Medical Properties Trust Inc (MPW) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the 2007 Medical Properties Trust Earnings Conference Call. My name is Tanya and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to the host for today's call, Mr. Mike Stewart, General Counsel and Executive Vice President. Please proceed, sir.

Good morning. Thank you for joining the Medical Properties Trust conference call to review the company's announcement today regarding its results for the fourth quarter of 2007. With me today are Edward K. Aldag Jr., Chairman, President, and CEO of the company, and Steven Hamner, our Executive Vice President and Chief Financial Officer.

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 Federal Securities laws. 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 disclaims any obligation 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 refer to our web site at www.medicalpropertiestrust.com for the most directly comparable financial measures and related reconciliation. I will now turn the call over to our Chief Financial Officer, Steve Hamner.

Thank you, Mike. And I thank you all for joining us and taking interest in our company and participating in our call this morning. As is our practice, I will briefly summarize the fourth quarter financial results that we released this morning, describe certain transactions that affected the historical results, and then provide some forward-looking information about our expectations for 2008 results. I will then turn the call over to Ed Aldag. Let me start by referring you to the press release, and if any of you need a copy, it is now posted on our website at medicalpropertiestrust.com or feel free to call Betty in our office at 205-969-3755, and she will fax or PDF a copy to you.

As described in the press release, we reported FFO from continuing operations for the fourth quarter of 2007 of $0.30 per diluted share. For the year, that amount was $1.14 after considering previously reported items in this year's first quarter. These amounts represent increases of 20% and 24% respectively over the year earlier periods. There is some additional information that may be important as you consider our reported earnings, and I want to summarize that information.

There are two significant differences between the so-called white paper definition of FFO and what we have reported this morning. First, as we reported earlier in the fourth quarter, we successfully completed this indication of a new four-year credit facility at the end of November. At the same time, we terminated our existing facility and accordingly wrote off approximately $2.8 million of loan costs associated with that old facility. This represents approximately $0.06 per diluted share. Secondly, last year, we terminated a lease and sold the underlying real estate. In the interim period of about three months, we were responsible for funding the operations of the hospital. Both the gain on sale of the real estate and our losses on operations are treated as discontinued operations. In the fourth quarter, we charged approximately $528,000, primarily in legal fees or $0.01 per share, to discontinued the operations related to the ongoing litigation surrounding the termination of the lease. These two items result in our reported FFO from continuing operations of $0.30 for the fourth quarter. It's also important to remind you of our previous disclosure that we received a pre-payment penalty in the fourth quarter of approximately $1.1 million, that's net of scheduled payments from the mortgagee, which is equivalent to about $0.02 per share.

Before we move on from the historical results, I want to point out a change to our G&A levels that we experienced in the fourth quarter. As we announced earlier in 2007, our compensation committee implemented a multi-year incentive plan that provides for equity awards to officers. The great majority of these awards are performance based, such that management does not earn the awards until our shareholders have received targeted levels of total shareholder return. In 2007, primarily because our share price declined, management did not earn any of these performance-based awards. However, it seems the accounting rules require us to amortize these shares into expense even though we have not earned them, and even though we may never earn them. The non-cash share-based compensation expense we were required to recognize in the fourth quarter totaled approximately $1.8 million or $0.04 per share. Of this, $1.2 million represented shares that management has not earned and may never earn. Finally, we have amortization of due loan costs of approximately $400,000 or $0.01 per share.

To summarize, when we evaluate an appropriate dividend level, we take all of these items into account. For the fourth quarter, after adjusting FFO from continuing operations, for $0.02 for the pre-payment, $0.05 for the straight line rent, $0.04 for the non-cash share based compensation and $0.01 for the loan cost amortization, we have what we call AFFO, adjusted funds from operations, in excess of $0.28 for the fourth quarter. The press release this morning also mentioned that we paid our $0.27 dividend earlier in January. I'll take just a moment to briefly review our new credit facility because we have discussed that in the past.

The committed facility is for an aggregate $220 million. We can increase this by another $130 million subject to market conditions. If we did so, our total leverage ratio based on yesterday's share price, would proximate 52%. We think it's important and meaningful that we completed this facility in the depths of what we call frozen credit markets when it was common for lenders to be aggressively reducing their commitments even to existing customers. In contrast, every single participant in our new facility -- and there are presently six leading Wall Street banks -- every single participant is a new lender to MPT. They perform very detailed underwriting on the company, and we consider their participation under these conditions to be a true testament to our historical success and to the outlook for our future growth.

So let me just mention a few things about our outlook. In our press release this morning, we estimated that based solely on our existing portfolio, we expect FFO of approximately $1.21 per share in 2008. We have in the past discussed the difficulty of providing accurate earnings forecast when our income statement is so subject to the timing and amount of acquisitions, and it remains true that even a single acquisition for us can have a meaningful effect on our results. However, let me summarize some key information that should assist analysts and investors evaluate our 2008 earnings outlook.

At January 1, 2008, we have approximately $677 million of assets under lease. The weighted average GAAP lease rate is about 12.1%. And remember that all of our cash lease rates reset on January 1. Accordingly, our expected quarterly run rate for straight lane rent in 2008 is approximately $2.5 million. That's per quarter. We have mortgage loans receivables totaling $185 million that pay an average interest rate of 9.2%. There are $64 million in other loans that pay interest at an average of approximately 10%. We presently expect approximately $500,000 in Vibra percentage rents.

As of today, our existing debt totals approximately $402 million. Of this, $260 million is fixed at approximately 7.25%, that's all and including amortization of cost, and $142 million floats at up to a 200 basis point spread over LIBOR. Yesterday we locked in a new 30-day LIBOR contract for approximately 3.3%. By the way, for tax and restructuring purposes, we maximized our borrowings on December 31 and repaid $83 million on January 2. So you will see a significant difference in the $402 million that we owe today versus the roughly $483 million that we owed at the year end.

Finally, with respect to 2008, we expect a quarterly GAAP G&A to approximate $4.2 million. Of this amount, based on our existing long-term incentive plan, and including the amortization of performance-based shares that have not yet been earned, approximately $1.2 million per quarter is share-based compensation. So finally again, we have approximately $2.9 million in loan costs for our existing fixed rate debt and the new credit facility that we believe will result in non-cash quarterly amortization in 2008 of approximately $365,000.

I'll be happy to take questions about our forecast or the historical results after Ed's comments. Ed?

Thank you, Steve. And good morning to all of you listening. And again, we greatly appreciate your interest in Medical Properties Trust. 2007 was a very strong year, both operationally and strategically for Medical Properties Trust. However, as we all know, it was a disappointing one from a stock price standpoint.

First, operationally. Coming into 2007, our goal for acquisitions was to invest an additional $200 million in health care properties across the country. We increased that goal mid-year to $300 million, and in fact, ended the year with new additional investments of over $300 million. We continue to diversify from our concentration with Vibra, decreasing their percent of our portfolio down to approximately 25%. Prime on the other hand increased above 30%. Their properties continue to show outstanding operational results in each of the nine prime locations as is true of all of our properties, truly stands as a separate entity, generally in different markets. We will continue to work to decrease the concentration of both Prime and Vibra in a concentrated effort to further diversify our already strong tenant base.

All of our properties continued to operate very well. All but four of the 27 properties, have EBITDA, are trending up from 2006 to the end of 2007. All of the four that trended down in 2007 have good plans to improve in 2008, and all four are well protected with corporate guarantees and cross defaults and are more than covering their rent. The Vibra properties all continue to perform very well with the exception of two facilities which are below where they were this time last year. But each has positive cash flows. The other Vibra facilities, all produced EBITDA, are significantly better in 2007 than in 2006. Moreover, Vibra expects three of its newly developed properties that we own to make substantial incremental contributions to Vibra's bottom line as they ramp up in 2008.

All of the Prime properties are doing very well with only two exceptions. The first exception is Paradise Valley, where prime is ramping up operation after purchasing the facility in May of 2007. The second is Centinela Freeman which Prime just purchased from CFHS holdings in November. The performance of both of these properties is guaranteed by Prime, the extremely well-capitalized parent company. All of the other Prime hospitals continued to produce EBITDA or lease coverages well in excess of four times.

Monroe continues to make great stride in its strategic initiatives. The management team has done an outstanding job of recruiting a new position base at the hospital which is critical for its success. They have brought on several new physician who practice exclusively at the hospital. The hospital also has purchased one primary care group and is negotiating with the second largest area primary care group to purchase their practice. They have brought on the largest physician group to provide 24/7 cardiology coverage and the largest orthopedic group to provide 24/7 ortho coverage. All of these events have provided a tremendous amount of credibility to this facility in the community.

Bucks County had a few very encouraging months in the late fall of 2007. However, December was a disappointing month, and January hasn't seen much improvement. The tenant there contacted us this week to inform us that they wanted to focus on their core business of renal care. They are the fourth largest provider of renal care in the world. They are currently in discussions to determine the best course of action for the hospital which could include anything from joint ventures to selling the facility to another operator. The hospital continues to have very strong physician support.

North Cyprus in Houston continues to set records. They have far exceeded their budgets and our expectations. They have already completed the fourth and unfinished floor with their capital to add another 28 beds to the facility. We are extremely proud of the success this facility for our investors, our tenant, and the people of the North Houston that have benefited from the services offered there. The HPA Redding facility performed above expectations for the short time we owned it in 2007, while the Twelve Oaks facility performed below expectations.

Most of the Twelve Oaks disappointment came from a non-cash, non-operational one-time expense, and the unexpected retirement of two physicians. However, 2008 has already seen significant improvements. The post acute care properties in Texas are performing well above expectations. Their coverages are significantly above most LTACH and rehab hospitals.

On the regulatory front, we were pleased with the signing of the ship bill in December, 2007, which among other things froze the 75% rule for rehab hospitals at 60% and eliminated the 25% rule for freestanding LTACHs. In addition to this, the recent CMS proposal to increase the reimbursements to LTACHs would prove to be very positive for our tenants. Many of our properties experienced significant capital improvements paid for by our tenants themselves. As I previously stated, North Cyprus completed and shelved in the fourth floor to add 24 more MedSurg beds plus four Cardiac Critical Care beds and two more ORs all for a total of $6.5 million.

Sherman Oaks, a Prime property, totally upgraded the Emergency Room, Radiology Unit, their Burn Unit, their mechanical units, along with items such as a nurse caller system and other patient care systems for a total of $5 million from their own funds. Montclair, also a Prime property, made the same type of improvements made at Sherman Oaks for $1.5 million. Huntington Beach, another prime property, added $1.5 million for similar items. Paradise Valley, also a prime property, added $1.5 million of renovations, again paid for by Prime. The HPA Shasta Regional Hospital approved -- improved its facilities by $3.5 million, paid for by HPA. All in, our tenants have invested almost $20 million of their own capital in our properties for our benefit in addition to their investments in equipment upgrades.

Our investment opportunities for 2008 are very exciting. We have given the guidance of $200 million of new investments again for 2008. Some of the adversities in the market brought on by the credit crisis have presented us with opportunities we would not have necessarily had this time last year. We currently have a shadow pipeline of approximately $750 million to $1 billion. Our current liquidity gives us the ability to meet our 2008 goals without going back to the capital markets, but we are also exploring other avenues to take advantage of some of these extraordinary opportunities.

All of us are keenly aware the disappointing performance of our stock and most stocks in 2007. We understand that some of this was due to the market forces out of anyone's control, and some of it was due to a lack of understanding of our company by the investor world. To that end, we will continue to execute our plan and control the things that we can while we wait for the market conditions to return to something more logical. We will also make getting out in front of investors to tell our story a top priority. The management team has made three trips in the last two months to do just that, and it is paying off. Our stock prices outperformed our peers in December and January, and in fact were up approximately 18% on the year. We will continue to execute on our business plan as we have done since our inception and to make sure that the investors understand our company and our fundamentals. We look forward to 2008 and our expectations are that 2008 will be another outstanding year in the life of our company. With that, operator, we'll be glad to take questions.

(OPERATOR INSTRUCTIONS) And please stand by for your first question. Our first question comes from the line of Jerry Doctrow with Stifel, Nicolaus. Please proceed.

Hi. Good morning.

Hi, Jerry.

I think the one thing I wanted to just clarify a little bit, you touched on the percentage rent coming from Vibra. And I'm not sure I remember all the details anymore, but they have the option at some point of repaying you the loan and the percentage rent sort of goes away. So I think we had modeled some of that in. So can you just sort of give me a little bit more color on what that arrangement is and what your expectations are for them repaying.

Sure. They are now required under those agreements to pay us half a percent, a percentage rent. It goes all the way away when two things happen. One, they repay the loan, which is now at $29 million, down to $20.5 million. And at the same time, have replaced or have -- we have done another $50 million in new properties with them. Now obviously, the biggest drive there is going to be their repayment, pre-payment of the loan. And we haven't made any predictions as to when that would happen. Our -- what we've said in the past is as these three new properties that Ed mentioned come on line and begin to generate what Vibra believes will be very strong EBITDA margins, those properties will be available for refinance through third parties. The proceeds of which would presumably be used to pre-pay our loan.

Okay. So if we're assuming that could be, I don't know, a later '08 event or whatever, did you have any -- in your -- let me ask you this way. In your guidance, you assume that the Vibra percentage rate is there for all of '08?

Yes.

Okay, and any sense of just what's the range of reasonable assumptions about whether it could go away, or is that something we should be thinking about for '08, or is it really not a possibility in '08 do you think?

Well, I wouldn't say it's not a possibility because Vibra continues to perform extremely well, continues to generate incremental EBITDAR. So what that does for them is provide alternatives to our, frankly, very expensive financing for them.

Okay. So it could happen. And then a number I missed as you were running through it. On the -- just the G&A -- your sort of GAAP G&A as you were talking about your guidance for next year, you said it was like $1.2 million per quarter was the share-based comp. but I didn't get the total.

The total G&A?

Yeah.

Was I think we said 4.8.

4.8. That's per quarter? Or that's a --

That's quarter. Right. Quarter.

Okay. And I guess -- I mean, it sounds like you're very bullish on sort of prospects. Any sense of sort of yield on new investments given the current kind of investment environment?

Yeah. I'll let Ed answer that. Let me clarify, $4.2 million is our estimated G&A run rate.

4.2, okay.

Yeah.

Okay.

Jerry, we still think that the cap rates that we're seeing for our potential investment in 2008 is a very wide range from 9 to 11. If you look overall at where the cap rates were for the same potential tenants this time last year, you may be seeing an additional 50 to 75 basis point increase. The reason you haven't seen our lowered number increase from our range in this time last year is that we have opportunity to a stronger credit tenants today than we had last year because of the alternatives that they have aren't as many.

Okay. And when you say cap rate, is that really, we're really talking yield in terms of where your initial yields could be?

Yeah. And I'm talking about like going in.

The going in cash rate.

Going in cash rate.

That's correct.

Okay. And then, I don't know whether I want to go through, sort of each and every one, but there were a couple that you just talked about in terms of just issues that were sort of still underperformers or declining this or that. I just -- maybe just if I could quickly touch on -- That doesn't sound like there were any of them that you were particularly concerned about. Is that a fair characterization of your views?

Jerry, I think the only one that is really different from where we've been in the past is the Bucks County situation and that's just really too early for us to comment much on at this point.

And you have sort of full faith and credit across that whole -- what's the name of tenant again, the --

Well, the parent company there is DSI Holding.

Yeah. And do you have full faith and credit from them, or is it just a facility-based deal? So --

Well, it's more than a facility-based deal, but not a whole lot -- we have limited parent company guarantees on that.

Okay. Okay. Okay. Okay. So then and there, they've contacted you just -- I know it's early, but just any sense you're going to jointly pursue transfer from another tenant or sale or --

Or something, Jerry. Really, we've had just one meeting with them, and as I mentioned earlier, they're the fourth largest provider of renal care. They're funded by an equity partner, and their equity partner wants them to focus on that business.

And in fact one of the alternatives, and I think their ideal alternative would be to focus this hospital more on specialized renal care. So that's one of the alternatives that we will consider with them.

Okay. Could be it was set up to be a cancer hospital, right?

Well, they're set up to be a women's -- primarily, a women's breast hospital.

Okay. Okay.

But it is truly a general acute care hospital.

Right. We were in it when we were on tour. So okay. And then in terms of Monroe, is there just a time period now when you might see yourself -- you're sort of running the deal now with Vibra as your sort of contract manager. So is there sort of an end game there, sounds like you're making progress, but there's an end game there where it would move to sort of a more traditional tenant relationship or --

Well, I think it is. We continue to improve it, Jerry. Let me make sure we clarify. Vibra is literally running the day-to-day operation.

Yes. Okay.

And we have 2-1/2 people here that spend a tremendous amount of time on the project but we're not running the day-to-day operation. But obviously, we are more involved than we would like to be. But everything and more are falling in place to make this hospital the success that we all thought it could originally be.

Okay. And then, is the end game there? I think that's all I was trying to get a better sense of, that either Vibra becomes a tenant there or you find someone else to step in and sort of tenant or sell or, you know, what's -- the operations are improving, is there a point where it's either normal in your portfolio or moves off, just trying to understand --

Well, Jerry, remember that this one -- we didn't terminate the lease on this one. So we do have a separate tenant here, and Vibra actually has an ownership in that tenant. When we brought them in to manage it, they actually took an ownership position in the tenant.

Okay.

But yes, the ultimate end game could be either one of those scenarios. It could be that we in Vibra are so pleased with their performance that -- and the hospital is doing so well that they continue to operate it with the existing partnership long term. But it, also obviously as it continues to improve gives us the opportunity to bring in other operators to be the tenant.

Okay. That's fine. Thanks. And last thing, and again, I think that there's a headline out today that it's part of Bush's budget which, again, we haven't looked at any details on this. He's proposing to eliminate basic cost of living for all the health care providers kind of across the board, again, not at all clear whether that will happen. Certainly, he's just a lame duck. Would something like that be an issue to you? Do you think it will create any additional pressure or not that big a deal?

Jerry, I can't comment on the proposal that came out this morning.

Okay. All right. Thanks.

All right. Thank you, Jerry.

Our next question comes from the line of Steve Swett with Keefe, Bruyette. Please proceed.

Good morning, Ed and Steve.

Hey, Steve. How are you doing?

I'm fine, thanks. Just a couple of questions. First, the big increase in your shadow pipeline and then the -- I think one of your answers to Jerry, you inferred that the cap rates have gone up about 50 to 75 basis points on I guess a consistent operator, although some of the operator mix in that pipeline has changed a little bit. And that's why the overall yield expectations haven't changed. Is that right?

That's exactly right.

And so if I infer from that that the increase in the size of your shadow pipeline over the past six or nine months, is that related to operators that wouldn't have been out there, say a year ago because they had plenty of other sources of capital? And now are looking at other options?

Some of that is absolutely true. This time last year, they had unlimited sources of equity and debt, and that's just certainly not the case today. So clearly, we've got opportunities with potential customers today that would not have thought of us last year. But in addition to that, as you recall, we increased our acquisition staff in November. You take away the holidays, that person has really been on board now for two months. And some of that has helped, as well.

Okay. And then, if you look at your cost of capital -- I guess this is a question for Steve. Perhaps. Where do you think you could raise debt capital today, secure debt capital to finance some of these transactions?

Well, Steve, I don't think there is yet a market for secured real estate debt capital for hospitals. We were making some pretty good progress in developing that market through the CMBS underwriting as late as early summer. Of course, that is totally off the table now. So --

It hasn't started to clear up?

No. No. Though I think we are probably over the horizon before we would see hospital loans go into a CMBS at this point.

Okay. It leads me into my final question to the comment that was made about exploring other avenues. Could you just clarify that in any more detail, Ed? Is that related to finding joint venture partners or a more strategic partner?

It is all of the above including maybe some strategic asset sales or swaps.

Okay. Thanks a lot.

Thank you, Steve.

Our next question comes from the line of Michael Mueller with J.P. Morgan. Plea proceed.

Hi, guys, it's Joe Dazio here.

Hey, Joe.

A couple of questions on Bucks County. First, how much do you attribute the tenant's desires to, focusing -- want to focus on renal care versus the two down month? It's a kind of a 50/50 mix of all, 'cause it seems like throwing in the towel after just two down months is a little unexpected.

Joe, I'm not sure that you could look at it exactly like that, and again, I want to be careful what I say because we haven't had a whole lot of discussions but I'm not sure that some of the down that you're seeing -- clearly some of the down that you saw on December were holidays. But some of the other down also could be that the decision was made much earlier than what we heard about this week.

Okay. How would the -- you said they were looking to sell? Like how does that work with the lease, or were you looking to sell?

No. They're looking at all -- what all of their options are. As I said, their equity provider wants them to focus entirely on renal. As Steve mentioned, one of their options could be to convert a large portion of this hospital to renal to fit in with their model plan. Another option for them obviously would be to bring in a tenant that's acceptable to us. And then they're obviously -- there are options all in between that including joint ventures. So we are very early in the discussions about which direction to take but it is a very amenable discussion with -- between the management team of DSI and the people here at Medical Properties.

Okay. Quick question for Steve on guidance. The -- you mentioned taking down more debt at the end of the year, and I guess paying some off right after the New Year for tax purposes. I didn't quite catch how much you said it was. Was it $80 million?

At about $80 million. Right.

Okay. How much is outstanding on the line right now?

On the lines rights now, there is $37 million.

Okay.

Keep in mind that part of that facility, though, is a term piece also. So total on the revolver piece, the line and the term is right at $103 million.

Okay. Got it. And then last question, sorry, if I missed part of this earlier. You mentioned the -- I guess the Town and Country running through disc ops. Should we expect that just continue for the foreseeable future until we hear otherwise, or is that something that could go away?

Well, it will go away at some point. Really, the only cost you're seeing now is legal. I think it probably is reasonable to expect that to continue at least through the early part of this year. We just happen to be in probably the most expensive part of any legal case, and that's well into discovery and depositions. So I think you're right, Joe. You should probably expect that for another quarter or so anyway.

Okay. Thank you very much.

Thanks.

Ladies and gentlemen, as a reminder, that is star-one for questions. Our next question comes from the line of Peter Costa with FTN Midwest Securities. Please proceed.

Hi, guys. A couple of questions. You mentioned the two facilities, the Vibra facilities that are performing worse. Which two facilities are those, and what's your investment in those two facilities?

It's the Bowling Green, Kentucky facility, and the North Valley facility in Denver. And Steve, our total investment in the --

Total is right at $45 million on those two.

And total is $45 million?

Right.

And what's the cause of the underperformance there? Do you have any idea now?

Yes, absolutely. The Bowling Green one is a rehabilitation hospital, and as I said on these calls numerous times, it is the only rehab hospital in our portfolio that has not fully adjusted to the readjustment of the 75% rule, the movement from a predominantly orthopedic mix to a predominantly neurological mix. Bowling green is a relatively small community -- 300,000 plus. Basically only had two neurological groups, one of those groups has moved to Nashville, so it's a total re-education process there. The facility is making money, but it used to be prior to the shift, it was truly a superstar facility. So to see a decline from 2006-2007 is not an end-of-the-world scenario by any stretch of imagination. It's still performing, but it's just not the superstar that it was earlier. The Denver facility is a facility that was a part of the original six facilities that Vibra acquired with us. It was a facility that had we been able to choose, it's not one that we or Vibra would have acquired, but it came as a part of the other package. Our investment there is relatively small. It is a very competitive environment. It's primarily an LTACH/skilled nursing facility. It is, as I said, in a very competitive environment. Vibra is in the process of adding some new services and have high expectations for it in the middle to late part of '08 and the rest of '09.

And Peter, let me just clarify because you may not have the history of the original Vibra transaction. But it was an initial six properties, all of those plus the three properties we've since then done for Vibra are all cross defaulting and cross lateralized and guaranteed, so even if we had a situation in one of these properties where there was a deficiency in cash flow, which there's none, Vibra as a whole generates substantially more than enough to continue to make any make-up payments from any particular facility.

Okay. So it's the same ones as before?

Yes.

Okay. And then in terms of the share-based compensation, you talked about I think that that was $1.8 million in the quarter. And then you talked about projecting going forward to $1.2 million per quarter. Is that to say that your G&A is going to drop by $600,000 every quarter going forward or, just by that amount, or is there something else going on the G&A line that we should be thinking about?

Well, G&A going forward is going to be 4.2. There is a pretty significant amount of kind of catchup on this adjustment in the fourth quarter. So you should not expect $1.8 million. I'm sorry -- we're right at $1.8 million going forward in the quarter. I think we said $1.2 million is going to be performance-based share-based compensation in each of the 2008 quarters.

So the $600,000, where will I see that then? What's going to be taken -- the drop from $1.8 million in this quarter to $1.2 million, an increment of $600,000, or where is that going to show up? Where do you get that gain back, or is there some cost that's coming in? What's going to be the incremental cost there that covers that?

I guess I'm still not following your question. But the quarterly run rate of G&A that we gave for 2008, obviously it includes adjustments to a number of line items from vis-a-vis the 2007 fourth quarter. And that's how we came up with the total of $4.2 million.

Okay. So just focus on the 4.2. All right. And then can you go through sort of exactly what was the accounting there, the changes in accounting that occurred regarding the Vibra releases as they were renegotiated on the straight line versus the percentage rents? You've covered a little of it. But just in complete -- the total package of what exactly happened there in terms of what you're now paying for straight line rents on the Vibra facilities. And what you expect the percentage rates, we got that as $500,000 going forward but the straight line has come down some? Then what's the effect of the other stuff that went on with that renegotiation?

Yeah. Peter, let me suggest this because that's the conversation that we've had off and on for the past probably three quarters. So why don't I suggest you give me a call and I'll be happy to give you a call. And we can take all the time and detail to get you caught up on that.

Thank you.

There are no further questions at this time. I would now like to turn the call back over to management for closing remarks.

Again, we want to thanks all of you for your time and interest. And as always, if you have any followup questions today or later, please don't hesitate to call Steven Hamner, Edward Aldag Jr., or Charles Lambert. Thank you very much.

That concludes the presentation. You may now disconnect and have a great day.