Medical Properties Trust posts USD 140 M loss for fourth quarter

Medical Properties Trust, Inc. today announced financial and operating results for the fourth quarter and full-year ended December 31, 2022, as well as certain events occurring after the quarter end.

Net loss of ($0.24) and Normalized Funds from Operations (“NFFO”) of $0.43 for the 2022 fourth quarter and net income of $1.50 and NFFO of $1.82 for the full-year 2022, all on a per diluted share basis;

Fourth quarter 2022 net loss and full-year 2022 net income include a real estate impairment of approximately $171 million related to four properties leased to Prospect Medical Holdings (“Prospect”) in Pennsylvania as well as a write-off of roughly $112 million in unbilled Prospect rent also included in Funds from Operations (“FFO”) but excluded from normalized results;

“The vast majority of our portfolio is positioned to support a significant inflation-based increase in cash rents for 2023,” said Edward K. Aldag, Jr., Chairman, President, and Chief Executive Officer. “On the other hand, our initial outlook for this year contemplates a conservative scenario due to the underperformance of Prospect’s Pennsylvania hospitals that we first communicated over a year ago, as well as the process by which we expect to recover our full investment in Prospect’s Pennsylvania and Connecticut hospitals.”

Included in the financial tables accompanying this press release are information about the Company’s assets and liabilities, net income, and reconciliations of net income to NFFO and AFFO, including per share amounts, all on a basis comparable to 2021 results, as well as a reconciliation of total assets to total adjusted gross assets.

Portfolio update
In December, MPT acquired for £233 million six of the largest, highest acuity, most profitable, and best-known Priory inpatient behavioral health facilities, comprising 374 beds in the vicinity of London, Manchester, and Bristol in the United Kingdom. The third-party seller of the real estate provided MPT with roughly £105 million in attractive seller financing, and MPT assumed the in-place lease at an attractive cash yield, with inflation-based rent escalators and more than 20 years of the remaining lease term. The merged Priory and MEDIAN platforms are expected to continue to source select attractive real estate opportunities.

MPT plans to reallocate capital away from real estate leased to Prospect through the previously announced sale, predominantly for cash, of its Connecticut hospitals later this year, as well as by exercising lease provisions entitling it to the significant value embedded in Prospect’s managed care platform. For this to occur, 12 to 18 months is necessary to allow Prospect to recapitalize and prepare its managed care business for sale or recapitalization.

The Company has total assets of approximately $19.7 billion, including $13.4 billion in general acute care hospitals, $2.7 billion in behavioral health facilities, $1.4 billion in inpatient rehabilitation facilities, $0.3 billion in long-term acute care hospitals, and $0.2 billion of freestanding emergency room and urgent care properties. MPT’s portfolio includes 444 properties and approximately 45,000 licensed beds across the United States as well as in the United Kingdom, Switzerland, Germany, Australia, Spain, Finland, Colombia, Italy, and Portugal. The properties are leased to or mortgaged by 55 hospital operating companies.

Operating results and outlook
Operating results for the fourth quarter and year ended December 31, 2022, were a net loss of ($140) million (($0.24) per diluted share) and a net income of $903 million ($1.50 per diluted share), respectively, compared to net income of $207 million ($0.34 per diluted share) and $656 million ($1.11 per diluted share) in the year-earlier periods.

NFFO for the fourth quarter and year ended December 31, 2022, was $258 million ($0.43 per diluted share) and $1,088 million ($1.82 per diluted share), respectively, compared to $279 million ($0.47 per diluted share) and $1,036 million ($1.75 per diluted share) in the year-earlier periods

The Company is introducing initial 2023 calendar estimates of per share net income and NFFO of $0.83 to $0.98 and $1.50 to $1.65, respectively. At their high end, the ranges reflect management’s base case expectation that certain amounts are recovered from Prospect and recognized as revenue in the second half of 2023, while their low-end accounts for the remote possibility that the entirety of this revenue is recognized after 2023. The estimates are based on an existing portfolio which includes the impact of binding disposition transactions and changes to lease terms but excludes expected future contributions from development and other capital projects, the possible future impact of deleveraging, and other capital markets strategies.

These estimates do not include the effects, among others, of unexpected real estate operating costs, changes in accounting pronouncements, litigation costs, debt refinancing costs, acquisition costs, currency exchange rate movements, changes in income tax rates, interest rate hedging activities, write-offs of straight-line rent, other impairments or other non-recurring/unplanned transactions.

Moreover, these estimates do not provide for the impact on MPT or its tenants and borrowers from the global Covid-19 pandemic. These estimates may change if the Company acquires or sells assets in amounts that are different from estimates, market interest rates change, debt is refinanced or repurchased, new shares are issued or repurchased, additional debt is incurred, other operating expenses vary, income from equity investments vary from expectations, or existing leases or loans do not perform by their terms.
MB Bureau