Medical Properties Trust Aktie

Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medical Properties Trust First Quarter 2026 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Charles Lambert, Senior Vice President. Please go ahead.

Good morning. Welcome to the MPT conference call to discuss our first quarter 2026 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer; Rosa Williams, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting.

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 mpt.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section.

During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's 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 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, MPT 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 mpt.com for the most directly comparable financial results and related reconciliations.

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

Thank you, Charles, and thanks to all of you for joining us this morning on our first quarter 2026 earnings call. In a moment, you will hear details from the rest of the team, but let me first summarize what we're seeing across our diverse portfolio of hospitals. Total portfolio EBITDARM coverage remained steady year-over-year at 2.5x. Our post-acute portfolio delivered standout results with EBITDARM increasing approximately $80 million year-over-year, led by a 24% increase in Median, a 16% increase at Ernest Health and a 61% increase at Vibra which continues to deliver excellent results following the new 20-year master lease agreement executed in late 2025.

General acute performance was largely stable with EBITDARM increasing nearly $40 million year-over-year. These strong results were partially offset by our behavioral health portfolio, which continues to navigate to entirely separate challenges in the U.S. and U.K. markets. While both markets continue to experience strong demand in the U.S., providers are grappling with staffing shortages and in the U.K., demand is being dampened by funding pressures at the NHS. Rosa will elaborate shortly on strategic actions being taken to address this.

Looking ahead, we are encouraged by the trends we see across the portfolio in early 2026. Our momentum continues to build in post-acute. Our general acute care performance remained stable with strong performance across the portfolio, and we continue to see solid demand trends in the behavioral sector. Additionally, our portfolio of recently transitioned tenant rent continues to ramp as expected, with our tenants across Florida, Texas, Arizona and Louisiana fully current on rent due through April. Quorum and HonorHealth reached their fully stabilized rents in the third quarter of last year and HSA ramped to 75% in March, and we continue to expect 100% of monthly payments from HSA beginning in October. Based on these encouraging trends, we remain confident in reaching our goal of over $1 billion and annualized cash rent by year-end.

Rosa?

Thank you, Ed. This past quarter marked a period where our mature portfolio continued to deliver steady results, while new operators began moving from transition towards stabilization. That progress is increasingly visible as we look forward through 2026 and beyond. In this context, our international assets have provided a meaningful stabilizing force. In Germany, Median delivered one of its best operating periods today, supported by high occupancy, improving reimbursements and sustained demand across orthopedics and other rehabilitation services.

We are confident in Median's ability to drive strong performance throughout 2026, given its scale and operating discipline. Swiss Medical Network reinforced its leading position in the Swiss health care market through strategic acquisitions and expanded outpatient activities, focusing on disciplined capital deployment and the growth of their integrated care models. In the U.K., Circle Health continues to perform well within the general acute segment, benefiting from private pay utilization and higher acuity case mix.

Priory reports the demand for inpatient mental health services in the U.K. continues at record levels. Historically, the National Health Service has reimbursed private providers for a substantial majority of these patients. But as we have reported on previous earnings updates, the NHS is significantly reducing that reimbursement. In reaction, Priory continues to prioritize service line optimization, cost management and selective repositioning of certain facilities. We and Priory believe this to be a temporary condition, but the timing and degree of any recovery is unpredictable.

For purposes of our reported Priory EBITDARM coverages in this morning's supplemental, we have revised our allocated central costs, better reflecting retrospective, recent and future facility-level actual performance. Applying these allocations retrospectively has the effect of reducing trailing 12 months coverage by 40 basis points for Priory by 20 basis points for the behavioral health property type and not at all for the consolidated portfolio.

Turning to the U.S. portfolio. I'll begin with the operators most closely tied to recent transitions. At HSA, management is focused on improving its constrained liquidity and cash collections. In April, HSA engaged and fully onboarded Conifer to manage its revenue cycle operations. Additionally, HSA will be utilizing its own MEDITECH electronic health record system beginning tomorrow. These are critically important steps that HSA is confident, will improve collections, drive operational efficiency and reduce IT expense.

Management is also continuing efforts to add service lines, recruit positions and improve the facilities and equipment. HSA recently obtained equipment financing and has already begun ordering high-priority replacement equipment with these funds. Additionally, CMS recently granted contingent approval for the State of Florida's Medicaid directed payment program. HSA expects a significant increase in their net benefit compared to 2025, which would substantially improve their liquidity position. HSA has numerous capital projects in process, including a new parking deck, structural and electrical recertification, wound care center improvements, elevator upgrades and modernization, roof restoration and replacement of critical equipment.

Turning to NOR. Operations have been stable in the first few months with EBITDARM already in excess of its full contractual rent obligation, which goes into effect at the end of the year. Inpatient admissions are ahead of prior year and NOR is working to add service lines such as interventional radiology and restarting construction of a new emergency department at Culver City. This new state-of-the-art ED includes 23 private patient rooms, increases treatment and office space by 80% and fully meets state mandated seismic standards. This project is expected to be completed in the summer of 2027. We are encouraged by the steps NOR is taking to improve these facilities that anchor care for some of the most underserved communities in Los Angeles County.

More broadly, across the transition to U.S. portfolio, performance remains aligned with underwriting expectations. As Ed mentioned, Quorum and HonorHealth are paying fully stabilized rent as of the third quarter 2025. And with HSA now ramped to 75% and we have line of sight towards full contractual rents across these assets as we move through the ramp period.

Turning to the rest of our U.S. operators. Performance trends remain stable. Ernest Health remains a standout across post-acute rehabilitation with strong inpatient rehab performance, improving operating leverage and balance sheet strengthening following its refinancing. Ernest plans to convert all 6 MPT-owned LTAC facilities to IRFs by the end of 2026 as it transforms into a pure-play rehab operator. Ernest's rehabilitation hospitals have historically had meaningfully higher EBITDARM coverages than their average LTAC. At LifePoint, while performance has moderated from the elevated growth experienced in 2024, admissions and acuity continue to support stable cash generation.

Following the balance sheet and portfolio repositioning actions discussed last quarter, Vibra's EBITDARM coverage improved to 3x driven by accelerating volumes across both the rehabilitation and long-term acute care segments. Vibra's California assets performed particularly well, including the Reading facility, which is tracking ahead of MPT's underwriting expectations. As we look into 2026, we expect sustained progress around rent ramps, stabilization across transitioned assets and steady performance from our core operators. Collectively, these trends give us a clear view toward normalized contractual rent across the portfolio as we approach 2027. We believe the portfolio is increasingly positioned to deliver durable, sustainable cash flows and strategic growth opportunities over the long term.

Kevin?

Thank you, Rosa. Today, we reported normalized FFO of $0.14 per share for the first quarter of 2026, which was in line with our expectations. As we disclosed in last quarter's results, we're approximately $0.03 to $0.04 higher than it otherwise would have been due to onetime cash rent receipts. G&A expense was lower year-over-year in the quarter, primarily driven by the lower stock compensation expense due to the change in fair market value of certain cash settled awards in 2024 and 2025, of which no award has been or invested at this time. Additionally, and as discussed in our Form 10-K filing, we moved 7 additional legal entities into our U.K. restructure, effective in the first quarter, which resulted in a onetime $44 million tax benefit in the first quarter.

Steve?

Thank you, Kevin. I have just a few brief comments. Our balance sheet is relatively unchanged from the fourth quarter. Our nearest maturity is a EUR 500 million unsecured notes issue due in October of this year, which has a coupon of only 0.99%. Our $200 million term loan will mature in June of 2027 as will our revolver, subject to our extension right. Our $1.4 billion unsecured note issue matures in October 2027. We retain the options that we have discussed on recent quarterly updates, and we continue to plan around our ample security value and indenture flexibility to maximize delevering and interest coverage as our revenue continues to grow.

As we have previously suggested, our near-term use of capital for acquisitions is expected to be modest, strategic and accretive. During the quarter, we completed only the EUR 23 million acquisition of a hospital in Germany that we had previously reported and had been negotiating for well over a year. Separately, and again, consistent with our previous guidance that dispositions may continue at modest levels. We completed the sales of 2 small hospitals in the U.S.

Operationally, as already discussed, cash rent collections from the hospitals we re-tenanted in September 2024, continue to be paid in accordance with the contractual ramp with the exception of the small Ohio and Pennsylvania facilities that we had previously explained. Based on cash rent received for April, our annualized rent for these facilities, net of those we have sold represents about 74% of the contractual cash rent that was required under the previous master lease at the time of the September 2024 transition.

And once HSA reaches its fully stabilized cash rent beginning in this year's fourth quarter, that percentage is expected to grow to about 98% of the previous rent. The remaining 2-ish percent generally relate to the Ohio and Pennsylvania facilities. We again received no rent from these tenants in the first quarter, and we believe it is increasingly unlikely that they will return to operational profitability in the immediate future, partially because local health regulators have not granted necessary approvals to reopen. Accordingly, we recognized an impairment of our loan collateral related to these 2 facilities.

As Ed mentioned, we remain confident that our fourth quarter run rate for cash rents, including our portion of JV rents will approximate $1 billion. During the quarter, Prospect completed the sales of its remaining hospitals and continues to collect patient and other receivables in the ordinary course. MPT's previously discussed DIP loan at quarter end was approximately $60 million, and is secured primarily by the proceeds from the claims that the bankruptcy estate is litigating. As of March 31, those proceeds are estimated to substantially exceed our DIP loan commitment.

To the extent there is such an excess, we will also receive a significant but as yet undetermined portion over and above our DIP loan balance. While outstanding, the DIP loan accrues interest at all-in rates approximating 16%, although we will recognize any such income only as received.

And with that, I will turn the call back to the operator to queue any questions. Jeannie?

[Operator Instructions] Your first question comes from the line of Mike Mueller with JPMorgan.

I know you gave some color around the percentage of rent tied, I guess, the cash collections in April as compared to the prior master lease. But can you give us any more clarity in terms of the actual dollars -- dollar amounts collected? And are you still targeting that roughly $160 as it relates to that Steward pool?

We are, Mike. And when I gave those percentages 74%, 98%, that's with respect to that $160 million target amount. So going forward, again, pro forma for what we collected in April, we'll be collecting 74% of that $160 million.

Got it. Okay. I just wanted to make sure that, that was the right way to think about that. And then Second question, I know you talked about maintaining financial flexibility as it relates to upcoming maturities. But can you just tell us if you were heading down that path today, number one, where do you think refi -- are you largely looking particularly for the '26 maturity at a refi? What would rates be? I mean just talk -- get a little more granular, if you can, about what we should be expecting in the next couple of quarters there?

Yes. We're not in a position to really know with any precision what a coupon may be, that will be driven by a lot of things, including, as you point out, the sequencing of what we might address first, what we might address comprehensively. I'll just point just for reference and nothing else, our most recent secured lending has been done with our German portfolio that we did about a year ago at a 10-year roughly 5-plus percent coupon. Obviously, a little over a year ago, we did secured senior notes that are today trading in the 6% to 7% range. I'm not predicting that, that's what we'll be able to refinance at. But those are data points that we all have to look at.

Your next question comes from the line of Michael Carroll with RBC Capital Markets.

Can you guys provide us some color on HSA's current financial position just given the noise that has occurred over the past few months. And will the Florida [ DPP ] payments that Rosa mentioned, will that just be used to catch up on their accounts payable? Or do you think that they could use some of those proceeds to pay down the working capital loan that you have out to them?

Mike, to answer the last part of that question first. The answer is yes. We think they'll use some of the [ DIP ] funding to repay our ABL. We also believe that they are in a position now where they've got real interest in getting a permanent ABL, which hopefully will replace our 100% of our ABL in the recent near future.

Second part of the question was how they doing financially? From an EBITDARM standpoint, they continue to perform exceptionally well. They're generating approximately 3x EBITDARM coverage on a current cash rent basis. But they're still are continuing not to collect as much cash as we and they would like to see.

If you remember recently in their press releases, they've entered into a transaction with Conifer to take over their revenue cycle management that literally just happened last month. And they have just recently begun getting off of the old Steward MEDITECH license and having their own, literally going, the first hospital, I believe, was sometime in late April. They've gone from roughly a 78% to roughly an 82% in cash collections. That's a big number, but they need to get up in, obviously, in the 90s for those numbers to work well.

Okay. That's helpful. And then just switching to Priority real quick. When Rosa was kind of highlighting that the NHS payment reductions were dropped or reduced, when does that actually start hitting their P&L? So does the 1.6 coverage ratio in the supplemental, does that fully reflect those lower payments? Or should we expect that coverage ratio to continue to drop as more quarters of that lower payment starts to roll on into that calculation?

No. We're hopeful that we're near the bottom of that. As I think I said or Rosa said in her prepared remarks, we think it's a temporary situation. But there's no predictability of that. Historically, private providers in the U.K. have provided a significant majority of all of the mental health, especially inpatient services. And so what that means is if the NHS is not paying, then those people are going untreated, and we think that's unsustainable. So we're hopeful that at a trailing 12, 1.6x coverage. And again, keep in mind that's an EBITDARM coverage, that were near the bottom. But there's no assurance of that.

We're comfortable with our original underwriting. Our facilities continue to be fully paid rent. And I think, again, the biggest takeaway is this really isn't sustainable. But once again, we can't predict about -- predict the timing or the velocity of any recovery.

Mike, it's really a political issue here. The good news for us and for all behavioral health operators in the U.K. is that demand is exceptionally strong, continues to increase. The NHS has limited the number of beds available in private care for NHS patients in the behavioral sector. Obviously, as Steve points out, that can't last forever.

And then just real quick. When you say it's temporary, do you think that NHS could change those standards? And I'm assuming that's going to take some time, right? That's not going to happen in the next year or so?

I don't know that we agree with that. With the amount of demand that you have for the patients there. It literally is just a funding and political issue, a political issue in the funding for the NHS and the demand in the public that they have access to behavioral health matters. It literally could be fixed overnight. I'm not suggesting that it will be, but it could be.

Your next question comes from the line of John Kilichowski with Wells Fargo.

My first question is just on the potential impacts of the One Big Beautiful bill to your portfolio. When you think about the flow-throughs of once that bill is implemented, how will that affect your tenants and maybe specifically HSA as it's tracking towards you said onetime coverage at full rent.

Yes. John, from the One Big Beautiful bill overall, very broadly speaking, our operators do not believe overall that it will have a negative effect. There are obviously a few hospitals that will have more of effect than it will on others. HSA is fortunate in their portfolio that they don't believe it will have a significant effect on -- negative effect on any of their facilities.

Okay. That's helpful. And then my second question, did you lend to any of your tenants in the quarter?

Very limited. During the quarter, the only working capital loan we made was to the small Pennsylvania tenant that I mentioned earlier, and that was for less than $1 million. We previously reported, we're funding through a secured loan, the approximate $25 million cost of HSA's conversion to the MEDITECH EMR system that Rosa mentioned that actually goes into effect. She may have said as early as today or tomorrow, we loaned about $13 million during the quarter under that loan. And then we also funded through a second secured loan approximately $12 million in capitation liabilities that remained at the Prospect California hospitals when they exited bankruptcy very early this year.

Your next question comes from the line for Farrell Granath with Bank of America.

This is Farrell Granath. My first question was just about the dispositions. I quickly wanted to touch on the first quarter disposition that was expected that was mentioned on the last call. I believe it was with the prospect remaining Waterbury asset. Was that completed in this quarter? Or is that still ongoing?

Yes. The broader Waterbury transaction was completed in the quarter. I think I mentioned on my remarks that while those proceeds have been received and paid to us, the estate continues to collect receivables, and we'll continue to do that probably for at least a few more months just in the ordinary course, and those proceeds will also come in to repay our DIP loan.

And then also when just considering your portfolio, how do you evaluate potential targets for dispositions? Or is there a certain product that you're receiving inbound either as a value-add or more stabilized assets that get more attention that you'd consider disposing of?

Yes. Farrell, we obviously get a lot of inbounds and have for the last 20-something years on different assets. And when those come in, we look at the total picture and whether or not it's something that we would like to get rid of or whether the price was not that would be something that we would be willing to accept. We don't have a list of properties other than some of the few remaining Steward closed facilities that we're actively marketing. But other than that, we don't have facilities that we're actively marketing.

There are no further questions at this time. I will now turn the call back over to Ed Aldag for closing remarks.

Thank you very much. And as always, if you have any additional questions, don't hesitate to call us once the call is over. Thank you for your time.

Ladies and gentlemen that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medical Properties Trust Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Charles Lambert, Senior Vice President. Please go ahead.

Thank you, and good morning. Welcome to the MPT conference call to discuss our fourth quarter and full year 2025 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer; Rosa Williams, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting.

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 mpt.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section.

During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements. We refer you to the company's 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 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 mpt.com for the most directly comparable financial measures and related reconciliations.

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

Thank you, Charles, and thanks to all of you for joining us this morning on our fourth quarter 2025 earnings call. Before you hear from the rest of the team, I'll spend a few minutes discussing what we're seeing across our diverse portfolio of hospitals as well as a few recent strategic updates. Beginning with performance trends, total portfolio EBITDARM coverage increased year-over-year to 2.6x. General acute operators delivered particularly strong performance with more than $130 million EBITDARM increase versus the same quarter last year. For the second consecutive quarter, post acute care operators reported a $50 million EBITDARM increase year-over-year, led by a 15% improvement at Ernest Health, a 28% improvement at [indiscernible] and an 8% increase at Median. Finally, our behavioral health portfolio was down slightly year-over-year, driven by certain volume headwinds in the U.K. market and labor cost pressures in the U.S., which Rosa will elaborate on shortly.

During the quarter, we continued to take decisive steps to strengthen our portfolio. Given the strong performance of its post-acute facilities over the past few quarters, we are pleased to enter into a new 20-year master lease agreement with Vibra. We capitalized on an opportunity to acquire a high-performing post-acute facility in California for approximately $32 million with a strong cap rate. More recently, we acquired a new post acute care facility in Europe for EUR 23 million. We also continue to identify opportunities within the portfolio to achieve attractive returns that enhance our capital allocation flexibility moving forward. To that end, we sold 6 smaller properties during the quarter.

Before turning it over to Rosa, I also want to acknowledge that 2025 marked our 20th anniversary as a publicly traded company. Throughout the past 2 decades, we have been guided by the same core principles, providing hospital operators with capital solutions that allow them to focus on patient care, acquiring high-value real estate to deliver attractive returns for our shareholders and supporting the communities we serve around the world. These principles have stayed true as we've navigated periods of significant opportunities and challenges, and they continue to shape the strength of our business today. We are entering our third decade as a public company with strong conviction in our business model and a clear focus on strengthening our platform for the long term. We recently unveiled an updated brand identity, and we were able to acquire MPT as our stock ticker. Given the encouraging performance trends across the portfolio, we remain confident in reaching our goal of over $1 billion in annualized cash rent by year-end. Rosa?

Thank you, Ed. Entering 2026, I'm encouraged by the strength and steadiness we see across our global portfolio. Echoing Ed's comments, was a year in which we solidified our foundation for long-term sustainable performance. Our operators' discipline coupled with our own structured approach to retenanting and portfolio positioning gives us confidence as we look ahead to 2026 and beyond.

Our international portfolio today comprises 50% of our investments, and these operators continue to be a cornerstone of portfolio stability. In Germany, Median recorded its strongest quarter since entering the portfolio with quarterly EBITDARM increasing more than 20% year-over-year with occupancy at 90%. Improving reimbursement levels, growing orthopedics demand contributed to notable operational momentum that positions Median for continued strong performance in 2026.

In the U.K., general acute operators such as Circle Health sustained strong performance in the face of an evolving health care landscape. As a result of NHS budget constraints impacting the behavioral health market, Priory remains focused on adjusting to shifts in referral patterns and strategically modifying service lines to meet market demand at certain of its facilities. Across Continental Europe, Swiss Medical Network reported solid year-over-year growth in hospital EBITDARM. Its new clinical collaboration with the Mayo Clinic enhances its long-term capabilities and international reputation. Additional operators such as HM Hospitality, EMA and Atos continue to produce steady performance trends.

Turning to the U.S. portfolio. Ernest Health delivered double-digit growth in EBITDARM year-over-year, supported by strong performance of their inpatient rehabilitation facilities and expansion of inpatient rehab units within LTAC facilities. Ernest also successfully refinanced their 2026 term loan and revolver in Q4, extending maturities out to 2030 and compressing the rate, a significant credit enhancement.

At LifePoint Behavioral, new leadership is implementing forward-looking program enhancements that will modernize the segment, control labor cost, and support a strong revenue mix throughout 2026. As Ed mentioned, we recently entered into a new master lease agreement with Vibra, who increased EBITDARM coverage 28% year-over-year in Q3, driven by strong earnings in the rehab division. Our other long-standing tenants such as Surgery Partners and pipeline continue to report healthy performance trends.

Finally, our portfolio of recently transitioned tenants rent continues to ramp, and we expect them to be at 100% contractual rent by the end of 2026. During the quarter, we entered into a new 15-year lease agreement with NOR Healthcare Systems in California, which is expected to reach stabilized annual cash rent of $45 million in December, in line with the rent previously paid by Prospect for these facilities. HSA showed measured progress in Q4 with modest improvements in collections across its markets. Upcoming supplemental receipts and the expected implementation of the MEDITECH EMR system in Q2 are anticipated to support operations and facilitate cost savings. While HSA remains focused on improving cash collections, it's important to remember that HSA will finally be fully stand-alone operationally once the EMR system is implemented. We feel comfortable with the steps underway to drive revenue cycle management enhancements. Our team continues to carefully monitor performance across these new operators. In fact, just last week, members of our team visited the NOR and HSA Miami facilities, all of which had high patient activity. It's clear the efforts to bring back doctors and improved EMS turnaround times are already having a positive impact.

While the facilities are generally clean and in good condition, each operator is actively undertaking projects to modernize the properties. Taken together, the consistent performance of our international assets, the steady execution of our core U.S. operators and the ongoing ramp of our transition tenants provide us with a clear, confident outlook heading into 2026. We expect 2026 to be a year of continued stabilization and increasing cash rents as our tenants capitalize on service line enhancements, reimbursement tailwinds, EMR modernization, and operating efficiencies gained throughout 2025.

Our global portfolio is stronger, more diversified and more resilient than it has ever been. We are confident in the long-term earnings power of these assets, and we remain steadfast in our commitment to generating stable, growing cash flows for shareholders. Kevin?

Thank you, Rosa. Today, we reported normalized FFO of $0.18 per share for the fourth quarter and $0.58 per share for the full year 2025. As mentioned in our press release this morning, we completed a restructuring transaction with fiber in the fourth quarter, resulting in a new master lease agreement and collection of approximately $18 million in the form of a onetime rent payment for past obligations. In October, we received a $4 million payment of September rent from HSA. As a result of these cash receipts, normalized FFO was approximately $0.03 to $0.04 higher than it otherwise would have been for the quarter. In the fourth quarter, we entered into a new lease with NOR Healthcare Systems for the 6 California properties previously leased to Prospect. NOR is contractually scheduled to begin paying partial rent in June 2026 and with ramp up to 100% of contractual rents in December of 2026. We plan to account for their revenue on a cash basis as well. G&A expense was lower year-over-year in the quarter, primarily driven by the lower stock compensation expense due to the change in fair market value of certain performance-based equity compensation.

Finally, we recorded approximately $34 million of impairment charges in the quarter, the majority of which related to Prospect. From a cash flow perspective, we received approximately $70 million of net proceeds from the Prospect bankruptcy in the quarter with a remaining investment of $60 million expected to be collected in 2026 as the bankruptcy process nears in the end. Steve?

Thank you, Kevin. I just have a few general comments about our financial position and outlook, and then we can take any questions. First, a general reminder of our debt maturities and our options for refinancing and deleveraging. Our nearest maturity is a EUR 500 million unsecured notes issue due in October of this year. We are paying a rate of 0.99% on these notes. And so we'll, of course, maximize the time benefit from that rate. Our bank revolver and $200 million term loan will mature in June of 2027 after our presumed extension of this facility. And then our $1.4 billion unsecured notes issue matures in October 2027. We retained numerous options for refinancing maturing debt over the next 2 years.

Without belaboring those options, which we have discussed previously, they include refinancing with secured debt, additional asset sales and other transactions as the capital markets and our cost of capital continue to evolve. We are confident in these options because of our recent successes generating highly profitable sales of hospital real estate. Achieving attractive terms on the $2.5 billion of secured notes we issued a year ago, the euro portion of which are now trading at premiums implying a 5-ish percent rate, and the successful 10-year secured financing of our German rehab portfolio in June of last year at a similar 5-ish percent coupon. Our carefully crafted covenants have provided plenty of headroom to be able to consider each of these potential options.

As Ed mentioned, we announced a $150 million share repurchase plan last quarter that we used to repurchase a little less than 1% of our market cap through the end of the year. We also invested about $60 million in 2 attractively priced and well-performing post-acute rehabilitation facilities, which we intend to add to the respective master leases of 2 important long-term tenants. While these are relatively modest acquisitions, the acute and post-acute hospital real estate market continues to offer attractive growth opportunities, both in the U.S. and Europe that we will take advantage of as our cost of capital continues to improve.

And with that, I will turn the call back over to the operator to queue any questions. Regina?

[Operator Instructions] Our first question will come from the line of Michael Diana with Maxim Group.

I'd like to talk a little about your facility recycling during the quarter. I think you mentioned you sold 6 small properties and a surprise to me anyway, bought 2 properties. So maybe you could talk about those 8 properties, but also just more in general, what your view is on the recycling.

Sure, Michael. But let me first take the opportunity to thank you for picking up coverage on us and the time you spent with us to fully understand the company and our business model, and we certainly look forward to working with you. So the 6 properties that we sold were smaller properties. They were properties that were underperforming for the rest of the portfolio. We will continue to look at opportunities like that going forward. But also, we're in a position now where we can go back into the acquisition mode. We'll do it very selectively. We believe that the 2 properties that we acquired are very good investments and the opportunity for us to continue to support our existing tenants.

Our next question will come from the line of John Kilichowski with Wells Fargo.

Maybe if we could just start on the prospect sales. If you could just kind of help me source of uses. I think you gave some helpful color in the opening remarks, but maybe just to tie it all together. Could you talk about the sales proceeds from the assets that have closed the expectations of the asset under contract and then maybe what's going to be above and beyond the debt financing and where those proceeds will go.

So the only remaining transaction that's pending is the binding contract to acquire the water bearing facility in Connecticut, and we expect that to close in this quarter. That will significantly finalize the major components of the Prospect bankruptcy. We expect proceeds that will come from that sale, along with collecting of the receivables that will probably take over the next 60 to 90 days, will fully pay the [indiscernible] financing. And as we announced previously, probably going back as many as 2 quarters, we've committed to a super secured DIP commitment that we may fund going forward that the proceeds from causes of action, that is litigation that's being pursued by the litigation trust, we have first claim on those proceeds, and we remain highly confident, frankly, that the super secure DIP financing will be repaid from those proceeds.

That's helpful. And then maybe just jumping to your 26 rent target and the ramp from your legacy assets, legacy Stewart assets, the $22 million that you got this quarter. I believe last quarter, we got some color on expectations looking forward. Are you able to provide any color on what you expect to receive in the first quarter of this year?

No, we're not yet giving guidance on quarterly or annual amounts for a couple of reasons. One is, as Kevin mentioned, we still have several fairly significant tenants that we are accounting for on the cash received basis. And -- so we continue to watch that rent ramp. It has ramped in accordance with the contract that we entered into with those tenants going on 18 months ago now. And I think we said in our press release this morning that virtually all of them are fully paid as we sit here today. Now I'll qualify that with the 2 very small tenants that in recent quarters, we've also called out roughly 3% of the total replacement rents are not yet paying rent. But nonetheless, and as Ed pointed out, we continue to expect through 2026, by the end of 2026, will be at an annualized run rate of cash collections exceeding $1 billion.

And John, I think just further answer that question with Steve, is that there was one payment that HSA made for that was received last quarter that was for the previous quarter. Kevin went through that. The next big jump will be when NOR starts paying rent in June, I believe it is.

Our next question will come from the line of Austin Wurschmidt with KeyBanc.

This is Vikram Garewal on for Austin. Just one for me. Can you provide us with some additional color on the Vibra restructuring. Specifically, what was previous -- and what is the new cash rent expected from Vibra.

No. We haven't detailed that out. I'll remind you for the last couple of years, we've referred to this tenant kind of vaguely as the 1% tenant that we've been restructuring that was consummated in the fourth quarter, and therefore, the collection of $18 million of rent that was due, although not paying pending restructuring. And going forward, Vibra is a significantly stronger tenant for us. And I'll just again reiterate based on your question that there's no impact on previous rental revenue because we haven't been recognizing it because fiber has been on the cash basis. I don't know often that addressed your question.

Nick, as a part of answering that question, over refinanced all of their debt. So as Steve said, they're in a much better position today than they have previously been couple of their properties are actually now leased to Select Medical and rather than Vibra from our standpoint.

Our next question will come from the line of Michael Carroll with RBC Capital Markets.

Sorry. I wanted to stay on the Vibra transaction. I just wanted to confirm, in the press release, it sounded like the $32 million acquisition was leased to Vibra, I mean, did you buy that from Vibra? And if so, why was that included in this transaction?

We did buy it from Vibra and it is a great facility that we feel very good about and glad to have had the opportunity to acquire.

okay. And then the cash went to Vibra for that specific deal then?

Correct. Just to clarify a little bit, the $18 million we've actually had on our books, a significant part of that since this time last year when Vibra remained a deposit of $20 million and up at about half of it, we held in reserve to apply to rent. So your point is well taken. Yes, we provided proceeds by virtue of acquiring this asset. But fiber itself has put in probably upwards of $70 million over the course of this restructuring.

And not recall the proceeds from this sale to pay off debt that they had.

Okay. I mean is there -- I mean maybe it's just because the transaction is pretty complicated. I know that we've been talking about the 1% tenant fibra for it seems like the past few years now. is there a reason why it took so long to get this done? And is there anything I guess, and back to your earlier comments, Steve, you said that you weren't recognizing any rent from Vibra. So did Vibra have 0 rent payment in quarter outside of that $8 million payment, so it will be additive as you go into 1Q '26?

No, they were actually paying rent. This was just additional rent that they owed as well.

That had not previously been recognized.

David, the first part of your question, as I said, it was a total refinancing of Vibra's balance sheet. So there were multiple parties involved.

Our next question will come from the line of Mike Mueller with JPMorgan.

Yes. A couple of questions. I guess, on the first one, for this acquisition and the other acquisition, can you talk about pricing, I guess, the cap rates and coverages? And then for the second question, maybe just a little bit bigger picture. I know you bought some stock back in the quarter, but you also went through all the debt maturities coming due over the next couple of years. How are you thinking about today kind of buybacks versus delevering?

So let me answer the first part of that, Mike. The coverage on both of these were very strong. The cap rates are also very attractive. As you know, it's not our policy. It is our policy not to go disclose each individuals on the various properties, but these are very strong both on the coverage and from our standpoint on the cap rate.

Going forward, Michael, on the balance sheet, and we invested, what, roughly $25 million in our own stock over the quarter, relatively modest amount. We'll continue to evaluate when it's appropriate to be in the market with the stock. We have multiple opportunities that I tried to summarize very briefly in my prepared remarks to address the upcoming maturities and have a high level of confidence that we'll have some attractive options for addressing that, obviously, beginning this year as we have the very, very low rate euro issuance coming due in October.

Our next question will come from the line of Vikram Malhotra with Mizuho.

I guess two. One, just bigger picture. You mentioned the acquisitions. I'm just wondering sort of as the portfolio stands today, whether it's just noncore or international. Can you just talk about potential sales and give us an update on like how the buyer pool has shaped up, what sort of capital is still interested in owning hospital real estate.

So Vikram, if I understood your question correctly, there still continues to be a very strong market for people interested in acquiring our properties. We get calls often, but where we are today, we are much more likely to be in an acquisition mode than a disposition mode. We'll do dispositions as we review various items and think it's appropriate for us. but we are more in an acquisition mode.

And then I guess just on that acquisition point, just looking at the different, I guess, sub-asset classes, behavioral -- leaving hospital side. I'm wondering sort of the opportunity set when you look at post-acute and behavior, are there any specific focus areas, any types of assets -- just -- and I'm wondering just if you look to sort of maybe -- I don't want to call it expand, but maybe shift the focus in terms of types of healthcare/hospital settings in terms of acquisitions.

Sure. Our focus will continue to be general acute care, which it has been through the vast majority of the life of medical properties. But we will continue to look at post-acute, but that's primarily almost exclusively in the rehab sector, which we've been very strong on since the inception of the company. We're still big believers in behavioral. In the U.S., behavioral softness has not come from lack of demand, but lack of ability to have nurses and staff at each of the facilities. In the U.K., it's much more of a funding issue with NHS. If you follow the U.K., you'll know that the need is there. The desire is there. It's just more of a political funding standpoint. Still believers in both sectors, but probably the biggest acquisitions we'll make today will be in general acute care followed by post-acute care being rehab.

Our next question will come from the line of Farrell Granath with Bank of America.

This is Farrell Granath. I just wanted to also dig in a little bit more on your acquisitions. Just when thinking about Europe versus the U.S., especially now that we've seen some pressures just on public pay with headlines and reimbursement rates. -- does that weigh in on how you're evaluating your pipeline? Or can you give a quantifiable qualitative of how you think about your pipeline in both regions?

That's a good question, Farrell. And as you know, we're roughly 50-50 now, 50% of the United States and 50% outside of the United States. Still believe that the United States is the best health care in the world, and we obviously will continue to focus here. but it is less political outside of the United States. And so we like our investments outside of the United States very strongly. We're in 9 different countries. We'll continue to invest in the countries that we're in, and we'll continue to look for expansion places in Europe in places where we are not. We still feel very good about where health care in general is in the United States and feel very good that the -- we feel very strongly as they'll continue to be ups and downs, but we don't think there'll be any big ups and downs in the reimbursement in the United States.

And I guess also on that when thinking about the people who are selling, are these in the properties that you're acquiring? Are these marketed deals? Are you having reverse inquiries? Are these also just operators that you have passed business with? Just curious how that pipeline is building out.

Yes, it's probably 50% or slightly more of people that we've already done business with existing tenants or tenants that had formally been our tenants. There's still a very strong pipeline of people who know who we are that are looking to make acquisitions and to use our type of funding for those acquisitions. I would say most of the deals that come to us outside of our existing tenants are marketed transactions.

Farrell, I'll just point out in addition, just a little bit. We did a pretty limited amount, $60 million in total. That's a result of actually many quarters of negotiation and exploration. So it's not just something that generates just in the quarter. We're able to be and we are being very selective. Right now, again, we still want to see our cost of capital improve. And the point I think we want to make is as that happens, there is a pretty vibrant market. The fact that we did only $60 million in 2 transactions is not indicative of the size and vibrancy of the market. We could have. I'll put it this way, there were available many more transactions that we could have done that we evaluate. But again, we're being very selective.

Our next question is a follow-up from the line of Michael Carroll with RBC Capital Markets.

I guess, Ed or Rosa, I wanted to follow up and circle back on the comments related to HSA. Can you remind us, is that operator cash flow positive today with the rent fully ramped? I know that you indicated that last quarter that their coverage was above 1 on the full year rent ramps, but obviously, it takes time for cash collections to pick up to equal that.

Yes. The cash collections, as Rosa pointed out, are not where any of us would like to see them. However, if you look at this from where they came from, not just as a typical startup, they actually started out in the whole picking up the Steward properties. We're very pleased with where they are. We obviously want them to be much better. We talked about there being able to -- in the second quarter that we believe that they'll be totally independent acquiring the MEDITECH license and all that goes along with that, taking great steps in the cash collections. And we hope and feel good about their ability to do better than that. Where they are right now is still continuing to be at 1x full rent coverage.

Okay. And then just last 1 for me. I mean, does HSA or NOR need to be -- does MPW needing to provide the working capital loans still? Or have they weaned off of those specific loans and are able to work with what they have on their own balance sheets?

Yes. We have not provided any additional working capital loans for either one of those entities. We have provided HSA with funding to help them acquire the MEDITECH license and with no or the last fundings that we were participating in those were left over prospect bills.

And I will now turn the call back over to Edward Aldag for closing comments.

Regina, thank you very much. And again, thank all of you for listening today. And as always, if you have any additional questions, please don't hesitate to reach out to us. Thank you very much.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Medical Properties Trust Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Charles Lambert, Senior Vice President. Please go ahead.

Good morning. Welcome to the Medical Properties Trust conference call to discuss our third quarter 2025 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer; Rosa Williams, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting.

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 medicalpropertiestrust.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section.

During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our financial results and future events to differ materially from those expressed in or underlying such forward-looking statements.

We refer you to the company's 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 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 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 thanks to all of you for joining us this morning on our third quarter 2025 earnings call. Before you hear from the rest of the team, I'll spend a few minutes discussing recent strategic updates, including a few notable developments during the quarter in the Prospect bankruptcy process.

First, across all asset types, our tenants are delivering exceptional performance. General acute care operators reported a more than $200 million increase in EBITDARM year-over-year with tenants such as LifePoint Health and ScionHealth delivering double-digit percentage revenue increases during the quarter. Post-acute operators reported a $50 million EBITDARM increase versus the same quarter last year. That includes Ernest Health, up 17%, Vibra up 33% and MEDIAN up 7%. Finally, in our behavioral health portfolio, EBITDARM increased $10 million year-over-year. Rosa will share more details on this performance trends across our portfolio shortly.

In August, NOR Healthcare Systems in California was named the successful bidder for Prospect's 6 California facilities. We promptly agreed to a new lease agreement with NOR, the terms of which are broadly similar to those agreed to with other operators in our transitional portfolio. All rent will be deferred for the first 6 months, ramping to 50% for an additional 6 months and then reaching total stabilized annual rent of $45 million per year thereafter.

More recently, we reached a settlement agreement with Yale New Haven and Prospect, whereby Prospect will receive $45 million from Yale. This payment from Yale will be additive to the ultimate proceeds that Prospect receives for these properties. Prospect has already entered into an agreement to sell 2 of its Connecticut facilities to another operator and is actively engaged in negotiation with buyers around the third hospital.

Finally, our portfolio of new tenants continues to ramp monthly rent on schedule. With a few exceptions that are mentioned in our press release. We have collected all rent due from these operators through October, including 100% of rent from HSA.

In August, we sold 2 facilities from this portfolio in Phoenix, Arizona to a tenant for approximately $50 million pursuant to a purchase option in the lease. We continue to own approximately 15 acres of land in the area. We are increasingly confident in our ability to generate total annualized cash rent of more than $1 billion by year-end 2026. Notably, this $1 billion target does not reflect any rent contributions from any of the California Prospect properties.

Reflecting this confidence as well as our strong belief that our share price remains significantly undervalued, our Board of Directors has authorized a new $150 million share repurchase program that we intend to deploy opportunistically.

Furthermore, I want to call your attention to a comprehensive reaffirmation of our business model presentation posted to our website earlier this week. In this presentation, we directly address a range of false narratives that critics have been spreading about our business model. We believe it is important that shareholders, operators, journalists and lawmakers all have a complete understanding of the truth around MPT. There remains a dynamic macro policy environment, making the permanent and flexible capital solutions that MPT offers more important now than ever.

Rosa?

Thank you, Ed. As always, I will cover some highlights from the quarter across our diverse global portfolio beginning with Europe. As a reminder, international operators comprise approximately 50% of our total portfolio, and we continue to be pleased with the consistency of coverages exceeding 2x across this portfolio. This performance reflects these operators' strategic focus on high-quality patient care as well as continuous expansion of access to care within their communities.

In the U.K., Circle repeatedly ranks among the highest of all health care operators in patient satisfaction, maintaining a reputation score well above its next closest competitor. Circle continues to make significant investments in advanced technologies, including AI and robotics, strengthening its competitive advantages and reinforcing its position as one of the leading health care providers in the U.K. market.

Our Sulis Bath Hospital (sic) [ Sulis Hospital Bath ] in the U.K. is the first independent hospital to receive accreditation as an elective surgical hub deemed by the NHS and the Royal College of Surgeons of England. This recognition highlights the hospital's high standards in clinical performance, operational efficiency and patient care.

With coverages consistently above 2x, Priory has demonstrated its ability to adapt its service lines to the needs of each market, allowing for flexibility as the NHS' mental health model evolves. Priory continues to explore technological opportunities such as its partnership with Psyomics to launch an innovative digital pathway that aims to revolutionize access to personalized mental health care.

In Germany, MEDIAN continues to report strong negotiated reimbursement rates and occupancy trends, enabling them to meaningfully outperform prior year revenue and earnings.

In Switzerland, Swiss Medical has launched integrated care models in each of the French, German and Italian-speaking regions. With these new platforms successfully supplementing Swiss Medical's strong organic growth, EBITDAR grew more than 10% trailing 12 months year-over-year.

In Spain, IMED continues to progress construction on new hospitals in Alicante and Barcelona with scheduled openings during 2026 with over 70% of construction completed.

Turning to our U.S. portfolio. Ernest Health has continued increasing consolidated coverage every quarter over the past year with legacy IRFs reporting strong results and new developments rapidly ramping. As such, consolidated EBITDARM coverage is now approaching 2.4x. LifePoint Health continues to deliver high-margin growth at a steady, stable rate versus the rapid acceleration observed in 2024. Conemaugh Memorial continues to be the most significant growth driver within LifePoint -- MPT's LifePoint portfolio with trailing 12-month admissions increasing 15% year-over-year.

Surgery Partners 3 facilities delivered another quarter of strong performance with consolidated EBITDARM coverage above 6x. Our hospital in Wisconsin recently completed a much anticipated expansion to their operating suite to accommodate additional surgeons wanting to bring cases to this respective facility. HSA continues to improve operations and staffing across markets with Q2 and Q3 EBITDARM coverage approaching 1x on fully ramped rent, which, as a reminder, does not fully ramp until September of 2026.

Summer seasonality drove softer volumes in the third quarter, but revenue remained strong due to a higher patient acuity mix. MPT has committed to funding approximately $40 million over the next 2 years for necessary infrastructure and other capital improvement projects, including HVAC and elevator replacements. The vast majority of this amount is for a newly constructed 7-story parking deck. These costs will be added to the lease space upon which the tenants will owe rent.

HonorHealth launched its rebranding in Arizona by renaming Mountain Vista to Four Peaks Medical Center. In addition, Honor remains focused on physician recruitment, executing its self-funded CapEx strategy and upgrading facilities ahead of anticipated volume recovery.

Quorum Health's Odessa facility continues to improve performance with stronger-than-expected admissions and surgical volumes. In August, Odessa Regional announced that it achieved Silver certification as a Cribs for Kids National Safe Sleep Hospital, demonstrating adherence to rigorous guidelines established by the Cribs for Kids National Safe Sleep Hospital Certification program. Insight Health reopened ER services at Trumbull, Ohio earlier this month with plans to slowly open more services as volumes come back along with physicians and staff.

Prime Healthcare's MPT facilities continue to show improved performance with EBITDARM coverage over 2x as volumes and ER conversion rates have increased across the portfolio. Prime received credit rating upgrades from Fitch, Moody's and S&P during the third quarter. Pipeline Health continues to demonstrate growth with EBITDARM coverage over 2x. Additionally, they are opening new service lines for patients at all 4 hospitals.

In summary, we are very encouraged by performance trends across our portfolio. Our portfolio of new tenants continues to ramp monthly rent payments, and we remain well positioned to generate significant cash flow from our 388 properties and approximately 39,000 licensed beds around the world, enabling us to create value for shareholders moving forward. Kevin?

Thank you, Rosa. Today, we reported normalized FFO of $0.13 per share for the third quarter of 2025. The normalized FFO result would have been $0.01 higher if not for the payment of September rent by cash basis HSA on October 1. These results fully reflect the full quarter dilutive impact of not only our first quarter secured bonds, the second quarter MEDIAN joint venture refinancing.

Higher G&A expense versus the second quarter also impacted GAAP results, primarily driven by higher stock compensation expense resulting from the change in the fair market value of 2024 and 2025 performance-based equity compensation, of which no shares have been earned or vested as of September 30, 2025.

Our earnings from equity interest were higher in the quarter as changes in German tax policy resulted in a net deferred tax benefit to our German JV and as the value of the underlying real estate in the CommonSpirit joint venture continues to adjust upwards. Neither of these items are included in our normalized FFO results.

We recorded approximately $82 million in net impairments, the majority of which related to Prospect and the decline in expected proceeds of certain Pennsylvania and Rhode Island assets. We continue to expect that cash proceeds from both the settlement with Yale and Connecticut and the sale of the Connecticut facilities will be more than sufficient to repay MPT's outstanding DIP loan balances. Despite this expectation, accounting rules require that we record impairments to our Prospect carrying values. There are other immaterial adjustments to carrying values during the quarter, including routine adjustments to marketable securities that were disclosed as noncash fair value adjustments in our reporting.

I will now hand the call over to Steve to discuss our liquidity and capital strategy moving forward. Steve?

Thank you, Kevin. I'll wrap up quickly with just a few points, none of which will be surprising, and then we can take any questions.

First, a quick summary of the strategies we have been executing for repaying and otherwise addressing future maturities. We've sold at significant gains and financed at above book values many billions of dollars in highly attractive hospital assets. Almost without exception, these transactions have provided clear validation of our underwriting rigor and the resulting asset values. Access to these values has given us the assurance and flexibility to repay and refinance several billion dollars of debt in 2025 alone. The secured notes we issued in February are now trading at significant premiums. And our most recent transaction financed more than $2 billion of German rehabilitation hospitals at a 5.1% coupon.

This access to capital has also given us the ability to re-tenant and begin collecting what is now scheduled to be an incremental $200 million plus in annual cash rent from new operators, resolve the issues around Prospect bankruptcies and address debt maturing in 2027 and beyond, all of which we are doing successfully.

Along with our clear visibility into rent ramping to a scheduled incremental $200-plus million, the upcoming 2026 annual escalations, cash payment of our roughly $100 million DIP loan and periodic asset sales similar to what we have reported in the last few quarters, we also have reason to expect even more liquidity. Specifically, and while there is no certainty, Prospect is expected to generate proceeds in excess of the $100 million balance of our DIP loan. A substantial majority of any such proceeds will flow to MPT.

We are evaluating the sale or lease of several assets, which are not currently yielding meaningful returns. And we also continue to evaluate sales of earning assets and portfolios for attractive gains. For example, Aevis Victoria, our co-owner of Infracore and the parent of Infracore's Swiss Medical Network lessee, is currently exploring various strategic options for its affiliates, including Infracore, to support their long-term development. Infracore is considering various opportunities to open up its capital or even list on a stock market in order to meet the growing demand for sale and leaseback solutions in the public and private hospital market in Switzerland.

As this and other market indicators demonstrate, demand for hospital real estate is strong across virtually all geographies. Our cost of capital is still higher than we expect it will be. But as we have previously said, we may make modest acquisitions when strategically important. But as Ed pointed out, repurchasing our own common stock is among our very best and most accretive uses of capital. And for that reason, we announced this morning that we have implemented a $150 million strategic stock repurchase plan that will make available some of this expected growing liquidity to capture that permanent value.

This announcement demonstrates our conviction that recent prices of our common stock do not reflect our assets' underlying value, and we have, therefore, not issued any shares under our recently implemented at-the-market offering program. We reestablished that program and the long-term opportunistic flexibility it provides us in August, shortly after the effectiveness of our new 3-year shelf registration statement.

Importantly, some of our unsecured notes outstanding still trade at discounts in today's markets. And nothing we may consider with respect to share repurchase or ATM programs rules out continuation of possible debt refinancing or redemption strategies. We've conclusively demonstrated that we have the asset values to accomplish these strategies.

Moreover, as you would expect, we carefully monitor and plan for the maintenance of all debt covenants as we look into possible future capital transactions. We consciously designed and negotiated these covenants to provide us the opportunistic flexibility to execute these strategies, and we are confident that we will do so.

And with that, I will turn the call back to the operator to queue any questions. Kayla?

[Operator Instructions] Your first question comes from the line of Mike Mueller with JPMorgan.

I guess on the buyback, the question here. I mean, how do you weigh looking at a buyback versus using the capital to either pay down debt, buy back other debt, just given where the leverage level is today and even on a pro forma basis, where it will be? And I guess the follow-up to that is in terms of funding a buyback, would you only use asset sales? Or would you use cash on hand or tap the credit line? Can you just put that whole buyback into perspective for us?

Sure, Mike. We, first of all, have a number of opportunities, and we've been talking about these for several quarters, and that's reinvest in the business with, as I mentioned, and as we've done on a very limited basis, strategically buying new assets. We certainly recognize the trading volumes and levels of some of the unsecured bonds that could provide attractive opportunities for tendering or repurchasing on either small or large scale. And we recognize, as we've just conceded that we think our shares are significantly undervalued. So we have all of those options. We have resources available. We will continue to evaluate the opportunities and the timing of those opportunities and the sources of that capital. I can't say I doubt we're going to borrow money -- incremental money in order to fund the buyback.

And we've mentioned a few of the increasing -- possibly increasing cash resources that we'll have, including some assets that are currently not earning much, if anything, and possibly some of the well-received earning assets that we've demonstrated just as in the last several billion dollars of asset sales, we expect any additional asset sale, earning asset sales would also be at very attractive profitable gains. So all of that is available. And as we've been doing for a couple of years now, we evaluate periodically, constantly, in fact, what's the best use of the available capital that we have.

And your next question comes from the line of Michael Carroll with RBC Capital Markets.

I just want to follow up on Mike's questions related to the buyback. I mean is this -- can you kind of highlight the timing of this of when some of these purchases could occur? I mean I know you have a big debt maturity in 2027. You still are pulling money on the line of credit for -- to meet some of the debt covenants. You're still kind of cash flow negative, at least in terms of some of the investments you made, I guess, post that. I mean, do we need to have all that kind of resolved before you start to buy back stock? Or are you willing to do that in the near term?

Yes, Mike, I think you should assume it will start immediately.

Okay. And then, Ed, can you give us an update on HSA? I know you were -- you had some positive commentaries on their progress and the ramp-up that they've been doing. Maybe provide some details on what drove the late September rent payment? And is that a concern that -- like does that cause you any concerns of their ability to pay the ramped up rent over time? Can you provide some color on that?

Sure. They continue to perform very well. The biggest improvements in Florida come from recruiting the doctors back to the facilities that left during the Steward debacle. They also have been extremely successful, probably exceeding even our expectations in Texas. From the standpoint of their cash delay in October -- in September -- excuse me, it was the -- we believe, the final steps of getting the TSA in order, getting the money repaid to the lender that they had for the DIP money in Florida, and we do not expect any additional issues.

And I'll just point out one last thing. And you remember, September, the rent actually doubled. And so they paid twice in September, actually on October 1 and what they had been paying. And again, I think we made clear in the press release, they've already paid October rent.

And your next question comes from the line of Farrell Granath with Bank of America.

I was just wondering if you could add a little commentary around the Yale New Haven hospitals. I saw the update with having at least 2 with greater line of sight of a potential close. Is there anything else that you can share and also the potential third if there's any further interest?

So Farrell, I think you're going to need to repeat that. No one around the table heard the first part of your question.

So sorry about that. I was just asking about the Yale New Haven hospitals and the progress on having those either re-leased or sold under the binding agreements? Or is that involved as well as the third property?

Yes, sure. So the 2 facilities are under binding agreement. We expect those to close hopefully before year-end, if not shortly thereafter. The other one, we hope to have a binding agreement imminently with another buyer.

Okay. And also, I saw a little bit of commentary on the NHS restructuring and impacting of the referral on the behavioral providers. Does that grant you any concern on the future health of that sector for Priory for their EBITDARM coverage? Or does that maybe add a little target if that could be something to dispose of and use for capital funding?

So we've talked about this in the last quarter, I know, perhaps the one before, too. So NHS, as they have did with acute care a few years back, they want to try to keep as much of their mix of patients in their own hospitals, and now they're doing the same thing with behavioral. It's our belief that they ultimately will realize the benefit of having independent hospitals to treat some of those patients because they're just -- the resources are needed in the independent sector to assist with getting the volume of patients treated. So no, we think it's short term and will come back around. And in the meantime, Priory has, as evidenced by their 2x coverage, been able to put operational items in place to continue to perform very well.

The operator there does not expect to see a significant decrease in their coverage.

And your next question comes from the line of Omotayo Okusanya with Deutsche Bank.

In terms of the rent collections in the quarter, I think in the press release, you did mention that there was maybe not as much of collection as you expected in Pennsylvania and Ohio. Curious if that relates to Insight in particular? And if you could just kind of give us an update on that asset transition.

Yes. Tayo, it's almost exclusively the Ohio facility, as you probably know, probably read, they were delayed in reopening the facility that's up and -- has gotten open. Senator Moreno has been very helpful in that. So we expect that to change. We have delayed when we expect their actual full rent to begin, and I believe that's in -- moved to January. And then the -- in Pennsylvania, that's a very, very small amount of money. The facility continues to improve and not exactly sure when that one will start paying rent.

That's a $30,000 a month rent payment, Tayo.

Got you. Okay. That's helpful. And then just kind of looking through the sub, it looks like there was some additional about $20 million of new loans in the quarter. Just kind of curious if you could kind of talk us through who that was to, if it's to any of the kind of operators of the assets in transition?

There were 2 loans to operators, one being insight, and that was for CapEx and for reopening cost. And then there was a loan to the facility in Pennsylvania, Tenor, and that too was for CapEx.

Got you. That's helpful. And then another one for me. The 8 assets, I mean, you took about 23 assets, 15 were leased, 8 were kind of out there and you kind of were kind of looking at what to ultimately do with those 8 assets, including some other developments. Could you just walk us through kind of the status of those 8 and kind of what's happening?

Tayo, I'm not sure exactly the 8. I guess the 2 big ones would be the one in Massachusetts in Norwood and then the other one in Texas in Texarkana. Both of those facilities remain under construction. And other than about all I can say at this particular point because of various NDAs, we are in negotiations with people about those facilities.

I will now turn the call back over to Ed Aldag for closing remarks.

Thank you very much, and thank you all for joining us. As always, if you have any questions, please don't hesitate to reach out to Drew, and we'll get back with you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medical Properties Trust Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Charles Lambert, Senior Vice President. Please go ahead.

Thank you, and good morning. Welcome to the Medical Properties Trust conference call to discuss our second quarter 2025 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; Steven Hamner, Executive Vice President and Chief Financial Officer; Kevin Hanna, Senior Vice President, Controller and Chief Accounting Officer; Rosa Hooper, Senior Vice President of Operations and Secretary; and Jason Frey, Managing Director, Asset Management and Underwriting.

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 medicalpropertiestrust.com in the Investor Relations section. Additionally, we're hosting a live webcast of today's call, which you can access in that same section.

During the course of this call, we will make projections and certain other statements that may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks, uncertainties and 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 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 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 thanks to all of you for joining us this morning on our second quarter 2025 earnings call. Before you hear from the rest of the team, I'll spend a few minutes discussing the state of the health care market and a few recent strategic updates. In early July, U.S. Congress passed the one big beautiful bill ag, introducing Medicaid funding changes and work requirements for the Affordable Care Act.

These changes are expected to be phased in over the next decade to allow ample time for hospital operators to adjust their businesses as necessary. And as providers digest this impact, we expect they will increasingly explore innovative capital solutions, creating greater need for MPT's business model to enhance financial flexibility and operational agility. MPT's objective has always been to offer hospitals permanent capital solutions that facilitate greater focus on patient care. And we are committed to today as ever to doing our part to ensure hospitals can continue serving the communities that they rely on. shifting to a few important updates from the quarter.

As Roger will discuss in detail shortly, our portfolio of new tenants continues to report encouraging performance trends and rental income associated with these facilities is increasing rapidly as planned, whereas in the first quarter of this year, we reported approximately $3.4 million in cash revenue from these properties that has increased to $11 million this quarter. We expect it to reach approximately $17 million by the third quarter.

In fact, 3 of these new operators have already ramped up to fully bold monthly contractual amounts. The new operators have done an impressive job to enhance operations, upgrade facilities and attract top doctors and patients, and we look forward to continuing to partner with them moving forward.

Turning to our European portfolio. In June, our joint venture in Germany announced a successful EUR 702 million refinancing transaction at a 5.1% fixed rate. Steve will discuss this transaction in more detail as it's an important demonstration of investor appetite for high-quality health care infrastructure in Europe and further validation of our ability to access low-cost capital. With steady contributions from our stabilized portfolio and a rapidly ramping portfolio of new operators, we remain confident in our ability to reach total annualized cash rent of more than $1 billion by year-end 2026. Rosa?

Thank you, Ed. Turning now to some highlights from across our diverse portfolio of operators around the world. Overall, our tenants continue to report growing admissions and surgical volumes translating to increasing EBITDARM coverage ratios across asset types year-over-year. I will begin with our international portfolio. Circle remains focused on being the U.K.'s most innovative and technologically advanced hospital provider with significant investments in robotics and AI. Circle's trailing 12-month EBITDARM coverage continued to increase in the second quarter year-over-year.

Priory, the largest independent mental health care provider in the U.K. has maintained steady performance with top line growth, driven primarily by increased patient acuity and EBITDARM coverage of around 2.3x. Priory expects that NHS England's recently announced 10-year health plan, which includes commitments for mental health services, will result in a more integrated, inclusive and resilient health system that they are uniquely positioned to support.

Shifting to Continental Europe. In Germany, median has delivered excellent year-over-year improvements in revenue and earnings, driven by strong occupancy trends and increasing reimbursement rates. This performance drove a competitive and successful refinancing that Steve will review in more detail shortly.

During the quarter, MPT increased its equity investment in the Infracore joint venture by approximately CHF 50 million, inclusive of a CHF 25 million short-term loan to facilitate the acquisition of a general acute facility in Switzerland and pay down debt. In June 2025, Ibis, the parent company of Swiss Medical Network held its first Capital Markets Day and the newly opened Genolier Innovation Hub event space.

This event highlighted Swiss Medical stellar performance with 21% year-over-year revenue growth in the first quarter of 2025, driven by significant expansion of its outpatient network and integration of new sites.

Turning to the U.S. Earnest Health's EBITDARM coverage increased to 2.3x, sustaining a trend of sequential quarterly increases over the past year as new developments ramp. Legacy IRFs are delivering impressive results with May 2025 trailing 12-month coverage exceeding 2.8x. As discussed in previous quarters, Earnest continues to execute an action plan geared towards becoming more rehab-focused by establishing inpatient rehab units within its LTAC following the success of its first inpatient rehab unit at the Provo LTAC.

LifePoint Health again reports strong top line revenue growth driven by increased admissions, particularly at Canama Memorial, where trailing 12-month admissions increased 18% year-over-year. As a result, LifePoint's EBITDARM coverage increased significantly year-over-year. LifePoint Behavioral reported higher admissions growth year-over-year.

Surgery Partners delivered another quarter of excellent performance with EBITDARM coverage of approximately 7x. In the South Florida market, HSA reports volume improvement, coupled with successful implementation of several cost-saving initiatives. These charges for the first 6 months of 2025 are almost 7% higher than the same period in 2024. And successful physician recruitment efforts have led to recoupment of lost surgical volumes, which are outpacing 2024 volumes.

In Louisiana, Glenwood discharges in the first half of 2025 are almost 11% higher than the same period in 2024, and the local team is focused on opening additional beds as the volume demands. And at St. Joseph Hospital in Texas, HSA's effective physician recruitment efforts have resulted in discharges that are back in line with 2024, while surgical volumes are 3% ahead of 2024.

HonorHealth in the Phoenix Metro area has been focused on executing its self-funded CapEx strategy and upgrading facilities ahead of anticipated volume recovery. Encouragingly, requests for applications to join the medical staff have been up approximately 20% since HonorHealth took over operations. Forum Health is now paying 100% of its monthly rent on which they are fully current.

In Odessa, admissions and surgical volumes have been stronger than expected. Importantly, the Quorum team is focused on ramping up OB services, including the neonatal intensive care unit, which is a vital service line in the Odessa community.

In summary, our transitional portfolio is quickly ramping performance and rent payments as expected, and our other tenants from around the world are delivering consistent performance, driven by healthy volume and cost trends. Put simply, MPT's portfolio is well positioned to continue to generate significant cash flow and create value for shareholders moving forward.

Kevin?

Thank you, Rosa. This morning, we reported normalized FFO of $0.14 per share for the second quarter of 2025. The normalized FFO result is notable because the quarter was fully loaded with the incremental quarterly interest related to the $2.5 billion and refinanced debt we completed earlier this year, the cost of which was substantially offset by the substantial increase as scheduled and cash rents from tenants that last year replaced Stewart.

Similarly, additional unconsolidated interest expense related to our German JV refinancing will fully impact Q3 results. Lower G&A expense also impacted GAAP results, primarily driven by reduced stock compensation expense. This decreased stock compensation expense results from a change in the fair value -- fair market value of 2024 performance-based equity compensation, of which no shares have vested.

And to remind you, no shares are even eligible for vesting unless the share value equals at least $7 by December 31, 2027. As is our historical practice, we reversed the impact of this favorable adjustment in our normalized results. We recorded approximately $111 million in net impairments and fair market value adjustments primarily related to our investment in PHP based on the closed sale to Astrana that was previously reported.

There were other immaterial adjustments to carrying values, including routine adjustments to marketable securities, that also included in the aggregate of net impairments and fair market value adjustments. The carrying values of certain assets weighed to prospects are subject to resolution of matters pending in the prospect bankruptcy, including whether the court will approve certain changes to the debtor and possession arrangements.

To the extent these matters are resolved prior to the company's filing of its 10-Q, the impact of such resolutions may need to be reflected in the 10-Q and may vary possibly materially from the results we present today.

I will now hand the call over to Steve to discuss our liquidity and capital strategy moving forward. Steve?

Thank you, Kevin. I just have a couple of points to highlight about our earnings report. First, the hospital real estate, we re-tenanted late last year continues to generate the cash rents as expected. There was virtually no cash rent from those operators in last year's fourth quarter, a little less than $4 million in the first quarter during the second quarter, and that is scheduled to continue to increase to $17 million next quarter.

Rosa already spoke about the strong operations reported by these tenants, all of which validates the hospital real estate business model in general and our historical underwriting of these facilities in particular. To remind you, beginning in October 2026, we expect to be collecting 100% of fully ramped rent totaling about $160 million on an annualized basis.

In fact, as of the start of 2025 third quarter, contracted annualized cash rent represents more than $60 million or almost 40% of the fully ramped up print. And we have collected all but 3% of July rent as of today. Second, and as Kevin just pointed out, second quarter interest expense is fully loaded for the incremental cost of the $2.5 billion in new secured notes we issued mid-first quarter. But on a quarter-to-quarter basis, the growing rental income substantially offset that incremental interest expense.

All else equal, and there is no assurance that all else will remain equal. As we go into the third quarter, the expected further increases in cash rents should more directly drop to the bottom line. Now just a few observations about the balance sheet, all of which are consistent repeat from previous quarters. For the second consecutive quarter, we completed a substantial refinancing transaction.

Most recently, with the previously announced secured refi of our German joint venture. 2 inarguable conclusions are evident. Our assets have not only retained but increased their values. Multiple sophisticated global institutional investors and lenders completed detailed physical and financial diligence, including independent appraisals that resulted in strong value growth in these JV assets. That's consistent with the strong valuations that attracted 7x oversubscription of the $2.5 billion in secured notes in February.

Following that February issuance, that had a blended rate of slightly less than 8% and an underwritten very attractive underwritten 65% LTV. This most recent JV refi was executed at a low fixed rate of only 5.1%, a surprise to many analysts, especially in light of the 10-year term. This was a competitive process with an outcome that continues to demonstrate the depth of the global market for well underwritten hospital real estate, proving that MPT has multiple avenues for access to affordable capital.

The $30 million sale in the second quarter of a stand-alone LTAC at an amount close to our original investment, along with a handful of additional transactions we expect in the near future, aggregating more than $100 million are priced at amounts near or in excess of our basis. Continuing to demonstrate the resilience of our underwriting and maintaining the values of hospital real estate. These pending sales are all subject to binding contracts, one which we expect will benefit our prospect recovery waterfall.

Finally, virtually every major decision we have made over the last year has been based on increasing our financial flexibility as we consider further balance sheet options. These are decisions to sell assets. re-tenant valuable hospital real estate with carefully attenuated cash rental schedules that are performing and paying as expected. Refinancing debt taking the dilution associated with early redemption of lower rate debt as we satisfy all near-term maturities and extending our maturity horizon to give us a long runway for execution of operational strategies that will build equity value.

So today, we retain the optionality that execution of these strategies has provided us. We are not pressed for time as we continue to execute, and this quarter's growth in contractual cash rents is demonstrative of that execution. We retain all the options that we have described in earlier quarters. We have valuable hospital real estate that is available for monetization. This may include joint venture capital.

We have clearly demonstrated the opportunities for further debt refinancing. And as we continue to execute and grow earnings, we look forward to further reduction in our cost of capital, leading to increases in our equity valuation. We will continue to evaluate the best approach and use of these options at the appropriate time.

And with that, I'll turn the call back to the operator to queue any questions. John?

[Operator Instructions] Your first question comes from the line of Michael Carroll with RBC Capital Markets.

Can you guys provide some color on HSA's performance? And how confident are you that rent ramp will occur as expected I guess, when or have they already started paying cash rents, I guess, when does that specifically commence in your lease agreement with them?

Mike, you must have missed the early part of the call. Rosa went over in great detail, the improvements that they've made in all of the hospitals that they've taken over, and they have been paying rent and they're current on their rent now.

And are you still confident that that can ramp up as written in lease?

Yes. We are very impressed with what they've done with the hospitals, the way they brought doctors that were previously operating at stewards that left during the bankruptcy have come back, and we believe they're doing a good job.

Okay. And then, Ed, I guess, in the bankruptcy filings with Stewart, there was a claim from a lender that HSA was in default on a loan I mean it sounds like that issue was resolved. I mean are they still in default on that loan? Or can you kind of describe HSA's credit and if they're on default on any other issues outside of MPW?

So Mike, that was well described in the various court filings just to remind you, when they took over from stores September 11, Stewart had not paid into the supplemental payment for Florida. There was approximately $28 some-odd million that was due and a $55 million payment that would then come from the state of Florida.

HSA chose to borrow that money from a lender and pay that money into the state of Florida. And it took the state of Florida longer to repay that because the Stewart -- the people that were running Stewart, post the bankruptcy or post filing bankruptcy, decided to file a claim on that money even though they hadn't paid any of the supplemental payment taxes for that.

And you're right. has been resolved and that lender has been mostly paid back. I believe there's a small amount of money still outstanding from both the state and then from HSA to that lender. I had nothing to do with operations.

Okay. Great. No, I appreciate that. And then just lastly for me, and I know that you guys discussed this a little bit in the prepared remarks, but can you talk a little bit about the prospect recovery process. I know that PHP proceeds were lower than expected. Is that -- was that impaired in your financial statements in the other bucket? And I guess, can you talk about like how -- what's the time line of the expectations of if MPW could collect anything in addition to, I guess, those PHP loans kind of in the prospect bankruptcy case?

So Mike, again, if you follow through the bankruptcy of this particular entity, we reached a global settlement with them. I believe it was January of this year, January, February is a big along those slides. That has a waterfall. So everything goes into a bucket and then flows out. The PHP process, I think strata paid something in the neighborhood of $700-plus million vast majority of that ended up going to repay debt and legal fees and consulting fees. And so that's why the small amount flowed through to MPT.

We believe that the stalking horses for both Connecticut and California will be announced fairly soon. And then we believe that shortly thereafter, the auction will take place, and we will move forward with closing on these properties. Still a lot of interest, particularly in the California properties.

Your next question comes from the line of Michael Mueller with JPMorgan.

I jumped on late, too. So I have a feeling a lot of what I was going to ask has already been covered. But just in terms of the asset sales that you mentioned, I think you mentioned about $100 million, is that still expected to close this year? Can you talk a little bit about the, I guess, the product type of geographies? And then as a follow-up on the I guess, the Swiss investment. I guess what's the thought process there in terms of deciding to allocate new capital for investment as opposed to sitting on the sidelines?

So Mike, on the properties that we expect to close on the call, they do expect to close before year-end, and they are essentially either left over Steward properties or other orphan type properties. On the Swiss Medical, as we have stated previously, 1 of the avenues that we've been trying to explore a long time with Swiss Medical and Infracore is to get inroads into the public hospitals.

This was an opportunity, we believe, for Infracore to make a strong inroad into that market to allow them other avenues for buying properties outside of the private sector and into that public sector. It's a relatively small investment, and we think strategically, it was the right thing to do.

Your next question comes from the line of John Kilichowski with Wells Fargo.

A question for me on just the legacy Steward asset ramp up here. just based on the update that you've given us and the expected $17 million in 3Q, are you still on pace to hit that $150 million annualized run rate by October '26? Or do you think you're running ahead at this point?

Well, I think the operators are running ahead, whether any of them will agree to ramp up the rent from their required portion, I kind of doubt it. But clearly, the operations is ahead where we thought it would be.

Got it. And then you increased the -- your equity investment in for core in the quarter. Could you elaborate on the strategic rationale and the expected return profile?

Yes, that was primarily done to pay off debt in Infracore, had debt that was coming due and we thought it was a good return on our investment for InfoCore.

Your next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Steve, I just wanted to confirm, I think a point you made earlier on with with prospects, the California assets, you talked about a stocking house on that. Is that going to be sold? I thought there was an opportunity to possibly recent it instead?

You broke up there at the end, but I think you're asking about the potential stocking horse on the California properties. There are people that are -- they are looking -- there are people that are looking to lease the facilities and entities that are looking to purchase the facilities. And I think within the next couple of weeks or so, the stalking horse will be made public and then we'll go to an auction.

Okay. That's helpful. And then I appreciate the comments you made earlier on about the changes to ACA and Medicaid expansion and kind of what you thought some of your operators would have to do -- operators in general would have to do in anticipation of that. Can you just talk to me a little bit about, again, when you talk to your operators kind of how we're gearing up for that to ultimately happen once some of those changes start to happen in 2028? Like what are the key things that we really have to get right over the next 2 to 3 years?

Tayo, if you look at the bill and all of the things that are in it, we -- none of us will know what exactly comes from it until we've had a few years to see what comes from it. And what I mean by that is the intent for the bill is to get people off of Medicaid and back into the workforce or god somebody hit the button. One of the things that we won't know is how many of those people that get back into the workforce that are getting off Medicaid, go into an entity that allows them commercial insurance.

If that's the case, then our operators would actually see an increase in their revenue. If you ask our operators, most of them are not -- no one having a heart attack about it. Most of them believe that there will be some places that there are improvements to their revenue because of those changes. But the bottom line is that nobody will know for sure for a number of years to come.

Got you. That's helpful. And then last one for Steve. The balance on the line of credit and also the cash balance kind of remains elevated. I know in 1Q you were kind of trying to manage around some uncertainty around write-offs and things like that associated with prospects. Just kind of curious with that kind of behind you now that you've kind of taken this additional write-offs of $113 million or $130 million or so this quarter, why kind of why that's still elevated and if we can expect some payoff of the line with the large cash balance going forward?

Yes, you're right, Tayo. It's the same explanation as in the first quarter, albeit significantly lower going into the end of the quarter, which is obviously the key date here and an abundance of caution, we simply build up the cash balance. That was repaid less than 24 hours later. Whether that will be the case at the end of the next quarter. I don't know, we'll continue to evaluate and make sure that there's no footfall on our covenants.

So July, you already paid it down already in July.

That's right.

Your next question comes from the line of Farrell Granath with Bank of America.

I was hoping that you could add a little bit more color on the CMS proposed elimination of the inpatient-only list. I know you just made some comments about the big beautiful build, but I was curious if there's been any conversations on that is how that would impact operations on your tenant level?

So Farrell, your volume was so low. We couldn't hear the first part of your question. We heard the last part. To back up, can you repeat that, if you don't mind?

Sorry about that. But I was curious if you could add a little color around the CMS proposed elimination of the inpatient-only list and how that may impact the operations on the tenant level.

Yes. Farrell, I think what you're referring to is that it just goes from an inpatient to an outpatient and none of our operators have expressed any concern over that.

Okay. And also a little bit more color. I know you mentioned there was about 3% of rent not collected and I think there was also a note of in the press release on the $500,000 in rent related to 2 facilities? If you could just give a little bit more color.

Sure. It's the facilities in Ohio and the facility in Pennsylvania. I believe everybody is probably familiar with what's going on in Ohio. We had -- we -- the operator there had an issue with Steward and Steward not paying over the amount of revenue that they had generated. That is still an ongoing issue for them. They hope to be operational again by the end of next month. We'll see if it is or not.

And then the other one is in Sharon, Pennsylvania, another very small facility. It actually is operating well under the circumstances. It's just been a slow process for them.

Your next question comes from the line of Vikram Malhotra with Mizuho.

This is George on for Vikram. And my apologies if I missed that, I just joined a little bit later. But have you provided any additional loans to the HSA and does the HSA EBITDA cover the cash rent they're paying right now?

The answer is yes and no. We did loan an additional $5 million in May. That was, again, part of the issues where they were having very public issues that they were having with Steward and their TSA agreement. Those have been resolved and they are not covering the full cash rent at this point.

And just one more for me. Just on the one tenant that is below one coverage. I think those are the Columbia assets. What's the latest there? Any update on where do you see coverage trending? And -- are you -- is that like a potential risk or monitoring?

So interestingly, those hospitals are performing exceptionally well. They are extremely full. The problem is, is they aren't being reimbursed from the system down there. It's not just our hospitals, it's countrywide. So hopefully, it will be resolved over the next 6 months. But the administration new election is in May of 2026. And we certainly believe it will be resolved by that point. But it's not an issue of whether or not the facilities are generating the revenue. They just aren't collecting the cash.

I will now turn the call back over to Ed Aldag for closing remarks.

John, thank you very much, and thank all of you again. I believe most of you probably know that Tim Berryman retired this past quarter. So this is our first earnings call in a very long time without them. We wish him the very, very best. And if you have any questions, please don't hesitate to call through.

Ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect your lines. Have a pleasant day, everyone.