Medical Properties Trust, Inc. Reports First Quarter Results

Posted by Business Wire May 2, 2019

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

Reaffirms Estimate of $2.5 Billion in 2019 Acquisitions

BIRMINGHAM, Ala.–(BUSINESS WIRE)–Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW)
today announced financial and operating results for the first quarter
ended March 31, 2019 and recent highlights.

“As MPT executes on its robust $5 billion pipeline, considerable
progress has been made on our previously announced Healthscope
acquisition with the securing of financing and the scheduling by
Healthscope on May 22 of its shareholder meeting,” said Edward K. Aldag,
Jr., MPT’s Chairman, President and Chief Executive Officer. “We expect
to close on this $859 million transaction during the second quarter. In
another transaction, MPT has expanded its footprint in the UK with the
acquisition of BMI Harbour Hospital, an acute care hospital located in
Poole, England. In the capital markets, we had outstanding execution in
the first quarter raising approximately $400 million through our
‘at-the-market’ program, in anticipation of substantial acquisition
activity throughout the remainder of 2019.”

FIRST QUARTER AND RECENT HIGHLIGHTS

  • Net income of $0.20 and Normalized Funds from Operations (“NFFO”) of
    $0.31 in the first quarter both on a per diluted share basis;
  • Acquired the freehold interest of the BMI Harbour Hospital, an acute
    care hospital located in the highly desirable area of Poole, England,
    for approximately $45.4 million;
  • Agreed with a syndicate of banks to terms of an Australian $1.2
    billion unsecured term loan;
  • Sold 22.6 million common shares for approximately $400 million through
    the Company’s “at-the-market” program totaling 28.2 million shares and
    $494 million since commencement of sales in 2018’s fourth quarter.

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

In April, MPT closed on the acquisition of BMI Harbour Hospital for
$45.4 million at a GAAP yield of almost 7.0%. The 29-bed acute care
hospital located in Poole, England, an affluent coastal city southwest
of London, is MPT’s fourth hospital in the UK, and is operated by BMI
Healthcare, one of the largest private hospital operators in the UK, and
a new relationship for MPT. The Company acquired the freehold asset
subject to an in-place lease with 14 years remaining on its initial term
and a highly attractive fixed escalator.

Since November 2018, the Company has sold 28.2 million shares of common
stock under its “at-the-market” program generating approximately $494
million of proceeds, further strengthening its balance sheet. Of that
amount, approximately $400 million was generated in the first quarter of
2019. This positions MPT with sector-leading leverage of 5.0 times
EBITDA assuming completion of the Healthscope transaction and $2.25
billion in liquidity from $1.0 billion in cash and $1.25 billion of
availability on the revolver.

The Company has pro forma (including Healthscope and BMI Harbour) total
gross assets of approximately $10.2 billion, including $7.8 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 288 properties representing more than 33,000
licensed beds in 29 states and in Germany, the United Kingdom, Italy,
Spain and Australia. The properties are leased to or mortgaged by 32
hospital operating companies.

OPERATING RESULTS AND OUTLOOK

Net income for the first quarter of 2019 was $75.8 million (or $0.20 per
diluted share), compared to $90.6 million (or $0.25 per diluted share)
in the first quarter of 2018.

NFFO for the first quarter of 2019 was $117.8 million compared to $131.5
million in the first quarter of 2018. Per share NFFO was $0.31 per
diluted share in the first quarter of 2019, compared to $0.36 per
diluted share in the first quarter of 2018.

The change in net income and NFFO from 2018’s first quarter is
attributable to more than $1.5 billion in asset sales throughout 2018,
including the sale of a 50% interest in 71 German hospitals by way of a
joint venture arrangement.

The Company reaffirmed its estimate of 2019 acquisitions of $2.5
billion, upon which completion, the Company expects an annual run-rate
of $1.02 to $1.04 per diluted share for net income and $1.54 to $1.56
per diluted share for NFFO. The Company’s previous guidance regarding
calendar year 2019 net income and NFFO is suspended pending clarity on
the timing of closing these anticipated acquisitions.

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,
May 2, 2019 at 11:00 a.m. Eastern Time to present the Company’s
financial and operating results for the quarter ended March 31, 2019.
The dial-in numbers for the conference call are 844-535-3969 (U.S.) and
409-937-8903 (International); both numbers require passcode 8498286. 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 May 16, 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 8498286.

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 that provides capital to hospitals located throughout the U.S. and
other countries. We focus exclusively on hospitals, which is where the
highest intensity of care is provided to patients. MPT is currently the
second-largest non-governmental owner of hospital beds in the U.S. Our
financing model allows owners of hospitals to unlock the value of their
underlying real estate, primarily through sale leaseback transactions.

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; annual run-rate net income
and NFFO per share; the amount of acquisitions of healthcare real
estate, if any; estimated leverage; 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) March 31, 2019 December 31, 2018
Assets (Unaudited) (A)
Real estate assets
Land, buildings and improvements, intangible lease assets, and other $ 5,394,092 $ 5,268,459
Mortgage loans 1,214,780 1,213,322
Net investment in direct financing leases   684,547     684,053  
Gross investment in real estate assets 7,293,419 7,165,834
Accumulated depreciation and amortization   (498,915 )   (464,984 )
Net investment in real estate assets 6,794,504 6,700,850
 
Cash and cash equivalents 995,548 820,868
Interest and rent receivables 24,788 25,855
Straight-line rent receivables 243,556 220,848
Equity investments 506,123 520,058
Other loans 365,402 373,198
Other assets   301,532     181,966  
Total Assets $ 9,231,453   $ 8,843,643  
 
Liabilities and Equity
Liabilities
Debt, net $ 4,023,568 $ 4,037,389
Accounts payable and accrued expenses 188,956 204,325
Deferred revenue 9,979 13,467
Obligations to tenants and other lease liabilities   118,474     27,524  
Total Liabilities 4,340,977 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 – 391,839 shares at March 31, 2019 and 370,637
shares at December 31, 2018

392 371
Additional paid-in capital 4,803,672 4,442,948
Retained earnings 141,427 162,768
Accumulated other comprehensive loss (67,892 ) (58,202 )
Treasury shares, at cost   (777 )   (777 )
Total Medical Properties Trust, Inc. Stockholders’ Equity 4,876,822 4,547,108
 
Non-controlling interests   13,654     13,830  
Total Equity   4,890,476     4,560,938  
 
Total Liabilities and Equity $ 9,231,453   $ 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
March 31, 2019 March 31, 2018
 
Revenues
Rent billed $ 108,598 $ 128,011
Straight-line rent 20,651 15,791
Income from direct financing leases 17,280 17,681
Interest and other income   33,925     43,563  
Total revenues 180,454 205,046
 
Expenses
Interest 50,551 57,023
Real estate depreciation and amortization 33,352 35,802
Property-related 3,066 2,184
General and administrative   23,451     17,818  
Total expenses 110,420 112,827
 
Other income (expense)
Gain on sale of real estate, net – 1,467
Earnings from equity interests 3,720 3,271
Other   204     (4,739 )
Total other income (expense)   3,924     (1 )
 
Income before income tax 73,958 92,218
 
Income tax benefit (expense)   2,333     (1,175 )
 
Net income 76,291 91,043
Net income attributable to non-controlling interests   (469 )   (442 )
Net income attributable to MPT common stockholders $ 75,822   $ 90,601  
 
 
Earnings per common share – basic and diluted:
Net income attributable to MPT common stockholders $ 0.20   $ 0.25  
 
Weighted average shares outstanding – basic 380,551 364,882
Weighted average shares outstanding – diluted 381,675 365,343
 
 
Dividends declared per common share $ 0.25 $ 0.25
 
 
 
 
 
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
March 31, 2019 March 31, 2018
 
FFO information:
Net income attributable to MPT common stockholders $ 75,822 $ 90,601
Participating securities’ share in earnings   (476 )   (195 )
Net income, less participating securities’ share in earnings $ 75,346 $ 90,406
 
Depreciation and amortization 39,854 36,517
Gain on sale of real estate, net   –     (1,467 )
Funds from operations $ 115,200 $ 125,456
 
Write-off of straight-line rent and other, net of tax benefit   2,596     6,059  
Normalized funds from operations $ 117,796 $ 131,515
 
Share-based compensation 6,715 1,856
Debt costs amortization 2,067 1,789
Straight-line rent revenue and other   (28,050 )   (23,425 )
Adjusted funds from operations $ 98,528   $ 111,735  
 
 
 
Per diluted share data:
Net income, less participating securities’ share in earnings $ 0.20 $ 0.25
Depreciation and amortization 0.10 0.09
Gain on sale of real estate, net   –     –  
Funds from operations $ 0.30 $ 0.34
 
Write-off of straight-line rent and other, net of tax benefit   0.01     0.02  
Normalized funds from operations $ 0.31 $ 0.36
 
Share-based compensation 0.02 0.01
Debt costs amortization 0.01 –
Straight-line rent revenue and other   (0.08 )   (0.06 )
Adjusted funds from operations $ 0.26   $ 0.31  
 

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 $ 1.02 $ 1.04
Participating securities’ share in earnings   –   –  
Net income, less participating securities’ share in earnings $ 1.02 $ 1.04
 
Depreciation and amortization   0.51   0.51  
Funds from operations $ 1.53 $ 1.55
 
Other adjustments   0.01   0.01  
Normalized funds from operations $ 1.54 $ 1.56  
 

(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)
 
 
March 31, 2019
 
Total Assets $ 9,231,453
Add:
Binding real estate commitments on new investments(2) 929,964

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

214,722
Accumulated depreciation and amortization 498,915
Incremental gross assets of our joint ventures(4) 367,390
Less:
Cash and cash equivalents   (995,548 )
Pro Forma Total Gross Assets(5) $ 10,246,896  
 

(2) Reflects a commitment to acquire 11 facilities in Australia,
along with the acquisition of two facilities in April 2019.

 

(3) Includes $77.4 million unfunded amounts on ongoing development
projects and $137.3 million unfunded amounts on capital
improvement projects and development projects that have commenced
rent.

 

(4)  Adjustment needed to reflect our share of our joint venture’s
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.

 
 

Contacts

Tim Berryman
Director – Investor Relations
Medical Properties
Trust, Inc.
(205) 969-3755
[email protected]

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