MEDICAL PROPERTIES TRUST INC Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Updates: In the Prospect bankruptcy process, NOR Healthcare Systems was named successful bidder for 6 California facilities with deferred rent terms. A settlement with Yale New Haven and Prospect was reached, with Prospect set to receive $45 million. New tenants' portfolio ramps monthly rent on schedule, and 2 facilities in Phoenix were sold. Board authorized a $150 million share repurchase program. A comprehensive reaffirmation of the business model was posted.
• Tenant Performance: General acute care operators saw over $200 million increase in EBITDARM year-over-year. Post-acute operators had $50 million EBITDARM increase. Behavioral health portfolio EBITDARM increased $10 million year-over-year.
• Regional Asset Performance: Europe and US portfolio operators showed varied positive performances, with improvements in operations, construction, and rebranding across different regions.

Segment Performance

• International Portfolio: International operators comprise approximately 50% of the total portfolio, with coverages consistently exceeding 2x. In the UK, Circle ranks highly in patient satisfaction and invests in advanced technologies; Sulis Hospital Bath is accredited as an elective surgical hub. Priory adapts to market needs and explores technological opportunities. In Germany, MEDIAN reports strong reimbursement rates and occupancy. In Switzerland, Swiss Medical launches integrated care models with EBITDAR growth over 10% year-over-year. In Spain, IMED progresses with new hospital construction.
• US Portfolio: Ernest Health's consolidated EBITDARM coverage approaches 2.4x. LifePoint Health delivers high-margin growth, with Conemaugh Memorial as a significant driver. Surgery Partners' facilities have strong performance. HSA's operations improve, with EBITDARM coverage approaching 1x on fully ramped rent by September 2026. HonorHealth rebrands, Quorum Health's Odessa facility shows improved performance, Insight Health reopens ER services, Prime Healthcare's facilities have improved performance with EBITDARM coverage over 2x, and Pipeline Health demonstrates growth with new service lines.

Guidance

• Expect to generate total annualized cash rent of more than $1 billion by year-end 2026 (excluding California Prospect properties).
• Board authorized a new $150 million share repurchase program to be deployed opportunistically.
• Confidence in share price undervaluation, with no shares issued under the at-the-market offering program.

Risks

• Dynamic macro policy environment may impact business.
• Uncertainty in asset disposal processes, such as progress of some asset sales.
• Potential risks related to maintaining debt covenants.

Q: On the buyback, how do you weigh looking at a buyback versus using capital to pay down debt or other uses, and how will you fund the buyback?

A: We have multiple opportunities, including reinvesting in the business, strategically buying new assets, and considering bond repurchasing. We will evaluate opportunities and sources of capital, including asset sales, cash on hand, or credit line.

Q: Update on HSA, including details on late September rent payment and concerns about their ability to pay ramped up rent?

A: HSA continues to perform well. The late September rent payment was due to final steps of getting the TSA in order and repaying lender money, with no additional issues expected. They've already paid October rent.

Q: Update on Yale New Haven hospitals, including progress on closures and third property?

A: 2 facilities are under binding agreement, expected to close before year-end or shortly thereafter. The third property hopes to have a binding agreement imminently with another buyer.

Q: Status of the 8 assets mentioned?

A: The 2 big ones, in Massachusetts Norwood and Texas Texarkana, remain under construction, with negotiations ongoing with parties due to NDAs.