Medical Properties Belief (NYSE: MPW)
Q1 2024 Earnings Name
Might 09, 2024, 11:00 a.m. ET
Contents:
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Ready Remarks
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Questions and Solutions
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Name Individuals
Ready Remarks:
Operator
Welcome to the primary quarter 2024 Medical Properties Belief earnings convention name. All individuals can be in a listen-only mode. [Operator instructions] In the present day’s name is scheduled for 60 minutes. Please notice this occasion can also be being recorded.
I’d now like to show the convention over to Mr. Charles Lambert. Please go forward.
Charles Lambert — Vice President, Treasurer, and Managing Director of Capital Markets
Thanks, and good morning. Welcome to the Medical Properties Belief convention name to debate our first quarter 2024 monetary outcomes. With me as we speak are Edward Ok. Aldag, Jr., chairman, president and chief govt officer of the corporate.
Steven Hamner, govt vp and chief monetary officer; Kevin Hanna, senior vp, controller and chief accounting officer; and Rosa Hooper, senior vp of operations and secretary. Our press launch was distributed this morning and furnished on Kind 8-Ok with the Securities and Trade Fee. For those who didn’t obtain a replica, it’s obtainable on our web site at medicalpropertiestrust.com, within the investor relations part. Moreover, we’re internet hosting a reside webcast of as we speak’s name, which you’ll entry in that very same part.
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Through the course of this name, we’ll make projections and sure different statements that could be thought-about forward-looking statements throughout the which means of the Non-public Securities Litigation Reform Act of 1995. These forward-looking statements are topic to identified and unknown dangers, uncertainties and different components which will trigger our monetary outcomes and future occasions to vary materially from these expressed in or underlying such forward-looking statements. We refer you to the corporate’s studies filed with the Securities and Trade Fee for a dialogue of the components that might trigger the corporate’s precise outcomes or future occasions to vary materially from these expressed on this name. The knowledge being offered as we speak is as of this date solely, and besides as required by the federal securities legal guidelines, the corporate doesn’t undertake an obligation to replace any such data.
As well as, through the course of the convention name, we’ll describe sure non-GAAP monetary measures, which needs to be thought-about along with and never in lieu of comparable GAAP monetary measures. Please notice that in our press launch, Medical Properties Belief has reconciled all non-GAAP monetary measures to essentially the most instantly comparable GAAP measures in accordance with Reg G necessities. You can even confer with our web site at medicalpropertiestrust.com for essentially the most instantly comparable monetary measures and associated reconciliations. I’ll now flip the decision over to our chief govt officer, Ed Aldag.
Ed Aldag — Chief Govt Officer
Thanks, Charles, and due to all of you for becoming a member of us this morning on our first quarter 2024 earnings name. I am happy to be joined once more as we speak by Steve Hamner, Rosa Hooper and Kevin Hanna. You’ll hear from every of them shortly. For the previous a number of quarters, you have heard me say that we’re centered on executing a capital allocation technique to generate at the least $2 billion of extra liquidity in 2024.
I am happy to share that we have made robust progress on this technique, executing $1.6 billion of whole liquidity transactions this yr, together with the just lately introduced sale of 75% of our curiosity in 5 Utah hospitals to a brand new three way partnership with a number one multibillion-dollar asset supervisor. We have used the proceeds from these transactions to pay down near-term debt, together with full compensation of our Australian time period mortgage that was due in 2024. Importantly, whereas we have already reached 80% of our preliminary liquidity goal, we’re simply getting began. And now, count on to exceed that quantity for the yr.
Our early outcomes show there may be robust demand for our property at enticing valuations. We now have a number of obtainable levers to generate extra liquidity and we stay actively engaged in quite a few discussions. As with the transactions already executed, we count on to proceed demonstrating the worth and money stream potential, embedded in our portfolio all year long. Turning to Stewart and its determination earlier this week to begin a Chapter 11 restructuring course of.
There has clearly been an excessive amount of media consideration on this submitting. And we need to take a couple of minutes to share our perspective instantly with all of you. First, in the event you’ve had a possibility to learn via the primary day declarations that Steward filed with the US Chapter Court docket, you will see a transparent story of how Steward obtained right here. Notably, no point out was fabricated from hire as a contributor to Steward’s misery.
We consider that chapter will facilitate the retenanting or sale of Steward Hospitals in an orderly and well timed vogue. We firmly consider that an orderly transition of Steward Hospitals to new operators is in the very best curiosity of everybody, and we’re dedicated to offering a $75 million in debt financing to assist obtain that. We count on Steward to make use of this financing to make sure continuity of affected person care whereas accelerating the retenanting of those hospitals. To be clear, now we have not dedicated to offering any extra funding past this preliminary $75 million.
As I stated earlier than, hire isn’t talked about by Steward on the checklist of contributing components to his monetary stress. That is as a result of hire, which represents solely a small fraction of a hospital’s whole income is nearly by no means the first price of economic stress for hospitals. And as Steward wasn’t paying hire, they’d be paying curiosity and principal repayments on some kind of financing for the amenities, as a result of as everyone knows, buildings will not be free. Whereas we have seen an excessive amount of misinformation just lately reported about our enterprise mannequin, the very fact stays that MPT supplies hospital operators everlasting and inexpensive capital enabling them to redirect the substantial money assets that might in any other case be used for actual property to their major mission, therapeutic sufferers.
We proceed to be happy with the progress we’re making with events within the Steward Hospitals. It might be inappropriate for us to debate the small print of every of those transactions till they’re accepted by the courtroom. I’ll now flip it over to Rosa to debate the efficiency of our portfolio. Rose?
Rosa Hooper — Senior Vice President of Operations and Secretary
Thanks, Ed. As with the previous few quarters, I am going to take you thru a number of the highlights throughout our portfolio of essential hospital actual property, starting with just a few high-level feedback. Through the fourth quarter of 2023, we had been happy with the stable sequential and year-over-year protection enhancements delivered throughout our portfolio. In truth, on a discrete quarter over quarter sequential foundation, our common acute inpatient rehab and LTAC segments all reported rising protection within the fourth quarter.
And through the first quarter of 2024, quantity tendencies throughout our portfolio, excluding Steward and Prospect grew in keeping with and, in some instances, outpaced the expansion of huge public operators. Behavioral well being hospitals, which symbolize 14% of our portfolio, proceed to see rising volumes yr over yr as these amenities show their enduring worth of their respective communities. Whereas LTACHs have seen declining year-over-year volumes on account of the CMS waiver expiration final Might, it’s price noting that these amenities symbolize simply 1.5% of our portfolio and are usually a part of bigger operators that embody inpatient rehab and/or acute care hospitals, due to this fact, making certain diversification and extra protection for ongoing hire funds. Going ahead, we’ll now not present particular person disclosure of LTACH coverages however will as an alternative start to mix them with inpatient rehab coverages for a post-acute property kind.
Within the U.Ok. and Continental Europe, operators proceed to learn from robust development in reimbursement charges, general volumes and better acuity emission. Main most operators to report rising working revenue yr over yr. Circle stays properly positioned within the U.Ok.
personal healthcare market with regular quantity development and rising affected person acuity that’s anticipated to increase via 2024. With the sustained development of personal medical insurance protection and self-pay within the U.Ok. Circle has delivered regular monetary efficiency and count on that robust efficiency to be maintained. As the most important unbiased psychological healthcare supplier within the U.Ok.
by quite a few beds precedence continues to capitalize on elevated demand for behavioral well being companies throughout the U.Ok. They’re seeing steadily enhancing reimbursement tendencies, together with secure occupancy ranges and stay centered on cost-effective administration to make sure high quality and environment friendly care. Collectively, these focus areas are driving incremental enhancements in protection and earnings. Forest father or mother firm, MEDIAN, has largely recovered from the impacts of the COVID-19 pandemic on its German operations with enhancing occupancy, favorable reimbursement charges, moderating inflation and robust price management.
MEDIAN’s working margins have confirmed resilient over the previous a number of years and we count on them to take care of that stability. Whereas Swiss Medical’s profitability was marginally impacted by inflationary pressures, and investments associated to its pioneering built-in care community in 2023. Preliminary outcomes from the primary quarter already point out that these short-term headwinds are abating. As well as, Swiss Medical’s Janelle Innovation Hub, which started development in 2021, stays on monitor to open within the second half of 2024.
Turning to our U.S. portfolio. Excluding Steward & Prospect, we’re seeing rising admissions nearly universally throughout our diversified portfolio of common acute hospitals, inpatient rehabilitation amenities, or IRFs, and payroll well being amenities. Reimbursement charges are usually accelerating and operators are doing a commendable job of controlling prices on this inflationary setting.
A significant spotlight for the quarter was the announcement of the brand new JV, we fashioned with a number one funding agency involving our hospitals within the Salt Lake Metropolis space of Utah operated by widespread spirits. We’re happy to retain an approximate 25% curiosity in these amenities and count on robust efficiency tendencies to persist over the long-term. Ernest Well being reported secure efficiency with consolidated EBITDARM protection above two instances. Ernest IRF are performing properly with protection in extra of two instances on their same-store IRF, excluding Ernest’s three current developments, it’s approaching thrice.
Ernest whole reported protection was adversely impacted at its LTACH amenities by the quantity headwinds I discussed earlier. As an essential reminder, LTACH comprised lower than 20% of our funding in Ernest and their hire is greater than lined by the IRFs. Shifting to Prime, as a part of the California and New Jersey sale transaction, MPT and Prime agreed to a brand new 20-year grasp lease for our remaining 4 Prime hospitals. The brand new grasp lease features a buy possibility for Prime to purchase the true property of those remaining hospitals for a minimal buy worth of $238 million.
They report rising volumes and normalization of labor prices, which has led to improved EBITDARM for MPT owned hospitals. At our LifePoint hospitals, volumes have sustained momentum, following the good rebound we noticed within the fourth quarter of 2023. Because of this, LifePoint MPT-owned LifePoint amenities have delivered significant EBITDARM enhancements over the past a number of months, together with an encouraging March by which they ship the very best month-to-month EBITDARM in additional than two years. LifePoint’s just lately devoted cardiovascular and Surgical Care Pavilion at Conemaugh, Memorial and Pennsylvania, has been very well-received by the neighborhood, and we stay optimistic that it’s going to additional place that marketplace for future success.
Our LifePoint behavioral amenities inpatient volumes have steadily elevated, offsetting seasonal declines in volumes from partial hospitalization packages and intensive outpatient packages. At ScionHealth, common acute amenities reported almost a full flip enchancment in protection yr over yr to 1.9 instances, pushed by double-digit quantity will increase and substantial reductions in contract labor. Nonetheless, like Ernest, LTACH efficiency has been adversely impacted by the waivers that expired in 2023. Lastly, Prospect paid money, hire and curiosity of roughly $7 million through the quarter and reported EBITDARM protection of roughly one-time on its California portfolio for the 12 months ended December 31, 2023.
Protection has additional elevated to roughly 1.3 instances on a trailing 12-month foundation via the top of February. Prospect paid March hire for California after the top of the quarter. Nonetheless, right now, MPT has not but acquired hire for the months of April and Might. To briefly summarize, earlier than I flip it over to Kevin, the vast majority of operators in our extremely diversified portfolio continued to carry out properly, and we’re inspired by the quantity and price tendencies we’re seeing throughout geographies and care settings.
As such, we stay assured within the core pillars of our enterprise mannequin and the long-term money stream potential of our portfolio. Kevin?
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Thanks, Rosa. This morning, we reported a GAAP internet lack of $1.23 per share and normalized FFO of $0.24 per share for the primary quarter of 2024. As talked about in our earnings launch, first quarter outcomes included roughly $18 million of consolidated money income from Steward and Prospect. It’s price noting that Steward moreover proceed to make full cost because it pertains to the Massachusetts partnership portfolio, about $19 million within the first quarter at MPT share.
Subsequent to quarter finish, Steward has paid $9.5 million in hire, half of which is MPT share and Prospect has paid roughly $7 million. We additionally described roughly $693 million in non-cash impairments recorded within the quarter, primarily associated to non-real property investments in Steward and Worldwide three way partnership. These costs had been estimated and recorded pursuant to U.S. GAAP accounting guidelines and mirror conservative assumptions concerning potential recoveries, which MPT stays dedicated to pursuing.
As was the case final quarter, investments within the operations of Steward and funding within the operations of the Worldwide three way partnership had been evaluated with help of a third-party unbiased appraiser. The primary quarter costs included the total impairment of MPT’s roughly $360 million mortgage to Steward made in 2021, the rest of its fairness funding in Steward and different obligations. Additional, we impaired our full funding within the worldwide three way partnership. As a reminder, these investments had been beforehand moved to money foundation accounting and no associated revenue was recorded within the first quarter.
It’s price noting a few different changes to normalized FFO. First, we adjusted the ebook worth of our funding in PHP Holdings downward by roughly $60 million, primarily based on the latest third-party unbiased appraisal. Additional, we acknowledged an roughly $8 million loss on our gross sales of precedence time period mortgage, in addition to an $8 million unfavorable adjustment to the honest worth of marketable securities, akin to our shares and EBIT. One thought earlier than I hand it over to Steve, we remind traders prematurely of our 10-Q submitting, that first quarter money flows from operations is usually influenced negatively by the timing of money curiosity funds on our debt, assuming no impression from transactions or Steward retaining exercise, we might count on 2024 money stream from operations to be seasonally weighted to the again half of the yr.
With that, I’ll flip it over to Steve for a dialogue of liquidity and our general capital allocation technique. Steve?
Steven Hamner — Govt Vice President and Chief Monetary Officer
Thanks, Kevin. I am going to start by echoing Ed’s earlier feedback concerning the success of the liquidity plan we described late final yr, which is working even higher than we predicted. At the moment, we estimated that in all of 2024, we might generate $2 billion from asset gross sales and secured financing. By midway via April, we had achieved $1.6 billion or 80% of the preliminary estimate.
And people transactions had been executed throughout a very risky interval, when it comes to inflation and rates of interest. Primarily based on these early successes, we consider we’ll exceed our $2 billion goal for 2024, with extra transactions at enticing valuations and capitalization charges properly inside what our public securities indicate. Going again a bit additional, MPT has diminished its internet debt by $1.6 billion since this time final yr. We have achieved this delevering primarily with about $2.4 billion of proceeds from worthwhile asset gross sales, together with utterly exiting Australia, promoting hospitals again to operators pursuant to their repurchase choices, and most just lately, our sale of 75% on of our Utah amenities for nearly $900 million of money proceeds, and that doesn’t embody the $190 million of non-recourse financing proceeds.
As a slide notice, this Utah transaction absolutely validates the worth we paid for these hospitals in 2020, once they had been operated by Steward. We’re happy to retain a 25% curiosity, which supplies us the chance to take part in any future will increase within the values of those property. We at the moment have about $900 million in instantly obtainable liquidity via money balances and revolver capability. Deliberate makes use of for this present liquidity, in addition to future working money flows and any proceeds from potential extra transactions embody up $275 million for the Steward debtor in possession mortgage.
And as Ed talked about, now we have made no dedication to fund any greater than that. Reimbursement of £100 million, that is about US$130 million in a sterling-denominated vendor financing mortgage, due late this yr and prepayment of roughly one other £105 million or one other roughly $130 million, associated to our Sterling denominated time period mortgage. And as much as about $230 million in improvement commitments, together with two initiatives that could be bought, so the precise quantity of that funding is unsure. Partly in recognition of our success in promoting property at enticing valuations and in addition in mild of the deteriorating Steward state of affairs previous to its chapter submitting, we just lately amended our financial institution amenities.
One among our financial institution mortgage monetary covenants limits the quantity of unsecured debt as a proportion of unencumbered property to 65%. For that calculation, the quantity of unencumbered property leased to tenants in chapter is restricted to 10%. The Financial institution Group agreed to waive this 10% limitation via the early — via the quarterly June 30 check, which implies that all else equal. Steward property will stay within the unencumbered asset calculation for monetary covenants till the subsequent quarterly check on September 30.
Our plan and expectation are that through the 5 months till September 30, we’ll change Steward with higher certified operators at a lot of our hospitals they’re at the moment leased to Steward. In order that even when Steward stays in chapter at the moment and the waiver is just not prolonged, its impact on our unencumbered asset value-based monetary coveted anticipated to be mitigated. Second, given our present priorities and the liquidity generated from asset gross sales and financing transactions already executed and anticipated sooner or later, we now not want the big $1.8 billion revolving credit score facility that we had throughout earlier years, when our acquisitions exceeded $3-plus billion yearly. Accordingly, we provide to cut back the revolver dedication by $400 million all the way down to $1.4 billion.
Additional, as a result of the vast majority of these liquidity transactions are anticipated to be gross sales somewhat than secured financings, we venture comparatively low ranges of secured borrowings for the foreseeable future. And accordingly, we had been prepared to cut back our secured debt basket from 40% all the way down to 25%. Earlier than going to questions, I am going to simply summarize and level out, now we have addressed all our 2024 maturities. We now have solely the 100 million-pound sterling mortgage remaining to be paid.
And we count on to have vital liquidity going into 2025, and that is earlier than contemplating the attainable liquidity that we count on to attain from the extra transactions that I’ve alluded to. Our plans stay to proceed to monetize property, enhance liquidity and scale back debt and retenant hospital actual property that’s at the moment leased to Steward. And with that, I’ll flip it over to questions, operator.
Questions & Solutions:
Operator
Thanks. We are going to now start the question-and-answer session. [Operator instructions] And the primary query will come from Austin Wurschmidt with KeyBanc Capital Markets. Please go forward.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Hey, good morning, everyone. First, simply questioning if the entire amenities leased to Steward are open and working and whether or not you count on that can stay the case? And simply questioning in the event you’re nonetheless receiving the weekly money stream studies from Steward’s Advisors and simply any adjustments for higher or worse there?
Ed Aldag — Chief Govt Officer
So, Austin, the entire amenities apart from those that had been beforehand closed previous to chapter proceed to be working. After which, the second query, we do proceed to obtain money stream studies from Steward advisors, they usually have thus far exceeded their projections on, I consider, each week.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
In order you begin negotiations or have been in negotiations with different events to backfill the operations at these amenities, I imply, what is the considering round potential hire transferring ahead relative to Steward’s prior contractual money hire?
Steven Hamner — Govt Vice President and Chief Monetary Officer
So the hospitals, as we have been saying for a lot of months, on a localized four-wall perspective are producing constructive EBITDAR. The problems with Steward, that are very properly specified by the chapter filings, are round legacy payables, income cycle administration, the extent of income reimbursement. So all of that’s to say that we consider that these hospitals can proceed to pay hire on the contractual ranges. Now, there’s clearly so much that goes into negotiation.
And with chapter, there’s extra scrutiny. However that is a long-winded method of claiming we anticipate throughout the portfolio to proceed to get at or close to the quantity of hire that the present lease agreements name for.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
After which, simply final one for me. I suppose, any sense on the time line of when you can begin to get any of those amenities again or whether or not any of those leases can be rejected for any causes both for higher or worse? That is all for me. Thanks.
Steven Hamner — Govt Vice President and Chief Monetary Officer
I am sorry. I believe your query was across the time line. And I believe, once more, within the chapter filings, there are some very strict goal date to have agreements in place, that might then begin the regulatory course of. I will not get out of business legislation as a result of I do not assume many people are attorneys on this name.
However now we have no indication that Steward would have any motivation in rejecting both of the 2 grasp leases.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Thanks.
Operator
The following query will come from Joshua Dennerlein with Financial institution of America. Please go forward.
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
Yeah. Hey, guys. Thanks for the time. Simply curious on the DIP financing, why did you guys really feel the necessity to present the DIP financing? After which, I used to be trying over the BK paperwork.
Simply curious why it is known as junior debt after which what’s it in your construct?
Ed Aldag — Chief Govt Officer
Josh, the rationale that we determined to do the $75 million DIP financing is precisely as I stated in my ready remarks is that we predict it is crucial that the hospitals proceed to function as we undergo this course of.
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
Have been there no different potential of us you’ll be prepared to supply the financing within the BK?
Ed Aldag — Chief Govt Officer
Sure, they completely had been. There are different lenders concerned, as , however we’re not going to get into the small print of these negotiations at this level.
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
OK. After which, within the BK doc, it was known as junior DIP financing, I believe it is right time period. Simply curious, does that imply it is junior to different like debt or claims? Or why was that time period used?
Steven Hamner — Govt Vice President and Chief Monetary Officer
Nicely, due to the safety waterfall, and as you alluded to, there may be — there are different lenders which have first liens on the standard collateral of receivables.
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
OK. I’m — if I used to be — I am incorrect, however I at all times thought that financing was like essentially the most safe declare. On the PHP holdings write-down, simply may you sort of stroll us via like what drove the honest market adjustment? Like what’s driving that? And the way does that probably impression the potential monetization, I believe you guys have talked about prior to now?
Steven Hamner — Govt Vice President and Chief Monetary Officer
It is primarily based on, as we do each quarter, unbiased value determinations and evaluations of loads of inputs, together with issues like low cost fee financing charges. So it is actually on a non-public foundation. I believe, as Kevin described, like some other safety that we worth on a good market foundation. It is clearly an estimate, and it isn’t primarily based on our — essentially our expectation of what occurs to PHP or when.
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
OK. So simply the way in which that you simply answered it, was it extra primarily based on identical to strikes in rates of interest? Or was there one thing that modified with just like the money flows of the underlying investments?
Ed Aldag — Chief Govt Officer
Sure. I believe the most important piece, as Steve alluded to, was the low cost fee and a few working capital changes as properly, however primarily the low cost fee.
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
All proper. Respect the time. Thanks.
Operator
[Operator instructions] Our subsequent query will come from Vikram Malhotra with Mizuho. Please go forward.
Unknown speaker — Mizuho Securities — Analyst
Hello, that is George on for Vikram. Are you able to simply touch upon prospects? How ought to we take into consideration the hire restoration there?
Steven Hamner — Govt Vice President and Chief Monetary Officer
The hire restoration, is that what —
Unknown speaker — Mizuho Securities — Analyst
Sure, hire restoration.
Steven Hamner — Govt Vice President and Chief Monetary Officer
Nicely, as Rosa identified, now we have collected the hire on the California property via March, however that March cost got here subsequent to March. And as of now, we have not collected April or Might.
Rosa Hooper — Senior Vice President of Operations and Secretary
There is a level, the fee funds are anticipated within the coming months, which can be a slug of money for prospects. So we might anticipate getting — them having extra proceeds on the time.
Unknown speaker — Mizuho Securities — Analyst
OK. That is useful. And simply are you able to present extra colour on the pricing of the inclinations that you simply did in April and also you talked about you are prone to exceed the $2 billion goal of liquidity. How does this quantity appear like as we speak? And what are your expectations?
Steven Hamner — Govt Vice President and Chief Monetary Officer
So I believe we talked about this, and it is a good query final quarter with respect to the Prime property that we bought, which we calculated a mid-7s cap fee. And we stated that the negotiations we had been beneath going at the moment, and albeit, we stay the place we closed a kind of and we stay negotiating others. That cap fee within the mid-7s plus or minus, could be very indicative when adjusted for geography and dimension and high quality of property to what we count on to attain on the extra gross sales or financings that now we have talked about.
Unknown speaker — Mizuho Securities — Analyst
And simply how giant do you assume the pipeline could be? Like how a lot above the $2 billion? For those who can present extra colour, that might be tremendous assist.
Steven Hamner — Govt Vice President and Chief Monetary Officer
Nicely, you are breaking apart a little bit bit, but when I heard you accurately, in fact, we have already achieved 80% of the $2 billion. And primarily based on these outcomes, and our visibility into the market into potential consumers and financing sources. That is why we stated we predict we’ll finally exceed the $2 billion, via the rest of 2024 and we predict it will likely be at related pricing, enticing pricing for us
Unknown speaker — Mizuho Securities — Analyst
Nice. Thanks for taking my query.
Steven Hamner — Govt Vice President and Chief Monetary Officer
Thanks.
Operator
The following query will come from Michael Carroll with RBC. Please go forward.
Michael Carroll — RBC Capital Markets — Analyst
Sure. Thanks. Steve and Rosa, I wished to circle again on the prospect state of affairs. I suppose how regarding is it that they have not paid April and Might rents? And I do know Rosa, you stated that QAF funds are going to come back in.
I imply, does that repair their state of affairs? And what month do these QAF funds are available in?
Steven Hamner — Govt Vice President and Chief Monetary Officer
So your query, how regarding is, in fact, the prospects have been on a money foundation for a while. And as Rosa talked about, I am going to let her tackle the QAF in a minute. We have at all times had with our California operators this QAF subject. After which, once you mix it with respect particularly to Prospect, and delays in disposing of different areas within the nation, they’ve vital money pressures on.
However other than that, having been paid via the quarter, with the QAF subject, that once more, is just not surprising. We stay assured that finally the money will are available in to pay the hire in California.
Ed Aldag — Chief Govt Officer
And California protection continues to enhance.
Rosa Hooper — Senior Vice President of Operations and Secretary
These QAF funds are due on the finish — or ought to are available in by the top of this month into Might, and it is a substantial sum. It ought to actually assist them with their money stream.
Ed Aldag — Chief Govt Officer
Work in February was nearly one-third.
Michael Carroll — RBC Capital Markets — Analyst
Sure. I am assuming that what the Connecticut and Pennsylvania and perhaps the Rhode Island property are sort of weighing that down. In the event that they — as they’re lacking these hire funds, have they got different money pressures which might be making their place tighter, I suppose, does lacking these hire funds in April and Might clear up their money points? Or are they falling behind one other vendor payables that they could have?
Steven Hamner — Govt Vice President and Chief Monetary Officer
I do not assume now we have a touch upon that. Once more, we count on to get our hire, they usually’re working at a degree. And once more, as talked about, the very positively enhancing protection. Now, you must convert that protection to money, and that is what we count on is available in with the QAF.
Michael Carroll — RBC Capital Markets — Analyst
OK. After which, simply lastly, Steve, are you able to discuss a little bit bit concerning the — what you are anticipating for the Steward transitions? I do know you stated in your ready remarks that did not want the ten% BK covenant check in September, do you count on it transitions to happen, do you count on a portion of transitions to happen? And I did take a look at the BK submitting saying that they count on a number of the stuff to get finished by the start of August. I imply, I am assuming for this to get finished by the start of August, you would want to have loads of course of already underway? I imply, are you able to touch upon how a lot curiosity there are in these hospitals proper now? And are individuals trying on the financials to get able to put in bids? Or is that course of simply beginning proper now?
Ed Aldag — Chief Govt Officer
Mike, it has been occurring for nearly 5 months now. We’re method down the street with many alternative individuals.
Michael Carroll — RBC Capital Markets — Analyst
After which, Steve, your touch upon the ten% BK covenant, was that — do you count on a proportion of the Steward hospitals to be transitioned? Or like are you able to sort of make clear that remark?
Steven Hamner — Govt Vice President and Chief Monetary Officer
Nicely, I am going to attempt to make clear. I will not attempt to predict. The purpose I used to be attempting to make is, if we’d like aid from that covenant on the finish of September, we might count on that want, all else equal, to be considerably mitigated by the variety of hospitals that transfer away from the Steward relationship into new relationships. Now, we do not attempt to predict precisely which hospitals will transition, on which date.
However between now and the top of this nearly five-month interval, we do assume that — once more, primarily based on what Ed simply stated, bear in mind this did not simply begin with the submitting of chapter. They have been advertising these hospitals for at the least 5 – 6 months. However we do count on, with out specifying which hospitals, go win, we do count on {that a} significant quantity of Steward publicity can be moved away to new operators earlier than the top of September.
Michael Carroll — RBC Capital Markets — Analyst
OK. Nice. Thanks.
Operator
Your subsequent query will come from Mike Mueller with J.P. Morgan. Please go forward.
Mike Mueller — J.P. Morgan — Analyst
Sure. Hello. Perhaps a few fast ones right here. I suppose following up on the prior query.
Are you able to give us a excessive degree sense of on the finish of this course of, what portion of Steward property you assume you may have now will finally be managed by different operators, both by bought or transitioned or no matter?
Ed Aldag — Chief Govt Officer
Mike, I am unsure, I utterly perceive your query, however I believe you stated on the finish of this transition each time it’s, can we count on any of the amenities to proceed to be operated by Steward? Is that the query?
Mike Mueller — J.P. Morgan — Analyst
Let me rephrase it. I suppose, on the finish of this chapter course of on the different aspect of it, what portion of your Steward property now do you assume we’ll be within the arms of different operators versus being operated by Steward?
Ed Aldag — Chief Govt Officer
I’d guess, we’re near 100%.
Mike Mueller — J.P. Morgan — Analyst
OK. After which, I suppose, because it pertains to the current information with Connecticut, Yale New Haven, I suppose are you able to give us, I suppose, present ideas on what the Plan B is there, if that — if these property don’t get bought?
Ed Aldag — Chief Govt Officer
Sure. With the continuing discussions between the state Yale and prospect, we’re simply not going to touch upon that proper now.
Mike Mueller — J.P. Morgan — Analyst
Bought it. OK. Thanks.
Operator
The following query will come from Jonathan Hughes with Raymond James. Please go forward.
Jonathan Hughes — Raymond James — Analyst
Hello. Good morning. Are there any issues or discussions with new potential operators for the Steward properties, specializing in rising market share which may result in focus points and perhaps scrutiny from the FTC? Or is it as a result of Steward is in chapter, the first purpose is to discover a new operator and protect healthcare companies no matter elevated market share?
Ed Aldag — Chief Govt Officer
Sure, Jonathan, it is loads of totally different markets. So I am unable to be 100% correct on this, however the very best of my restoration proper this second, I do not assume there are any that might require a market focus subject.
Jonathan Hughes — Raymond James — Analyst
OK. After which, perhaps my second query on the dividend. The final month’s dividend was declared after the Utah and the Prime transactions, which was constant together with your prior feedback that the dividend relies on liquidity transactions. And that press launch talked about that it was a daily dividend, however that April dividend was declared greater than 5 months after the prior.
So is it honest to imagine future dividends may additionally be extra sporadic and perhaps given the change in Steward’s standing since then and give attention to preserving liquidity, is the board nonetheless snug with that present dividend quantity? Thanks.
Ed Aldag — Chief Govt Officer
Sure. Jonathan, our subsequent board assembly is identical day as our Annual Assembly, which I consider is Might 30, and it will likely be mentioned at that time.
Jonathan Hughes — Raymond James — Analyst
All proper. Look ahead hear to extra. Thanks for the time.
Operator
Your subsequent query will come from John Pawlowski with Inexperienced Avenue. Please go forward.
John Pawlowski — Inexperienced Avenue Advisors — Analyst
Thanks for the time. My first query is on the Utah transaction. The press launch stated $1.1 billion in proceeds previous to prices and reserves. Are you able to quantify what the fee and reserves are and I think about a few of it is capex? So any extra colour on the deferred capex in that portfolio and the way it impacted the transaction worth could be useful.
Steven Hamner — Govt Vice President and Chief Monetary Officer
Nicely, the reference to price and reserves are simply customary price of a transaction charges, brokerage and typical reserves that our first lien lender could require. And I am not fairly positive if the follow-up query.
Ed Aldag — Chief Govt Officer
There was nothing extraordinary in these bills in reserve —
Steven Hamner — Govt Vice President and Chief Monetary Officer
No. No, that is my level. I am unsure what was meant by capex.
John Pawlowski — Inexperienced Avenue Advisors — Analyst
There isn’t any extra capex that MPW must fund to get that headline buy worth?
Steven Hamner — Govt Vice President and Chief Monetary Officer
That is an absolute internet lease that the operator, Widespread Spirit is liable for capex.
John Pawlowski — Inexperienced Avenue Advisors — Analyst
OK. Subsequent query is on Steward. So with the Macquarie JV, simply on condition that Steward continues to be paying hire or MPWs lease funds due from Steward on both of your grasp leases with Steward subordinated to the JV when that was structured?
Ed Aldag — Chief Govt Officer
No.
John Pawlowski — Inexperienced Avenue Advisors — Analyst
Final query for me. Did you pledge any of your actual property as collateral along side the Steward ABL or bridge mortgage refinancing? And if that’s the case, what number of property have leaned in opposition to them proper now?
Ed Aldag — Chief Govt Officer
No.
John Pawlowski — Inexperienced Avenue Advisors — Analyst
All proper. Thanks for the time.
Operator
This concludes our question-and-answer session. I want to flip the convention again over to Mr. Ed Aldag for any closing remarks. Please go forward.
Ed Aldag — Chief Govt Officer
Thanks, Chuck and we admire everybody listening as we speak. If in case you have any extra questions, please do not hesitate to name Drew or Tim, they usually’ll get your questions responded to as shortly as we are able to. Thanks.
Operator
[Operator signoff]
Length: 0 minutes
Name individuals:
Charles Lambert — Vice President, Treasurer, and Managing Director of Capital Markets
Ed Aldag — Chief Govt Officer
Rosa Hooper — Senior Vice President of Operations and Secretary
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Steven Hamner — Govt Vice President and Chief Monetary Officer
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Joshua Dennerlein — Financial institution of America Merrill Lynch — Analyst
Unknown speaker — Mizuho Securities — Analyst
Michael Carroll — RBC Capital Markets — Analyst
Mike Mueller — J.P. Morgan — Analyst
Jonathan Hughes — Raymond James — Analyst
John Pawlowski — Inexperienced Avenue Advisors — Analyst
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Medical Properties Belief (MPW) Q1 2024 Earnings Name Transcript was initially printed by The Motley Idiot
