Medical Properties Trust, Inc. (MPW)

MPW 
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Medical Properties Trust, Inc. (MPW)

Q2 2013 Earnings Conference Call

August 8, 2013; 11:00 a.m. ET

Executives

Edward Aldag Jr. - Chairman, President & Chief Executive Officer

Steven Hamner - Executive Vice President & Chief Financial Officer

Charles Lambert - Managing Director

Analysts

Mike Carroll - RBC Capital Markets

Karin Ford - KeyBanc Capital Markets

Tayo Okusanya - Jefferies & Company, Inc.

Michael Mueller - J.P. Morgan

Daniel Bernstein - Stifel Nicolaus & Company, Inc.

Presentation

Operator

Good day ladies and gentlemen. Thank you all for joining and welcome to the second quarter, Medical Properties Trust earnings conference call. My name is Lisa and I’ll be your coordinator for today.

Today’s conference is being recorded and at this time all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to Mr. Charles Lambert, Managing Director, for opening remarks. Sir, please proceed. Thank you.

Charles Lambert

Thank you. Good morning and welcome to the Medical Properties Trust conference call to discuss our second quarter 2013 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 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 report 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 Aldag Jr.

Thank you Charles and thank all of you for joining us this morning. Today we are able to announce a number of acquisitions that we’ve been working on. While we are not in a position at this point to provide all of the details, we are announcing more than $400 million of acquisitions thus far in 2013 and with five months remaining for this year, we feel good about the ability to add to this amount.

Included in the $400 million are three acute care hospitals from a successful, large national multi-hospital chain. The total investment in these three hospitals will be approximately $280 million. As a result of this additional $400 million in acquisitions, our largest tenant exposures will be Prime at 24% and Ernest at 17%.

Our existing hospital portfolio continues to perform well. For our mature operations, meaning they have been in our portfolio for at least 12 months on a trailing 12-month basis ending 5/31/13, our acute care hospitals were 5.6 times EBITDA or lease coverage, our LTACHs were 2.01 times, and our IRFs 2.85 times.

Since acquiring the original 16 Ernest hospitals, Ernest has completed two additional hospitals and one addition, all of which have begun operations. They have two more, which are still under construction and have also acquired one up and running facility this year. These were all flooded by MPT and this brings the total of Ernest facilities up to 21.

The facilities we have currently under construction are Oakley with NSH, South Ogden with Ernest, Post Falls with Ernest, and Victoria with Post Acute, which is almost complete.

We have recently extended one of our leases that was set to expire in 2014. This lease was extended for an additional five years to 2019. We also agreed to extend a lease to 2028 that was set to expire in 2019. This will leave only one $45 million lease that will currently expire in 2014. The tenant has the option to continue to renew that lease on an annual basis.

Reimbursement in all three sectors; acute care, rehabilitation and long-term acute continues to be stable and profitable. This has occurred despite sequestration and soft utilization in some markets. Soft utilization has resulted from a minimum flu season and uninsured patients in some areas. However, the MPT portfolio of hospitals has largely been unaffected by the uninsured, due the efficiency of our operators.

Health Reform is in the midst of being implemented and to-date our hospitals have performed well under hospital readmission rules and value-based purchasing. The outlook for hospital reimbursement is positive. CMS recently released final reimbursement rules for all three sectors. Acute Care Rehabilitation services received slight increases, while LTACHs are basically unchanged.

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