Medical Properties Trust Inc (MPW) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2008 Medical Properties Trust Inc. earnings conference call. My name is Jeri and I will be your operator 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 the conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Mike Stewart, Executive Vice President and General Counsel. You may proceed, sir.

Thank you, operator, and good morning, everyone. Welcome to the Medical Properties Trust conference call to discuss our fourth-quarter and full-year 2008 financial results. With us today from senior management are Edward K. Aldag, Jr., Chairman, President, and Chief Executive Officer, and Steven Hamner, Executive Vice President and Chief Financial Officer.

A press release was distributed this morning, January 29, and will be furnished on Form 8-K with the SEC. If you did not receive a copy, it is available on our website at www.medicalpropertiestrust.com, in the investor relations section. Additionally, we are 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 our underlying -- such forward-looking statements. We refer you to the Company's reports filed with the Securities and Exchange Commission for a discussion of these factors that could cause the Company's actual results or future events to differ materially from those expressed in this call.

The information we provide 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 measure in accordance with Regulation G requirements. You can also refer to our website at www.medicalpropertiestrust.com, for the most directly comparable financial measures and related reconciliation.

I would like to turn the call over now to our Chief Executive Officer, Ed Aldag, for his opening remarks.

Thank you, Mike, and good morning, everyone. Thank you for joining us on today's conference call. Before turning the call over to our Chief Financial Officer, Steve Hamner, to review our financial results, I would like to highlight our achievements for the year, provide some perspective on trends within the healthcare industry, and then update you on the state of our portfolio.

In 2008, we made dramatic progress on growing and diversifying our real estate platform. For the full year, we have made $425 million in healthcare real estate investments, which is over $200 million ahead of our original objective. For the year, we increased total healthcare investments by over 40% to more than $1.3 billion at year-end. These investments have broadened both our geographic and tenant diversification while increasing the overall scale of our real estate platform.

Today we have a total of 51 healthcare properties in 21 states. For the full year, the Company delivered a 22% increase in total revenues. One of the most important measures of diversification for our portfolio is how much does any one property represent of our total portfolio. In 2008, we made great progress in this area. Today no one property represents more than 6% of the total portfolio and only five represent 5% or more.

Our investments in 2008 also have substantially improved the credit strength of our portfolio. In a few minutes, Steve will describe our anticipated 2009 lease and interest revenue, but it is important at this time to note that more than 67% of our total revenue is generated by some of the strongest hospital operators in the country, including some publicly reporting companies. And while our operator Prime Healthcare Services is not publicly traded, we do include the parent company financial statements in our periodic filings so investors can see for themselves how strong that operator is. By the way, Prime currently ranks among the largest 12 hospital operators in the entire country.

We expect that as our portfolio grows we will continue to focus on acquiring hospitals that are operated by companies like these that have demonstrated their expertise and ability to operate profitably in good and bad economic and regulatory conditions. In 2003, the year we formed Medical Properties Trust, one of our principal goals was to become the leading source of financing of hospital real estate nationwide. With the completion of our 2008 acquisitions, we believe we are now the company to turn to in real estate financing for hospitals across the nation.

Now I would like to take a moment to speak to what's happening within the healthcare industry and in particular hospitals. There have been some reports within the media about the state of hospitals and specifically the possible negative effects the country's recession is having on or may have on hospitals broadly. However, as with news reports in general, they are broad reports that lump all hospitals in the same category.

In reviewing the hospital sector, just like any sector, it is important to remember that not all hospitals are the same. Our LTACs and rehab hospitals for example have very little exposure to commercial insurance and private pay, which could be affected by the nation's rising unemployment. While it is true that the rising unemployment will likely increase the number of uninsured, you cannot assume a direct proportional effect from the unemployment to utilization of hospitals as not all of these people were or are customers of hospitals.

In fact, when reviewing hospital utilization in recessions past, even the deep recession of the mid-'70s, utilization for hospitals actually went up. Even in bad times, people need hospitals. In fact, the hospital sector was the only private sector in the US economy to experience job growth in 2008 and furthermore, these jobs were not front-end loaded in 2008. Hospitals actually experienced job growth just this past December and there continues to be nursing vacancies to be filled throughout the country at more than 100,000.

We compared our hospitals that were in our portfolio in both November 2007 and in November 2008. The results are very positive and further reflect the strength of our portfolio and MPT especially during the economic crisis the country is experiencing.

Patient days were 8.7% higher in November 2008 compared to November 2007. Outpatient visits were 6.5% higher in November '08 compared to November '07. Emergency room visits remained unchanged. Net revenues were 7% higher in November '08 compared to November '07 and bad debt was 4.4% lower in November '08 compared to November '07.

While we certainly agree that all companies including hospitals are being very cautious with their capital expenditures during these uncertain times, we are confident that our portfolio is well-positioned to not only weather but to outperform the current market. Four of our hospitals are actually undergoing some form of expansion in order to keep up with their increasing profitable utilizations.

Healthcare spending, particularly the hospital sector, is expected to continue to increase throughout 2009 and years thereafter. It is already very clear that the Obama administration will continue to make increasing access for healthcare to all Americans one of its top priorities. We expect that shortly after the stimulus package, Congress will pass and the President will sign a bill that will increase funding for hospital utilization of the country.

While we anticipate that some of our facilities may see some effects of the recession, it is important to note that when reviewing any concerns you may have about how a slowdown in the economy might affect our tenants, our EBITDAR lease coverages are some of the very best in the industry. While it is a little difficult to compare our portfolio from year to year because of acquisitions during the year, our overall lease coverage portfolio wide increased approximately 30% from 2007 to 2008. More specifically, the acute care hospital coverage was 4.81 times for 2008, LTACs 1.77 times, and our rehab hospitals 3.37 times.

There are additional trends that we are seeing in the hospital sector that are also promising. These include continued advancement in technological innovations and demand from both physicians and patients for modern conveniently located facilities. The significance of these trends is that healthcare operators are increasingly conserving their capital for investment in operations and new technologies rather than investment in real estate. And therefore, there's increased demand to lease rather than own hospital facilities.

Our management team's ability to source, fund, and manage well-located hospitals position us well now and when overall economic conditions improve. Our tenants are well-funded, experienced healthcare facility operators and healthcare systems. In terms of revenues, our largest tenants are currently prime at 33.8% of revenues, (inaudible) at 15.4% followed by North Cyprus Medical Center, HealthSouth, IASIS, and Community Health Systems, each in the single digits.

Looking ahead, spreading investment exposure across the tenant base remains a key objective and we will continue to enhance tenant diversification as we did in 2008 with strategic activities such as the acquisitions we made in 2008. These activities may also include selective dispositions in refinancing.

So in summary, while the overall economic picture remains challenging right now, healthcare spending is robust and all trends point toward our portfolio's continued upswing. As well, the trend of healthcare operators to preserve capital positions our Company well. Our triple net lease structure affords operators the ability to channel that capital into facility improvements, technology upgrades, staff additions, and even new construction.

Now I will provide a brief update on specific assets. First as previously announced in November, we signed a new long-term triple net lease agreement for Shasta Regional Medical Center in Redding, California with Prime replacing the previous operator. The agreement provides us with an ownership interest in the new lease as well as additional rental revenue from a 5% increase in the value of the real estate from $60 million to $63 million.

This agreement should also generate valuable incremental income for us up to an additional $20 million based on the future profitability of the hospital's operations. This incremental revenue comes in the form of additional rent and as a profits interest in the operator itself and is expected to be paid from our 50% share in cash flow from the operations. It is important to understand that this incremental $20 million is over and above the contractual lease payments and requires no additional investment from MPT.

Regarding River Oaks and as communicated, we are pursuing various scenarios regarding the sale or releasing of the Houston campuses. This process is taking a bit longer than originally anticipated due to the after effects of Hurricane Ike as well as the overall state of the credit markets. However, we are still seeing interest in both campuses at values above or near our total investment in River Oaks. We are currently in negotiations with four different parties for these facilities. There is of course no assurance that we will complete a transaction with any of these parties.

Turning to Monroe Hospital, this facility continues to pose strong operating results as a result of our strategies we earlier implemented. In the fourth quarter of 2008, net patient revenue grew from $2.9 million in the month of September to almost $4.5 million in the month of December and EBITDAR grew from $331,000 in September to more than $1.3 million in December.

We continue our discussions with several large operators concerning a potential lease, purchase, or even joint-venture structures with potential operators for this facility. However, it is important to note that with the improved performance of Monroe, we have taken it off our internal special asset list, leaving only Bucks and River Oaks on that list.

We are also currently considering alternatives for our Bucks County facility. The current operator, DSI, has given notice that they intend to close the facility in February. Most of the potential new operators at Bucks have indicated they would prefer to obtain their own license instead of assuming the existing DSI license. Therefore, they would [refer] the closure. We recently entered into a nonbinding letter of intent with one of the proposed new operators, although no definitive agreement has yet been signed.

It is important to note that on an AFFO range that Steve will go over in a few minutes, we have assumed no revenue from either Bucks or River Oaks. We truly expect that both Bucks and River Oaks will generate revenue in 2009, but because we currently do not have binding agreements, we have assumed no revenue from these two facilities for this year.

Given current economic conditions, we are also continuing to improve our liquidity and overall financial position. We have taken several prudent steps to strengthen our balance sheet, including the adjustment of the dividend pay in the fourth quarter to $0.20 per share. This represents an annualized yield of approximately 15.25% based on the closing price of $5.24 on January 27.

Capital preservation is key for us, as any company in this current environment. In January, we completed a public offering of 13.4 million shares, generating net proceeds of approximately $68 million. While it is never preferable to raise equity in this type of environment when your stock price is clearly trading at deep discounts, we were extremely pleased that so many of our current and new investors recognized the benefits of this offering and purchased new shares. In fact, the offering in early January was so oversubscribed that we were able to complete the offering at market.

The current economic crisis worldwide is truly historic in nature and we knew there would be a small window of opportunity to raise new equity right after the first of the year and we wanted to be sure that we did not delay and miss this window. With this equity, MPT is well-positioned for the long term including future acquisitions once we see a bottom to the credit crisis.

So in conclusion, 2008 was a significant year for our Company in terms of investment and operations. If you were able to ignore the global negative effects on our stock price, and which as a significant shareholder in our Company I am no more able to do that than most of you, 2008 was a tremendous year for our company. Our properties performed very well. We have successfully repositioned two of the four properties on our special asset list, and we have positioned our balance sheet in a manner that allows us to be very well-positioned for the long-term.

At this time, I will ask Steve Hamner, our Executive Vice President and Chief Financial Officer, to go over our specific year-end and fourth-quarter results.

Thanks, Ed, and good morning, everyone. I will provide a brief overview of our financial results for the fourth quarter and full year 2008, but I want to spend the majority of my time reviewing our outlook for anticipated 2009 operations because our future operations will not be directly comparable to 2008 results. That is because since really the beginning of 2008, we have successfully completed a number of major transactions that have positioned MPT to thrive even through the unprecedented economic conditions that the world is in today.

Those transactions have resulted in a portfolio and capital structure very different and very improved from when we started the year. So let me proceed and then we will open up the call to your questions.

First, the historical quarterly results. For the fourth quarter of 2008, we reported normalized funds from operations or FFO of $0.22 per diluted share and adjusted FFO of $0.21 per share. There are a number of items unique to the fourth quarter that are included in FFO that I would like to go through with you briefly.

First, we charged off approximately $4.7 million, that's $0.07 per diluted share, a various receivables related to Bucks County. Of this amount, approximately $2.9 million or $0.05 a share is for previously accrued straight-line rent and we do not include that portion of the charge off in our normalized FFO. The remaining portion, roughly $1.8 million, is classified as bad debt and operating expense and is classified in the fourth quarter in the G&A line item.

We incurred approximately $1.4 million or $0.02 a share in legal expense related to the Houston Town & Country litigation. We continue to believe that the allegations have no merit and that we will prevail at trial, which we are prepared to start by the way in March. Moreover, we believe that some or all of these expenses may be recovered through insurance, but due to the uncertainty of future defense costs and the ultimate outcome of the trial, we cannot be assured that our total future cost will not exceed the limits of our insurance policies.

Also included in G&A is the deductible portion of damages sustained by our River Oaks campuses during Hurricane Ike. This amounts to approximately $1.3 million or $0.02 per share. And as I said, is also included in fourth-quarter G&A.

We expensed another approximately $1.1 million, $0.02 a share, of costs associated with the bankruptcy of Hospital Partners of America, the former tenant at both River Oaks and Shasta. We believe most of these costs may be substantially recovered through collection of pre-bankruptcy accounts receivable on which we have first lien. But we have elected not to recognize any recovery until issues surrounding the bankruptcy proceedings are clarified.

For the year ended December 31, normalized FFO and adjusted FFO per diluted share were each $1.19. These results were affected by the same items we just discussed and other items that we have previously discussed on prior earnings calls including the effect of annualizing the weighted average share count over the entire year instead of quarterly.

The per-share FFO levels were calculated using a fourth-quarter weighted average share count of 65.075 million and a full year 2008 weighted average share count of 62.144 million.

Let's discuss capital for just a few minutes and I will give you a few metrics concerning our capital structure and liquidity sources. As of today, we have approximately $580 million in borrowings. That's down from about $638 million at year-end. Of this total, approximately $350 million is in fixed rate facilities that carry a weighted average rate of approximately 7.4%. Approximately $230 million of our total borrowings is in variable rate loans with a weighted average rate today of approximately 2.5%.

We have approximately $70 million of cash and immediate availability under our revolving credit agreements. Our first meaningful, non-extendable maturity of debt is for approximately $30 million in November 2010. That loan, which may be prepaid without penalty, is secured by most of the assets we acquired from HCP that have a collateral valuation of approximately $330 million, which of course would be freed up if we elect to pay the $30 million loan balance.

We have unfunded commitments to finance certain expansion and refurbishment projects within our portfolio totaling less than $5 million. We have no commitments to acquire or develop any new facilities.

So our expected cash flow from operations will be sufficient to continue to fund our limited commitments and pay our $0.20 quarterly cash dividend and our liquidity and unencumbered assets provide a high level of confidence that we will have multiple options three years from now in November 2011 to satisfy our debt maturities at that time. Nonetheless, we are continuing to explore potential opportunities to selectively dispose of or otherwise refinance some of our assets. We have no binding agreements for any such transactions, but we have recently seen encouraging signs that some real estate investors may be getting more active.

Meanwhile until there is a lot more clarity about potential property sales across the entire real estate spectrum and about credit conditions in general, it is unlikely that we will commit to any significant uses of our available capital.

Let's turn briefly to future operations and our estimate of what our existing portfolio and operations are expected to produce insofar as FFO in 2009. As those who have followed the Company know, our practice is to provide estimates of annualized FFO run rates based on our in-place portfolio. Based on the assumptions I am about to go through, we believe that 2009 run rate will be between $0.88 and $0.92 per diluted share.

The share count for both basic and diluted measures is approximately 78 million shares. This of course is an additional 13 million plus shares over our December 31 share count as a result of the successful offering we completed earlier this month.

We stopped rent accrual on River Oaks Hospital as of October 1, 2008. Ed has discussed the status of our process to sell or lease the two River Oaks campuses but for purposes of estimating our run rate, we have assumed no revenue related to these facilities. Similarly, we have stopped accrual of revenue from our Bucks County Hospital and written off the rent and receivables that we believe are not collectible. Our run rate estimate for 2009 does not include any Bucks County revenue even though as Ed described, we are negotiating with several parties for a new lease or sale transaction and we believe we will have some resolution in 2009.

Interest expense is estimated based on existing loan balances and fixed interest rates and a LIBOR rate across the year of 2%. Our general and administrative expenses in 2009 are estimated to total approximately $21 million, which is comparable to our 2008 levels after reduction for items such as what I described a little earlier. Included in the estimate is the cost of non-cash share-based compensation of approximately $6 million. The substantial majority of this expense is based on a stock price assumption that on average exceeds $13 per share and on the assumption that 100% of shares that are subject to performance criteria will vest, when in fact it is likely that many of those shares will not rest. The run rate does not include any costs that may be incurred with respect to the Houston litigation.

The terms of our existing leases are expected to result in straight-line rent revenue of approximately $7 million, generally ratably across the four quarters of 2009. We do not assume any incremental revenue from our profits interest in the Shasta Hospital operations. As a reminder, when we signed a new lease agreement with the Prime entity as of November 1 of last year, we received the right to receive up to 50% of that entity's cash flow for a total of up to $20 million over the term of the lease. We are not required to make any incremental investment in the entity in order to earn this participation.

Although there is no assurance about the amount or timing of any such participation, we believe that the Shasta entity will become cash flow profitable during the latter half of 2009 and that we will begin receiving distributions in 2010 which could amount to approximately $1.2 million.

As we have discussed, we are negotiating possible transactions regarding Monroe and Bucks County that may include similar participating interest. Our strategy includes the exploration of other such opportunities. If we are successful in completing these types of agreements, we believe the volatility inherent in the level of operating earnings will be mitigated by increasing the number and diversity of similar arrangements. Moreover, because we expect that most of these arrangements will be similar to Shasta in that little or no additional capital investment is required for us to achieve the returns, any added volatility has very little real cost to us.

Finally, this 2009 estimated run rate does not include the effect of a change in accounting for our two issues of exchangeable notes. We believe that application of this pronouncement as required in 2009 will result in non-cash increases in interest expense of approximately $2.2 million.

And with those comments, I will turn the call back to the control of the operator and she will queue any questions that you may have.

(Operator Instructions) Kevin Ellich, RBC Capital Markets.

Good morning, guys. Thanks for taking my questions. I guess I'd like to start off with the guidance and the G&A expenses. Steve, you did a nice job of breaking out all of the components but I was just wondering -- and I missed the Houston litigation expense. Could you tell us what that was again and then what should we expect going forward?

The Houston litigation in the fourth quarter amounted to about $1.4 million in defense costs and I'm not sure what your question was, Kevin, but --

The question was, you know, the G&A expense. I guess is the $10 million a good number to use?

No, the $10 million is not a good number to use. If you look at the $10 million -- roughly $10.020 million in G&A for the fourth quarter, that includes over $4 million of unusual onetime nonrecurring similarly phrased charges that include for example -- we discussed the Bucks County write off. Bucks County was a $4.7 million write off of which $3 million of that went to straight-line rent and $1.8 million of that is included in that $10 million of G&A as a bad debt expense. (multiple speakers)

Sorry, that bad debt, that is just a one-time expense then?

Yes, that's right, as is of course the roughly $1.3 million in retention costs that we had on the River Oaks hurricane damage. We are still negotiating with insurers and contractors but we believe we may have had as much as $6 million or $7 million in damage to the two buildings, all of which is insured of course except for our retention, which was $1.3 million. So we charged off that $1.3 million to G&A as a property expense in the fourth quarter. So that also was included in that $10.020 million.

Also there is another I think I mentioned roughly $1.1 million in HPA related costs that we believe may be recoverable but given the status of the bankruptcy proceedings, we have elected basically to reserve those costs until we get more clarity on the bankruptcy and our rights to the collateral. So that -- those three items themselves amount to over $4 million in again, as you describe it one-time charges that are included in the roughly $10 million of G&A.

Okay. No, that's helpful. Then going back to Bucks County, I know you guys stated that you haven't included anything in your guidance, but if as you come back and how much might be recovered if you do get some agreements from the operators at that facility?

Well, Kevin, we think that -- we were virtually certain at this point that we will not be restructuring that lease with the existing operator. We've gone back and forth with that operator really for the last 12 months and I think as Ed mentioned a little earlier on the call, the hospital is probably very likely going to be closed within a couple of weeks and there will be some wind down period. But our negotiations currently are with other parties. And so we don't expect to -- well, there's not much likelihood, we will put it that way, that we will recover any of that $1.7 million above what we've already calculated into that.

Okay and then just going back to the economy and obviously the stimulus is a positive, but have your operators rally talked to you guys about what type of the Medicaid exposure they have given the challenging fiscal deficit environment the states are in right now?

Kevin, the largest Medicaid exposure we have is out in California with the Prime properties, and they are very comfortable with their revenue where it is right now, with their Medi-Cal situation.

Okay, that's all I have. Thanks.

Jerry Doctrow, Stifel Nicolaus.

Thanks. I guess I wanted to shift gears a little bit and talk more about sort of the capital structure. I think you detailed obviously the offering, reduction in dividends, some of the things you've done already. I was wondering if we could just think a little bit further out. I think you've got the converts as well coming. So I think you talked about some asset sales. I was just wondering if we could get a little bit maybe broader sense strategically of kind of what else you're thinking about to sort of manage those -- kind of impending maturities and whether something like an exchange offer for the existing converts or that sort of thing is also on the agenda?

Well I guess, Jerry, the simple answer is everything is on the agenda as we look out to November 2011. We take some confidence in the fact that as I mentioned that we've got $330 million basically of properties that are encumbered now that can be released with the payment in 2010 or earlier if we were to so choose of the KeyBanc $30 million term loan. Now of course, that assumes that there's going to be a credit market to take advantage of that collateral and we are not making that assumption, taking that for granted. Who knows how long and how deep the situation we are in is going to last. But that is clearly an alternative.

What you mentioned, bringing in some of the debt at a discount is something we consider on an ongoing basis. We have been unable just frankly to get comfortable with the arithmetic on an exchange, a stock for note exchange. But things can change. We do think there is a reasonable likelihood that we will access some additional liquidity with a couple of specific property transactions, although there's no assurance of that.

And with more cash that may come from that, that gives us even that much more to consider perhaps with respect to bringing in some of the debt at a discount.

And is it --? So asset sale repurchasing some of the debt at a discount would be one clear option I guess that is on the agenda. In terms of just -- you also I think had mentioned refinancing. Just any sense -- and obviously it's a very still disrupted market but I think in the past, your feeling was that there was sort of secured property level debt maybe from regional banks and that sort of thing. Any sense of sort of where that market is? Do you do any testing of the waters there?

That's a good point, and in fact, we haven't announced because it's a relatively small transaction, but we did complete the financing of a single property, our Wichita HealthSouth rehabilitation hospital with a local bank out of Kansas and got very good terms on that. We accessed 60% of value at a fixed rate, very attractive fixed rate in the 6% neighborhood and we have continued to explore other opportunities like that. And there are such other opportunities. It takes a lot of digging to find a local bank that has the capacity and the desire to underwrite a property like this. But we have identified a few and it's possible that there will be more of those.

It's a lot of work for not much proceeds, but nonetheless, we are able to chip away at some of the issues and that's been worth it to us. So that's a long-winded way of saying -- there could be another $50 million perhaps of refinancings of that type.

Okay, and -- but what kind of terms -- is it a five-year term, 10-year term or --?

Yes, five-year term.

Okay and fixed rather than floating?

It's fixed. We have the option. We elected to fix this one at --.

Okay and let's see, a lot of this other stuff I think you have covered. I guess one or two other things -- while we are staying on the debt, just in terms of where you stand on sort of debt covenants, you know, are there just some key covenants you can give us a sense of where you are on the metrics?

Well, there's a number of limits and sublimits and covenants in subcovenants and all I can tell you I guess on this call would be we are well within with lots of headroom on each and every one of the covenants.

Okay and I guess one or two other things than just on operators. The wellness centers -- you didn't specifically touch on. They are not a part of the portfolio. You know, coverage there, how they are holding up, sort of in the economic downturn?

Jerry, of all the facilities, they are the only ones that have really shown any effect on the recession and it's been there but been slight. As you know, they've never been a stellar performer from the day we bought them. They pay their rent and their coverages. We have the corporate guarantee there. The coverages on the individual facilities are slightly below one times, but we have the corporate guarantee and they have I think a total of 23 or some odd number of total facilities in their total portfolio.

Okay, and so it's -- reminds me, through the company as to how many you own of the 23?

It's Healthtrax and we own six of them, but I think they have 23 or so other than our six.

Just remind you, Jerry, we have a total investment in '06 of about $15 million.

Okay, and is that something that would potentially be on the block (inaudible) among others?

Absolutely.

Then the one other thing on I think Prime mostly could potentially I guess affect (inaudible) less, but separate from whether Medicare rates and all that sort of stuff -- certainly California is one of those states talking about withholding actual cash distributions. Has any of that happened or is that an issue that you think Prime is prepared to deal with just not paying the money even though it is owed?

Yes, I think they are very prepared to handle it. As you know, it happened a very short while this past fall while the state was in their budget discussions I should say. But I think that Prime is very well capable of handling it.

All right, I think that's all for me for now, thanks.

Karin Ford, KeyBanc Capital Markets.

Good morning. A question on the guidance. Is there any rent from Monroe included in the guidance?

Yes, Monroe we assumed full payment of rent and actually they have started paying rent. They are ramping up to a full contractual payment in April. They paid $100,000 in January and they will ramp that up $100,000 a month so that March they are paying $300,000 and then in April they will be fully paying the rent. So that is included in the $0.88 to $0.92 run rate.

And in April, what's the full rental payment?

$335,000, something like that. I'm getting some hesitant nods, but something in that neighborhood.

Okay, that's great. Thanks. Second question is I think you guys had mentioned on the third-quarter call that you were expecting Bucks County to stay with the existing operator, that they weren't -- they were happy with the operations there and now it seems like it's getting ready to close. What sort of changed at Bucks County there?

We did state that and there was the fact the biggest change is they replaced their internal management team. They replaced their CEO and a new CEO came in, did his own assessments of what direction he wanted to take the company in. As you will recall, the vast majority of their business is in the renal business. This is really an outlier for them and he chose in this economic climate to focus on their strengths.

Then the current negotiations you are having with the new tenant, how much lower do you think the rent will be versus what the previous tenant was paying?

Well, I'm not sure it would be fair to say that it would be any lower, Karin. But as I stated in my prepared remarks, we are currently negotiating with a number of tenants, a number of prospects. We currently have a signed nonbinding LOI, but since we are still in negotiations with people, it would not be very prudent of me to disclose what those terms are at this point.

Okay, any other potential properties with issues out there on the horizon?

We are certainly not aware of any.

Final question is just on the dividend after the December cut at the $0.80 level, it looks like based on the midpoint of your FFO guidance less the call it $0.11 per share of straight-line that you guys indicated in your guidance, that you are slightly below that $0.80 level on an AFFO basis in 2009. Can you sort of talk about your comfort level in that and would you consider paying some of that $0.80 in stock?

Well, you didn't quite get a complete reconciliation to AFFO, Karin, because you're right, you take out the straight line obviously, but you add back in I think I mentioned $6 million of share-based compensation and a very heavy amortization of loan costs. So it ends up actually we are forecasting $0.01 higher AFFO than FFO. So it's actually -- you could call it a pickup but it's actually basically a wash.

With respect to the second part of your question, no, we set the dividend when we did based on what we thought the portfolio could do at a minimum. And we don't expect -- we don't expect that 2009 will be at the low end of that range. It could even exceed the range obviously depending on lots of other things that may happen. And just philosophically as we sit here today, I think this management and our Board feels fairly strongly about the need to continue cash dividends and we are talking about the entire REIT sector, frankly. I think if a lot of REITs continue to go toward non-cash dividends, I think it has long-term negative ramifications for the entire industry.

Okay, thanks very much.

Michael Mueller, JPMorgan.

Hi, couple of things. First of all on the charges in the fourth quarter, can you just walk through the geography of those, which ones are in G&A, which ones are elsewhere?

Sure, let's just go through the ones that are not in G&A would be the $1.4 litigation cost. That's down in discontinued operations. It would be the $3 million write off of the Bucks straight-line rent. And then what is in G&A is the roughly $1.3 million in insurance retention for River Oaks, another roughly $1.1 million in other charges cost and accruals related to the prior tenant at River Oaks, and then the $1.8 million in current rents that we had previously recognized from Bucks. So that's a total of about something over $4 million that are included in the $10 million of recorded G&A.

Okay, so we shouldn't strip the $4 million from the $10 million out and say $6 million is -- what caused the $6 million versus -- I think your prior quarters if I'm not mistaken were in the $4 million to $5 million range. Is that right?

Yes, there are a number of other costs related to all of the transitions that we've gone through with some of the problem properties and there is a true up of a compensation cost primarily related to the non-executives. And so you are right. As you look forward into the guidance or the estimate we gave for 2009, it probably should be assuming we think a roughly $5 million, $5.25 million a quarter in total G&A. So that gets you back to your run rate that I think you are probably right on.

Okay, and then what is the Bucks revenue that goes away per quarter or per year?

It's roughly $4 million, so $0.04 or $0.05 a share.

Okay. So if we are thinking about Q4 run rate versus Q1 and going forward, getting down to the $0.22, $0.23, the only changes that are occurring is the offering impact and just stripping out $4 million a year. There's nothing else that's taken from the run rate in one quarter going forward because Shasta is already out of Q4. That's a fair statement, correct?

Shasta and River Oaks.

That's what I meant, Shasta, River Oaks. Sorry for that because they had a full --

That's right. You've got -- the only change because you are right, both. River Oaks was not in Q4, so you are taking out obviously you are accounting for 13 million new shares and then taking out the bugs. And then there was no Shasta by the way in October, so that is another $300,000, $400,000 that we did not recognize in October that will be recognized going forward.

Okay, thank you.

Omotayo Okusanya, UBS.

Yes, good morning. Most of my questions have been answered. It is just a quick one. The line of credit, can you give us what the current balance of the line is and then based on your current covenants, what is the maximum amount you could put on the line at this point in time?

We have two lines, just to be totally accurate. One for $42 million, that's the single property collateralized by North Cyprus. That's $42 million. That's fully drawn. Then we have the $220 million facility with -- led by JPMorgan and KeyBanc, and that has $66 million of term and $154 million of revolver and about roughly $65 million to $70 million is available under that revolver portion.

And I'm sorry, what was the --?

(multiple speakers) million if you needed to?

Yes, under the covenants, the entire revolver availability is available, so we've got between $65 million and $70 million depending on which day you look at it.

Okay, thank you.

Jerry Doctrow, Stifel Nicolaus.

I understand you may not want to get pinned down, but what I was trying to just get a sense of is in terms of expectations when we might expect to see some of the resolutions on things like Houston, like Bucks. Is it sort of a kind of -- I'm assuming we are -- nothing is going to happen in the first quarter. Is it kind of the first half, second half? Just any sense about when we might know one way or the other if something is going to happen or not happen?

Jerry, in this climate, it's really a very broad range. Something could happen in this quarter, but more likely to happen in the second or third quarters of this year.

And that's on both?

Yes.

Okay, thank you.

This concludes the Q&A portion of your conference. I would now like to turn the call back over to Mr. Ed Aldag for closing remarks. You may

Again, I want to thank all of you for joining us today and we certainly appreciate your continued support and interest in Medical Properties Trust. As always, please feel free to give myself, Charles Lambert, or Steve Hamner a call. Thank you.

Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.