Medical Properties Trust Q3 profit swings to $202 million on asset sales

Medical Properties Trust, Inc. (MPT) swung to a profit in the third quarter, reporting net income of $202 million, or 34 cents per share, against a loss of $78 million a year earlier, according to a press release furnished with an 8-K filed on Oct. 29.

The company recorded a $158 million gain on asset sales in the quarter and a $70 million gain tied to the repayment of debt, the company said.

The company is a self-advised real estate investment trust formed in 2003 to acquire and develop net-leased hospital facilities. As of Sept. 30, it had 365 properties and about 37,000 licensed beds, according to the release.

Here's how the company did:

• Net income per share: 34 cents vs. a loss of 13 cents a year earlier
• Total revenue: $250.14 million vs. $237.52 million a year earlier
• Normalized funds from operations per share: 11 cents vs. 13 cents a year earlier
• Dividend declared per share: 9 cents vs. 8 cents a year earlier

Asset sales and debt

The company completed asset sales that produced about $680 million in cash proceeds in the third quarter, representing an aggregate $158 million gain. The sales included its remaining interest in five hospitals in Utah, sold for about $174 million, and its interest in the real estate of two hospitals in Idaho, sold to affiliates of Intermountain Health for about $371 million.

The company said the sale prices exceeded its original investments. It said the proceeds are available for repayment of debt and other balance sheet improvement.

The company completed a private offering of about $2.4 billion of secured notes. The proceeds were used to repay existing debt, including the 2026 notes and about 50% of the 2027 notes, the company said.

Chairman, President and Chief Executive Officer Edward K. Aldag, Jr. said, “Our results this quarter demonstrate the decisive steps we have taken to strengthen our balance sheet and create greater flexibility to further reduce debt and pursue selective growth opportunities.”

At the end of the quarter, debt, net was $9.26 billion. The company reported an adjusted net debt to annualized EBITDAre ratio of 8.7 times.

Tenant and guidance

The company said its operator HSA has faced revenue cycle management challenges that precluded payment of its September rent. That reduced NFFO by two cents during the quarter, the company said.

HSA recently engaged Ovation Healthcare to oversee operations across the portfolio and improve billings and collections, the company said. The company also provided additional working capital support to HSA during the quarter.

The company continues to expect portfolio cash rents in excess of $1.0 billion in 2027, even after the reduction of rental income associated with assets sold in the third quarter. That estimate includes conservative assumptions about rental income from cash basis tenants, including HSA.

Revenue and costs

General acute care hospitals produced $157.6 million, or 63.0%, of third-quarter revenue. Behavioral health facilities produced $54.6 million, or 21.8%, and post-acute care facilities produced $35.9 million, or 14.4%, the company's supplemental information shows.

Circle Health was the largest source of revenue by operator in the quarter at $54.8 million, or 21.9% of the total. Priory Group contributed $28.3 million.

Interest expense rose to $153.1 million from $132.4 million a year earlier. Real estate and other impairment charges, net, fell to $23.9 million from $81.8 million. General and administrative expense was $29.0 million, down from $37.7 million.

Earnings from equity interests were $7.0 million, compared with $34.4 million a year earlier. The company's supplemental package is available in the Investor Relations section of its website, www.mpt.com.