Medical Properties Trust, Inc. (MPW)

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Medical Properties Trust, Inc. (MPW)

Q4 2012 Earnings Conference Call

February 7, 2013 11:00 ET

Executives

Charles Lambert - Managing Director

Edward K. Aldag, Jr. - Chairman, President and Chief Executive Officer

Steven Hamner - Executive Vice President and Chief Financial Officer

Analysts

Karin Ford – KeyBanc Capital Markets

Tayo Okusanya - Jefferies

Michael Carroll - RBC Capital Markets

Mike Mueller - JPMorgan

Phil DeFelice - Wells Fargo

Daniel Bernstein - Stifel

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2012 Medical Properties Trust Earnings Conference Call. My name is Clinton and I’ll be your operator for today. At this time, all participants are in a listen-only mode. We’ll conduct a question-and-answer session towards the end of this conference. (Operator Instructions) And as a reminder, this call is being recorded for replay purposes.

And now, I’d like to hand the call over to Charles Lambert, Managing Director. Please proceed sir.

Charles Lambert - Managing Director

Good morning. Welcome to the Medical Properties Trust conference call to discuss our fourth quarter and full year 2012 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 website at www.medicalpropertiestrust.com in the Investor Relation’s 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 maybe 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 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.

Edward K. Aldag, Jr. - Chairman, President and Chief Executive Officer

Thank you, Charles and thank you all of you for being with us today. In 2012, everything came together for MPT. All of the hard work and precise planning paid off. The capital and balance sheet planning, the personnel planning and development, the acquisitions’ groundwork, it all came together to produce a year of spectacular results. In previous years, we had never acquired more than approximately $425 million in any one year, and in fact, had averaged about $300 million a year. In 2012, our acquisitions and commitments exceeded $800 million.

Our normalized FFO per share for the year increased by 27%. By the fourth quarter, our FFO had increased 32% year-over-year. Our pay-out ratio improved to 80% and is expected to continue to improve in 2013. Both of these metrics are almost a full year ahead of our projections and investors’ expectations. As you know, we take a very disciplined approach to our RIDEA or equity type investments. The non-Ernest or RIDEA investments proved themselves this year generating returns in excess of 40% on an annualized basis for the last three quarters. The Ernest results are right in line with expectations generating an approximately 15% return on our equity type investment.

Some of the highlights of 2012 for MPT are we completed a restructuring of our investment with Prime, whereby all of our leases are now under master leases. In addition to the security that a master lease provides, we also improved the annual rental increases to correspond to CPI without any limits. We completed a management agreement with St. Vincent’s Health which operates 14 hospitals in Indiana and is part of the Ascension Health Group for the management of Monroe Hospital in Bloomington, Indiana. We selectively sold two average assets or 27% more than their original cost validating our investment leases and demonstrating to the market the value of our existing portfolio.

Our portfolio continued to perform well above industry standards. The EBITDAR lease coverage ratio for our mature operations meaning the properties have been in our portfolio for at least a year at approximately 5 times. Nine of our facilities achieved the Top Performer recognition from the Joint Commission. We received an upgrade for Moody’s in our credit rating to Ba1. We executed several capital transactions that maintained conservative leverage levels provided us with stability and financial flexibility and with a record low cost of capital for MPT.

We issued a $100 million in unsecured term loan at 250 basis points over LIBOR. We issued $220 million in equity. We increased the revolver by $70 million now having a total of eight banks participating in the credit facility. We issued $200 million in 10-year unsecured bonds at 50 basis points lower than our most recent issue. MPT’s total return to shareholders for 2012 was approximately 31% and was more than 85% for the last five years placing MPT in the approximately 88 percentile of broad based REIT indices.

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