Medical Properties Trust Reveals Record-Breaking Year-to-Date

BIRMINGHAM, AL – Medical Properties Trust Inc. (MPT), a self-advised REIT, revealed its successful third-quarter report and outlined its record-breaking year during its Q3 earnings phone call.

The REIT, which specializes in acquiring and developing net-leased hospital facilities, provided an overview of its financial and operational results to shareholders and call-participants, depicting a prosperous year and a $5 billion acquisition pipeline.

“A year ago, we noted that we anticipated 2019 to be another record year for MPT,” MPT president and CEO, Edward Aldag Jr. stated on the call. “As we near the close of 2019, we can certainly say that has been a fantastic year and we may not be done yet.”

The company’s results exceeded expectations with a 40% growth in assets since the beginning of the year, upon acquiring and leasing $3.7 billion in 100% leased, hospital real estate to well-positioned operators.

MPT EVP and CFO, Steven Hamner expressed the significance of this growth, stating, “it took us 10 years to acquire our first $3.7 billion in assets, the same amount that we have invested in the last nine months alone.”

The company additionally reported a normalized FFO of $0.33 per diluted share for Q3, and confirmed its annual run-rate of $1.56 to $1.58 per share.

“We are delighted with where we stand at the end of the third quarter of this record breaking year, Aldag stated on the call. “On top of the $3.4 billion of previously announced accretive investments, we added another $282 million in high-quality assets recently and are poised for even more significant acquisitions soon.”

Summarizing the REIT’s Q3 investments, MPT executive leadership unveiled that within the third quarter, the REIT completed a variety of transactions by adding to its existing portfolio and developing new partnerships.

Within its existing portfolio, MPT added 22 properties to its same-store reporting, including 13 inpatient rehabilitation facilities (IRFs) in Germany, Louisiana and Ohio, eight acute-care hospitals in Florida, Pennsylvania, Ohio, Idaho and Germany, and one LTACH in Texas.

On the call, Aldag stated, “Same-store acute care EBITDARM coverage is 3.19 times, which represents a slight 16 basis point decrease year-over-year, primarily driven by slight volume declines at a few of our larger general acute hospitals.”

The REIT updated participants on its partnership with Steward, stating that the healthcare network discontinued its operations at an Arizona hospital, due to nearby, newly-developed competition. Though MPT assured participants that this is expected to be a positive decision for the healthcare system’s bottom line for continued improvement throughout 2019.

The company additionally expanded its long-standing relationship with the post-acute care operator, Vibra, acquiring three IRFs for $200 million. Along with this group of properties, MPT acquired seven long-term acute care facilities (LTACH) for $54 million, with an overall coverage of 5 times.

Providing further insight on its existing portfolio, Aldag stated, “IRF EBITDARM coverage is 1.97 times, which is essentially flat compared to 1.98 times year-over-year. It is probably important to note that the U.S. IRFs saw a 9.9% increase in coverage from 2.55 times to 2.81 times. LTACH EBITDARM coverage is 1.5 times, which is essentially flat year-over-year, this does not include the recently acquired Vibra portfolio where the LTACH’s have a combined coverage of approximately 5 times. As a reminder, LTACHs including the Vibra portfolio, we just acquired currently represents 2.6% of our total portfolio.”

While the company expanded its existing portfolio and investments within the US, Germany and the UK in Q3, the REIT claimed that 92% of its 2019 investments were conducted through new relationships.

During Q3, the company made initial investments of $284 million for Swiss Medical Network in Switzerland, and $906 million for Healthscope in Australia. The company additionally closed a $55 million transaction with Halsen Healthcare, as a new MPT operator, for an acute care hospital in California.

Among MPT’s transactions, the REIT most recently closed a $28 million transaction for a behavioral health opportunity with Neuropsych to develop a 92-bed freestanding neuropsychiatric hospital in Texas. The facility is expected to open in the third-quarter of 2020, and MPT expressed its intention to continue its relationship with the behavioral health operator in the future.

During the third quarter, MPT also closed on its previously announced acquisition of 8 acute care hospitals in the U.K. with Ramsay Healthcare for nearly $423 million.

Lastly, the company completed its previously announced $1.55 billion acquisition of the Prospect Medical Holdings hospital portfolio, which are performing as expected.

“With the transactions discussed today as well as the previously announced transactions from the first half of the year, we have already achieved the single largest year of acquisition growth in MPT history, and we still have another quarter to go,” Aldag stated on the call. “While I can’t predict with certainly when we will be able to announce and close any of the properties we are working on in our pipeline, we do expect that we will be able to make such announcements over the next couple of quarters.”

MPT revealed a current robust pipeline of more than $5 billion in active, potential transactions; consisting almost exclusively of acute care hospitals within previously invested in markets.

Within these actionable acquisition opportunities, the REIT expressed its continuing efforts to pursue new operators across the globe. Intending to grow primarily through new domestic and international opportunities, MPT claims its purposeful trend is to see many new operators in the next tranche of the pipeline.

Since its third-quarter, the REIT recently acquired 10 acute care hospitals for $700 million.

“We believe that MPT, in particular among healthcare REITs, has created a commanding position in the early stages of a rapidly expanding market for acute hospital real estate in the economically developed areas of the world where we operate,” Hamner expressed on the call.

“Because only a small percentage of acute hospitals are leased, we have a high level of confidence that as this market continues to expand, MPT will continue to grow at immediately accretive pricing for the foreseeable future,” Hamner claimed. “We believe it is not unreasonable to expect meaningful acquisition volume in the near-term. As we underwrite and plan permanent financing for these target acquisitions, we expect capitalization rates and an investment spreads similar to our year-to-date transactions, and we intend to remain modestly levered in accordance with our long standing strategies.”

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