Medical Properties reports 3Q 2008 results
HIGHLIGHTSDuring the third quarter 2008, the Company:Posted third quarter normalized Funds from Operations ("FFO") of approximately $19.7 million or $0.30 per diluted share and Adjusted Funds from Operations ("AFFO") of $20.9 million or $0.32 per diluted share;Delivered a 54.5% increase in total revenues year-over-year;Paid a third quarter cash dividend of $0.27 per common share on October 16, 2008;Completed the acquisition of the two remaining facilities in the previously disclosed $357.2 million, 20-property portfolio acquisition, increasing total assets to $1.3 billion.More recently:The Company entered into a new long-term lease agreement for its Shasta Regional Medical Center in Redding, California, obtaining an ownership interest in the new operator as part of the lease agreement;Achieved positive operating earnings at Monroe Hospital;Agreed in principle to the restructuring of the investment in the DSI of Bucks County hospital to give MPT an interest in the operating entity.Edward K. Aldag, Jr., chairman, president and chief executive officer, commented, "During the quarter, we made significant progress in regards to our Shasta, Bucks County and Monroe facilities, including the new long-term lease agreement we just announced at Shasta. Our management team utilized its considerable healthcare expertise to implement this creative transaction structuring, taking advantage of the recent changes to REIT regulations. The new agreement's participation features are expected to generate additional income to the Company of up to $20 million over the lease term, although our expectation is that we will earn that in the earlier years of the lease. This operating income is over and above the base rents from real estate that we will realize during the lease term; these rental revenues are based on an initial rate of 9.25% of the $63 million lease base and increase annually at a 2.0% rate generating a GAAP lease rate of 10.1%. Moreover, if the operator elects to purchase the property, we will receive an additional $3.0 million over what we paid for the facilities.""We have negotiated a structure with similar features for our Bucks County facility. In addition to the current rental revenues from our hospital real estate investment, we expect to earn significant operating income from our 15% interest in the Bucks County operating company. Also, our strategies at Monroe Hospital have now resulted in positive operating earnings, making our investment more attractive to potential purchasers or lessors. Through initiatives such as these, we continue to harvest the value we've created in our $1.3 billion portfolio to provide incremental capital for continuing investment and liquidity improvement."OPERATING RESULTSNormalized FFO for the third quarter 2008 was approximately $19.7 million or $0.30 per diluted share, compared with $14.9 million or $0.30 per diluted share for the third quarter 2007. AFFO for the quarter was $20.9 million or $0.32 per diluted share, compared with $13.3 million or $0.27 per diluted share for the third quarter 2007. Normalized FFO and AFFO for the third quarter 2008 excluded a non-cash $1.5 million write-off of accrued straight-line rent related to the new lease for Shasta Regional Medical Center and the recent closure of the River Oaks hospital. Per share amounts were affected by an increase in the weighted average diluted common shares outstanding to 65.2 million for the quarter ended September 30, 2008, from 49.4 million for the same period in 2007.For the first nine months of 2008, the Company reported normalized FFO of $59.9 million or $0.98 per diluted share, compared with $39.3 million or $0.83 per diluted share for the same period in 2007. AFFO for the first nine months of 2008 was $61.8 million or $1.01 per diluted share, compared with $36.9 million or $0.78 per diluted share for the same period in 2007. Net income for the first nine months of 2008 was $32.6 million or $0.53 per diluted share compared with $33.4 million or $0.71 per diluted share for the same period a year ago. Per share amounts were affected by an increase in the weighted average diluted common shares outstanding to 61.2 million for the nine months ended September 30, 2008, from 47.2 million for the same period in 2007.Normalized FFO and AFFO for the nine-months ended September 30, 2008 excludes: (1) an $11.1 million ($0.18 per share) non-cash write-off of accrued straight-line rent related to three Vibra properties that were sold during the second quarter and $1.5 million of accrued straight-line rent related to the new lease at the Shasta Regional Medical Center and the recent closure of the River Oaks Hospital; (2) a $3.2 million write-off of deferred financing costs related to an interim facility that was committed by a syndicate of banks in March 2008, but not utilized, to facilitate the recent portfolio acquisition, and (3) a $2.1 million write-off of receivables of discontinued operations in the second quarter. Additionally, normalized FFO included a $7.0 million ($0.11 per share) early lease termination fee received from Vibra Healthcare in the second quarter.PORTFOLIO UPDATEAt September 30, 2008, the Company had total real estate assets of approximately $1.1 billion, a 34% increase for the nine-month period ended September 30, 2008. At the end of this same period, the Company's real estate portfolio included 49 healthcare properties in 21 states. A total of 46 facilities are owned by the Company and leased to 14 tenants. These include 24 general acute care hospitals, 13 long-term acute care hospitals, six inpatient rehabilitation hospitals and six wellness centers. The remaining three assets are in the form of first mortgage loans on general acute care facilities leased to two operators.