Medical Properties Trust Inc (MPW) 2013 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you all for joining, and welcome to the second-quarter Medical Properties Trust earnings conference call. My name is Lisa, and I will be your coordinator for today.

Today's conference is being recorded. And at this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session.

(Operator Instructions)

I would now like to turn the conference over to Mr. Charles Lambert, Managing Director, for opening remarks. Please proceed. Thank you.

Thank you. Good morning, and welcome to the Medical Properties Trust conference call to discuss our second-quarter 2013 financial results. With me today are Edward K. Aldag, Jr., Chairman, President, and Chief Executive Officer of the Company; and Steven Hamner, Executive Vice President and Chief Financial Officer.

Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If did you not receive a copy, it is available on our website at www.medicalpropertiestrust.com in the Investor Relations section. Additionally, we're 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 or underlying such forward-looking statements. We refer you to the Company's report filed with the Securities and Exchange Commission for a 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 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 measures in accordance with Reg G requirements. You can also refer to our website at www.medicalpropertiestrust.com for the most directly comparable financial measures and related reconciliations.

I will now turn the call over to our Chief Executive Officer, Ed Aldag.

Thank you, Charles, and thank all of you for joining us this morning.

Today, we're able to announce a number of acquisitions that we've been working on. While we're not in a position at this point to provide all of the details, we are announcing more than $400 million of acquisitions thus far in 2013. And with five months remaining for this year, we feel good about the ability to add to this amount. Included in the $400 million are three acute care hospitals from a successful large national multi-hospital chain. The total investment in these three hospitals will be approximately $280 million.

As a result of this additional $400 million in acquisitions, our largest tenant exposures will be Prime at 24% and Ernest at 17%. Our existing hospital portfolio continues to perform well. For our mature operations -- meaning they have been in our portfolio for at least 12 months -- on a trailing 12-month basis ending 5/31/13, our acute care hospitals were 5.6 times EBITDA or lease coverage. Our [LTACs] were 2.01 times, and our URFs, 2.85 times. Since acquiring the original 16 Ernest hospitals, Ernest has completed 2 additional hospitals and 1 addition, all of which have begun operations. They have two more which are still under construction, and have also acquired one up-and-running facility this year. These were all [funded] by MPT, and this brings the total of Ernest facilities up to 21.

The facilities we have currently under construction are Oak Leaf with NSH, South Ogden with Ernest, Post Falls with Ernest, and Victoria with Post-Acute, which is almost complete. We have recently extended one of our leases that was set to expire in 2014. This lease was extended for an additional five years to 2019. We also agreed to extend a lease to 2028 that was set to expire in 2019. This will leave only one $45 million lease that will currently expire in 2014. The tenant has the option to continue to renew that lease on an annual basis.

Reimbursement in all three sectors -- acute care, rehabilitation, and long-term acute -- continues to be stable and profitable. This has occurred despite sequestration and soft utilization in some markets. Soft utilization has resulted from a minimum flu season and uninsured patients in some areas. However, the MPT portfolio of hospitals has largely been unaffected by the uninsured, due to efficiency of our operators.

Health reform is in the midst of being implemented, and to-date, our hospitals have performed well under hospital readmission rules and value-based purchasing. The outlook for hospital reimbursement is positive. CMS recently released final reimbursement rules for all three sectors. Acute care rehabilitation services received slight increases while, LTACs are basically unchanged. The outlook for managed care in all markets is stable. The full effect of health reform on our hospital reimbursement is uncertain. However, many experts continue to predict an overall positive effect on hospital utilization and payment.

Our recent and pending announced acquisitions put our total assets at approximately $2.8 billion. Without any additional acquisitions, our FFO payout ratio on a run-rate basis would be 74%. With our active acquisitions pipeline, we feel good about the further growth of FFO.

Steve?

Thank you, Ed.

I would like to briefly go through an operational summary of the quarter and comment on the expected effects on future operations of our recent and expected near-term acquisitions. First, a little perspective.

We did not make any acquisitions until very late in the quarter, and you will remember that we sold two hospitals early in the quarter; and, of course, we issued new common equity in February. In light of that, total revenue for the quarter was about $57.5 million, up almost 18% over 2012's second quarter. And at least as important, our normalized FFO per share for the second quarter was $0.24, which is a 9% increase over the same period in 2012. So even though we had a net-dilutive quarter insofar as property transactions, our consistent success at growing our earning assets by double digits every year translates into predictable and significant year-over-year growth in per-share results. Year to date in 2013, our normalized FFO per share is 20% higher than 2012's result, notwithstanding the dilutive property sales, our equity offering in the first quarter, and our decision to discontinue recognition of rental income from Monroe.

Since the end of the first quarter of this year, we have acquired or contracted to acquire more than $400 million in high-quality hospital real estate. The weighted average GAAP yield on those eight facilities is expected to be 9.25%. That's on the lower end of our historical range, reflecting in part the high quality of the assets and their operators. But even at this end of the range, these investments will be immediately and strongly accretive to FFO per share. Moreover, the yield may actually be higher, because in some cases, our CPI escalators do not have a floor or a ceiling, meaning the annual escalations are not captured in the straight-line rate. So the investments announced today will drive quarterly growth in our per-share results as, of course, will any additional acquisitions, which given our pipeline, we certainly expect to make.

In addition to the three-hospital portfolio we announced today, we also acquired two Kansas City-area acute care hospitals in mid-June. These facilities are operated by Prime Healthcare and have been added to the current master lease structure with Prime. Ed also mentioned the growth of our Ernest portfolio of state-of-the-art, Post-Acute hospitals, including the Post Falls, Idaho, and South Ogden, Utah, rehabilitation facilities. Each new Ernest hospital generates not only a very attractive and well-covered real estate return to our shareholders, but for no incremental capital investment on our part, we earn 80% of the after-rent earnings of the facility.

Sometimes I think that arithmetic is overlooked. Through ownership of MPT REIT shares, our shareholders earn a widespread of long-term growing and predictable rental income over their long-term cost of capital. In fact, one of the widest breadths available to real-estate investors in any segment. And on top of that, they can expect to earn significant additional income without investing any incremental capital.

And while the Ernest developments are designed to begin paying rent upon completion of construction, and earning income after a ramp-up period, we also have opportunities with Ernest to make immediately accretive investments in operating hospitals. In July, we invested $15.8 million in an in-patient rehabilitation facility that is now leased to and operated by Ernest, providing immediate per share accretion. We have actually been able to consider several similar opportunities with Ernest, and we expect that these will be an important avenue for growth in our real estate and operating portfolio with Ernest.

We reported on our last call the second-quarter sale of two hospitals to the lessees whose leases had expired, for $18.5 million. We recognized gains of about $2.1 million on the two sales. We presently have no other property sales pending or planned. There are no other lease maturities in 2013, and only two in 2014, one of which Ed mentioned has recently noticed us of its intent to renew. And the other of which is a highly profitable operator that is unlikely to vacate.

We ended the quarter with a leverage ratio of 38%, which is measured as net debt to undepreciated assets. Our net-debt-to-EBITDA ratio, based on the second quarter, was 4.5 times. At June 30, we had $40 million drawn under our revolving credit facility. Liquidity measured by cash on hand and availability under the revolver is almost $400 million, so we have ample liquidity to complete the pending acquisitions while maintaining our prudent leverage and credit policies.

In brief, we intend to maintain on a normalized long-term basis a debt-to-total-assets ratio of 40% to 45%; debt-to-EBITDA of around 5.5 times; and a dividend payout of between 75% and 80%. To maintain these measures, we will opportunistically access the capital markets from time to time, depending on a number of factors, including evolving market conditions, expected timing of near-term acquisitions, the outlook of our acquisition pipeline, and the likelihood of property sales or other internal so-called harvesting of value. At present, we believe the markets for high-yield bonds, convertible debt, common equity, and bank debt would be open to us at generally attractive costs.

Turning to guidance, let's review how all of these moving parts are expected to affect our estimates for the remainder of 2013 and beyond. Anyone who has invested in us or followed us for any length of time knows that our acquisitions can be lumpy. The last couple of months that have straddled our second and third quarters is a very good example. And our predicted closing dates can be delayed, sometimes for months, affecting our earnings estimates for any particular periods.

Accordingly, we expect normalized FFO for the second half of 2013 to range between $0.51 and $0.53, or $1.00 to $1.02 for the full fiscal year. That assumes limited additional acquisitions in 2013. The difference in our present estimate and our earlier estimate of $1.10 is primarily caused by acquisitions' timing and capital markets assumptions. For example, we previously expected the $283 million portfolio transaction that we announced this morning to close as early as May. And the $75 million Prime transaction was estimated to close six weeks sooner than it actually did. At the same time, we, along with most real-estate investors, have experienced an increase in the cost of financing for both debt and equity.

Finally, we have already mentioned that the asset quality, portfolio size, and operator experience regarding this morning's announced transaction resulted in a lower yield than our recent and historical average. As we look into 2014, we expect the current portfolio, assuming closing on the transaction we announced this morning, will generate a run rate of normalized FFO of between $1.06 and $1.10 per diluted share, continuing the strong annual per-share growth in FFO. And each acquisition we make generates immediate and significant per-share FFO accretion. So we expect those 2014 results to be even better as we continue making acquisitions.

As usual, these estimates do not include the effects, if any, of debt refinancing costs, real estate operating cost, interest-rate swaps, write-offs of straight-line rent, property sales, or other nonrecurring or unplanned transactions. In addition, this estimate will change if market interest rates change, debt is refinanced, additional debt is incurred, assets are sold, other operating expenses vary, income from investments and tenant operations vary from expectations, or existing leases do not perform in accordance with their terms.

With that, we will take any questions, and I will turn the call back to the operator.

Lisa?

Thank you. So ladies and gentlemen, we will now conduct the question-and-answer session.

(Operator Instructions)

And your first question is from the line of Michael Carroll of RBC Capital Markets. Please go ahead. Thank you.

Is it the typical yield for your investments between 9% and 11%? And your average yield year to date was 8.6%. What's different about these assets than your normal investments?

The lower weighted average yield on the $400 million-plus that we've talked about this morning is driven significantly by the biggest of those investments -- the $283 million portfolio transaction we announced. While we're unable to go into much detail about that transaction yet, as Ed mentioned, it is with a very well known, very well capitalized, highly experienced operator of many hospitals across the country. And the quality of the assets themselves, including to a great extent relatively new construction, drove the market rate that we were able to negotiate down lower than what our historical average has been.

And, Mike, while historically it's been 9% to 11%, it's still the 11% in the top range of what we're looking at right now. So the range of where we are today in our active pipeline is in the 8%-plus range to 11%. We have deals that we're working on right now that are in the 11% range, but as Steve said, the size of this transaction pushed the overall down right now.

I want to emphasize again, as we talk about weighted average GAAP rates, that when there is no fixed escalation, as is the case in some of these acquisitions, then we don't get the optical benefit anyway of the straight line REIT -- rent averaging. So again, it just reiterates the point I tried to make in my remarks that as inflation is incurred, which we expect it to be, then this rate will actually be higher than that GAAP rate.

Now did you say that you're willing to go below that 9%? And is there other assets out there that you're currently looking at that you are willing to go below that 9% range?

Yes, the range today, of the assets that we're looking at, is 8%-plus to 11%. So it is -- it has dropped the 9%.

So what changed from going from 9% to 8%-plus?

Well, I think it's everything that Steve has just mentioned, that it's the size and quality of some of the assets that we've been able to look at recently. You've heard from us over the last few quarters that the portfolios that we've been working on without a whole lot of detail, because we haven't been able to provide that to you at this point. But the quality and size of the portfolios that we're working on have pushed that down.

But we're still working on attractive assets in that up to 10%-plus range. And, in fact, the higher end of the range that goes into this weighted average of 9.25% exceeds 10%.

Okay. And then, Ed, did you give us, sorry if I missed this, the tenant coverage ratios across your portfolio this time in your prepared remarks?

I did. Would you like that again?

No, I can just read the transcript. That's fine. Can you give us an update on the First Choice developments and how many sites are picked out right now? And when should we expect to you start making those investments?

Well, very, very soon, any day now. The way the process has worked, once we close the final documents, which has been awhile, they began presenting us with locations. They presented us with approximately 20 locations-plus at this point. We've got about 5 of them that are in the final stages of approval and expect construction to commence any day.

Should we expect in the third quarter that will you have some investments on those properties then?

Oh, absolutely.

Our next question is from the line of Juan Sanabria of Bank of America. Please proceed.

With regards to guidance and the movement between last quarter and this quarter's numbers, I'm still a little bit confused. Last quarter you knew the timing of the equity raise, had highlighted the dispositions of assets with the leases expiring. And I understand lower cap rates has a bit of an impact on a full-year basis, but it seems like I'm still missing something.

Is there a much higher debt cost that you're assuming and taking out the revolver for fixed-rate debt than you'd previously assumed. And if so, can you quantify that? And is that plus the lower cap rate really the difference between your -- in addition to the timing also, the difference between the full-year run-rate number at the end of the year, the $1.06 to $1.10, to the previous $1.10 guidance?

There are a number of small, $0.01 here, $0.02 there specific differences. Basically they all even out. So the real impact comes from the items you've mentioned. The lower cap rate than we had anticipated, the timing, which I gave you a couple of examples of those. When we had our first-quarter call in late April, we truly were expecting this announcement we made today to be made at literally any time. And it got put on the shelf by the seller for awhile.

And at the same time, if you will recall, our common stock was trading significantly higher than it is today, along with the other healthcare REITs. And the cost that we could issue bonds was probably 75 BPS lower than it is today. So those three components, timing, cap rate, cost of capital, drive the great majority of the difference. And the difference really -- (multiple speakers)

Sorry, with your reference to the cost of equity, should we assume that you are going to use equity to further -- further equity this year to take care of your balance sheet a little bit?

Well, again, we could use debt, all debt, I think, under the current acquisition plans, or acquisition announcements, and still be within the range of -- that we gave earlier, the 45% or lower leverage, the 5.5 times EBITDA, and the dividend payout. But as I also mentioned, we will be opportunistic. We will keep an eye on the market. We have a number of alternatives to permanently finance what's in the immediate pipeline, and what could be a little bit further down the road. So we have no express plans as we sit here today.

Okay. So the main difference, if I'm hearing you right is bond cost, 70 basis points higher, the timing as it relates to the relative earnings downgrade versus prior expectations.

Well, the cap rate.

And the cap rate, sorry. Okay, great.

It's not just bonds. Just to clarify again, three months ago we were trading at $17-plus, and so obviously we're not any more. So that has effect on our cost of equity capital.

Okay, and one other question. What are your latest thoughts with regards to international opportunities? What should we be thinking in terms of timing of a potential expansion? And what should we be thinking in terms of valuations relative to what you guys are doing in the US from a cap-rate perspective? And what sort of geographies are the most appealing?

Well, it's certainly been something we've looked at since the inception of our Company 10 years ago. We've explored a lot of different areas. We've been actively exploring it since the beginning. We've pretty much narrowed it down to the Western European countries to do one of our first acquisitions. There are a number of opportunities that we are actively looking at right now. They are all within the same range of the 8% to 11% that we gave you -- gave the callers a few minutes ago. From a timing standpoint, it could be as early as this year. It could roll over into 2014. It's just when the opportunities present itself at the right time.

Okay. So your previous comment about equities seems to imply that if you were to want to do something in Europe, you would want to shore up your balance sheet ahead of any potential sizeable --

It's not just Europe. It's -- obviously, we don't intend on not growing any beyond the acquisitions that we've announced here. So as we continue to look at managing the Company and our growth expectations, we've got to take all of that into consideration.

Okay. One follow up. What size would make sense as an initial beachhead in a new market for you? Just round numbers.

It's hard to give that you number exactly right now, but certainly somewhere north of $100 million.

Our next question is from the line of Karin Ford of KeyBanc. Please proceed.

When is the large portfolio expected to close? I think you said third quarter in the release, but can you give us a little more specific than that?

I don't know. We really can't. Third quarter. We're halfway through it already.

Is it possible it slips to 4Q, or are you pretty confident that it's 3Q?

Well, sitting here today, there's no reason to think that it should slip. But in the realm of anything is possible, yes, it's possible, but that's certainly not our expectation.

Okay. And did the quality of the operator and the quality of the portfolio cause to you change your underwriting on coverage differently on this acquisition versus others?

The coverage is very strong.

Thank you for your question, we're going to have to move onto the next question. Our next question is from the line of Tayo Okusanya of Jefferies.

First of all, congratulations on the fairly large deal pipeline out there. That is good to see. Ed, in the press release, you do make some allusions to additional acquisitions beyond what you have announced so far. And you have given us some color about the $100 million to go to a new market. Could you give us an overall sense of how large the deal pipeline could be, beyond what you have announced already?

Tayo, I can, but what I can't tell you is how much of that I think will actually close or happen in 2013 versus 2014. But we are actively right now working on a number of acquisitions that include a portfolio of properties, as well as individual properties that are in the neighborhood of $600 million to $800 million.

That's helpful. And then any thoughts on the recent news coming out with all these large hospital M&A transactions, what you think of all that and whether that's creating any opportunities for you?

Well, it certainly should create opportunities, and I think that we're going to continue to see some consolidation. As I said, I think, in the last call, I think the consolidation is going to primarily be related to the consolidation by for-profits of not-for-profits. Some of the for-profit consolidation that we see going on in the market right now is somewhat of anomaly based on some specifics with individual companies, as we're all very much aware of. But any time you've got those type of acquisitions where you've got capital needs, it presents an opportunity for us.

Our next question is from Caitlin Burrows of Goldman Sachs. Please proceed.

Is your FFO guidance shift impacted at all by your operating view? That is, are there any additional hospitals that are no longer accruing rent?

No, the only one not accruing rent is Monroe. Specifically, Florence continues to pay rent. They've remained current on rent through the month of August. So there's no impact on any operating issues, and we're not aware of any operating issue other than the ones we've previously discussed.

Okay. And then also, what will be the impact, if any, that you're now lower 2013 FFO guidance will have on compensation?

Compensation is a matter for the Compensation Committee, and we've not had recent discussions with them, and that wouldn't generally happen until toward the end of the year.

Going back to Karin Ford. Karin, if would you like to finish off your question. I'm very sorry. Your line is open.

Thank you. I think you covered it, but wanted to see if you felt like the strategic activity going on in the broader hospital operator market could provide you with potential opportunities for deals? Or do you feel like there's enough -- would you consider something like the Vanguard Health deal, which I know some REITs looked at, or is the one-off asset pool large enough at this point that you feel like there's enough deals in that space you don't need to play in the bigger strategic space?

Well, again, I think the answer to both questions is yes. The one-offs is large enough for us to fill out our acquisition pipeline, but there are an awful lot of very good-looking opportunities out there with some of the strategic opportunities, such as the Vanguard. But some of the others in particular that I mentioned on the previous calls and just a little bit of while ago on this call, of the acquisition of not-for-profits by the for-profit environment. And we see -- are seeing a number of those that we think are good opportunities for us.

Some of your peers have noted some increase in competition in other sectors, aside from hospitals, but other healthcare spaces. Are you guys seeing any increase in competition in your space?

Not any more than usual. I guess some of the larger REIT -- healthcare REITs out there have certainly made some noise and some looks into some of the acute care space. And as I have mentioned when I get asked this question, I think that's good news for us and good news for the market that we're in. We welcome the competition at this point.

Okay so our next question is from the line of Mike Mueller of JPMorgan. Please proceed.

I was curious, going back to the three-hospital acquisition. What happened in May? One, where it ended up getting shelved or pushed off? And considering you're announcing it now where you didn't announce it on the 1Q call and it was pretty close, what's different now?

The first thing was totally internal with the seller of the properties, and it had nothing to do with the selling of these assets, but something else that they were working on. The thing that's changed is that we have definitive agreement signed at this point.

Got it. Okay. And two other quick ones. Steve, does the $1.06 to $1.10 have debt and equity or capital markets assumptions in there?

Yes, to maintain the metrics that we went through a little earlier.

Okay, so it does. And last question. Thinking about the comments on international, why do you think international, doing something overseas makes sense at this point? It seems like the domestic pipeline, from what you're saying, is pretty strong. And you're saying the returns are comparable. So what makes that it much attractive where it's something you really want to good over and do?

Mike, that's a good question, and as we've said since the beginning when we started looking at international, it is a way for us to diversify. We obviously are a specialized REIT in the hospital space. That's what our Management team knows very well. We're all people that came out of owning and operating hospitals, whether they be the post-acute or the acute care sector.

So when we look at our portfolio and we think of how we diversify, we certainly didn't need to diversify within the US into other products that other healthcare REITs do very well. So in looking at the international market, it gives us the opportunity to continue to invest in a product that we know and know well, while at the same time, being able to diversify outside of the US healthcare system and take away some of the potential risk of having limited payers.

Our next question is from the line of Daniel Bernstein of Stifel. Please go ahead, thank you.

On the international side, do you see any development opportunities as well as acquisition?

On the development side in the international, we wouldn't do any ground-up construction development, certainly, at this point. If we participated in any development side, it would be as a take-out as opposed to doing it from the start.

Okay. And I'm not sure if you have commented on it before, but in terms of international versus domestic in your portfolio, do you have some kind of target ratio you would like to be or limit to how much international you would want to do?

Yes, no, we haven't mentioned that, and we don't have one. It's more looking at each individual transaction on an individual basis at this point and where we think it fits into our total overall portfolio.

Okay. Would it be fair to say you're still more focused on the domestic than international?

Oh, absolutely.

The other question, the healthcare REITs, some of the big cap REITs have seen additional competition there. Have you seen private equity at all involved in the hospital space? They seem to be more focused on MOBs and senior's housing. Do you think you're finding any additional interest in the hospital space from private equity?

There is on the operating side. The difference between this go-round and what you saw pre-2008, in pre-2008, the private equity was willing to use their dollars on the real estate as well as the operations. Today, we get a lot of calls from private equity companies that are looking to invest in the operating side of acute care hospitals and bringing us to the table for the real estate side.

Why do you think they're avoiding the real estate side? Is it a -- I'm not sure what the rationale is there, but you --

I don't think they're avoiding it at all. It's the difference in the returns that they can get from the operating side versus the real estate side. As you well know, real estate investors require much lower return than operating investors do.

Okay. It's just math for them.

Right.

Our next question is from Tayo Okusanya of Jefferies. Please go ahead, thank you.

A couple of quick ones. First of all, with the development pipeline, it's getting much more robust now. Could you give us a sense of what expected yields are on a majority of these developments?

Tayo, the pipeline it is not as robust as it may appear to be, because of the First Choice piece. Other than that, you're primarily looking at the Ernest transactions. With the Ernest transactions that we've done, the cap rates are in line, slightly higher than the up-and-running facilities that we've purchased in what -- two years ago now, almost two years ago now. And so on an overall basis, the return for the development deals is higher than it is, but it's not -- I don't think it's as robust as may think that it is from the standpoint of the size of the First Choice transactions.

Okay, so is the number close to about 10% or slightly south of 10%?

Well, it varies, Tayo, depending on the transaction, but it is higher than what we would do, the comparable transaction for on that. And as you know, we don't give it out on each individual operator.

Keep in mind, Tayo, on Ernest, those properties go into the master lease, so there's significant incremental coverage and credit there. On the Wisconsin property for National Surgical Hospitals, that's a replacement hospital. So there's really no ramp-up risk. There's really no construction risk, because all of that is born by the well-capitalized operator. When that facility is completed, they will turn off the lights on the old facility and turn on the lights on the new facility. And it's truly an up-and-running, highly profitable hospital, so you don't have really any of the development risk that you would otherwise think comes with the development. Nonetheless, that's a very attractive cap rate.

But you're not giving out specific numbers at this point to help us out?

We haven't done that in several years.

Understood, understood. It's just getting bigger, so I want to make sure we're capturing your value creation from it correctly, that's all. And then the last thing, in 2Q as well, you did hear a couple of hospitals talk about weak admission volumes. I know you alluded to it a little bit in your commentary, Ed. But could you give us a sense of what you think may have caused some of that, and why your operators did not go through a similar trend?

Well, as I said, there was some softening, primarily due to the lack of a flu season, and some underinsured or uninsured in some markets. But it's still not very dramatic compared to some of the more rural areas. If you look at our hospital portfolio, ours are more urban-based and metropolitan-based, as opposed to the pure rural players. I think where you saw some of the bigger disappointments in, primarily in some of the larger operators that own the community-based hospitals.

Thank you for all your questions, ladies and gentlemen. I would now like to hand back the call over to Mr. Ed Aldag for closing remarks. Thank you.

Thank you, Lisa. We appreciate it, and we appreciate all of your interest. If you have any questions, please don't hesitate to call Steve, Charles, or myself. Thank you very much.

Thank you all for joining, ladies and gentlemen. That concludes today's conference call. You may now disconnect your lines. Have a good day. Thank you.