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Section 1: 8-K (8-K)

mrt-8k_20181109.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 9, 2018

 

MEDEQUITIES REALTY TRUST, INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Maryland

001-37887

46-5477146

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

3100 West End Avenue, Suite 1000

Nashville, TN

 

37203

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (615) 627-4710

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Item 2.02.  Results of Operations and Financial Condition.

On November 9, 2018, MedEquities Realty Trust, Inc. (the “Company”) issued a press release announcing its financial position as of September 30, 2018, results of operations for the three and nine months ended September 30, 2018 and other related information. Also on November 9, 2018, the Company made available on its website (www.medequities.com) a supplemental package, which contains information concerning the Company’s financial position as of September 30, 2018, results of operations for the three months ended September 30, 2018 and other related information. Copies of such press release and supplemental package are furnished as Exhibits 99.1 and 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

In accordance with General Instructions B.2 and B.6 of Form 8-K, the information included in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 7.01.  Regulation FD Disclosure.

The disclosure contained in Item 2.02 is incorporated herein by reference.

Item 9.01.  Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

Number

 

Description

 

 

 

99.1

 

Third quarter earnings press release, dated November 9, 2018

 

 

 

99.2

 

Third quarter 2018 supplemental package

 

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

MedEquities Realty Trust, Inc.

 

 

 

 

Date: November 9, 2018

 

By:

/s/ Jeffery C. Walraven

 

 

 

Jeffery C. Walraven

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

mrt-ex991_6.htm

Exhibit 99.1

MEDEQUITIES REALTY TRUST REPORTS THIRD QUARTER 2018 RESULTS

 

NASHVILLE, Tenn., November 9, 2018 – MedEquities Realty Trust, Inc. (NYSE: MRT) (the “Company”) today announced its consolidated financial results for the quarter ended September 30, 2018 and other recent developments.

 

Overview – Third Quarter and Recent Developments

 

Reported results attributable to common stockholders for the third quarter of 2018 of net loss of $(0.07) per share, Funds from Operations (“FFO”) of $0.07 per diluted share, and Adjusted FFO (“AFFO”) of $0.22 per diluted share.

 

The reduction in base rent and related write-off of straight-line rent receivable associated with the Company’s Texas Ten Portfolio impacted both net loss attributable to common stockholders and FFO by $0.24 per diluted share and AFFO by $0.09 per diluted share.

 

Consistent with terms of a construction mortgage loan provided to Sequel Youth and Family Services (“Sequel”) in October 2017, the Company acquired a 63-bed behavioral health facility treating youths and adolescents in September 2018 that previously served as collateral for the loan for a purchase price of approximately $6.4 million and leased the facility to Sequel pursuant to a 15-year triple-net lease at an initial yield of 9.0%.

 

On October 9, 2018, the Company amended its secured credit facility, primarily to address recent tenant performance issues with the Texas Ten Portfolio and the deferral of a portion of the Fundamental Healthcare master lease payment, as previously disclosed.

 

Pending resolution of matters related to the Company’s Texas Ten Portfolio, which include obtaining regulatory approvals of the transfer of operations to a new operator and commencement of rent pursuant to a new lease, the Company’s Board of Directors delayed any decision regarding the dividend for the third quarter of 2018.

 

Revised 2018 per share guidance for net income attributable to common stockholders to $0.21 to $0.23 (from $0.60 to $0.61), FFO to $0.75 to $0.77 (from $1.13 to $1.15) and AFFO to $1.00 to $1.02 (from $1.19 to $1.22) primarily as a result of impacts from the Texas Ten Portfolio.

 

Financial Results for the Third Quarter of 2018

Net loss attributable to common stockholders for the quarter ended September 30, 2018 was $(2.1) million, or $(0.07) per share, compared with net income attributable to common stockholders of $5.3 million, or $0.17 per diluted share, for the same period in 2017.  Consolidated total revenues for the quarter ended September 30, 2018 were $9.7 million, compared with $15.8 million for the same period in 2017. The Company placed the Texas Ten Portfolio on non-accrual status for revenue recognition commencing in the third quarter based on the ongoing operating difficulties of the tenant.  The Company recognized $0.5 million in rental income for cash rents received and wrote off the $4.8 million straight-line rent receivable related to the Texas Ten Portfolio master lease. The Texas Ten Portfolio accounted for a $7.9 million decrease in revenues, including the reduction of straight-line rent, which was partially offset by a $2.1 million increase in revenues attributable to the Company’s real estate investment activities during and subsequent to the third quarter of 2017.

 

FFO for the quarter ended September 30, 2018 was $2.2 million, or $0.07 cents per diluted common share, compared with $9.2 million, or $0.29 per diluted common share, for the same period in 2017.  The decrease in FFO reflects the $7.9 million reduction in revenue associated with the Texas Ten Portfolio.

 

AFFO for the quarter ended September 30, 2018 was $7.1 million, or $0.22 per diluted common share, compared with $9.0 million, or $0.29 per diluted common share, for the same period in 2017.  The reduction in base rent recognized for


 

the Texas Ten Portfolio accounted for a $2.7 million decrease in AFFO.  The straight-line rent receivable write off had no effect since straight-line rents are an adjustment to derive AFFO.

 

Other changes that impacted both FFO and AFFO include $1.7 million in higher net revenues from the Company’s real estate portfolio, excluding the Texas Ten Portfolio; a $0.8 million decrease in general and administrative expenses; $1.1 million in higher interest expense associated with a higher weighted-average balance and interest rate; and $0.6 million in real estate acquisition-related costs on transactions determined no longer viable.

 

Investment Activity

As of September 30, 2018, the Company had gross real estate investments totaling approximately $643.2 million, which was comprised of $596.0 million in 34 healthcare facilities and $47.2 million in five mortgage notes receivable and one note receivable collateralized by existing healthcare facilities and redevelopment of healthcare facilities. In addition, the Company had approximately $15.1 million remaining to fund under various funding commitments and construction mortgage notes as of September 30, 2018.

 

Consistent with terms of a construction mortgage loan provided in October 2017 to construct a 63-bed behavioral health facility in Andersonville, Tennessee that specializes in treating youths and adolescents, on September 21, 2018, the Company acquired the facility. The purchase price of approximately $6.4 million was satisfied by applying the aggregate principal amount outstanding on the construction mortgage note. Upon acquisition, the Company leased the facility to Sequel pursuant to a triple-net lease at an initial yield of 9.0%, with annual escalators. This new facility is a replacement for an existing nearby facility operated by Sequel.

 

Financing Activity

Credit Facility Amendment

On October 9, 2018, the Company amended its $300 million secured credit facility, primarily to account for recent tenant performance issues with the Texas Ten Portfolio and the deferral of a portion of the rent under the Fundamental Healthcare master lease, both of which have been previously disclosed. The following is a summary of the amended terms of the credit agreement, a copy of which was included as an exhibit in a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 12, 2018:

 

 

Increases the applicable margin on outstanding borrowings to a range of 2.00% to 3.50% from 1.75% to 3.00% for LIBOR-rate loans, depending on the Company’s leverage ratio.  The new margins remain in effect until the satisfaction of various performance hurdles outlined in the amendment (but no earlier than July 1, 2019), including, among others, approval of a new tenant for the Texas Ten Portfolio by December 31, 2018 and completion of the expansion at Mountain’s Edge Hospital by March 31, 2019 (the “Performance Hurdles”);

 

Increases temporarily the borrowing base availability attributable to the Company’s existing borrowing base assets, other than the Texas 10 Portfolio, until December 31, 2018;

 

Reduces the borrowing base availability attributable to the Texas Ten Portfolio until December 31, 2018, provided that the borrowing base availability attributable to the Texas Ten Portfolio will be reduced to zero and the Texas Ten Portfolio will be excluded as a borrowing base asset if the portfolio is not re-leased on terms acceptable to the lenders or certain other conditions are not satisfied on or prior to December 31, 2018;

 

Until the satisfaction of the Performance Hurdles, restricts future borrowings under the credit agreement to approximately $20.4 million for specific uses, comprised primarily of the remaining funding obligations for the expansion at Mountain’s Edge Hospital and under the Company’s construction mortgage loan to Haven Healthcare; unless approved by lenders representing two-thirds of the outstanding commitments under the credit agreement, until satisfaction of the Performance Hurdles has occurred; and

 

Restricts dividends and distributions beginning in 2019, unless approved by lenders representing two thirds of the outstanding commitments under the credit agreement, if a default or event of default has occurred as a

 

 


 

 

result, in whole or in part, of the Company’s failure to re-tenant the Texas Ten Portfolio and obtain approval of the new tenant by December 31, 2018.

 

Guidance for 2018

Primarily as a result of the referenced impacts from the Texas Ten Portfolio, the Company for the year ending December 31, 2018, revised its guidance for net income attributable to common stockholders to $0.21 to $0.23 (from $0.60 to $0.61) per diluted common share, FFO to $0.75 to $0.77 (from $1.13 to $1.15) per diluted common share and AFFO to $1.00 to $1.02 (from $1.19 to $1.22) per diluted common share.

 

A reconciliation of projected net income attributable to common stockholders per diluted share to projected FFO and AFFO per diluted share is provided as follows:

 

 

Full Year

 

 

2018 Range

 

 

Low

 

High

Net income attributable to common stockholders

 

$

0.21

 

 

$

0.23

 

Add: Real estate depreciation & amortization, net of noncontrolling interest

 

0.54

 

 

0.54

 

FFO attributable to common stockholders

 

0.75

 

 

0.77

 

Stock-based compensation expense

 

0.11

 

 

0.11

 

Deferred financing costs amortization

 

0.04

 

 

0.04

 

Expensed transaction costs

 

0.07

 

 

0.07

 

Straight-line rental income, net of noncontrolling interest

 

0.01

 

 

0.01

 

Other adjustments (1)

 

0.02

 

 

0.02

 

AFFO attributable to common stockholders

 

$

1.00

 

 

$

1.02

 

______________________________

(1) Includes adjustments for non-real estate depreciation and straight-line rent expense.

The Company’s guidance for net income attributable to common stockholders, FFO and AFFO for 2018 is based on the following assumptions:

 

No rents received or revenue recognized for the Texas Ten Portfolio in the fourth quarter of 2018

 

Total investment volume of approximately $77 million

 

Cash general and administrative expenses of approximately $10.1 million

 

Interest expense of approximately $12.5 million, including approximately $1.2 million in amortization of deferred financing costs

 

Weighted average diluted share count of 31.7 million

 

Portfolio Update

For the twelve months ended June 30, 2018 (the most recent reporting period for which information is available for the Company’s operators), the Company’s stabilized, single-tenanted portfolio experienced an increase in occupancy and a slight decline in rent coverages, primarily related to its skilled nursing facility (“SNF”) portfolio. Beginning with this reporting period, the Texas Ten Portfolio was removed from the Company’s stabilized portfolio because the Company is actively seeking to transition the facilities to a new operator.

  

 


 

 


 

Texas Ten Tenant

For the reporting period ended June 30, 2018, the tenant for the Company’s ten skilled nursing facilities in Texas (the “Texas Ten Tenant”) reported that the rent and fixed charge coverage ratios were 0.79x and 0.72x, respectively, for the trailing twelve-month reporting period ended June 30, 2018, as compared to 0.77x and 0.70x, respectively, for the prior trailing twelve-month reporting period ended March 31, 2018. Rent coverage on an EBITDARM basis for the same reporting periods was 1.07x and 1.04x, respectively. For the third quarter of 2018, the Texas Ten Tenant, currently on cash basis revenue recognition, paid us approximately $0.5 million applied to rent. We have continued to seek alternative tenants for the facilities in the Texas Ten Portfolio.

 

Discussions are in advanced stages with multiple parties that have expressed interest in the portfolio. At this time, we expect that a master lease with a new operator would commence effective January 1, 2019, subject to obtaining regulatory approvals, and would provide for annual cash base rent of approximately $7.7 million. However, we can provide no assurances regarding our ability to lease the facilities to a new operator on such terms, in a timely manner or at all.

 

Fundamental Healthcare

Mountain’s Edge Hospital, leased and operated by a subsidiary of Fundamental Healthcare (“Fundamental”), is undergoing an expansion to add five operating rooms. Once construction is completed, Fundamental believes the facility will be able to provide a broad variety of surgical services that will result in higher patient volumes and reimbursements. The operating results of the Mira Vista skilled nursing facility have been adversely affected by turnover in the facility’s administrator position as well as by increased competition in the market. As a result of the operating performance at these two facilities, management of Fundamental has reported to us that, for the trailing twelve-month period ended June 30, 2018, the portfolio rent coverage ratio was 0.74x. Additionally, Fundamental management reported the fixed charge coverage ratio of the Fundamental Guarantor for the trailing twelve-month period ended June 30, 2018 was 1.08x.

 

Consistent with its prior disclosures in August 2018, the Company executed an amendment to the master lease with Fundamental on October 6, 2018, to defer a portion of monthly rent in the aggregate amount of approximately $2.4 million (the “Total Abatement Amount”), for the period from May 20, 2018 through March 20, 2019 (“the Temporary Abatement Period”). During the Temporary Abatement Period, Fundamental is required to pay monthly interest on the then-outstanding Total Abatement Amount at an annual interest rate of 9.0% in addition to other contractual rents due under the Fundamental Master Lease. Beginning April 20, 2019, Fundamental is required to repay the Total Abatement Amount based on a nine-month amortization schedule ending on December 20, 2019, in addition to other contractual rents due under the Fundamental Master Lease.

 

The Temporary Abatement Period coincides with the currently planned date of completion of the expansion of Mountain’s Edge Hospital and the commencement of surgical procedures in the new operating rooms, in order to align expected operational performance with contractual rent.

 

Quarterly Distributions to Common Stockholders

Pending resolution of matters related to the Company’s Texas Ten Portfolio, which include obtaining regulatory approvals of the transfer of operations to a new operator and commencement of rent pursuant to a new lease as discussed in the Portfolio Update section above, the Company’s Board of Directors delayed any decision regarding the dividend for the third quarter of 2018. There can be no assurances regarding the timing and amount of the third quarter dividend. All future dividends remain subject to the discretion of the Company’s Board of Directors.

 

Earnings Conference Call and Webcast

The Company will host a conference call and live audio webcast, both open for the general public to hear, on Monday, November 12, 2018 at 7:30 a.m. Central Time. The number to call for this interactive teleconference is (412) 542-4116. A

 

 


 

replay of the call will be available through November 19, 2018 by dialing (412) 317-0088 and entering the replay access code, 10125156.

 

The live audio webcast of the Company’s quarterly conference call will be available online in the Investor Relations section of the Company’s website at ir.medequities.com. The online replay will be available approximately one hour after the end of the call and archived for approximately twelve months.

 

About MedEquities Realty Trust, Inc.

MedEquities Realty Trust (NYSE: MRT) is a self-managed and self-administered real estate investment trust that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. The Company’s management team has extensive industry experience in acquiring, owning, developing, financing, operating, leasing and monetizing many types of healthcare properties and portfolios. MedEquities’ strategy is to become an integral capital partner with high-quality and growth-oriented facility-based providers of healthcare services on a nationwide basis, primarily through net-leased real estate investment. For more information, please visit www.medequities.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about the Company’s 2018 guidance and related assumptions, strategic plans and objectives, potential property acquisitions and investments, anticipated capital expenditures, access to capital, the declaration, if any, the timing and the amounts of anticipated cash distributions to our stockholders in the future, the ability of the Texas Ten Tenant and Fundamental to improve their operating results and return to compliance with financial covenants under their master leases, our ability to lease the Texas Ten facilities to other tenants on terms acceptable to the lenders under our credit agreement and satisfy the Performance Hurdle and other conditions under our credit agreement, the future borrowing capacity under our credit agreement and other matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will” and variations of these words and other similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.  Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” included in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), and other documents filed by the Company with the SEC from time to time, including our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. You are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results.

 

 

Contacts:

 

 

Jeff Walraven

 

Tripp Sullivan

EVP & Chief Financial Officer

 

SCR Partners

(615) 627-4712

 

(615) 760-1104

IR@medequities.com

 


 

 


 

MedEquities Realty Trust, Inc.

 

Consolidated Balance Sheets

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2018

 

 

December 31, 2017

 

Assets

 

(unaudited)

 

 

 

 

 

Real estate properties

 

 

 

 

 

 

 

 

Land

 

$

45,594

 

 

$

43,180

 

Building and improvements

 

 

535,366

 

 

 

505,623

 

Intangible lease assets

 

 

11,387

 

 

 

11,387

 

Furniture, fixtures and equipment

 

 

3,634

 

 

 

3,538

 

Less accumulated depreciation and amortization

 

 

(55,064

)

 

 

(41,984

)

Total real estate properties, net

 

 

540,917

 

 

 

521,744

 

 

 

 

 

 

 

 

 

 

Mortgage notes receivable, net

 

 

39,973

 

 

 

18,557

 

Note receivable

 

 

7,000

 

 

 

-

 

Cash and cash equivalents

 

 

5,810

 

 

 

12,640

 

Other assets, net

 

 

34,509

 

 

 

28,662

 

Total Assets

 

$

628,209

 

 

$

581,603

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Debt, net

 

$

270,447

 

 

$

215,523

 

Accounts payable and accrued liabilities

 

 

7,005

 

 

 

6,605

 

Deferred revenue

 

 

1,635

 

 

 

2,722

 

Total liabilities

 

 

279,087

 

 

 

224,850

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock, $0.01 par value. Authorized 400,000 shares; 31,863 and 31,836

   issued and outstanding at September 30, 2018 and December 31, 2017,

   respectively

 

 

314

 

 

 

314

 

Additional paid in capital

 

 

378,211

 

 

 

375,690

 

Dividends declared

 

 

(87,646

)

 

 

(67,691

)

Retained earnings

 

 

50,450

 

 

 

44,196

 

Accumulated other comprehensive income

 

 

4,200

 

 

 

1,247

 

Total MedEquities Realty Trust, Inc. stockholders' equity

 

 

345,529

 

 

 

353,756

 

Noncontrolling interest

 

 

3,593

 

 

 

2,997

 

Total equity

 

 

349,122

 

 

 

356,753

 

Total Liabilities and Equity

 

$

628,209

 

 

$

581,603

 

 


 

 


 

MedEquities Realty Trust, Inc.

 

Consolidated Statements of Operations

 

(in thousands, except per share amounts)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

8,399

 

 

$

15,114

 

 

$

40,649

 

 

$

43,240

 

Interest on mortgage notes receivable

 

 

1,103

 

 

 

644

 

 

 

2,964

 

 

 

1,606

 

Interest on notes receivable

 

 

176

 

 

 

8

 

 

 

341

 

 

 

27

 

Total revenues

 

 

9,678

 

 

 

15,766

 

 

 

43,954

 

 

 

44,873

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,388

 

 

 

3,931

 

 

 

12,765

 

 

 

11,176

 

Property related

 

 

307

 

 

 

326

 

 

 

1,726

 

 

 

1,155

 

Real estate acquisition related

 

 

610

 

 

 

33

 

 

 

902

 

 

 

362

 

Franchise, excise and other taxes

 

 

96

 

 

 

50

 

 

 

238

 

 

 

76

 

General and administrative

 

 

2,284

 

 

 

3,046

 

 

 

10,656

 

 

 

9,196

 

Total operating expenses

 

 

7,685

 

 

 

7,386

 

 

 

26,287

 

 

 

21,965

 

Operating income

 

 

1,993

 

 

 

8,380

 

 

 

17,667

 

 

 

22,908

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

1

 

 

 

3

 

 

 

11

 

 

 

5

 

Interest expense

 

 

(3,190

)

 

 

(2,117

)

 

 

(8,534

)

 

 

(5,440

)

 

 

 

(3,189

)

 

 

(2,114

)

 

 

(8,523

)

 

 

(5,435

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,196

)

 

$

6,266

 

 

$

9,144

 

 

$

17,473

 

Less: Net income attributable to noncontrolling interest

 

 

(951

)

 

 

(941

)

 

 

(2,890

)

 

 

(2,821

)

Net income (loss) attributable to common stockholders

 

$

(2,147

)

 

$

5,325

 

 

$

6,254

 

 

$

14,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.07

)

 

$

0.17

 

 

$

0.19

 

 

$

0.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,624

 

 

 

31,467

 

 

 

31,576

 

 

 

31,429

 

Diluted

 

 

31,624

 

 

 

31,506

 

 

 

31,618

 

 

 

31,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.21

 

 

$

0.21

 

 

$

0.63

 

 

$

0.63

 

 


 

 


 

Non-GAAP Financial Measures

We consider the following non-GAAP financial measures useful to investors as key supplemental measures of our performance: funds from operations attributable to common stockholders (“FFO”) and adjusted fund from operations attributable to common stockholders (“AFFO”).

Funds from Operations

FFO is a non-GAAP measure used by many investors and analysts that follow the real estate industry. FFO, as defined by the National Association of Real Estate Investment Trusts (“Nareit”), represents net income (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairments of real estate assets, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Noncontrolling interest amounts represent adjustments to reflect only our share of real estate-related depreciation and amortization. We compute FFO in accordance with Nareit’s definition, which may differ from the methodology for calculating FFO, or similarly titled measures, used by other companies.

Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. We believe that the presentation of FFO provides useful information to investors regarding our operating performance by excluding the effect of real-estate related depreciation and amortization, gains or losses from sales for real estate, including impairments, extraordinary items and the portion of items related to unconsolidated entities, all of which are based on historical cost accounting, and that FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders.

Our calculation of FFO may not be comparable to measures calculated by other companies that do not use the Nareit definition of FFO or do not calculate FFO per diluted share in accordance with Nareit guidance. FFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.

Adjusted Funds from Operations

AFFO is a non-GAAP measure used by many investors and analysts to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations.  To calculate AFFO, we further adjust FFO for certain items that are not added to net income in Nareit’s definition of FFO, such as acquisition expenses on completed real estate transactions, non-real estate-related depreciation and amortization (including amortization of lease incentives, tenant allowances and leasing costs), stock-based compensation expenses, and any other non-comparable or non-operating items, that do not relate to the operating performance of our properties. For the nine months ended September 30, 2018, approximately $2.0 million of transaction costs comprised primarily of professional fees incurred during the second quarter of 2018 was added back in the calculation of AFFO. To calculate AFFO, we also adjust FFO to remove the effect of straight-line rent revenue, which represents the recognition of net unbilled rental income expected to be collected in future periods of a lease agreement that exceeds the actual contractual rent due periodically from tenants for their use of the leased real estate under each lease. Noncontrolling interest amounts represent adjustments to reflect only our share of straight-line rent revenue.

Our calculation of AFFO may differ from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. AFFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.


 

 


MedEquities Realty Trust, Inc.

 

Reconciliations of FFO and AFFO

 

(in thousands, except per share amounts)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income (loss) attributable to common stockholders

 

$

(2,147

)

 

$

5,325

 

 

$

6,254

 

 

$

14,652

 

Real estate depreciation and amortization, net of noncontrolling interest

 

 

4,308

 

 

 

3,849

 

 

 

12,513

 

 

 

10,929

 

FFO attributable to common stockholders

 

 

2,161

 

 

 

9,174

 

 

 

18,767

 

 

 

25,581

 

Stock-based compensation expense

 

 

781

 

 

 

783

 

 

 

2,833

 

 

 

2,673

 

Deferred financing costs amortization

 

 

262

 

 

 

241

 

 

 

779

 

 

 

803

 

Expensed transaction costs

 

 

13

 

 

 

-

 

 

 

2,059

 

 

 

-

 

Non-real estate depreciation and amortization

 

 

131

 

 

 

136

 

 

 

406

 

 

 

422

 

Straight-line rent expense

 

 

37

 

 

 

39

 

 

 

112

 

 

 

118

 

Straight-line rent revenue, net of noncontrolling interest

 

 

3,737

 

 

 

(1,348

)

 

 

1,092

 

 

 

(3,496

)

AFFO attributable to common stockholders

 

$

7,122

 

 

$

9,025

 

 

$

26,048

 

 

$

26,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding-

   earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,624

 

 

 

31,467

 

 

 

31,576

 

 

 

31,429

 

Diluted

 

 

31,624

 

 

 

31,506

 

 

 

31,618

 

 

 

31,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.07

)

 

$

0.17

 

 

$

0.19

 

 

$

0.46

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding- FFO and AFFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

31,624

 

 

 

31,467

 

 

 

31,576

 

 

 

31,429

 

Diluted

 

 

31,673

 

 

 

31,506

 

 

 

31,618

 

 

 

31,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.07

 

 

$

0.29

 

 

$

0.59

 

 

$

0.81

 

Diluted

 

$

0.07

 

 

$

0.29

 

 

$

0.59

 

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AFFO per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.23

 

 

$

0.29

 

 

$

0.82

 

 

$

0.83

 

Diluted

 

$

0.22

 

 

$

0.29

 

 

$

0.82

 

 

$

0.83

 

 

(Back To Top)

Section 3: EX-99.2 (EX-99.2)

mrt-ex992_7.pptx.htm

Slide 0

Exhibit 99.2

Slide 1

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Table of ContentsIntroductionManagement, Board of Directors & Investor Contacts2Executive Summary3Capitalization Analysis & Research Coverage42018 Guidance5Financial InformationConsolidated Balance Sheets6Consolidated Statements of Operations - GAAP7Funds from Operations (FFO) & Adjusted Funds from Operations (AFFO)8EBITDA, EBITDAre & Adjusted EBITDAre9Debt Overview10Operational & Portfolio InformationOperator Overview & Lease Coverage11Market Summary12Annualized Rental Income Expiration Schedule13Payor Mix by Revenue & Facility-Level Occupancy14Transaction Activity15Additional InformationGlossary16Forward looking statements: This supplemental package contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about our 2018 guidance and related assumptions, the strategic plans and objectives, potential property acquisitions and investments, anticipated capital expenditures (and access to capital), amounts of anticipated cash distributions to our stockholders in the future and other matters. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” "will" and variations of these words and other similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and/or could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. For a description of factors that may cause the Company’s actual results or performance to differ from its forward-looking statements, see the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” included in the Company’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) and other documents filed by the Company with the SEC from time to time, including the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018. You are cautioned to not place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results.Information regarding our operators, tenants and guarantors: This supplemental package includes information regarding certain of our tenants and guarantors, which are not subject to SEC reporting requirements. The information related to our tenants and guarantors contained in this report was provided to us by such tenants or guarantors, as applicable, or was derived from publicly available information. We have not independently investigated or verified this information. We have no reason to believe that this information is inaccurate in any material respect, but we cannot provide any assurance of its accuracy. We are providing this data for informational purposes only. The most recent completed period for which financial and operating information is available for our tenants and guarantors is the period ended June 30, 2018.Definitions and reconciliations: For definitions of certain terms used throughout this supplemental, including certain non-GAAP financial measures, see the Glossary on pages 16-17. For reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures, see pages 8-9. On the cover: TOP - Vibra Rehabilitation Hospital of Amarillo, Amarillo, TX; Mountain's Edge Hospital, Las Vegas, NV; Desert Hope Outpatient Center, Las Vegas, NV; MIDDLE - The Rio at Mission Trails, San Antonio, TX; Baylor Scott & White Medical Center - Lakeway, Lakeway, TX; Physical Rehabilitation and Wellness Center of Spartanburg, Spartanburg, SC; Horizon Specialty Hospital of Henderson, Las Vegas, NV; BOTTOM - Kemp Care Center, Kemp, TX; Heritage Park Nursing Center, Upland, CA; Mira Vista Court, Fort Worth, TX.

Slide 2

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Management, Board of Directors & Investor ContactsCorporate3100 West End Avenue, Suite 1000Nashville, Tennessee 37203615.627.4710www.medequities.comExecutive and Senior ManagementJohn McRobertsBill HarlanJeff WalravenChairman and ChiefPresident, Chief OperatingExecutive Vice PresidentExecutive OfficerOfficer and Directorand Chief Financial OfficerForrest GardnerMichael HammillDavid TravisSVP of Asset & SVP of Finance & CapitalSVP & Chief Accounting OfficerInvestment ManagementMarketsBoard of DirectorsRandall ChurcheyJohn FoySteven GeringerLead Independent DirectorIndependent DirectorIndependent DirectorStephen GuillardBill HarlanElliott MandelbaumIndependent DirectorPresident & Chief OperatingIndependent DirectorOfficerTodd MansfieldJohn McRobertsStuart McWhorterIndependent DirectorChairman & Chief Executive OfficerIndependent DirectorTransfer AgentAmerican Stock Transfer & Trust Co.59 Maiden LaneNew York, New York 10038800.937.5449Investor RelationsJeff WalravenTripp SullivanExecutive Vice President & Chief Financial OfficerSCR Partners615.627.4710615.760.1104jwalraven@medequities.comIR@medequities.com

Slide 3

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Executive SummaryCompany overview: MedEquities Realty Trust (NYSE: MRT) is a self-managed and self-administered real estate investment trust that invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. The Company’s management team has extensive industry experience in acquiring, owning, developing, financing, operating, leasing and monetizing many types of healthcare properties and portfolios. MedEquities’ strategy is to become an integral capital partner with high-quality and growth-oriented facility-based providers of healthcare services on a nationwide basis, primarily through net-leased real estate investment. For more information, please visit www.medequities.com.Unaudited As of 09/30/18Select Portfolio Statistics Number of Properties34 Licensed Beds (1)2,755 Facility-Level Occupancy (2)76.2%Weighted Average Lease Term Remaining (3)12.8TTM Portfolio EBITDARM/Rent Coverage (4)2.85xBalance Sheet ($ in thousands)Cash$5,810Gross Assets (5)$683,273Total Debt (6)$271,000Net Debt (Total Debt less Cash)$265,190Net Debt / Gross Assets38.8%Net Debt to Adjusted EBITDAre, annualized5.4x(1) Excludes the 241 beds in the AAC sober living facilities that are not licensed for medically intensive treatment.(2) Reflects the facility-level occupancy of our total stabilized, single-tenanted portfolio. Effective with the third quarter of 2018, the Texas Ten Portfolio was removed from our stabilized portfolio because we are actively seeking to transition the facilities to a new operator. See Glossary for definition of our stabilized portfolio.(3) Excludes the medical office building in Brownsville, TX and the Texas Ten Portfolio.(4) Includes guarantor-level coverage for our stabilized, single-tenanted buildings for the trailing 12 months as of June 30, 2018.(5) The carrying amount of total assets, plus accumulated depreciation and amortization, as reported in the Company's consolidated financial statements.(6) Excludes approximately $553,000 of net deferred financing costs reported as a component of the debt balance in the Company's consolidated financial statements.

Slide 4

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Capitalization Analysis & Research CoverageUnaudited (in thousands except for per-share data and percentages)Three Months Ended9/30/20186/30/20183/31/201812/31/20179/30/2017Common Stock Data Weighted-Average Shares Outstanding - Basic31,624 31,552 31,550 31,499 31,467 Weighted-Average Shares Outstanding - Diluted31,673 31,626 31,610 31,549 31,506 High Closing Price $11.79 $11.02 $11.32 $11.94 $12.79 Low Closing Price $9.62 $9.75 $9.67 $10.37 $11.37 Average Closing Price $10.60 $10.32 $10.62 $11.33 $11.86 Closing Price (as of period end) $9.72 $11.02 $10.51 $11.22 $11.75 Common Shares Outstanding (1)31,863 31,885 31,887 31,836 31,756 Market Value of Common Shares (1) $309,708 $351,373 $335,132 $357,200 $373,133 Total Market Capitalization (1)(2) $580,708 $616,373 $567,832 $573,400 $580,633 Equity Research Coverage (3)B. Riley FBRJMP SecuritiesRBC Capital MarketsBryan MaherPeter MartinMichael Carroll646.885.5423415.835.8904440.715.2649Cantor Fitzgerald & CompanyJ.P. Morgan SecuritiesJoseph FranceMichael Mueller212.915.1239212.622.6689Capital One SecuritiesKeyBanc Capital MarketsDaniel BernsteinJordan Sadler571.835.7202917.368.2280CitigroupRaymond James & AssociatesSmedes RoseJonathan Hughes212.816.6243727.567.1000"Investor Conference Call and Webcast:The Company will host a conference call and live audio webcast, both open for the general public to hear, on November 12, 2018 at 7:30 a.m. Central Time. The number to call for this interactive teleconference is (412) 542-4116. A replay of the call will be available through November 19, 2018 by dialing (412) 317-0088 and entering the replay access code, 10125156."(1) Based on closing price and ending shares for the last trading day of the quarter.(2) Market value of shares plus debt as of quarter end.(3) The analysts listed provide research coverage on the Company. Any opinions, estimates or forecasts regarding the Company's performance made by these analysts are theirs alone and do not represent opinions, estimates or forecasts by the Company or its management. The Company does not by reference above imply its endorsement of or concurrence with such information, conclusions or recommendations.

Slide 5

3Q 2018- Supplemental MedEquities Realty Trust, Inc.2018 GuidanceUnauditedFull Year 2018 RangePer shareLowHighNet income attributable to common stockholders $0.21 $0.23 Real estate depreciation & amortization, net of noncontrolling interest 0.54 0.54 FFO attributable to common stockholders $0.75 $0.77 Stock-based compensation expense 0.11 0.11 Deferred financing costs amortization 0.04 0.04 Expensed transaction costs 0.07 0.07 Straight-line rental income, net of noncontrolling interest 0.01 0.01 Other adjustments (1) 0.02 0.02 AFFO attributable to common stockholders $1.00 $1.02 AssumptionslNo rents received or revenue recognized for the Texas Ten Portfolio in the fourth quarter of 2018lTotal investment volume of approximately $77 millionlCash general and administrative expenses of approximately $10.1 millionlInterest expense of approximately $12.5 million, including approximately $1.2 million in amortization of deferred financing costs.lWeighted average diluted share count of 31.7 million

Slide 6

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Consolidated Balance Sheets(in thousands)9/30/20186/30/20183/31/201812/31/20179/30/2017Assets:(unaudited)(unaudited)(unaudited)(unaudited)Real estate properties:Land $45,594 $45,281 $43,181 $43,180 $42,250 Building and improvements 535,366 527,651 505,699 505,623 489,334 Intangible lease assets 11,387 11,387 11,387 11,387 11,387 Furniture, fixtures and equipment 3,634 3,538 3,538 3,538 2,981 Less accumulated depreciation and amortization (55,064) (50,567) (46,286) (41,984) (37,547)Total real estate properties, net $540,917 $537,290 $517,519 $521,744 $508,405 Mortgage notes receivable, net 39,973 42,773 41,513 18,557 29,120 Note receivable 7,000 7,000 - - - Cash and cash equivalents 5,810 4,172 5,917 12,640 7,264 Other assets, net 34,509 37,107 32,729 28,662 26,044 Total assets $628,209 $628,342 $597,678 $581,603 $570,833 Liabilities:Debt, net $270,447 $264,406 $232,065 $215,523 $206,782 Accounts payable and accrued liabilities 7,005 5,825 6,204 6,605 6,376 Deferred revenue 1,635 1,751 1,587 2,722 2,040 Total liabilities $279,087 $271,982 $239,856 $224,850 $215,198 Equity:Common stock $314 $314 $314 $314 $314 Additional paid in capital 378,211 377,685 376,702 375,690 374,994 Dividends declared (87,646) (81,340) (74,525) (67,691) (60,935)Retained earnings 50,450 52,597 49,365 44,196 38,426 Accumulated other comprehensive income (loss) 4,200 3,769 3,034 1,247 (8)Total MedEquities Realty Trust, Inc. stockholders' equity 345,529 353,025 354,890 353,756 352,791 Noncontrolling interest 3,593 3,335 2,932 2,997 2,844 Total equity $349,122 $356,360 $357,822 $356,753 $355,635 Total liabilities and equity $628,209 $628,342 $597,678 $581,603 $570,833

Slide 7

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Consolidated Statements of Operations - GAAP(in thousands, except per-share amounts)Three Months Ended(Unaudited)9/30/20186/30/20183/31/201812/31/20179/30/2017Revenues:Rental income $8,399 $16,321 $15,929 $15,673 $15,114 Interest on mortgage notes receivable 1,103 1,074 787 551 644 Interest on notes receivable 176 165 - 8 8 Total revenues $9,678 $17,560 $16,716 $16,232 $15,766 Operating expenses:Depreciation and amortization 4,388 4,183 4,194 4,328 3,931 Property related 307 1,097 322 327 326 Real estate acquisition related 610 184 108 95 33 Franchise, excise and other taxes 96 71 71 65 50 General and administrative 2,284 5,056 3,316 2,481 3,046 Total operating expenses $7,685 $10,591 $8,011 $7,296 $7,386 Operating income $1,993 $6,969 $8,705 $8,936 $8,380 Other income (expense):Interest and other income 1 3 7 4 3 Interest expense (3,190) (2,786) (2,558) (2,261) (2,117)Total other income (expense) $(3,189) $(2,783) $(2,551) $(2,257) $(2,114)Net income (loss) $(1,196) $4,186 $6,154 $6,679 $6,266 Less: Net income attributable to noncontrolling interest (951) (954) (985) (909) (941)Net income (loss) attributable to common stockholders $(2,147) $3,232 $5,169 $5,770 $5,325 Net income (loss) attributable to common stockholders per share - basic and diluted $(0.07) $0.10 $0.16 $0.18 $0.17 Weighted-average shares outstanding - basic31,624 31,552 31,550 31,499 31,467 Weighted-average shares outstanding - diluted31,624 31,626 31,610 31,549 31,506

Slide 8

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Funds from Operations (FFO) & Adjusted Funds from Operations (AFFO)Unaudited (in thousands, except per-share amounts)Three Months Ended9/30/20186/30/20183/31/201812/31/20179/30/2017Net income (loss) attributable to common stockholders $(2,147) $3,232 $5,169 $5,770 $5,325 Real estate depreciation and amortization, net of noncontrolling interest 4,308 4,093 4,112 4,248 3,849 FFO attributable to common stockholders $2,161 $7,325 $9,281 $10,018 $9,174 Stock-based compensation expense 781 996 1,056 714 783 Deferred financing costs amortization 262 259 258 248 241 Expensed transaction costs 13 2,046 - - - Non-real estate depreciation and amortization 131 142 133 138 136 Straight-line rent expense 37 37 38 39 39 Straight-line rent revenue, net of noncontrolling interest 3,737 (1,216) (1,429) (1,326) (1,348)AFFO attributable to common stockholders $7,122 $9,589 $9,337 $9,831 $9,025 Weighted-average shares outstanding - earnings per shareBasic 31,624 31,552 31,550 31,499 31,467 Diluted 31,624 31,626 31,610 31,549 31,506 Net income (loss) attributable to common stockholders per share - basic and diluted $(0.07) $0.10 $0.16 $0.18 $0.17 Weighted-average shares outstanding - FFO and AFFOBasic 31,624 31,552 31,550 31,499 31,467 Diluted 31,673 31,626 31,610 31,549 31,506 FFO per common shareBasic $0.07 $0.23 $0.29 $0.32 $0.29 Diluted $0.07 $0.23 $0.29 $0.32 $0.29 AFFO per common shareBasic $0.23 $0.30 $0.30 $0.31 $0.29 Diluted $0.22 $0.30 $0.30 $0.31 $0.29

Slide 9

3Q 2018- Supplemental MedEquities Realty Trust, Inc.EBITDA, EBITDAre & Adjusted EBITDAreUnaudited (in thousands)Three Months Ended9/30/20186/30/20183/31/201812/31/20179/30/2017Net income (loss) $(1,196) $4,186 $6,154 $6,679 $6,266 Interest expense 3,190 2,786 2,558 2,261 2,117 Franchise, excise, and other tax expense 96 71 71 65 50 Depreciation and amortization 4,646 4,442 4,453 4,593 4,192 EBITDA $6,736 $11,485 $13,236 $13,598 $12,625 Gains or losses on dispositions of depreciated property - - - - - Impairment write-downs of depreciated property - - - - - Adjustments to reflect Company's share of EBITDAre of unconsolidated affiliates - - - - - EBITDAre $6,736 $11,485 $13,236 $13,598 $12,625 Straight-line rent write-off 4,776 - - - - Stock-based compensation expense 780 996 1,056 714 783 Expensed transaction costs 13 2,046 - - - Adjusted EBITDAre $12,305 $14,527 $14,292 $14,312 $13,408

Slide 10

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Debt OverviewUnaudited ($ in thousands) at 9/30/2018 Debt Instrument - Secured Bank FacilityMaturityRateRate TypeBalance % of Total Debt $300 Million Revolving Credit FacilityFebruary-214.14% (1)Floating $146,000 53.9% $125 Million Term LoanFebruary-223.84% (2)Fixed 125,000 46.1% $271,000 100.0% Balance Sheet ($ in thousands) at 9/30/2018 Cash $5,810 Gross Assets (3) $683,273 Total Debt $271,000 Net Debt $265,190 Debt Ratios at 9/30/2018 Net Debt to Gross Assets Ratio38.8% Net Debt to Total Market Capitalization45.7% Net Debt to Adjusted EBITDAre, annualized5.4x(1) Weighted-average interest rate outstanding at September 30, 2018 based on LIBOR and a leverage adjustment. At September 30, 2018, the facility pricing grid ranges from 175-300 basis points over LIBOR depending upon leverage. On October 9, 2018, the facility pricing grid ranges were amended to 200-350 basis points over LIBOR depending upon leverage.(2) The Company entered into interest rate swap arrangements, effective April 10, 2017, on the full $125 million term loan. The Company's forecasted all-in interest rate under the term loan is composed of a fixed swap rate of 1.84% plus the applicable margin under the credit facility.(3) The carrying amount of total assets plus accumulated depreciation and amortization, as reported in the Company's consolidated financial statements.

Slide 11

3Q 2018- Supplemental MedEquities Realty Trust, Inc.Operator Overview & Lease CoverageUnaudited ($ in thousands) at 9/30/18 Gross Number of Operator States Property Type Investment GLA/Square FeetLicensed Beds (1) OnPointeTX SNF $145,142 339,733 1,138 Life GenerationsCA SNF/ALF 96,696 181,149 559 Fundamental HealthcareNV, SC, TX ACH/LTACH/SNF 88,495 211,280 431 Vibra HealthcareCA, IN, TXLTACH/IRF/SNF (2) 100,806 144,388 164 Baylor Scott & White HealthTX ACH 75,056 270,512 106 AAC HoldingsNV, TX BH 25,047 180,307 - Magnolia Health SystemsIN SNF 15,039 52,919 160 Prospect MedicalCT SNF 10,133 65,721 130 Advanced DiagnosticsTX ACH 17,549 23,619 4 Sequel Youth and Family ServicesTN BH 6,384 37,548 63 Multi-tenantedTX MOB 15,634 67,682 - Total - All Properties $595,981 1,574,858 2,755 Stabilized Facility & Guarantor Lease CoverageUnaudited TTM rent coverage (3)EBITDARM Rent CoverageFacilityGuarantor (7) Twelve Months EndedSkilled (4)Hospital (5)Total (6)Skilled (4)Hospital (5)Behavioral (6)Total June 30, 20181.32x2.71x1.92x3.06x1.70x6.42x2.85x March 31, 20181.39x2.65x1.94x3.09x1.65x6.78x2.88x December 31, 20171.42x2.41x1.85x3.12x1.76x6.50x2.92x September 30, 20171.37x1.69x1.50x1.68x1.83x-2.74x June 30, 20171.47x1.63x1.54x1.51x1.83x-2.57xEBITDAR Rent CoverageFacilityGuarantor (7) Twelve Months EndedSkilled (4)Hospital (5)Total (6)Skilled (4)Hospital (5)Behavioral (6)Total June 30, 20181.08x2.40x1.65x2.55x1.57x6.42x2.54x March 31, 20181.14x2.35x1.67x2.59x1.52x6.78x2.57x December 31, 20171.18x2.12x1.59x2.63x1.63x6.50x2.61x September 30, 20171.13x1.49x1.28x1.35x1.70x-2.29x June 30, 20171.22x1.43x1.31x1.27x1.70x-2.24x(1) Excludes 241 beds in the AAC sober living facilities that are not licensed for medically intensive treatment.(2) Includes one 60-bed IRF in Indiana that currently contains 26 SNF beds. The operator is in the process of determining the final mix of beds, but we expect that some of the existing SNF beds will be converted to IRF beds and that the remaining SNF beds will continued to be utilized as such.(3) All periods reflect the removal of the Texas Ten Portfolio from our stabilized portfolio because we are actively seeking to transition the facilities to a new operator.(4) Includes SNF and ALF connected to a SNF.(5) Includes LTACH, IRF and ACH.(6) Includes BH on guarantor coverage only.(7) Guarantor coverage does not include ACH.

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3Q 2018- Supplemental MedEquities Realty Trust, Inc.Market SummaryUnaudited ($ in thousands) at 9/30/2018(1)PROPERTY TYPE Geography SNF/ALF ACH LTACH BH IRF (2) MOB Total % of Total Texas11 2 -2 1 1 17 50.0% California6 -1 ---7 20.6% Nevada-1 1 2 --4 11.8% Indiana2 ---1 -3 8.9% South Carolina1 -----1 2.9% Connecticut1 -----1 2.9% Tennessee---1 --1 2.9% Total21 3 2 5 2 1 34 100.0%% OF TOTAL PROPERTIES62%8%6%15%6%3%DISTRIBUTION OF LICENSED BEDS (3) Geography SNF/ALF ACH LTACH BH IRF MOB Total % of Total Texas 1,280 110 - - 44 - 1,434 52.1% California 559 - 60 - - - 619 22.5% Nevada - 130 39 - - - 169 6.1% Indiana 186 - - - 34 - 220 8.0% South Carolina 120 - - - - - 120 4.4% Connecticut 130 - - - - - 130 4.7% Tennessee - - - 63 - - 63 2.2% Total 2,275 240 99 63 78 - 2,755 100.0%% OF TOTAL BEDS83%9%3%2%3%0%GROSS INVESTMENT GeographySNF/ALFACHLTACHBHIRFMOBTotal% of Total Texas $161,142 $92,605 $- $11,479 $19,399 $15,634 $300,259 50.4% California 96,696 - 58,030 - - - 154,726 26.0% Nevada - 32,485 20,010 13,568 - - 66,063 11.1% Indiana 15,039 - - - 23,377 - 38,416 6.4% South Carolina 20,000 - - - - - 20,000 3.4% Connecticut 10,133 - - - - - 10,133 1.7% Tennessee - - - 6,384 - - 6,384 1.0% Total $303,010 $125,090 $78,040 $31,431 $42,776 $15,634 $595,981 100.0%% OF TOTAL GROSS INVESTMENT51%21%13%5%7%3%RENTAL INCOME (Twelve months ended September 30, 2018) OperatorSNF/ALFACHLTACHBHIRFMOBTotal% of Total Life Generations $8,618 $- $- $- $- $- $8,618 17.6% Fundamental Healthcare 3,548 4,288 1,967 - - - 9,803 20.0% Vibra Healthcare - - 5,332 - 2,228 - 7,560 15.4% Baylor Scott & White Health - 15,162 - - - - 15,162 30.9% AAC Holdings - - - 2,440 - - 2,440 5.0% Advanced Diagnostics Hospital - 1,770 - - - - 1,770 3.6% Magnolia Health Systems 1,542 - - - - - 1,542 3.1% Prospect Medical 993 - - - - - 993 2.0% Sequel Youth and Family Services - - - 18 - - 18 0.0% Medical office building - - - - - 1,188 1,188 2.4% Total $14,701 $21,220 $7,299 $2,458 $2,228 $1,188 $49,094 100.0%% OF RENTAL INCOME30%43%15%5%5%2%BASE RENT (4) (Twelve months ended September 30, 2018) OperatorSNF/ALFACHLTACHBHIRFMOBTotal% of Total Life Generations $8,312 $- $- $- $- $- $8,312 18.8% Fundamental Healthcare 3,356 3,423 1,866 - - - 8,645 19.5% Vibra Healthcare - - 5,401 - 2,350 - 7,751 17.5% Baylor Scott & White Health - 12,769 - - - - 12,769 28.8% AAC Holdings - - - 2,192 - - 2,192 4.9% Advanced Diagnostics Hospital - 1,523 - - - - 1,523 3.4% Magnolia Health Systems 1,352 - - - - - 1,352 3.1% Prospect Medical 903 - - - - - 903 2.0% Sequel Youth and Family Services - - - 16 - - 16 0.0% Medical office building - - - - - 856 856 2.0% Total $13,923 $17,715 $7,267 $2,208 $2,350 $856 $44,319 100.0%% OF BASE RENT32%40%16%5%5%2%(1) Excludes any investment in and income from notes and mortgage notes receivable and excludes the results from the Texas Ten Portfolio for Rental Income and Base Rent.(2) Includes one 60-bed IRF in Indiana that currently contains 26 SNF beds. The operator is in the process of determining the final mix of beds, but we expect that some of the existing SNF beds will be converted to IRF beds and that the remaining SNF beds will continued to be utilized as such.(3) Excludes 241 beds in the AAC sober living facilities that are not licensed for medically intensive treatment.(4) Base rent represents the contractual rent due under the facility lease agreements that is included in rental income and excludes items such as operating expense reimbursements, straight-line rent revenues, amortization of above-market leases and lease incentives, and any late fees.

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3Q 2018- Supplemental MedEquities Realty Trust, Inc.Annualized Rental Income Expiration ScheduleUnaudited ($ in thousands) (at 9/30/2018)YearLicensed Beds (1)Expiring Annualized Rental Income (ARI) (2)(3)% of ARI Expiring (2)2018-2028 - $- - 2029 392 4,533 9.0%2030 603 10,213 20.2%2031 166 20,572 40.7%2032 333 12,116 24.0%2033 123 3,073 6.1%Total 1,617 $50,507 100.0%(1) Excludes the 241 beds in the AAC sober living facilities that are not licensed for medically intensive treatment and the 1,138 beds in the Texas Ten Portfolio. (2) Excludes the medical office building in Texas, the Texas Ten portfolio and mortgage notes receivable.(3) Annualized rental income is defined as total consolidated rent, including straight-line rent and amortization of lease incentives, and excluding operating expense reimbursements as of September 30, 2018, multiplied by twelve.

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3Q 2018- Supplemental MedEquities Realty Trust, Inc. Payor Mix by Revenue & Facility-Level OccupancyUnaudited (1)Twelve Months Ended June 30, 2018Stabilized, Single-Tenanted PortfolioSNF Portfolio (2) OperatorMedicareMedicaidCommercialOtherFacility-Level OccupancyMedicareMedicaidCommercialOtherQ-MixFacility-Level Occupancy Life Generations34%27%30%9%89.1%34%27%30%9%72.6%89.1% Fundamental31%24%41%4%79.8%29%43%21%7%57.0%79.6% Vibra42%0%55%3%65.3%------ AAC Holdings0%0%99%1%50.2%------ Advanced Diagnostics3%0%9%87%------- Magnolia Health Systems17%63%0%20%47.1%17%63%0%20%37.2%47.1% Prospect Medical27%45%8%20%95.0%27%45%8%20%54.5%95.0% Total Portfolio28%17%37%18%76.2%31%36%23%11%64.4%81.2% Stabilized, Single-Tenanted PortfolioSNF Portfolio (2) Twelve Months EndedMedicareMedicaidCommercialOtherFacility-Level OccupancyMedicareMedicaidCommercialOtherQ-MixFacility-Level Occupancy June 30, 201828%17%37%18%76.2%31%36%23%11%64.4%81.2% March 31, 201829%17%36%18%76.4%31%35%23%11%65.2%81.5% December 31, 201730%17%36%17%77.2%32%34%22%11%65.6%82.2% September 30, 201739%18%35%7%86.1%34%31%24%11%68.7%88.9% June 30, 201740%16%38%6%85.9%36%29%26%9%70.7%89.1%(1) Excludes results from the Texas Ten Portfolio for all periods.(2) Includes one assisted living facility (ALF) connected to a skilled nursing facility (SNF).

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3Q 2018- Supplemental MedEquities Realty Trust, Inc.Transaction ActivityUnaudited ($ in thousands) (at 11/09/2018) AcquisitionsAcquisition Date# of PropertiesOperatorProperty TypePurchase Price (1)Licensed Beds (2)Initial YieldLocation9/21/20181Sequel Youth and Family Services (3)BH $6,384 63 9.00%Andersonville, TN6/27/20181Vibra HealthcareIRF/SNF (4) 23,350 60 9.00%New Albany, IN11/10/20171Advanced Diagnostics Hospital EastACH 17,500 4 9.60%East Houston, TX8/9/20174AAC HoldingsBH 25,000 -8.75%NV, TX7/31/20172Magnolia Health SystemsSNF 15,000 160 9.00%IN6/30/20171Prospect Medical HoldingsSNF 10,000 130 9.00%Tolland, CTPost-IPO Subtotal10 $97,234 417 10/2/20151OnPointeSNF $11,600 117 8.50%Graham, TX10/1/20151Vibra HealthcareIRF 19,400 44 8.75%Amarillo, TX10/1/20151Life GenerationsSNF 15,000 98 8.75%San Diego, CA7/30/20159OnPointeSNF 133,400 1,021 8.50%TX3/31/20151Fundamental HealthcareACH 35,400 130 8.75%Las Vegas, NV3/31/20155Life GenerationsSNF/ALF 80,000 461 8.75%CA2/20/20151Fundamental HealthcareSNF 16,000 142 8.75%Ft. Worth, TX2/3/20151Baylor Scott & White Health (5)ACH 75,000 106 12.70%Austin, TX9/19/20141Multi-tenantedMOB 15,100 --Brownsville, TX8/1/20142Fundamental HealthcareLTACH/SNF 40,000 159 8.55%-9.00%NV, SC8/1/20141Vibra HealthcareLTACH 58,000 60 8.75%Kentfield, CAPre-IPO Subtotal24 $498,900 2,338 Total34 $596,134 2,755 Mortgage InvestmentsOrigination Date# of PropertiesOperatorProperty TypeTotal FundedInterest RateEstimated Completion (6)Location4/6/20181Medistar CorporationIRF $7,000 10.00%Stockton, CA3/29/20181Adora Midtown ParkSNF/ALF 5,000 10.00% Completed Dallas, TX1/19/20181Cobalt Medical DevelopmentIRF 5,414 9.50%/15.00%(7) 1Q 2019 Clarksville, IN8/1/20171Medistar CorporationMOB 9,700 10.00%Webster, TXPost-IPO Subtotal4 $27,114 8/1/20141Vibra Healthcare (8)LTACH $8,699 9.00%Springfield, MATotal5 $35,813 Funding Commitments and Construction Mortgage NotesOrigination Date# of PropertiesOperatorProperty TypeTotal CommitmentTotal OutstandingEstimated Completion (6)Location1/8/20181Haven Behavioral HealthcareBH $19,000 $12,513 4Q 2018 Boise, ID3/20/20171Fundamental Healthcare (9)ACH 11,000 4,295 1Q 2019 Las Vegas, NVTotal2 $30,000 $16,808 (1) Represents cash price paid rather than GAAP cost basis.(2) Excludes the 241 beds in the AAC sober living facilities that are not licensed for medically intensive treatment.(3) The facility was acquired pursuant to an option that applies the previous $6.0 million construction mortgage loan on the property originated in October 2017 and leased to the operator pursuant to a 15-year triple net lease.(4) The facility includes 34 IRF beds and 26 SNF beds. The operator is in the process of determining the final mix of beds, but we expect that some of the existing SNF beds will be converted to IRF beds and that the remaining SNF beds will continued to be utilized as such.(5) A triple-net master lease commenced on September 1, 2016 with Baylor Scott & White Health upon an operator change.(6) Projected completions are based on construction timing provided by our operators, and there can be no guarantee that these schedules will be completed exactly as currently contemplated.(7) The loan has a claw-back feature that would equate to a 15.0% rate from the inception of the loan should we elect not to exercise our purchase option.(8) In June 2018, Vibra paid down $1,000 of the principal amount of the outstanding loan supported by a corporate guaranty as well as the first mortgage on the Vibra LTACH in Springfield, MA. The loan is a 10-year amortizing loan requiring monthly principal and interest payments.(9) Pursuant to the amended master lease with Fundamental, rents increase at a rate of 9.4% (current in-place lease rate) on incremental draws on the funding commitment for the Mountain's Edge Hospital expansion project.

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3Q 2018- Supplemental MedEquities Realty Trust, Inc.Glossary"Acute: refers to a disease or condition with a rapid onset and short course.""Acute Care Hospital (“ACH”): general medical and surgical hospitals that provide both inpatient and outpatient medical services and are owned and/or operated either by a non-profit or for-profit hospital or hospital system. These facilities often act as feeder hospitals to dedicated specialty facilities.""Adjusted EBITDAre: Adjusted EBITDAre represents EBITDAre, as defined below, adjusted further for the effects of acquisition costs, stock-based compensation expense and non-cash write-offs of straight-line rent and accounts receivable. Adjusted EBITDAre is a relevant non-GAAP measure broadly used by investors and analysts to evaluate the operating performance of a company and to assess a company’s credit strength, including the ability to service indebtedness. Our calculation of Adjusted EBITDAre may differ from the methodologies used by other companies and, accordingly, our Adjusted EBITDAre may not be comparable to amounts reported by other companies. Adjusted EBITDAre should not be used as a substitute for any GAAP financial measures for the purpose of evaluating our financial performance, financial position or cash flows.""Adjusted Funds From Operations attributable to common stockholders (“AFFO”): AFFO is a non-GAAP measure used by many investors and analysts to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations. To calculate AFFO, we further adjust FFO for certain items that are not added to net income in the National Association of Real Estate Investment Trusts' (""Nareit"") definition of FFO, such as acquisition expenses on completed real estate transactions, non-real estate-related depreciation and amortization (including amortization of lease incentives, tenant allowances and leasing costs), stock based compensation expenses, and any other non-comparable or non-operating items that do not relate to the operating performance of our properties. To calculate AFFO, we also adjust FFO to remove the effect of straight-line rent revenue, which represents the recognition of net unbilled rental income expected to be collected in future periods of a lease agreement that exceeds the actual contractual rent due periodically from tenants for their use of the leased real estate under each lease. Noncontrolling interest amounts represent adjustments to reflect only our share of straight line rent revenue. Our calculation of AFFO may differ from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. AFFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.""Assisted Living Facility (“ALF”): residential care facilities that provide housing, meals, personal care and supportive services to older persons and disabled adults who are unable to live independently. They are intended to be a less costly alternative to more restrictive, institutional settings for individuals who do not require 24-hour nursing supervision."Behavioral Health Facility (“BH”): facilities that provide inpatient and outpatient services for the treatment of behavioral health, mental illness and substance abuse. These can include facilities for intensive outpatient treatment, inpatient residential treatment, sober living rehabilitation and psychiatric care."EBITDA: calculated as net income (computed in accordance with GAAP) plus interest expense, taxes, and depreciation and amortization. Our calculation of EBITDA may differ from the methodologies used by other companies and, accordingly, our EBITDA may not be comparable to amounts reported by other companies. EBITDA should not be used as a substitute for any GAAP financial measures for the purpose of evaluating our financial performance, financial position or cash flows.""EBITDAR: represents earnings from the operator’s financial statements before interest, taxes, depreciation, amortization and rent and may be adjusted for certain non-recurring, infrequent or out-of-period items."EBITDAre: is calculated as EBITDA plus or minor losses and gains on the disposition of depreciated property, including losses or gains on change of control, plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, plus or minus adjustments to reflect the Company's share of EBITDAre of unconsolidated affiliates. Management believes EBITDAre is useful to investors in evaluating and facilitating comparisons of our operating performance between periods and between other REITs. We calculate EBITDAre in accordance with Nareit's definition, which may differ from the methodology for calculating, EBITDAre, or similarly titled measures, used by other companies. As a result, our calculation of EBITDAre may not be comparable to measures calculated by other companies that do not use the Nareit definition of EBITDAre. EBITDAre should not be used as a substitute for any GAAP financial measures for the purpose of evaluating our financial performance, financial position or cash flows."EBITDAR Rent Coverage: represents the operator EBITDAR of our stabilized facilities for the trailing twelve months divided by the contractual lease rent for the same period. For the leases that have been in place for less than 12 months as of the date presented, the annualized base rent under the applicable lease as of such date is used.""EBITDARM: represents earnings from the operator’s financial statements before interest, taxes, depreciation, amortization, rent and management fees and may be adjusted for certain non-recurring, infrequent or out-of-period items.""EBITDARM Rent Coverage: represents the operator EBITDARM of our stabilized facilities for the trailing twelve months divided by the contractual lease rent for the same period. For the leases that have been in place for less than 12 months as of the date presented, the annualized base rent under the applicable lease as of such date is used."Facility-Level Occupancy: Occupancy is calculated by dividing the daily number of beds occupied each day as reported by the operators at their facilities during the period presented by the beds in operations (available) at the facilities for the same period.Funds From Operations attributable to common stockholders (“FFO”): FFO is a non-GAAP measure used by many investors and analysts that follow the real estate industry. FFO, as defined by Nareit, represents net income (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairments of real estate assets, plus real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Noncontrolling interest amounts represent adjustments to reflect only our share of depreciation and amortization. We compute FFO in accordance with Nareit’s definition, which may differ from the methodology for calculating FFO, or similarly titled measures, used by other companies. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, most real estate industry investors consider FFO to be helpful in evaluating a real estate company’s operations. We believe that the presentation of FFO provides useful information to investors regarding our operating performance by excluding the effect of real-estate related depreciation and amortization, gains or losses from sales for real estate, including impairments, extraordinary items and the portion of items related to unconsolidated entities, all of which are based on historical cost accounting, and that FFO can facilitate comparisons of operating performance between periods and between REITs, even though FFO does not represent an amount that accrues directly to common stockholders. Our calculation of FFO may not be comparable to measures calculated by other companies that do not use the Nareit definition of FFO or do not calculate FFO per diluted share in accordance with Nareit guidance. FFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity."Gross assets: the carrying amount of total assets plus accumulated depreciation and amortization, as reported in the Company’s consolidated financial statements.""Inpatient Rehabilitation Facility (“IRF”): facilities that provide inpatient rehabilitation services for patients recovering from injuries, organ transplants, amputations, cardiovascular surgery, strokes, and complex neurological, orthopedic and other medical conditions following stabilization of their acute medical issues.""Long-Term Acute Care Hospital (“LTACH”): facilities designed for patients with serious medical problems that require intense, special treatment for an extended period of time (typically at least 25 days), offer more individualized and resource-intensive care than a skilled nursing facility, nursing home or acute rehabilitation facility, and patients are typically transferred to a long-term acute care hospital from the intensive care unit of a traditional hospital."

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3Q 2018- Supplemental MedEquities Realty Trust, Inc.Glossary (continued)"Medical Office Building (“MOB”): single-tenant or multi-tenant buildings where doctors, physician practice groups, hospitals, hospital systems or other healthcare providers lease space and are typically located near or adjacent to acute care hospitals or other facilities where healthcare services are rendered. Medical office buildings can include outpatient surgical centers, diagnostic labs, physical therapy providers and physician office space in a single building.""Post-acute: the period of time following acute care, in which the patient continues to require elevated levels of medical treatment.""Q-Mix: Quality mix is presented as non-Medicaid revenue as a percentage of total revenue. ""Skilled Nursing Facility (“SNF”): facilities that usually house elderly patients and provide restorative, rehabilitative and nursing care for patients not requiring more extensive and sophisticated treatment that may be available at acute care hospitals or long-term acute care hospitals. They are distinct from and offer a much higher level of care for older adults compared to senior housing facilities. Patients typically enter skilled nursing facilities after hospitalization."Stabilized Portfolio: as of June 30, 2018, our stabilized, single-tenanted portfolio includes only our 10 stabilized skilled nursing facilities, four of our stabilized behavioral health facilities, our two stabilized long-term acute care hospitals, our one stabilized assisted living facility (that is connected to a skilled nursing facility in our portfolio), our one stabilized inpatient rehabilitation facility and our one stabilized acute care hospital. Our non-stabilized, single-tenanted properties as of June 30, 2018 were Mountain’s Edge Hospital and the Texas Ten Portfolio. We consider a facility to be non-stabilized if it is a newly completed development, is undergoing or has recently undergone a significant addition or renovation, or is being repositioned or transitioned to new operators, but in no event beyond 24 months after the date of classification as non-stabilized. Lakeway Hospital is excluded from all operator metrics as a result of Baylor Scott & White's lack of reporting requirements for facility level financial information. Acquired properties that otherwise meet the definition of a stabilized property are included in operating metrics beginning with the first full quarter of ownership.

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