Good day, ladies and gentlemen, and welcome to the Medical Properties Trust Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference may be recorded. I would now like to turn the conference over to Mr.
Charles Lambert, Treasurer and Managing Director. Sir, you may begin.
Thank you. Good morning. Welcome to the Medical Properties Trust conference call to discuss our Q2 2018 financial results. With me today are Edward K. Aldag, Jr, Chairman, President and Chief Executive Officer of the company and Stephen Hamner, Executive Vice President and Chief Financial Officer.
Our press release was distributed this morning and furnished on Form 8 ks with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website atwww.medicalpropertiestrust.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section. During the course of this call, we will make projections and certain other statements that may be considered forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward looking statements.
We refer you to the company's reports filed with the Securities and Exchange Commission for a discussion of the factors that could cause the company's actual results or future events to differ materially from those expressed in this call. The information being provided today is as of this date only and except as required by the federal securities laws, the company does not undertake a duty to update any such information. In addition, during the course of the conference call, we will describe certain non GAAP financial measures, which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, Medical Properties Trust has reconciled all non GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. You can also refer to our website at www.medicalpropertiestrust.com for the most directly comparable financial measures and related reconciliations.
I will now turn the call over to our Chief Executive Officer, Ed Aldag.
Thank you, Charles, and thank all of you for listening in today for our 2018 Q2 earnings call. During the Q2, we have announced or completed transactions that have or will generate more than $600,000,000 of value over and above our net investment. Through these transactions and others previously executed, we continue to demonstrate the strength and value of our portfolio. We recently announced the pending formation of a joint venture with Promonial Group, one of Europe's leading asset and wealth managers with over €23,000,000,000 under management. Primonial will acquire a 50% interest in a portfolio of 71 post acute care hospitals throughout Germany, while MPT retains a 50% interest.
MPT will continue the role of asset manager. Our strategic vision to expand beyond the U. S. Continues to be very beneficial to MPT as highly regarded investors throughout the world are choosing to partner with us. The establishment of this partnership also demonstrates a credible endorsement of the worth of our portfolio, as this transaction alone is valued at more than 1.6 €1,000,000,000 of which we expect to recognize a gain of approximately €500,000,000 upon closing.
In another recent announcement, MPT will sell our equity interest in the OpCo of Earnest Health to the private equity firm, One Equity Partners, a 2015 spin out of JPMorgan with approximately $7,000,000,000 of assets under management. Upon closing, MPT expects our portion of the proceeds to be $175,000,000 which represents an approximate 13% unlevered IRR on our original $96,000,000 investment. The culmination of this transaction will allow MPT to recognize the value from an investment I'm not sure the market ever fully recognized. Additionally, MPT will continue to own the real estate of these 25 post acute hospitals and benefit from the strong returns they generate. We expect to continue to grow with this relationship.
We also completed the sale of 3 LTACHs to Vibra HealthCare for $73,100,000 resulting in a $24,200,000 gain on the sale of real estate and a 12.8 percent unlevered internal rate of return. NBT once again has demonstrated of mature assets for double digit returns to our shareholders. This transaction brings our total investment in LTACH down to approximately 3% of our total portfolio. Additionally, this quarter brought a new prominent not for profit hospital operator into our portfolio following the successful transition of the Arizona Adeptus properties to Dignity Health. The transaction again proves the value of the MPT freestanding emergency room model to hospitals and health systems across the nation.
Just last week, it was announced that one of our operators, Apollo backed RCCH, will acquire LifePoint Health to create an even stronger healthcare provider with combined pro form a revenues of over $8,000,000,000 approximately 60,000 employees and 12,000 licensed beds at 84 acute hospitals. This merger continues to enhance the strength of our already robust portfolio of hospital operators. Given our relationship with RCCH and their equity partner Apollo, we fully expect to be able to continue to grow our assets with this new company. Last quarter, Prime signed a memorandum of understanding with the Department of Justice to resolve all claims. Prime has already started the execution process, which includes a settlement agreement and a corporate integrity agreement.
Prime expects to issue a press release in the near future and they have indicated they are pleased with the final terms of this settlement. Prime Healthcare continues to perform well. Prime's EBITDARM coverage for the trailing 12 months ending Q1 of 2018 was over 4.5 times. Prime's cash collections continue to track with net revenues. Steward, our largest tenant continues to perform well and we expect that they will achieve a record year in 2018.
The 2017 acquisitions by Steward, which are still in process of integration, mainly in the Texas and Utah markets are on track. Steward's EBITDARM coverage for the trailing 12 months ending Q1 of 2018 was approximately 2.25 times. With this quarter's reporting, we removed a net of 3 properties from our same store reporting. As noted previously, this quarter we sold 3 Vibra long term acute care hospitals and transitioned operators on 1 long term acute care hospital and one inpatient rehabilitation facility was added to same store reporting. The trailing 12 months across our portfolio have shown strong results.
Our same store total portfolio EBITDARM coverage for trailing 12 months Q1 2018 is approximately 3.3 times, which represents a 9% increase year over year and a 1% increase quarter over quarter. Within our same store acute care portfolio year over year, EBITDARM coverage improved approximately 13% from 3.7 times to 4.2 times. LTACH EBITDARM coverage was flat at 1.65 times. IRF EBITDARM coverage also remained relatively flat at 1.9 times. LTACHs represent, as I previously said, approximately 3% of our portfolio and U.
S. IRFs represents 5.6% of our portfolio. The United States represents 80% of our total portfolio. Over the next year or so, we'd like to see the European portion increase back up to the 30% plus or minus range. Acute Care Hospitals continue to make up the bulk of our investments domestically at 79%.
This is right in line with our target range. Our top three tenants are Steward at 37%, Median at 12.5% and prime at 11.7%. As you know, we believe the most important concentration number is on a property by property basis because each facility is underwritten on its own merits. Currently, no property represents more than approximately 3.5% of our total portfolio. Over the last 12 months, we have invested or committed to invest approximately $300,000,000 in new investments with our existing tenants.
We expect this number will continue to increase annually as we continue to grow. Having strong relationships with our valued customers allows us to have built in growth over and above new business. We also have a significant number of projects we are working on both here in the U. S. And in Europe.
It is too early on all of them to predict which will close this year. However, it is important to note that we are currently actively working on projects valued at approximately €3,000,000,000 in Europe and more than $2,000,000,000 here in the U. S. We will update these projects once we have signed commitments. I want to take a moment to comment on a very important story.
11 years ago, we invested in the Shasta Hospital in Redding, California. This hospital has been a large success story for us here at MPT. The success has been due in large part to the fabulous people in Reading and the surrounding areas that work at this hospital. Many of you have probably seen on the news the devastating Carr Fire that literally destroyed much of the area and has even threatened our own hospital and the downtown area of Reading. The operation of the hospital has been vital to not only the people of Reading, but also the firefighters and volunteers fighting the fire.
Without the dedicated employees and doctors of the hospital, Shasta Regional Medical Center could have never stayed open. At least 32 healthcare workers reported to work last week despite losing their homes and everything they had to the fires. I want to take this opportunity to thank them for their dedication to their fellow residents of Reading and for reminding us all about the good things of humanity. This hospital is a prime run hospital and I want to commend their management team throughout the organization, especially those on-site and ready for the work they did in serving the patients and residents in this very dangerous and fast moving fire. Steve?
Thank you, Ed. This morning, we reported normalized FFO of 0 point 18 consistent with our own end market expectations. There are just a couple of items this quarter that reconcile NAREIT to normalized FFO. Virtually all of the adjustments to arrive at normalized FFO this quarter related to straight line rent in the aggregate amount of $7,200,000 Of this, fully $5,100,000 was to write off unbilled straight line rent related to our sale of the 3 L tax to VIBRA, on which we recognized a gain of $24,200,000 The remainder primarily relates to the acceleration of straight line rent on certain of the Adeptus facilities that we expect to sell or re lease in the near term. You may recall that we've described these adjustments on the last two quarterly earnings calls.
There now remains a balance of about $2,700,000 that we expect will be written off over the next few quarters as we finally resolve the last of the Adeptus facilities. One final point I want to bring to your attention regarding our balance sheet presentation is the classification of about $1,250,000,000 as assets held for sale. This represents the net book value of the assets that will form the previously announced joint venture with Promonial. Post closing, we will report our 50% interest in the JV as equity investment in unconsolidated subsidiaries and recognize our portion of the JV's net income as earnings from equity investment in unconsolidated subsidiaries. The secured debt will be recorded on the books of the JV.
To summarize this transaction again, we are selling to affiliates of Promonial a 50% interest in this newly formed JV for approximately €816,000,000 or at yesterday's exchange rate $955,000,000 which along with the recognized increase in value of our remaining 50% interest resulted in an expected gain on sale of approximately €500,000,000 again at yesterday's exchange rate equivalent to about $600,000,000 Our gross undepreciated investment in these hospitals, including transfer and other taxes that were expensed at the time of acquisition, aggregate about $1,400,000,000 resulting in an unlevered IRR of more than 15%. From any measurement perspective, this clearly is a tremendous outcome for MPT and just as importantly, an objective and independent indication of the future outstanding shareholder value that may be created by the recycling, reinvestment of our $1,500,000,000 in cash resulting from recent transactions. Most of you are aware that we have also been exploring a potential similar structure for some of our U. S. Acute assets in order to diversify our exposure to any single operator.
With the other capital recycling successes as the Primonial JV, the Ernest transactions, the fiber sales and other unannounced but expected opportunities, we certainly do not need additional capital for delevering or reinvestment. So we have decided to sell or re tenant certain of the Steward Hospitals rather than continue to take the additional time necessary to create a joint venture. As a result, we have entered negotiations with 2 new operators to buy or lease certain Steward Hospitals, the impact of which is expected to be very similar to our previous expectations about a JV. Moreover, we also are improving the Steward portfolio by purchasing certain of the mortgage properties over the next few quarters. By converting these mortgages to owned properties, this makes the portfolio that much more valuable and attractive to potential partners for when and if we do decide to remarket the portfolio.
And in any case, the expected reinvestment of proceeds from the Promonial JV and other transactions will joint venture arrangement. Ed has already mentioned our sale of 3 Vibra LTACs back to Vibra, so I will simply reiterate that this transaction not only reduced our LTAC exposure to approximately 3%, but provided outstanding profit and IRR results for these investments, along with about $53,000,000 in cash proceeds. Regarding Adeptus, since our last quarterly call in May, we signed a new long term master lease for 8 Phoenix area facilities with Dignity Health, a large investment grade rated not for profit system. Economic terms of the leases are substantially consistent with the terms of the previous Adeptus lease. We also have agreed to resolution of 8 of the 16 Adeptus facilities that we agreed to sever as part of the bankruptcy plan.
These facilities with a book value of approximately $36,000,000 are expected to be leased to 2 operators, one of which is new to MPT, at economic terms substantially consistent with the previous Adeptus terms. We have engaged a financial advisor to market for sale or lease another 7 facilities with a book value of approximately $34,000,000 and we continue to consider alternatives for the 8th facility with a book value of about $33,000,000 as it remains subject to the Adeptus master lease. With regard to full year 2018 normalized FFO, we plan to reinstate our estimated guidance shortly after closing of the JV and Earnest transactions. We believe both of these will close prior to the end of this third quarter. At that time, we will be able to determine the impact of these transactions on net income, rental and other revenue and interest expense for the remainder of the year.
After using proceeds to fully repay our revolving credit facility with a June 30 balance of approximately $820,000,000 we expect our net debt to EBITDA multiple will be approximately 4.7 times and we will have cash on hand of approximately $800,000,000 This puts MPW in a uniquely attractive position among many REITs today. We will have a pristine balance sheet, liquidity of more than $2,000,000,000 while maintaining prudent leverage and a broad and diverse pipeline of acquisition opportunities that Ed just described. On a pro form a basis for full reinvestment of such cash, along with maintenance of sector leading leverage levels, annualized normalized FFO is expected to range between 1.46 dollars and $1.50 per diluted share. To be clear, we are not at this time establishing a guidance range, but merely pointing out that the end result of the recent transactions is expected to be increased FFO per share, substantially reduced leverage ratios and significant operator diversification. We are among the very few REITs that offer substantial near term and accretive growth opportunities, and we have consistently demonstrated our ability to generate outstanding unlevered IRRs for our investors.
We are excited about continuing to execute that plan. And with that, I will turn it over for questions. Operator?
And our first question will come from the line of Michael Carroll with RBC Capital Markets. Your line is
now open.
Yes, thank you.
Steve, can you provide some additional details regarding the potential Steward transactions? How many of these assets do you want to sell? And when you say re lease some of those facilities,
does Stewart want to exit
the ones that they recently bought? Or how should we think about that?
Today, Mike, we are in significant negotiations for 2. One of those would be a sale to a different operator and the other would be a release of a facility that Steward has actually negotiated an exit with a different operator.
So does plan on stopping operating these 2?
Well, Steward will exit them. Yes, Steward will exit both. They will both continue to be operated just by different operators. Okay.
And then how can you quantify these sales and how much will this reduce your exposure to Steward?
No, we can't at this time, But it is very similar in volume to what we were expecting from the joint ventures transaction. So point being, we're achieving the same result generally. We're just doing it quicker and without a lot of friction that comes with establishing a joint venture. Now we may go back to that. Again, you can tell by what we did with Promonial that notwithstanding that there is friction in bringing on partners.
But the results that we got and the future that it indicates for us with having significant new avenues of very affordable capital is very well worth that. Now once we finish rationalizing the Steward portfolio and by that I mean basically converting certain of the mortgages to owned real estate, that makes the portfolio much more attractive to joint venture partners. And we may well elect to reopen those discussions sometime in the future.
Okay. And then can you talk a little bit about the investments that you're looking at right now? What type of deals are of interest to you? And I know you highlighted that there's about $5,000,000,000 that you're currently tracking. What's a reasonable number to expect is going to be the close rate on those deals?
And how does that compare to the deals you tracked historically?
Mike, they are almost all acute care hospitals, some rehab spattered in there with primarily in the German market. But for the most part, European and U. S, they're all general acute care hospitals. It's hard to give you an exact number because the size of some of these portfolios are large, but I think that it would be very reasonable to expect the number the success rate on the number in Europe to be at least $1,000,000,000 and the success rate in the U. S.
To be somewhere around $750,000,000
Okay. Question, the German acquisitions, would that be put joint venture or are you going to be doing that by yourself?
We'd be doing that by ourselves.
Okay, great. Thank you.
Thank you. And the next question will come from the line of Drew Babin with Baird. Your line is now open.
Hey, good morning.
Good morning, Drew.
A question on the dispositions and redeployment. Would the proceeds from the median Promoting Al JV for any formal reason need to be redeployed directly within Europe from a repatriation standpoint?
No. That's our expectation. But obviously, we'll bring a significant amount of that back home to repay the dollar based revolver. And the rest of it is available to bring back home subject to currency risk. But we do expect, as Ed just described, to be able to reinvest euros in euro denominated assets.
Okay. And then as far as the redeployment pipeline, I was hoping you could talk some and obviously in a very general context about potential GAAP and cash redeployment yields in the U. S. And Europe, and how they've trended over the last 12 months or so?
They stayed relatively flat, haven't had much change in the last certainly in the last 6 months. In the last 12 months, there's probably been a slight uptick, but not much in the last 6 months.
So certainly in Europe, where they're not seeing the rising rate environment that we are here, it's we haven't seen much increase. I will tell you the estimate we gave you for a run rate post full reinvestment is a very modest GAAP rate lower than what's our average on the books today and frankly, we hope lower than what we're actually able to put it to work at.
Okay. And then one last question, I guess as it pertains to your prior guidance range and just your general expectations going into the year, was the re leasing of the Adeptus facilities to Dignity, was that ahead of your expectations? Was there some kind of a loss of rent relative to what Adeptus was paying built in the guidance for the year? Or is that the outcome you expected from the beginning?
We expected that from the beginning that the same as I think last quarter we were able to announce the Colorado transaction of a similar size. I think they were both about 8 facilities. And from the beginning, we had every right to demand what was in the Adeptus master lease. After all, those properties, those 16 properties were leased to a joint venture between Adeptus and the respective hospital systems. So from the beginning, we expected not to lose any revenue on the transition.
Great. That's all for me. Thank you.
Thanks.
Thank you. And the next question comes from the line of Jordan Sandler with KeyBanc Capital Markets. Your line is now open.
Hi, everyone. This is Katie on for Jordan. You guys touched upon this in your prepared remarks about the recent LifePoint merger with RCCH and Apollo. Could you guys comment about your interest or appetite in participating in the financing of the transaction by buying the real estate?
Katy, I think that the short answer is that we are very interested. We have a long relationship with Apollo. It's been a very pleasant and good working relationship and we certainly expect to be to continue to be working with them in the future.
Thank you. And then just a quick one. Could you guys give did you guys give the cap rate on the disposition for the 3 LTACs you sold in the quarter?
We did not, but obviously at a roughly 13% IRR, it was a very attractive transaction for us.
And a $24,000,000 gain, Katy.
Thanks, guys.
Thank you.
Thank you. And the next question will come from the line of Tayo Okusanya with Jefferies. Your line is now open.
Yes. Good morning everyone. How are you? Good. Good.
Thank you. I'm just trying to understand the Steward situation a little bit better in regards to your statement earlier on that despite a different structure, you're basically kind of getting the same thing you were looking for, but in a more efficient way. So I guess, what I'm trying to figure out is, if you release or if one hospital and there's a new operator in it and then they actually sell the other assets, I'm not quite sure if I can understand how proceeds from that scenario equate to the proceeds you'd have gotten out of a JV?
Well, Tayo, remember that the real object of any joint venture or process that we did with the Steward portfolio was not necessarily proceeds. As Steve pointed out earlier, we have substantial through this method still provides us with the same diversification that we would have gotten through the potential joint venture of the limited portfolio we were discussing previously.
Okay. That makes perfect sense. So it's more of the diversification goal. That's still pretty much the same?
That's correct.
Excellent. Okay. I got that now. That's helpful. And then second of all, on the LTACH side, post the sale to Vibra, the coverage is about 1x and everything you kind of have left.
Assuming that all the is that the earnest LTAC stuff left? Or kind of what's that stuff, the low coverage, how do you kind of think about that?
Sure. Tayo, it is almost exclusively the earnest facilities. There are approximately 3 other facilities that are not related to Ernest. But remember that the EBITDAR coverage that we present is an artificial number because we have always penalized ourselves in adding a 5% management fee to that number. So I think the easier number to look at or the better number to at is what the EBITDARM coverage is, and it continues to be in the $165,000,000 range, which is roughly what it was in the last quarter as well.
And also remember that in the earnest LTACHs, there are 8 earnest LTACHs and they're all cross defaulted with the rehabilitation hospitals, which continue to perform very well. And just yesterday, I got some additional information about the performance of the Earnest portfolio. And they have remember, we report all of these coverages in 1 quarter in arrears. And the operational numbers that I got yesterday bode very well for the future of the Ernest facilities.
Got you. Is there a number you can provide, just again with all of the cross collateralization with the other earnest assets, what's kind of your overall fixed charge coverage or whatever terminology you want to use for that coverage number? For the master lease rather than just
So for earnest including all of their facilities, their coverage is in excess of 2 times.
That's helpful. And that's all again cross collateralized, it's all one master lease?
It's all master lease with the exception of 4 facilities. And frankly, I'm not sure if any of those are LTACHs that are mortgaged, but the mortgages are across to the master lease.
That is helpful. I look forward to seeing you do something in Europe very soon.
Thanks, Tayo.
Thank you. And the next question will come from the line of Karin Ford with MUFG Securities. Your line is now open.
Hi, good morning. Just wanted to follow-up on the LifePoint RCCH deal. I know that LifePoint's hospitals are a little bit more rural than your current portfolio. Are you interested in more rural assets? And do you think there should be a cap rate premium on a rural hospital versus an urban one?
Well, Karen, as you and I have discussed for at least the last 10 years, my definition of rural may be different than some people because I grew up in a really rural town in South Alabama. But generally speaking, no, we're not generally interested in rural hospitals that are in very, very small communities with no growth potential, but LitePoint has a number of hospitals that we would be very interested in.
Got it. And you definitely saw a nice improvement in acute care coverage. Can you just give us more color as to what you think drove that?
Well, I don't think it's much different than what you're seeing in healthy operators across the country. We all saw what HCA's reporting was this past week. You look at the prime hospitals, which probably makes up the bulk of the improvement, but some of the improvement is also from the Steward integration. But it is certainly Prime's efforts that they've made over the last 18 months and focusing on their collections and their operations rather than their growth.
Thanks. I wanted to ask you about the increasing interest from healthcare systems in vertical integration with skilled nursing and senior care, ProMedica Ascension, etcetera. Do you think that's the future? And would MPW like to participate and own senior housing operated by one of its customers?
Well, the short answer to the last question is no, that we are very comfortable with our mix of properties and what we know. From a vertical integration, I really think it depends on each one of the operators. I'm not going to talk specifically about some of the opportunities that have happened out there that are outside of our portfolio, which have been very large transactions. But obviously, some of our operators currently have skilled nursing facilities in their portfolio. They have some that are a part of our hospitals, which we do own, but they're very, very small in nature and not a total integration like I the portfolio that you're probably referring to.
Great. And just one last one on the modeling side. There was almost a $2,000,000 sequential pickup in G and A from 1Q to 2Q. Is $19,500,000 the right run rate there going forward?
No, it's not. That spike is a timing issue related to a quarterly catch up of certain estimated expenses. So Q1 was slightly lower than it should have been. Q2 is slightly higher than it should have been.
Okay. So roughly an average between the 2?
That's right.
Okay. Thank you very much.
Thanks, Karen.
Thank you. And the next question comes from the line of Eric Fleming with SunTrust. Your line is now open.
Yes. Hey, Eric. Any update on the RCCH Pascoe Hospital? Any progress there?
One day.
All right. So they're still working through all the fun out there
in Oregon
or Eastern Washington. Yes.
All right. Thanks. Thank you. And the next question comes from the line of Chad Vanacore with Stifel. Your line is now open.
Thank you. So I'm going to backtrack a little bit just because I had a little phone issues towards the end of Steve's commentary and Michael's question. But that $1.46 FFO guidance, am I right that that's run rate post reinvestment of proceeds from these JV transactions you expect in Q3?
That's correct.
Okay. And then Steve, does that include contemplated Steward acquisitions or that's not in that number?
The Steward transactions we mentioned, no, that's not in there. But remember, one of those we expect will simply be an assignment of the lease. So there'll be no impact from that one in any case.
All right. And then just re tenanting or sale of property, are these mostly the IASIS Hospitals or what we consider legacy Steward, which is kind of a little bit harder to get at seeing as they've grown so much? And then who is driving that? Is this Steward consolidating their core portfolio? Or is it NPW just wanting to redistribute its risk amongst operators?
No, it's primarily Steward having people approach them and want a certain asset because they think it fits their specific portfolio and Steward's okay with the offer that they've been given and the exiting of that particular area. And then the other one is just Steward readjusting from some of their original plans.
Okay. And then just one last one. You're contemplating new guidance at the end of Q3 after a lot of these transactions are closed. What are some of the moving pieces that keep you from releasing that guidance now?
Primarily timing and again primarily then on PRIMONIAL. The fewer months we have left in the year, the more sensitive the results get. And so it's primarily timing. Okay.
Yes.
And our next question comes from the line of Juan Sanabrio with Bank of America Merrill Lynch. Line is now open.
All right, thanks. Just on Chad's question on the guidance. The 146 to 150 run rate, that's not an 2018 number. That's kind of maybe a 2019 number to start ex any incremental acquisitions or dispositions. Is that a fair way to think about it?
No, I don't think so because one that would imply that on January 1, we reinvest 100% of our proceeds and we're not at all saying that. We're just trying to give some indication of the strategic reason and the results and the opportunity But when we do reinvest. Now what Ed's described with $5,000,000,000 worth of potential pipeline, we could reinvest that earlier than expected. But at this point, we're not ready to handicap when and how much that will be reinvested.
Okay. So it sounds like you have a huge pipeline, but it may not be reinvested by the time January 1 rolls around is what you're trying to say?
It certainly won't be, Juan.
Okay. Okay. And then I was just hoping you could touch on prime. You talked about kind of an agreement or MOU with the DOJ. Is there any dollar number you could share if there's any sort of penalty that they've agreed to?
And with the corporate integrity agreement, any thoughts on what that incremental Yes
Yes. Juan, we along with Brian think that this is great news just to have it behind them. They are going to issue a press release in the very near future, which will outline all of this in detail. There certainly will be a dollar payment as there always is with these things, But the most important aspect of it is the corporate integrity agreement and Prime doesn't think that there will be any material negative impact on their operations from the corporate integrity agreement and that's the most exciting good news. Okay.
And then lastly to Karen's questions on G and A, you guys have grown assets fairly significantly over the last several years. How do you guys think about benchmarking that as a percentage of assets or rents? And what's the goal in terms of efficiency and when do you think you can get there?
Well, I think we're pretty satisfied with what we reported last year and kind of the 9 ish low 9 ish that we are now given the portfolio today as we continue to grow. Presumably, we expect that to continue to come down modestly. But once again, at $10,000,000,000 it's harder to bring it down by virtue of volume than it was back when we were $2,000,000,000 But point being, we've got a very attractive G and A burden. We expect it to continue to come down modestly with our growth, notwithstanding the timing spike that you might get from period to period.
And the low 9s is what number, sorry?
You know from a dollar standpoint, 1?
You mentioned a low none. I don't know if that was a percentage
of revenue. Yes, that's the percent of revenue, I'm sorry.
Okay, great. Thank you very much.
Thanks, Juan.
Thank you. This does conclude today's question and answer session. I would now like to turn the call back over to Mr. Ed Haudeg for closing remarks.
Thank you, Sabrina. And again, thank all of you for listening in today and thank you for your questions. If you have any additional questions once the call has ended, please don't hesitate to give us a call. Thank you very much.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a