MPW - NYSE

Good day. And welcome to the Medical Properties Q2 2023 Trust Earnings Conference Call. All participants will be in a listen-only mode for the 60-minute call. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Phone note, this event is being recorded. I would now like to turn the conference over to Charles Lambert, Vice President. Please go ahead.

Good morning. Welcome to the Medical Properties Trust conference call to discuss our second quarter 2023 financial results. With me today are Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of the company; and Steven Hamner, Executive Vice President and Chief Financial Officer. Our press release was distributed this morning and furnished on Form 8-K with the Securities and Exchange Commission. If you did not receive a copy, it is available on our website at 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 and/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 2023 earnings call. As we’ve always said and continue to firmly believe there is no scenario where a world exists without hospitals. Even as healthcare delivery has changed over the years with technological advances, the importance of hospitals to the delivery system not only remains critical, but has grown in importance. Hospital services remain the largest single category of spending in the U.S. healthcare. According to CMS projections, hospital services are expected to continue to make up 31% of total healthcare spending in 2023. That equates to approximately $1.5 trillion. Importantly, hospital services are projected to continue growing. CMS expects hospital services to grow almost 6% over the next seven years to eight years because of the aging population, growing consumer demand and expanded medical service offerings. Combined, this volume growth with the fact that our operators are generally seeing 3% to 6% average rate increases as they negotiate new payer agreements along with continued Medicare rate increases over the last several years and you see a compelling case for strong performance from the hospital sector. During the COVID pandemic, governments all over the world validated these essential nature of hospitals with various types of provider relief funds. These funds sustained hospitals through the pandemic and now as volumes have come back and continue to grow, hospitals all over the world continue to show improvement in performance. You can refer to our supplemental information filed this morning for more detailed information on our portfolio. And remember, while reviewing that information, we report one quarter in arrears. Most of you probably have seen the reporting by various publicly reporting hospital operators on their most recent quarters. Their numbers, which are one-quarter more recent than hours, continue to show the overall market improving. Let me take a few moments to highlight some of our larger tenants. This past Friday, Steward refinanced their ABL five months ahead of the December 2023 maturity. The new ABL is led by a group of third-party private credit lenders, whose aggregate assets under management exceed $50 billion. The new ABL provides significantly more liquidity to Steward than the most recent facility. There are seven unrelated lenders in the ABL. Steward taking the concerns of the market for the ABL refinancing off the table and having a new ABL with a much larger liquidity availability with a maturity of four years plus Steward having the right to extend that maturity is a very strong positive. MPT’s investment in the credit facility is very pursue [ph] with all the other lenders and provides MPT with a strong return. This participation is not an operating loan to Steward. This is well secured by receivables that MPT would not otherwise have a security interest in. Steward continues to perform well operationally. In fact, their EBITDARM coverage is currently one of the strongest in our portfolio at 2.9 times. Steward’s volumes are doing well and they expect to continue improvement throughout 2023 and 2024. Their primary focus going forward will be, one, to divest some of their lines that don’t fit into their overall future plans and to continue to reduce their use of contract labor, which is down 43% from 12/31/22 to around only 1% of their total FTEs. I spent some time in California a few weeks ago, visiting the Prospect and Pipeline management teams and a few of the respective hospitals. Let me start with Prospect. Prospect California continues to perform in line with our expectations. One of the hospitals I visited was the Culver City Hospital. The area has seen an impressive revibalization and the hospital itself was extremely busy. Prospect is making improvements to several areas of the facility, including a brand-new state-of-the-art emergency department. Prospect is also moving their corporate headquarters to this area to be closer to this hospital. The managed care business continues to be profitable and on track to meet revenue and EBITDA targets and time lines. They are still planning for a monetization event of the managed care business in 2024. Some of you may have seen that late last week, Prospect was hit with a ransomware attack. The FBI is assisting in this case. According to Prospect, patient care at Prospect hospitals has been minimally impacted, thanks to the extraordinary efforts of the nurses, doctors and all of the hospital staff following in-place downtime procedures. Prospect is working hard to bring the impacted systems back online. Many other hospital providers in the country have been hit with similar attacks. During the first six months of 2023 alone, the healthcare sector, including healthcare providers, health plans and business associates has suffered approximately 295 breaches. These include providers such as HCA, Common Spirit, John Hopkins, CHS, Kaiser and many more. The Yale, Connecticut transaction is still progressing to close pursuant to the APA, neither we nor Prospect are aware of any opposition to this transaction. I’m pleased to report that Pipeline facilities in California, which only represent 1% of our portfolio, continue to be on track. Volumes are steadily improving and contract labor continues to subside. The state recently approved the behavioral hospital portion of Coast Plaza Hospital. Coast Plaza should see significant increases to EBITDA from this unit in the near-term. The grand opening of this unit was this past weekend. Regarding LifePoint, the performance for their overall portfolio for the second quarter saw good improvement over our reporting today of the first quarter results. You may have seen the bond issue that was recently announced by LifePoint. The bond issue had these second quarter results included and was upside from its original target. All of this is a good indication of their current operations. There are several initiatives going on in the third quarter and fourth quarters that should show significant improvement in their results by end of the year. Senior management team continues to be bullish on their facilities. Moving on to the operations in the United Kingdom. We continue to be pleased with the overall performance of that portfolio. In addition, the recent press releases issued by the U.K. Government, reflecting The Elective Recovering Taskforce implementation plan to address the historically large NHS patient wait list was a further endorsement of the private healthcare sector. Notably, the plan contemplates utilization of available private sector capacity to help resolve that wait list, as well as advocating increased patient choice to access more care. We believe this will positively impact our U.K. hospitals over time. Most importantly, this plan continues to validate what we have known all along, that our private hospitals in the U.K. are a vital component of the healthcare landscape in the U.K. and continuous momentum behind the alignment of the NHS and private healthcare sector, ensuring quality patient care overall in the U.K. Our other European hospitals continue to be a steady rock. Overall, from a trailing 12 months quarter-over-quarter, our acute care sector improved from 2.6 times in Q4 2022 to 2.8 times in Q1 2023. Inpatient rehabilitation facilities and behavior were essentially flat quarter-over-quarter at approximately 1.8 times. LTACHs at just over 1% of our portfolio declined from 1.7 time to 1.5 times. Also, just as a reminder, we no longer include any grant money in any of the trailing 12-month calculations. While our stock and bond prices have recovered some in the past couple of months, we’re not satisfied that they reflect the true value and strength of our portfolio, especially given the sustained inflated -- inflation protection and growing cash rents that our master lease structures provide and the demonstrated value of our portfolio. More than a year ago, we told our investors that our Board will continually evaluate our deleveraging and investment strategies as our debt and equity pricing reacts to our continued performance. Steve?

Thank you, Ed. This morning we reported a GAAP net loss of $0.07 and normalized FFO of $0.48 per diluted share for the second quarter of 2023. There are a few components of these reported results that I will point out and we will, of course, then take questions in a few minutes. First, as we have previously disclosed, our very attractive lease of former Steward Utah hospitals to Common Spirit resulted in a non-cash charge for the acceleration of the amortization of intangible lease assets and the write-off of straight-line rent, aggregating about $380 million, neither adjustment affected normalized FFO. Second, we have restructured our ownership of most of our approximately $4.1 billion of assets in the U.K. under a REIT regime, resulting in a tax benefit of approximately $160 million, again, not affecting normalized FFO. However, in addition to providing more efficiency and strategic flexibility, we do expect it to be an important contributor to our cost reduction efforts going forward. Third, we recognized about $68 million in Prospect rent and interest. This is based on the previously disclosed Prospect recapitalization transactions that included our exchange of certain real estate and other assets for interest in Prospects managed care business. In brief summary, you will recall our May 23rd announcement that as of the end of the first quarter, we carried these assets at approximately $573 million. After obtaining updated valuations and an appraisal to determine marketability discounts, the estimated value of our interest in managed care as of the May closing was approximately $655 million. That’s in addition to our roughly $515 million of leased California hospitals and $355 million of cash that we expect to collect from the sale to Yale of our Connecticut hospitals. Accordingly, we recognized in the second quarter the rent and interest that would have been collected in 2023 through the May closing date. Those are the most significant items. Just a few additional and less important comments. First, cost related to our Short Seller Litigation, which we normalize out of FFO, were about $2.5 million. You may note that we added a line in our normalized FFO reconciliation for adjustments reflecting the likelihood of achieving certain performance metrics and -- which is partially offset by the acceleration of share-based compensation related to the retirement of one of our founders. And finally, the quarterly adjustment for non-cash increases and decreases in mark-to-market investments was unfavorable this quarter by approximately $8 million. During the quarter, we completed the sale of seven hospitals in Australia and the related repayment of approximately A$730 million in debt. This had a nominal impact on normalized FFO. During the third quarter or early fourth quarter, we expect to complete the sale of the remainder of our Australian hospitals for approximately A$470 million, proceeds of which we expect to use for further debt reduction. One last point, although it has no impact on normalized FFO. Subsequent to June 30, we completed the previously announced sale of three hospitals to Prime for approximately $100 million. Our primary focus continues to be on use of capital for debt reduction. This includes the expected use of cash proceeds of approximately $800 million from sales of our Australian and $100 million from our Prime portfolios, the $355 million expected cash from the sale of our Connecticut hospitals to Yale and repayments of a $60 million mortgage loan to Infracore affiliate that we received late in the second quarter. There are also a few smaller transactions that are possible of closing during the remainder of 2023 that could aggregate as much as $200 million plus in cash proceeds. During the second quarter, we also received from Steward $100 million in repayment of the loan we made in 2022. As our press release and Ed earlier described, our primary new capital commitment came in the third quarter as we elected to participate in Steward’s new syndicated ABL facility for up to $140 million. This facility is secured by first-lien interest in patient receivables. That is receivables from government payers, commercial insurers, managed care companies and others. There are several compelling benefits to this investment. Given the conditions in the bank lending market since the SVB and other disruptions earlier this year, the return on these first-lien collateralized facilities has been very attractive. The lending group and the Steward facility, including MPT, will be paid monthly at double-digit rates. And as noted, our investment is collateralized by a borrowing base of government and commercial receivables. There is a well-developed market for these participations and that should give us optionality for liquidity during the four-year term of the lending agreement, we elect to assign our investment and reallocate the capital for different uses. In deciding to allocate this capital to this particular investment, we considered, among other things, and in addition to the attractive collateral package and the cash return that Steward’s operations continue to perform well, most recently generating EBITDARM coverage of approximately 2.9 times, and our $140 million participation represents approximately 4% of our Steward investment overall and accordingly, allows us to capture attractive incremental and accretive new operating income at nominal incremental risk. So as we stated in this morning’s press release, we have refined our 2023 calendar normalized FFO estimate to a range of between $1.53 per share and $1.57 per share. Simply as a directional indication based only on year-to-date inflation data in the countries where we have meaningful investments, and of course, this data will continue to evolve, we anticipate that 2024 cash rents will increase by more than $50 million. Of that, approximately $30 million is already included in our GAAP basis straight-line projections. And with that, we have time for a few questions and I’ll turn the call back over to the operator.

Thank you. [Operator Instructions] Our first question comes from Joshua Dennerlein with Bank of America. Please go ahead.

Yeah. Hey, guys. Steve, one comment I picked up on when you were mentioning the -- you said that the U.K. REIT mentioned the cost reduction. I guess what else are you looking to do as far as like reduced costs across the organization?

So as the velocity of the acquisitions changes, as the nature of the transactions over the last, certainly, a couple of years in the inflationary and debt environment, our cost toward acquisitions is continually monitored. We look at really every component over the -- what impacts G&A. You will note also, I think, I mentioned, share-based compensation was reduced, because of the unlikelihood that prior awards would be met. With respect to the taxes that you mentioned, we expect at least a $2 million quarterly benefit on a go-forward basis simply from the U.K. restructuring. That restructuring reflected about 70%, 75% of our U.K. properties and as certain tax attributes evolve over the remainder of those properties, there will be additional benefit that we pick up.

And then for the guidance range, just what’s assumed in there? Is the $0.11 from the PHP included? And is the Steward loan included in there as well? Just -- and then if so, what were the kind of offsets?

So the Steward loan is marginal. Again, it represents, as I mentioned, less than -- way less than 5% of what we already get from Steward. It’s even at $140 million, it’s not relatively large that would impact -- that would have a net impact on FFO going forward. What was the first part of the question? I am...

The $0.11...

Yeah. Yeah. Yeah. Yeah. That’s in there. That’s historical FFO. Now we’ve made clear, of course, we said clearly that, that’s not cash. I think the press release actually said, it came in lieu of cash. It is a reflection of the excess in value of the managed care interest that we have over the book values of the real estate and other assets that we exchanged for that managed care business. So just to be clear...

But I don’t thing...

I’m sorry. Go ahead, Josh.

No. No. I was going to ask, is -- was that included in the prior guidance that you released at 1Q?

Yeah. Yes. It was. Yes, an estimate for that was included in the prior guidance.

Okay. Okay. I will jump back in the line. Thank you.

Thanks.

The next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Hey. Good morning, everybody. So will the convertible loan related to PHP and any -- in your equity stake, I guess, will there be any recurring cash flow from those investments?

No. Not at this time. We expect to realize that value upon the ultimate monetization of the PHP business. But, no, we’re not expecting any cash income related to that instrument. To be clear, beginning in September, we will start collecting at the 50% level, the rent on the California facilities and that increases to 100% collection in March of next year.

Got it. Understood. And then so, I know it’s all happening real time, but what’s sort of the current plan to monetize the investment and what does that time line look like at this point?

So as -- yeah. I am sorry. Go ahead.

Austin, that’s still scheduled for 2024. The revenue and EBITDA numbers are still on track. They’re still performing well, probably, doing slightly better than original projections and the hope is that they can monetize that sometime in 2024.

Got it. And so then just last one for me, just to help understand the guidance. So we really need to back out the $0.11 from the current run rate to think about sort of that quarterly figure moving forward and then not plan on, I guess, any cash from PHP. So really it’s just the pickup that you’re getting from California from this point.

Yeah.

So I guess that -- was it $0.37 plus any California pickup in the back half of the year? Is that the right way to think?

That is all correct.

Yeah.

That is all correct. Yeah.

Okay. Thank you.

Our next question comes from Steven Valiquette with Barclays. Please go ahead.

Hi. Thanks. Good morning, everyone. Yeah. Look, my question was kind of similar to that or the one that was just asked around the guidance, because obviously, if you were $0.38 in the first quarter on normalized FFO, $0.48 this quarter was the moving parts. The back half guidance, I thought maybe was implying only $0.68 to $0.72 on normalized FFO, which would be $0.35 a quarter, which is below where the street is right now at $0.40 a quarter. It sounds like that’s not the right way to think about it. So I just want to make sure there’s not some step down in the quarterly run rate of FFO in the back half of the year versus what was happening at least maybe versus that $0.38 in the first quarter.

Well…

Just further insight on that [ph]. Thanks.

Yeah. Only to the extent of what you already know, which is we’ve had some diluted sales, obviously, Australia, Prime, although Prime is just not that meaningful. But with those clarifications, yes, you are correct.

Okay. I just want to make sure. Okay. That was it for me. Thanks.

The next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Thanks for taking the questions. Just I wanted to go back to the Steward ABL and your participation. I know you said double-digit returns. But you also mentioned it’s not really moving the guidance. So can you maybe just step back, and A, walk us through what was the need if there are six other investors? What was the need for you to participate in that, did Citi and other syndicate members not want to participate? And now that you’re in the syndicate, I’m assuming like the 2022 financials are done and dusted and you have access to them?

So, Vikram, the dislocation in the lending market right now, the main traditional banks, national banks, regional banks just aren’t doing these types of loans anymore. So that’s why you’ve got these different types of lenders that are in it now. It is six other lenders totally unassociated with any of us with Steward or with MPT. The reason for us participating is as simple as it was getting it -- the decision of getting it done right now versus maybe getting it done in 30 days. There continues to be good interest from other potential lenders and participating in the syndicate. But this takes the ABL off the table. It takes the questions that we keep getting about when is Steward going to refinance? Are they going to be able to refinance, now having an ABL that’s out there for four-plus years because they have the right to extend? It’s merely a trade-off on timing.

And yes, Vikram, we do plan to file Steward’s 2022 financials once we receive them. That will appear as a new exhibit to our 2022 10-K. To be clear, we’re doing so at the request of the SEC specifically for 2022 and it should not be taken as a precedent that we will file these annually going forward. As a reminder, the SEC’s rules provide very specific guidelines as to when tenant financials may need to be filed and we generally will not and actually may not be permitted to file the tenant’s private financial statements unless clearly required by this guidance.

That’s helpful. Thanks so much. And then just bigger picture, I mean, on this loan, is it fully -- can you give us some sense of like what’s the incremental liquidity, is it fully drawn? And just stepping back related to that, is there an official or maybe an internal limit as to how much you can or would like to invest or lend to a specific tenant?

So, Vikram, we’ve got a really bad connection. But I think I can answer your question with respect to the sizing and the amount of incremental liquidity to Steward, that’s not for us to share and so we can’t comment on that other than what Ed said in his opening comments that it does provide liquidity to Steward significantly more than they had under the old facility. The second part of your question is, I think, no, we don’t have any guidelines. We don’t have any policies. I’m not aware, certainly, other than the REIT rules and the various buckets that we’re able to invest in as a REIT, which this certainly does not implicate. We have no plans at this point to make this an ongoing business line.

Vikram just further answering that question. These decisions are made at the Board level.

Got it. Okay. And then just one last, if I may. Just stepping back with the environment. We’ve talked on and off about you’re still seeing interest from potential new investors in the hospital landscape, whether in the U.S. or globally, any anecdotes, examples you can share of new investors stepping in, finding hospital real estate attractive and what that may mean for pricing? Thanks so much.

Yeah. Vikram, I don’t think it’s appropriate at this time given some of the conversations that we have other than to tell you that we have had literally new people calling us at least monthly.

Thank you.

The next question comes from Mike Mueller with JPMorgan. Please go ahead.

Yeah. Hi. A couple of things, can you remind us how much California income is baked into the back half of the year guidance first?

Well, I’ll just give you off the top of my head. Maybe somebody can help me out here while I’m telling you, but it’s a roughly $500 million investment at an 8%-plus contractual rate that we will collect 50% on the -- from September to the end of the year. Somebody writing something down and I can’t read the writing here. So -- is that $10 million, Drew?

Okay.

Yeah. About $10 million of rent.

Got it. And then in March, that goes to 100% and is that…

Exactly.

…and is that a cash rate or is that a GAAP versus cash rate?

That’s cash. No. That’s cash. And…

Okay.

And in March, that will be upward of 8.4%, I think.

Okay.

On the $513 million...

And then…

Yeah.

Got it. And then on the Steward ABL, how much of that do you expect to be drawn down, I guess, initially, I guess, you can have up to $140 million outstanding?

$140 million, you should assume is initially drawn.

The $140 million. Okay. And last question, is it possible to give a sense as to where you think your 10-year debt costs are today across the regions, U.S., U.K., Europe?

No. We really can’t. I mean, obviously, you can imagine, we follow that, but there’s actually very little trading in a disrupted market. So we don’t necessarily believe that, if we’re showing a discount on $1 million of trades for a bond issue that doesn’t mature for six years or eight years. We really don’t take that as indication of where we would refinance now very thankfully. And by design, of course, we don’t have to refinance now. We have the single maturity coming due later this year, £400 million. We have the liquidity and liquidity resources to simply write a check for that. The only maturity, again, I’m repeating what we’ve been going through for a while, but the only maturity in 2024 then is the Australian term loan, which we’ve already paid down a significant majority of that. And then, as Ed alluded to earlier, we continue to monitor our cost of capital as reflected by those indications that you mentioned in the debt markets and certainly by our share price and our Board continually considers the different levers that we have to pull to make sure that our liquidity is significantly more than the minimum required.

Okay. Thank you.

Our next question comes from Connor Siversky with Wells Fargo. Please go ahead.

Good morning. Thanks for having me on the call. A year or so ago, MPW described Steward’s operating restructuring efforts, I believe there was a ramp of several hundred million dollars an improvement to EBITDAR. I mean how far along the line of these restructuring efforts is Steward currently? When could we expect for this to be completed and does this strategy change at all with the new ABL and/or input from the credit funds involved?

Yeah. No. Not at all, Connor. They are -- they have completed all of their cost restructuring. They’re benefiting from all of that cost restructuring. 2022 numbers will show a positive EBITDA number and 2023 and 2024 will continue to show vast improvement.

Okay. And apologies if I missed this earlier, but related to Vikram’s question on asset pricing, I mean, just looking down the line towards 2025 and 2026 where there are significant debt maturities. I mean, is there a plan in place to sell more assets or if you could just walk us through what you’re thinking to refinance that stack?

So what we’ve just mentioned, we have these levers to pull, one of which is asset sales and I’ll come back to pricing in a minute. And the other is something similar but not quite joint ventures like we’ve done in the past with Primonial and Macquarie. And Ed’s already mentioned the kind of over the transom interest that we get literally monthly from others who are very eager to find similar ways to participate in these assets. On the pricing, I mean, all we can point to is what we’ve done most recently and if you’ve seen our NAREIT Investor deck. We’ve got a slide in there that list every transaction we’ve done since the beginning of 2022, which demonstrate that there remains a very vibrant private market for infrastructure, like community assets, like many of our assets are that they’re well underwritten necessary in the community, inflation protected and demonstrated as infrastructure like by virtue of what we saw during COVID with governments and people doing everything possible to maintain these community assets. So that obviously doesn’t say that what we sold Australia for at 5.7% or what we sold Steward Macquarie for at 5.6% or the great pricing we’re getting on Common Spirit, that doesn’t prove that it’s going to happen in the future. But we’ve seen no indication that this private market is diminishing at all for assets like this. So, again, just to reiterate, that is -- those are major levers we can pull as we get closer to the 25 months, 26 months or earlier. There may be opportunity to do things earlier, of course.

Okay. Thank you.

Our next question comes from Jonathan Hughes with Raymond James. Please go ahead.

Hi, there. I’m just curious, why was guidance maybe now revised in conjunction with the Prospect recapitalization announcement from May. Was there just some timing uncertainty related to that? I’m just trying to understand when I do it then versus today?

And I hate to be thick, Jonathan, but we did revise guidance. Are you saying why didn’t we do it earlier? Is that the question? Why don’t we make it as...

Yes. Thanks. Yeah.

Yeah.

Back in May versus today.

Well, a couple of reasons. One, it’s not our practice. And based on my experience, probably not the practice of many of our peers to revise guidance between quarterly reporting. That may or may not be, but it’s not generally our practice. Secondly, it’s a relatively minor compression of guidance from what we had earlier. Thirdly, the transaction happened on May 23rd and as I tried to point out earlier, we had multiple validations, multiple independent third parties who took different perspectives on the value of the managed care business. It’s a private company. It’s not uncomplicated that what Prospect has done is to extract various different operations and subsidiaries from across the Prospect ownership and put it into a single operating company and measure that and then provide that information to the appraisers and so forth, such that. We only got something that the auditors were able to look at and we were confident in the $655 million value. That didn’t happen on May 23rd. It didn’t happen for six-plus weeks afterwards. So between those two reasons, it’s just -- it’s not what we do generally, I mean, unless there was something really material and dramatic, and we just simply didn’t have the information until more recently.

Okay. And I guess then just sticking with the updated guidance from this morning and the midpoint of kind of the third quarter and fourth quarter FFO implied by the updated guidance is about $0.35 and then if you take out the non-cash income, you’d get to just call it, $0.28 or so of FFO, which would be below the quarterly dividend, but I know that’s expected to improve in the next year. And I asked about sustainability of that dividend last quarter and you are comfortable with -- and you said you were comfortable with it, but the market today is still giving you a little credit with the stock yielding 13% and leverage is up from last quarter to nearly 7 times. So I just have to ask again, has the Board seriously considered a cut to retain more funds to more quickly improve the balance sheet and pay down debt?

So, look, I would just reiterate what both, Ed and I have already said, and that is we’re not satisfied with our cost of capital as implied by the share price. We’re not getting the credit that we think we should. And so going all the way back to, I think, our fourth quarter call back in February, I think, we actually said everything is on the table and that’s at the Board level. And then, again, just a few minutes ago, I said the Board is constantly evaluating, considering that. And we’ve talked already on this call about liquidity opportunities and I’ll just repeat it, if everything is on the table.

Okay. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Ed Aldag for any closing remarks.

Thank you, Operator, and I appreciate everybody’s interest today. On a personal note, I’d like to take just a moment. This today will mark the very last time in almost 20 years that I will sit across the table with Emmett Mclean, one of our original founders. As we have previously announced, Emmett is retiring this month and that we wish you the very best. We wish you the very best with your grandchildren, your wife. Enjoy yourself well Emmett. Thank you.