Medical Properties Trust CEO Discusses Q4 2010 Results - Earnings Call Transcript

Medical Properties Trust, Inc. ( MPW)

Q4 2010 Earnings Call Transcript

January 27, 2011 11:00 am ET

Executives

Charles Lambert – Finance Director

Edward Aldag Jr – Chairman, President and CEO

Steven Hamner – EVP and CFO

Analysts

Jerry Doctrow – Stifel Nicolaus

Ralph Davies – J P Morgan

Karin Ford – KeyBanc

Fred Morgan – RBC Capital Markets

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2010 Medical Properties Trust, Inc. earnings conference call. My name is Stephanie, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator instructions) I would now like to turn the conference over to your host for today, Mr Charles Lambert, Director of Finance. Please proceed.

Charles Lambert

Good morning. Welcome to the Medical Properties Trust conference call to discuss our fourth quarter and year-end 2010 financial results. With me today are Edward K Aldag Jr, Chairman, President and Chief Executive Officer of the company; and Steven Hamner, Executive Vice President and Chief Financial Officer.

Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our Web site at www.medicalpropertiestrust.com, in the Investor Relations section. Additionally, we are 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 such information. In addition, during the course of this 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 Regulation G requirements. You can also refer to our Web site 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.

Edward Aldag Jr

Thank you Charles. In the second half of 2010, we renewed our acquisition activities announcing to the market that we anticipated investing $150 million in new properties in 2010, just half of our historical normal levels prior to the global recession. We ended the year by investing approximately $213 million, 42% ahead of projections.

We acquired three new existing inpatient rehabilitation hospitals with an established but new to MPT tenant, two new existing LTACH hospitals and one in escrow, again with an established but new to MPT tenant, and started the development of one new acute care hospital with an established operator but one that was also new to MPT. These acquisitions further improved our already strong tenant and geographic diversification, and continued to enhance our strong returns with a weighted average going-in cash cap rate of almost 9.5%.

In addition, the six existing properties in this $213 million generate EBITDAR lease coverage of over 2.5 times, which is right in line with our existing LTACH and rehab hospitals. As we have said on recent calls, our acquisition pipeline is very strong and we expect 2011 investments to be back to normal levels. You will recall that we said in late 2010 that we expected to invest at least $300 million in new investments in 2011. Due to the excess we are having, we are raising that guidance today to at least $350 million.

In January of this year, we have closed another $87 million of investments and have another $56 million at the stage where we are hopeful the transactions will close any day now. We continue to feel very positive about the hospital industry. Due to the fact that this fourth quarter earnings call is only three weeks after the year-end, we do not have all of the financial data for most of our hospitals for the month of December. And in fact, most of our publicly reporting tenants will not report their 2010 results until late February. So we will not have the specific coverage numbers for you today. However, it is clear that our portfolio continues to produce strong coverages.

It appears that our acute care hospital sector will most likely remain flat to slightly down with EBITDAR coverage in the 6.5 times to 7 times. The LTACH portion, which was 2.17 times last year trailing 12 months looks like it will end the year in the same range, and the rehab hospitals, which were three times last year trailing 12 months looks like it will end the year essentially flat as well.

As we indicated in 2010 and actually put to work on a small scale in early 2010, we will continue to take advantage of our hospital knowledge and make some ideal [ph] investments in several of our new facilities in 2011. We continue to see investment opportunities where we can achieve out-size returns allowing MPT to increase its year-over-year organic growth.

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