Medical Properties Trust Earnings Call Insights: Putting Liquidity to Work, Leases

On Thursday, Medical Properties Trust, Inc. (NYSE:MPW) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Putting Liquidity to Work

Tayo Okusanya – Jefferies & Company, Inc.: Couple of questions. I just wanted to make sure I understand 2012 guidance correctly. The $11.7 million in earnings in guidance from Ernest, does that also include the interest income you expect to earn on the loan to the operating company.

Edward K. Aldag, Jr. – Chairman, President and CEO: Yes. It does.

Tayo Okusanya – Jefferies & Company, Inc.: Okay, now I understand what that number is. Then when I look at the guidance of $0.85 and I compare to a year ago or so when we were kind of talking about what 2012 could look like, the idea was always once you guys have put all your liquidity to work you would end up in a range somewhere in the mid-$0.90. We’ve kind of come out roughly at about $0.85 now for 2012 and you have put all that prior liquidity to work with the Ernest deal. Just kind of curious what the differences between that initial target and kind of where we ended up in the year if you could reconcile those two numbers?

R. Steven Hamner – EVP and CFO: Remember, we’re putting this liquidity to work during the year. Ernest didn’t come on until March 1. The next $100 million we expect will be in the second quarter and then another $200 million in the fourth quarter. So, by the fourth quarter we’ll actually be on a run rate basically of roughly $0.26 to $0.28 and I think that does get you way above that mid-$0.90 estimate that we provided several quarters ago.

Edward K. Aldag, Jr. – Chairman, President and CEO: Tayo, I think the part what you are leaving out as well is the offering that we did just recently in conjunction with the Ernest transaction, we still have approximately $400 million in liquidity to put to work.

Tayo Okusanya – Jefferies & Company, Inc.: Then the additional $400 million or so of liquidity that you’re going to be putting to work, the $100 million in second quarter and then the $200 million in fourth quarter, could you talk a little bit about what those deals are, the probability of those deals closing or whether it’s just something in the pipeline you’re still working on? Then also if the 2013 run rate of $1.06 includes permanent financing for those two big chunks of acquisitions you’re going to be doing in the back half of this year?

Edward K. Aldag, Jr. – Chairman, President and CEO: Tayo, on the $300 million, the $100 million we believe is very eminent. So, obviously, the deal that we are working on, it looks just like the rest of our portfolio. It won’t be any surprises there. The other $200 million, again there is obviously a further down the line because of the timing that we expected to be, but it too is our traditional property types that we are working on.

Tayo Okusanya – Jefferies & Company, Inc.: Are you using permanent financing for that deal in your 2013 numbers or it’s just the run rate with that deal sitting on the line of credit?

R. Steven Hamner – EVP and CFO: That’s right, the latter, Tayo. We have not termed out the line of credit for the $200 million deal.

Tayo Okusanya – Jefferies & Company, Inc.: Anything new on River Oaks and Monroe. Could you give us updates on those two assets?

R. Steven Hamner – EVP and CFO: Yes, there is. On River Oaks we have signed a lease with the lead tenant there and the construction is progressing well, and the lead tenant actually takes up approximately 30%, is that right, approximately 30% of the total space. Then on Monroe, it continues to perform well. We continue to have a good amount of interest, folks knocking on our door, wanting to acquire the facility, but there is no additional things to report at that point.

Tayo Okusanya – Jefferies & Company, Inc.: In Monroe are you getting rents payment yet?

Edward K. Aldag, Jr. – Chairman, President and CEO: We’re accruing rents.

Leases

Daniel Bernstein – Stifel Nicolaus: I just had a question on the Kindred leases. When do those expire? It looks like in your supplemental that’s pretty far off perhaps, but I just wanted to make sure I understood that. Are you looking at any of the LTACHs and (indiscernible) maybe marketing at this point?

Edward K. Aldag, Jr. – Chairman, President and CEO: Dan, the Kindred leases that we have remember that they were acquired through the Triumph and RehabCare acquisitions. So, the remaining term on those are pretty far out, seven to ten years. Then the – actually they are more than that. Then the second part of your question was, are we looking at the Ventas properties? No, we have not – other than just looking at them very briefly, we have not done anything serious with them.

Daniel Bernstein – Stifel Nicolaus: Maybe more of a housekeeping question here. What else is going – do you have an idea of what straight line rents are going to be this year. Assuming there’s some timing with the Ernest acquisition, I just wanted to make sure we were thinking about the right number.

R. Steven Hamner – EVP and CFO: Yeah, what you see this quarter is kind of what you are going to get based on that, about $1.4 million.

Daniel Bernstein – Stifel Nicolaus: I guess the other question I had was on the 15% return you are talking about. If I recall correctly from last earnings call, a portion of that is non-cash is non-cash. Is that still going to be the case or I guess there were some minimum payments that had to be done in cash, but what portion of that 15% return is going to be cash this year?

Edward K. Aldag, Jr. – Chairman, President and CEO: We actually expect that it all will be. You remember the way the structure – we get a preferred return that staggers up to the 15% and takes, what I think, three years to get to that point.

Daniel Bernstein – Stifel Nicolaus: But you expect all of it to be in cash based on…

Edward K. Aldag, Jr. – Chairman, President and CEO: All of it 2013, most of it in 2012.