Medical Properties Trust, Inc. (MPW)

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Medical Properties Trust, Inc. (MPW)

Q3 2012 Earnings Conference Call

October 30, 2012 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

Jana Galan - Bank of America Merrill Lynch

Daniel Bernstein - Stifel Nicolaus

Mike Mueller - JPMorgan

Presentation

Operator

Welcome to the Q3 2012 Medical Properties Trust Earnings Conference Call. My name is Ellen and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Charles Lambert, Managing Director. Mr. Lambert, you may begin.

Charles Lambert - Managing Director

Thank you. Good morning. Welcome to the Medical Properties Trust conference call to discuss our third quarter 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 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 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 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 all of you for listening in today. First and foremost, please know that all of our thoughts and prayers go out to those in the path of Hurricane Sandy. We pray that you and all of your families are safe, dry and warm.

Today, we announced the continuation of a truly spectacular year for Medical Properties Trust. With today’s announcement, we show a continuation of our strong performance resulting in an FFO payout ratio of 80% for the third quarter. We also announced that we have made an additional $259 million in acquisitions since our last call. Year-to-date in 2012, we have now made a total of $781 million in strategic acquisitions and commitments. This is a record level of acquisitions for us and is approximately 80% higher than we have ever done in one year. And we still expect to complete additional acquisitions in the fourth quarter.

Based only on our existing portfolio, which includes the acquisitions announced today, we expect our annual run-rate FFO per share to be $1.8. Said in a slightly different way if we made no further acquisitions, no more in the fourth quarter and none in 2013, our 2013 FFO would be $1.8 per share. This equates to a pay-out ratio of 74% from our in-place portfolio. We have a strong pipeline of potential acquisitions for next year. We will provide guidance for what we expect in 2013 as we get closer to year end 2012. In any event given our low cost of capital and our ability to continue invest in properties at an average of going in cash cap rate of 10%. We expect our acquisitions to be immediately accretive.

Our portfolio continues to produce one of the highest EBITDAR lease coverage ratios in the REIT universe. And I know most of you know this, but again just to be sure we are all on the same page. We analyzed our lease coverage ratio using EBITDAR, not EBITDA or like some of our peers as it means to be conservative we made the assumption that if we were to have to replace the management company, we would still have to pay a third-party management fee.

Our overall portfolio EBITDAR lease coverage for properties that have been in our portfolio for at least 12 months is right at 5 times. Both the LTACHs and IRFs produced a good year-over-year increase to their coverage with the LTACHs increased into 2.5 times and the IRFs to 3.6 times. The only decline we saw was in the acute care sector with an approximate 5% quarter-over-quarter decline. This is fairly normal for the third quarter over second quarter results for the acute care hospital sector and it’s been similarly reported by non-MPT hospitals all across the country.

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