Q1 2024 Medical Properties Trust Inc Earnings Call
Good day and welcome to the first quarter 2020 for medical properties Trust earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Operator: Good day, and welcome to the first quarter 2024 Medical Properties Trust Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up.
Operator: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone and to withdraw. Your question. Please press Star then two please limit yourself to one question and one follow up and if you have further questions. You may reenter. The question queue. Today's call is scheduled for 60 minutes.
Operator: Please note. This event is also being recorded I would now like to turn the conference over to Mr. Charles Lambert. Please go ahead.
Operator: If you have further questions, you may re-enter the question queue. Today's call is scheduled for 60 minutes. Please note this event is also being recorded. I would now like to turn the conference over to Mr. Charles Lambert. Please do so.
Charles R. Lambert: Thank you and good morning.
Charles R. Lambert: Thank you and good morning. Welcome to the Medical Properties Trust conference call to discuss our first quarter 2024 financial results. With me today are Edward K. Aldag, Jr., Chairman, President, and Chief Executive Officer of the company. Steven Hamner, Executive Vice President and Chief Financial Officer. Kevin Hanna, Senior Vice President, Controller, and Chief Accounting Officer, and Rosa Hooper, Senior Vice President of Operations and Secretary.
Charles R. Lambert: Welcome to the medical properties Trust conference call to discuss our first quarter 2024 financial result.
Charles R. Lambert: With me today are Edward K, Outback Junior Chairman, President and Chief Executive Officer of the company.
Charles R. Lambert: Steven Hamner Executive Vice President and Chief Financial Officer, Kevin Hannah Senior Vice President Controller, and Chief Accounting Officer.
Charles R. Lambert: And frozen Hooper senior Vice President of operations and Secretary.
Charles R. 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 Dot com in the Investor Relations section.
Charles R. Lambert: Our press release was distributed this morning and filed on Form 8K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at medicalpropertiestrust.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section.
Charles R. Lambert: Additionally, we're hosting a live webcast of todays call, which you can access in that same section.
Charles R. 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 and for.
Charles R. 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 and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's reports filed with the Securities and Exchange Commission for a discussion of the factors that could cause the company's actual results or future events to differ materially from those expressed in this call.
Charles R. Lambert: Events to differ materially from those expressed in or underlying such forward looking statements.
Charles R. 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.
Charles R. 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.
Charles R. 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. 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 the Reg G requirement. You can also refer to our website at medicalpropertiestrust.com for the most directly comparable financial measures and related reconciliation. I will now turn the call over to our Chief Executive Officer, Ed Alda.
Edward K. Aldag: 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 R. 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. You can also refer to our website.
Edward K. Aldag: Medical properties Trust Dot com for the most directly comparable financial measures and related reconciliations.
Edward K. Aldag: Thank you, Charles, and thanks to all of you for joining us this morning on our first quarter 2024 earnings call. I'm pleased to be joined again today by Steve Hamner, Rosa Hooper, and Kevin Hanna. You will hear from each of them shortly.
Edward K. Aldag: Charles and thanks to all of you for joining US. This morning on our first quarter 'twenty 'twenty four earnings call I'm pleased to be joined again today by Steve Hamner, Rosa Hooper and Kevin Hana.
Edward K. Aldag: You will hear from each of them shortly.
Edward K. Aldag: For the past several quarters, you've heard me say that we are focused on executing a capital allocation strategy to generate at least $2 billion of additional liquidity in 2024. I'm pleased to share that we've made strong progress on this strategy, executing $1.6 billion of total liquidity transactions this year, including the recently announced sale of 75 percent of our interest in five Utah hospitals to a new joint venture with a leading multi-billion dollar asset manager.
Edward K. Aldag: For the past several quarters, you've heard me say that we're focused on executing our capital allocation strategy to generate at least $2 billion of additional liquidity in 2020 for them.
Edward K. Aldag: I'm pleased to share that we've made strong progress on this strategy executing $1 6 billion of total liquidity transactions this year, including the recently announced sale of 75% of our interest in five you're told hospitals to a new joint venture with a leading multibillion dollar asset manager we've.
Edward K. Aldag: We've used the proceeds from these transactions to pay down near-term debt, including full repayment of our Australian term loan that was due in 2024. Importantly, while we've already reached 80% of our initial liquidity target, we're just getting started, and now expect to exceed that amount for the year.
Edward K. Aldag: Use the proceeds from these transactions to pay down near term dead, including full repayment of our Australian term loan that was due in 'twenty 'twenty four and <unk>.
Edward K. Aldag: Fortunately, while we've already reached 80% of our initial liquidity target. We're just getting started and now expect to exceed that amount for the year are early results prove there is strong demand for our assets at attractive valuations, we have several available levers to generate additional liquidity.
Edward K. Aldag: Our early results prove there is strong demand for our assets at attractive valuations. We have several available levers to generate additional liquidity, and we remain actively engaged in numerous discussions. As with the transactions already executed, we expect to continue demonstrating the value and cash flow potential embedded in our portfolio throughout the year. Turning to Stewart and his decision earlier this week to commence a Chapter 11 restructuring process. There has obviously been a great deal of media attention on this filing, and we want to take a few minutes to share our perspective directly with all of you.
Edward K. Aldag: And we remain actively engaged in numerous discussions with the transactions already executed we expect to continue demonstrating the value and cash flow potential embedded in our portfolio throughout the year.
Edward K. Aldag: Turning to Stuart and his decision earlier this week to commence a chapter 11 restructuring process. There has obviously been a great deal of media attention on this filing and we want to take a few minutes to share our perspective directly with all of you.
Edward K. Aldag: First, if you've had an opportunity to read through the first day declarations that Stewart filed with the U.S. Bankruptcy Court, you will find a clear story of how Stewart got here. Notably, no mention was made of rent as a contributor to Stewart's distress. We believe that bankruptcy will facilitate the re-tenanting or sale of Steward hospitals in an orderly and timely fashion. We firmly believe that an orderly transition of Stewart Hospitals to new operators is in the best interest of everyone, and we're committed to providing $75 million in dip financing to help achieve that.
Stewart: First if you've had an opportunity to read through the first day declarations that Stuart filed with the U S. Bankruptcy Court you will find a clear story of how Stewart gone here, notably no mention was made of rent as a contributor to Stuart's distress.
Edward K. Aldag: We believe the bankruptcy will facilitate the reach entity or sell let stewart hospitals in an orderly and timely fashion.
Edward K. Aldag: We firmly believe that an orderly transition of Stewart hospitals to new operators is in the best interests of every wide and we're committed to providing a $75 million and dip financing to help achieve that.
Edward K. Aldag: We expect Steward to use this financing to ensure continuity of patient care while accelerating the re-tenanting of its hospitals. To be clear, we have not committed to providing any additional funding beyond this initial $75 million. As I said before, rent is never mentioned by Stewart on the list of contributing factors to his financial stress. That's because rent, which represents only a small fraction of a hospital's total revenue, is virtually never the primary cause of financial stress for hospitals.
Edward K. Aldag: We expect Stuart is this financing to ensure continuity of patient care, while accelerating the reach anything of its hospitals.
Edward K. Aldag: To be clear, we have not committed to providing any additional funding beyond this initial $75 million.
Edward K. Aldag: As I said before rent is never mentioned by Stuart on the list of contributing factors to his financial distress.
Edward K. Aldag: That's because rent, which represents only a small fraction of our hospitals total revenue is virtually never the primary cause of financial stress for hospitals.
Edward K. Aldag: And if Stewart wasn't paying rent, they'd be paying interest on principal repayments on some type of financing for the facilities, because, as we all know, buildings are not free. While we've seen a great deal of misinformation recently reported about our business model, the fact remains that NPT provides hospital operators with permanent and affordable capital, enabling them to redirect the substantial cash resources that would otherwise be used for real estate to their primary mission, healing patients.
Edward K. Aldag: And as Stuart wasn't paying rent they'd be paying interest and principal repayments on some type of financing for the facilities.
Edward K. Aldag: As we all know buildings are not free.
Edward K. Aldag: We've seen a great deal of misinformation recently reported about our business model.
Edward K. Aldag: <unk> remains at MPT provides hospital operators permanent and affordable capital, enabling them to redirect a substantial cash resources that would other bad otherwise be used for real estate do their primary mission healing patients.
Edward K. Aldag: We continue to be pleased with the progress we are making with parties interested in Stewart Hospitals. It would be inappropriate for us to discuss the details of each of these transactions until they are approved by the court. I will now turn it over to Rosa to discuss the performance of our portfolio.
Edward K. Aldag: We continue to be pleased with the progress, we're making with parties interested in Stewart hospitals, it would be inappropriate for us to discuss the details of each of these transactions until they are approved by the court.
Rosa: I'll now turn it over to Roger to discuss the performance of our portfolio rather than.
Rosa H. Hooper: Thank you, Ed. As with the past few quarters, I'll take you through some of the highlights across our portfolio of critical hospital real estate, beginning with a few high-level comments. During the fourth quarter of 2023, we were pleased with the solid sequential and year-over-year coverage improvements delivered across our portfolio. In fact, on a discrete quarter-over-quarter sequential basis, our General Acute, Inpatient Rehab, and LTCH segments all reported increasing coverage in the fourth quarter. And during the first quarter of 2024, volume trends across our portfolio, excluding steward and prospect, grew in line with, and in some cases, outpaced, the growth of large public operators.
Rosa: As with the past few quarters I'll take you through some of the highlights across our portfolio of critical hospital real estate, beginning with a few high level comments.
Rosa H. Hooper: Behavioral health hospitals, which represent 14% of our portfolio, continue to see increasing volumes year over year as these facilities prove their enduring value in their respective communities. While LTACs have seen declining year-over-year volumes as a result of the CMS waiver expiration last May, it is worth noting that these facilities represent just 1.5% of our portfolio and are generally part of larger operators that include inpatient rehab and or acute care hospitals, therefore ensuring diversification and additional coverage for ongoing rent payments. Going forward, we will no longer provide individual disclosure of LTAC coverage but will instead begin to combine them with inpatient rehab coverage for a post-acute property type.
Rosa H. Hooper: During the fourth quarter of 2023, we were pleased with the solid sequential and year over year coverage in prison, that's delivered across our portfolio.
Rosa H. Hooper: In fact on a discrete quarter over quarter sequential basis, our general acute inpatient rehab and <unk> segments, all reported increase in cap rates in the fourth quarter.
Rosa H. Hooper: And during the first quarter of 'twenty 'twenty four volume trends across our portfolio, excluding Stewart and prospect grew in line with and in some cases outpace the growth of large public operators.
Rosa H. Hooper: Pedro help hospitals, which represent 14% of our portfolio.
Rosa H. Hooper: I need to say increasing volume year over year as these facilities prove their enduring value in their respective communities.
Rosa H. Hooper: Well L. Tagg, the same declining year over year volume as a result of the CMS waiver expiration last night and it's worth noting that these facilities represent just 1.5% of our portfolio and are generally part of larger operators that include inpatient rehab and or acute care hot.
Rosa H. Hooper: Metals, therefore, ensuring diversification and additional coverage for ongoing rent payments going forward, we will no longer provide individual disclosure of al Tac coverages, but will instead began to combine them with inpatient rehab averages for our post acute property type.
Rosa H. Hooper: In the UK and Continental Europe operators continued to benefit from strong growth in reimbursement rate.
Rosa H. Hooper: In the UK and continental Europe, operators continue to benefit from strong growth in reimbursement rates, overall volumes, and higher acuity levels, leading most operators to report increasing operating profits year over year. Circle remains well positioned in the UK private healthcare market with steady volume growth and increasing patient acuity that is expected to extend through 2024. With the sustained growth of private health insurance coverage and self-pay in the U.K., Circle has delivered steady financial performance and expects that strong performance to be maintained. As the largest independent mental health care provider in the U.K. by number of beds, Priory continues to capitalize on increased demand for behavioral health services within the U.K.
Rosa H. Hooper: Overall volume and higher acuity admissions, leading most operators to report increasing operating profit year over year.
Rosa H. Hooper: Circle remains well positioned in the U K private health care market with steady volume growth and increasing patient acuity that is expected to extend through 2024 with the sustained growth of private health insurance coverage and self pay in the U K circle has a delay.
Rosa H. Hooper: Steady financial performance and expect that strong performance could be maintained.
Rosa H. Hooper: It's the largest independent mental health care provider in the U K by number of beds Priory continues to capitalize on increased demand for behavioral health services within the U K.
Rosa H. Hooper: They are seeing steadily improving reimbursement trends along with stable occupancy levels and remain focused on cost-effective management to ensure quality and efficient care. Together, these focus areas are driving incremental improvements in coverage and earnings. Friary's parent company, Median, has largely recovered from the impacts of the COVID-19 pandemic on its German operations with improving occupancy, favorable reimbursement rates, moderating inflation, and strong cost control. Median's operating margins have proven resilient over the past several years, and we expect them to maintain that stability.
Rosa H. Hooper: They are seeing steadily improving reimbursement trends along with stable occupancy levels and remain focused on cost effective management to ensure quality and efficient care. Together. These focus areas are driving incremental improvements in coverage and earnings.
Rosa H. Hooper: Parent company median has largely recovered from the impacts of the COVID-19 pandemic on its German operations with improving occupancy favorable reimbursement rate moderating inflation and strong cost control.
Rosa H. Hooper: <unk> operating margins have proven resilient over the past several years and we expect them to maintain that stability.
Rosa H. Hooper: Well with medical its profitability was marginally impacted by inflationary pressures and investments related to its pioneering integrated care network. In 2023 initial results from the first quarter already indicate that these temporary headwinds are abating. In addition.
Rosa H. Hooper: While Swiss Medical's profitability was marginally impacted by inflationary pressures and investments related to its pioneering integrated care network in 2023, initial results from the first quarter already indicate that these temporary headwinds are abating. In addition, Swiss Medical's Janelier Innovation Hub, which began construction in 2021, remains on track to open in the second half of 2024.
Rosa H. Hooper: <unk> Suisse Medicals Gianelli, a innovation hub, which began construction in 2021 remains on track to open in the second half of 'twenty 'twenty four.
Rosa H. Hooper: Turning to our U S portfolio, excluding Stewart and prospect, we're seeing increasing emissions almost universally across our diversified portfolio of general acute hospital inpatient rehabilitation facilities or our and behavioral health facilities re.
Rosa H. Hooper: Turning to our U.S. portfolio, excluding steward and prospect, we're seeing increasing admissions almost universally across our diversified portfolio of General Acute Hospitals, Inpatient Rehabilitation Facilities, or IRFs, and Behavioral Health Facilities. Reimbursement rates are generally accelerating, and operators are doing a commendable job of controlling costs in this inflationary environment. A major highlight for the quarter was the announcement of the new JV we formed with a leading investment firm involving our hospitals in the Salt Lake City area of Utah, operated by Common Spirit.
Rosa H. Hooper: Embarkment rights are generally salad, writing and operators are doing a commendable job of controlling cost in this inflationary environment.
Rosa H. Hooper: A major highlight for the quarter was the announcement at the new JV, we formed with a leading investment firm involving our hospitals in the Salt Lake City area of Utah operated by common spirit.
Rosa H. Hooper: We are pleased to retain an approximate 25% interest in these facilities and expect strong performance trends to persist over the long term. Ernest Health reported stable performance with consolidated EBITDARM coverage above two times. Ernest's earths are performing well, with coverage in excess of two times on their same store earths, excluding Ernest's three recent developments. It is approaching three times.
Rosa H. Hooper: We are pleased to retain an approximate 25% interest in these facilities and expect strong performance trends to persist over the long term.
Rosa H. Hooper: Orange County reported stable performance with consolidated EBITDAR coverage above two times.
Rosa H. Hooper: This earth are performing well with coverage in excess of two times on their same store are exploiting earn its three racing development. It is approaching three times.
Rosa H. Hooper: EARNEST's total reported coverage was adversely impacted at its LPAC facilities by the volume headwinds I mentioned earlier. As an important reminder, LTACs comprise less than 20% of our investment in Earnest, and their rent is more than covered by the OAS. Shifting to PRIME as part of the California and New Jersey sale transaction, MPT and PRIME agreed to a new 20-year master lease for our remaining four PRIME hospitals. The new master lease includes a purchase option for Prime to buy the real estate of these remaining hospitals for a minimum purchase price of $238 million.
Rosa H. Hooper: Ernest total reported coverage with adversely impacted edits L pack facilities by the volume headwinds I mentioned earlier.
Rosa H. Hooper: As an important reminder, al Tac comprised less than 20% of our investment in earnest and their rent is more than covered by the army.
Rosa H. Hooper: Shifting to prime as part of the California, and New Jersey sale transaction M. P. T M. Prime agreed to a new 20 year Master lease for our remaining four prime hospitals the.
Rosa H. Hooper: The new Master lease includes a purchase option for prime to bother real estate of these remaining hospitals for a minimum purchase price of 238 million.
Rosa H. Hooper: They report increasing volumes and normalization of labor costs, which has led to improved EBITDOM for MPT-owned hospitals. At our LifePoint hospitals, volumes have sustained momentum following the nice rebound we saw in the fourth quarter of 2023. As a result, MPT-owned LifePoint facilities have delivered meaningful EBITDARM improvements over the last several months, including an encouraging march in which they delivered the highest monthly EBITDARM in more than two years. LifePoint's recently dedicated cardiovascular and surgical care pavilion at Kahneman Memorial in Pennsylvania has been very well received by the community, and we remain optimistic that it will further position that market for future success.
Rosa H. Hooper: That report increasing volumes and normalization of labor cost, which has led to improved EBIT dorm for M. P. T owned hospital.
Rosa H. Hooper: At our lives point hospitals volumes have sustained momentum following the nice rebound we saw in the fourth quarter of 2023.
Rosa H. Hooper: As a result life point M. P. T O life point facilities have delivered meaningful EBIT dorm improvements over the last several months, including an encouraging March in which they deliver the highest monthly EBIT dorm and more than two years.
Rosa H. Hooper: Life points recently dedicated cardio vascular and surgical care pavilion at Panama Memorial in Pennsylvania has been very well received by the community and we remain optimistic that it will further position that market for future success.
Rosa H. Hooper: Our Lifepoint Behavioral Health facilities inpatient volumes have steadily increased, offsetting seasonal declines in volumes from partial hospitalization programs and intensive outpatient programs. At Scion Health, General Acute Facilities reported nearly a full-turn improvement in coverage year-over-year to 1.9 times, driven by double-digit volume increases and substantial reductions in contract labor. However, like Ernest, LTCH performance has been adversely impacted by the waivers that expired in 20
Rosa H. Hooper: Our life point behavioral facilities inpatient volumes have steadily increased offsetting seasonal declines in volumes from partial hospitalization programs and intensive outpatient programs.
Rosa H. Hooper: At scion help general acute facilities reported nearly a full turn improvement in coverage year over year to one nine times driven by double digit volume increases and substantial reductions in contract labor. However, like Ernest Al Tac performance has been adversely impacted.
Rosa H. Hooper: By the waivers that expired in 2023.
Rosa H. Hooper: Finally, prospects paid cash rent and interest of approximately $7 million during the quarter and reported EBITDARM coverage of approximately one times on its California portfolio for the 12 months ended December 31, 2023. However, coverage has further increased to approximately 1.3 times on a trailing 12-month basis through the end of February. Prospect paid March rent for California after the end of the quarter. However, at this time, MPT has not yet received rent for the months of April and May.
Rosa H. Hooper: Finally prospect paid cash rent and interest of approximately $7 million during the quarter and reported EBIT darn coverage of approximately one times on its California portfolio for the 12 months ended December 31 2023.
Rosa H. Hooper: Coverage has further increased to approximately 1.3 times on a trailing 12 month basis through the end of February.
Rosa H. Hooper: Prospect paid March rent for California. After the end of the quarter. However, at this time M. P. T has not yet received rent for the month of April and May.
Rosa H. Hooper: To briefly summarize before I turn it over to Kevin, the majority of operators in our highly diversified portfolio continue to perform well, and we're encouraged by the volume and cost trends we're seeing across geographies and care settings. As such, we remain confident in the core pillars of our business model and the long-term cash flow potential of our portfolio. Thank you, Rosa.
Speaker Change: To briefly summarize before I turn it over to Kevin the majority of operators and our highly diversified portfolio continued to perform well.
Kevin: And we're encouraged by the volume and crop cost trends, we're seeing across geographies and care settings as such we remain confident in the core pillars of our business model and the long term cash flow potential of our portfolio.
Rosa H. Hooper: Evan.
Unknown Executive: We also described approximately $693 million in non-cash impairments recorded in the quarter, primarily related to non-real estate investments of Stewart and the International Joint Venture. These charges were estimated and recorded pursuant to U.S. GAAP accounting rules and reflect conservative assumptions regarding potential recoveries, which NPT remains committed to pursuing. As was the case last quarter, investments in the operations of Stewart and investments in the International Joint Venture were evaluated with the assistance of a third-party independent appraiser.
Kevin: Thank you Rosa. This morning, we reported a GAAP net loss of $1 23 per share and normalized <unk> 24 per share for the first quarter of 'twenty 'twenty four.
Unknown Executive: Thank you, Rosa. This morning, we reported a gap net loss of $1.23 per share and normalized FFO of $0.24 per share for the first quarter of 2024. As mentioned in our earnings release, first quarter results include approximately $18 million of consolidated cash revenue from Steward and Prospect. It is worth noting that Steward additionally continued to make full payments as it relates to the Massachusetts Partnership portfolio, about $19 million in the first quarter at MPT share. Since the quarter ended, Steward has paid $9.5 million in rent, half of which is MPT's share, and Prospect has paid roughly $7 million.
Unknown Executive: And in our earnings release first quarter results include approximately $18 million of consolidated cash revenue from Stewart and prospect. It is worth noting that Stuart. Additionally, contribute to make full payment as it relates to the Massachusetts partnership portfolio about $19 million in the first quarter at M. P T share subsequent to quarter.
Unknown Executive: In Stewart and paid $9 $5 million in rent half of which is M. P T share and prospect as paid roughly $7 million.
Unknown Executive: We also described approximately $693 million and noncash impairments recorded in the quarter, primarily related to non real estate investments and Stuart and the international joint venture. These charges were estimated and recorded pursuant to U S. GAAP accounting rules and reflects conservative assumptions regarding potential recoveries.
Unknown Executive: Which MPT remains committed to pursuing as was the case last quarter and investments in the operations of steward and investment in the operations of the international joint venture were evaluated with the assistance of a third party independent appraiser. The first quarter charges included a full impairment of MPT is approximately 360 million.
Unknown Executive: The first quarter charges included the full impairment of NPT's approximately $360 million loan to Stewart made in 2021, the remainder of its equity investment in Stewart, and other obligations. Furthermore, we impaired our full investment in the International Joint Venture. As a reminder, these investments were previously moved to cash-based accounting, and no related income was recorded in the first quarter. It is worth noting a couple other adjustments to normalized FFO. First, we adjusted the book value of our investment in PHP holdings downward by approximately $60 million based on the most recent third-party independent appraisal.
Unknown Executive: Our loan to Stuart.
Unknown Executive: Made in 2021, the remainder of its equity investment in Stuart and other obligations further we impaired our pool of investment and the international joint venture as a reminder, these investments were previously moved to cash basis accounting and no related income was recorded in the first quarter, it's worth noting a couple of other adjustments to normalize up above.
Unknown Executive: First we adjusted the book value of our investment and then excuse me on PHP holdings downward by approximately $60 million based on the most recent third party independent appraisal further we recognized an approximately $8 million loss on our sale of the priority term loan as well as at $8 million negative adjustment to the fair value Mark.
Unknown Executive: Further, we recognize an approximate $8 million loss on our sale of the priority term loan, as well as an $8 million negative adjustment to the fair value of marketable securities, such as our shares and EBIT. One thought before I hand it over to Steve. We remind investors in advance of our 10Q filing that first quarter cash flows from operations are typically influenced negatively by the timing of cash interest payments on our debt.
Unknown Executive: Well securities such as our shares and Eva.
Unknown Executive: One thought before I hand, it over to Steve we remind investors in advance of our 10-Q filing that first quarter cash flows from operations is typically influenced negatively by the timing of cash interest payments on our debt assuming no impact from transactions or Stewart re tendering activity, we would expect 2024.
Unknown Executive: Assuming no impact from transactions or steward re-tenanting activity, we would expect 2024 cash flow from operations to be seasonably weighted to the back half of the year. With that, I will turn it over to Steve for a discussion of liquidity and our overall capital allocation strategy.
Unknown Executive: Cash flow from operations to be seasonally weighted to the back half of the year with that I'll turn it over to Steve for a discussion of liquidity and our overall capital allocation strategy.
Steve: Thank you Kevin.
Steve: I'll begin by echoing Ed's earlier comments about the success of the liquidity plan we described late last year, which is working even better than we predicted. At that time, we estimated that during all of 2024, we would generate $2 billion from asset sales and secured financing. By halfway through April, we had achieved $1.6 billion, or 80% of the initial estimate, and those transactions were executed during a particularly volatile period in terms of inflation and interest rates.
Steve: I'll begin by echoing Ed's earlier comments about the success of the liquidity plan. We described late last year, which is working even better than we predicted at that time, we estimated that during all of 2024, we would generate $2 billion from asset sales and secured financing.
Steve: By halfway through April we had achieved $1 $6 billion or 80% of the initial estimate.
Steve: And those transactions were executed during a particularly volatile period in terms of inflation and interest rates.
Steve: Based on those early successes, we believe we will exceed our $2 billion target for 2024 with additional transactions at attractive valuations and capitalization rates well inside of what our public securities imply. Going back a bit further, MPT has reduced its net debt by $1.6 billion since this time last year. We've accomplished this primarily with about $2.4 billion of proceeds from profitable asset sales, including completely exiting Australia, selling hospitals back to operators pursuant to their repurchase options, and most recently, our sale of 75% of our Utah facilities for almost $900 million of cash. And that does not include the $190 million of non-recourse financing proceeds. As a side note, this Utah transaction fully validates the price we paid for these hospitals in 2020 when they were operated by Stewart.
Steve: Based on those early successes, we believe we will exceed our $2 billion target for 2024.
Steve: With additional transactions at attractive valuations and capitalization rates well inside of what our public securities in fly.
Steve: Pulling back a bit further in P. T has reduced its net debt by $1.6 billion. Since this time last year. We've accomplished this delevering, primarily with about $2 $4 billion of proceeds from profitable asset sales, including completely exiting Australia selling hospitals.
Steve: Two operators pursuant to their repurchase options and most recently our sale of 75% of our Utah facilities for almost 9 million $900 million of cash proceeds.
Steve: And that does not include the $190 million of nonrecourse financing proceeds.
Steve: As a side note this Utah transaction fully validates the price we paid for these hospitals in 2020, when they were operated by Stuart.
Steve: We are pleased to retain a 25% interest, which provides us the opportunity to participate in any future increases in the values of these assets. We currently have about $900 million in immediately available liquidity through cash balances and revolver capacity. Planned uses for this current liquidity, as well as future operating cash flows and any proceeds from potential additional transactions, include up to $75 million for the Stewart Debtor in Possession Loan, and as Ed mentioned, we have made no commitment to fund any more than that.
Steve: We are pleased to retain a 25% interest which provides us the opportunity to participate in any future increases in the values of these assets.
Steve: We currently have about $900 million in immediately available liquidity through cash balances and revolver capacity.
Steve: Planned uses for this current liquidity as well as future operating cash flows and any proceeds from potential additional transactions include.
Steve: Up to $75 million for the Stewart debtor in possession loan and as Ed mentioned, we have made no commitments to fund any more than that.
Steve: Repayment of 100 million pounds, that's about U S dollar $130 million in our Sterling denominated seller financing loan due late this year and prepayment of approximately another 105 million pounds or another roughly $130 million related to our sterling denominated term loan.
Steve: Repayment of 100 million pounds, that's about U.S. dollar 130 million, in a sterling denominated seller financing loan due late this year, and prepayment of approximately another 105 million pounds, or another roughly 130 million dollars, related to our sterling denominated term loan, and up to about $230 million in development commitments, including two projects that may be sold, so the actual amount of that funding is uncertain.
Steve: And up to about $230 million and development commitments, including two projects that may be sold so the actual amount of that funding is uncertain.
Steve: Partly in recognition of our success in selling assets at attractive valuations and also in light of the deteriorating Stewart situation prior to its bankruptcy filing we recently amended our bank facilities.
Steve: Partly in recognition of our success in selling assets at attractive valuations and also in light of the deteriorating steward situation prior to its bankruptcy filing, we recently amended our bank facility. One of our bank loan financial covenants limits the amount of unsecured debt as a percentage of unencumbered assets to 65%. For that calculation, the amount of unencumbered assets leased to tenants in bankruptcy is limited to 10%.
Steve: The bank group agreed to waive this 10% limitation through the quarterly June 30 test, which means that, all else equal, steward assets will remain in the unencumbered asset calculation for financial covenants until the next quarterly test on September 30. Our plan and expectation is that during the five months until September 30, we will replace stewards with better-qualified operators at many of our hospitals that are currently leased to stewards so that even if Stewart remains in bankruptcy at that time and the waiver is not extended, its effect on our unencumbered asset value-based financial covenant is expected to be mitigated.
Steve: One of our bank loan financial covenants limits, the amount of unsecured debt as a percentage of unencumbered assets to 65%.
Steve: For that calculation the amount of unencumbered assets leased to tenants in bankruptcy is limited to 10%.
Steve: The Bank group agreed to waive this 10% limitation through the early through the quarterly June 30 test, which means that all else equal Stewart assets will remain in the unencumbered asset calculation for financial covenants until the next quarterly test on September <unk>.
Steve: Our plan and expectation are that during the five months until September 30, we will replace Stuart with better qualified operators at many of our hospitals. They're currently leased to Stuart So that even if Stewart remains in bankruptcy at that time and the waiver is not extended its effect on our unencumbered asset value.
Steve: This financial Covenant is expected to be mitigated.
Steve: Second, given our current priorities and the liquidity generated from asset sales and financing transactions already executed and expected in the future, we no longer need the large $1.8 billion revolving credit facility that we had during earlier years when our acquisitions exceeded $3 billion plus annually. Accordingly, we offer to reduce the revolver commitment by $400 million, down to $1.4 billion. Furthermore, because the majority of these liquidity transactions are expected to be sales rather than secured financings, we project relatively low levels of secured borrowings for the foreseeable future, and accordingly, we were willing to reduce our secured debt basket from 40% down to 25%.
Steve: Second given our current priorities and the liquidity generated from asset sales and financing transactions already executed and expected in the future we no longer need the large 1.8 billion dollar revolving credit facility that we had during earlier years, when our acquisitions exceeded three plus billion dollars annually.
Steve: Accordingly, we offered to reduce the revolver commitment by $400 million down to $1 $4 billion.
Steve: Further because the majority of these liquidity transactions are expected to be sales rather than secured financings. We project relatively low levels of secured borrowings for the foreseeable future and accordingly, we were willing to reduce our secured debt basket from 40% down to 25%.
Steve: Before going to questions I'll, just summarize and pointed out we have addressed all of our 2024 maturities. We have only the 100 million pounds sterling mortgage remaining to be paid.
Steve: Before going to questions, I'll just summarize and point out that we have addressed all our 2024 maturity. We have only the £100 million sterling mortgage remaining to be paid. And we expect to have significant liquidity going into 2025, and that's before considering the possible liquidity that we expect to achieve from the additional transactions that I've alluded to. Our plans remain to continue to monetize assets, increase liquidity, and reduce debt and re-tenant hospital real estate that is currently leased to stewards. And with that, I will turn it over to you for questions, Operator.
Steve: And we expect to have significant liquidity going into 2025, and that's before considering the possible liquidity that we expect to achieve from the additional transactions that I've alluded to.
Steve: Our plans remain to continue to monetize assets increase liquidity.
Steve: And reduce debt and re tenant hospital real estate that is currently leased to Stuart.
Speaker Change: And with that I will turn it over for questions operator.
Speaker Change: Thank you we will now begin the question and answer session.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.
Austin Todd Wurschmidt: If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. Again, please limit yourself to one question and one follow-up. And if you have further questions, you may re-enter the question queue. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Austin Wurschmidt with KeyBank Capital Markets. Please go ahead.
Operator: To ask a question you May Press Star then one on your Touchtone phone.
Austin Todd Wurschmidt: If you're using a speakerphone please pick up your handset before pressing the keys.
Austin Todd Wurschmidt: Anytime a your question has been addressed so you would like to withdraw your question. Please press Star then two.
Austin Todd Wurschmidt: Again, please limit yourself to one question and one follow up and if you have further questions. You may reenter. The question queue. At this time, we'll pause momentarily to assemble our roster.
Austin Todd Wurschmidt: And your first question will come from Austin, <unk> with Keybanc capital markets. Please go ahead.
Unknown Executive: Hey, good morning everybody. First, just wondering if all of the facilities leased to Steward are open and operating and whether you expect that will remain the case. And just wondering if you're still receiving the weekly cash flow reports from Steward's advisors and any changes for better or worse there.
Austin Todd Wurschmidt: Hey, good morning, everybody first just wondering if all of the facilities leased to steward, our open and operating and whether you expect that will remain the case and just wondering if you're still receiving the weekly cash flow reports from stewards advisors and just any changes for better or worse there.
Unknown Executive: So all of a sudden all of the facilities other than the ones that were previously closed prior to bankruptcy continue to be operating.
Unknown Executive: So, Austin, all of the facilities other than the ones that were previously closed prior to bankruptcy continue to be operating. And on the second question, we do continue to receive cash flow reports from Stewards Advisors, and they have so far exceeded their projections on, I believe, every week.
Unknown Executive: And then the second question, we do continue to receive a cash flow our reports from the stewards of advisors and they have so far exceeded their projections on I believe.
Unknown Executive: Every week.
Unknown Executive: So as you start negotiations or have been in negotiations with other parties to backfill the operations of these facilities, I mean, what's the thinking around, you know, potential rent moving forward relative to stewards' prior contractual cash rent?
Austin: So as you start negotiations or have been in negotiations with other parties to backfill the operations at these facilities I mean whats the thinking around you know potential rent moving forward relative to stewards prior contractual cash rent.
Unknown Executive: So the hospitals is as we've been saying for many months on a a localized four walls.
Unknown Executive: So the hospitals, as we've been saying for many months, on a localized, four walls perspective, are generating positive EBITDA. The issues with Stewart, which are very well laid out in the bankruptcy filings, are around legacy payables, revenue cycle management, and the level of revenue reimbursement. So all of that is to say that we believe that these hospitals can continue to pay rent at the contractual levels. Now there's obviously a lot that goes into negotiation, and with bankruptcy there's more scrutiny, but that's a long-winded way of saying we anticipate, across the portfolio, to continue to get at or near the amount of rent that the current lease agreements cost.
Unknown Executive: Perspective are generating positive EBITDAR the issues with steward, which are very well laid out in the bankruptcy filings.
Unknown Executive: Our around legacy payables revenue cycle management, the the the level of revenue reimbursement. So all of that is to say that that we believe that these hospitals can continue to pay rent at the contractual levels now there's obviously a lot that goes into negotiation and with bankruptcy. There is there's.
Unknown Executive: There's more scrutiny, but that's a long winded way of saying we are we anticipate across the portfolio to continue to get at or near the amount of rent that are that the current lease agreements call for.
Unknown Executive: And then just last one for me, I guess in any sense on the timeline of when you could start to get any of these facilities back or whether any of these leases will be, you know, rejected for any reasons either, you know, for better or worse. And that's all for me. Thank you.
Speaker Change: And then just last one for me I guess any sense on the timeline of when you could start to get any of these facilities backs or whether any of these leases will be you know.
Unknown Executive: Rejected them for any reasons either.
Unknown Executive: And that's all for me thank you.
Speaker Change: I'm sorry, I think your question was around the timeline and I think again in the bankruptcy filings. There are some some very strict target date to have agreements in place that that.
Unknown Executive: I'm sorry, I think your question was around the timeline, and I think again in the bankruptcy filings, there are some very strict target dates to have agreements in place that would then start the regulatory process. I won't get into bankruptcy law because I don't think many of us are lawyers on this call, but we have no indication that Stewart would have any motivation to reject either of the two master liaisons.
Unknown Executive: That would then start the regulatory process I won't get into bankruptcy law, because I don't think many of US are lawyers on this call but.
Unknown Executive: We have no indication that steward would have any motivation in rejecting either of the two master leases.
Speaker Change: Thank you.
Unknown Executive: The next question will come from Joshua dinner line with Bank of America. Please go ahead.
Joshua Dennerlein: The next question will come from Joshua Dennerlein with Bank of America. Please go ahead.
Joshua Dennerlein: Yeah, Hey, guys. Thanks for the time.
Unknown Executive: Yeah, hey guys, thanks for the time. I'm just curious about the dip financing. Why did you guys feel the need to provide the dip financing? And then I was looking over the BK documents, just curious why it's called junior debt and then what is it junior to?
Unknown Executive: Just curious on the financing why did you guys feel the need to provide the dip financing and then I was over there.
Unknown Executive: That's J documents just curious why it's called junior debt and then what is the junior too.
Unknown Executive: Josh and the reason that we decided to do the $75 million debt financing is exactly as I said in my prepared remarks is that.
Unknown Executive: Gosh, the reason we decided to do the $75 million in-kind financing is exactly as I said in my prepared remarks, that we think it's very important that the hospitals continue to operate as we go through this process.
Unknown Executive: We think it's very important that the hospitals continue to operate as we go through this process.
Unknown Executive: Were there no other potential folks who would be willing to provide div financing in the BK?
Unknown Executive: Were there no other potential folks who would be willing to provide financing and the BK.
Unknown Executive: Yeah, there absolutely were others. There are other lenders involved, as you know, but we're not going to get into the details of those negotiations at this point.
Speaker Change: Yeah, absolutely where others are other lenders involved as you know, but we're not going to get into the details of those negotiations at this point.
Unknown Executive: Okay, Okay and then.
Unknown Executive: Okay, um, and then in the BK document, it was referred to as junior financing. I think that's the correct term. Just curious, does that mean it's junior to other like, that or claims or or why was that term used?
Unknown Executive: In the U K documents it was referred to as junior.
Unknown Executive: Financing.
Unknown Executive: The correct term.
Unknown Executive: Curious does that mean its junior to other like.
Unknown Executive: Pat or claims are or why was that term you used.
Unknown Executive: Well, because of the security waterfall, and as you allude to, there are other lenders that have first liens on the typical collateral of receivables.
Unknown Executive: Well, but because of the security waterfall and as you allude to there. There is there are other lenders that have first liens on the the typical collateral of of receivables.
Unknown Executive: Okay.
Unknown Executive: Okay, I always, correct me if I'm wrong, I'm wrong, but I always thought financing was like the most secure claim. Eh, anyway, um... Any on the PHP holdings right down, could you kind of walk us through like what drove the fair market adjustment? Like what's driving that? And how does that potentially impact the potential monetization, which I think you guys have talked about in the past.
Unknown Executive: Pardon me, if I was wrong I'm wrong, but I I always thought to financing with like the most secure.
Unknown Executive: Okay.
Unknown Executive: Okay.
Unknown Executive:
Unknown Executive: And then on the CHP holdings write down just could you kind of walk us through like what what drove the.
Unknown Executive: Fair market adjustment like what's driving that and how does that potentially impact the potential monetization I think you guys have talked about in the past.
Unknown Executive: Okay.
Speaker Change: It is based on as we do every quarter independent appraisals and evaluations of our a lot of inputs, including things like discount rate.
Unknown Executive: It's based on, as we do every quarter, independent appraisals and evaluations of a lot of inputs, including things like discount rates and financing rates, so it's really on a private basis. I think, as Kevin described, like any other security that we value on a fair market basis. It's clearly an estimate, and it is not necessarily based on our expectation of what happens to PHP or when.
Unknown Executive: Financing rates.
Unknown Executive: So it's really on a private basis I think as Kevin described like any other a security that we value on them on a fair market basis. It's.
Unknown Executive: It's clearly an estimate and it is it is not based on our necessarily our expectation of what happens to PHP or win.
Unknown Executive: Okay.
Unknown Executive: Okay, so the Unknown Executive, Joshua Dennerlein, Medical Properties Trust Inc
Unknown Executive: It's just the way that you answered it was more based on just like moves in interest rates or was there something that changed with like the cash flows of the underlying investments.
Unknown Executive: Yeah, I think the biggest piece, as Steve alluded to, was the discount rate and some working capital adjustments as well, but mainly the discount rate.
Speaker Change: Yeah, I think the biggest piece of it.
Joshua Dennerlein: Steve alluded to with the discount rate and some working capital adjustments as well, but mainly the discount rate.
Joshua Dennerlein: Alright, I appreciate the time thanks.
Unknown Executive: Alright, I appreciate the time. Thanks.
Unknown Executive: Okay.
Joshua Dennerlein: Again as a reminder.
Operator: Again, as a reminder, please limit yourself to one question and one follow-up. Our next question will come from Vikram Malhotra with Mizzouho. Please go ahead.
Operator: Please limit yourself to one question and one follow up our next question will come from Vikram Malhotra with Mizuho. Please go ahead.
Vikram L. Malhotra: Hi, this is George Young for Vikram. Can you just comment on Prospect? What should we think about rent recovery there?
Operator: Hi, This is George on for Vikram can you just comment on prospects, how should we think about the recovery there.
George Young: The rent recovery is that wood.
Unknown Executive: The rent recovery is that what... Rain Recovery?
George Young: Written coverage ratio and the recovery.
Unknown Executive: Yeah, well, the rent, the rent coverage recovery. Oh, I think he's saying rent recovery. Well, as Rosa pointed out, we collected the rent on the California assets through March. But that March payment came subsequent to March. And as of now, we've not collected April or May.
George Young: Yeah, well the rent the rent coverage recut.
Unknown Executive: Recovery.
Unknown Executive: And rent recovery well as Rosa pointed out we have collected the rent on the California asset through March but that March payment came subsequent to March and as of now we've not collected April or may.
Unknown Executive: Hum.
Unknown Executive: As a point, cost payments are expected in the coming months, which will be a slug of cash for prospects, so we would anticipate them having additional proceeds at that time.
Unknown Executive: The point that the quad payments are expected in the coming months, which will be a slug of cash or prospect. So we would anticipate getting them, having additional proceeds at that time.
Unknown Executive: Okay. That's helpful and just can you provide more color on the pricing of the dispositions that you did in April and you mentioned, you're likely to exceed the $2 billion, arguing frankly D. How does this number look like today and you know what are your expectations.
Unknown Executive: Okay, that's helpful. And can you please provide more color on the pricing of the dispositions that you did in April? And you mentioned you're likely to exceed the $2 billion target of liquidity. What does this number look like today? And you know, what are your expectations?
Unknown Executive: So I think we mentioned this, and it's a good question, last quarter with respect to the prime assets that we sold, which we calculated a mid-7s cap rate, and we said that the negotiations we were undergoing at that time, and frankly we remain, well, we closed one of those and we remain negotiating others, that cap rate in the mid-7s plus or minus is very indicative when adjusted for geography and size and quality of assets to what we expect to achieve on the additional sales or financings that we have mentioned.
Unknown Executive: So I think we mentioned this and its a good question last quarter with respect to the prime assets that we sold.
Unknown Executive: <unk>, which we calculated a mid sevens cap rate.
Unknown Executive: And we said that the negotiations we are under going at that time, and frankly, we remain where we close one of those and we remain negotiating others that that cap rate in the mid sevens, plus or minus is very indicative when adjusted for geography and size and and quality of.
Unknown Executive: Assets too to what we expect to achieve on the on the additional sales or financings that we have mentioned.
Unknown Executive: And just how long do you think the pipeline would be like how how much above the 2 billion ice again provide more Colorado would be super helpful.
Unknown Executive: And just how large do you think the pipeline would be? Like how much above the two billion? If you can provide more color, that would be super helpful.
Speaker Change: Well, you're breaking up a little bit, but if I heard you correctly of course, we've already achieved 80% of the $2 billion.
Unknown Executive: Well, you're breaking up a little bit, but if I heard you correctly, of course, we've already achieved 80% of the $2 billion. And based on those results and our visibility into the market, into potential buyers and financing sources, that's why we've said we think we'll ultimately exceed the $2 billion through the remainder of 2024. And we think it will be at similar prices, attractive prices for us.
Unknown Executive: And based on those results are.
Unknown Executive: And our visibility into the market into potential buyers and financing sources.
Unknown Executive: That's why we've said we think we will we will ultimately exceed the 2 billion through.
Unknown Executive: Through the remainder of 2024, and we think it will be at similar pricing attractive pricing for us.
Speaker Change: Great. Thank you for taking my question.
Unknown Executive: Great, thank you for taking my question.
Speaker Change: Thank you.
Michael Albert Carroll: The next question will come from Michael Carroll with RBC. Please go ahead.
Unknown Executive: The next question will come from Michael Carroll with RBC. Please go ahead.
Michael Albert Carroll: Yeah. Thanks, Steven Rosen I wanted to circle back on the prospect situation I guess, how concerning is it that they haven't paid April and May rents and I know Rosa you said that Paul payments are going to come in I mean does that fix their situation and what month do those co op payments come in.
Unknown Executive: Yep, thanks, Steven, and Rosa. I wanted to circle back on the prospect situation. I guess how concerning is it that they haven't paid April and May rents? And I know, Rosa, you said that the quaff payments are going to come in. I mean, does that fix their situation? And in what month do those quaff payments come in?
Speaker Change: So so your question of how how concerning is of course.
Unknown Executive: So your question, how concerning is, of course, you know, the prospect's been on a cash basis for some time. And as Rosa mentioned, I'll let her address the COIF in a minute, we've always had with our California operators this COIF issue. And then when you combine it with respect specifically to prospect and delays and the disposal of other regions in the country, they have significant cash pressures on them. But aside from that, having been paid through the quarter with the COIF issue, that again is not unexpected, we remain confident that, ultimately, you know, the cash will come in to pay the rent in California.
Unknown Executive: Prospect has been on cash basis for for some time and as Rosa mentioned and I'll, let her address the coop in a minute, we've always had with our California operators that this co-op issue.
Unknown Executive: And.
Unknown Executive: Then when you combine it with respect specifically to prospect and delays and disposing of other regions in the country are they they they have significant cash pressures on them.
Unknown Executive: But but aside from that having having been paid through the quarter with the coop issue that again is not unexpected we we remain confident that ultimately the.
Unknown Executive: The cash will come in to pay the rent in.
Unknown Executive: Before and you.
Unknown Executive: and California coverage continues to improve.
Unknown Executive: California coverage continues to improve.
Unknown Executive: Those cost payments should come in by the end of this month, the end of May, and it's a substantial sum. It should really help them with their time.
Unknown Executive: It does pop payments are due at the end or should come in by the end of this not into may and it's a substantial sum it should really help them with their cash flow.
Unknown Executive: In December and February, it was almost a 1-3.
Unknown Executive: February was almost a $1 three.
Unknown Executive: Yeah, I'm, assuming though that what the Connecticut, and Pennsylvania, and maybe the Rhode Island assets are kind of weighing that down.
Unknown Executive: Yeah, I'm assuming though that the Connecticut and Pennsylvania and maybe the Rhode Island assets are kind of weighing that down. If they are as they are missing these rent payments, do they have other cash pressures that are making their position tighter? I guess missing these rent payments in April may solve their cash issues? Or are they falling behind on other vendor payables that they may have?
Unknown Executive: If they as they are missing these rent payments do they have other cash pressures that better R. R.
Unknown Executive: They're making their position tighter I guess does missing these rent payments in April and may solve their cash issues or are they falling behind another vendor payables that they may have.
Speaker Change: I don't I don't think we have a comment on on that we we began weeks, we expect to get a rent and they're operating at a level and again as mentioned the.
Unknown Executive: I don't think we have a comment on that, you know, again, we expect to get our rent. And they're operating at a level, and again, Ed's mentioned the very positively improving coverage, now you have to convert that coverage to cash, and that's what we expect comes in with the QOF.
Unknown Executive: Very.
Unknown Executive: Positively improving coverage now you'd have to convert that covers to catch and that's what we expect comes in with the qual.
Unknown Executive: Okay and then just finally, Steve can you talk a little bit about what you're expecting for the Stewart transitions I know you said in your prepared remarks that you didn't need the 10% BK Covenant test in September do you expect it.
Unknown Executive: Okay. And then just finally, Steve, can you talk a little bit about what you're expecting for the steward transitions? I know you said in your prepared remarks that you didn't need the 10% BK Covenant test in September because you expected transitions to occur. Do you expect a portion of the transitions to occur?
Unknown Executive: Transitions to occur or do you expect a portion of transitions occur and I did look at the Dk filings, saying that they expect some of this stuff to get done by the beginning of August I mean, I'm assuming for this to get done by the beginning of August you would need to have a lot of process already underway I mean can you comment on.
Unknown Executive: And I did look at the BK filing saying that expect some of this stuff to get done by the beginning of August. I mean, I'm assuming for this to get done by the beginning of August, you would need to have a lot of processes already underway. I mean, can you comment on how much interest there is in those hospitals right now? And are people looking at the financials to get ready to put in bids? Or is that process just starting right now? Oh my, it's been, it's been going on.
Unknown Executive: How much interest there are in those hospitals right now and <unk>.
Unknown Executive: Are people looking at the financials to get ready to put in bids or is that process just starting right now.
Unknown Executive: Well Mike, it's been going on for almost five months now. We're way down the road with many different people.
Speaker Change: Well, Mike it's been it's been going on for almost five months now where we're way down the road with many different people.
Unknown Executive: And then Steve your comment on the 10% BK Covenant was that do you expect a percentage of the Stewart hospitals to be transitioned or like can you kind of clarify that comment.
Unknown Executive: And then, Steve, your comment on the 10% BK covenant was that, do you expect a percentage of the steward hospitals to be transitioned? Or, like, can you kind of clarify that comment? Well,
Unknown Executive: The point I was trying to make is that if we need relief from that covenant at the end of September, we would expect that need, all else equal, to be substantially mitigated by the number of hospitals that move away from the steward relationship into new relationships. Now, we don't try to predict exactly which hospitals will transition on which dates, but between now and the end of this almost five-month period, we do think that, again, based on what Ed just said, this didn't just start with the filing of bankruptcy.
Unknown Executive: Well.
Unknown Executive: Well, I'll try to clarify. I won't try to predict.
Unknown Executive: I'll try to clarify I won't I won't try to predict the point I was trying to make is if we need relief from that covenant at the end of September.
Unknown Executive: We would expect that need all else equal to be substantially mitigated by the number of hospitals that move away from the Stewart relationship into new relationships now we do.
Unknown Executive: Don't try to predict exactly which hospitals will transition one on which date, but between now and the end of this almost five months period, we do think that again based on what Ed just said remember this didn't just start with the filing of bankruptcy they've been marketing these hospitals for for at least five or six months.
Unknown Executive: But we do we do expect a without specifying which hospitals go when we do expect that a meaningful amount of steward exposure will be moved away to new operators before the end of September.
Unknown Executive: They've been marketing these hospitals for at least five or six months. But we do expect, without specifying which hospitals will go when, that a meaningful amount of steward exposure will be moved away from new operators before the end of September.
Speaker Change: Okay, great. Thank you.
Unknown Executive: Yeah.
Unknown Executive: The next question will come from Mike Mueller with JP Morgan. Please go ahead.
Michael William Mueller: The next question will come from Mike Mueller with J.P. Morgan. Please go ahead.
Unknown Executive: Yeah, hi. Maybe a couple quick ones here. I guess following up on the prior question, can you give us a high-level sense of, you know, at the end of this process, what portion of steward assets do you think you have now will ultimately be managed by other operators, either sold or transitioned or whatever?
Michael William Mueller: Yeah, Hi, maybe couple of quick ones here I guess following up on the prior question do you can you give us a high level sense of you know at the end of this process what portion of Stewart assets.
Unknown Executive: Do you think you have now will ultimately be managed by other operators either place.
Unknown Executive: Old or transitioned or whatever.
Unknown Executive: Okay.
Speaker Change: Mike I'm not sure I completely understand your question, but I think you said at the end of this transaction transition whenever it is do we expect any of the facilities to continue to be operated about Stuart is that the question.
Unknown Executive: Mike, I'm not sure I completely understand your question, but I think you said at the end of this transition, whenever it is, do we expect any of the facilities to continue to be operated by Stewart? Is that the question?
Unknown Executive: Let me rephrase it. I guess at the end of this bankruptcy process, on the other side of it, what portion of your steward assets now do you think will be in the hands of other operators as opposed to, you know, being operated by Stewart?
Speaker Change: Yeah, Let me give you let me rephrase it I guess at the end of this bankruptcy process.
Unknown Executive: At the other side of it what portion of your Steward assets now do you think will be in the hands of other operators as opposed to you know.
Unknown Executive: No.
Unknown Executive: Being operated by Stuart.
Unknown Executive: I would guess close to 100%.
Unknown Executive: I I I I would guess, we're close to 100%.
Unknown Executive: Okay, okay. And then, as it relates to the recent news with Connecticut and Yale New Haven, can you give us, I guess, current thoughts on what the plan B is if those assets do not get sold?
Unknown Executive: Okay, Okay, and then I guess.
Unknown Executive: As it relates to the recent news with Connecticut, Yale New Haven, I guess can.
Unknown Executive: Can you give us a.
Unknown Executive: I guess current thoughts on what the plan B is there if that if those assets do not get sold.
Unknown Executive: Yeah with the ongoing discussions between the state Yale and a prospect we were just not going to comment on that right now.
Unknown Executive: Yeah, with the ongoing discussions between the state, Yale, and Prospect, we're just not going to comment on that right now.
Unknown Executive: Okay, thank you.
Speaker Change: Got it okay. Thank you.
Unknown Executive: The next question will come from Jonathan Hughes with Raymond James. Please go ahead.
Jonathan Hughes: The next question will come from Jonathan Hughes with Raymond James. Please go ahead.
Jonathan Hughes: Hi, good morning.
Unknown Executive: Hi, good morning. Are there any concerns or discussions with new potential operators for the steward properties, focusing on increasing market share that might lead to concentration issues and maybe scrutiny from the FTC? Or is it because steward is in bankruptcy? The primary goal is to find a new operator and preserve healthcare services regardless of increased market share.
Jonathan Hughes: Are there any concerns or our discussions with new potential operators for the steward properties, focusing on increasing market share that might lead to concentration issues and maybe scrutiny from the FTC or is it because you are it is in bankruptcy.
Unknown Executive: Primary goal.
Unknown Executive: Finally, new operator preserves healthcare services, regardless of increased market share.
Unknown Executive: There are a lot of different markets, so I can't be 100% accurate on this, but to the best of my ability right now, I don't think there are any that would require a market concentration issue.
Unknown Executive: Yeah, there are a lot of different marks.
Speaker Change: There's a lot of different markets. So I can't be 100% accurate on this but to the best of my recovery right. This moment I don't think there are any that would require a a market concentration issue.
Unknown Executive: Okay.
Unknown Executive: And then maybe my second question on the on the dividends the last month dividend was.
Unknown Executive: And then, maybe my second question on the dividends, the last month's dividend was... declared after the Utah and the prime transactions, which was consistent with your prior comments that the dividend is dependent on liquidity transactions, and that press release mentioned that it was a regular dividend, but that the April dividend was declared more than 5 months after the previous one. So is it fair to assume future dividends might also be more sporadic and, maybe, given the change in stewardship status since then and the focus on preserving liquidity? Is the board still comfortable with that current dividend amount? Thanks. Jonathan.
Unknown Executive: Declared after the Utah transactions, which was consistent with your prior comments that the dividend.
Unknown Executive: Liquidity transactions and that press release mentioned that it was a regular dividend.
Unknown Executive: That April dividend was declared more than five months. After the prior so is it fair to assume future dividends might also be more sporadic and maybe given the change in Stuart status.
Speaker Change: And focus on preserving liquidity is the board is still comfortable with that client.
Speaker Change: Thanks, John.
Unknown Executive: Jonathan, our next board meeting is the same day as our annual meeting, which I believe is May the 30th, and it'll be discussed at that point.
Unknown Executive: Jonathan Our next board meeting is the same day as our annual meeting, which I believe has made the 30th and it'll it'll be discussed at that point.
Unknown Executive: Alright.
Unknown Executive: I look forward to hearing more of them. Thank you for your time.
Speaker Change: A court hearing more then thank you for the time.
Unknown Executive: The next question will come from John Pawlowski with Green Street. Please go ahead.
John Joseph Pawlowski: The next question will come from John Pawlowski on Green Street. Please go ahead.
John Joseph Pawlowski: Thanks for the time My first question is on the Utah transaction press release said $1 $1 billion in proceeds prior to costs and reserves.
Unknown Executive: Thanks for your time. My first question is on the Utah transaction. The press release said $1.1 billion in proceeds prior to costs and reserves. Can you quantify what the costs and reserves are, and I imagine some of it's CAPEX, so any additional color on the deferred CAPEX in that portfolio and how it impacted the transaction price would be helpful.
Unknown Executive: Can you quantify what the costs and reserves are and I imagine some of its capex. So any additional color on the deferred capex in that portfolio and how it impacted the transaction price it would be helpful.
Speaker Change: Well the reference to our costs and reserves are just customary cost of a transaction fee.
Unknown Executive: Well, the reference to costs and reserves is just customary costs of a transaction, fees, brokerage, and typical reserves that a first lien lender may require. And I'm not quite sure if I'll allow the follow-up question...
Unknown Executive: Fees.
Unknown Executive: Brokerage and.
Unknown Executive: And in typical reserves that have a first lien lender may require.
Speaker Change: And I'm not quite sure I, followed the follow up question.
Unknown Executive: There's nothing extraordinary in those expenses and reserves. No, no, that's my point. And I'm not sure what was meant by CAPEX.
Unknown Executive: Nothing extraordinary in those expenses and reserve no no that was my point that cause that.
Unknown Executive: And I'm not sure what was meant by Capex.
Unknown Executive: No. There's no there's no additional capex that MPW needs to fund to get that headline purchase price.
Unknown Executive: There's no additional CapEx that NPW needs to fund to get that headline purchase price.
Unknown Executive: This is an absolute net lease that the operator, Common Spirit, is responsible for CAPEX.
Unknown Executive: This is a there's an absolute net lease.
Unknown Executive: That the operator common spirit is responsible for for Capex.
Unknown Executive: Next question is on Steward. So with the Macquarie JV, just given that Steward's still paying rent on that JV, were NPW's lease payments due from Steward on either of your master leases with Steward subordinated to the JV when that was structured? Okay, last question for me: Did you pledge any of your real estate collateral in conjunction with the Stewart ABL or Bridge Loan Refinancing? And if so, how many assets do they have liens against them right now?
Unknown Executive: Okay.
Unknown Executive: Next question is on stored so with the Macquarie JV I'm.
Unknown Executive: Just given that started still paying rent on that JV or MPW lease payments due from steward on either of your master leases, which Stuart subordinated to the JV when that was structured.
Unknown Executive: No.
Unknown Executive: Okay our.
Unknown Executive: Last question for me did you pledge any of your real estate as collateral in conjunction with the Stewart ABL or bridge loan refinancing and if so how many assets have liens against them right now.
Unknown Executive: No.
Speaker Change: Alright, thanks for the time.
Unknown Executive: Yeah.
Unknown Executive: Yeah.
Unknown Executive: This concludes our question and answer session I would like to turn the conference back over to Mr. Ed <unk> for any closing remarks. Please go ahead.
Edward K. Aldag: This concludes our question and answer session. I would like to turn the conference back over to Mr. Ed Aldag for any closing remarks. Please go ahead.
Edward K. Aldag: Thank you, Chuck, and we appreciate everyone listening today. If you have any additional questions, please don't hesitate to call Drew or Tim, and they'll get your questions responded to as quickly as we can. Thank you. This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Edward K. Aldag: Thank you Chuck and we appreciate everyone listening today, if you have any additional questions. Please don't hesitate to call drew her term and they'll get to your questions responded to as quickly as we can.
Edward K. Aldag: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Edward K. Aldag: Yeah.
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Edward K. Aldag: Yeah.
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Edward K. Aldag: Yeah.
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Edward K. Aldag: Okay.
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Operator: [music].