Company Announcements

Medical Properties Trust, Inc. Reports Second Quarter Results

Per Share Net Income of $0.20 and Normalized FFO of $0.31

Acquisitions of $3.4 Billion Represents Year-to-Date Growth of 37%

Additional Acquisitions in Second Half of 2019 Expected

BIRMINGHAM, Ala.--(BUSINESS WIRE)--Aug. 1, 2019-- Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced financial and operating results for the second quarter ended June 30, 2019 and recent highlights.

“Our over-achievement of MPT’s 2019 acquisitions goal only half-way through the year demonstrates that we are in the early stages of a rapidly expanding global market for hospital real estate,” said Edward K. Aldag, Jr., MPT’s Chairman, President and Chief Executive Officer. “Even though we have announced completed and pending transactions totaling $3.4 billion, a 37% year-to-date growth rate, we expect that this market will continue to offer further acquisition opportunities during the remainder of this year and beyond,” continued Aldag.

“In the capital markets, our cost of equity and debt capital continues to decline as a result of MPT’s strong balance sheet, diversified portfolio and increased scale. Recent highly successful equity and debt offerings resulted in net proceeds to the Company of approximately $858 million and $885 million, respectively. Our $900 million offering of senior notes priced with a historically low coupon of 4.625%. This strong execution in the capital markets supports our future growth and the continuation of our strongly accretive acquisitions.”

SECOND QUARTER AND RECENT HIGHLIGHTS

  • Net income of $0.20 and Normalized Funds from Operations (“NFFO”) of $0.31 in the second quarter both on a per diluted share basis;

Previously announced transactions and capital markets activities in the second quarter and more recently include the following:

  • Completed or announced binding agreements to make $3.4 billion of highly and immediately accretive investments in hospital real estate with outstanding characteristics:

– Approximate 8.0% blended GAAP rate for all 2019 year-to-date transactions;

– Established new relationships with 6 high-quality hospital operators each offering expanding growth opportunities;

– Highly-sought operators are leaders in their respective markets throughout the U.S., Australia, Switzerland and the UK;

– 7 countries now represented in MPT’s portfolio with the additions of Australia and Switzerland;

– 333 total properties with the addition of 58 facilities in 2019 year-to-date;

– Expanded behavioral and investment grade-rated, not-for-profit service lines.

  • Issued 51.75 million shares of common stock (including underwriters’ overallotment) for net proceeds of approximately $858.1 million to partially fund investment in Prospect portfolio;
  • Issued $900 million of 4.625% senior notes due 2029 at an issue price of 99.5% of par value from an upsized public offering with net proceeds of approximately $885.0 million to partially fund investment in Prospect portfolio and the remaining net proceeds to be used for general corporate purposes;
  • S&P Global Ratings revised its outlook to stable from negative on July 16 affirming their BB+ ratings on the Company and its operating partnership, MPT Operating Partnership L.P. and BBB- issue-level rating on MPT’s senior unsecured notes.

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, all on a basis comparable to 2018 results. In addition, a reconciliation of pro forma total gross assets to total assets is included in the financial tables accompanying this press release.

PORTFOLIO UPDATE

Including all 2019 year-to-date transactions that have closed or are pending the Company has reduced its exposure to its largest tenant, Steward Health Care by 23% to approximately 30%, down from 40% as of December 31, 2018. MPT’s exposure to its top two tenants has been reduced by 17% to approximately 42%, down from 51%. This reduction in tenant concentration is the result of the Company adding 6 new high-quality operators to its portfolio thus far in 2019 bringing the current number of operators to 36.

Acute care hospitals as a percentage of MPT’s total portfolio has increased by 15% to 81%, up from 71% as of December 31, 2018. As a percentage of the Company’s U.S. portfolio acute care hospitals have increased by 3% to 86%, up from 84%.

The Company has pro forma (including Prospect and Ramsay) total gross assets of approximately $13.0 billion, including $10.5 billion in general acute care hospitals, $1.6 billion in inpatient rehabilitation hospitals, and $0.3 billion in long-term acute care hospitals. This pro forma portfolio includes 333 properties representing more than 37,500 licensed beds in 30 U.S. states and in Germany, the United Kingdom, Switzerland, Italy, Spain and Australia.

OPERATING RESULTS AND OUTLOOK

Net income for the second quarter of 2019 was $79.4 million (or $0.20 per diluted share), compared to $111.6 million (or $0.30 per diluted share) in the second quarter of 2018.

NFFO for the second quarter of 2019 was $120.9 million compared to $129.9 million in the second quarter of 2018. Per share NFFO was $0.31 per diluted share in the second quarter of 2019, compared to $0.36 per diluted share in the second quarter of 2018.

The Company expects an annual run-rate of $1.10 to $1.12 per diluted share for net income and $1.56 to $1.58 per diluted share for NFFO based on year-to-date transactions in 2019.

A reconciliation of NFFO guidance to net income is included with the financial tables accompanying this press release.

These estimates do not include the effects, if any, of unexpected real estate operating costs, changes in accounting pronouncements, litigation costs, debt refinancing costs, acquisition costs, currency exchange rate movements, interest rate hedging activities, write-offs of straight-line rent or other non-recurring or 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, new shares are issued, additional debt is incurred, other operating expenses vary, income from our equity investments vary from expectations, or existing leases do not perform in accordance with their terms.

CONFERENCE CALL AND WEBCAST

The Company has scheduled a conference call and webcast for Thursday, August 1, 2019 at 11:00 a.m. Eastern Time to present the Company’s financial and operating results for the quarter ended June 30, 2019. The dial-in numbers for the conference call are 844-535-3969 (U.S.) and 409-937-8903 (International); both numbers require passcode 2572988. 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 through August 15, 2019. Dial-in numbers for the replay are 855-859-2056 and 404-537-3406 for U.S. and International callers, respectively. The replay passcode for both U.S. and International callers is 2572988.

The Company’s supplemental information package for the current period will also be available on the Company’s website under the “Investor Relations” section.

About Medical Properties Trust, Inc.

Medical Properties Trust, Inc. is a self-advised real estate investment trust formed to acquire and develop net-leased hospital facilities. The Company’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.

The statements in this press release that are forward looking are based on current expectations and actual results or future events may differ materially. Words such as "expects," "believes," "anticipates," "intends," "will," "should" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results of the Company or future events to differ materially from those expressed in or underlying such forward-looking statements, including without limitation: the satisfaction of all conditions to, and the timely closing (if at all) of pending transactions, including Prospect and Ramsay investments; annual run-rate net income and NFFO per share; the amount of acquisitions of healthcare real estate, if any; results from potential sales and joint venture arrangements, if any; capital markets conditions; estimated leverage metrics; the repayment of debt arrangements; statements concerning the additional income to the Company as a result of ownership interests in equity investments and the timing of such income; the payment of future dividends, if any; completion of additional debt arrangements, and additional investments; national and international economic, business, real estate and other market conditions; the competitive environment in which the Company operates; the execution of the Company's business plan; financing risks; the Company's ability to maintain its status as a REIT for income tax purposes; acquisition and development risks; potential environmental and other liabilities; and other factors affecting the real estate industry generally or healthcare real estate in particular. For further discussion of the factors that could affect outcomes, please refer to the "Risk factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 and as updated by the Company’s subsequently filed Quarterly Reports on Form 10-Q and other SEC filings. Except as otherwise required by the federal securities laws, the Company undertakes no obligation to update the information in this press release.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
 
Consolidated Balance Sheets
(Amounts in thousands, except for per share data) June 30, 2019 December 31, 2018
Assets (Unaudited) (A)
Real estate assets
Land, buildings and improvements, intangible lease assets, and other

$

6,552,944

 

$

5,268,459

 

Mortgage loans

 

1,216,442

 

 

1,213,322

 

Net investment in direct financing leases

 

686,599

 

 

684,053

 

Gross investment in real estate assets

 

8,455,985

 

 

7,165,834

 

Accumulated depreciation and amortization

 

(531,880

)

 

(464,984

)

Net investment in real estate assets

 

7,924,105

 

 

6,700,850

 

 
Cash and cash equivalents

 

451,652

 

 

820,868

 

Interest and rent receivables

 

24,103

 

 

25,855

 

Straight-line rent receivables

 

268,901

 

 

220,848

 

Equity investments

 

799,058

 

 

520,058

 

Other loans

 

370,631

 

 

373,198

 

Other assets

 

284,761

 

 

181,966

 

Total Assets

$

10,123,211

 

$

8,843,643

 

 
Liabilities and Equity
Liabilities
Debt, net

$

4,878,310

 

$

4,037,389

 

Accounts payable and accrued expenses

 

192,948

 

 

204,325

 

Deferred revenue

 

10,449

 

 

13,467

 

Obligations to tenants and other lease liabilities

 

117,869

 

 

27,524

 

Total Liabilities

 

5,199,576

 

 

4,282,705

 

 
Equity
Preferred stock, $0.001 par value. Authorized 10,000
shares; no shares outstanding

 

-

 

 

-

 

Common stock, $0.001 par value. Authorized 500,000 shares;
issued and outstanding - 394,425 shares at June 30, 2019 and 370,637 shares at December 31, 2018

 

394

 

 

371

 

Additional paid-in capital

 

4,855,310

 

 

4,442,948

 

Retained earnings

 

121,772

 

 

162,768

 

Accumulated other comprehensive loss

 

(66,530

)

 

(58,202

)

Treasury shares, at cost

 

(777

)

 

(777

)

Total Medical Properties Trust, Inc. Stockholders' Equity

 

4,910,169

 

 

4,547,108

 

 
Non-controlling interests

 

13,466

 

 

13,830

 

Total Equity

 

4,923,635

 

 

4,560,938

 

 
Total Liabilities and Equity

$

10,123,211

 

$

8,843,643

 

 
(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, 2019 June 30, 2018 June 30, 2019 June 30, 2018
 
Revenues
Rent billed

$

110,882

 

$

122,827

 

$

219,480

 

$

250,838

 

Straight-line rent

 

25,136

 

15,073

 

45,787

 

30,864

 

Income from direct financing leases

17,386

 

18,934

 

34,666

 

36,615

 

Interest and other income

 

39,145

 

45,068

 

73,070

 

88,631

 

Total revenues

 

192,549

 

201,902

 

373,003

 

406,948

 

 
Expenses
Interest

 

52,326

 

 

58,126

 

 

102,877

 

 

115,149

 

Real estate depreciation and amortization

 

33,976

 

 

34,466

 

 

67,328

 

 

70,268

 

Property-related (A)

 

8,290

 

 

1,920

 

 

11,356

 

 

4,104

 

General and administrative

 

22,272

 

 

19,552

 

 

45,723

 

 

37,370

 

Acquisition costs

 

-

 

 

411

 

 

-

 

 

411

 

Total expenses

 

116,864

 

 

114,475

 

 

227,284

 

 

227,302

 

 
Other income (expense)
(Loss) gain on sale of real estate, net

 

(147

)

 

24,151

 

 

(147

)

 

25,618

 

Earnings from equity interests

 

4,441

 

 

4,155

 

 

8,161

 

 

7,426

 

Other

 

(333

)

 

(2,153

)

 

(129

)

 

(6,892

)

Total other income

 

3,961

 

 

26,153

 

 

7,885

 

 

26,152

 

 
Income before income tax

 

79,646

 

 

113,580

 

 

153,604

 

 

205,798

 

 
Income tax benefit (expense)

 

274

 

 

(1,563

)

 

2,607

 

 

(2,738

)

 
Net income

 

79,920

 

 

112,017

 

 

156,211

 

 

203,060

 

Net income attributable to non-controlling interests

 

(482

)

 

(450

)

 

(951

)

 

(892

)

Net income attributable to MPT common stockholders

$

79,438

 

$

111,567

 

$

155,260

 

$

202,168

 

 
 
Earnings per common share - basic and diluted:
Net income attributable to MPT common stockholders

$

0.20

 

$

0.30

 

$

0.40

 

$

0.55

 

 
Weighted average shares outstanding - basic

 

394,574

 

 

364,897

 

 

387,563

 

 

364,889

 

Weighted average shares outstanding - diluted

 

395,692

 

 

365,541

 

 

388,683

 

 

365,442

 

 
 
Dividends declared per common share

$

0.25

 

$

0.25

 

$

0.50

 

$

0.50

 

 
(A) Includes $6.4 million and $7.7 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 and six months ended June 30, 2019, respectively. These costs are required to be presented on a gross basis (with offset included in Interest and other income), following our adoption of the new lease accounting standard on January 1, 2019. We presented similar items in the prior year on a net basis.
 
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, 2019 June 30, 2018 June 30, 2019 June 30, 2018
 
FFO information:
Net income attributable to MPT common stockholders

$

79,438

 

$

111,567

 

$

155,260

 

$

202,168

 

Participating securities' share in earnings

 

(446

)

 

(323

)

 

(922

)

 

(518

)

Net income, less participating securities' share in earnings

$

78,992

 

$

111,244

 

$

154,338

 

$

201,650

 

 
Depreciation and amortization

 

40,407

 

 

35,156

 

 

80,261

 

 

71,673

 

Loss (gain) on sale of real estate, net

 

147

 

 

(24,151

)

 

147

 

 

(25,618

)

Funds from operations

$

119,546

 

$

122,249

 

$

234,746

 

$

247,705

 

 
Write-off of straight-line rent and other, net of tax benefit

 

406

 

 

7,235

 

 

3,002

 

 

13,294

 

Unutilized financing fees

 

914

 

 

-

 

 

914

 

 

-

 

Acquisition costs, net of tax benefit

 

-

 

 

411

 

 

-

 

 

411

 

Normalized funds from operations

$

120,866

 

$

129,895

 

$

238,662

 

$

261,410

 

 
Share-based compensation

 

6,317

 

 

4,869

 

 

13,032

 

 

6,725

 

Debt costs amortization

 

2,188

 

 

1,802

 

 

4,255

 

 

3,591

 

Straight-line rent revenue and other

 

(29,508

)

 

(24,376

)

 

(57,558

)

 

(47,801

)

Adjusted funds from operations

$

99,863

 

$

112,190

 

$

198,391

 

$

223,925

 

 
 
 
Per diluted share data:
Net income, less participating securities' share in earnings

$

0.20

 

$

0.30

 

$

0.40

 

$

0.55

 

Depreciation and amortization

 

0.10

 

 

0.10

 

 

0.20

 

 

0.20

 

Loss (gain) on sale of real estate, net

 

-

 

 

(0.07

)

 

-

 

 

(0.07

)

Funds from operations

$

0.30

 

$

0.33

 

$

0.60

 

$

0.68

 

 
Write-off of straight-line rent and other, net of tax benefit

 

-

 

 

0.03

 

 

0.01

 

 

0.03

 

Unutilized financing fees

 

0.01

 

 

-

 

 

-

 

 

-

 

Acquisition costs, net of tax benefit

 

-

 

 

-

 

 

-

 

 

-

 

Normalized funds from operations

$

0.31

 

$

0.36

 

$

0.61

 

$

0.71

 

 
Share-based compensation

 

0.02

 

 

0.01

 

 

0.03

 

 

0.02

 

Debt costs amortization

 

-

 

 

0.01

 

 

0.01

 

 

0.01

 

Straight-line rent revenue and other

 

(0.08

)

 

(0.07

)

 

(0.14

)

 

(0.13

)

Adjusted funds from operations

$

0.25

 

$

0.31

 

$

0.51

 

$

0.61

 

 

Notes:

(A) Certain line items above (such as real estate depreciation) include our share of such income/expense from unconsolidated joint ventures. These amounts are included with the activity of all 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, or 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 and after adjustments for unconsolidated partnerships and joint ventures.

 

In addition to presenting FFO in accordance with the NAREIT definition, we also 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 necessary 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 financial performance 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) unbilled rent revenue, (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 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 leases generally have significant contractual escalations of base rents and therefore result in recognition of rental income that is not collected until future periods, and costs that are deferred or are non-cash charges. 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
Annual Run-Rate Guidance Reconciliation
(Unaudited)
 
 
Annual Run-Rate Guidance - Per Share(1)
Low High
 
 
Net income attributable to MPT common stockholders

$ 1.10

$ 1.12

Participating securities' share in earnings

-

-

Net income, less participating securities' share in earnings

$ 1.10

$ 1.12

 
Depreciation and amortization

0.45

0.45

Funds from operations

$ 1.55

$ 1.57

 
Other adjustments

0.01

0.01

Normalized funds from operations

$ 1.56

$ 1.58

 
(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.

 

Pro Forma Total Gross Assets
(Unaudited)
 
 
June 30, 2019
 
Total Assets

$

10,123,211

 

Add:
Binding real estate commitments on new investments(2)

 

1,990,551

 

Unfunded amounts on development deals and
commenced capital improvement projects(3)

 

209,986

 

Accumulated depreciation and amortization

 

531,880

 

Incremental gross assets of our joint ventures(4)

 

549,980

 

Less:
Cash and cash equivalents

 

(451,652

)

Pro Forma Total Gross Assets(5)

$

12,953,956

 

 

(2) Reflects a commitment to invest in 16 facilities in the United States and eight facilities in the United Kingdom.

(3) Includes $60.2 million unfunded amounts on ongoing development projects and $149.8 million unfunded amounts on capital improvement projects and development projects that have commenced rent.

(4) Adjustment needed to reflect our share of our joint ventures' gross assets.

(5) Pro forma total gross assets is total assets before accumulated depreciation/amortization, assumes all real estate binding commitments on new investments and unfunded amounts on development deals and commenced capital improvement projects are fully funded, and assumes cash on hand is fully used in these transactions. We believe pro forma total gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our binding commitments close and our other commitments are fully funded.

 

Source: Medical Properties Trust, Inc.

Tim Berryman
Director – Investor Relations
Medical Properties Trust, Inc.
(205) 969-3755
tberryman@medicalpropertiestrust.com