MEDICAL PROPERTIES TRUST INC Q1 FY2024 earnings call

• Focused on a capital allocation strategy to generate at least $2 billion of additional liquidity in 2024, having executed $1.6 billion of total liquidity transactions including the sale of 75% of 5 Utah hospitals. - Regarding Steward's Chapter 11 restructuring, no mention of rent as a contributor to Steward's distress; $75 million debt financing is provided to help retenanting. - Portfolio performance: Positive volume and coverage trends in various segments; adjustments to LTACH disclosure; U.K. and European operations performing well; U.S. portfolio excluding Steward and Prospect showing improvements. - Liquidity plan: Exceeding $2 billion liquidity target for 2024, reduced net debt by $1.6 billion, current liquidity of $900 million, plans for using liquidity including Steward DIP financing, debt repayments, and development commitments. - Adjustments to bank facilities: Waived 10% limitation on unencumbered assets related to Steward until September 30.

Behavioral health hospitals, representing 14% of the portfolio, continue to see increasing volumes year-over-year. LTACHs, which are 1.5% of the portfolio, saw declining year-over-year volumes due to the CMS waiver expiration last May but are part of larger operators. In the U.K. and Continental Europe, Circle has steady volume growth and increasing patient acuity; Priority benefits from increased demand for behavioral health services; MEDIAN has recovered from COVID impacts; Swiss Medical's profitability was marginally impacted by inflation but initial results show headwinds abating. In the U.S. portfolio, excluding Steward and Prospect, general acute hospitals, inpatient rehabilitation facilities, and payroll health facilities have increasing admissions. Ernest Health has stable performance with EBITDARM coverage; Prime's new master lease includes a purchase option; LifePoint facilities have sustained momentum; SionHealth's general acute facilities improved coverage; Prospect paid rent but MPT hasn't received April and May rents.

• Expect to exceed the $2 billion liquidity target for 2024. - Confident in the core pillars of the business model and the long-term cash flow potential of the portfolio. - Plans to continue monetizing assets, increasing liquidity, and retenanting Steward-leased hospitals.

• Uncertainty with rent collections from Prospect for April and May. - Potential market concentration issues with new operators, though management doesn't foresee immediate concerns. - Impact of Steward's bankruptcy on financial covenants if transitions don't occur as expected.

Q: All facilities leased to Steward open and operating? And any changes in cash flow reports?

A: All of the facilities other than the ones that were previously closed prior to bankruptcy continue to be operating. We do continue to receive cash flow reports from Steward advisers, and they have so far exceeded their projections on, I believe, every week.

Q: What's the thinking around potential rent moving forward relative to Steward's prior contractual cash rent?

A: We anticipate across the portfolio to continue to get at or near the amount of rent that the current lease agreements call for.

Q: Why did you guys feel the need to provide the DIP financing?

A: The reason that we decided to do the $75 million dip financing is that we think it's very important that the hospitals continue to operate as we go through this process.

Q: What drove the fair market adjustment for PHP Holdings write-down?

A: It's based on independent appraisals and evaluations of a lot of inputs, including things like discount rate financing rates.

Q: How should we think about the rent recovery for Prospect?

A: The QAF payments are due at the end -- or should come in by the end of this month into May, and it's a substantial sum. It should really help them with their cash flow.

Q: What's your expectation on Steward transitions?

A: We do expect that a meaningful amount of Steward exposure will be moved away to new operators before the end of September.

Q: What portion of Steward assets do you think will be managed by other operators at the end of the process?

A: I would guess, we're close to 100%.

Q: Are there concerns or discussions with new potential operators for Steward properties regarding market concentration issues?

A: It's a lot of different markets. So I can't be 100% accurate on this, but the best of my recovery right this moment, I don't think there are any that would require a market concentration issue.

Q: About the dividend, is the Board still comfortable with the current dividend amount?

A: Our next Board meeting is the same day as our Annual Meeting, which I believe is May 30, and it will be discussed at that point.

Q: Can you quantify the cost and reserves in the Utah transaction?

A: The reference to cost and reserves are just customary cost of a transaction fees, brokerage and typical reserves that our first lien lender may require. There was nothing extraordinary in those expenses in reserve.

Q: Did you pledge any of your real estate as collateral in conjunction with the Steward ABL or bridge loan refinancing?

A: No.