conference call to discuss our fourth quarter and full year 2023 financial results.

Additionally, we are hosting a live webcast of todays call, which you can access in that same section.

Charles Reynolds Lambert: With me today are Edward K, Outback Junior Chairman, President and Chief Executive Officer of the company.

During the course of this 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 $19 95. These forward looking statements are subject to known and unknown risks uncertainties and other factors that may cause our financial results in.

Charles Reynolds Lambert: Steven Hamner Executive Vice President and Chief Financial Officer, Kevin Hannah Senior Vice President Controller, and Chief Accounting Officer, and Rosa Hooper Senior Vice President of operations and Secretary.

Charles Reynolds Lambert: 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 it is available on our website at medical properties Trust's Dot com in the Investor Relations section.

Future events to differ materially from those expressed and our 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.

Charles Reynolds Lambert: Additionally, we're hosting a live webcast of todays call, which you can access in that same section.

Charles Reynolds Lambert: During the course of this 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 in <unk>.

Information being provided today is as of this date, only and except as required by the 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.

Charles Reynolds Lambert: Events to differ materially from those expressed and our underlying such forward looking statements.

Charles Reynolds Lambert: 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.

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.

Charles Reynolds Lambert: The information being provided today is as of this date, only and except as required by the federal Securities laws. The company does not undertake a duty to update any such information.

Can also refer to our website at medical properties Trust Dot com for the most directly comparable financial measures and related reconciliations.

I will now turn the call over to our Chief Executive Officer, Ed <unk>. Thank.

Charles Reynolds Lambert: 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.

Thank you Charles and thanks to all of you for joining US. This morning on our fourth quarter 2023 earnings call I am pleased to be joined again today by Steve Hamner Rosa Hooper and Kevin Hannah you will hear from each of them shortly.

Charles Reynolds Lambert: 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.

As discussed in detailed last quarter. Our primary focus right now is executing a capital allocation strategy that will aim to generate at least $2 billion of additional liquidity in 2024 and help us satisfy our debt maturities for several years into the future.

Charles Reynolds Lambert: You can also refer to our website at medical properties Trust's Dot com for the most directly comparable financial measures and related reconciliations.

Speaker Change: I will now turn the call over to our Chief Executive Officer at Outback.

Since outlining this new capital allocation approach last year, we have made significant strides and I'd like to begin today by highlighting that progress.

Outback: Thank you Charles and thanks to all of you for joining US. This morning on our fourth quarter 2023 earnings call I'm pleased to be joined again today by Steve Hamner Rosa Hooper and Kevin Hannah you will hear from each of them shortly.

During the fourth quarter, we closed on the sale of our four remaining Australian facilities for approximately $305 million or a five 7% cap rate.

And in our press release earlier. This morning, we announced another $480 million of agreed upon liquidity transactions, including the sale of five hospitals to prime at a seven 4% economic cap rate as well as the sale of our syndicated term loan investment in media and the parent company of Priory group.

We believe these recent transactions and other processes. We are actively engaged in clearly demonstrate that our assets remain attractive to operators and sophistic real estate investors around the world.

We are actively working on several additional cell asset sale opportunities as well as other transactions that we believe will validate underwritten asset values.

And the prices we have achieved to date are broadly consistent with initial indications of market value that we've received on these other assets.

As such we remain disciplined and optimistic in our ability to continue to execute transactions on attractive terms and we feel good about where we stand today relative to our $2 billion target for 2024.

The board will meet later this quarter to discuss the dividend the board's policy on the dividend remains unchanged.

As always been the case the board will review all aspects of the company, including items, such as <unk> payout ratios re requirement and liquidity.

Before I turn it over to Rosa, Kevin and Steve to go through our results in more detail I wanted to provide a brief update on steward and prospect.

During our last call in October we discussed stewards revenue cycle management challenges, which had resulted in a sizable accounts payable backlog.

Unfortunately, since that time Stewarts cash collection challenges have begun more pronounced and the resulting changes to vendor payment terms that put pressure on supplies constraining stewards ability to perform higher margin surgeries that are a key driver of cash flow.

As a result in early January we shared that we had been working with steward and its advisers to develop an action plan to strengthen their balance sheet liquidity accelerate recovered a recovery of unpaid rent and ultimately significantly reduce our exposure to steward.

Which had resulted in a sizable accounts payable backlog on.

This plan contemplates a wide range of strategic transactions, including transitioning certain hospitals to new tenants and selling its managed care business called stewardship.

It will take some time for Stuart to execute these steps we are encouraged by the early progress.

As a result in early January we shared that we had been working with steward and its advisers to develop an action plan to strengthen their balance sheet liquidity accelerate recovered a recovery of unpaid red and ultimately significantly reduce our exposure to steward.

As this plan is executed steward needs access to liquidity to continue to operate as critical hospital facilities. As we previously disclosed in January we funded a $60 million bridge loan, which provided a MPT a second lien on stewardship business subordinate only to Stuart's ABL.

This plan contemplates a wide range of strategic transactions, including transitioning certain hospitals to new tenants and selling its managed care business called stewardship.

Lenders, we also can send into a limited and tapering deferral of rent until the end of June or the completion of the anticipated asset sales in the fourth quarter Steward paid approximately 25% of all rent and interest owed to M. P. J.

It will take some time for Stuart to execute these steps we are encouraged by the early progress.

And this plan is executed steward needs access to liquidity to continue to operate its critical hospital facilities. As we previously disclosed in January we funded a $60 million bridge loan, which provided a M. P. T. A second lien on stewardship business subordinate only to Stuart's ABL.

In our press release. This morning, we shared that MPT and certain lenders in the ABL group are negotiating a new bridge facility under which each party would fund an additional initial 37 and a half million dollars to steward of which MPT has already funded $20 million.

Any additional funding is entirely dependent on steward's, achieving significant milestones towards optimizing the amount and timing of mpt's recoveries.

Turning to prospect.

Fortunately in California prospect is current on all rent and interest due through January 2024.

Though they have not yet paid February rent <unk>.

Prospects EBITDAR has improved year over year, driven by increased admission volumes higher Medicare reimbursement rates and lower supply costs. We are encouraged by their most recent December trailing 12 month rent coverage, which was above one times.

Any additional funding is entirely dependent on steward's, achieving significant milestones towards optimizing the amount and timing of mpt's recoveries.

While we do not have a meaningful update to share today on the sale of prospect three Connecticut hospitals to Yale New Haven as a reminder, our $2 billion of targeted liquidity transactions does not include this expected transaction or the expected recovery of our investment in PHP holdings.

Turning to prospect importantly, in California prospect is current on all rent and interest due through January 2024.

Though they have not yet paid February rent <unk>.

Prospects EBITDAR has improved year over year, driven by increased admission volumes higher Medicare reimbursement rates and lower supplies cost. We are encouraged by their most recent December trailing 12 month rent coverage, which was above one times.

As detailed in our press release. This morning, we had moved Stewart and prospect to cash basis accounting and divided our portfolio into two categories. Our hope is that this split will make it easier for investors to track the performance of our stabilized portfolio, which consists of more than 11 billion of assets and is accounted for.

While we do not have a meaningful update to share today on the sale of prospects three Connecticut hospitals to Yale New Haven as a reminder, our $2 billion of targeted liquidity transactions does not include this expected transaction or the expected recovery of our investment in PHP holdings.

Using the accrual method is.

Is this breakdown demonstrates the portfolio continues to perform well reinforcing our conviction in <unk> underlying business model. While hospital operators have spent the past several years navigating challenges ranging from the COVID-19 pandemic do unprecedented labor shortages to insufficient reimbursement rates.

As detailed in our press release. This morning, we had moved steward and prospect to cash basis accounting and divided our portfolio into two categories. Our hope is that this split will make it easier for investors to track the performance of our stabilized portfolio, which consists of more than 11 billion of assets and is accounted for.

And some tenants have suffered more long term impacts from those headwinds than others. The simple fact remains that there are no more essential services than those provided by acute care hospitals for more than 20 years. Our underwriting approach is centered on these essential infrastructure like characteristic and identifying hospitals that are.

Using the accrual method is.

Is this breakdown demonstrates the portfolio continues to perform well reinforcing our conviction in N V D's underlying business model, while hospital operators have spent the past several years navigating challenges ranging from the COVID-19 pandemic do unprecedented labor shortages to insufficient reimbursement rates.

Integral to sustaining community health over many years given.

Given the highly diversified portfolio of assets, we've assembled over that period, we are confident in our ability to find competent replacement operators as needed and to continue to execute sales that achieve our objectives.

I'll now turn it over to rosy to provide an update on performance of the stabilized portfolio during the fourth quarter Rosa.

Thank you and it's great to be able to participate in today's discussion and take you through some of the highlights across our portfolio of critical hospital real estate.

Meaning with Europe broadly speaking, we are encouraged by recent market trends, including increased occupancy rate growing reimbursement revenue and the continued normalization of labor cost is.

Integral to sustaining community health over many years given.

That's private insurance coverage expands in the U K Circle health continues to demonstrate steady financial performance.

I'll now turn it over to roads and to provide an update on the performance of the stabilized portfolio during the fourth quarter Rosa.

Circle has seen an increase in orthopedic joint procedures of more than 50% compared to pre COVID-19 data.

Charles Reynolds Lambert: Thank you and it's great to be able to participate in today's discussion and take you through some of the highlights across our portfolio of critical hospital real estate.

Inpatient admissions also remain on an upward trajectory as patients continue to seek high quality care alternatives to long wait times.

Charles Reynolds Lambert: With Europe broadly speaking, we are encouraged by recent market trends, including increased occupancy rate growing reimbursement revenue and the continued normalization of labor cost as.

In addition to being named private hospital group of the year by Health Investor U K for the third consecutive year Circle was also named as an outstanding company to work for by Best Company in 2023.

Charles Reynolds Lambert: As private insurance coverage expands in the U K Circle health continues to demonstrate steady financial performance.

Let's turn now to priority, which is the largest independent mental health care provider in the U K by number of bad Priory delivered EBIT darn coverage of two two times for the quarter and continues to benefit from the rapid growth of behavioral health services in the U K.

Charles Reynolds Lambert: Circle has seen an increase in orthopedic joint procedures of more than 50% compared to pre COVID-19 data.

Charles Reynolds Lambert: Inpatient admissions also remain on an upward trajectory as patients continue to seek high quality care alternatives to long wait times.

It is capitalizing on this trend by driving increases to its already high utilization rate negotiating reimbursement rate increases and ensuring efficient cost management at.

As a reminder, priory is managed by one of M. P. Tastes long term operators median which is based in Germany.

Charles Reynolds Lambert: Let's turn now to priority, which is the largest independent mental health care provider in the U K by number of bad.

<unk> continues to steadily improve occupancy although at a slower ramp than originally anticipated following government imposed COVID-19 restrictions.

Charles Reynolds Lambert: Priory delivered EBIT darn coverage of two two times for the quarter and continues to benefit from the rapid growth of behavioral health services in the U K.

Negotiated reimbursement rate increases in Germany were above expectation and a stabilization in energy expenses have allowed median to achieve its 2023 financial targets.

Charles Reynolds Lambert: It is capitalizing on this trend by driving increases to its already high utilization rate negotiating reimbursement rate increases and ensuring efficient cost management.

Swiss Medical network had a highly productive 2023, completing several renovation and expansion projects and executing a handful of smaller sized acquisitions that will complement their capabilities in existing markets.

Charles Reynolds Lambert: As a reminder, priory is managed by one of M. P. Tastes long term operators median which is based in Germany.

Charles Reynolds Lambert: Median continues to steadily improve occupancy although at a slower ramp than originally anticipated following government imposed COVID-19 restrictions.

Earlier this year Swiss medical launched the first integrated care organization in Switzerland, providing a first mover advantage and an untapped market.

Charles Reynolds Lambert: Negotiated reimbursement rate increases in Germany were above expectation and a stabilization in energy expenses have allowed median to achieve its 2023 financial targets.

Additionally, Swiss medical remains focused on the development of its generally a innovation hub.

Our state of the art multi tenant lab training simulation platform and office space attached to their flagship acute care hospital, which is expected to accelerate the transfer of innovative clinical solutions from bench to bedside the.

Charles Reynolds Lambert: With medical network had a highly productive 2023, completing several renovation and expansion projects and executing a handful of smaller sized acquisitions that will complement their capabilities in existing markets.

The innovation hub is on track to open in the second half of 2024.

Outback: Earlier this year Swiss medical launched the first integrated care organization in Switzerland, providing a first mover advantage and an untapped market.

Shifting to our approximately 5 billion Americas portfolio, we have been pleased to see operators largely maintained hospital volumes, while making significant progress in reducing contract labor.

Outback: Additionally, Swiss medical remains focused on the development of its generally a innovation hub.

Our Colombian hospitals continue to see high demand in their respective communities and the two Colombian operators have maintained coverage in excess of one and a half times.

Outback: Our state of the art multi tenant lab training simulation platform and office space attached to their flagship acute care hospital, which is expected to accelerate the transfer of innovative clinical solutions from bench to bedside the.

Common spirit, which recently announced that it would take over direct management of our five Utah hospitals from Centura health continues to deliver strong property level performance reporting steady volumes across hospitals during the quarter.

Outback: The innovation hub is on track to open in the second half of 2024.

Outback: Shifting to our approximately 5 billion Americas portfolio, we have been pleased to see operators largely maintain hospital volumes, while making significant progress in reducing contract labor.

<unk> delivered another quarter of strong performance with trailing 12 month EBITDAR coverage of.

Two times after removing the impact of Saint Francis which is no longer reported in our supplemental given the transaction announced today.

Outback: Our Colombian hospitals continue to see high demand in their respective communities and the two Colombian operators have maintained coverage in excess of one and a half times.

Prime has successfully reduced contract labor costs, while inpatient and ER volumes continue to increase year over year across our facilities.

Outback: Common spirit, which recently announced that it would take over direct management of our five Utah hospitals from Centura health continues to deliver strong property level performance reporting steady volumes across hospitals during the quarter.

As prime remained focused on efforts to negotiate more favorable payer contracts, we expect to see increased surgical volumes over time.

Overall, our earnings portfolio continues to deliver steady performance, while its long term acute care hospitals continue to navigate the impacts of admission criteria waivers that were eliminated in the first half of 2023.

Outback: <unk> delivered another quarter of strong performance with trailing 12 month EBITDAR coverage of.

Outback: Two times after removing the impact of Saint Francis which is no longer reported in our supplemental given the transaction announced today.

Our S rehab business has offset any declines associated with that.

Outback: Prime has successfully reduced contract labor costs, while inpatient in ER volumes continued to increase year over year across our facilities.

In fact, when examining the earth portfolio exclusive of ramp up cost associated with their need development same store Earth achieved approximately three times EBITDAR coverage.

Outback: As prime remains focused on efforts to negotiate more favorable payer contracts, we expect to see increased surgical volumes overtime.

Volumes at our life point hospital to remain relatively flat on a year over year basis life point has made significant strides in reducing contract labor by nearly half as they execute on their recruiting and retention initiatives, particularly on the physician recruitment that which over time, we expect will result in <unk>.

Outback: Overall, our Ernest portfolio continues to deliver steady performance, while its long term acute care hospitals continue to navigate the impacts of admission criteria waivers that were eliminated in the first half of 2023.

Outback: Our rehab business has offset any declines associated with that.

Praised volumes and revenue.

This is particularly true with their economy Memorial Hospital in Pennsylvania, where any underperform. It has an outsized impact on coverages for this portfolio Panama.

Outback: In fact, when examining the earth portfolio exclusive of ramp up cost associated with their new developments same store Earth achieved approximately three times EBITDAR coverage.

Panama recently dedicated a knee self funded $77 million cardio vascular and surgical care pavilion that will provide state of the art care for patients.

Outback: Volumes at our life point hospital to remain relatively flat on a year over year basis life point has made significant strides in reducing contract labor by nearly half as they execute on their recruiting and retention initiatives, particularly on the physician recruitment side, which over time, we expect will result in <unk>.

The vast majority of light points investment over $60 million went into the real estate, while the remaining portion went towards new cutting edge equipment. The new leadership for this market is excited about the positive clinical impact this will have for their patience and combining this with their physician.

Outback: Proved volumes and revenue.

Outback: This is particularly true at their economy Memorial Hospital in Pennsylvania, where any underperform. It has an outsized impact on coverages for this portfolio.

Treatment successes, we believe this market is well positioned for improved performance.

Outback: Panama recently dedicated a new self funded $77 million cardio vascular and surgical care pavilion that will provide state of the art care for patients. The vast majority of life points investment over $60 million went into the real estate, while the remaining portion went to.

Our life point behavioral facilities continued to benefit from increased revenues, resulting from increased inpatient volume <unk>.

<unk> point behavior with ability to manage labor cost in a rising wage environment has further enabled them to maintain strong performance. We continue to make progress on the construction of our new life point behavioral facility in Mckinney, Texas, along with multiple other expansion projects at our hospitals in Texas.

Outback: <unk>, new cutting edge equipment.

The new leadership for this market is excited about the positive clinical impact this will have for their patience and combining this with their physician recruitment successes. We believe this market is well positioned for improved performance.

Kansas.

Scion help has produced consistent quarter over quarter coverage improvements in the past year by growing revenue, while reducing contract labor.

Outback: Our life point behavioral facilities continued to benefit from increased revenues, resulting from increased inpatient volume life point behavioral its ability to manage labor cost in a rising wage environment has further enabled them to maintain strong performance.

Scion helped general acute hospital has seen an 11% increase in year to date revenue over prior year driven by increases in both admissions and surgeries.

We are pleased with our portfolio's Q3, 2023 performance compared to that of public reporting hospitals, excluding steward for trailing 12 months Q3, 2023 mpt's portfolio of acute care hospitals reported volume increases that we're for the most.

We continue to make progress on the construction of our new life point behavioral facility in Mckinney, Texas, along with multiple other expansion projects at our hospitals in Texas and Kansas.

Outback: Scion help us produce consistent quarter over quarter coverage improvements in the past year by growing revenue, while reducing contract labor side.

Part higher than that of the public reporting companies and income statement growth metrics that were generally in line with those of the public reporters.

Outback: Scion helped general acute hospital has seen an 11% increase in year to date revenue over prior year driven by increases in both admissions and surgeries.

Over the years MPT has carefully constructed a well diversified portfolio in terms of care settings operators and geographies.

Outback: We are pleased with our portfolio's Q3, 2023 performance compared to that of public reporting hospitals.

We have over 50 unique tenants operating across the highest acuity care settings, including rehabilitation behavioral and acute care hospitals.

Outback: Looting steward for trailing 12 months Q3, 2023 mpt's portfolio of acute care hospitals reported volume increases that we're for the most part higher than that of the public reporting companies and income statement growth metrics that were generally in line with those of the pub.

After skewered, our second largest operator circle health represents 12% of our portfolio.

I'll, let by Priory at 8% and prospect at 6% geographically our properties are spread across nine countries with nearly 40% outside the United States Importantly, this deliberate diversification strategy helps safeguard against any operator specific.

Outback: Reporters.

Outback: Over the years M. P. T has carefully constructed a well diversified portfolio in terms of care settings operators and geographies.

Outback: We have over 50 unique tenants operating across the highest acuity care settings, including rehabilitation behavioral and acute care hospitals.

The challenges that may arise as well as geopolitical and economic disruption with that I will turn the call over to Kevin to discuss our financial results Kevin.

Outback: After skewered, our second largest operator circle health represents 12% of our portfolio.

Thank you Rosa. This morning, we reported a GAAP net loss of $1 11 per share and normalized <unk> of a positive 36 cents per share for the fourth quarter of 'twenty three.

Outback: I'll, let by Priory at 8% and prospect at 6% geographically our properties are spread across nine countries with nearly 40% outside the United States.

As Ed mentioned and as described in our press release. This morning, we have move steward to cash basis accounting effective January one 2024, we want to highlight that included in fourth quarter normalized <unk> is approximately <unk> 12 per share of steward quarterly revenue recognized prior to this accounting change.

Importantly, this deliberate diversification strategy helps safeguard against any operator specific challenges that may arise as well as geopolitical and economic disruption with that I will turn the call over to Kevin to discuss our financial results Kevin.

In the press release, we also detailed approximately $770 million of charges recorded this quarter primarily related to Stewart.

Kevin Hannah: Thank you Rosa. This morning, we reported a GAAP net loss of $1 11 per share and normalized <unk> of a positive 36 cents per share for the fourth quarter of 'twenty three.

Importantly, these charges were recorded pursuant to U S GAAP accounting rules and reflect conservative assumptions regarding potential recoveries.

Kevin Hannah: As Ed mentioned and described in our press release. This morning, we have move steward to cash basis accounting effective January one 2024, we want to highlight that included in fourth quarter normalized <unk> is approximately <unk> 12 per share of.

These charges consisted of the following a $154 million of rent reserves and 224 million of straight line rent reserves.

$81 million reserves on unpaid pick and other interest receivables related to Stewart loans, and our loan to our international joint venture.

Kevin Hannah: Steward quarterly revenue recognized prior to this accounting change.

112 million of real estate impairments with the assistance of a third party independent appraiser, we analyzed all Stewart properties, and many others, where possible impairment this quarter and identified less than 10 properties, where our net book value exceeded the estimated fair value and we adjusted our books Accordingly.

Kevin Hannah: In the press release, we also detailed approximately $770 million of charges recorded this quarter primarily related to Stewart.

Kevin Hannah: Importantly, these charges were recorded pursuant to U S GAAP accounting rules and reflect conservative assumptions regarding potential recoveries.

We also had 171 million of non real estate impairments, which again using a third party independent appraiser, we adjusted our non real estate investments and steward to reflect the current.

Kevin Hannah: These charges consisted of the following a $154 million of rent reserves and 224 million of straight line rent reserves.

Kevin Hannah: 81 million reserves on unpaid pig and other interest receivables related to Stewart loans alone to our international joint venture.

Estimated fair value of our related collateral finally, we made a 30 million dollar charge in earnings from equity interest to reflect the reserves for build and straight line rent on the properties included in the Massachusetts Joint venture. These charges were recorded on several different line items of our income statement.

Kevin Hannah: 112 million of real estate impairments with the assistance of a third party independent appraiser, we analyzed all Stewart properties, and many others, where possible impairment this quarter and identified less than 10 properties, where our net book value exceeded the estimated fair value and we adjusted our books Accordingly.

And we have included additional tables in our release this morning showcasing the impact of these charges.

Beyond impairment charges, we did have two other adjustments to normalize episodes that I want to highlight as is typical we recognize fair value adjustments in the quarter from adjusting certain marketable securities.

Kevin Hannah: We also had 171 million of non real estate impairments, which again using a third party independent appraiser, we adjusted our non real estate investments and steward to reflect the current estimated fair value of our related collateral. Finally, we made a 30 million dollar charge in earnings from equity interest to reflect the reserves.

Like our Swiss investment any of us to market. This $8 4 million negative adjustment is net of a gain recognized on a P. H P investment as the managed care business continued to perform well.

Kevin Hannah: For build and straight line rent on the properties included in the Massachusetts Joint venture. These charges were recorded on several different line items of our income statement.

Second and due to Stuart and the significant adjustments made this quarter, we recorded a $6 6 million cumulative adjustment to stock compensation expense to reflect our updated estimate of expected payouts for certain Scott Ward grants over the past years and with that I will turn it over to Steve for a discussion of our liquidity position and plan.

Kevin Hannah: And we have included additional tables in our release this morning showcasing the impact of these charges.

Kevin Hannah: On impairment charges, we did have two other adjustments to normalize episodes that I want to highlight as is typical we recognize fair value adjustments in the quarter from adjusting certain marketable securities.

Steve.

Thank you, Kevin I will wrap up our prepared remarks with some perspective around our near term recapitalization process that Ed mentioned at the start of the call.

Kevin Hannah: Our Swiss investment any of us to market. This $8 4 million negative adjustment is net of a gain recognized on a PHP investment as the managed care business continued to perform well.

On last quarter's call. We described our plans for accessing capital through asset sales and limited secured financing we announced an initial target of about $2 billion over the course of 2020 for.

Kevin Hannah: Second and due to Stuart and the significant adjustments made this quarter, we recorded a $6 6 million cumulative adjustment to stock compensation expense to reflect our updated estimate of expected payouts for certain Scott Ward grants over the past years and with that I will turn it over to Steve for a discussion of our liquidity position and plan.

This morning, we announced that we have so far agreed to transactions aggregating almost 25% of that initial target.

The largest of these transactions is our agreement to sell two hospitals to prime for $350 million.

Kevin Hannah: Steve.

Steve Hamner: Thank you, Kevin I will wrap up our prepared remarks with some perspective around our near term recapitalization process that Ed mentioned at the start of the call.

Importantly, and encouragingly the economics of the transaction imply a capitalization rate of about seven 4%.

That is obviously much better than what our share price implies or even what some investors believe our secured financing rate would be Moreover.

Steve Hamner: On last quarter's call. We described our plans for accessing capital through asset sales and limited secured financing we announced an initial target of about $2 billion over the course of 2024.

Moreover, we expect to realize an approximate $50 million GAAP gain on the transaction and the purchase price exceeds our unappreciated initial investment by about $30 million.

Steve Hamner: This morning, we announced that we have so far agreed to transactions aggregating almost 25% of that initial target.

Steve Hamner: The largest of these transactions is our agreement to sell two hospitals to prime for $350 million.

We expect to receive $250 million of the purchase price in cash upon expiration of a short notice period, and the remaining $100 million before or on the expiration of a nine month.

Steve Hamner: Importantly, and encouragingly the economics of the transaction imply a capitalization rate of about seven 4%.

Interest bearing mortgage note due to M. P T.

Steve Hamner: That is obviously much better than what our share price implies or even what some investors believe our secured financing rate would be.

In addition, we were able to consolidate our four remaining hospitals leased to prime under a new 20 year Master lease with the lease base of $238 million, notably the original master lease in place for three of these hospitals was otherwise set to expire next year.

Steve Hamner: Moreover, we expect to realize an approximate $50 million GAAP gain on the transaction and the purchase price exceeds our unappreciated initial investment by about $30 million.

Steve Hamner: We expect to receive $250 million of the purchase price in cash upon expiration of a short notice period, and the remaining $100 million before or on the expiration of a nine month.

In addition to the benefit of extending the term of this leaves our relative rent will increase by approximately $5 million. So the economic seven 4% cap rate is based on the $350 million purchase price and $26 million of net rent that is.

Interest bearing mortgage note due to M. P T.

Steve Hamner: In addition, we were able to consolidate our four remaining hospitals leased to prime under a new 20 year Master lease with the lease base of $238 million, notably the original master lease in place for three of these hospitals was otherwise set to expire next year.

That $31 million of contractual rent on the two hospitals, we sold offset by the $5 million rent increase that results from the increased lease base added to the new master lease.

The new lease also provides prime an option to purchase these facilities at any time for $260 million, which would represent an additional gain on sale of real estate of approximately $95 million for M. P T over and above the $50 million gain I just mentioned.

Steve Hamner: In addition to the benefit of extending the term of this leaves our relative rent will increase by approximately $5 million. So the economic seven 4% cap rate is based on the $350 million purchase price and $26 million of net rent that is.

These are all attractive hospitals and in our view Doctor Prim ready and his management team are amongst the most reliable and capable operators of acute hospitals in the country.

Steve Hamner: That $31 million of contractual rent on the two hospitals, we sold offset by the $5 million rent increase that results from the increased lease space added to the new master lease.

But the geographic location of these hospitals are not necessarily the best in our portfolio and yet they traded at a seven 4% economic capitalization rate.

This speaks very strongly of continued investor interest and confidence and well underwritten hospitals that are necessary to a community's overall health care infrastructure.

We have approved we have proven that repeatedly over the past couple of years and Prime is just the most recent example of the recent transactions that have validated the value of our assets include but are certainly not limited to the sale of our Australian portfolio in October of last year and in India.

Steve Hamner: These are all attractive hospitals and in our view Doctor Prim ready and his management team are amongst the most reliable and capable operators of acute hospitals in the country.

Steve Hamner: But the geographic location of these hospitals are not necessarily the best in our portfolio and yet they traded at a seven 4% economic capitalization rate.

Painted capitalization rate of less than 6%.

The new lease put in place with common spirit in Utah, roughly one year ago, which effectively placed a mid 7% cap rate on the rental stream.

Steve Hamner: This speaks very strongly of continued investor interest and confidence and well underwritten hospitals that are necessary to a community's overall health care infrastructure.

The recent hospital sales to prime for $460 million, which generated very attractive irr's and fully recovered our initial investment from at least 10 years earlier all of these transactions and more have been executed and global economic and financial markets that have not necessarily been friendly to sellers of large off.

Steve Hamner: We have approved we have proven that repeatedly over the past couple of years and Prime is just the most recent example of the recent transactions that have validated the value of our assets include but are certainly not limited to the sale of our Australian portfolio in October of last year and in India.

<unk> facilities.

And that is why we are encouraged by the progress, we're making and our protein shall path to exceeding our initial $2 billion target.

Steve Hamner: Painted capitalization rate of less than 6%.

Steve Hamner: The new lease put in place with common spirit in Utah, roughly one year ago, which effectively placed a mid 7% cap rate on the rental stream.

Which as a reminder, does not account for any proceeds from the sale of our Connecticut assets. The Yale any monetization of our interest in prospects PHP managed care business or any possible proceeds from resolution of the previously mentioned so called non top 10, operator that we discussed on last quarter's call.

Steve Hamner: The recent hospital sales to prime for $460 million, which generated very attractive irr's and fully recovered our initial investment from at least 10 years earlier all of these transactions and more have been executed and global economic and financial markets that have not necessarily been friendly to sellers of large off.

Although we are not prepared to announce specifics. This morning, the valuation metrics of potential transactions that are currently subject to letters of intent and in process definitive documentation are adjusted for geography size and tenant characteristics highly comparable to these recent transactions and in particular the.

Steve Hamner: <unk> facilities.

And that is why we are encouraged by the progress, we're making and our protein shall path to exceeding our initial $2 billion target.

Steve Hamner: Which as a reminder, does not account for any proceeds from the sale of our Connecticut assets. The Yale any monetization of our interest in prospects PHP managed care business or any possible proceeds from resolution of the previously mentioned so called non top 10, operator that we discussed on last quarter's call.

Prime transaction.

As we realized capital from these transactions, we expect to immediately reduce our debt maturities in 2024, we have only two maturing loans approximately $300 million in may and $130 million in December in the interim we will reduce our revolver balances, which in recent months have carried an interest.

Steve Hamner: Although we are not prepared to announce specifics. This morning, the valuation metrics of potential transactions that are currently subject to letters of intent and in process definitive documentation are adjusted for geography size and tenant characteristics highly comparable to these recent transactions and in particular the.

Rate of around six 9% for the U S dollar borrowings.

In 2025, we will have roughly $900 million in bank debt and $550 million in unsecured notes maturing.

And as just noted we expect our planned sales and secured financing transactions will provide more than sufficient proceeds to satisfy these maturities.

Steve Hamner: Prime transaction.

Steve Hamner: As we realized capital from these transactions, we expect to immediately reduce our debt maturities in 2024, we have only two maturing loans approximately $300 million in may and $130 million in December in the interim we will reduce our revolver balances, which in recent months have carried an interest.

And with that we have time for a few questions and I'll turn the call back over to the operator.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Steve Hamner: Rate of around six 9% for the U S dollar borrowings.

You're using a speakerphone please pick up your handset before pressing the keys.

Steve Hamner: In 2025, we will have roughly $900 million in bank debt and $550 million in unsecured notes maturing.

But anytime you question has been addressed and you would like to withdraw your question. Please press Star then two.

In the interest of time, please limit yourself to one question and one follow up.

Steve Hamner: And as just noted we expect our planned sales and secured financing transactions will provide more than sufficient proceeds to satisfy these maturities.

Time will pause momentarily to assemble our roster.

Yeah.

Our first question comes from Boston, where Schmidt from Keybanc capital markets. Please go ahead.

Speaker Change: And with that we have time for a few questions and I'll turn the call back over to the operator.

Great. Thanks.

Afternoon.

One.

Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Actual rent payments that you agreed upon earlier this year for February and second I guess, just given the additional capital that you and other ABL lenders have agreed to fund how much confidence do you have in the ramp in cash rent payments.

Speaker Change: Using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press star two.

The coming months that you laid out earlier this year.

Speaker Change: Just at a time, please limit yourself to one question and one follow up.

So Stuart is compliant with our previous agreement for ramping up.

Speaker Change: This time, we'll pause momentarily to assemble our roster.

The rent and we expect that they will remain compliant.

Speaker Change: Okay.

Speaker Change: Our first question comes from Boston, where Schmidt from Keybanc capital markets. Please go ahead.

Through through June when that ramp gets all the way back to 100%.

Schmidt: Good afternoon.

Got it and then just as far as on the 2 billion in liquidity I believe 40% of that amount was expected to be through.

Schmidt: Stuart.

Schmidt: The partial rent payment that you agreed upon earlier this year for February and second I guess, just given the additional capital that you and other ABL lenders have agreed to fund how much confidence do you have in the ramp in cash rent payments in the coming months that you laid out earlier this year.

Loans are secured data I think more specifically I mean, how far along are you in negotiations on that front.

When when you could close in and I guess, what are you what are you hearing around terms.

For for any such proceeds.

Schmidt: So Stuart is compliant with our previous agreement for ramping up.

So.

Clarify I'm not sure I don't remember in fact, saying that 40% would be secured debt I think all we've done all of these studies is.

Schmidt: The rent and we expect that they will remain compliant.

Schmidt: Through through June when that ramp gets all the way back to 100%.

There'll be limited secured debt.

We're not in a position this morning to give the details, but I did mentioned by the way that that a significant amount of the remaining $2 billion is under either LOI are being negotiated through definitive documents and.

Speaker Change: Got it and then just as far as on the $2 billion of liquidity I believe 40% of that amount was expected to be through loans or secured debt I think more specifically I mean, how far along are you in negotiations on that front you know any sense. When you when you could close in and I guess what are you what are you hearing around terms.

Further we tried to mention that the pricing that you saw not only with the most recent prime transaction, but with a with transactions last year is generally consistent with the valuation metrics that means pricing or interest rates that we're seeing in those transactions that are in progress.

Speaker Change: For for any such proceeds.

So to clarify I'm not sure I don't remember in fact, saying that 40% would be secured debt I think all we've done all of these studies is.

Speaker Change: There'll be limited secured debt.

Speaker Change:

Understood I'll hop back in the queue. Thank you.

The next question comes from Joshua <unk> from Bank of America. Please go ahead.

Yeah, Hey, guys. Thanks for the time I guess.

Speaker Change: And.

Just maybe a follow up on that what kind of gives you the confidence that Stuart given the ramp up and start paying full rent starting in June.

Speaker Change: Further we tried to mention that the pricing that you saw not only with the most recent prime transaction, but with with transactions last year is generally consistent with the valuation metrics that means pricing or interest rates that we're seeing in those transactions that are in progress.

So it's driven by two key strategies.

Strategies that we mentioned early last month, one of those is the the aggressive efforts at repositioning re tenant ting or otherwise selling facility.

Speaker Change: Understood I'll hop back in the queue. Thank you.

<unk> facilities, there now occupied and operated by Steward Secondly is dependent upon a satisfactory monetization of its own stewardship.

Speaker Change: The next question comes from Joshua <unk> from Bank of America. Please go ahead.

Joshua: Yeah, Hey, guys. Thanks for the time I guess.

Managed care business.

Joshua: Maybe a follow up on that.

And Josh you. In addition to that we've been getting weekly cash flow reports from Stewart's advisers to which they've exceeded every one of them thus far.

Joshua: What kind of gives you the confidence that Stuart given the ramp up and start paying full rent starting in June.

Joshua: So it's driven by two key strategies.

Okay, and maybe a follow up to that answer just how easy is it to re tenant at our facility and how do you guys think about just like the transition period.

Joshua: Strategies that we mentioned early last month, one of those is the the aggressive efforts at repositioning re tenant ting or otherwise selling a facility.

If you were just to re tenant the steward property.

Joshua: <unk> facilities, there now occupied and operated by Steward Secondly is dependent upon a satisfactory monetization of its own stewardship.

So the answer to that varies from state are at some stage, it's really easy can be done overnight some states take a little bit longer but the real answer to that question I think for US is that we've been extremely pleased with the amount of interest we've gotten and almost all of the facilities and almost all of facilities, we've got more than <unk>.

Joshua: Managed care business.

Joshua: And Josh you. In addition to that we've been getting weekly cash flow reports from Stewart's advisers to which they've exceeded every one of them thus far.

One party, who is interested in the facilities.

Speaker Change: Okay, and maybe a follow up to that answer just how easy is it to re tenant at our facility and how do you guys think about just like the transition period.

Okay.

Yeah.

The next question comes from Michael Carroll from RBC. Please go ahead.

Speaker Change: If you were just a steward property.

Yes, Thanks, I wanted to circle back on the Steward Bridge loan I just wanted to get the street. So MPW was already funded an additional $20 million, but the other certain ABL lender that was going to match that they haven't yet provided those funds.

Speaker Change: Well the answer to that varies from state are at some stage, it's really easy can be done overnight some states take a little bit longer but the real answer to that question I think for US is that we've been extremely pleased with the amount of interest we've gotten and almost all of the facilities and almost all of facilities, we've got more than <unk>.

That transaction is not closed yet.

And then what is what are we waiting for them now I guess, what milestones need to be achieved for that money to be paid out and what other milestones need to be achieved for you to pay out the other $17 5 million that you agreed to do.

Speaker Change: One party, who is interested in the facilities.

Speaker Change: Okay.

Okay.

Speaker Change: The next question comes from Michael Carroll from RBC. Please go ahead.

Well so those milestones have been reached so in other words, the $37 5 million each that MPT.

Michael Carroll: Yes, Thanks, I wanted to circle back on the Steward Bridge loan I just wanted to get the street. So MPW was already funded an additional $20 million, but the other certain ABL lender that was going to match that they haven't yet provided those funds.

And the ABL lenders are expected to fund those milestones have been reached.

And.

And in order to fund anything further than that then additional milestones, which which are directly related to those two key strategies that I've just mentioned a re tenant ting and selling the noncore stewardship asset there are some very specific relatively stringent milestones that are.

Michael Carroll: That transaction is not closed yet.

Speaker Change: And then what is what are we waiting for them now I guess, what milestones need to be achieved for that money to be paid out and what other milestones need to be achieved for you to pay out the other $17 5 million that you agreed to do.

That they'd have to be met in order to fund anything else, but again just to clarify the first $37 5 million a piece of which we have funded 20.

Well so those milestones have been reached so in other words, the 37 and a half million each that MPT.

Speaker Change: And the ABL lenders are expected to fund those milestones have been reached.

<unk> is expected to close.

Speaker Change: And.

Soon.

Speaker Change: And in order to fund anything further than that then additional milestones, which which are directly related to those two key strategies that I just mentioned to re tenant ting and selling the noncore stewardship asset there are some very specific relatively stringent milestones that are.

Depending on having already met.

The early milestones.

So why haven't hasn't the other ABL lender provided their initial funding at the.

The documentation is not complete.

Okay, and then just if I can squeeze one more in there I guess for the potential buyers of your Stewart assets is there are concerns of fraudulent conveyance at all related to them potentially selling off parts of their business and buyers have that concern.

Speaker Change: That they'd have to be met in order to fund anything else, but again just to clarify the first $37 5 million a piece of which we have funded 20.

But.

I wouldn't know how to answer that for for any particular buyer, but but clearly steward is in a distressed situation and there are multiple advisors, including legal advisors and no no transaction would happen under any type of fraudulent conveyance. So that one of one of the key.

Speaker Change: <unk> is expected to close.

Speaker Change: Soon.

Speaker Change: Depending on having already met.

Speaker Change: The early milestones.

Speaker Change: So why haven't hasn't the other ABL lender provided their initial funding at the.

Speaker Change: The documentation is not complete.

Speaker Change: Okay, and then just if I can squeeze one more in there I guess for the potential buyers of your Stewart assets is there are concerns of fraudulent conveyance at all related to them potentially selling off parts of their business and buyers have that concern.

As to our underwriting over the years has been we own hospitals that that nobody wants to see closed and so there's a great deal of cooperation, particularly in some of the eastern States.

That typically have heavier regulatory hand for the regulators for the state for others to help facilitate these transactions. So I don't think there's going to be an issue with fraudulent conveyance and.

Speaker Change: But.

And Mike obviously, we've done this before and in there there are plenty of advisors working on these transactions.

Okay. Thank you.

The next question comes from Mike Mueller from J P. Morgan. Please go ahead.

Speaker Change: As to our underwriting over the years has been we own hospitals that that nobody wants to see closed and so there's a great deal of cooperation, particularly in some of the eastern States.

Yes, hi for the $3 50, a prime sales I guess why isn't using twice I'm looking at the E cap rate just on.

That rent stream going away.

Speaker Change: That typically have heavier regulatory hand for the regulators for the state or others to help facilitate these transactions. So I don't think theres going to be an issue with fraudulent conveyance.

Great way to look at it versus netting netting the rent escalator in there and then just you know.

On top of that are the transactions youre looking at going forward.

The economics are more similar to that number in the sevens or.

Speaker Change: And Mike obviously, we've done this before and in there there are plenty of advisors working on these transactions.

Standalone number in the high eights.

What was important to answer that question is very simple it was all done in one transaction.

Mike: Okay. Thank you.

Mike: The next question comes from Mike Mueller from J P. Morgan. Please go ahead.

Second part of that question is that yes. It's there are more similar to the number that we quoted.

Michael Carroll: Yes, hi.

Michael Carroll: 350 of Prime sales I guess why isn't using twice I'm looking at the E cap rate just on that rent stream going away.

Okay. Thank you.

The next question comes from Vikram Malhotra from Mizuho. Please go ahead.

Michael Carroll: The right way to look at it versus netting netting the rent escalator in there and then just one.

I'm wondering.

Just maybe first one I wanted to understand the maybe you could give a little bit.

Michael Carroll: On top of that are the transactions, we're looking at going forward.

More color on the $2 billion.

Michael Carroll: The economics are more similar to that net number in the sevens or.

Glen.

You mentioned, there's a bunch of NOI as well.

Michael Carroll: Standalone number in the high eights.

I'm just trying to understand.

Michael Carroll: It was important to answer that question is very simple it was all done in one transaction.

Give us a flavor of what types of buyers. These are timing wise.

Michael Carroll: Second part of that question is that yes. It's there are more similar to the number that we quoted.

Let's say it didn't get the need.

Is there a plan b in terms of addressing the debt coming due.

Speaker Change: Okay. Thank you.

Well, we have addressed the debt all the way through this year and significantly we expect 2025.

Speaker Change: The next question comes from Vikram Malhotra from Mizuho. Please go ahead.

Vikram Malhotra: Hi, good morning. Thanks.

Vikram Malhotra: Maybe first one I wanted to understand the maybe you could give a little bit.

Also and you broke up a little bit vikram, but I think the question was.

Vikram Malhotra: More color on the $2 billion.

What type of buyers and timing.

Vikram Malhotra: Glen.

Vikram Malhotra: You mentioned, there's a bunch of NOI as well.

From the beginning going back to last October we said this was a three to four quarter trends transition.

Speaker Change: I'm just trying to understand.

Speaker Change: Give us a flavor of what types of buyers. These are timing wise.

And so when the first of those three to four quarters, we've done 25% that's.

Speaker Change: It just it didn't get the need.

Speaker Change: Is there a plan b in terms of addressing the debt coming due.

That's not to predict that the next transactions will be done as rapidly, but again just to reiterate we do have a significant amount of the $2 billion under LOI, we are actively negotiating with with highly capable counterparties.

Speaker Change: Well, we would we've addressed the debt all the way through this year and significantly we expect 2025.

And we're encouraged by the terms that we've negotiated which again are very consistent with what you saw with the prime Trintech and we're going to answer the rest of the question everything that Steve mentioned that we're working on actively either in the LOI stage or definitive documents all have backups with them.

Speaker Change: Also and you broke up a little bit vikram, but I think the question was.

Speaker Change: What type of buyers and timing and from the beginning going back to last October. We said this was a three to four quarter trends transition.

Speaker Change: And so when the first of those three to four quarters, we've done 25% that's.

Okay.

And then just sort of clarify on Stuart I think you said on the call correct me, but.

Speaker Change: That's not to predict that the next transactions will be done as rapidly, but again just to reiterate we do have a significant amount of the $2 billion under LOI, we are actively negotiating with with highly capable counterparties.

Last payment with it being about 25% of the contractual rent but.

What about the prior.

They've made by Sanofi in minutes I can just maybe back up and give us a sense of what the backlog so far or is it just that you had been to need on those months and that's all going to be paid when things.

Speaker Change: And we're encouraged by.

The terms that we've negotiated which again are very consistent with what you saw with the prime Trintech and vehicle to answer the rest of the question everything that Steve mentioned that we're working on actively either in the LOI stage or definitive documents all have backups with them.

I didn't get resolved and just related to that are you given your comments on fluke being made.

Linking that to sort of there must be a link but I'm.

I'm just trying to bridge that between where you see the dividend because it feels like at this point.

Speaker Change: Okay.

And then just sort of clarify on Stuart I think you said on the call and correct me, but.

You know that we.

We'll see.

Speaker Change: Last payment was I think about 25% of the contractual rent but.

No dividend or not paying the dividend would probably be beneficial. So I guess I'm thinking about like what are they actually being in what you know what's the backlog.

Speaker Change: What about the prior period.

Speaker Change: They've made by Sanofi in minutes I can just maybe back up and give us a sense of what the backlog so far or is it just that you had been to need on those months and that's all going to be paid when things.

Well Vikram I'll start with an part of that question then the dividend is not dependent on Steward's rent.

More dependent on our ability to close some of these liquidity transactions.

Speaker Change: It didn't get resolved then just related to that are you given your comments on fluke being made.

And again, if I heard the question correctly about 25% of the rent that steward OS on two master leases. One one is the Massachusetts joint venture and the other is everything else in in total about 25% of that was paid.

Speaker Change: Linking that to sort of there must be a link but I'm.

Speaker Change: I'm just trying to bridge that between where you see the dividend because it feels like at this point.

Speaker Change: You know that the proceeds or the.

Speaker Change: The dividend or not paying the dividend would probably be beneficial. So I guess I'm thinking about like what are they actually being in what you know what's the backlog.

In the fourth quarter.

I think that way.

Speaker Change: Well Vikram I'll start with an part of that question then the dividend is not dependent on Steward's rent are more dependent on our ability to close some of these liquidity transactions.

Because if I remember correctly.

Shortfall. It started was it was it you know.

Gilbert did prior to.

It was it was in October are all rent was 100% paid.

As of the end of the third quarter and in any rent that is not paid.

Speaker Change: But and again, if I heard the question correctly about 25% of the rent that steward OS on two master leases. One one is the Massachusetts joint venture and the other is everything else.

October and thereafter.

Yeah, Okay got it okay. Thank you.

Yeah.

The next question comes from Conor Seversky from Wells Fargo. Please go ahead.

Speaker Change: In total about 25% of that was paid.

Speaker Change: In the fourth quarter.

Hi, Thank you for the time in the context of some of the write downs related to Stewart that were outlined today in the press release has your equity stake in Stuart already been written down or any of the loans that had been provided to Stewart have those already been written down or are those still sitting at full value.

Speaker Change: I think that way.

Because if I remember correctly.

Short fall started was it was it you know October or was it prior to us.

Speaker Change: It was it was in October are all rent was 100% paid as of the end of the third quarter and in any rent that is not paid was was.

Hey, Connor, yes, so they have been written down I mean, we look at it on combined basis the.

Speaker Change: October and thereafter.

Speaker Change: Yeah, Okay got it okay. Thank you.

The operating loans as well as the equity and we wrote down in combination of around $90 million for those.

Speaker Change: The next question comes from Conor Seversky from Wells Fargo. Please go ahead.

Non operator and vessels will call it.

Connor Siversky: Hi, Thank you for the time in the context of some of the write downs related to Stewart that were outlined today in the press release has your equity stake steward already been written down or any of the loans that had been provided to Stewart have those already been written down or are those still sitting at full value.

Non real estate, Inc.

Does that include the loans.

Yes, it's a combination.

Again, we look at them together, so it's $90 million reduction for all the combined.

Okay. Thank you and then in the press release.

In the comments it outlines a $5 billion worth of assets that are in the cash the cash accounting pool.

Hey, Connor, yes, so they have been written down I mean, we look at it on combined basis.

And then in the detail it states $4.6 billion I'm wondering.

Connor Siversky: The operating loans as well as the equity and we wrote down in combination of around $90 million for those.

Stuart and prospects are the only operators currently subject to cash accounting or is there anything else in there.

Connor Siversky: Non operator and vessels will call it.

Connor Siversky: Non real estate, Inc.

We have three I'll call them small operators they represent about less than a one 5% of our total assets that we've been accounting for them on a cash basis once been there since day, one just just very small.

Connor Siversky: Does that include the loans.

Connor Siversky: Yes.

Connor Siversky: The nation.

Connor Siversky: Again, we look at them together, so it's $90 million reduction for all the combined.

Connor Siversky: Okay. Thank you and then in the press release.

Okay. Thank you.

Connor Siversky: In the comments it outlines a $5 billion worth of assets that are in the cash the cash accounting pool.

The next question comes from John Pawlowski from Green Street. Please go ahead.

Thanks, Good morning could you provide some more details on.

Connor Siversky: And then in the detail it states $4.6 billion I'm wondering if stewart and prospects are the only operators currently subject to cash accounting or is there anything else in there.

Mystic operator number one 0.3 times coverage whats going on that operator, and have you or do you expect I guess financial support that operator through.

Speaker Change: We have three I'll call them small operators they represent about less than a one 5% of our total assets that we've been accounting for them on a cash basis once been there since day, one it's just very small.

They're loans rent abatements rent deferrals.

First the first answer to the last part of that question is no we have not.

And John we know we have confidence in this operator in this particular market, which you know we're not going to.

Speaker Change: Okay. Thank you.

Speaker Change: The next question comes from John Pawlowski from Green Street. Please go ahead.

John Pawlowski: Thanks, Good morning could you provide some more details on a domestic operator number one with 0.3 times coverage whats going on that operator and have you or do you expect I guess financial support that operator through.

Disclosed a particular operator, but.

We do expect to see turnaround over the course of 2024.

Particular, operator, just made significant investments in new facilities.

That particular place at Rhodes is referring to.

John Pawlowski: They're loans rent abatements rent deferrals.

Okay, and so you don't expect to give any financial support this year for that operator.

Speaker Change: First the first answer to the last part of that question is no we have not.

No it will not be needed.

Speaker Change: And John we know we have confidence in this operator in this particular market, which you know we're not going to.

I appreciate it last question for me, Steve can you give us a sense for the average general acute care hospital in your portfolio right now what type of secured financing you'd be able to get on those assets in terms of LTV rate any any details would be appreciated.

Disclosed a particular operator, but.

Speaker Change: We do expect to see turnaround over the course of 2024.

Speaker Change: Particular, operator, just made significant investments in new facilities.

So we expect to be able to announce that we hope relatively soon with with respect to to at least one of the transactions that we've been referring to that as a secured.

Speaker Change: That particular place at Rhodes is referring to.

Okay, and so you don't expect to give any financial support this year for that operator.

Secured financing transaction, that's included and those that are referred to as being under LOI and and definitive document.

Speaker Change: No it will not be needed.

Speaker Change: I appreciate it last question for me, Steve can you give us a sense for the average general acute care hospital in your portfolio right now what type of secured financing you'd be able to get on those assets in terms of LTV rate any any details would be appreciated.

Negotiation.

But we will wait until we have something definitive to announce.

Okay. Thank you.

The next question comes from Tayo Okusanya from Deutsche Bank. Please go ahead.

Steve Hamner: So we expect to be able to announce that we hope relatively soon with with respect to to at least one of the transactions that we've been referring to that that is a secured.

Hi, Yes, good afternoon and.

Thank you for the time.

In regards to the upcoming asset sales or the secured financing could you just walk us through how you.

Steve Hamner: Our secured financing transaction Thats included and those that are referred to as being under LOI and and definitive document.

Hum.

On the secured the syndicators of your of your line of credit in particular.

Negotiation.

How do you have to get involved in this in any way I'm, assuming just given there's a large balance on on our line of credit that kind of looking at all of this movement and.

Steve Hamner: But we will wait until we have something definitive to announce.

Speaker Change: Okay. Thank you.

Speaker Change: The next question comes from Tayo Okusanya from Deutsche Bank. Please go ahead.

What kind of conversations you have to have with them to make sure they're comfortable with everything that's going on.

Omotayo Tejumade Okusanya: Hi, Yes, good afternoon and.

So.

Omotayo Tejumade Okusanya: Thank you for the time.

As we tried to walk you through a few minutes ago as we complete these transactions.

In regards to the upcoming asset sales or the secured financing could you just walk us through how you.

We will pay down than the depending maturity starting with the $300 million in in May and excess until the next maturity will absolutely go go to the bank group to the to the revolver. So so obviously the bank lenders are very satisfied to see that.

Omotayo Tejumade Okusanya: Hum.

Omotayo Tejumade Okusanya: On the secured the syndicators of your of your line of credit in particular.

Omotayo Tejumade Okusanya: How do you have to get involved in this in any way I'm, assuming just given there's a large balance on on our line of credit that kind of looking at all of this movement and.

Gotcha, Okay. Thank you.

Omotayo Tejumade Okusanya: What kind of conversations you have to have with them to make sure they're comfortable with everything that's going on.

The next question is a follow up from Michael Carroll from RBC. Please go ahead.

Omotayo Tejumade Okusanya: So.

Omotayo Tejumade Okusanya: As we tried to walk you through a few minutes ago as we complete these transactions.

Yes. Thanks.

Are your financial covenants right now and then how confident are you that you have the full access to your line of credit.

Omotayo Tejumade Okusanya: We will pay down than the depending maturity starting with the $300 million in in May and excess until the next maturity will absolutely go go to the bank group to the to the revolver. So so obviously the bank lenders are very satisfied to see that.

Fully fully confident we have a significant headroom and.

And in our own financial covenants, either with the bank group or with the against the unsecured.

Our bond indentures.

And then what is the covenant that's the tightest I don't know if you can provide any color on where it is today is it the interest coverage ratio is that the one that we should be looking at and where is it at versus where it needs to be.

Speaker Change: Gotcha, Okay. Thank you.

Speaker Change: The next question is a follow up from Michael Carroll from RBC. Please go ahead.

Michael Carroll: Yes. Thanks.

Yeah, that's not.

Michael Carroll: Are your financial covenants right now and then how confident are you that you have the full access to your line of credit.

That's not our schedule, we normally publish but we have significant headroom in all of the all of the covenants. The one you mentioned.

Michael Carroll: Fully fully confident we have a significant headroom.

And is certainly not an issue.

None of them are issues for them.

Okay, and then last one from me Steve is what is the assumed cap rate on the prime purchase options on that remaining portfolio. So if they exercise those purchase options I guess, what would the cap rate be on those on those sales.

Michael Carroll: In our own financial covenants, either with the bank group or with the against the unsecured.

Speaker Change: Our bond indentures.

Speaker Change: And then what is the covenant that's the tightest I don't know if you can provide any color on where it is today is it the interest coverage ratio is that the one that we should be looking at and where is it at versus where it needs to be.

I'd have to come back to you on that I don't have that right in front of me, but what I would point you to is if they exercise that option it would be a $268 million I'm.

Yeah, that's not that's that's.

I'm, sorry, $260 million and and that includes or let me put it this way that's the least days.

Speaker Change: That's not our schedule, we normally publish but we have significant headroom in all of the all of the covenants. The one you mentioned is certainly not an issue.

Speaker Change: None of them are issues for them.

On those assets is now $238 million and that $2 38 actually include.

Speaker Change: Okay, and then last one from me Steve is what is the assumed cap rate on the prime purchase options on that remaining portfolio. So if they exercise those purchase options I guess, what would the cap rate be on those on those sales.

I'm not sure we disclose this but I will have $45 million and additional lease space that as part of this is ed called it a comprehensive unified transaction.

Steve Hamner: I'd have to come back to you on that I don't have that right in front of me, but what I would point you to is if they exercise that option it would be a $268 million.

Was added to this new master lease so all of that kind of a long winded way of saying the $260 million purchase price will will represent almost $100 million gain on those assets. So.

Steve Hamner: I'm, sorry $260 million.

Steve Hamner: And that includes or let me put it this way that's the least days.

I'm happy to come back to you on a on a cap rate basis, but but I think that's very very indicative.

Steve Hamner: On those asset is now $238 million and that $2 38 actually include.

Okay and then.

Yes.

But the point of disclosing all of that again is just to show the interest and the valuation that the market puts on these assets.

Steve Hamner: I'm not sure we disclose this but I will have $45 million and additional lease space that as part of this is ed called it a comprehensive unified transaction.

Okay, Great and then 100 million gain you quote that's the depreciated book gain and the other number you gave us was the.

Steve Hamner: Was added to this new master lease so all of that kind of a long winded way of saying the $260 million purchase price will will represent almost $100 million gain on.

Gross book value of the assets.

That's right.

Okay. Thank you.

The next question is a follow up from Tayo Okusanya from Deutsche Bank. Please go ahead.

Steve Hamner: On those assets so.

I'm happy to come back to you on a cap rate basis, but but I think that's very very indicative.

Yes.

Again, just a quick one I'm not sure if you are.

If you talked about this.

Speaker Change: Okay and then.

Speaker Change: Yes.

Apologize if you did but the L tax rent coverage going down to one one.

Speaker Change: Appointed disclosing all of that and again, it's just to show the interest in the valuation that the market puts on these assets.

With the most recent report English this one for the reporting diesel 119, a year ago is that all earnest or is there something else going on there.

Speaker Change: Okay, Great and then 100 million gain you quote that's the depreciated book gain and the other number you gave us was the.

Speaker Change: Gross book value of the assets.

You could talk.

Talk about a little bit.

I know we've talked about this the last few quarters. The reason for the decline in the old taxes that the waivers that everybody had during COVID-19 of obviously all gone away. We only owned 15 Elitexc remaining all of the old tech or have a parent guarantee or either cross defaulted with arbs that cover is obviously much higher Brazil.

Speaker Change: That's right.

Speaker Change: Okay. Thank you.

Speaker Change: The next question is a follow up from Tayo Okusanya from Deutsche Bank. Please go ahead.

Speaker Change: Yes.

Omotayo Tejumade Okusanya: Again, just a quick one I'm not sure if you are.

Omotayo Tejumade Okusanya: If you talked about this.

Omotayo Tejumade Okusanya: Apologize if you did but the L tax rent coverage going down to one one.

Steve.

<unk>.

Of those 15 facilities more than half of them are covering more than one and a half times.

Omotayo Tejumade Okusanya: With the most recent reporting versus one Florida reporting before 119, a year ago is that all earnest or is there something else going on there.

Great. Thank you Matt.

There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to Ed <unk> for any closing remarks.

Speaker Change: You could talk.

Speaker Change: Talk about a little bit.

Speaker Change: I know we've talked about this for the last few quarters. The the reason for the decline in the old taxes that the waivers that everybody had during COVID-19 of obviously all gone away. We only owned 15 Elitexc remaining all of the old tech or have a parent guarantee or either cross defaulted with arbs that cover is obviously much higher Brazil.

Thank you very much and thank all of you for listening in today. If you have any follow up questions. Please don't hesitate to contact drew or Tim. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change:

Speaker Change: Of those 15 facilities more than half of them are covering more than one and a half times.

Speaker Change: Great. Thank you Matt.

Speaker Change: There are no more questions in the queue. This concludes our question and answer session I would like to turn the conference back over to Ed <unk> for any closing remarks.

Ed: Thank you very much and thank all of you for listening in today. If you have any follow up questions. Please don't hesitate to contact drew or Tim. Thank you very much.

Ed: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Ed: Yeah.

Ed: Okay.

Ed: Yeah.

Ed: Yes.

Ed: Yeah.

Ed: Yes.

Ed: Sure.

Ed: Yes.

Ed: [music].

[music].

Q4 2023 Medical Properties Trust Inc Earnings Call

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