Medical Properties Trust, Inc. common stock

Good day and welcome to the Medical Properties Trust second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's 60-minute call is being recorded. I would now like to turn the conference over to Charles Lambert. Please go ahead.

Thank you and good morning. Welcome to the Medical Properties Trust conference call to discuss our second quarter 2024 financial results. With me today are Edward K. Aldag, Jr., Chairman, President, and Chief Executive Officer of the company, Steven Hamner, Executive Vice President and Chief Financial Officer, Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer, and Rosa Hooper, Senior Vice President of Operations and Secretary. Our press release was distributed this morning and furnished on Form 8K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at MedicalPropertiesTrust.com in the Investor Relations section. Additionally, we're 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 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 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 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.

Thank you, Charles, and thanks to all of you for joining us this morning on our second quarter 2024 earnings call. I'm pleased to be joined again today by Steve Hamner, Kevin Hanna, and Rosa Hooper. Also joining the call for Q&A this morning is Jason Fry. Jason has been with the NPT for 15 years and was recently named Managing Director of Asset Management and Underwriting. During the quarter, we continue to see positive trends across our global portfolio of hospital real estate. Consistent with what's been reported by large public operators, admissions and surgical volumes are increasing year over year, and the overall financial health of our hospitals is improving. Before Rosa discusses these portfolio trends in more detail, I would like to spend a few minutes providing an update on our capital allocation strategy as well as Steward Healthcare's ongoing Chapter 11 restructuring process. Beginning with our strategy, we indicated last quarter that we were on track to exceed our initial $2 billion target for additional liquidity We have successfully carried the momentum forward, executing several additional transactions at attractive valuations, including the July sale of freestanding emergency department facilities, as well as one general acute care hospital in Arizona to Dignity Health for approximately $160 million, or an implied cap rate of less than 7.5%. As a result, we have generated $2.5 billion in total liquidity to date and repaid all debt scheduled to mature in 2024. We remain focused on accelerating debt pay down and have several available levers to create additional liquidity comfortably satisfying our expected maturities in 2025 and beyond. Turning to Steward. This is understandably a complicated restructuring process involving several interested stakeholders with competing priorities. The Massachusetts market has received the most public attention to date, which is particularly unfortunate as the noise in Massachusetts has slowed down sales process in other important markets where transitioning stewards' ownership is expected to be more straightforward. As a reminder, The eight properties that Stewart operates in Massachusetts are 50% owned by MPT through our interest in a joint venture with Macquarie Infrastructure Partners. These properties are also subject to a master lease agreement that's separate from all other Stewart properties around the country. Since early 2024, well before Stewart's Chapter 11 filing in May, We have sought to work collaboratively with Stewart and the Commonwealth to keep its hospitals functioning and minimize patient disruption through the transition to new operators, including stepping in to provide necessary capital when no other party was willing to do so. We have regularly met with the Department of Health and Human Services. We have participated in several rounds of negotiations with state officials to discuss viable solutions. We believe all of these hospitals are critical to the health care of the respective communities. And over the years, we have invested approximately $140 million over and above our original purchase price into these eight facilities to fund various infrastructure upgrades. We have long maintained these facilities can be run profitably by other operators. And the recent bidding process validated this belief. Quality operators, including some of the largest private hospital systems in the country, showed early interest in submitting or actually submitted bids, contemplated various rent concession scenarios that NPT and Macquarie were willing to grant. In short, we believe there were several viable paths to keeping all eight of these hospitals open, and NPT was willing to be a part of the solution to avoid closure of any of the hospitals. Unfortunately, the considerable volume of inaccurate and negative commentary scared away or discouraged many for-profit and out-of-state operators from participating in the process. The Commonwealth's focus seems to have been on transferring ownership of these hospitals only to in-state, not-for-profit operators, and ultimately, the regulators determine who receives the license to operate these facilities. We are deeply concerned that the recent criticism of privately owned health care businesses and real estate owned by REITs stems from a misunderstanding that will only damage access to care and employment opportunities for health care workers over the long term. The fact of the matter is every dollar of a hospital's own resources that is used for real estate is a dollar that is unavailable to invest in valuable patient-facing categories. and Cell Leasebacks have proven over the long term to be a relatively inexpensive financing alternative compared to the other choices. Given the conditions currently being imposed on the sales process in Massachusetts, we believe exiting these eight properties and allowing Steward and the Commonwealth to determine the most appropriate outcome is in the best interest of all stakeholders. Our primary objectives have always been to ensure that the health care of these communities benefits from our business model and to protect the best interests of our shareholders. We are obviously disappointed with the outcome in Massachusetts, but subject to court approval, we expect positive results in Stewart's remaining markets based on the real estate agreements we have negotiated with new operators as well as others that are close to being finalized. We urge all parties in the process to move with a greater sense of urgency for the sake of all of the local communities. I'll now turn it over to Rosa to discuss the performance trends across our portfolio.