Per Share Net Loss of ($0.07) and Normalized
FFO of $0.48 in Second Quarter
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE:
MPW) today announced financial and operating results for the second
quarter ended June 30, 2023, as well as certain events occurring
subsequent to quarter end.
- Net loss of ($0.07) and Normalized Funds from Operations
(“NFFO”) of $0.48 for the 2023 second quarter on a per diluted
share basis;
- Commenced in May rent collections at a newly developed
post-acute facility in California leased to Ernest Health at a
total cost of approximately $50 million;
- Sold in July three general acute hospitals in Kansas and Texas
to Prime Healthcare for roughly $100 million;
- Elected to participate in August as one of seven unrelated
initial lenders in Steward Health Care System’s (“Steward”)
syndicated asset-backed credit facility; and
- Established a REIT structure within the United Kingdom,
reducing future expected income tax expense and expanding strategic
flexibility.
Included in the financial tables accompanying this press release
is information about the Company’s assets and liabilities, net
income, and reconciliations of net income to NFFO and AFFO,
including per share amounts, all on a basis comparable to 2022
results.
PORTFOLIO UPDATE
During the third quarter, Steward refinanced its asset-backed
credit facility five months ahead of the maturity of its previous
agreement. The new facility carries a four-year term and provides
significant incremental liquidity to Steward. The leaders of the
lending group, experienced private credit funds Sound Point Capital
Management and Brigade Capital Management, offered MPT the
opportunity to participate. After careful consideration of the
terms, pricing and security in the form of government and
commercial receivables, MPT elected to invest up to $140 million,
an amount not to exceed 25% of the fully syndicated facility.
In early August, one of Pipeline Health System’s (“Pipeline”)
Los Angeles-area safety net hospitals, Coast Plaza Hospital,
announced the opening of a specialized inpatient behavioral health
unit to fill a critical need in underserved communities. The
expansion, which MPT agreed to fund last year, was completed ahead
of schedule and is expected to be profitable for Pipeline and
supportive of the related increase in rental payments to MPT.
The Company has total assets of approximately $19.2 billion,
including $12.5 billion of general acute facilities, $2.6 billion
of behavioral health facilities and $1.7 billion of post-acute
facilities. MPT’s portfolio includes 444 properties and
approximately 44,000 licensed beds across the United States as well
as in the United Kingdom, Switzerland, Germany, Australia, Spain,
Finland, Colombia, Italy and Portugal. The properties are leased to
or mortgaged by 55 hospital operating companies.
OPERATING RESULTS AND OUTLOOK
Net loss for the second quarter ended June 30, 2023 was ($42
million) (($0.07) per diluted share) compared to net income of $190
million ($0.32 per diluted share) in the year earlier period.
Included in 2023 second quarter net loss is the previously
disclosed roughly $286 million in accelerated lease intangible
amortization related to the early termination of Steward’s leases
of five Utah hospitals now leased to CommonSpirit and a related $95
million straight-line rent write-off, partially offset by a roughly
$160 million tax benefit related to the Company’s establishment of
a U.K. REIT, as well as the recognition of $68 million of 2023
previously unrecorded but contractually owed rent and interest
revenue from the receipt of equity in PHP Holdings LLC (“PHP”).
NFFO for the second quarter ended June 30, 2023 was $285 million
($0.48 per diluted share) compared to $275 million ($0.46 per
diluted share) in the year earlier period. Included in 2023 second
quarter NFFO is roughly $68 million ($0.11 per diluted share) from
the receipt of equity in PHP in lieu of cash for 2023 previously
unrecorded but contractually owed rent and interest revenue from
Prospect Medical Holdings, Inc. (“Prospect”). In accordance with
accounting requirements, the value of MPT’s investment in PHP was
established at roughly $655 million based on estimates from
multiple independent third parties and the application of an
appropriate marketability discount.
The Company is narrowing its 2023 calendar estimate of per share
net income to $0.33 to $0.37 to account for second quarter results
and is also narrowing its estimate of per share NFFO to $1.53 to
$1.57. The ranges include Prospect-related income from the expected
resumption of partial California rental payments, recognition of
the PHP equity value received in the second quarter and other
amounts. The estimates are based on an existing portfolio which
includes the impact of binding disposition and leasing transactions
and excludes expected future contributions from development and
other capital projects.
These estimates do not include the effects, among others, of
unexpected real estate operating costs, modifications to lease
terms, changes in accounting pronouncements, litigation costs, debt
refinancing costs, acquisition costs, currency exchange rate
movements, changes in income tax rates, interest rate hedging
activities, write-offs of straight-line rent and in place lease
intangibles, other impairments or other non-recurring/unplanned
transactions. These estimates may change if the Company acquires or
sells assets in amounts that are different from estimates, market
interest rates change, debt is refinanced or repurchased, new
shares are issued or repurchased, additional debt is incurred,
other operating expenses vary, income from equity investments vary
from expectations, or existing leases or loans do not perform in
accordance with their terms.
CONFERENCE CALL AND WEBCAST
The Company has scheduled a conference call and webcast for
Tuesday, August 8, 2023 at 11:00 a.m. Eastern Time to present the
Company’s financial and operating results for the quarter ended
June 30, 2023. The dial-in numbers for the conference call are
844-481-2836 (U.S.) and 412-317-1856 (International); there is no
passcode requirement. Call participants are to ask the operator to
be joined to the Medical Properties Trust, Inc. conference call
upon dialing in. The conference call will also be available via
webcast in the Investor Relations section of the Company’s website,
www.medicalpropertiestrust.com.
A telephone and webcast replay of the call will be available
beginning shortly after the call’s completion. The telephone replay
will be available through August 22, 2023 using dial-in numbers
877-344-7529 (U.S.), 855-669-9658 (Canada) and 412-317-0088
(International) along with passcode 3185290. The webcast replay
will be available for one year following the call’s completion on
the Investor Relations section of the Company’s website.
The Company’s supplemental information package for the current
period will also be available on the Company’s website in the
Investor Relations section.
The Company uses, and intends to continue to use, the Investor
Relations page of its website, which can be found at
www.medicalpropertiestrust.com, as a means of disclosing
material nonpublic information and of complying with its disclosure
obligations under Regulation FD, including, without limitation,
through the posting of investor presentations that may include
material nonpublic information. Accordingly, investors should
monitor the Investor Relations page, in addition to following our
press releases, SEC filings, public conference calls, presentations
and webcasts. The information contained on, or that may be accessed
through, our website is not incorporated by reference into, and is
not a part of, this document.
About Medical Properties Trust, Inc.
Medical Properties Trust, Inc. is a self-advised real estate
investment trust formed in 2003 to acquire and develop net-leased
hospital facilities. From its inception in Birmingham, Alabama, the
Company has grown to become one of the world’s largest owners of
hospital real estate with 444 facilities and approximately 44,000
licensed beds in ten countries and across four continents. MPT’s
financing model facilitates acquisitions and recapitalizations and
allows operators of hospitals to unlock the value of their real
estate assets to fund facility improvements, technology upgrades
and other investments in operations. For more information, please
visit the Company’s website at
www.medicalpropertiestrust.com.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements can generally be identified by
the use of forward-looking words such as “may”, “will”, “would”,
“could”, “expect”, “intend”, “plan”, “estimate”, “target”,
“anticipate”, “believe”, “objectives”, “outlook”, “guidance” or
other similar words, and include statements regarding our
strategies, objectives, future expansion and development
activities, and expected financial performance. Forward-looking
statements involve known and unknown risks and uncertainties that
may cause our actual results or future events to differ materially
from those expressed in or underlying such forward-looking
statements, including, but not limited to: (i) the economic,
political and social impact of, and uncertainty relating to,
potential impact from health crises (like COVID-19); (ii) the
ability of our tenants, operators and borrowers to satisfy their
obligations under their respective contractual arrangements with
us, especially as a result of the adverse economic impact of the
COVID-19 pandemic, and government regulation of hospitals and
healthcare providers in connection with same (as further detailed
in our Current Report on Form 8-K filed with the SEC on April 8,
2020); (iii) our expectations regarding annual guidance for net
income and NFFO per share; (iv) our success in implementing our
business strategy and our ability to identify, underwrite, finance,
consummate and integrate acquisitions and investments; (v) the
nature and extent of our current and future competition; (vi)
macroeconomic conditions, such as a disruption of or lack of access
to the capital markets or movements in currency exchange rates;
(vii) our ability to obtain debt financing on attractive terms or
at all, which may adversely impact our ability to pursue
acquisition and development opportunities and pay down, refinance,
restructure or extend our indebtedness as it becomes due; (viii)
increases in our borrowing costs as a result of changes in interest
rates and other factors; (ix) international, national and local
economic, real estate and other market conditions, which may
negatively impact, among other things, the financial condition of
our tenants, lenders and institutions that hold our cash balances,
and may expose us to increased risks of default by these parties;
(x) factors affecting the real estate industry generally or the
healthcare real estate industry in particular; (xi) our ability to
maintain our status as a REIT for federal and state income tax
purposes; (xii) federal and state healthcare and other regulatory
requirements, as well as those in the foreign jurisdictions where
we own properties; (xiii) the value of our real estate assets,
which may limit our ability to dispose of assets at attractive
prices or obtain or maintain equity or debt financing secured by
our properties or on an unsecured basis; (xiv) the ability of our
tenants and operators to operate profitably and generate positive
cash flow, comply with applicable laws, rules and regulations in
the operation of our properties, to deliver high-quality services,
to attract and retain qualified personnel and to attract patients;
(xv) potential environmental contingencies and other liabilities;
(xvi) the risk that the expected sale of three Connecticut
hospitals currently leased to Prospect does not occur; (xvii) the
risk that MPT’s expected sale of its remaining Australian portfolio
does not occur; (xviii) the risk that MPT is unable to monetize its
investment in PHP at full value within a reasonable time period or
at all; (xix) the risk that other property sales, loan repayments,
and other capital recycling transactions do not occur; and (xx) the
risks and uncertainties of litigation.
The risks described above are not exhaustive and additional
factors could adversely affect our business and financial
performance, including the risk factors discussed under the section
captioned “Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2022 and as updated in our quarterly
reports on Form 10-Q. Forward-looking statements are inherently
uncertain and actual performance or outcomes may vary materially
from any forward-looking statements and the assumptions on which
those statements are based. Readers are cautioned to not place
undue reliance on forward-looking statements as predictions of
future events. We disclaim any responsibility to update such
forward-looking statements, which speak only as of the date on
which they were made.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands, except for
per share data) June 30, 2023 December 31, 2022
Assets
(Unaudited) (A) Real estate assets Land, buildings
and improvements, intangible lease assets, and other
$
13,133,651
$
13,862,415
Investment in financing leases
1,231,652
1,691,323
Real estate held for sale
401,125
-
Mortgage loans
299,326
364,101
Gross investment in real estate assets
15,065,754
15,917,839
Accumulated depreciation and amortization
(1,251,165
)
(1,193,312
)
Net investment in real estate assets
13,814,589
14,724,527
Cash and cash equivalents
324,050
235,668
Interest and rent receivables, net
177,643
167,035
Straight-line rent receivables
779,584
787,166
Investments in unconsolidated real estate joint ventures
1,487,118
1,497,903
Investments in unconsolidated operating entities
1,812,150
1,444,872
Other loans
199,360
227,839
Other assets
609,881
572,990
Total Assets
$
19,204,375
$
19,658,000
Liabilities and Equity Liabilities Debt, net
$
10,237,558
$
10,268,412
Accounts payable and accrued expenses
444,926
621,324
Deferred revenue
49,766
27,727
Obligations to tenants and other lease liabilities
157,411
146,130
Total Liabilities
10,889,661
11,063,593
Equity Preferred stock, $0.001 par value. Authorized 10,000
shares; no shares outstanding
-
-
Common stock, $0.001 par value. Authorized 750,000 shares; issued
and outstanding - 598,344 shares at June 30, 2023 and 597,476
598
597
shares at December 31, 2022 Additional paid-in capital
8,547,835
8,535,140
Retained (deficit) earnings
(241,301
)
116,285
Accumulated other comprehensive income (loss)
6,680
(59,184
)
Total Medical Properties Trust, Inc. Stockholders' Equity
8,313,812
8,592,838
Non-controlling interests
902
1,569
Total Equity
8,314,714
8,594,407
Total Liabilities and Equity
$
19,204,375
$
19,658,000
(A) Financials have been derived from the prior year
audited financial statements.
MEDICAL PROPERTIES TRUST, INC.
AND SUBSIDIARIES
Consolidated Statements of
Income
(Unaudited)
(Amounts in thousands, except for per share data) For
the Three Months Ended For the Six Months Ended June 30, 2023 June
30, 2022 June 30, 2023 June 30, 2022
Revenues Rent
billed
$
247,491
$
241,209
$
495,648
$
504,611
Straight-line rent
(39,329
)
58,518
17,364
119,562
Income from financing leases
68,468
51,873
81,663
103,649
Interest and other income
60,765
48,626
92,931
82,204
Total revenues
337,395
400,226
687,606
810,026
Expenses Interest
104,470
87,730
202,124
178,913
Real estate depreciation and amortization
364,403
84,334
448,263
169,650
Property-related (A)
24,676
21,135
31,786
29,733
General and administrative
35,604
38,858
77,328
80,282
Total expenses
529,153
232,057
759,501
458,578
Other income (expense) Gain on sale of real estate
167
16,355
229
467,993
Real estate and other impairment charges
-
-
(89,538
)
(4,875
)
Earnings from equity interests
12,224
14,785
23,576
22,123
Debt refinancing and unutilized financing costs
(816
)
(619
)
(816
)
(9,435
)
Other (including fair value adjustments on securities)
(10,512
)
2,031
(15,678
)
16,793
Total other income (expense)
1,063
32,552
(82,227
)
492,599
(Loss) income before income tax
(190,695
)
200,721
(154,122
)
844,047
Income tax benefit (expense)
148,262
(10,657
)
144,719
(22,036
)
Net (loss) income
(42,433
)
190,064
(9,403
)
822,011
Net loss (income) attributable to non-controlling interests
396
(467
)
160
(733
)
Net (loss) income attributable to MPT common stockholders
$
(42,037
)
$
189,597
$
(9,243
)
$
821,278
Earnings per common share - basic and diluted: Net
(loss) income attributable to MPT common stockholders
$
(0.07
)
$
0.32
$
(0.02
)
$
1.37
Weighted average shares outstanding - basic
598,344
598,827
598,323
598,751
Weighted average shares outstanding - diluted
598,344
599,026
598,323
598,979
Dividends declared per common share
$
0.29
$
0.29
$
0.58
$
0.58
(A) Includes $21.1 million and $18.3 million of ground lease
and other expenses (such as property taxes and insurance) paid
directly by us and reimbursed by our tenants for the three months
ended June 30, 2023 and 2022, respectively, and $25.3 million and
$24.6 million for the six months ended June 30, 2023 and 2022,
respectively.
MEDICAL PROPERTIES TRUST, INC. AND
SUBSIDIARIES Reconciliation of Net Income to Funds From
Operations (Unaudited)
(Amounts in thousands, except for
per share data)
For the Three Months Ended For the Six Months Ended June 30, 2023
June 30, 2022 June 30, 2023 June 30, 2022
FFO
information: Net (loss) income attributable to MPT
common stockholders
$
(42,037
)
$
189,597
$
(9,243
)
$
821,278
Participating securities' share in earnings
(469
)
(345
)
(984
)
(747
)
Net (loss) income, less participating securities' share in earnings
$
(42,506
)
$
189,252
$
(10,227
)
$
820,531
Depreciation and amortization
382,244
101,976
484,204
201,435
Gain on sale of real estate
(167
)
(16,355
)
(229
)
(467,993
)
Real estate impairment charges
-
-
52,104
-
Funds from operations
$
339,571
$
274,873
$
525,852
$
553,973
Write-off (recovery) of unbilled rent and other
95,642
1,943
135,268
(328
)
Other impairment charges
-
-
-
4,875
Litigation and other
2,502
-
10,228
-
Share-based compensation adjustments
(4,363
)
(966
)
(4,363
)
(966
)
Non-cash fair value adjustments
8,374
(943
)
4,253
(8,966
)
Tax rate changes and other
(157,230
)
(825
)
(164,535
)
(825
)
Debt refinancing and unutilized financing costs
816
619
816
9,435
Normalized funds from operations
$
285,312
$
274,701
$
507,519
$
557,198
Share-based compensation
10,800
11,075
22,629
22,879
Debt costs amortization
5,203
4,560
10,324
10,173
Rent deferral, net
2,380
(3,327
)
4,793
(7,043
)
Straight-line rent revenue from operating and finance leases
(60,825
)
(74,757
)
(123,414
)
(152,090
)
Adjusted funds from operations
$
242,870
$
212,252
$
421,851
$
431,117
Per diluted share data: Net (loss)
income, less participating securities' share in earnings
$
(0.07
)
$
0.32
$
(0.02
)
$
1.37
Depreciation and amortization
0.64
0.17
0.81
0.33
Gain on sale of real estate
-
(0.03
)
-
(0.78
)
Real estate impairment charges
-
-
0.09
-
Funds from operations
$
0.57
$
0.46
$
0.88
$
0.92
Write-off (recovery) of unbilled rent and other
0.16
-
0.23
-
Other impairment charges
-
-
-
-
Litigation and other
-
-
0.01
-
Share-based compensation adjustments
-
-
-
-
Non-cash fair value adjustments
0.01
-
-
(0.01
)
Tax rate changes and other
(0.26
)
-
(0.27
)
-
Debt refinancing and unutilized financing costs
-
-
-
0.02
Normalized funds from operations
$
0.48
$
0.46
$
0.85
$
0.93
Share-based compensation
0.02
0.02
0.04
0.04
Debt costs amortization
0.01
0.01
0.02
0.02
Rent deferral, net
-
(0.01
)
-
(0.01
)
Straight-line rent revenue from operating and finance leases
(0.10
)
(0.13
)
(0.21
)
(0.26
)
Adjusted funds from operations
$
0.41
$
0.35
$
0.70
$
0.72
Notes:
(A) Certain line items above (such as
depreciation and amortization) include our share of such
income/expense from unconsolidated joint ventures. These amounts
are included with all activity of our equity interests in the
"Earnings from equity interests" line on the consolidated
statements of income.
(B) Investors and analysts following the
real estate industry utilize funds from operations ("FFO") as a
supplemental performance measure. FFO, reflecting the assumption
that real estate asset values rise or fall with market conditions,
principally adjusts for the effects of GAAP depreciation and
amortization of real estate assets, which assumes that the value of
real estate diminishes predictably over time. We compute FFO in
accordance with the definition provided by the National Association
of Real Estate Investment Trusts, or Nareit, which represents net
income (loss) (computed in accordance with GAAP), excluding gains
(losses) on sales of real estate and impairment charges on real
estate assets, plus real estate depreciation and amortization,
including amortization related to in-place lease intangibles, and
after adjustments for unconsolidated partnerships and joint
ventures.
In addition to presenting FFO in
accordance with the Nareit definition, we disclose normalized FFO,
which adjusts FFO for items that relate to unanticipated or
non-core events or activities or accounting changes that, if not
noted, would make comparison to prior period results and market
expectations less meaningful to investors and analysts. We believe
that the use of FFO, combined with the required GAAP presentations,
improves the understanding of our operating results among investors
and the use of normalized FFO makes comparisons of our operating
results with prior periods and other companies more meaningful.
While FFO and normalized FFO are relevant and widely used
supplemental measures of operating and financial performance of
REITs, they should not be viewed as a substitute measure of our
operating performance since the measures do not reflect either
depreciation and amortization costs or the level of capital
expenditures and leasing costs (if any not paid by our tenants) to
maintain the operating performance of our properties, which can be
significant economic costs that could materially impact our results
of operations. FFO and normalized FFO should not be considered an
alternative to net income (loss) (computed in accordance with GAAP)
as indicators of our results of operations or to cash flow from
operating activities (computed in accordance with GAAP) as an
indicator of our liquidity.
We calculate adjusted funds from
operations, or AFFO, by subtracting from or adding to normalized
FFO (i) straight-line rent, (ii) non-cash share-based compensation
expense, and (iii) amortization of deferred financing costs. AFFO
is an operating measurement that we use to analyze our results of
operations based more on the receipt, rather than the accrual, of
our rental revenue and on certain other adjustments. We believe
that this is an important measurement because our
infrastructure-type assets generally require longer term leases
with annual contractual escalations of base rents, resulting in the
recognition of a significant amount of rental income that is not
billable/collected until future periods. Our calculation of AFFO
may not be comparable to AFFO or similarly titled measures reported
by other REITs. AFFO should not be considered as an alternative to
net income (calculated pursuant to GAAP) as an indicator of our
results of operations or to cash flow from operating activities
(calculated pursuant to GAAP) as an indicator of our liquidity.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES 2023
Guidance Reconciliation (Unaudited) 2023 Guidance - Per
Share(1) Low High
Net income attributable to MPT common
stockholders
$
0.33
$
0.37
Participating securities' share in earnings
-
-
Net income, less participating securities' share in earnings
$
0.33
$
0.37
Depreciation and amortization
1.14
1.14
Real estate impairment charges
0.09
0.09
Funds from operations
$
1.56
$
1.60
Other adjustments
(0.03
)
(0.03
)
Normalized funds from operations
$
1.53
$
1.57
(1) The guidance is based on current
expectations and actual results or future events may differ
materially from those expressed in this table, which is a
forward-looking statement within the meaning of the federal
securities laws. Please refer to the forward-looking statement
included in this press release and our filings with the Securities
and Exchange Commission for a discussion of risk factors that
affect our performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807725046/en/
Drew Babin, CFA, CMA Senior Managing Director of Corporate
Communications Medical Properties Trust, Inc. (646) 884-9809
dbabin@medicalpropertiestrust.com
Medical Properties (NYSE:MPW)
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