Medical Properties Trust (MPW) Q2 2022 Earnings Call Transcript

Medical Properties Trust (MPW -4.91%)
Q2 2022 Earnings Call
Aug 03, 2022, 1:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Medical Properties Trust second quarter 2022 earnings conference call. [Operator instructions] 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

Good afternoon. Welcome to the Medical Properties Trust conference call to discuss our second quarter 2022 financial results. With me today are Edward 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, 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.

Ed Aldag — Chairman, President, and Chief Executive Officer

Thank you, Charles, and thank all of you for listening in today to our second quarter earnings call for 2022. You all will recall that the public reporting hospital operators reported Q1 2022 results, reflecting the issues with the omicron surge in December, January, and part of February. As we predicted last quarter, since we report coverages one quarter in arrears, the results we reported from our operators today show that same softening. Furthermore, just as we predicted with the public health systems like HCA and Tenet, who have both published their Q2 results, the positive trends that we are seeing in March and April have accelerated into May and June.

There are several points that we believe are important for us to address today. First, we underwrite every investment at the facility level. We believe reporting coverages at the facility level is the appropriate metric. Whether we acquire a large portfolio of hospitals or a single hospital, we underwrite that acquisition at the facility level, understanding the competition market, the physician referral sources, and the operator.

We must be right on the market and the referral sources, but long-term collection of our rent does not depend on the financial results of a particular operator. In the few times that we’ve had to transition from one operator to another, we have been successful in attracting high capable and qualified operators because we had acquired hospital real estate that was essential to the community and in the right hand could be operated profitably. And as a reminder, our rent typically represents approximately 5% to 7% of a hospital’s net revenue. Two, Radley is an operator’s real estate subject to an MPT lease rarely is 100% of an operator’s real estate subject to an MPT lease.

In many cases, MPT does not even own the majority of an operator’s real estate. And three, hospitals can and do exist without corporate offices. However, corporate offices and their functions would not exist without the hospitals they support. Another item that is sometimes confusing to investors is the repair and maintenance numbers in coverage.

The repair and maintenance is expensed on the income statement and represents the bulk of nondiscretionary spending required to maintain the hospital real estate. The hospital’s capitalized expenditures then fall into two primary categories, equipment-related and building related. In both cases, the entire amount of the expense does not represent an immediate cash outlay. The overwhelming majority of these costs are financed and repaid over the terms agreed to by lenders or vendors.

For larger true real estate capital expenditures like a new hospital tower, a new parking deck or roof replacement, MPT has always been supportive of continued investment in our hospital real estate to the extent that a project meets our underwriting criteria. Sometimes MPT has to finance these investments in which case they’re generally added to our lease space. Moving on now to discuss our operators in the portfolio lease coverages. You all may recall that historically, we provided coverage at the EBITDARM level.

Over the years, many shareholders and analysts suggested that we provide EBITDARM coverages to be consistent with other REITs. Internally, we use a conservative 5% of net revenues across the board with our tenants to approximate the management cost of operators. Most of our operators’ actual cost is significantly less than the 5%. The actual cost usually approximates between 3% and 4% and some even less.

We used the 5% internally to help show us direction and early warning signs. Let me give you some specific examples. Using our tenants’ actual numbers and not the 5% number we use internally across the board, LifePoint’s actual EBITDAR coverage for the trailing 12 months ending March 31st, 2022, was 1.38 times; [Inaudible] health was 1.17 times; priority was 1.75 times; pipeline was 1.0 times and so on. Whether we use the 5% or the numbers provided by the tenant, this is an art and not a science.

Also remember that as announced during the last earnings call and as previewed by HCA, Tenet, and others, the first quarter of 2022 was a difficult quarter for everyone. Our operators have returned to more normal metrics since then. Our total portfolio EBITDARM coverage for the trailing 12-month period ending 3/31/2022 was 2.4 times. This compares to the trailing 12-month period ending 12/31/’21 of approximately 2.7 times.

The trailing coverage for last year’s first quarter results was also 2.4 times. Using the surrogate number of 5% of net revenue for management fee, EBITDAR total portfolio coverage for the trailing 12-month period ending 3/31/2022 was 1.7 times. The details of our EBITDARM and EBITDAR coverages using the 5% number by operator are shown in our supplement report we filed this morning. Now let me take a few moments to provide some high-level updates on some of our larger tenants.

Steward operations continue to make dramatic improvements from 2020. In 2020, Steward’s unadjusted EBITDA was approximately $209 million. In 2021, based on current unaudited numbers, Steward generated an unadjusted EBITDAR of more than $450 million. This reflects a more than $240 million improvement.

Based on the most recent two months, Steward’s internal unadjusted EBITDAR shows a run rate of more than $800 million. The Utah and Miami markets alone continue to perform very strong and made up approximately $350 million of that $800 million. By the end of September, Steward will have paid back all of its MAP requirement, excluding the small amount associated with the hospital in Massachusetts that was hit by flood two years ago. The exhaustion of the payback of the MAP money in September and the termination of the tenant management agreement will mean approximately $50 million additional cash dollars per month available to Steward.

Volumes at Steward are up 11% over the volumes in February and up more than 20% than the same time last year. And very importantly, the quality of these volumes is strong. Current labor costs at Steward are currently 9% lower than they were in January. Circle continues to reflect steady operations and coverages.

Self-pay admissions continue to trend upwards, which is a good thing in the U.K. as growing NHS backlogs are driving substantial wait times in the public sector and overall volumes are approximating pre-pandemic levels. Circle also continues to report that they are not experiencing any significant issues with staffing or in-place acts. Prospect has not rebounded where we hoped they would, at this point, post the third COVID cycle and staffing changes.

In talking with management, they are still bullish on California and believe that Pennsylvania has turned the corner after an enterprise system conversion. Prospect continues to actively — is actively involved in ongoing negotiations with the would be acquirers for the Connecticut and Pennsylvania markets. To date, we have not been involved in any of these negotiations. Swiss Medical Network continues to perform well as well as they have in the past.

They continue to outperform the prior year from a revenue growth standpoint and expect to continue that trend as they onboard their most recent acquisitions. Median’s operations and coverage remained steady as they have throughout the pandemic. Average occupancy through May has trended up from the prior year and additional increases are expected during the remainder of 2022. Personnel costs through May 2022 have been managed below budget and are up only 6% year over year.

Median expects to be able to effectively manage in alignment with expectations during the remainder of 2022. Priory saw an increase in coverage in Q1 2022 and remains near two times coverage since the transaction last year. Occupancy remains strong in the remainder of 2022 is currently expected to be in alignment with expectations. Healthscope at the end of 2021 during the early months of 2022 and Australia continued to institute periodic restrictions on elective surgeries due to the COVID pandemic.

Healthscope continue to work toward completion of multiple capital improvement projects at a number of our facilities. Prime continued its strong coverage performance in Q1 2022. 15 of our facilities posted EBITDARM coverage of over three times with seven of our facilities covering over four times. Volumes during Q1 2022 were almost even with Q1 2021 and their cash position is strong.

Dr. Prem Reddy, the founder and CEO of Prime Healthcare was recently recognized by the Los Angeles Business Journal as one of the 500 most influential leaders and executives in Los Angeles. This was the third consecutive year that Dr. Reddy has been recognized on this prestigious list and Dr.

Kavitha Bhatia, president and chair of the Prime Healthcare Foundation was also named to that list. Lastly, before I turn the call over to Steve, I’d like to provide a quick update on some of our recent activity on the acquisition front. With locations across Spain, the U.K., Australia, and the United States. Our second Spanish transaction is a development agreement with one of our current operators IMED.

Recall back in 2015, we agreed to a similar deal with IMed to develop a brand-new state-of-the-art hospital in Valencia, Spain. That facility, which is a recovery of our annual report on multiple occasions, was completed in 2017 and has successfully served as their flagship hospital. The facility has now matured and IMED is ready to begin the next phase of our growth strategy with the development of the three new acute care hospitals across the Mediterranean coast of Spain. The estimated combined budget of these redevelopment projects is EUR 121 million.

Each facility has a separate construction time line, but we expect it to be completed between the second half of 2023 and the second half of 2024. We are excited to grow our investments and relationship with the team at IMED. Early in the third quarter, we closed on a $26 million acquisition of another hospital in Colombia, operated by a new tenant to MPT named FCV. They are a pioneer in Colombia and Latin American healthcare, excellence as the first received to receive JCI accreditation in Colombia.

Also during the quarter, MPT acquired from separate third parties, two facilities located in Arizona and Florida and leased to Steward for a combined $80 million. The Arizona facility, which will operate as a combined ambulatory surge in our imaging center and freestanding emergency department, is expected to drive additional volume to the nearby Mountain Vista Medical Center in Mesa, which is a Steward facility. The Florida general acute care facility provides Steward an economical way to expand within the same services area as their and is expected to commence operations in January 2023. And with that, I’ll turn the call over to Steve.

Steven Hamner — Executive Vice President and Chief Financial Officer

Thank you, Ed. This morning, we reported normalized FFO of $0.46 per diluted share. The $0.01 change from the first quarter’s result was expected and is primarily related to the effect of the late first quarter close of the Macquarie joint venture. As this morning’s press release noted, our 2022 calendar year guidance of $1.78 to $1.82 per share remains unchanged.

. Adjustments to normalized FFO are routine and immaterial individually and in the aggregate, and I’ll be happy to address any questions during our Q&A. So for the next few minutes, I want to discuss a few of the slides we posted this morning as an investor update. Frankly, these slides are more of an investor reminder that an update because nothing has changed from how we have run the company and underwritten the real estate that comprises about 85% of our total assets since our inception. But of course, as we have grown from $0 in assets in 2004 to $22 billion today, our investor base has certainly changed, and some investors do not have the long-term history that others have.

So we believe this is a good time to describe our general strategy for investing in hospital real estate and review the outstanding successes our strategy has delivered over that 18-year period. Then before we go to Q&A, I will briefly describe our expectations about investments and capital markets activities in the present market and economic environment. First and foremost, we invest primarily in real estate. We underwrite our real estate investments to attract successful operators such that just like most REITs and other real estate investors, if any particular lessee is unable to continue paying our rent, we expect to find another lessee that can.

In other words, it is the characteristics of our real assets that we believe attract successful operators and sustainable real estate returns as opposed to relying on any particular operator lessee to bring value to our real assets. Slide 4 in our investor update summarizes some of the key characteristics of hospital real estate that if present, will attract a profitable replacement operator if necessary. The more of these real estate characteristics that any particular hospital facility has, the more likely it is that that hospital is truly critical community infrastructure that a replacement operator will be able to run profitably and continue paying us attractive real estate returns. Many of you have heard MPT’s executive officers acknowledge that it is the primary responsibility of MPT management to identify, underwrite and invest in hospital real estate that has these characteristics.

And our history proves that we have been successful in doing so. That is what Slide 5 and the update demonstrates. In our 18-year history, we have invested about $24 billion in the real estate assets of about 530 hospitals. And due to our specialized hospital expertise applied to our initial underwriting, it has only been necessary to replace operators of 20 of these facilities.

That’s in addition to the Adeptus relationship, which we described in last quarter’s investor update. Slide 5 demonstrates that we have actually made money. Frankly, we think this should be the expectation for real estate investors, certainly across the long term. And to be clear, this slide aggregates every instance of operator replacement over 18-plus years.

And by the way, this success is not solely due to our underwriting. Slide 5 also describes the value of being a lessor versus a lender and of the master lease structure, both of which are key components of our overall strategies and historical success. Finally, Slide 5 calls out three examples of the 11 instances of operator replacement, each with different causes and outcomes. Town & Country, which was a ground-up development of a state-of-the-art acute hospital in MOB due to our careful underwriting that we consciously designed to ensure that this real estate was needed in and valuable to the surrounding community.

This campus was extremely attractive to other prospective operators in the Houston market. When the original lessee was unable to access profitable managed care contracts and by the way, a risk that MPT identified very early in the underwriting process. We had multiple alternatives and ultimately elected to sell our real estate for an attractive price to the dominant acute provider in the market, and we more than recovered our investment. Just to make clear, again, it was the real estate, not the operator that was valuable to the buyer.

Shasta Hospital in Redding, California is a good example of what can happen when an operator’s parent not MPT’s lessee gets into financial stress and even enters bankruptcy. Our hospital real estate was being operated at an attractive EBITDA coverage ratio even when the parent company, who was our guarantor, was deeply solved because of the facility level profitability and because our lease is almost always mandate that our lessee is a special purpose entity creditors may not attach our real estate assets or facility operations other than secured receivables. Shasta was truly a community infrastructure asset. To the extent that the state of California regulators work with us and the replacement operator to transfer license and keep the hospital open in a matter of 24 hours.

There was simply not enough capacity in the market to absorb the loss of patient access that a closure of Shasta would have created. It has then been operated at strong profitability. And not only did we negotiate higher rents with the new operator but we were paid a $12 million cash inducement fee in addition to net rent. Finally, the slide calls out our small Ltac in New Orleans as an example, because it was our very first RIDEA transaction, giving us the ability to capture operating upside in addition to the real estate rents, which in this case were unchanged from the prior operator.

Just to summarize, again, in these cases and a few other instances when we have had to terminate a lessee, it was the quality and characteristics of our real estate that protected us from material financial losses. The operating results of the terminated lessee did not impair our asset or impact the value of our recoveries. And by the way, virtually all of the $20 million in losses you see on Slide 5 resulted from a single relationship that comprised five of the 20 facilities summarized. And even some of this could have been avoided because we elected to contribute one of the facilities to the local community instead of selling it for value.

Our point in going through this is not to highlight operator failures, but to point out that, first, we invest in real assets whose values are not derived from any particular lessee. And second, if we continue to carefully underwrite as we have since our inception, even when there is, as there will inevitably be operator weaknesses, we have good reason to believe that we will successfully retenant our hospital real estate. It doesn’t simply turn into an empty building that generates no rental revenue. But to be clear, any such transition is disruptive in a management distraction and this motivates us to work with tenants that we believe can recover from their problems, sometimes even to the extent of providing financial support.

But the amount of any such financial support is considered in the aggregate $20 million loss mentioned on Slide 5. Some REITs address these tenant issues, but generally, MPT has not done so, with permanent reductions of rent other material amendments to lease obligations, acquisition of equity or preferred ownership and purchase of tenant operations among other means. I want to take a couple of minutes to consider our largest tenant relationship Steward, which Ed has already highlighted. First, the characteristics of the 41 hospitals we own and lease to Steward, regardless of whether or not Steward remains the operator are consistent with those that we’ve discussed earlier and that would be very attractive to competitors and other potential replacement operators.

Slide 4 refers to them in detail. so I will comment only briefly. First, and as we have previously discussed, the real estate we own and presently leased to Steward comprises six different markets. In the aggregate, the facility-level EBITDARM coverage for the 12 months ended March 31st was 2.6 times.

Remember, this includes, as Ed mentioned, two relatively weak quarters of financial performance across the entire hospital industry. That is evidenced by the publicly reporting operators such as HCA, Tenet, and others. My point, of course, is that even in — the industrywide weak operating and financial environment, the Steward facilities continue to operate profitably at the facility level. And by the way, EBITDARM coverages across the six markets range from 2.0 times to 3.7 times.

Secondly, I remind you that Steward’s Massachusetts operations, it’s first and among its largest markets, was recently subjected to detailed and sophisticated underwriting as part of last quarter’s completion of our joint venture with Macquarie Infrastructure Funds. This process confirmed our own evaluation of the value of the Massachusetts real estate. Finally, and very importantly, I will just reiterate what Ed discussed about the recent generation of EBITDAR for May and June. On an annualized basis for these two most recent months, the run rate EBITDAR for Stewart approximated $800 million, including more than $350 million for the Utah and Florida markets combined.

We are not suggesting that these annualized run rates will be sustained because there’s no assurance that they will be. But we are confident that Steward, especially in its major markets, is a healthy operator and will continue to pay its rent based on very strong long-term coverage ratios. And most importantly, even if Steward s not the lessee, we believe the value and characteristics of our real estate currently leased to Steward ill attract, frankly, as it already has multiple potential replacement operators. But we expect additional contributions Steward’s improving operations will also include, again, as Ed mentioned, by the middle of mid, Steward will have fully repaid over $400 million of MAP funding and have completed its transition from tenants management of its recent Florida portfolio acquisition, freeing up between a total of $45 million and $50 million of cash flow per month starting earlier than in October.

That provides up to $600 million on an annualized basis and incremental cash flow. Almost $70 million of delayed Texas Medicaid waiver payments will have been received by the end of the third quarter. Moreover, Steward’s Texas hospitals expect to begin receiving an incremental $6 million per month based on new Medicaid waiver calculations. Elective procedures in Steward’s Massachusetts hospitals returned to normal during the second quarter.

And in fact, we expect that Steward will receive state reimbursement in the near term of almost $30 million for COVID-related losses. Moreover, the staffing and other industrywide issues, which we have heard about from recent quarterly reports from public acute operators have similar to those reports, also began to substantially improve across the Steward system. In addition to this recovery of cash that Steward has funded in recent months, Steward has begun implementing strategic and operational initiatives that should lead to further near-term improvements. First, the previously disclosed sale of Steward’s value-based Medicare business to CareMax would not only generate additional liquidity of as much as $125 million, but just as importantly, will align the interest of both organizations in a manner that will pave the way for future profitable growth opportunities.

Second, as the industry continues to recover from the omicron-related revenue is happing pressures from late 2021. Steward has almost completely executed substantial cost initiatives in labor, purchase services, the previously mentioned runoff of the tenant management services contract and further EHR cost rationalization. In the aggregate, Steward expects these to range between $350 million and $400 million annually. Finally, let me give you a little perspective about the terminated sale of Steward’s Utah operations to HCA.

Almost a year ago, Steward and HCA agreed to a binding agreement for the sale of these operations. Unfortunately, the FTC blocked the transaction, and it was. Nonetheless, the value of Steward’s Utah operations and the value of MPT’s Utah real estate that were both so attractive to HCA have not gone away. In fact, Steward continued to improve the financial performance of Utah, even while waiting to close the sale to HCA.

Steward now has alternatives with respect to Utah, including retaining and continuing to operate the highly profitable market itself. Notwithstanding Steward’s strong recent and improving facility level EBITDAR and performance across its portfolio. The most recent quarters have suffered from cash pressures. These were caused by, for the most part, the investment of more than $200 million in last summer’s acquisition of five hospitals in the Miami area.

The repayment of the previously mentioned $420 million in MAP obligations. Delay of Medicaid reimbursed by the state of Texas of close to $70 million, the mandated restrictions of elective procedures in Massachusetts late last year and earlier this year, and, of course, the termination of the HCA transaction. And as I described a minute ago, with the exception of the cash proceeds that were anticipated from the terminated HCA sale, these issues are almost fully resolved and even more importantly, we are confident in the near-term improvements in operating cash flows that could aggregate up to $1 billion annually. So all of this describes why we remain enthusiastic about, first and foremost, the value of our hospital real estate, but also of Steward’s near- and long-term outlooks.

This led us to agree early in the second quarter to facilitate Steward’s transition of its recent cash pressures to the strongly positive cash flow outlook I have just described by providing a $150 million debt facility to Steward. Among other key terms in the facility are a relatively short five-year term cross collateralization to our master leases mandatory prepayment from proceeds of any sale of Utah and other operations and attractive ticker interest payment. The strength of our master lease structure, whereby we basically have first priority in the valuable Utah and Florida operations, along with other markets, made this investment decision very attractive for MPT. Moving on to a brief discussion of capital acquisition.

We previously predicted that our 2022 acquisitions volume will be in the $1 billion to $3 billion range. And given the rapid and dramatic development in the capital markets and the global economic environment, even since our last earnings call, acquisitions will likely be — very likely be on the low end of that range. There are no meaningfully sized transactions in the pipeline, although there are actually a number of potential transactions in the market, and we are generally seeing indications that sellers are beginning to adjust their expectations in line with changes in the cost of real estate capital. But I do want to reiterate an MPT stream that we have always felt has not received enough recognition, and that is our built-in inflationary rental escalations.

Slide 13 in the update deck summarizes based on July 2022 U.S. and European inflation rates, the increase in cash rents we expect to receive in 2023 compared to a same-store portfolio in 2022. So in other words, this accounts for the Macquarie joint venture as if it occurred on January 1st, 2022. We estimate that our cash rents will increase in 2023 over 2022 by about $57 million as a result of our inflationary escalators.

That’s an average increase across the portfolio of approximately 4.4%. Applying an estimated and arbitrary blended capitalization rate of 6.5% to this incremental cash results in the equivalent of about $875 million of additional leased real estate, for which we have zero cost of capital. So in capital markets that are temporarily squeezing investment spreads, we are very pleased with the built-in improvements in yield that we expect beginning early in 2023. And of course, that’s on top of the previously disclosed 2022 escalation.

And with that, we’ll turn the call over to questions. Dennis?

Questions & Answers:

Operator

[Operator instructions] And your first question is from the line of Steven Valiquette with Barclays. Please go ahead.

Steven Valiquette — Barclays — Analyst

Great. Thanks. Hello, everyone. Thanks for taking the question.

I guess just a follow-up on the disclosure around the Steward financials, its annual run rate is close to the $800 million of EBITDA somewhere in there. I guess you mentioned that’s still unadjusted but there were similar adjustments you’d make to that as you’ve done for the other numbers you report when you do your rent coverage ratios. Is there any way just to give us the math on where that would shake out on either EBITDAR or EBITDARM and rent coverage the way it stands right now, just looking for color around that?

Ed Aldag — Chairman, President, and Chief Executive Officer

There are no adjustments. Those are just the numbers. We do not make any adjustments to any of the EBITDAR numbers in any of the tenants and those that we report for tenant are not adjusted either. They are unadjusted.

Steven Valiquette — Barclays — Analyst

OK. That’s helpful. And then I guess it did from 2.8 to 2.6 on a sequential basis, but again, that is in one quarter in arrears. So based on what you’re saying, we should assume that when you’re reporting this next quarter, all else being equal, that probably trends back upwards.

That sounds like that’s kind of the message that you’re trying to convey I want to confirm that.

Ed Aldag — Chairman, President, and Chief Executive Officer

Well, all of these are numbers from the first quarter. So we’re behind the quarter in all the publicly reporting. So all of our tenants were experiencing the same issues that they publicly reported about the same time we were reporting our first quarter earnings.

Steven Valiquette — Barclays — Analyst

OK. Got it. OK. All right.

That’s helpful. Thanks.

Operator

Your next question is from the line of Austin Wurschmidt with KeyBanc’s Capital Markets. Please go ahead. OK. We’ll move on to the next person, and that is from the line Joshua Dennerlein with Bank of America.

Please go ahead.

Joshua Dennerlein — Bank of America Merrill Lynch — Analyst

Hey, guys. I appreciate all the new color in the presentation. All right. That 5% proxy to go from EBITDARM to EBITDAR.

I guess I heard the details, but I’m just curious why you wouldn’t actually just use the actual and you use that 5% sound like it’s always more?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yeah, Josh. That’s a fair question. So we’ve been doing this a long time. And the reason is that we’re trying to get a number that’s standard across the board for us when we’re doing our analysis.

We obviously are looking at all of the numbers all of the time. But even when the tenants are providing us what their management cost are. They fluctuate quarter to quarter. They’re based on what they allocate to their particular properties.

And remember that very seldom do we own 100% of all of any one tenant’s properties. So it gets very confusing and sometimes can be misleading. So we’ve just decided to be very conservative and use the 5% number.

Joshua Dennerlein — Bank of America Merrill Lynch — Analyst

OK. So it sounds like that’s kind of like the upper limit you would ever kind of —

Ed Aldag — Chairman, President, and Chief Executive Officer

Yeah. The vast majority of our tenants’ actual numbers that they provide are much less than that 5%. It doesn’t change some of the people’s very much. I listed some of the ones that some of our bigger tenants in my script there.

Joshua Dennerlein — Bank of America Merrill Lynch — Analyst

OK. And then you mentioned Prospect Health. It sounds like they’re having like a bit slower recovery on the cash flow front and put they’re below EBITDAR. Just curious what’s driving that.

Ed Aldag — Chairman, President, and Chief Executive Officer

Yes. So the East Coast facilities have never done as well as their West Coast facilities. They’re very bullish on the West Coast facilities and continue to believe that those facilities will generate good coverage. They had the same issues in the first quarter that everybody else did.

Some of our California properties saw more of those issues from a labor standpoint than across the country. In Pennsylvania, they’re probably very extremely bullish on where they are in Pennsylvania. But as you know, they are in active negotiations on selling both Pennsylvania and the Connecticut facilities.

Joshua Dennerlein — Bank of America Merrill Lynch — Analyst

OK. Thanks.

Operator

Your next question is from the line of Michael Carroll with RBC Capital Markets. Please go ahead.

Michael Carroll — RBC Capital Markets — Analyst

Yeah. Just digging into prospect a little bit more. I know that — I guess, and it sounded like in your prepared remarks that they’re not hitting your expectations too, so they’re underperforming where you thought that they should be. I mean, has their results started to rebound kind of post this omicron wave? And are they heading in the right direction now?

Ed Aldag — Chairman, President, and Chief Executive Officer

So they are, Mike. I guess I should have gone into a little more detail about why my expectations were more. They think they’re right on track. They feel very, very good about it.

And when you talk to them, I just expected the improvements to be a little bit better than they were — maybe now that we’re past the omicron surge that we saw in the first quarter, they will be. When we report third quarter, their second quarter — but they’re just where I was hoping that they would be, but the management continues. I spoke with the CEO early this week, and he continues to feel good about where they are.

Michael Carroll — RBC Capital Markets — Analyst

And were they impacted more by omicron than some of your other tenants look like their coverage ratio dropped a little bit more, kind of compare them versus the other tenants between 1Q and 4Q?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yeah. I don’t know about volume-wise, but certainly, they had probably more hospitalizations on the East Coast for those omicron patients that didn’t generate the profit margins that previous COVID patients were generating.

Michael Carroll — RBC Capital Markets — Analyst

OK. And then in your remarks, too, you were kind of highlighting that they are excited about California, Pennsylvania is turning a corner. But what about Connecticut? You haven’t — you didn’t mention about the viewpoint on what’s going on with that portfolio?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yes. I think that’s because they’re the furthest along with their negotiations with the potential buyer there, though I haven’t had as many discussions about operations as I have where they are about selling those facilities. But as I said in my prepared remarks, we still haven’t had any discussions with a potential purchaser.

Michael Carroll — RBC Capital Markets — Analyst

OK. And when does that typically occur when do they bring you into kind of get approval on executing that transaction?

Ed Aldag — Chairman, President, and Chief Executive Officer

Well, probably soon. I think there have been some public going back and forth between Yale and Prospect at this point, but they’re probably pretty close to where they think they need to be to bring us in.

Michael Carroll — RBC Capital Markets — Analyst

OK. And then is the expectation still that the Pennsylvania and the Connecticut assets will be sold?

Ed Aldag — Chairman, President, and Chief Executive Officer

That is certainly for Connecticut, that is their expectation. I’m not sure that Prospect fills that way about Pennsylvania anymore.

Michael Carroll — RBC Capital Markets — Analyst

OK. Great. And then just last 1 for me. I don’t know if I heard an update on the prime purchase options.

So we have a viewpoint of what’s going on with those assets?

Steven Hamner — Executive Vice President and Chief Financial Officer

No. There is no update, Mike. We remain kind of ambivalent — on the one hand, of course, it’s a very nice if you return for us. On the other hand, it’s about 300 — upwards of $360 million that we would apply to debt, reduce our leverage.

So that’s as much of a report as we have.

Michael Carroll — RBC Capital Markets — Analyst

And when do those leases officially expire?

Steven Hamner — Executive Vice President and Chief Financial Officer

Well, the termination is really not that relevant. They actually expired at the end of last month, but it’s typical on any expiration or extension to continue to negotiate. There still leasing they’re still leasing from us at this point.

Michael Carroll — RBC Capital Markets — Analyst

OK. Great. Thank you.

Operator

Your next question is from the line of Connor Siversky with Berenberg. Please go ahead.

Connor Siversky — Berenberg Capital Markets — Analyst

Hey. Good afternoon out there. Thank you for having me on the call. I hate to go back to this, but just in terms of Steward’s EBITDA run rate, — just so we’re clear, this only happens after we get through the $200 million investment in Florida, $420 million in MAD obligations, and that delay in Texas funding.

But to get to that point, — is that what necessitates the $150 million debt facility to Steward in the intern?

Steven Hamner — Executive Vice President and Chief Financial Officer

It really is, Connor, when you add up all of that hitting in a very kind of tight timetable. And so that’s really what facilitated us being willing, frankly, a little bit eager to make this investment. We truly expect fourth quarter and Steward to be generating the very strong levels of EBITDAR, if not the $800 million, then certainly very strong cash flow — free cash flow coverage.

Connor Siversky — Berenberg Capital Markets — Analyst

OK. Understood. And then on Page 5 of the investor presentation slides. Obviously, you outlined several models of success repositioning properties over the years.

And then in consideration of some of the deferrals booked over the last several quarters, are there any assets that are kind of falling into this pool right now? Or anything you’re repositioning currently? And if so, what the time frame on that could look like?

Steven Hamner — Executive Vice President and Chief Financial Officer

No. The only new deferral is a very limited amount down in Australia because they, once again, earlier in the year, shut down elected procedures. So you remember in the very earliest days of COVID, we deferred a couple of — 50% of a couple of quarters. We’re now collecting that back.

we agreed to a very limited amount that ended in May. So we’re — back in June, we were fully collecting again. That’s the only deferral we’ve done that’s not in accordance with lease terms.

Connor Siversky — Berenberg Capital Markets — Analyst

Got it. Understood. And then last one for me, just considering what happened in Utah. I mean, from your perspective, what’s the most attractive avenue to take here? I mean do you leave Steward in the facilities? Or do you seek a JV partner, which might be a little more difficult given the rate environment? Or is there another operator that could potentially step in to buy those operations? I’m just curious to see what the most attractive outcome to you guys would be?

Steven Hamner — Executive Vice President and Chief Financial Officer

Well, from selling the operations, that’s a steward decision. Steward is doing very, very well, as we mentioned. If you take roughly $125 million run rate EBITDAR for Utah alone and put a market multiple on that, that’s EBITDA, by the way. Has options.

They may elect to sell or joint venture with another operating partner. For us, the biggest advantage, frankly, would be in diversification. But we’re very confident in having Steward as our tenant in Utah and that may ultimately be what they choose to do. There’s a lot of opportunity as a very strong market.

Connor Siversky — Berenberg Capital Markets — Analyst

OK. Understood. Thank you for the time.

Operator

Your next question is from the line of Vikram Malhotra with Mizuho. Please go ahead.

Vikram Malhotra — Mizuho Securities — Analyst

Thanks so much for taking the question So just maybe going back to the coverages and just bigger picture how the lease may be structured. So if I heard you correct, you highlighted, obviously, labor costs are an issue. We’re probably coming off of funds that the government has provided in the care funds, some of the public hospitals like HCA, etc., said volumes are a little lighter. Can you give us a sense of what the trailing three-month coverages, just so we know what spot looks like? And do you anticipate that to dip before things improve?

Ed Aldag — Chairman, President, and Chief Executive Officer

So Vik, I don’t — to make sure I understand your question. You’re asking what the coverages were for the last three — for second quarter to third quarter.

Vikram Malhotra — Mizuho Securities — Analyst

Well, if you have the spot or you have like — I mean, I guess you gave it a 1Q trailing if you just have like what’s the in-place if you do it on a trailing three-month because the number went from two to 1.7 on an EBITDA basis. So I’m just wondering like on a spot basis, what would that be?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yes. I don’t have the exact number for you other than to tell you that it is — they are up from where they were in the first quarter, quarter over quarter, not trailing 12 just quarter over quarter.

Vikram Malhotra — Mizuho Securities — Analyst

And quarter over quarter, that’s essentially 2Q over 1Q?

Ed Aldag — Chairman, President, and Chief Executive Officer

That’s correct.

Vikram Malhotra — Mizuho Securities — Analyst

OK. And then in these leases, I just want to clarify, when you have a say, a leaves with a hospital and in some — I’m assuming you mentioned you have a guarantee. Is this — the way hospitals are structured? Is this a guarantee with the sort of the mother ship, the obligated group? Or is this a guarantee with the SPV at a state or city level?

Steven Hamner — Executive Vice President and Chief Financial Officer

No. It’s the parent typically. And of course, every relationship has differences. But typically, it’s the parent company.

So every one of our facilities is occupied and leased by, as you point out, a special entity. And that’s where we derive that facility-level coverage, but we also have the protection of the guarantee typically by the parent company.

Vikram Malhotra — Mizuho Securities — Analyst

OK. That’s helpful. And then just last one, I guess, the — given where you are cost of capital in the past, you’ve talked about potential new JVs. There’s also some talk about KKR and Ramsay.

And I’m just wondering or — what sort of have you seen broadly in the hospital space JV for your assets? And can you talk — give us an is the Ramsay transaction something of interest to you?

Steven Hamner — Executive Vice President and Chief Financial Officer

Well, we typically wouldn’t comment on transactions that we may or may not be involved with. But frankly, I’ll show my hand here by saying I’m really not up-to-date on what’s going on with Ramsay and KKR at this point. My impression was the fee cap rate that KKR was seeking was going to be hard to get done. But that’s just my historical recollection There is, nonetheless, remains a very, very strong interest in these types of assets.

And it’s driven really by two criteria. One, I mentioned at the end of my prepared remarks, and that’s just really, really strong inflationary protection. That is long term and is permanent. That’s very attractive in today’s market.

And then secondarily, of course, really going back to just before COVID started. COVID demonstrated the absolute certainty that governments and people are going to support their infrastructure like hospitals. And so all of that has led to a very high level of interest in the private area, and that’s with sovereigns and pension funds and asset managers and people like you just mentioned KKR. So we expect that that continues.

As in any real estate cycle, typically, I think the sellers are the last ones to come up to the table and recognize that, well, I’m not going to get a 4% cap rate like I could have 12 months ago. But as I mentioned earlier, we’re seeing that shift. We’re seeing some recognition that the current interest rate and cost of capital environment is not going to support pricing that it may have supported a couple of years ago.

Ed Aldag — Chairman, President, and Chief Executive Officer

So Vik, on top of the pricing that Steve was just referring to, we like Ramsay. We think Ramsay is a good operator. We own six Ramsay hospitals. But we’re not interested in the structure that was the original.

And I feel like Steve haven’t kept up with it, but the original structure was asked to investors to be a part of a fund and we didn’t have any interest in that. But we do like Ramsay as an operator.

Vikram Malhotra — Mizuho Securities — Analyst

OK. Thank you very much.

Operator

Your next question is from the line of Derek Johnston with Deutsche Bank. Please go ahead.

Derek Johnston — Deutsche Bank — Analyst

Hi, everybody. Ed, so how is your acquisition pipeline standing today? And really, what’s it going to take to drive acquisition volumes — are you seeing any positive developments to get back to like precoded activity levels?

Ed Aldag — Chairman, President, and Chief Executive Officer

So the pipeline is still there. It didn’t go anywhere. There’s still plenty of things out there that are all just kind of floating around. But I think everybody from the sellers and potential like us or are all kind of sitting around waiting to see where the world goes.

I don’t think there are many deals getting done right now. We certainly on the interest in doing any deals right now with the market as confused as it is. So I’m not sure I can give you an exact answer for when we get back to the regular normalized-type acquisition levels. It’s not that the opportunities aren’t there.

it’s that the world is in such a flux right now. We aren’t actively trying to pursue the levels that we have been historically.

Derek Johnston — Deutsche Bank — Analyst

That is helpful. And then switching gears a bit. So the slipping coverage ratios are a bit of an issue. And I feel like we’ve covered that, right? But the question is, can they also be a leading indicator for future acquisitions, potentially like driving higher volumes as hospitals look to sales leasebacks to unlock capital or reinvest?

Steven Hamner — Executive Vice President and Chief Financial Officer

I think that implies that hospitals in financial distress are more willing to do sale-leaseback transactions. And that may be, but that’s never been our target. Again, using trailing 12, particularly including the trailing six months and as of the end of the first quarter is really not the right baseline. In any year, the first quarter is the weakest quarter.

We all know that first quarter activity in particularly general acute hospitals is weaker than the other quarters. But in this particular first quarter, it’s exponentially weaker than any other quarter would be. So I’d be careful. I think we’re careful of reading into the decline in coverage as indicated by our calculations that that’s something that’s not going to be recovered pretty quickly.

Ed Aldag — Chairman, President, and Chief Executive Officer

And maybe we would have been concerned if they didn’t all bounce back like we knew they were going to bounce back as we already saw what the end of February and March were looking like when we did the first quarter earnings call.

Derek Johnston — Deutsche Bank — Analyst

Thanks, guys. That’s it for me.

Operator

Your next question is from the line of Michael Mueller with J.P. Morgan Chase. Please go ahead.

Michael Mueller — J.P. Morgan — Analyst

Yeah. Hi. I guess going back to acquisitions. As you move into 2023, if the stock isn’t back to a level where you like to where you feel more comfortable issuing equity.

Should we think of you as having another pool of assets that you would potentially sell or joint venture or just potentially kind of weighted out and keep the pause on the acquisition volume?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yes, Mike, I don’t — I know I’m not ready to try to predict what 2023 is going to look like at this point with the economy where it is, the Fed as confused as it is with the administration — and so it’s not just our stock price, obviously, but it’s all of those pieces together. So we wouldn’t have the need to do the big joint venture if we didn’t — if we weren’t in an acquisition mode.

Michael Mueller — J.P. Morgan — Analyst

Got it. OK. OK. That’s fair.

Thank you.

Operator

Your next question is from the line of Tayo Okusanya with Credit Suisse. Please go ahead.

Omotayo Okusanya — Credit Suisse — Analyst

Yes. Good afternoon. First of all, Ed, Steve, and the team, thank you so much for all the additional disclosure. It’s super, super helpful, and I hope that this is kind of here to stay.

So thanks for that. First question is Steward. I have a two-parter there. The term loan, the five-year term loan, could you tell us again exactly when that kicks in and what the interest rate audit is and any kind of kicker interest payments that you talked about? If you could just show a little bit more detail about what potential upside could come from that.

And then second of all, Stewart itself, their line of credit is mentioned mature. They are terming on our revolving line is meant to mature in September. And I think it’s like the one thing you haven’t talked about in your Steward update. If you have any update for us in regards to that particular line item?

Ed Aldag — Chairman, President, and Chief Executive Officer

Sure, Tayo. Let me take the ABL first, and you and I have been together for a long time. So I know your healthcare background. And you know that ABLs are highly secured loans.

They’re secured by the receivables and have very good margins. So it’s usually not something that we even think about mentioning. Obviously, we’ve never had an issue in any of our tenants being able to renew their ABL and certainly don’t expect that situation here either.

Steven Hamner — Executive Vice President and Chief Financial Officer

I’ll just go about I’ll take the opportunity, Tayo. The Shasta Hospital that was in our prepared remarks, and it is in Slide 5 of the update. Even as we were transitioning from one operator to another and coming through bankruptcy, Shasta redid their ABL, again, because Ed said, and again, you know, it’s well over secured by government receivables primarily with the discount on that. So that’s the reason it just doesn’t get a lot of attention from us.

With respect to the credit facility we provided, — it was closed and completed by the end of the quarter, frankly, well before the end of the quarter. It has a nominal and escalating interest rate that would be equivalent to a lease. And as you know, we don’t disclose specific terms of those. The kicker is attractive.

I mean it’s not hundreds of millions of dollars by any means, but it would increase the nominal interest rate by several turns. And aside from that, I mean, it’s generally what we would disclose about any particular transaction, very well secured, of course, and pride as an accretive even in today’s market at a nicely accretive transaction.

Omotayo Okusanya — Credit Suisse — Analyst

What causes the kicker to kick in? Is this —

Ed Aldag — Chairman, President, and Chief Executive Officer

I’m sorry, you broke up, Tayo.

Omotayo Okusanya — Credit Suisse — Analyst

Yes. I thought what causes the kicker to kick in? Like what are the terms that make you kind of get the kicker?

Steven Hamner — Executive Vice President and Chief Financial Officer

New payment Yes. It’s built — it’s not dependent on any particular transaction.

Omotayo Okusanya — Credit Suisse — Analyst

That’s helpful and good to know. And Ed, in prior quarters with your rent coverage, you’ve always kind of helped us understand what the government grant in that number what kind of anti was having on the rent coverage. Is that something you could provide this quarter as well of — if you took that out, plus coverage dropped 30 bps or 40 bps like you kind of expressed last quarter?

Ed Aldag — Chairman, President, and Chief Executive Officer

You’re talking about the grants. There aren’t that many brands still left in the coverage. I don’t have to get that exact number, Tayo, but we’re about done with those. So I don’t know the exact number what it is right now.

Omotayo Okusanya — Credit Suisse — Analyst

OK. That’s helpful. And then just on from one more. Direct deferrals again, $7 million year to date.

I think you mentioned earlier on that, that all relates to health scope. Is that correct? Or were there any other kind of rent deferrals in that number?

Ed Aldag — Chairman, President, and Chief Executive Officer

No. That’s correct.

Omotayo Okusanya — Credit Suisse — Analyst

Excellent. Thank you so much.

Ed Aldag — Chairman, President, and Chief Executive Officer

And again, already back to paying 100% of that.

Omotayo Okusanya — Credit Suisse — Analyst

Yep. Thank you.

Operator

Your next question is from the line of Jonathan Hughes with Raymond James. Please go ahead.

Jonathan Hughes — Raymond James — Analyst

Hey. Good afternoon. Just kind of following up on Tayo’s question a second ago on that $150 million debt facility, I think did you say that it was extended at the end of the quarter? Was that — is that as of June 30th? Or are you talking about like this quarter? And I guess maybe why wasn’t it put on the investment page in the supplement?

Steven Hamner — Executive Vice President and Chief Financial Officer

No. It was completely closed during June. And it’s not a long-term sustained investment kind of like what’s our bread and butter. That’s really the only reason we didn’t put it on there.

certainly will be clear in the 10-Q, and we were eager to get it out there today in this morning’s comments. So that’s really all there was to that.

Jonathan Hughes — Raymond James — Analyst

OK. Fair enough. And then — earlier you talked about potential JVs, and I know there’s a lot of demand out there. But if there are any other transactions, could we expect kind of the entirety of any of those potential JV proceeds to be used for debt repayment and/or capital recycling? Or could we see some use for stock buybacks? I understand that likely wouldn’t be huge, but and leverage does play a part.

But that is an investment in your own company that comes with no underwriting uncertainty and would be at an attractive kind of high six cash yield, a 15% discount to consensus.

Steven Hamner — Executive Vice President and Chief Financial Officer

Yes. All of which makes medical sense, of course, but we don’t have a JV yet. We don’t have anticipated proceeds. So we certainly haven’t given thought to how we might apply those proceeds.

It will depend, just to sort of repeat what Ed said a minute ago, it will depend on a lot of things we don’t know right now. What is going on in the economic environment. I mean, what’s going on in the political and global environment, what’s available to us in the bar as higher cap rate investments potentially, we just don’t know. But all of the uses that you named are certainly available to us.

Jonathan Hughes — Raymond James — Analyst

Yep. OK. And then one more on the kind of capex disclosure clarification. And I realized it was kind of standard practice and a standard cost for hospitals, but it’s a little unique in the traditional net lease world is — is that part of the reason why maybe it wasn’t emphasized before this is just that it’s kind of status quo on the hospital side.

But as we look at other types of traditional net lease real estate, we generally see that below the EBITDA line.

Ed Aldag — Chairman, President, and Chief Executive Officer

Jonathan, I think it’s because hospitals are what we know, and sometimes we forget, it’s not what everybody else knows, and we’re not traditional real estate people.

Jonathan Hughes — Raymond James — Analyst

OK. Fair enough. Thank you for the time. Appreciate it.

Operator

Your next question is from the line of John Pawlowski with Green Street. Please go ahead.

John Pawlowski — Green Street Advisors — Analyst

Thanks for keeping the call going. Steve, do you expect to release an amended 10-K with Steward’s audited financials this year?

Steven Hamner — Executive Vice President and Chief Financial Officer

Not at this point. And the reason is primarily because we always want to follow what the SEC rules are and the SEC rules do not require it. So because they don’t require it, we would have some issues with our tenants in — on our own filing financial statements.

John Pawlowski — Green Street Advisors — Analyst

All right. Do you — so I struggle with the optics of that. You disclosed it a few years in the past, and now you’re extending additional financing to a highly levered entity that struggles with cash flow. It’s an issue for the stock.

So I may feel better about the selective disclosure of doing it in the past and not doing it today. during a very tough operating climate where we need visibility on financial health?

Steven Hamner — Executive Vice President and Chief Financial Officer

All fair points, John, but we disclosed it in the past because of the SEC requirements. — and we’re not required now. It’s a very specific requirement. And if we do become required to disclose it under the SEC rules, we absolutely will.

We’re trying to provide as much as we can. I know we’re doing that gradually, but we made a lot of progress over the last couple of quarters. Ed described kind of the high-level results on an unaudited basis early in his prepared remarks. And so that’s where we have it now.

John Pawlowski — Green Street Advisors — Analyst

OK. I want to spend a minute on Prospect. So property level coverage of 0.6 times, and that excludes lower quality hospitals. So I know you’ve vendors prospect and others as high-quality operators.

So I just don’t see a scenario where a next operator can come in and cover ranks. So can you help us feel better about rent come for prospect hospitals given the high-quality hospitals are at 0.6 times?

Steven Hamner — Executive Vice President and Chief Financial Officer

Yes. So we don’t share the same. It sounds like kind of more urgent, immediate concern that you have on prospect. — if there are hospitals in any of our tenant portfolios that are weaker than other hospitals in that tenant portfolio, that’s the power usually of the master lease arrangement.

We’ve emphasized as prospect management has emphasized the value of the West Coast portfolio. And any so-called excess value over our lease base in those West Coast hospitals is applied to what could be a deficiency — and I’m not saying there is, but if there is a deficiency on the East Coast, then we get the benefit of the excess value on the West Coast.

John Pawlowski — Green Street Advisors — Analyst

OK. I guess my point is there’s no excess in the West Coast because you’re sub one time. But maybe the final question would be do you plan to extend incremental debt financing to prospect to bridge them similar to Steward?

Steven Hamner — Executive Vice President and Chief Financial Officer

No. We don’t expect that will be necessary. — yes, we don’t expect that to be necessary. And we are aware of conversations and potential transactions that we can’t speak to in the public environment, but we have reason to think that prospect is not going to result in any material impairment or loss to MPT.

John Pawlowski — Green Street Advisors — Analyst

OK. Thank you for that time.

Operator

Your next question is from the line of Jon Petersen with Jefferies. Please go ahead.

Jon Petersen — Jefferies — Analyst

Thanks. I like how you saved all the Johns and Jonathans for the end of the call. So just a follow-up on the Steward financials. You have a footnote where you say that the — because the value of it is less than 20%, you don’t have to disclose it.

I think that’s the SEC rules. So your revenues are 2% can you pull back the curtain a little bit and maybe just help us better understand how you value the assets internally in your portfolio to get to that hurdle?

Steven Hamner — Executive Vice President and Chief Financial Officer

It’s a GAAP basis calculation. There’s no valuation other than what’s on the books.

Jon Petersen — Jefferies — Analyst

I see. OK. And then you guys — you had — I appreciate your comments on the HCA Steward breakup in Utah. Just curious if there’s any more just higher-level thoughts there on, I guess, the ability for your tenants to sell their operations are you guys to retenant if the FTC is going to step in when they have some of these concerns, it would seem like the natural operator to come in would be one of the larger ones in the market.

But if the FTC is just going to block those deals, I mean, how should we think about prospects for retenanting hospitals?

Steven Hamner — Executive Vice President and Chief Financial Officer

Well, fair point. We have an extreme environment in antitrust today. It’s not just hospitals, particularly hospitals, but it’s all around — but HCA is already a competitor in the market that was defined by the others may reasonably object to that definition. But the fact is the fact the FTC said there’s a particular market.

HCA was already in it. And therefore, this transaction was FTC objective to it. So the simple answer there, and it is quite a simplistic answer is if — generally, if a prospective operator comes in and is not already a competitor, then it wouldn’t have the same propane of the FTC for getting terminated.

Ed Aldag — Chairman, President, and Chief Executive Officer

John, I don’t dare speak for the FTC, but in addition to that, not only was HCA already in the market HCA and Steward would have represented 30% of the market, so not a huge number. But HCA is the highest cost provider. And that’s primarily — and if you read the information, that’s what the FTC hung their hat on that the — if HCA Vault Steward, they would raise the prices and the market would lose their — one of their low-cost providers. That’s not the case for some of the other people in the market that don’t have the same percentage that HCA had and certainly aren’t recognized as a high-cost provider.

Jon Petersen — Jefferies — Analyst

All right. That’s helpful. Thank you.

Operator

Your next question is from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

Great. Thanks and good afternoon. Given the current cost of capital today and sort of the leverage position, you discussed the low end of the $1 billion to $3 billion range as being a higher likelihood at this point. I guess, one, is achieving or exceeding that $1 billion dependent at all on the outcome of the primes repurchase option? And then second, what’s sort of the right level of investment you’re comfortable with going forward if there isn’t a meaningful change in your cost of capital?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yes. And Austin, sorry about the earlier when we — I don’t know what the glitch was when we called on Brian, I apologize about that.

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

No problem.

Ed Aldag — Chairman, President, and Chief Executive Officer

I’m not — I certainly can’t tell you where I think we’ll get back to. We certainly ought to be able to, in a regular environment, continue to do $3-plus billion in acquisitions. But given where the market is a bigger driver right now that by market, I mean just the entire market, not MPT stock, not the cost of capital, but just to the confusions within the market as a whole, where we are in the recession or whatever you want to call it, and those types of questions as to whether or not we’ll exceed the $1 billion by much or exceeded at all. So it’s not dependent on the prime potential repurchase of their properties.

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

Got it. That’s helpful. And then just secondly, I guess given the comment earlier on disclosure requirements for Steward. should we expect that you could continue to give us updates on tenant health and maybe that run rate EBITDA figure at least in the short run going forward?

Ed Aldag — Chairman, President, and Chief Executive Officer

Yeah. Absolutely, Austin. We’re doing all that we can to continue to provide information to get everybody comfortable.

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

Understood. Thank you.

Operator

And does this conclude the Q&A session of the call. I will now turn the call back over to Ed for closing remarks.

Ed Aldag — Chairman, President, and Chief Executive Officer

Dennis, thank you very much and thank you all again for listening in today. If you have any follow-up questions, please don’t hesitate to call Drew or Tim.

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

Steven Hamner — Executive Vice President and Chief Financial Officer

Steven Valiquette — Barclays — Analyst

Joshua Dennerlein — Bank of America Merrill Lynch — Analyst

Michael Carroll — RBC Capital Markets — Analyst

Connor Siversky — Berenberg Capital Markets — Analyst

Vikram Malhotra — Mizuho Securities — Analyst

Derek Johnston — Deutsche Bank — Analyst

Michael Mueller — J.P. Morgan — Analyst

Omotayo Okusanya — Credit Suisse — Analyst

Jonathan Hughes — Raymond James — Analyst

John Pawlowski — Green Street Advisors — Analyst

Jon Petersen — Jefferies — Analyst

Austin Wurschmidt — KeyBanc Capital Markets — Analyst

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