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Medical Properties Trust (MPW 5.56%)
Q4 2023 Earnings Call
Feb 21, 2024, 12:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day and welcome to the Medical Properties Trust Incorporated fourth quarter 2023 conference call. All participants will be in listen-only mode. [Operator instructions] After today’s presentation, there will be an opportunity to ask questions. And please note that today’s presentation will only last 60 minutes.
[Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Charles Lambert, vice president. Please go ahead.
Charles Lambert — Vice President, Treasurer, and Managing Director of Capital Markets
Thank you. Good morning. Welcome to the Medical Properties Trust conference call to discuss our fourth quarter and full year 2023 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; and Rosa Hooper, senior vice president of operations and secretary. 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 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.
Ed Aldag — Chairman, President, and Chief Executive Officer
Thank you, Charles, and thanks to all of you for joining us this morning on our fourth quarter 2023 earnings call. I’m pleased to be joined again today by Steve Hamner, Rosa Hooper, and Kevin Hanna. You will hear from each of them shortly. As discussed in detail last quarter, our primary focus right now is executing a capital allocation strategy that will aim to generate at least 2 billion of additional liquidity in 2024 and help us satisfy our debt maturities for several years into the future.
Since outlining this new capital allocation approach last year, we have made significant strides, and I’d like to begin today by highlighting that progress. During the fourth quarter, we closed on the sale of our four remaining Australian facilities for approximately $305 million or a 5.7% cap rate. And in our press release earlier this morning, we announced another $480 million of agreed-upon liquidity transactions, including the sale of five hospitals to Prime at a 7.4% economic cap rate, as well as the sale of our syndicated term loan investment in Median, the parent company of Priory Group. We believe these recent transactions and other processes we are actively engaged in clearly demonstrate that our assets remain attractive to operators and sophisticated real estate investors around the world.
We are actively working on several additional sell — asset sale opportunities, as well as other transactions that we believe will validate underwritten asset values. And the prices we have achieved to date are broadly consistent with initial indications of market value that we’ve received on these other assets. As such, we remain disciplined and optimistic in our ability to continue to execute transactions on attractive terms, and we feel good about where we stand today relative to our $2 billion target for 2024. The board will meet later this quarter to discuss the dividend.
The board’s policy on the dividend remains unchanged. As has always been the case, the board will review all aspects of the company, including items such as FFO payout ratios, REIT requirements, and liquidity. Before I turn it over to Rosa, Kevin, and Steve to go through our results in more detail, I wanted to provide a brief update on Steward and Prospect. During our last call in October, we discussed Steward’s revenue cycle management challenges, which had resulted in a sizable accounts payable backlog.
Unfortunately, since that time, Steward’s cash collection challenges have become more pronounced and the resulting changes to vendor payment terms have put pressure on supplies, constraining Steward’s ability to perform higher-margin surgeries that are a key driver of cash flow. As a result, in early January, we shared that we have been working with Steward and its advisors to develop an action plan to strengthen their balance sheet, liquidity, accelerate recovery of unpaid rent, and ultimately significantly reduce our exposure to Steward. This plan contemplates a wide range of strategic transactions, including transitioning certain hospitals to new tenants and selling its managed care business called Stewardship. While it will take some time for Steward to execute these steps, we are encouraged by the early progress.
As this plan is executed, Steward needs access to liquidity to continue to operate its critical hospital facilities. As we previously disclosed in January, we funded a $60 million bridge loan, which provided a — MPT a second lien on Stewardship’s business, subordinate only to Steward’s ABL lenders. We also consented to a limited and tapering deferral of rent until the end of June or the completion of the anticipated asset sales. In the fourth quarter, Steward paid approximately 25% of all rent and interest owed to MPT.
In our press release this morning, we shared that MPT and certain lenders in the ABL group are negotiating a new bridge facility, under which, each party would fund an additional initial $37.5 million to Steward, of which MPT has already funded $20 million. Any additional funding is entirely dependent on Steward’s achieving significant milestones toward optimizing the amount and timing of MPT’s recoveries. Turning to Prospect. Importantly, in California, Prospect is current on all rent and interest due through January 2024, though they have not yet paid February’s rent.
Prospect’s EBITDARM has improved year over year, driven by increased admission volumes, higher Medi-Cal reimbursement rates, and lower supplies costs. We are encouraged by their most recent December trailing 12-month rent coverage, which was above one times. While we do not have a meaningful update to share today on the sale of Prospect’s three Connecticut hospitals to Yale New Haven, as a reminder, our $2 billion of targeted liquidity transactions does not include this expected transaction or the expected recovery of our investment in PHP Holdings. As detailed in our press release this morning, we have moved Steward and Prospect to cash-basis accounting and divided our portfolio into two categories.
Our hope is that this split will make it easier for investors to track the performance of our stabilized portfolio, which consists of more than 11 billion of assets and is accounted for using the accrual method. As this breakdown demonstrates, the portfolio continues to perform well, reinforcing our conviction in MPT’s underlying business model. While hospital operators have spent the past several years navigating challenges ranging from the COVID-19 pandemic to unprecedented labor shortages to insufficient reimbursement rates and some tenants have suffered more long-term impacts from those headwinds than others, the simple fact remains that there are no more essential services than those provided by acute care hospitals. For more than 20 years, our underwriting approach is centered on these essential infrastructure-like characteristics and identifying hospitals that are integral to sustaining community health over many years.
Given the highly diversified portfolio of assets we’ve assembled over that period, we are confident in our ability to find competent replacement operators, as needed, and continue to execute sales that achieve our objectives. I will now turn it over to Rosa to provide an update on the performance of the stabilized portfolio during the fourth quarter. Rosa.
Rosa Hooper — Senior Vice President, Operations
Thank you, Ed. It’s great to be able to participate in today’s discussion and take you through some of the highlights across our portfolio of critical hospital real estate. Beginning with Europe. Broadly speaking, we are encouraged by recent market trends, including increased occupancy rate, growing reimbursement revenue, and the continued normalization of labor cost.
As private insurance coverage expands in the U.K., Circle Health continues to demonstrate steady financial performance. Circle has seen an increase in orthopedic joint procedures of more than 50% compared to pre-COVID data. Inpatient admissions also remained on an upward trajectory as patients continued to seek high-quality care alternatives to long wait times. In addition to being named Private Hospital Group of the Year by HealthInvestor UK for the third consecutive year, Circle was also named as an Outstanding Company to Work For by Best Companies in 2023.
Let’s turn now to Priory, which is the largest independent mental healthcare provider in the U.K. by number of beds. Priory delivered EBITDARM coverage of 2.2 times for the quarter and continues to benefit from the rapid growth of behavioral health services in the U.K. It is capitalizing on this trend by driving increases to its already high utilization rate, negotiating reimbursement rate increases, and ensuring efficient cost management.
As a reminder, Priory is managed by one of MPT’s long-term operators, Median, which is based in Germany. Median continues to steadily improve occupancy, although at a slower ramp than originally anticipated following government-imposed COVID restrictions. Negotiated reimbursement rate increases in Germany were above expectations, and a stabilization in energy expenses have allowed Median to achieve its 2023 financial targets. Swiss Medical Network had a highly productive 2023, completing several renovation and expansion projects and executing a handful of smaller-sized acquisitions that will complement their capabilities in existing markets.
Earlier this year, Swiss Medical launched the first integrated care organization in Switzerland, providing a first-mover advantage in an untapped market. Additionally, Swiss Medical remains focused on the development of its Genolier Innovation Hub, a state-of-the-art multitenant lab, training simulation platform, and office space attached to their flagship acute care hospital, which is expected to accelerate the transfer of innovative clinical solutions from bench to bedside. The innovation hub is on track to open in the second half of 2024. Shifting to our approximately 5 billion Americas portfolio.
We have been pleased to see operators largely maintain hospital volumes while making significant progress in reducing contract labor. Our Colombian hospitals continue to see high demand in their respective communities, and the two Colombian operators have maintained coverage in excess of 1.5 times. CommonSpirit, which recently announced that it would take over direct management of our five Utah hospitals from Centura Health, continues to deliver strong property-level performance, reporting steady volumes across hospitals during the quarter. Prime delivered another quarter of strong performance with trailing 12-month EBITDARM coverage of two times after removing the impact of Saint Francis, which is no longer reported in our supplemental given the transaction announced today.
Prime has successfully reduced contract labor costs, while inpatient and ER volumes continue to increase year over year across our facilities. As Prime remains focused on efforts to negotiate more favorable payer contracts, we expect to see increased surgical volumes over time. Overall, our Ernest portfolio continues to deliver steady performance. While its long-term acute care hospitals continue to navigate the impacts of admission criteria waivers that were eliminated in the first half of 2023, Ernest rehab business has offset any declines associated with that.
In fact, when examining the IRF portfolio exclusive of ramp-up costs associated with their new developments, same-store IRF achieved approximately three times EBITDARM coverage. Volumes at our LifePoint hospitals remained relatively flat on a year-over-year basis. LifePoint has made significant strides in reducing contract labor by nearly half as they execute on their recruiting and retention initiatives, particularly on the physician recruitment side, which, over time, we expect will result in improved volumes and revenue. This is particularly true at their Conemaugh Memorial Hospital in Pennsylvania, where any underperformance has an outsized impact on coverages for this portfolio.
Conemaugh recently dedicated a new self-funded $77 million cardiovascular and surgical care pavilion that will provide state-of-the-art care for patients. The vast majority of LifePoint’s investment, over $60 million, went into the real estate, while the remaining portion went toward new cutting-edge equipment. The new leadership for this market is excited about the positive clinical impact this will have for their patients. And combining this with their physician recruitment successes, we believe this market is well-positioned for improved performance.
Our LifePoint Behavioral facilities continue to benefit from increased revenues resulting from increased inpatient volume. LifePoint Behavioral’s ability to manage labor costs in a rising wage environment has further enabled them to maintain strong performance. We continue to make progress on the construction of our new LifePoint Behavioral facility in McKinney, Texas, along with multiple other expansion projects at our hospitals in Texas and Kansas. ScionHealth has produced consistent quarter-over-quarter coverage improvements in the past year by growing revenue while reducing contract labor.
ScionHealth’s general acute hospitals have seen an 11% increase in year-to-date revenue over the prior year, driven by increases in both admissions and surgeries. We are pleased with our portfolio’s Q3 2023 performance compared to that of public reporting hospitals. Excluding Steward, for trailing 12-month Q3 2023, MPT’s portfolio of acute care hospitals reported volume increases that were, for the most part, higher than that of the public reporting companies and income statement growth metrics that were generally in line with those of the public reporters. Over the years, MPT has carefully constructed a well-diversified portfolio in terms of care settings, operators, and geographies.
We have over 50 unique tenants operating across the highest acuity care settings, including rehabilitation, behavioral, and acute care hospitals. After Steward, our second-largest operator, Circle Health, represents 12% of our portfolio, followed by Priory at 8%, and Prospect at 6%. Geographically, our properties are spread across nine countries, with nearly 40% outside the United States. Importantly, this deliberate diversification strategy helps safeguard against any operator-specific challenges that may arise, as well as geopolitical and economic disruption.
With that, I will turn the call over to Kevin to discuss our financial results. Kevin.
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Thank you, Rosa. This morning, we reported a GAAP net loss of $1.11 per share and normalized FFO of a positive $0.36 per share for the fourth quarter of ’23. As Ed mentioned and described in the press release this morning, we have moved Steward to cash-basis accounting effective January 1, 2024. We want to highlight that included in fourth quarter normalized FFO is approximately $0.12 per share of Steward quarterly revenue recognized prior to this accounting change.
In the press release, we also detailed approximately 770 million of charges recorded this quarter, primarily related to Steward. Importantly, these charges were recorded pursuant to U.S. GAAP accounting rules and reflect conservative assumptions regarding potential recoveries. These charges consisted of the following: 154 million of rent reserves and 224 million of straight-line rent reserves, 81 million reserves on unpaid PIK and other interest receivables related to Steward loans and a loan to our international joint venture, 112 million of real estate impairments.
With the assistance of a third-party independent appraiser, we analyzed all Steward properties, and many others were in possible impairment this quarter and identified less than 10 properties where our net book value exceeded the estimated fair value, and we adjusted our books accordingly. We also had 171 million of nonreal-estate impairments, which, again, using a third-party independent appraiser, we adjusted our nonreal-estate investments in Steward to reflect the current estimated fair value of our related collateral. Finally, we made a $30 million charge in earnings from equity interest to reflect the reserves for build and straight-line rent on the properties included in the Massachusetts joint venture. These charges were recorded on several different line items of our income statement, and we have included additional tables in our release this morning showcasing the impact of these charges.
Beyond impairment charges, we did have two other adjustments to normalize FFO that I want to highlight. As is typical, we recognize fair value adjustments in the quarter from adjusting certain marketable securities like our Swiss investment in Aevis to market. This 8.4 million negative adjustment is net of a gain recognized on our PHP investment as the managed care business continues to perform well. Second, and due to Steward and the significant adjustments made this quarter, we recorded a 6.6 million cumulative adjustment to stock compensation expense to reflect our updated estimate of expected payouts for certain stock award grants over the past year.
And with that, I will turn it over to Steve for discussion of our liquidity position and plans. Steve.
Steven Hamner — Executive Vice President, Chief Financial Officer
Thank you, Kevin. I will wrap up our prepared remarks with some perspective around our near-term recapitalization process that Ed mentioned at the start of the call. On last quarter’s call, we described our plans for accessing capital through asset sales and limited secured financing. We announced an initial target of about $2 billion over the course of 2024.
This morning, we announced that we have so far agreed to transactions aggregating almost 25% of that initial target. The largest of these transactions is our agreement to sell two hospitals to Prime for $350 million. Importantly and encouragingly, the economics of the transaction imply a capitalization rate of about 7.4%. That is obviously much better than what our share price implies or even what some investors believe our secured financing rate would be.
Moreover, we expect to realize an approximate $50 million GAAP gain on the transaction, and the purchase price exceeds our undepreciated initial investment by about $30 million. We expect to receive $250 million of the purchase price in cash upon expiration of a short notice period and the remaining $100 million before or on the expiration of a nine-month interest-bearing mortgage note due to MPT. In addition, we were able to consolidate our four remaining hospitals leased to Prime under a new 20-year master lease with a lease base of $238 million. Notably, the original master lease in place for three of these hospitals was otherwise set to expire next year.
In addition to the benefit of extending the term of this lease, our relative rent will increase by approximately $5 million. So, the economic 7.4% cap rate is based on the $350 million purchase price and $26 million of net rent. That is the $31 million of contractual rent on the two hospitals we sold, offset by the $5 million rent increase that results from the increased lease base added to the new master lease. The new lease also provides Prime an option to purchase these facilities at any time for $260 million, which would represent an additional gain on sale of real estate of approximately $95 million for MPT, over and above the $50 million gain I just mentioned.
These are all attractive hospitals. And in our view, Dr. Prem Reddy and his management team are among the most reliable and capable operators of acute hospitals in the country. But the geographic location of these hospitals are not necessarily the best in our portfolio, and yet they traded at a 7.4% economic capitalization rate.
This speaks very strongly of continued investor interest and confidence in well-underwritten hospitals that are necessary to a community’s overall healthcare infrastructure. We have approved — we have proven that repeatedly over the past couple of years, and Prime is just the most recent example. Other recent transactions that have validated the value of our assets include, but are certainly not limited to, the sale of our Australian portfolio in October of last year at an integrated capitalization rate of less than 6%; the new lease put in place with CommonSpirit in Utah roughly one year ago, which effectively placed a mid-7% cap rate on the rental stream; other recent hospital sales to Prime for $460 million, which generated very attractive IRRs and fully recovered our initial investment from at least 10 years earlier. All these transactions and more have been executed in global economic and financial markets that have not necessarily been friendly to sellers of large operating facilities.
And that is why we are encouraged by the progress we are making and our potential path to exceeding our initial $2 billion target, which, as a reminder, does not account for any proceeds from a sale of our Connecticut assets to Yale, any monetization of our interest in Prospect’s PHP managed care business, or any possible proceeds from resolution of the previously mentioned so-called non-top 10 operator that we discussed on last quarter’s call. Although we are not prepared to announce specifics this morning, the valuation metrics of potential transactions that are currently subject to letters of intent and in-process definitive documentation are, adjusted for geography, size, and tenant characteristics, highly comparable to these recent transactions and, in particular, the Prime transaction. As we realize capital from these transactions, we expect to immediately reduce our debt maturities. In 2024, we have only two maturing loans: approximately $300 million in May and $130 million in December.
In the interim, we will reduce our revolver balances, which, in recent months, have carried an interest rate of around 6.9% for the U.S. dollar borrowings. In 2025, we will have roughly $900 million in bank debt and $550 million in unsecured notes maturing. And as just noted, we expect our planned sales and secured financing transactions will provide more than sufficient proceeds to satisfy these maturities.
And with that, we have time for a few questions, and I’ll turn the call back over to the operator.
Questions & Answers:
Operator
Thank you. We’ll now begin the question-and-answer session. [Operator instructions] Our first question comes from Austin Wurschmidt from KeyBanc Capital Markets. Please go ahead.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Great. Thanks and good afternoon. On Steward, one, have they paid you the partial rent payment that you agreed upon earlier this year for February? And second, I guess, just given the additional capital that you and other ABL lenders have agreed to fund, how much confidence do you have in the ramp in cash rent payments, you know, in the coming months that you laid out earlier this year?
Steven Hamner — Executive Vice President, Chief Financial Officer
So, Steward is compliant with our previous agreement for ramping up the rent, and we expect that they will remain compliant through June when that ramp gets all the way back to 100%.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Got it. And then just as far as on the 2 billion of liquidity, I believe 40% of that amount was expected to be through, you know, loans or secured debt, I think, more specifically. I mean, how far along are you in negotiations on that front? You know, any sense when you could close? And I guess, what are you hearing around, you know, terms for any such proceeds?
Steven Hamner — Executive Vice President, Chief Financial Officer
So, to clarify, I’m not sure — I don’t remember, in fact, saying that 40% would be secured debt. I think all we’ve done — all we said is there’ll be limited secured debt. We’re not in a position this morning to give the details, but I did mention, by the way, that a significant amount of the remaining $2 billion is under either LOI or being negotiated through definitive documents. And further, we tried to mention that the pricing that you saw, not only with the most recent Prime transaction, but with transactions last year, is generally consistent with the valuation metrics.
And that means pricing or interest rates that we’re seeing in those transactions that are in progress.
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Understood. I’ll hop back in the queue. Thank you.
Operator
The next question comes from Joshua Dennerlein from Bank of America. Please go ahead.
Josh Dennerlein — Bank of America Merrill Lynch — Analyst
Yeah. Hey, guys. Thanks for the time. I guess, just maybe a follow-up on that, what kind of gives you the confidence that Steward will be able to ramp up and start paying full rent starting in June?
Steven Hamner — Executive Vice President, Chief Financial Officer
So, it’s driven by two key strategies that we mentioned early last month. One of those is the aggressive efforts at repositioning, retenanting, or otherwise selling facilities that are now occupied and operated by Steward. Secondly, it’s dependent upon a satisfactory monetization of its own Stewardship managed care business.
Ed Aldag — Chairman, President, and Chief Executive Officer
And, Josh, in addition to that, we’ve been getting weekly cash flow reports from Steward’s advisors, to which they’ve exceeded every one of them thus far.
Josh Dennerlein — Bank of America Merrill Lynch — Analyst
OK. And maybe a follow-up to that answer, just how easy is it to retenant a facility, and how do you guys think about just like the transition period if you were to retenant a Steward property?
Ed Aldag — Chairman, President, and Chief Executive Officer
So, the answer to that varies from state. In some states, it’s really easy. It can be done overnight. Some states take a little bit longer.
The real answer to that question, I think, for us, is that we’ve been extremely pleased with the amount of interest we’ve gotten in almost all of the facilities. And in almost all of the facilities, we’ve got more than one party who is interested in the facilities.
Josh Dennerlein — Bank of America Merrill Lynch — Analyst
OK. Thanks, guys.
Operator
The next question comes from Michael Carroll from RBC. Please go ahead.
Michael Carroll — RBC Capital Markets — Analyst
Yeah. Thanks. I wanted to circle back on the Steward bridge loan. I just want to get this straight.
So, MPW has already funded an additional $20 million, but the other certain ABL lender that was going to match that, they haven’t yet provided those funds?
Steven Hamner — Executive Vice President, Chief Financial Officer
That transaction has not closed yet.
Michael Carroll — RBC Capital Markets — Analyst
And what is — what are we waiting for on that? I guess, what milestones need to be achieved for that money to be paid out, and what other milestones need to be achieved for you to pay out the other 17.5 million that you agreed to do?
Steven Hamner — Executive Vice President, Chief Financial Officer
Well, so those milestones have been reached. So, in other words, the 37.5 million each that MPT and the ABL lenders are expected to fund, those milestones have been reached. And in order to fund anything further than that, then additional milestones which are directly related to those two key strategies that I just mentioned, the retenanting and selling the noncore Stewardship assets, there are some very specific, relatively stringent milestones that have to be met in order to fund anything else. But again, just to clarify, the first 37.5 million apiece, of which we have funded 20, is expected to close soon, depending on having already met the early milestones.
Michael Carroll — RBC Capital Markets — Analyst
So, why haven’t — hasn’t the other ABL lender provided their initial funding yet?
Steven Hamner — Executive Vice President, Chief Financial Officer
The documentation is not complete.
Michael Carroll — RBC Capital Markets — Analyst
OK. And then just if I can squeeze one more in there, I guess, for the potential buyers of these Steward assets, is there a concern of fraudulent conveyance at all related to them potentially selling off parts of their business, and do those buyers have that concern?
Steven Hamner — Executive Vice President, Chief Financial Officer
I wouldn’t know how to answer that for any particular buyer, but clearly, Steward is in a distressed situation and there are multiple advisors, including legal advisors, and no transaction would happen, you know, under any type of fraudulent conveyance. So, that’s — one of the keys to our underwriting over the years has been, you know, we own hospitals that nobody wants to see closed. And so, there’s a great deal of cooperation, particularly in some of the eastern states that typically have heavier regulatory hand, for the regulators, for the state, for others to help facilitate these transactions. So, I don’t think there’s going to be an issue with fraudulent conveyance.
Ed Aldag — Chairman, President, and Chief Executive Officer
And, Mike, obviously, we’ve done this before and there are plenty of advisors working on these transactions.
Michael Carroll — RBC Capital Markets — Analyst
OK. Thank you.
Operator
The next question comes from Mike Mueller from J.P. Morgan. Please go ahead.
Mike Mueller — JPMorgan Chase and Company — Analyst
Yeah. Hi. For the 350 of Prime sales, I guess, why isn’t using — why isn’t looking at the 8.8 cap rate just on, you know, that rent stream going away the right way to look at it versus netting the rent escalator in there? And then just, you know, on top of that, are the transactions you’re looking at going forward, the economics are more similar to that net number in the 7s or the stand-alone number in the high 8s?
Ed Aldag — Chairman, President, and Chief Executive Officer
So, to first answer to that question is very simple, it was all done in one transaction. The second part of that question is that yes, it’s — they are more similar to the number that we quoted.
Mike Mueller — JPMorgan Chase and Company — Analyst
OK. Thank you.
Operator
The next question comes from Vikram Malhotra from Mizuho. Please go ahead.
Vikram Malhotra — Mizuho Securities — Analyst
Morning. Thanks. Just maybe first one, I wanted to understand the — maybe you can give us a little bit more color on the 2 billion of planned, you know, sales. You mentioned there’s a bunch on LOIs as well.
I’m just trying to understand, you know, can you give us a flavor of what types of buyers these are? Timing-wise, let’s just say things get delayed, you know, is there a Plan B in terms of addressing the debt coming due?
Steven Hamner — Executive Vice President, Chief Financial Officer
Well, we’ve addressed the debt all the way through this year, and significantly, we expect 2025 also. And you broke up a little bit, Vikram, but I think the question was what type of buyers and timing, and, you know, from the beginning, going back to last October, we said this was a three- to four-quarter transition. And so, in the first of those three to four quarters, we’ve done 25%. That’s not to predict that the next transactions will be done as rapidly.
But again, just to reiterate, we do have a significant amount of the $2 billion under LOI. We’re actively negotiating with highly capable counterparties, and we’re encouraged by the terms that we’ve negotiated, which, again, are very consistent with what you saw with the Prime transaction.
Ed Aldag — Chairman, President, and Chief Executive Officer
And, Vikram, to answer the rest of the question, everything that Steve mentioned that we’re working on actively, either in the LOI stage or definitive documents, all have backups with them.
Vikram Malhotra — Mizuho Securities — Analyst
OK. And then just to clarify on Steward, I think you said on the call, correct me, but last payment was, I think, about 25% of the contractual rent. But what about the prior period where they’ve made partial payments, like just maybe back up and give us a sense of like what’s the backlog so far, or is it just that they’ve been delayed on those months and that’s all going to be paid when things get resolved? And just related to that, are you — given your comments on full payment, are you linking that to sort of — there must be a link, but I’m just trying to bridge that between where you see the dividend going because it feels like, at this point, you know, the proceeds from the dividend or not paying the dividend would probably be beneficial. So, I’m just trying to think about like what have they actually paid and what’s the backlog?
Ed Aldag — Chairman, President, and Chief Executive Officer
So, Vikram, I’ll start with the end part of that question, and the dividend is not dependent on Steward’s rent. It’s more dependent on our ability to close some of these liquidity transactions.
Steven Hamner — Executive Vice President, Chief Financial Officer
And again, if I heard the question correctly, about 25% of the rent that Steward owes on two master leases, one is the Massachusetts joint venture and the other is everything else, in total, about 25% of that was paid in the fourth quarter. I think that was your question.
Vikram Malhotra — Mizuho Securities — Analyst
Because I — if I remember correctly, the shortfall started, was it, you know, October, or was it prior to October?
Steven Hamner — Executive Vice President, Chief Financial Officer
Yes. It was in October. All rent was 100% paid as of the end of the third quarter, and any rent that is not paid was October and thereafter.
Vikram Malhotra — Mizuho Securities — Analyst
Yeah. OK. Got it. OK.
Thank you.
Operator
The next question comes from Connor Siversky from Wells Fargo. Please go ahead.
Connor Siversky — Wells Fargo Securities — Analyst
Hi. Thank you for the time. In the context of some of the write-downs related to Steward that were outlined today in the press release, has your equity stake in Steward already been written down for any of the loans that had been provided to Steward? Have those already been written down or are those still sitting at full value?
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Hey, Connor, yes. So, they have been written down. I mean, we look at it on a combined basis, the operator loans, as well as the equity, and we wrote down in combination around $90 million for those non-operator investments, we’ll call it. [Inaudible]
Connor Siversky — Wells Fargo Securities — Analyst
OK. Does that include the loans?
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Yes, the combination. Again, we look at them together. So, it’s a 90 million reduction —
Connor Siversky — Wells Fargo Securities — Analyst
OK.
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Were all combined.
Connor Siversky — Wells Fargo Securities — Analyst
OK. Thank you. And then in the press release in the comments, it outlines $5 billion worth of assets that are in the cash accounting pool, and then in the detail, it states $4.6 billion. I’m wondering if Steward and Prospect are the only operators currently in — subject to cash accounting or is there anything else in there?
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Yeah, we have three, you know, I would call them small operators. They represent about less than 1.5% of our total assets that we’ve been accounting for them on a cash basis. One’s been there probably since day one, just very small.
Connor Siversky — Wells Fargo Securities — Analyst
OK. Thank you.
Operator
The next question comes from John Pawlowski from Green Street. Please go ahead.
John Pawlowski — Green Street Advisors — Analyst
Thanks. Good morning. Can you provide some more details on just domestic operator, number one, with 0.3 times coverage? What’s going on on that operator and have you — and do you — or do you expect to give financial support to that operator through loans, rent abatements, rent deferrals?
Ed Aldag — Chairman, President, and Chief Executive Officer
The first answer to the last part of that question is no, we have not.
Rosa Hooper — Senior Vice President, Operations
And, John, we — no, we have confidence in this operator in this particular market, which I’m — you know, we’re not going to disclose the particular operator, but we do expect to see turnaround over the course of 2024.
Ed Aldag — Chairman, President, and Chief Executive Officer
And that particular operator just made significant investments in new facilities at that particular place that Rosa is referring to.
John Pawlowski — Green Street Advisors — Analyst
OK. And so, you don’t expect to give any financial support this year to that operator?
Ed Aldag — Chairman, President, and Chief Executive Officer
That’s correct.
Rosa Hooper — Senior Vice President, Operations
No. It will not be needed.
John Pawlowski — Green Street Advisors — Analyst
Appreciate it. Last question from me. Steve, can you give us a sense for the average general acute care hospital in your portfolio right now? What type of secured financing you’d be able to get on on those assets in terms of LTV rate? Any details would be appreciated.
Steven Hamner — Executive Vice President, Chief Financial Officer
So, we expect to be able to announce that, we hope, relatively soon with respect to at least one of the transactions that we’ve been referring to that is a secured financing transaction that’s included and those that are referred to as being under LOI and definitive document negotiation. But we’ll wait until we have something definitive to announce.
John Pawlowski — Green Street Advisors — Analyst
OK. Thank you.
Operator
The next question comes from Tayo Okusanya from Deutsche Bank. Please go ahead.
Tayo Okusanya — Deutsche Bank — Analyst
Hi. Yes. Good afternoon and thank you for the time. In regards to the upcoming, you know, asset sales or the secured financings, could you just walk us through how your unsecured — the syndicators of your line of credit, in particular, I mean, how they have to get involved in this in any way? I’m assuming, just given there’s a large balance on the line of credit, they’re kind of looking at all this movement.
And, you know, what kind of conversations do you have to have with them to make sure they’re comfortable with everything that’s going on?
Steven Hamner — Executive Vice President, Chief Financial Officer
So, as we tried to walk you through a few minutes ago, as we complete these transactions, we will pay down the pending maturity, starting with the $300 million, in May. And excess until the next maturity will absolutely go to the bank group, to the revolver. So, obviously, the bank lenders are very satisfied to see that.
Tayo Okusanya — Deutsche Bank — Analyst
Gotcha. Yeah. Thank you.
Operator
The next question is a follow-up from Michael Carroll from RBC. Please go ahead.
Michael Carroll — RBC Capital Markets — Analyst
Yeah. Thanks. How tight are your financial covenants right now and then how confident are you that you have the full access to your line of credit?
Steven Hamner — Executive Vice President, Chief Financial Officer
Fully confident. We have significant headroom in our own financial covenants, either with the bank group or with the unsecured bond indentures.
Michael Carroll — RBC Capital Markets — Analyst
And then, Steve, what is the covenant that’s the tightest? I don’t know if you can provide any color on where it is today. Is it the interest coverage ratio? Is that the one that we should be looking at and where is it at versus where it needs to be?
Steven Hamner — Executive Vice President, Chief Financial Officer
Yeah, that’s not a schedule we normally publish, but we have significant headroom in all of the covenants. The one you mentioned is certainly not an issue. None of them were issues [Inaudible]
Michael Carroll — RBC Capital Markets — Analyst
OK. And then last one for me, Steve, is what is the assumed cap rate on the Prime purchase options on that remaining portfolio? So, if they exercise those purchase options, I guess, what would the cap rate be on those sales?
Steven Hamner — Executive Vice President, Chief Financial Officer
I’d have to come back to you on that. I don’t have that right in front of me. But what I would point you to is if they exercised that option, it would be a $268 million. I’m sorry, $260 million.
And that includes — or let me put it this way. That’s — the lease base on those assets is now $238 million. And that 238 million actually includes — I’m not sure we disclose this, but I will, $45 million in additional lease base that, as part of this, as Ed called it, the comprehensive unified transaction, was added to this new master lease. So, all of that’s kind of a long-winded way of saying the $260 million purchase price will represent almost $100 million gain on those assets.
So, I mean, I’m happy to come back to you on a cap rate basis, but I think that’s very, very indicative.
Michael Carroll — RBC Capital Markets — Analyst
OK. And then that 100 million gain —
Steven Hamner — Executive Vice President, Chief Financial Officer
The point in disclosing all that, again, it’s just to show the interest and the valuation that the market puts on these assets.
Michael Carroll — RBC Capital Markets — Analyst
OK. Great. And then that 100 million gain, you quote that’s the depreciated book gain and the other number you gave us was the gross book value of the assets.
Steven Hamner — Executive Vice President, Chief Financial Officer
That’s right.
Michael Carroll — RBC Capital Markets — Analyst
OK. Thank you.
Operator
The next question is a follow-up from Tayo Okusanya from Deutsche Bank. Please go ahead.
Tayo Okusanya — Deutsche Bank — Analyst
Hi. Yes. Thank you again. Just a quick one.
I’m not sure if you talked about this and I apologize if you did, but the LTACH rent coverage going down to 1.1 with the most recent reporting versus 1.4, the reporting before, and 1.9 a year ago, is that all Ernest or is there something else going on there that you could talk about a little bit?
Ed Aldag — Chairman, President, and Chief Executive Officer
Yeah. You know, we’ve talked about this for the last few quarters. The reason for the decline in the LTACH is that the waivers that everybody had during COVID have obviously all gone away. We only owned 15 LTACHs remaining.
All of the LTACHs are — have a parent guarantee or either cross-defaulted with IRFs that covered obviously much higher facilities. Of those 15 facilities, more than half of them, we’re covering it more than 1.5 times.
Tayo Okusanya — Deutsche Bank — Analyst
Great. Thank you, Ed.
Operator
There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Ed Aldag for any closing remarks.
Ed Aldag — Chairman, President, and Chief Executive Officer
Jason, thank you very much, and I thank all of you for listening in today. If you have any follow-up questions, please don’t hesitate to contact Drew or Tim. Thank you very much.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Charles Lambert — Vice President, Treasurer, and Managing Director of Capital Markets
Ed Aldag — Chairman, President, and Chief Executive Officer
Rosa Hooper — Senior Vice President, Operations
Kevin Hanna — Senior Vice President, Controller and Chief Accounting Officer
Steven Hamner — Executive Vice President, Chief Financial Officer
Austin Wurschmidt — KeyBanc Capital Markets — Analyst
Josh Dennerlein — Bank of America Merrill Lynch — Analyst
Michael Carroll — RBC Capital Markets — Analyst
Mike Mueller — JPMorgan Chase and Company — Analyst
Vikram Malhotra — Mizuho Securities — Analyst
Connor Siversky — Wells Fargo Securities — Analyst
John Pawlowski — Green Street Advisors — Analyst
Tayo Okusanya — Deutsche Bank — Analyst
