Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2021 Medical Properties Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, . Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to turn the conference over to your host today, Charles Lambert. Thank you. Please go ahead.

Thank you. Good morning and welcome to the Medical Properties Trust conference call to discuss our third quarter 2021 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 the underlying such forward-looking statements. We refer you to the Company's reports filed with the Securities and Exchange Commission for discussion of the factors that could cause the Company's actual results or future events to differ materially from those expressed in this call. The information being provided today is as of this date only and except as required by the federal securities laws, the Company does not undertake a duty to update any such information. In addition, during the course of the conference call, we will describe certain non-GAAP financial measures which should be considered in addition to and not in lieu of comparable GAAP financial measures. Please note that in our press release, Medical Properties Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP 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 Chief Executive Officer, Ed Aldag.

Thank you, Charles, and thanks all of you for listening in today for our third quarter 2021 earnings call. During the month of September, we made two announcements that are significant milestones for MPT. Steve will go over each of these in detail in a few moments. But it is important for me to put them in context. The first one was a partnership with Macquarie Infrastructure Partners V for eight Stuart hospitals in Massachusetts. These transactions alone reflect a number of very strong points. MBC is always referred to in all of our hospitals as important parts of any community’s infrastructure. As part of our underwriting, we investigate the importance of each facility to that specific community. As most of you know, Macquarie is one of the world's leading infrastructure investors. They too believe the premise that most hospital are an important part of our communities’ infrastructure. We regard research the world's leading experts in hospital investing. They turned to NBT in the words of one of their executives, NBT is the clear leader and there really isn't a number two, when we purchased the Massachusetts hospitals five-years ago. The cap rate on these leases was in the mid-7% range and is escalated since then, the value of these hospitals that we agreed with Macquarie was based on a market cap rate in the mid-5 percent range, reflecting our unique underwriting expertise. Stewards, operating skills and a market for hospital real estate that is rapidly attracting sophisticated private investors. These conditions establish a whole new value for our entire portfolio, not just the Massachusetts hospitals. We are excited about this relationship with Macquarie and we hope to be able to grow it together. And while we're not making any additional announcements today, we are encouraged about opportunities we have…

Thank you, Ed. This morning, we reported normalized FFO of $0.44 per diluted share for the third quarter of 2021, along with adjusted FFO per share of $0.34. From the end of 2019 through 2021, year-to-date. MPT is among a very small handful of large cap rates that continue to deliver double-digit growth on a per-share basis. When considered along with our low 80s% AFFO payout ratio, our access to abundant attractively priced capital and growing acquisition opportunities in virtually all of our markets. MPT offers near and long-term immediately accretive asset, revenue, and dividend growth that is not available for most regions. And that's exactly what the activities of the Third Quarter, so abundantly demonstrated. Before I discuss these activities, I will point out a few minor items that impacted our reported results. First, as is the case every quarter, we recognized a change in the market value of our investment in the securities of Aevis, the parent of our tenant, Swiss Medical Network, and $800,000 gain for this quarter. Second, we wrote off $3.6 million in straight line rent and other costs related to properties that were sold during the quarter for an aggregate of about $42 million. Aside from these routine reporting adjustments, we realized gains on these transactions of about $9.3 million. As we have previously explained, GAAP requires us to present as MPT expenses, certain cost, even though they are contractual obligations of and we are reimbursed by our tenants. These charges amounted to approximately $4 million for the quarter, and we included this amount in property-related expenses and offsetting revenue of a similar amount in our Income Statement. Finally, again as required by GAAP, we have reclassified the book value of the Massachusetts hospitals that are pending contribution to our joint venture with Macquarie…

Your first question comes from Q - Jonathan Hughes with Raymond James.

Good morning. Thanks for the time.

Good morning.

I know you are limited a bit in what you can say, but could you share some high-level commentary on the soon to be HCA Utah facilities and the option for you to sell them to HCA? I mean, could those effectively become like an ATM vehicle? Where if for some reason the future of the public market doesn't provide you with an attractive or appropriate cost of equity capital you could sell those to HCA to generate capital for other investments.

So that's a very good perspective. And it actually is the way if we were to elect that it could work. We -- I think in our announcement, we actually disclosed. There's a put option that we haven't disclosed, total details of it. But at a minimum that we can put the properties to HCA at no less than fair value. There's actually a flaw that we're unable to disclose, but it's a very attractive option for us and provides us the liquidity, flexibility that you just described.

Okay. And I assume that put option here is a unique feature to this deal because you don't have a meaningful equity stake in the operator unlike some of the other larger relationships you have.

Well, the put option is, is not normally something we have in our leases. I'm not sure that's necessarily related to less than 10% equity stakes in certain of our operators. But you're absolutely correct and that it's something of a unique feature.

Okay. And then one more for me. Looking at the other funding source to the debt side, your run rate net debt to EBITDA assumes six turns, but I think the pandemic in some recent actions proved your underwriting. It was well as the stability and safety of hospitals. And it's either you did talk about the leverage target in your prepared remarks. But as you consider running leverage, maybe a little higher like closer to 7 since it does seem like your hospitals can handle it, you can raise international pretty low rates. It just seems like an interesting way to lower your overall cost of capital and drive further accretion from investments. Just curious to hear your thoughts on that front.

Yeah, so going into fair observation, it's just to replicate from that perspective. At this point though, and for the long-term future, we think we'll retain that 5 to 6 times target. And there are good reasons for that were still growing very rapidly. We want to be able to react quickly to potential acquisition. Sometimes these are very large acquisitions. And if we're already running up towards the top of what is -- what does a prudent leverage range, then sometimes we don't have the flexibility to react quickly. So that's just one reason why we think the 5 to 6 times range is appropriate. Another is we are a public Company, there is a calculus, I'm not sure it can be precisely expressed, but there is a calculus between share value and leverage. And we think another reason for that 5 to 6 times is -- that's probably the fulcrum for keeping our equity valuation at a point where we think is appropriate.

Okay. Well, I appreciate the color, and thanks for the time.

Your next question comes from Jordan Sadler with KeyBanc Capital Markets.

Hey, this is Arthur Porto on for Jordan. My first question is on the investment pipeline through 2022, you could just provide some color on geography, asset type, and pricing and maybe the overall scale the pipeline?

Sure, Arthur. The pipeline remains extremely strong. We continue to work a pipeline in the $3 to $5 billion range that doesn't mean we have three to $5 billion of acquisitions to make, but it's an active pipeline. But having said that, we haven't given any sort of indications of what we think will close for the remainder of the year. We've done 3.7 billion so far this year. We're very happy with where we are right now. The vast majority of that property of that pipeline is general acute care hospitals. located all throughout our existing markets. We've got some additional things that we know that we're working on with some of our existing operators, that will certainly come to fruition in the next couple of quarters. So that's where we are right now.

Great, thanks. And I just have a follow-up question on