Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2020 Medical Properties Trust Earnings Inc. Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Charles Lambert, Vice President, please go ahead, sir.
Good morning.
Welcome to the Medical Properties Trust conference call to discuss our 4th quarter and calendar year 2020 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 at www.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 and 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 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 good morning to all of you listening in today to our 2020 recap and insight into what 2021 will look like for MPT. 2020 will be a year that we will all remember for the rest of our lives. For those of us at MPT, we'll be remembered not only for the pandemic, but how well MPT was positioned to continue our outperformance. We outperformed our peers in almost every measurable financial metric. But what makes me the proudest about that is the fact that the business plan and the groundwork we put in place for the last almost 20 years was absolutely validated and reinforced during the pandemic.
I also want to take this opportunity to congratulate the MPT workforce for the incredible job they did adjusting to the virtual offices and the new norms created by the virus. They did all of this without missing a beat. I also want to thank the tens of thousands of frontline workers And all of the hundreds of MPT hospitals for literally putting their lives on the line to keep health care available to people all around the world. NPT hospitals proved essential and extraordinary in 9 countries on 4 continents, truly our proudest moment to date. And while the year had untold numbers of challenges, I want to take just a moment to reflect on the remarkable accomplishments of our health care systems and providers worldwide.
Just like we knew they were all capable of, our operators adjusted their operations on a moment's notice, They reconfigured their beds, added PPE, ventilators and learned how to treat a new world disease. Our operators are world class. They moved quickly and amazingly to treat their populations with COVID while not ignoring their COVID, non COVID patients. I cannot say enough to express my gratitude to each and every one of them for the job they did. At MPT, we were able to continue our remarkable growth.
We were able to close on almost $3,600,000,000 in transactions throughout 2020. We began 2020 with the announcement of our approximate $2,000,000,000 acquisition of BNI in the U. K. We entered South America for the first time with our Columbia transaction. We expanded our ownership of Inficor, The real estate owner of Swiss Medical Network, the 2nd largest private operator in Switzerland, we acquired new and valuable hospital assets We've established partners such as Prime Healthcare, Circle and Median, and we grew our Earnest portfolio via several new IRF developments throughout the U.
S. We also established new relationships with operators, including the NHS in the U. K. And CURA Health, a U. S.
Operator of inpatient rehabilitation hospitals. And just like last year, we began 2021 with a major announcement of an approximate £800,000,000 investment to acquire a portfolio of real estate at Priory Group, the leading behavioral health provider in the U. K. This acquisition further expands our investment in behavioral health, an area of health care that we believe has a tremendous underserved need throughout the world and also offers NTT a major platform for future growth. We were able to improve our concentration metrics with the Priory acquisition.
Now with a total of 50 operators, Our largest tenant represents 22% of our portfolio. And most importantly, no single property represents more than 2.8% of our overall portfolio. Remember, every single hospital serves a distinct local market. Healthcare is truly a local business. Regardless of parent ownership, the most important diversity measure is at the single property level.
Our hospitals performed very well in 2020 despite hospitals across the world being essentially shut down for 2 to 3 months. Let me take a moment to walk you through some amazing statistics. As we did last quarter, we want to be very transparent about our coverage ratios. So I'll first provide you with EBITDARM coverages for the trailing 12 months Q3 2020 with all grants, but still not including any Medicare advances that have been received by our operators to date. I will then give you those same ratios without Remember that we added 4 properties, 3 international IRFs and 1 acute care to our same store reporting, And we removed 4 Acute Care properties.
Inclusive of the $706,000,000 in grants through the CARES Act fund Received to date, our same store portfolio EBITDARM coverage for all sectors for the trailing 12 months Ending Q3 2020 was 3.13x. This represents an 18.4% increase year over year. Same store acute care EBITDARM coverage was 3.51 times, which represents a 20% increase year over year. LTACH EBITDARM coverage was 2.39 times, which represents an almost 50% increase year over year. IRF EBITDARM coverage was 2.21x, which represented a 6.6% increase year over year.
Now those same ratios excluding any grants and remembering all hospitals were essentially shut down for 2 to 3 months. Our same store portfolio EBITDARM coverage for all sectors for the trailing 12 months ending Q3 2020 declined to 2.02x. Again, these coverages did not include any CARES Act and did include the 2 to 3 months that these hospital operators were essentially shut down. Same store acute care EBITDARM coverage was approximately 2 times, which represented a 32% decrease LTACH EBITDARM coverage, approximately 2.07x, which represented an almost 30% increase year over year, and the IRF coverage was 2.1%, which represented a 1.4% increase year over year. So you see that even without any Chairs Act grants whatsoever, Our operators were still very well covered.
And furthermore, without any grasp, comparing the Q3 2020 To the Q3 2019, all of the operations are very close to or better than they were in 2019. Excluding any grants or advances, the total same store portfolio EBITDARM coverage was off just 6% from 2019 levels for the Q3. As I previously mentioned and Steve will report on in more detail, We have already had a great start to 2021. We continue to work on strong opportunities both in the U. S.
And abroad. We expect 2021 to be another successful year for MPT. MPT has the strongest portfolio of hospitals in the world. Our operators are at the very top of the class in their regions. We remain committed to quality, accretive investments and look forward to seeing MPT continue its role as the leading provider of capital to hospitals worldwide.
Steve? Thank you, Ed.
This morning, we reported normalized FFO of $0.41 per diluted share for the Q4 of 2020. This represents growth of 17% over last year's 4th quarter results and on a full year basis is an astounding 21 and year over year growth rate during a period in which the entire world was battling a devastating pandemic. As Ed has just described, we expect continued double digit per share FFO growth as we go into 2021. All else equal, even if we stopped our acquisition activities today and based on the assumptions underlying our updated run rate guidance, FFO per share would be expected to increase by another 10 plus percent, and we certainly do not expect to stop our acquisition activities. I'll make a few points about the financial results we reported with this morning's press release.
First, we recorded $27,600,000 or $0.05 per share in a debt refinancing charge during the Q4. This is related to our redemption of 800,000,000 dollars of unsecured notes that were due in 2024. We redeemed these notes, which had a weighted average coupon of 6% with proceeds from our recent issuance of new notes that have a 3.5% coupon, generating long term interest savings and a strongly positive net present value. 2nd, our practice is to deduct from AFFO The unbilled or straight line rent portion of revenue to reflect an amount closer to a cash basis. You will note that the $71,700,000 deduction in our reconciliation to net income exceeds the 55 $100,000 of straight line rent in the statement of income.
That's because to be more reflective of cash like revenue, we also deduct from AFFO, the straight line rent that is recognized by our unconsolidated joint venture operations and other non cash revenue. Finally, total G and A continues to represent about 9% of total revenue and that total revenue adjusted Similarly includes unconsolidated joint venture revenue. It is also helpful to point out that 35% of G and A is for estimated share based compensation, a significant portion of which is not actually paid unless we continue to deliver Strongly accretive acquisitions, dividend growth and market leading returns to our shareholders. Other items immaterial on both an individual and collective basis included a small fair value adjustment loss on our equity investment in EVIS, the parent of our tenant Swiss Medical Network, a favorable tax adjustment related to our investment in InfraCore and other one time items. During the Q4, we closed on roughly $670,000,000 of Acquired transactions with 5 different operators.
1st, in late November, we acquired for £50,000,000 The 999 year ground lease on the Royal Marsden Private Care, a general acute facility operated by England National Health Service and prominently located in London's Cavendish Square at the very entrance to the world renowned Harley Street Complex a premier London hospital providers. It has been a long term goal of ours to find an opportunity to demonstrate to the NHS The ease of working with the hospital experts at MPT, and we could not have found a better facility. Already, this has led to other real opportunities that we fully expect to manifest in additional investments with the NHS. We also acquired in mid December the Reading Hospital for 85,000,000 We actually bid to acquire this hospital several years ago when an institutional investor paid more than we were willing at the time. But when it came time to consider the impact of market changes and a standalone hospital operation in the very Bespoke hospital real estate market, the institutional investor preferred to sell to someone with a long term expertise in that market, and we ultimately acquired the hospital.
Reading will be joined to our long term master lease agreement with Circle, providing The financial accretion of value to both the Reading investment and the overall Circle relationship. The United Kingdom And Central London, in particular, remain one of the most attractive real estate markets in the world. But even with keen competition, especially for the premier Cavendish Square location on an ultra long term lease. These investments will yield to us a blended lease rate and spread through our funding cost consistent with our recent European and UK investments. We also added to our U.
S. Inpatient rehabilitation portfolio in the quarter With the mid December acquisition of 2 properties in El Paso, Texas and Louisville, Kentucky leased to Cura Health for roughly $58,000,000 CURA Health is an operator of 17 post acute hospitals across 10 states and is sponsored by the respected and experienced healthcare investor, Nautic. In addition, we purchased an earnings facility for $17,000,000 in Elgin, South Carolina and committed to the development of an earnings facility in in California at a total projected cost of $48,000,000 We also acquired from Ernest 4 hospitals that we had mortgaged as part of our initial 2012 transaction with Ernest. These hospitals along with the Elgin and Stockton facilities have been joined to an existing master lease agreement with Ernest that now has a remaining initial term of 17 years until 2,037. The CURA Health and Earnest leases have a weighted average GAAP lease rate approximating 10%.
Finally, at the end of the 4th quarter, We increased our investment in IntraCore by approximately CHF 207 1,000,000. As Ed mentioned, we kicked off 2021 with For £800,000,000 of about 40 primarily behavioral hospitals that will be leased to UK's largest operator of the prior agreement. The leases will be structured to provide master lease characteristics for a term of up to 45 years and a GAAP basis capitalization rate of about 8.6%. Simultaneously, Priory was acquired by Waterland Private Equity, The premier DUS Private Equity investor who also owns Medienkliniken, the largest private operator of German post acute and behavioral hospitals and our long established and successful tenant. MPT has a 5.1% passive interest in median And we'll have a 9.9% passive interest in the Priory tenant.
Even in the depth of the COVID environment, Priory attracted significant interest by competing bidders, but MPT had unique competitive advantages that led to our successful bid with Waterland. The Priory transaction has a structure similar to our very successful Median Investments. As a reminder, With Median, we originated and then assembled a €1,200,000,000 portfolio of hospitals at very attractive cash returns. We seasoned that portfolio and validated our underwriting and then recapitalized it with low cost joint venture equity cost at a substantially compressed cap rate. And while there is no assurance that these results will be replicated with Clari, We think the value of our investment in the priority real estate will be even further improved as Waterland executes its planned strategy to combine Priory and Median, creating the largest behavioral platform in Europe.
Ed mentioned already that we did not slow down in 2020 and our recent transactions certainly demonstrate that. As we enter 2021, We continue to work on a vibrant pipeline, including expanding our investments and relationships in the U. S. As we negotiate these possible transactions, we see general underwriting in economic terms as unchanged from recent years' acquisitions. This includes a bias toward general acute facilities, consistent coverage projections and a mostly flat capitalization rate.
I'll simply summarize what we previously reported about our capital activities in the quarter. I mentioned a minute ago that we recently issued $1,300,000,000 in 10 year unsecured notes at 3.5%, in part to redeem $800,000,000 in unsecured notes maturing in 2024 that had a blended coupon of 6%. Also on the debt side, we recast our $1,500,000,000 credit facility earlier this month, extending the duration of the revolver and term loan components to 20242026, respectively. On top of that, we arranged for an interim credit facility under similar initial terms for up to $900,000,000 about $680,000,000 denominated as £500,000,000 of which was temporarily drawn to fund the prior review. On the equity side, we raised a combined $828,000,000 from 4th quarter ATM activity and our early January follow on offering.
As mentioned earlier, we have increased our run rate normalized FFO guidance range to $1.72 to to $1.76 This is based upon 4th quarter annualized normalized FFO of 1.63 and adjusted for the annualized EBITDA effects of mid quarter and post quarter transactions, completion of and billing for development And expansion projects and the effect on interest expense and share count of assumptions about the capital transactions that would be necessary to generally achieve our target net debt to EBITDA ratio. It is It's important for us to reiterate that this is not meant to be a forecast of earnings or FFO results for any particular quarter or year. In fact, this calculation will change with each material additional acquisition or disposition of assets, capital raising transactions, dividend modification, debt repayments and other planned changes to our in place EBITDA. Accordingly, we will maintain our practice of updating this estimate periodically. What this calculation does show is that based on the economics of our completed and committed investments And on current expectations about future capital transactions, we continue to achieve strongly and immediately positive Per share increases in FFO and AFFO.
Our liquidity remains excellent with roughly $1,500,000,000 of cash and immediate borrowing capacity as of today. With that, we'll turn the call back to the operator for questions.
Please stand by and follow the Q and A roster. Our first question comes from Joshua Pederleen with Bank of America. You may proceed with your question.
Hey, good morning guys and thanks for the question.
Ed, I just wanted to follow-up on a comment from your opening remarks. You mentioned that the Priory Group It's going to be a platform for MPW within behavioral health.
Curious, is that growth
going to be focused on the UK? Or is it kind of a partnership across Europe?
Yes. I didn't mean to imply that it was Platform within the prior reorganization, more of a platform for us to invest in more behavioral health. It's something that we wanted to do for a long time. We Like it was very much needed. And certainly, as you know, under the Obamacare, it was something that was mandated to have coverage.
But it's just not Hasn't grown in the U. S. Like it has outside of the U. S. So we're excited to have the Priory Behavioral Health.
We think there are other opportunities Outside of Priory, but we by having that big investment in Priory gives us the ability to approach other operators.
Interesting. So it sounds like in Europe, it's a much bigger sector to invest in. Is that
Yes, that is correct. That is correct.
Okay. Awesome. And then on the coverage ratios, can you remind me if The coverage ratios you pulled are trailing 12 months. And if so, how should we kind of think about the evolution going forward It's kind of some of the pre COVID operations rollout. And I guess I'm more focused on the coverage ratios excluding the CARES Act grants.
Sure. Absolutely. They are trailing 12%. So what we reported includes, obviously, the first quarter, the 2nd quarter in which all hospitals were basically shut down and then the 3rd quarter in which they began to come back into operations. It does not include any of the 4th quarter because The reporting that we get from our hospital operators.
We do have the unofficial October, November numbers from some of our operators. And it looks like the continuation of building back to where they were on a trailing 12 coverage to pre COVID numbers look very, very positive. I certainly don't want to give the number where I think we'll be in the Q4 yet, but I think it will be substantially higher without any CARES Act On where we are right now, let me just give you a couple of statistics. As an example, just quarter over quarter, our same store admissions For our acute care hospitals alone was up almost 20%, up 18%. In addition to that, many of the operators, as I mentioned on the last earnings call, were able to make a lot of expense adjustments.
We've seen that with some of the HCA reporting. That's the same thing with our operators as well. So I think that as HCA reported, I think that they all will come out of this In a much stronger position, and we're very excited about where they are operationally, and we'll continue to see those numbers grow. I don't know when we get back to our trading 12 above where we were pre COVID, but these are very, very strong numbers. When you think about A 2x coverage with an entire quarter being shut down, that's extremely strong.
Yes. Appreciate that. Thanks, Ed. Thank you. Our next question comes from Connor Seversky with Berenberg.
You may proceed with your question.
Good morning, everybody. Thank you for having me on the call today. Good morning, Jonathan. Just to add
to Josh's question on the investment activity in the U.
K. I'm curious about behavioral health, some
of the initiatives that have been laid out by the NHS there. I'm wondering if you can provide any color as What kind of momentum that space is seeing in the U. K. In terms of funding from the NHS?
Absolutely. This actually started well before COVID. They made a very big push to outsource the behavioral health. NHS's facilities We're very old, very dilapidated. They didn't build any additional facilities.
They instead closed the facilities and decided they were going to use The 3rd party private sector. So they have pushed it in a very good way. They've added additional funding. And all of this was pre COVID. So during COVID, they actually used some of the behavioral health hospitals in those early months and the same things that we had saw happen over here In the U.
S, where they used some of those for true acute care facilities, they didn't need as many as they So they very quickly opened them back up to behavioral. The behavioral came back in a very, very big way without any Additional COVID funding from the NHS. So if you look at just the hospitals that we acquired from Priory, and remember that Clari has 300 plus facilities, but a vast majority of those are educational or autistic, Very small facilities that don't meet our criteria. So what we bought were the behavioral health hospitals. And when you look at those alone, They actually ended up 2020 about 2% better than they were in 2019 without any additional funding.
But the NHS in all of England, as we've all learned even here in the U. S, that mental health, behavioral health It's a real issue during the pandemic, and they are absolutely committed to increase the funding that they committed to Glad to tell you. So it's in a very strong position right now.
That's great color. Thanks for that. Changing gears a little bit, thinking about the race to distribute the vaccine versus some of the emerging virus variants that we're seeing news flow on, Is there any commentary available from your operators, whether in the U. S. Or elsewhere, in regard to the take up of the vaccinations by the healthcare workers and how quickly it's that are being distributed through the facilities?
Yes. It obviously varies from region and how but it would follow the same that you would see at people's It's about vaccines in general. But very generally speaking, very generally speaking, probably 70 The hospital employees have agreed to take the vaccine. We don't have any operators at this point that have Made the decision to require all of their operators. As all of us know and some of us have had the opportunity to talk to Some of the experts, particularly in my case with the people at Pfizer, they think that we only need 40% of the population to Take the vaccine along with the roughly 30% of us that have already had COVID to get us to a herd immunity type situation.
So the 70% of the healthcare workers that are taking the vaccine is a very, very strong number and Stronger than what we're seeing throughout the population right now.
Okay. And then one more quick one for me.
Just looking at pro form a leverage, ticked up a little bit. So I'm just wondering when you consider the investment pipeline through the end of
the year, maybe beyond, if you're going to consider a different financing mix for future acquisitions. No. It wouldn't be accurate to So different because over the last especially couple of years, we've really tapped any number of sources from traditional Common equity issuances to long term unsecured notes with the joint ventures, Joint Venture financing, equity financing along with secured financing in those joint ventures. We've used the ATM Over the course of those 2 years, not even including the Permonial joint venture A couple of years ago, we've sold several $100,000,000 of assets and that's provided accretive financing. We've got a handful of more assets that are right for sale that would allow accretive refinancing.
And then at today's dividend rate, we know we're generating upwards of $200,000,000 a year in retained AFFO. So we will continue to tap all of those as the need arises and as the circumstances mandate which And those various alternatives are better at any particular time.
Okay. Thanks for that. That is all from me. I'll leave the floor.
Thanks, Don.
Thank you. Our next question comes from Steven Valiquette with Doug Barclays. You may proceed with your question.
Thanks. Good morning, everybody.
Good morning, Steve.
So Ed, when you were commenting in your prepared remarks around the pipeline, You talked about expanding investments and relationships in the U. S.
So just curious, I'm not going to
be able to give more color on the pipeline overall, But sort of balancing U. S. Versus international opportunities. Nelson, you've talked a lot historically about And being able to better penetrate the not for profit hospitals in the U. S, I don't know if that portion of the U.
S. Pipeline has also accelerated. Just wanted to get more color on the overall pipeline. Thanks.
Sure, Stephen. It really hasn't changed from my comments on the last earnings call that we had. Obviously, as we all know, the acquisitions don't all happen on the same day, and we just did a big U. K. Acquisition.
So it's a little bit skewed right now. But we continue to see about 60% of the portfolio in the U. S. And 40% outside. That obviously is It's not a fixed number as we go because of the way acquisitions work out.
But we have a number of good large acquisition opportunities that we are actively working in the U. S, which we hope to be able to announce over the next couple of quarters. We still continue to have opportunities outside of the U. S. Again, most of what we're doing continues to be on a dollar basis, continues to be in general acute care hospitals.
But we also, as I mentioned earlier, have some good Good sized opportunities outside of the U. S. For behavioral. We still have behavioral opportunities in the U. S, but they're not big opportunities.
So the vast majority of what we're looking at in both international and national is generally acute care hospitals.
Okay, great. Okay.
That's it for me. Thanks.
Thanks, Dave.
Thank you. Our next question comes from Todd Stender with Wells Fargo. You may proceed with your question.
For the Priority deal, how many hospitals ended up coming with the portfolio?
So Todd, it is approximately somewhere between 3540 hospitals. And remember that as I've said earlier, prior we had a total of 300 plus facilities, but many of those are very small facilities that don't fit our model. So if you look at their overall EBITDAR numbers, The vast majority of that comes from these 35, 40 facilities that we acquired.
All right. So you guys you've extended the loan.
Is it cash flowing? Or that really just turns into real estate ownership upon consummation
of the merger or acquisition of the operators?
No, it's current paying, and we'll just Convert invisibly to observers from what will be categorized initially as interest to lease payments As we actually close each individual hospital.
I see. And what's the rate of the loan right now relative to So that GAAP yield of 8.6 percent?
Yes. There's no difference.
No difference. Okay. How about
the timing of the bridge loan? Is that consummated in the first half here?
Is that what happens? The
GBP 250,000,000 loan that we made to the acquirer Was funded at the same time we closed on the real estate transaction, and we expect that to be repaid during 2021.
Got it. Okay. And then how about the 9.9% interest? Has that amount been determined yet or not yet?
That hasn't been disclosed.
Okay. Got it. And then just for behavioral health, you underwrote this at a 2x EBITDAR, is that a fair number for us to kind
of think about for the long term? Or should that trend a little bit higher into the 2.5 Time
for me.
Yes. It will absolutely trend higher. That's a very strong going in coverage there in the U. K, and that will trend higher. That does not that is on existing numbers.
It does not take into consideration the improvements that the new operator will make.
Got it. Okay. Thank you.
One last one for me. Steve, you mentioned the Ernest transaction. Was the South Carolina asset, was that, a loan converted to real estate ownership in Q4?
No, that was actually the purchase of a recently completed development.
Understood. Okay. Thank you.
Thank you. Our next question comes from Omotayo Okusanya with Mizuho. You may proceed with your question.
Yes. Good morning. Congrats on another strong quarter.
Thank you, Tayo.
My pleasure. Thanks for all the details in regards to rent coverage and the trend. Just kind of
Curious, is there a way you
can share additional details a little bit more on the tenant level around rent coverages rather than the total portfolio? Even if you don't want to talk specifically about one tenant, just to get, are they all kind of trending the same way? Is there someone that's kind of Behind all the others, because of something unique, especially for some of your larger tenants. Just trying to understand what may be happening at that level.
Absolutely, Tayo. And you'll notice in my very last part of my prepared remarks, I talked about the portfolio being the Strongest group of hospitals in the world, and it truly is. These operators all across the board in our portfolio are trending in the same direction. They all have very strong coverages. We don't have any in the large group of operators that are having any issues whatsoever.
We're seeing the same trends across the board. It is a very strong position where they are all right now.
Okay. That's
helpful. And then second question just and I think Steve Alec can touch on it a little bit. So When you think about U. S. Versus UT opportunities, I know you kind of said that this kind of forty-sixty balance is kind of where you hope to end up.
But kind
of when you're talking about near term, what could happen? Is it really more
of a U. S. Opportunity that's kind of lined up? Or is it more of a European or international opportunity?
No. Near term, it's more U. S.
Near term, it's more U. S.
Okay, great. Okay. Thank you. Thanks, Tayo.
Thank you. Our next question comes from Jordan Sadler with KeyBanc Capital Markets. You may proceed with your question.
Thanks. Good morning, guys.
Good morning.
So just a little bit Deeper on Priory. So as a partner in Median, I'm sort of curious about the financing. And Steve, I think you touched on it a little bit, Eventually, you brought in, I think, Pramodial. And I was curious to see if To know if they were invited to participate in the Priory deal given that they're a partner in medium.
No, we did, on our own, the priority transaction.
Okay. Well, that I know. Would it be likely that you would look to execute a similar type of structure around the permanent Capital base of Priory?
Yes. We have no plans for that as we sit here today. Okay. I made the point in my remarks because it the median transaction with Moneyile was so extraordinarily successful. It's not certainly not impossible that we would want to replicate that, but that would be a longer term Process, because as I mentioned, that was several years.
I think we began assembling that medium portfolio in 2013, 2014, And it was not until late in 2018 that we had completed assembling it. We had seasoned it. We had allowed Median to bring its efficiencies to bear and only then did we take it out And recapitalize it. So that's possible that the Priory could follow that pattern, but there is certainly no plan Our commitment to do that as we sit here today.
And Jordan, just to belabor the point that Steve's making, if we had brought Priory or anyone else in on the front end, We wouldn't have had the ability to realize the gain that we think we could realize later down the road if we did it at that time.
Okay. And then that makes sense. And then as it relates to the dispositions during the quarter, Olympian Medical And then Steve, you talked about some other potential. So one on Olympic Medical, anything you can offer up in terms of the economics there, I know there was $51,000,000 of proceeds, but any other details around sort of yield on sort of the sale? And then maybe the scale of additional dispositions or how much else do you have teed up?
So remember, Olympia was a mortgage loan for us. And the operator, Alecto, Sold it to UCLA and as part of our Relationship with Alecto that we've been disclosing over the past couple of years, we've had a couple of facilities that we've taken impairment charges on. We've stopped recognizing current rent. And so the $51,000,000 proceeds Those not only to repay 100% of the mortgage balance, our mortgage balance that was outstanding on the Olympia facility, But recovered some of those prior charges and provided for profit over and above that on other Cross collateralizing, cross defaulted charges we have taken over the last couple of years.
Okay. Got it. And then other sales? Just how much the FTEF?
Yes. We Relatively minimal, but when considering combining various sources For capital, for recycling, meaningful, a coverage of a couple of $100,000,000 over the potential course of the next
Okay, great. I can yield the floor. Thank you.
Thanks, Jordan.
Thank you. Our next question comes from Mike Molla with JPMorgan. You may proceed with your question.
Hi. Just a quick one. Is there any updated timing on recognizing straight line income from prior?
Well, that will start the straight line will start as we close each facility. As Ed mentioned, And just by way of a little background, we agreed with Waterland to provide £800,000,000 of real estate financing. And it is our discretion as to which of the hundreds of facilities that Priory owns and operates We choose and that's why Ed comes up with the 35 to 40 facility. We're in the process of selecting our facilities. That process then will lead to periodic closings of those facilities.
And as each Facility is closed, we'll start recognizing the straight line component of the master lease agreement.
Got it.
So, Matt, we're hopeful that all of that is closed by the Q2 of this year.
Got it. Okay. That's it. Thank you.
Thanks, Mike.
Thank you. Our next question comes from Michael Carroll with RBC Capital Markets. May proceed with your question.
Yes, thanks. I wanted to touch on the NHS deal that you guys announced. And it seems like this is with a, I guess, a private operator within NHS, I guess. How does that work out? I guess, is it with NHS or was it a private operator or is it its own special segments that they created?
So we acquired a 999 Brown lease on the real estate that has the term used in the UK is an occupational lease With the NHS operator, that occupational lease, I think, has 40 plus Potential years running after which just like any other transaction and we would if they don't extend, We would the real estate would revert to us.
And now is that direct is that a corporate guarantee or is that leased Directly with NHS or is it a subsidiary of the NHS?
Well, the subsidiary is not the right term. The NHS is responsible for funding all NHS trust and operations. We're funding all NHS trusts and operations. And so it's effectively, in our view, a government yield.
So technically, all of the trusts operate independently of each other, but they are recognized as part of the NHS.
Okay. And then I guess how big of an opportunity is
it for you to continue to grow
with NHS in the UK? I know that most of the growth has been with private operators. I mean, there's an opportunity to make a bigger investment with the NHS?
We think so. We think that this opportunity has been there for a very long But it's always getting that first one in the door. We thought we had an opportunity 7 or 8 years ago with the Manchester Trust University Hospital there. But was this one actually closed? We expect that there will be others that we can do.
Does an HS typically sell their real estate? I mean, I guess, Do they own most of
their own? So the again, it's individual with each individual trust, And each individual trust has done a lot of different transactions similar to this, not necessarily a sale leaseback type transaction Or exact transaction, but a sell expect type transaction. So this isn't foreign to them.
Okay. And then can you talk a little bit about the Swift Medical Good deal. Did I hear that correctly? That was into the operator? Or was there some real estate investment tied with that?
Yes. No, it is the real estate portion of it. You'll remember that our investment there is with an entity called InfraCorp, Which you're not tenet there is the Swiss Medical Network. And we bought out one of the other Investors, this was something that we had planned on or hoped that we would be able to do when we made our original investment in InfraCore. And so when the opportunity came along, we were very excited to consummate it.
But it's entirely real estate.
Okay.
And then I know that there was an opportunity there when you originally did that deal to kind of consolidate and grow In that market, I mean, have you started doing that yet? Or is there near time opportunities to kind of start acquiring new properties and grow that entire venture?
Yes. I think we were
very close to adding new properties before COVID hit. So it is still the ultimate plan, but obviously with COVID, everything Switzerland got put on hold.
Okay. Great. Thanks guys.
Thanks Mike.
Thank you. Our next question comes from Tom Hennessy with Deutsche Bank. You may proceed with your question.
Good morning. Just going back to the pipeline real quick, could you
just discuss the impacts of
the pandemic on the pipeline,
I guess, as the year Progress.
I mean, I assume getting boots on the ground was a considerable challenge. But is there any way to quantify this, whether it be lost or delayed deals? How much capacity went unused as the year progressed? And then I guess any challenges carrying over to 'twenty one? And would you anticipate a meaningful acceleration once we get back to normal?
Yes. Thanks, Tom. I think that there weren't any deals that were lost. There were a large number of deals that got put on hold and delayed. Priory is a perfect example of that.
We were working on Priory Well before COVID hit. And obviously, when COVID hit, it along with everything else got put on hold. Most everything has opened back up, Including opportunities that we were just really getting into. So I think the pipeline as a total Figure is back to where we were on a pre COVID basis. Some of the items still move a little slow.
You talk about boots on the ground. We were very, very fortunate to have our Our Luxembourg office, yes, while those of us here in the U. S. Weren't allowed to come to Europe, our Luxembourg office was still able to travel freely. We also have boots on the ground in Australia.
So with some of the expansions, most of them were planned there. You remember when we did the Original transaction with Healthscope in Australia. We had a $300,000,000 planned addition to that portfolio. That obviously Got put on hold, but as I mentioned in the last earnings call, got started back up. And again, having our boots on the ground there has been able to be very, very beneficial.
In South America and Colombia, they still let us in. And so we've been able to have our team there and to continue that process. That's as I have said to some of the people that have asked over the last few months, that's probably the biggest challenge that we have in going forward in 'twenty one because It certainly is not going to be back to 2019 overnight, but it is our ability to operate in This new environment, I think we've done a very good job of it. We pride ourselves on building relationships with people face to face. We have to have had to do some of that from a Zoom standpoint.
But as we get into 'twenty one And more and more people throughout the world are able to have the vaccine. We hope to be able to be able to excuse me, we hope to be able to travel more freely. That obviously hasn't happened yet, but with our offices around the world, it hasn't slowed us down any. But that's where we are in the pipeline right now.
Our next question comes from Michael Lewis with Truist Securities.
My first question is about the run rate FFO guidance and our ability to use that as a yardstick. And the reason I ask is, You gave FFO guidance back in December 2019 and now a full year later, you still haven't quite made it even though 1,000,000,000 of dollars of accretive investment since then. You're still above the financial leverage target that was contemplated in that run rate. And I assume it's wrong to presume that your FFO would be higher today had you made no investments in 2020 and delevered the balance sheet by almost a turn. So are you missing your guidance?
Or is it just a timing related thing where it can take A year or however long it takes to get to that run rate.
So a couple of Points would be, firstly, we reported in 2020 FFO per share, 21% higher than we did in 2019. And second, so I don't think we're lagging. But more importantly, as I made an attempt earlier in my prepared remarks to explain, There's lots that goes into a run rate guidance. And when a company is growing very, very rapidly Like ours, I mean, over the last almost 10 years at 30 plus percent compounded annually, the only way To get to a firm target of FFO is to stop that growth because every single transaction that is done Impacts the arithmetic, the calculation that goes in. So I'm not quite sure.
I didn't quite hear all of your question, but are we lagging? I don't think so. We're growing Almost exponentially accretively and that's what the guidance is really meant to show because unless like I say you wanted to stop All of the forward looking assumptions, which include further growth, which include capital, which is a very significant part of the guidance is to bring the leverage back down from where we are, which is slightly above the Times into something between 56. That's the most significant meaningful impact to a straight EBITDA based Accretion. So again, I'm going to repeat myself.
But as long as we continue to grow, That run rate guidance is going to be a Constantly moving target. And the faster we grow, the more unpredictable it becomes. But it is important For investors to see that, nonetheless, we are investing accretively and frankly, very strongly accretively. And I think that's the evidence given by the 21% year over year per share results.
Okay. So I guess there's no time period on when you might hit this $172,000,000 to $176,000,000 for example?
Well, yes, if we stop growth, yes, we would expect to hit that in 2021. But we're not going to stop growth.
I see. Because the number you gave in December 2019 was $1.65 to 1.68 You just reported $0.41 right, which if you annualized would be $1.64 which is why I asked the question, but We could do this offline too. My second question, I wanted to ask about And this one maybe has already been answered. But as you talked about the trailing 12 month nature of the coverage ratios, I think is it fair again setting expectations? I would assume that we probably don't see much movement in that coverage then since 4Q is not going to be a unique comp, Year over year comp, 1Q won't be.
And really, we may not see real movement in that ratio, in that coverage ratio until we get This really kind of bizarre 2Q out of the trailing equation, is that a fair way to think about it?
Well, Mike, it is. But as I said earlier, while I don't want to set any expectations because we just have 2 months, unofficial numbers for a number of our tenants for the Q4. For the Q4 numbers, even on Trailing 12 looks substantially better than they did even on the Q3 trailing 12. So as I said earlier, we If you look at the same store admissions compared to the Q3, we're up compared to Q3 to Q2, We're up 10% overall and up 18% in acute care. And then if you look at the reporting that we've had for October November, They are very strong numbers.
So again, notwithstanding exact expectations, I do expect you to see good movement in the coverage For when we get through the Q1 and reporting 4th quarter numbers. But you're absolutely right. Until we're Through with the Q2, in which case, the all hospitals will basically shut down, you're not going to see numbers back above 2019.
Okay. That makes sense. It sounds promising. Thank you.
Thank you. Our next question comes from Jordan Sadler with KeyBanc Capital Markets. May proceed with your question.
And just a quick follow-up. I was confused a little bit by your answer to my next question about the rate on the waterline loan Versus the GAAP yield, I think in a previous question previous answer, you said that they were the same yield, but then Straight line rent is supposed to kick in as you close these properties. So I guess from a modeling perspective, are we modeling The £800,000,000 at 8.6 yield going in?
So that's a good point. And I didn't mean to imply that we will be earning 8.6% during this interim period. I was really in my own mind comparing that to the cash rate That actually yes, so which of which we haven't disclosed, yes.
Okay. So it's the same as the cash. So there will be a delta. As you close these loans, the GAAP yield or FFO yield will step up incrementally throughout the second like Through the Q2, basically, as you closed these? Yes.
That's
correct. Yes.
Got you. And then one other on the refi opportunities ahead of you. So I meant to touch on this
a little bit with prior year earlier, but
How do you intend to finance this portfolio with debt longer term?
So similar to Our kind of long term practice, because of the very, very low rates away from the U. S. And because We naturally want to hedge our purchase price. Our expectation would be that Long term, we would finance the Priory deal with as much unsecured local currency based No, it's as we can.
Along those lines, earlier you did some refi or pre refi opportunity Anything else you're sort of eyeing in the capital structure that looks a little bit above market that can be taken out?
I don't think there's a couple of euro issuances, but it's not nearly as attractive at this point. So we're not expecting that in the near term. It will be much more likely of being new issuances in the sterling market.
Okay.
Thank
you.
Thank you. And I'm not showing any further questions at this time. I would now like to the call back over to Ed Aldyfe for any further remarks.
Josh, thank you very much. And again, thank all of you for listening in today. Thank you for your interest in Medical Properties Trust. And if you have any additional questions after the call, please don't hesitate to reach out to Drew or Tim, and they'll get with the right people. So thank you very much.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.