Medical Properties Trust Inc (MPW) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q4 2013 Medical Properties Trust earnings conference call. My name is Brianna, and I will be your operator for today.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Charles Lambert, Managing Director. Please proceed.

Thank you. Good morning. Welcome to the Medical Properties Trust conference call to discuss our fourth-quarter and year-end 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 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 or underlying such forward-looking statements.

We refer you to the Company's reports 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 from 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 today for our fourth-quarter, year-end 2013 Medical Properties Trust earnings call.

For 2011, our normalized FFO was $0.71 per share; for 2012, it was $0.90 per share; and for 2013, our normalized FFO per share was $0.96. That is a 35% increase in normalized FFO per share over a two-year period. More importantly, we ended 2013 with an FFO run rate for 2014 of $1.10 per share, using the midpoint of our range. This amount represents a 55% increase over two years.

Remember that we do not have to do any new acquisitions to achieve the $1.10 FFO per share for 2014. The $1.10 is based on all the acquisitions in place at 12/31/2013, and produces a run rate FFO payout ratio of 76%. Remember, the $1.10 FFO run rate that we announced this morning is not guidance for 2014. This $1.10 is what we said it was, a 12/31/2013 in-place FFO run rate.

This does not include any acquisition activity for 2014, which we have guided this morning to be $500 million for 2014. We expect every acquisition we make in 2014 to be immediately accretive. We achieved this remarkable growth through a steady and strategically accomplished acquisitions plan over the past two years, which allowed us to increase our revenue by 79% since 2011.

During the same period, our total shareholder return for MPT shareholders was 43%. In 2012, we made $800 million in investments; in 2013, we made approximately $700 million in investments. Prior to 2011, our average annual investments had been $280 million per year.

We feel very good about our growth prospects for 2014. Over the last few years, we have consistently said that we expect to make at least $400 million in annual investments. The past two years we have greatly exceeded that amount.

Given our recent history, and what we have currently working on in our acquisitions pipeline, we are going to increase our minimum target this year to $500 million in investments. The vast majority of these investments should be in general acute-care hospitals with the majority being with tenants new to MPT. In fact, while there is no assurance we can complete any particular acquisition, some of our pipeline opportunities are of a size in nature and are at a negotiating stage, that it is possible that we could complete agreements for a significant portion of our estimate in the relatively near term.

We expect to continue to lead the industry in acute-care hospital investments. Our management team's vast experience in hospital operations gives us an edge in underwriting and relationships with hospital operators. Our existing portfolio, including only properties we have owned for at least 12 months, ended the fourth quarter on generally strong results, after a slight softening in the first half of the third quarter.

Our acute-care sector and rehab sector saw essentially flat coverages, year over year and quarter over quarter, of approximately 5.8 times and 2.9 times, respectively. Our LTACH saw a year over year 18-basis-point drop in coverage to about 1.87 times. In addition, all three sectors saw an uptick in overall admissions year over year.

Quarter-over-quarter admissions for the acute-care portion of our portfolio were essentially flat, while both the LTACHs and rehabs were up. As you are aware, LTACH legislation was recently passed that defines LTACH admissions criteria and new-patient provisions for LTACHs. Our operators have performed a review by individual hospital and believe that this legislation should generally be positive for them.

We had previously noted that the operator of the Florence facility and their affiliate at the Gilbert Hospital had not performed as we have expected. While the Florence facility continues to pay rent, we have issued a notice of default and termination for the Gilbert Hospital. The operator at Gilbert is contesting the termination.

We continue to receive interest from other operators, hoping to get an opportunity to become our tenant at both of these locations. We are currently in detailed negotiations with several potential operators for the Monroe facility. We hope to have something further to report, here, in the near future. In the meantime, Monroe continues to hold steady at an operational level well below its recognized potential.

Our various portfolio concentrations continue to improve. The most important concentration to us is what percent any one property represents of the whole portfolio. As of 12/31/2013, no one property represents more than 3.7% of our total portfolio.

When looking at the concentration on a state basis, our three largest concentrations are Texas, with 24% of the portfolio; California, with 17%; and Arizona, with 6%. Looking at concentration from an operator standpoint, Prime Hospital represents 22.67%; Ernest facilities, 15%; and IASIS hospitals, 11%. General acute-care hospitals represent 53% of our total portfolio, with rehab hospitals making up 22.3%, and LTACHs 14.71%, and the remaining in other assets.

In all total, MPT owns 8,102 hospital beds in the country, making us fourth-largest owner compared to other for-profit owners. Not only does MPT hold a leadership position in terms of beds owned, our average investment for acute-care bed is $297,000 per bed, while the average cost to build a replacement facility is approximately $1 million per bed. These numbers illustrate a barrier to entry which helps to provide protection for our portfolio, and it also is an indication of the unrecognized value in our portfolio.

Our RIDEA-type investments, totaling approximately $110 million, continue to perform well. The Ernest investment returned about 15%, while the non-Ernest, or RIDEA-type investments, returned 44% for the year. We are delighted with our 2013 results and off to a good start in 2014.

At this time, Steve will go over the details of the financial results before we open it up to questions. Steve?

Thank you, Ed.

We filed our press release this morning with details about our reported results, and I will be happy to take questions about those, momentarily. First, though, I want to provide some explanatory information about a couple of matters.

Normalized FFO for the year and quarter reflect $0.02 per share of reductions related simply to certain timing differences. The first is related to the issuance of EUR200 million in unsecured debt, in early October, for the acquisition of the German-rehab portfolio that did not close until December 1. When combined with our prior expectation of a November 1 closing, the overall effect on FFO aggregated about $2.6 million.

The second matter was a $900,000 non-cash adjustment to performance-based share-compensation expense to reflect achievement of the performance hurdles established in prior years earlier than previously assumed. The measure, by the way, was total return to shareholders that exceeded 43% for the three years ended December 31, 2013. This had a zero effect on aggregate expense or shares awarded for the prior-year programs. Without the impact of these items, our normalized FFO would be the $0.26-per-share consensus expectation.

The press release also describes the treatment, as we have previously announced, of the German transfer taxes that were part of the EUR184 million consideration, paid for the RHM portfolio. On a dollar-equivalent basis, these taxes were about $12 million, and in accordance with accounting requirements, were treated as acquisition expense. The tax amount was, nonetheless, treated in our agreement as part of the purchase price, and our rent is calculated based on the total EUR184 million.

Our investments in tenant operations continue to perform as expected, as Ed just mentioned. During 2013, we earned $19.4 million on about $110 million in investments. $14 million was earned on our $93.2 million secured loan to Ernest Health, a return approximating the 15% coupon.

As a reminder, that is in addition to the $35 million that we recognized in rent and mortgage interest on the Ernest portfolio. Secondly, we earned $5.4 million from investments in another seven separate tenants, with an aggregate investment of approximately $16 million.

Since our acquisition of Ernest two years ago, their management team has grown the portfolio from 16 to 20 up-and-running hospitals and is in the process of opening 1 more and evaluating several additional opportunities. Remember, that for each new Ernest hospital, in addition to the very attractive and long-term rental revenues, MPT earns at least 80% of operating income and makes little incremental investment in order to achieve those earnings.

At the end of the fourth quarter, we made a $20 million mortgage loan secured by a general acute-care hospital that provides, to us, a return based on an interest in the operations of the hospital, in addition to the interest on the loan. Of course, no income was recognize on this investment in 2013.

We sold one property in the fourth quarter that had paid approximately $1.4 million in annualized rent. We realized a cash sales price that, similar to other recent property sales, demonstrated that MPT brings significant value to hospital real estate that it acquires. This seven-year-old property was paying rent based on a capitalization rate of 12.5%, and we sold it at an implied rate of 9.7%, resulting in a 29% gain on our original, undepreciated cost, and a 14.1% unlevered internal rate of return.

Only one least term expires in 2014, and that lessee has the option to repurchase the property, which generates approximately $2.1 million in annualized rent, but we believe it highly unlikely that the lessee will vacate.

Ed described a few minutes ago our full pipeline, and I will reiterate that we believe the acquisition and development of at least $500 million in new hospital real estate is a good expectation for 2014, and moreover, that a meaningful amount of that could be achieved in the relatively near term. In so far as funding near-term acquisitions, we have a number of alternatives, from which we will select depending on market conditions at the appropriate time. But, we have immediately available about $300 million in cash and under our revolver.

For permanent funding of our acquisitions, we have long stated our balance sheet and capital principals. As most of you may remember, our leverage target is the 40% to 45% range of net debt to gross assets, which generally equates to the 5 to 5.5 times debt-to-EBITDA range. We are well in that range at the end of 2013. And if fact, we would be comfortable going above that temporarily in the current, low-interest-rate environment, but the long-term target will remain the 40% to 45% range.

We will be opportunistic in the capital markets, as we have a menu of options, including common stock, preferred stock, limited asset sales, and we are currently exploring joint-venture-type financing. In addition, in the last six months, we have completed two very successful, unsecured bond financings, and we are also seasoned issuers in the bank and convertible bond markets. So, as we continue to successfully make accretive acquisitions, we will evaluate all the options that are available to us, and make the decision at the appropriate time to maximize the accretion, while maintaining a prudent balance sheet.

The press release this morning included our normalized FFO run-rate estimate of between $1.08 and $1.12 per share for all of 2014. And, to remind everyone, that estimate is as if we make no new investments in 2014. We are confident that our 2014 investments -- and remember our target is at least $500 million -- will continue to be immediately accretive, which of course, would result in additional per-share FFO.

As usual, these estimates do not include the effects, if any, of debt refinancing costs, real estate operating costs, interest rate swaps, write-offs of straight-line rent, property sales, foreign currency gains and losses, or other non-recurring 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.

One last announcement before we go to questions. We have recently added a new Director of Investor Relations to our team, and we expect to get around soon to introducing investors and analysts to [Tim Berryman]. Over the next few months, Charles Lambert will transition many of his investor relations responsibilities to Tim. Charles will stay focused on his ever-growing responsibilities as Managing Director of Capital Markets, so you will continue to see him in our offices, your offices, and at conferences.

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

(Operator Instructions)

Tayo Okusanya, Jefferies.

Good afternoon, everyone. Good acquisition pipeline, it's good to hear that a lot of these deals could happen pretty quickly.

Could you talk a little bit about what the mix could be? Is it more general acute-care hospitals? Is it more post acute-care stuff?

Hello, Tayo, how are you this morning?

Good.

As I stated earlier in the call, we do expect that the vast majority of the acquisitions in 2014 to be general acute-care hospitals.

Okay. Can you give a sense of are you going to end up in your target cap-rate range of 9% to 10%, or do you think you could come in a little bit lower, like some other recent transactions?

Tayo, it will continue to be, as it was in 2013, it will be in the mid-8%s all the way up to a 12%.

Okay. That's great. And then, second question on Ernest, that portfolio is growing pretty quickly -- could you give us a sense of what the EBITDA Ernest is at this point, versus when you initially underwrote the deal?

We underwrote the deal, Tayo, EBITDA at about $15 million, if I recall going back two years. Since then, that portfolio of the 16 original hospitals has grown modestly. There were some hospitals that were in ramp up at that time. So, there has been some modest growth there.

And of course, we've added, or Ernest has added, as of now, four additional up-and-running hospitals, so they continue to ramp up. The long answer is, we don't have, to disclose today, an EBITDA number. If we did, it would not be very helpful because of the four hospitals and one more that they are about to open, that are in the early ramp-up phases. So, I will leave it at that.

The four new hospitals, these are just recently opened, so you really haven't put an EBITDA on those assets yet?

That's correct.

Yes, but I think what we have said in the past is, typically, if you look at the Ernest model, the template they have, their hospitals are generally similar from market to market, EBITDAR is projected at between $4 million and $5 million per copy. And then, the rent, just to make things easy, comes off the top of that at about $1.5 million.

So, it leaves between $2.5 million and $3.5 million-ish of EBITDA, keeping in mind, then, that MPT gets 80% of that for no incremental investment. That's, among other things, one of the real attractions from the beginning with the Ernest acquisition.

Got it. So, you are pretty comfortable with the step up for the loan from 7% to 10%?

Absolutely. That is a good point to make that, beginning of January, it did step up to the 10%.

Okay. Last one for me before I get off. I missed the full commentary on Gilbert and the lease termination there -- could you just go over that again one more time?

Sure, Tayo. There's not a whole lot to say at this point, other than this is the same group of two hospitals that we have with this operator that we have talked about for the last few earning calls. And, we terminated -- we noticed the termination of the lease for Gilbert very recently. The operator there has contested that, and that is where we are at this point.

Okay. And, do you have an operator lined up, good to go, once you can get them out?

I will say what we've said is, historically, and what I said, again, this morning, is that we have a number of people that would like to be the operator there.

Fair enough. All right. Thank you very much.

Thank you, Tayo.

Karin Ford, KeyBanc Capital Markets.

Just following up on Tayo's last question. What's the rent on the Gilbert hospital, and do you expect to have any impact on your rental payments from either Florence or Gilbert in 2014?

No, Karin, we do not, to answer the second part of your question. We do not expect, at this time, to impact earnings. First part of your question is, we have not, in a number of years, given specific property-by-property cap rates or revenue.

Okay. So, your current expectation is that Gilbert will continue to pay rent through the process, and then, there will be no interruption between them leaving and a new operator, potentially?

I think, to be a little bit more specific, which is important there's issues like this involved, we expect no impact, certainly no material impact, on future earnings based on the Gilbert and Florence situation.

Okay. Next question is, how much RIDEA income do you expect in 2014? What's baked into the run rate number that you give us?

About the name as 2013. We're still -- the biggest part, obviously, is Ernest, and the $93 million loan that has a coupon of 15%. Tayo just pointed out that pay rate increases to 10% as of January.

That is expected to remain about the same. And then, the remainder, which although is $5 million, which is not a big number in the scheme of things, we are not anticipating, in our guidance this morning, any material increase or decrease in that number.

Great. Thanks. And the last question, could you tell us what the interest rate is on the new Alecto mortgage, as well as what lease yield was on the three developments that you opened in the fourth quarter?

The Alecto relationship is, again, it's a RIDEA structure, and there is a floor on the interest rate, and there is no ceiling, but it is based on a percentage Alecto's earnings. The interest rate is -- again, we don't give specific cap rates or interest rates on a particular properties.

Karin, it is (multiple speakers). Pardon me?

Just looking for some help as we are trying to model that investment and how it is going to contribute to FFO next year?

Karin, it is in the range that I mentioned just a few minutes ago in answering Tayo's question, and it is at the upper end of that range.

Okay. That is helpful. And, the lease yield that you ended up getting on the three development completions?

That is in line with what you have seen for those types of developments over the last few years.

Okay. Thanks.

Daniel Bernstein, Stifel.

Good morning. I guess, one of the questions I had is in terms of the acquisition environment.

Are you seeing -- as you see some increased acquisition volume, are you seeing some increased competition as well? And, is that affecting cap rates? It just seems like there's not a lot of people -- still not a lot of people operating in your space, in terms of investing. And just trying to understand if you are seeing any more competition out there, whether it's rates or private equity?

Dan, it's not really private equity. The private equity continues to be what is has been for the last couple years since the credit crunch, which is that they see us as a great complement to their funds, which is not the same image you saw before the credit crunch. So, from that aspect, it has worked very well.

From increased competition, we have seen some, there certainly has been some other public statements made by some of our peers that have shown interest in the acute-care hospital sector. We think that's been very good overall, but we have not had to greatly compress our cap rates, particularly recently, because of that competition. There obviously was some in some of the acquisitions that we made last year.

Okay. Do you think there's any incentive upon hospital systems, given the change in healthcare reform, maybe for them to try to consolidate the industry hospital systems to get larger? Have you seen any of that at all? Or, is that just not -- maybe they are too worried about other items to go worry about buying another hospital -- but I was just trying to understand if hospitals, themselves, offer any competition for you?

Not competition, the consolidation works well for us, and the consolidation continues to be what we have shown that it has been over the at least the last 12 months to 18 months, which is primarily the for-profit sector acquiring not-for-profit hospitals and making the conversion. Obviously, you've got the transactions like CHS and HMA, but that is not the norm. The norm is more not -- for-profits acquiring hospitals from amenities, such as Dignity and others.

Okay. And, in terms of the $500 million investment outlook, is that mainly going to be acquisitions? Or you think there's some opportunities to provide some loans in there as well, which you have historically done?

They'll primarily be acquisitions, but let me clarify to make sure we are talking about the same thing. We will continue, from time to time, do loans that are structured as a loan, but from our standpoint, we view them as the same type of investments as our leases.

If they are done in a loan structure, it's primarily done for tax reasons, not for economic reasons. For economic, they look identical to each other. So, from our standpoint, it is the same type of investment that you have been seeing from us in the past.

Okay. And then, one last question, on G&A -- I don't know if I heard you. Did you give a G&A forecast for next year?

It seemed like the fourth quarter G&A, even taking out the performance award, seemed a little bit elevated, at least to what we had modeled. So, I was just trying to understand what is moving in G&A there for 2014?

No, we didn't break out the guidance into G&A. It is obviously, it's baked into that $1.08 to $1.12.

Okay. On a dollar number, do you think it will be higher than 2013? I'm just trying to understand if I should model that run rate closer to 4Q minus the performance award?

I would suggest not. There are a few items that in the aggregate -- even in the aggregate are not material, but I think that is where you are seeing a little bit of increase, and we don't expect those to repeat.

Okay. That's good enough for me. That's all I have, thanks.

Andrew Rosivach, Goldman Sachs.

This is actually Caitlin. We were wondering if you could tell us what the average cap rate you are expecting is for your acquisition pipeline?

Actually, we don't give the specifics, and we haven't in quite some time now. What we do give is, what I gave earlier, is that our range continues to be very close to what it was for 2013, which is a very wide range, and it runs from the mid-8%s all the up to 12%.

Okay. And then, is that on a GAAP or cash basis?

That's a going-in cash basis.

Could you say anything about the GAAP basis?

On the GAAP basis, typically, you will see our escalators are CPI-based, with a significant amount of them having a floor. The floor is generally around that 2%. So if you build in a 2% guaranteed increase over 15 years, you are probably looking at another, roughly, 150 bps of GAAP increment to add to the cash.

Okay. Thank you.

Michael Mueller, JPMorgan.

I guess, first, Florence and Gilbert -- just to run down everything again, here. So, the lease was terminated at Gilbert, is there a lease in place still at Florence?

Yes.

Okay. And, are you getting rent payments at both or not?

At Florence, yes. At Gilbert, yes, but we just announced the termination or just noticed the termination, which they contested, so we haven't gone far enough to see what's going to happen next.

But you were getting a rent payment up until then?

Yes, I think we'll just leave it at what Ed said, Mike. And I would reiterate, though, that we expect no impact in 2014 from either the Gilbert or Florence hospital.

Got it. Okay. And then, just two other questions on this one, not to beat a dead horse.

It seems like you are still booking FFO on each of those -- I think that's the case. What specifically happened at Gilbert as to why now -- why terminate now, considering it seems like most of the discussion has been around Florence up until then?

Again, Mike, it is subject to litigation, and we just really can't go into details. And really, again, given the context that we expect, certainly, no material impact from either of the facilities during 2014.

Okay. For the acquisition guidance of about $500 million, should we assume that is all domestic, or is a chunk of that overseas as well?

The vast majority of that is domestic.

Okay --

That didn't mean to imply that there will absolutely be any international.

Okay. Got it. And then, last question -- I know you talked about purchase options and a purchase option for 2014 that you said probably wouldn't be exercised, but what's the dollar magnitude?

Mike, that's not what he said. What he said was that their options are to purchase, renew the lease, or vacate, and that we don't have any expectations of them vacating. They may do one or the other.

Got it. How big is the dollar amount if the purchase option is exercised?

It is a $2.1 million rental, annualized rent.

Got it. Okay, and last one -- if we are looking out to 2015, is there anything substantial that could hit in 2015 as well?

We've got two leases maturing, and off the top of my head -- I'm being given a note here. Yes, we have got two leases maturing that we expect will renew. That, of course, is not assured, but we expect they will maintain the lease and maintain occupancy.

Got it. Okay, that was it. Thank you.

Michael Carroll, RBC Capital Markets.

Thanks. Ed, can you give us some additional color on the LTACH patient criteria and how it will positively impact your tenants?

Well, Mike, some of it is -- you remember that I got my start in the medical field in the rehab hospital business. It is not much different from the time that, when I started in that in the early 1980s, and the vast majority of our patients there were orthopedic, and now the vast majority of them are neurological.

It's very similar situation that we have here in the LTACH. Now that everyone knows what the patient criteria is, it will be easier for them to operate.

And, what it essentially does is it forces the operators to go to a much higher acuity patient. And, we believe that with all of our discussions with them prior to the announcement, and then post the announcement, that all of them will make the adjustments well. And that they will continue to be able to operate in basically a status-quo type situation.

I know it's not going to be effective for some time now, but when it does become effective, do you believe that coverage ratios will drop at all? Or, how is that going to impact it?

I don't think, and our operators don't think, that it will drop as it relates to the patient criteria. Now, there's a lot that can happen between now and 2015 with all of the other aspects -- it could go either way. But, our operators are not expecting to see their coverages drop, as it relates to this patient criteria that goes into effect in roughly two years.

Okay. How much of the RIDEA income that you generate is from the LTACH business?

Not much. Remember, the entire portion of the RIDEA transaction in our overall portfolio is extremely small. And a portion of the RIDEA that comes from just the LTACH portion, I don't have the exact percentage, but it is not a large dollar amount.

Okay. Is it mostly general acute-care hospitals?

No, it's LTACHs, rehabs, and two acute cares.

Now, that is that second bucket that we talked about, the $5.4 million. Of course, Ernest, again, makes up the significant amount of the total $19 million. But, aside from that, there's very little income that is tied directly to LTACHs.

Okay, and with the Ernest RIDEA income, is there any, I guess, are you recognizing any of that income outside of that 15% loan that you gave them?

We have not.

Okay. My last question relates to, I guess, your outlook -- that includes the developments, but not future acquisitions, right?

It does. To the extent the developments are scheduled come online in 2014, it takes that into account.

The development's already underway.

Great. Thanks guys.

Juan Sanabria, Bank of America Merrill Lynch.

Good morning. Just hoping you could give a little more color on the straight-line rent write-off benefit of $0.01 in the fourth quarter, and if that was related to Gilbert?

It is not. First of all, it's not a benefit. Just for background, that's related to the property that we sold.

So, of course, when you've got a lease with fixed steps, you have to accrue that. That's what straight-line rent is. So when that lease terminates for any reason, then the lessee is not obligated to make those payments anymore.

So, it is a non-cash accrual to begin with. If the lease stays in place for its term, it turns around naturally. If the lease terminates prior to its natural term, then it goes away. So, we sold the property that we mentioned, and it had about $900,000, or something like that, in straight-line rent that was removed, but there's no benefit to it.

Okay. Great. Could you talk a little bit about how you think of your cost of capital, particularly on the equity side, as we sort of think about financing acquisitions going forward? How do you -- sorry?

Yes. As we mentioned, when we put together a capital plan, depending on the type of capital, if it is just straight common equity that is a component of that plan or a funding, then we look at different views on equity cost of capital. We are not big believers in the black-box type models for a lot of smaller stocks. All in all, we look at the cost of equity, depending on different inputs, of between 7.5% and 8.5%, probably.

Okay, great. And, what should we be thinking in terms of any refinancings for 2014? Do you have anything penciled in, in terms of terming out any of the line, or should that happen as you do acquisitions? What are you thinking in terms of long-term cost of debt --?

We just don't have much outstanding on the line. And as you point out, it will just the kind of be a natural conversion as we add more properties and we continue to manage the balance sheet to those metrics we talked about earlier.

With respect to cost of debt, now, the most recent we did, again, was the euro deal in September, and that was at a 5.75%. A couple weeks earlier, we had done the US deal at 6%. If you talk to the bankers today, they will tell you that we would come in inside of those amounts, all things equal. If you are talking about revolver type or bank financing, then obviously it is a lot lower than that.

Okay. Lastly, you started out the conversation talking about the significant growth to FFO over the last few years and kind of referenced the payout ratio. What should we thinking about the dividend?

What we have said for, actually, a number of years now, is we want that normalized payout to be kind of right where it is today, between 75% and 80% payout on a normalized FFO basis.

Okay. Thanks, guys.

Thank you.

Tayo Okusanya, Jefferies.

Ed, in your comments, you kind of talked about Monroe -- it sounded like there were some opportunities to do something with that asset. Am I reading too much into that?

No, you are not, Tayo. We have good negotiations going on right now with a number of potential operators, but I'm not going to get real excited yet.

All right, good. Okay, I guess we will wait for news coming out of that then. Thank you.

All right.

Ladies and gentlemen, this will conclude today's question-and-answer session. I will now turn the call back over to Mr. Ed Aldag for closing remarks.

Thank you, Brianna, and thank all of you for listening in today. As always, if you have any questions, please don't hesitate to call Charles, Steve, or myself. Thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.