INVESTING IN THE FUTURE of Healthcare

Transcription

1 INVESTING IN THE FUTURE of Healthcare Jefferies 2015 Global Healthcare Conference June 1,

2 SAFE HARBOR This presentation includes forward-looking statements within the meaning of securities laws of applicable jurisdictions. Forward-looking statements can generally be identified by the use of forward-looking words such as may, will, would, could, expect, intend, plan, aim, estimate, target, anticipate, believe, continue, objectives, outlook, guidance or other similar words, and include statements regarding MPT s plans, strategies, objectives, targets, future expansion and development activities and expected financial performance. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results of the Company or future events to differ materially from those expressed in or underlying such forward-looking statements, including without limitation: the satisfaction of all conditions to, and the timely closing (if at all) of the MEDIAN acquisition and sale-leaseback transactions; the Company s financing of the transactions described herein; the capacity of MEDIAN and the Company s other tenants to meet the terms of their agreements; expected rent coverage; Normalized FFO per share; expected payout ratio, the amount of acquisitions of healthcare real estate, if any; capital markets conditions, the repayment of debt arrangements; statements concerning the additional income to the Company as a result of ownership interests in certain hospital operations and the timing of such income; the payment of future dividends, if any; completion of additional debt arrangement, and additional investments; national and international economic, business, real estate and other market conditions; the competitive environment in which the Company operates; the execution of the Company's business plan; financing risks; the Company's ability to maintain its status as a REIT for federal income tax purposes; acquisition and development risks; potential environmental and other liabilities; and other factors affecting the real estate industry generally or healthcare real estate in particular; and the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain equity or debt financing secured by our properties or on an unsecured basis, and the factors referenced under the section captioned Item 1.A Risk Factors in our annual report on Form 10-K for the year ended December 31, Actual results, performance or achievements may vary materially from any projections and forward looking statements and the assumptions on which those statements are based. Readers are cautioned not to place undue reliance on forward-looking statements, and MPT disclaims any responsibility to update such information. 2

3 INTRODUCTION TO MEDICAL PROPERTIES TRUST Unparalleled expertise in hospital real estate, finance and operations 3

4 FOCUSING EXCLUSIVELY ON THE MOST CRITICAL components of healthcare delivery MPT FOCUSES ON the heart of healthcare: General Acute Care hospitals Long Term Acute Care hospitals Inpatient Rehabilitation hospitals HOME HEALTH care INDEPENDENT living GENERAL ACUTE CARE hospitals LTAC hospitals ASSISTED living MEDICAL office SKILLED NURSING facilities INPATIENT REHAB hospitals 4

5 PORTFOLIO OVERVIEW 1 Note: Portfolio statistics as of March 31, 2015 and assume fully funded commitments and consummation of the MEDIAN transaction. (1) Includes 3 medical office buildings and 6 wellness centers. 5

6 INVESTMENT THESIS Stable and predictable income from essential community assets 6

7 HOSPITALS ARE NEEDED IN THEIR COMMUNITIES and current dynamics are highly favorable ALWAYS A NEED FOR HOSPITALS An aging population will result in increased demand for hospital services Healthcare will continue to evolve, but hospitals will remain foundational to the effective delivery and coordination of care CRITICAL PART OF COMMUNITY INFRASTRUCTRE Specialized physical plant is essential to the diagnosis and treatment of acute illness Hospitals are big employers in local communities ~ 4.8 million full-time equivalent hospital workers in the U.S. Physical relocation is often impractical Physician and patients are resistant to new locations HOSPITAL ECONOMICS Highest yielding healthcare real estate Well run hospitals generate strong margins Lease payments represent minor portion of net revenue Hospitals economics are improving CMS projects hospital expenditures will increase at 6% CAGR over next 10 years 7

8 HIGHER RENTAL YIELDS and lease coverages from hospitals 2014 RETURNS from Healthcare Real Estate 1 LEASE COVERAGE by Property Type 2 12% 10% 8% 11% 10% 9% % % % 0.5 0% LTACH Acute Care IRF 0.0 Acute Care IRF LTACH Skilled Nursing Senior Housing Hospitals provide the highest rental yields in healthcare real estate Superior lease coverage compared to other healthcare property types (1) Actual MPT Real Estate returns through December 31, (2) MPT TTM lease coverage as of February 28, 2015 for mature portfolio (properties in portfolio at least one year). Lease coverage ratios are derived solely from the financial information provided to us by our tenants. We do not independently audit or otherwise verify this information. Senior Housing average and Skilled Nursing average are calculated as the average of lease coverage for the HCN, HCP and VTR in respective property types. Lease coverage defined as EBITDAR divided by rent payment under the lease. 8

9 POPULATION IN MILLIONS GROWING DEMAND FOR HOSPITAL SERVICES with an aging population AGING POPULATION in the U.S % % % 21% 21% 22% 20% % 15% 14% % 65+ POPULATION 65+ AS % OF TOTAL POPULATION Source: U.S. Census Bureau 9

10 HOSPITAL OPERATING MARGINS ARE EXPANDING while revenue is trending toward outpatient DISTRIBUTION of INPATIENT vs. OUTPATIENT REVENUE 100% 90% 80% Inpatient Revenue 70% 60% 50% 40% 30% Outpatient Revenue 20% 10% 0% Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2013, for community hospitals. 10

11 DISCIPLINED PORTFOLIO MANAGEMENT and a comprehensive investment process Solid shareholder returns from a well-diversified and growing portfolio 11

12 HISTORY OF ATTRACTIVE shareholder returns 1 CURRENT DIVIDEND Yield MPT PAYOUT Ratio AVERAGE ANNUAL Total Return ( Q1 2015) 2 7.0% 6.0% 5.0% 4.0% 3.0% 4.5% 4.5% 5.7% 6.4% 90% 80% 70% 89% 83% 79% 22.0% 20.0% 18.0% 16.0% 16.5% 20.8% 2.0% 60% 14.0% 1.0% 12.0% 0.0% 50% % RMS3 (1) Peer yields from Bloomberg as of May 28,2015. MPT yield based on Q1 annualized dividend and share price as of May 28, (2) Based on annualized share price performance between 12/30/11 and 3/31/15 inclusive of dividend reinvestment, sourced from FactSet. (3) RMS is the MSCI US REIT Total Return Index. Source: Bloomberg, FactSet 12

13 STRONG PORTFOLIO DIVERSIFICATION generates reliable cash flow Property Type Breakdown Operator Breakdown International Geographic Mix 9% 1% 5% 54% 16% 5% 19% 22% 1% 176 Properties 2% 2% 2% 3% 27 Operators 17% 3 Countries 31% 5% 7% 11% 11% 77% GENERAL ACUTE CARE INPATIENT REHABILITATION LONG-TERM ACUTE PRIME MEDIAN ERNEST IJKG/HUMC LHP ALECTO UNITED STATES GERMANY UNITED KINGDOM OTHER ADEPTUS/FC KINDRED NON RE ASSETS IASIS 18 OTHER OPERATORS RHM NON RE ASSETS Note: Mix based on investment amounts. Property type diversification by investment based on both U.S. and European investments. All measures are pro forma for uncompleted acquisitions and development commitments, including the acquisition of MEDIAN. 13

14 MPT S OPERATOR REVENUE comes from reliable payors PAYOR MIX- United States 1 PAYOR MIX- Germany Rehab 2 PAYOR MIX- UK 4 11% 1% 13% 38% 31% 39% 35% 37% 30% 65% MEDICARE MEDICAID OTHER MANAGED CARE SELF PAY PENSION FUNDS STATUTORY HEALTH INSURANCE OTHER 3 PRIVATE NATIONAL HEALTH SERVICE (1) Based on MPT US portfolio. (2) Based on breakdown of total German rehab market. (3) Includes private insurance, employers insurance for civil servants, accident insurance, self pay and others. (4) Based on payor breakdown for MPT s facility in the UK. 14

15 PF CONTINUED DIVERSIFICATION has reduced property concentration CONCENTRATION BY Largest Property 1 20% 16% 15% 10% 9% 6% 7% 5% 4% 3% 2.9% 2.6% 0% Low near-term lease maturity levels provide MPT with stable, predictable cash flows, with no single property accounting for > 2.6% of MPT s portfolio (1) 2015 PF property concentration is pro-forma for uncompleted acquisitions, including the acquisition of MEDIAN. Note: The MEDIAN Transactions and asset development commitments are fully funded. 15

16 DIVERSIFIED GROUP OF OPERATORS are innovative industry leaders U.S. Top 15 Hospital System based on quality of care, efficiency and patient satisfaction; only for-profit system so honored (1) Top 5 Inpatient Rehabilitation and Long-Term Acute Care operator Sixth largest for-profit system; Texas Pacific Group is largest IASIS shareholder Largest Rehabilitation hospital provider Largest Long-Term Acute Care operator Private equity backed (CCMP) company formed by the experienced management team from former Triad Health that joint ventures with local not-for-profit entities to operate acute care facilities Leading freestanding emergency room system that is revolutionizing the delivery of emergency medical services INTERNATIONAL UK operator that uses clinician partnership model and closely collaborates with government funded National Health Service Largest private German rehabilitation operator Top 5 German rehabilitation operator (1) Prime Healthcare recognized as a Top 15 Health System by Truven Health Analytics and is the only for-profit system named in the Top 15 in the nation in Note: U.S. ranking source Modern Healthcare. 16

17 MPT S EXTENSIVE HEALTHCARE EXPERIENCE brought to every transaction AN EXPERIENCED TEAM AND A STRICT, DISCIPLINED PROCESS ACQUISITIONS UNDERWRITING CONTINGENCY PLANNING ASSET MANAGEMENT Identifies opportunities Conducts diligence Conducts market analysis Completes full diligence Developed before the investment is made Monitors asset performance Maintains client relationships Finalizes documentation 17

18 AN EXEMPLARY INVESTMENT track record TOTAL REAL ESTATE INVESTMENTS 1 MPT S UNDERWRITING EXPERIENCE and Lease Provisions Protect Against Losses Deep industry knowledge (MPT knows hospitals) 41 Investing in critical community infrastructure ( Hospitals needed by the community don t fail ) Underwriting conservatively (We always have a Plan B ) <1% Credit Losses over 10 Years Lease Defaults Provide Opportunity to Reset Rates (1) Does not include MEDIAN transactions. 18

19 STRONG EXTERNAL GROWTH from robust acquisition activity INVESTMENTS/COMMITMENTS ($mm) NORMALIZED FFO Per Share $1,600 $1,400 $1,200 $1,000 $800 $801 $700 $1,378 $1.20 $1.00 $0.80 $0.60 $0.66 $0.71 $0.90 $0.96 $1.06 $600 $400 $200 $213 $331 $416 $0.40 $0.20 $ YTD 2015 $ MPT s disciplined acquisition strategy has driven Normalized FFO per share growth of 12.6% per annum since Acquisitions continue to be immediately accretive to FFO. 19

20 STABLE & PREDICTABLE INTERNAL GROWTH 98% OF LEASES AND MORTGAGE LOANS HAVE FIXED OR CPI LINKED RENT ESCALATORS Total Leases and Mortgage Loans Pro Forma Escalated Rate 0% to 5% increase in CPI, MPT Rents increase: 1 $4.3 BILLION 1.4% - 4.0% Investment Value 1 Percent of Investments Escalation Provisions $2,581,000,000 60% Full CPI (92% have a floor of 1% to 2.65%) $1,187,000,000 27% CPI-based, most with collars ranging from 1% floor to 5% ceiling $480,000,000 11% Fixed increases, averaging 2.4% $67,000,000 2% Flat $4,315,000,000 Note: Rents would increase based on 2015 rent; Investment value includes construction in progress and assumes fully funded development projects. (1) Value based on undepreciated book value as of March 31, 2015 and is inclusive of MEDIAN real estate transaction and completed development projects. 20

21 WELL-COVERED LEASES WITH long-term maturities 12.0% 10.0% 8.0% 6.0% LEASE MATURITY Schedule 95% of 2022 Maturities under Master Lease Master Lease elections are all or none 11% 1 OPERATOR OPTIONS AT MATURITY MOST OFTEN: Elect to extend Typically 5 years at contractual escalations 4.0% 4% 4% 4% OCCASIONALLY: Elect to repurchase 2.0% 0.0% 0% 1% 0% 1% 2% 0% 1% Typically at the greater of fair value or MPT s investment Provide long-term, inflation-protected cash returns from critical community assets Average annual lease maturities through 2021 < 1.2% per annum RARELY: Elect to vacate Typically obligated to transition business to a new operator (1) Lease maturity schedule is pro-forma for MEDIAN transaction as of March 31,

22 PRUDENT CAPITAL STRUCTURE $1,100 $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 DEBT MATURITIES ($ in million) 1 $723 $450 $302 $350 $300 $215 $125 $ $723MM of revolver capacity available for investments as of March 31, % of non-credit facility debt is fixed rate or swapped to fixed rate Well-staggered debt maturities Company s Senior Notes recently upgraded by S&P to investment grade 2 Long term net leverage target of 40-45% Net Debt / Adjusted EBITDA target of 5.5x Senior unsecured notes Secured loans Credit Facility Available Term Loans Targeting investment grade ratings (1) As of March 31, Senior unsecured notes due 2020 are 200 million. Debt due in 2022 excludes debt premium. (2) On December 1, 2014 S&P upgraded MPT s corporate credit rating to BB+ from BB, with a stable outlook, post announcement of the acquisition of MEDIAN. Rating of Senior Notes was also raised to BBB- from BB. 22

23 SUSTAINABLE GROWTH IN THE U.S. and internationally Increased capital needs and a growing acceptance of sale leaseback model 23

24 MPT S GROWTH STRATEGIES Continue to penetrate and lead the U.S. hospital market 78+ Million Baby Boomers 8,000/day will turn 65 through 2029 More than 60% have at least one chronic disease Deepen investments in hospital operations Maintain as limited part of total investments Small investments relative to the associated triple net lease component All are passive Add new, high-acuity sectors that complement our portfolio Licensed ER Hospitals Free-standing high traffic physician staffed Emergency facilities Expand into new markets at home and abroad Western Europe 24

25 INTERNATIONAL DIVERSIFICATON REDUCES RISK of disruptions in U.S. hospital M&A activity GOVERNMENT INITIATIVE / EVENT Health Maintenance Organization (HMO) Act of 1973 Diagnosis-related Groups (DRGs) implemented by HCFA (now CMS) Health Security Act HillaryCare Balanced Budget Amendment U.S. Presidential Elections Patient Protection and Affordable Care Act (PPACA) 25

26 ATTRACTIVE HEALTHCARE MARKETS throughout Western Europe Government Very stable Democratic process to elect political leaders United States Western Europe (1) Very stable Democratic process to elect political leaders Demographics Under M Total (2) 413M Total (2) 87% 13% 81% 19% Laws Affordable Care Act movement towards universal care Universal healthcare and reimbursement mandated by law Opportunities for Growth Continued opportunities for growth primarily through acquisition and development of private and for-profit hospitals Increasing opportunities for growth as private for-profit hospital operators recognize the benefits of sale/leaseback financing model to fund facility improvements, technology upgrades, staff additions and new construction Germany UK Payors Medicare Federal government sponsored Medicaid State and Federal government sponsored Commercial insurance - Private Statutory Health Insurance (SHI) Pension Funds (DRV) National and Regional funds that pay for rehabilitation services Private Health Insurance limited to higher earners National Health Service (NHS) Single payor government system Private Health Insurance Coverage Coverage depends on individual s ability to pay and/or plan benefits Insurance primarily offered through employers and government German law mandates universal access and coverage; SHI and DRV covers 90% of German population In the UK, defined healthcare benefits are free to all residents of the UK through the NHS Physicians Combination of private practice and employment model Rate determined by government and negotiated health plans German physicians are employed doctors While most physicians are employed by NHS, they are free to admit patients to private healthcare facilities. Hospital Ownership Private For-profit Private Not-for-profit Public Not-for-profit 21% 21% 58% 17% 33% 50% 0% 8% 92% (1) Countries constituting Western Europe from UCLA Center for European and Eurasian Studies - web.international.ucla.edu/euro/countries/westeurope. (2) 2012 population estimates from The World Bank - data.worldbank.org/indicator/sp.pop.totl. 26

27 APPENDIX Normalized FFO Reconciliation 27

28 NORMALIZED FFO reconciliation For the Twelve Months Ended ($ in millions) Q15 Net Income attributable to MPT Operating Partnership, L.P. $ 89.9 $ 97.0 $ 50.5 $ 35.9 Participating securities' share in earnings (0.9) (0.7) (0.9) (0.3) Net Income $ 89.0 $ 96.3 $ 49.6 $ 35.6 Depreciation and amortization Continuing operations Discontinued operations Loss (gain) on sale of real estate (16.3) (7.7) (2.8) - Real estate impairment charge Funds from operations $ $ $ $ 50.4 Write-off of straight line rent Acquisition costs Debt refinancing costs Loan and other impairment charges Write-off of other receivables Normalized funds from operations $ $ $ $ 56.8 Normalized FFO is a non-gaap measure that is reconciled to net income at 28

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