UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,March 31, 20222023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-32559
Commission file number 333-177186
MEDICAL PROPERTIES TRUST, INC.
MPT OPERATING PARTNERSHIP, L.P.
(Exact Name of Registrant as Specified in Its Charter)
maryland delaware | 20-0191742 20-0242069 | |
(State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) |
1000 URBAN CENTER DRIVE, SUITE 501 BIRMINGHAM, AL | 35242 | |
(Address of principal executive offices) | (Zip Code) |
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (205) 969-3755
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, par value $0.001 per share, of Medical Properties Trust, Inc. | MPW | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ (Medical Properties Trust, Inc. only) | Accelerated filer | ☐ | ||||
Non-accelerated filer | ☒ (MPT Operating Partnership, L.P. only) | Smaller reporting company | ☐ | ||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of AugustMay 5, 2022,2023, Medical Properties Trust, Inc. had 599.0598.3 million shares of common stock, par value $0.001, outstanding.
EXPLANATORY NOTE
This report combines the Quarterly Reports on Form 10-Q for the three and six months ended June 30, 2022March 31, 2023 of Medical Properties Trust, Inc., a Maryland corporation, and MPT Operating Partnership, L.P., a Delaware limited partnership, through which Medical Properties Trust, Inc. conducts substantially all of its operations. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “Medical Properties,” “MPT,” or the “company” refer to Medical Properties Trust, Inc. together with its consolidated subsidiaries, including MPT Operating Partnership, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to “operating partnership” refer to MPT Operating Partnership, L.P. together with its consolidated subsidiaries.
MEDICAL PROPERTIES TRUST, INC. AND MPT OPERATING PARTNERSHIP, L.P.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED June 30, 2022March 31, 2023
Table of Contents
2
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
| June 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(In thousands, except per share amounts) |
| (Unaudited) |
|
| (Note 2) |
|
| (Unaudited) |
|
| (Note 2) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Land, buildings and improvements, intangible lease assets, and other |
| $ | 13,696,681 |
|
| $ | 14,062,722 |
|
| $ | 13,092,510 |
|
| $ | 13,862,415 |
|
Investment in financing leases |
|
| 2,076,813 |
|
|
| 2,053,327 |
|
|
| 1,582,416 |
|
|
| 1,691,323 |
|
Real estate held for sale |
|
| 0 |
|
|
| 1,096,505 |
|
|
| 881,587 |
|
|
| — |
|
Mortgage loans |
|
| 314,681 |
|
|
| 213,211 |
|
|
| 346,446 |
|
|
| 364,101 |
|
Gross investment in real estate assets |
|
| 16,088,175 |
|
|
| 17,425,765 |
|
|
| 15,902,959 |
|
|
| 15,917,839 |
|
Accumulated depreciation and amortization |
|
| (1,109,592 | ) |
|
| (993,100 | ) |
|
| (1,207,699 | ) |
|
| (1,193,312 | ) |
Net investment in real estate assets |
|
| 14,978,583 |
|
|
| 16,432,665 |
|
|
| 14,695,260 |
|
|
| 14,724,527 |
|
Cash and cash equivalents |
|
| 257,269 |
|
|
| 459,227 |
|
|
| 302,321 |
|
|
| 235,668 |
|
Interest and rent receivables |
|
| 94,206 |
|
|
| 56,229 |
| ||||||||
Interest and rent receivables, net |
|
| 169,511 |
|
|
| 167,035 |
| ||||||||
Straight-line rent receivables |
|
| 702,683 |
|
|
| 728,522 |
|
|
| 810,911 |
|
|
| 787,166 |
|
Investments in unconsolidated real estate joint ventures |
|
| 1,460,373 |
|
|
| 1,152,927 |
|
|
| 1,506,474 |
|
|
| 1,497,903 |
|
Investments in unconsolidated operating entities |
|
| 1,439,910 |
|
|
| 1,289,434 |
|
|
| 1,310,460 |
|
|
| 1,444,872 |
|
Other loans |
|
| 213,897 |
|
|
| 67,317 |
|
|
| 276,367 |
|
|
| 227,839 |
|
Other assets |
|
| 596,163 |
|
|
| 333,480 |
|
|
| 578,853 |
|
|
| 572,990 |
|
Total Assets |
| $ | 19,743,084 |
|
| $ | 20,519,801 |
|
| $ | 19,650,157 |
|
| $ | 19,658,000 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt, net |
| $ | 10,138,774 |
|
| $ | 11,282,770 |
|
| $ | 10,438,151 |
|
| $ | 10,268,412 |
|
Accounts payable and accrued expenses |
|
| 562,255 |
|
|
| 607,792 |
|
|
| 595,269 |
|
|
| 621,324 |
|
Deferred revenue |
|
| 21,210 |
|
|
| 25,563 |
|
|
| 29,391 |
|
|
| 27,727 |
|
Obligations to tenants and other lease liabilities |
|
| 154,974 |
|
|
| 158,005 |
|
|
| 144,092 |
|
|
| 146,130 |
|
Total Liabilities |
|
| 10,877,213 |
|
|
| 12,074,130 |
|
|
| 11,206,903 |
|
|
| 11,063,593 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock, $0.001 par value. Authorized 10,000 shares; |
|
| — |
|
|
| — |
| ||||||||
Common stock, $0.001 par value. Authorized 750,000 shares; |
|
| 599 |
|
|
| 597 |
| ||||||||
Preferred stock, $0.001 par value. Authorized 10,000 shares; |
|
| — |
|
|
| — |
| ||||||||
Common stock, $0.001 par value. Authorized 750,000 shares; |
|
| 598 |
|
|
| 597 |
| ||||||||
Additional paid-in capital |
|
| 8,557,120 |
|
|
| 8,564,009 |
|
|
| 8,541,414 |
|
|
| 8,535,140 |
|
Retained earnings (deficit) |
|
| 385,545 |
|
|
| (87,691 | ) | ||||||||
Retained (deficit) earnings |
|
| (25,413 | ) |
|
| 116,285 |
| ||||||||
Accumulated other comprehensive loss |
|
| (83,431 | ) |
|
| (36,727 | ) |
|
| (74,919 | ) |
|
| (59,184 | ) |
Total Medical Properties Trust, Inc. stockholders’ equity |
|
| 8,859,833 |
|
|
| 8,440,188 |
|
|
| 8,441,680 |
|
|
| 8,592,838 |
|
Non-controlling interests |
|
| 6,038 |
|
|
| 5,483 |
|
|
| 1,574 |
|
|
| 1,569 |
|
Total Equity |
|
| 8,865,871 |
|
|
| 8,445,671 |
|
|
| 8,443,254 |
|
|
| 8,594,407 |
|
Total Liabilities and Equity |
| $ | 19,743,084 |
|
| $ | 20,519,801 |
|
| $ | 19,650,157 |
|
| $ | 19,658,000 |
|
See accompanying notes to condensed consolidated financial statements.
3
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Net Income
(Unaudited)
| For the Three Months |
|
| For the Six Months |
| For the Three Months |
| |||||||||||||||
(In thousands, except per share amounts) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Rent billed | $ | 241,209 |
|
| $ | 216,870 |
|
| $ | 504,611 |
|
| $ | 430,214 |
| $ | 248,157 |
|
| $ | 263,402 |
|
Straight-line rent |
| 58,518 |
|
|
| 55,465 |
|
|
| 119,562 |
|
|
| 110,338 |
|
| 56,693 |
|
|
| 61,044 |
|
Income from financing leases |
| 51,873 |
|
|
| 50,337 |
|
|
| 103,649 |
|
|
| 101,231 |
|
| 13,195 |
|
|
| 51,776 |
|
Interest and other income |
| 48,626 |
|
|
| 59,120 |
|
|
| 82,204 |
|
|
| 102,774 |
|
| 32,166 |
|
|
| 33,578 |
|
Total revenues |
| 400,226 |
|
|
| 381,792 |
|
|
| 810,026 |
|
|
| 744,557 |
|
| 350,211 |
|
|
| 409,800 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest |
| 87,730 |
|
|
| 92,305 |
|
|
| 178,913 |
|
|
| 179,277 |
|
| 97,654 |
|
|
| 91,183 |
|
Real estate depreciation and amortization |
| 84,334 |
|
|
| 76,369 |
|
|
| 169,650 |
|
|
| 152,011 |
|
| 83,860 |
|
|
| 85,316 |
|
Property-related |
| 21,135 |
|
|
| 18,684 |
|
|
| 29,733 |
|
|
| 24,137 |
|
| 7,110 |
|
|
| 8,598 |
|
General and administrative |
| 38,858 |
|
|
| 34,545 |
|
|
| 80,282 |
|
|
| 70,618 |
|
| 41,724 |
|
|
| 41,424 |
|
Total expenses |
| 232,057 |
|
|
| 221,903 |
|
|
| 458,578 |
|
|
| 426,043 |
|
| 230,348 |
|
|
| 226,521 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Gain (loss) on sale of real estate and other, net |
| 16,355 |
|
|
| (1,387 | ) |
|
| 467,993 |
|
|
| (398 | ) | |||||||
Other (expense) income |
|
|
|
|
| |||||||||||||||||
Gain on sale of real estate |
| 62 |
|
|
| 451,638 |
| |||||||||||||||
Real estate and other impairment charges |
| (89,538 | ) |
|
| (4,875 | ) | |||||||||||||||
Earnings from equity interests |
| 14,785 |
|
|
| 7,339 |
|
|
| 22,123 |
|
|
| 14,440 |
|
| 11,352 |
|
|
| 7,338 |
|
Debt refinancing and unutilized financing costs |
| (619 | ) |
|
| (70 | ) |
|
| (9,435 | ) |
|
| (2,339 | ) |
| — |
|
|
| (8,816 | ) |
Other (including fair value adjustments on securities) |
| 2,031 |
|
|
| (771 | ) |
|
| 11,918 |
|
|
| 7,023 |
|
| (5,166 | ) |
|
| 14,762 |
|
Total other income |
| 32,552 |
|
|
| 5,111 |
|
|
| 492,599 |
|
|
| 18,726 |
| |||||||
Total other (expense) income |
| (83,290 | ) |
|
| 460,047 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income before income tax |
| 200,721 |
|
|
| 165,000 |
|
|
| 844,047 |
|
|
| 337,240 |
|
| 36,573 |
|
|
| 643,326 |
|
Income tax expense |
| (10,657 | ) |
|
| (50,179 | ) |
|
| (22,036 | ) |
|
| (58,539 | ) |
| (3,543 | ) |
|
| (11,379 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| 190,064 |
|
|
| 114,821 |
|
|
| 822,011 |
|
|
| 278,701 |
|
| 33,030 |
|
|
| 631,947 |
|
Net income attributable to non-controlling interests |
| (467 | ) |
|
| (256 | ) |
|
| (733 | ) |
|
| (353 | ) |
| (236 | ) |
|
| (266 | ) |
Net income attributable to MPT common stockholders | $ | 189,597 |
|
| $ | 114,565 |
|
| $ | 821,278 |
|
| $ | 278,348 |
| $ | 32,794 |
|
| $ | 631,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Earnings per common share — basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income attributable to MPT common stockholders | $ | 0.32 |
|
| $ | 0.19 |
|
| $ | 1.37 |
|
| $ | 0.48 |
| $ | 0.05 |
|
| $ | 1.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted average shares outstanding — basic |
| 598,827 |
|
|
| 587,514 |
|
|
| 598,751 |
|
|
| 581,877 |
|
| 598,302 |
|
|
| 598,676 |
|
Weighted average shares outstanding — diluted |
| 599,026 |
|
|
| 589,053 |
|
|
| 598,979 |
|
|
| 583,297 |
|
| 598,310 |
|
|
| 598,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Dividends declared per common share | $ | 0.29 |
|
| $ | 0.28 |
|
| $ | 0.58 |
|
| $ | 0.56 |
| $ | 0.29 |
|
| $ | 0.29 |
|
See accompanying notes to condensed consolidated financial statements.
4
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| For the Three Months |
|
| For the Six Months |
|
| For the Three Months |
| |||||||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Net income |
| $ | 190,064 |
|
| $ | 114,821 |
|
| $ | 822,011 |
|
| $ | 278,701 |
|
| $ | 33,030 |
|
| $ | 631,947 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized gain on interest rate swaps, net of tax |
|
| 25,920 |
|
|
| 4,207 |
|
|
| 70,852 |
|
|
| 19,711 |
| ||||||||
Foreign currency translation (loss) gain |
|
| (104,341 | ) |
|
| 9,014 |
|
|
| (117,556 | ) |
|
| (21,886 | ) | ||||||||
Unrealized (loss) gain on interest rate swaps, net of tax |
|
| (15,325 | ) |
|
| 44,932 |
| ||||||||||||||||
Foreign currency translation gain (loss) |
|
| 28,143 |
|
|
| (13,215 | ) | ||||||||||||||||
Reclassification of interest rate swap gain from AOCI, net of tax |
|
| (28,553 | ) |
|
| — |
| ||||||||||||||||
Total comprehensive income |
|
| 111,643 |
|
|
| 128,042 |
|
|
| 775,307 |
|
|
| 276,526 |
|
|
| 17,295 |
|
|
| 663,664 |
|
Comprehensive income attributable to non-controlling interests |
|
| (467 | ) |
|
| (256 | ) |
|
| (733 | ) |
|
| (353 | ) |
|
| (236 | ) |
|
| (266 | ) |
Comprehensive income attributable to MPT common |
| $ | 111,176 |
|
| $ | 127,786 |
|
| $ | 774,574 |
|
| $ | 276,173 |
|
| $ | 17,059 |
|
| $ | 663,398 |
|
See accompanying notes to condensed consolidated financial statements.
5
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity
(Unaudited)
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
(In thousands, except per share amounts) |
| Shares |
|
| Par |
|
| Shares |
|
| Par |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
|
| Shares |
|
| Par |
|
| Shares |
|
| Par |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| ||||||||||||||||||
Balance at December 31, 2021 |
|
| — |
|
| $ | — |
|
|
| 596,748 |
|
| $ | 597 |
|
| $ | 8,564,009 |
|
| $ | (87,691 | ) |
| $ | (36,727 | ) |
| $ | 5,483 |
|
| $ | 8,445,671 |
| ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 |
|
| — |
|
| $ | — |
|
|
| 597,476 |
|
| $ | 597 |
|
| $ | 8,535,140 |
|
| $ | 116,285 |
|
| $ | (59,184 | ) |
| $ | 1,569 |
|
| $ | 8,594,407 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 631,681 |
|
|
| — |
|
|
| 266 |
|
|
| 631,947 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 32,794 |
|
|
| — |
|
|
| 236 |
|
|
| 33,030 |
|
Unrealized gain on interest rate swaps, |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,932 |
|
|
| — |
|
|
| 44,932 |
| ||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13,215 | ) |
|
| — |
|
|
| (13,215 | ) | ||||||||||||||||||||||||||||||||||||
Stock vesting and amortization of |
|
| — |
|
|
| — |
|
|
| 3,107 |
|
|
| 3 |
|
|
| 11,801 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,804 |
| ||||||||||||||||||||||||||||||||||||
Stock vesting - satisfaction of tax |
|
| — |
|
|
| — |
|
|
| (1,179 | ) |
|
| (1 | ) |
|
| (27,918 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,919 | ) | ||||||||||||||||||||||||||||||||||||
Acquisition of non-controlling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 929 |
|
|
| 929 |
| ||||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (772 | ) |
|
| (772 | ) | ||||||||||||||||||||||||||||||||||||
Dividends declared ($0.29 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (174,018 | ) |
|
| — |
|
|
| — |
|
|
| (174,018 | ) | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 |
|
| — |
|
| $ | — |
|
|
| 598,676 |
|
| $ | 599 |
|
| $ | 8,547,892 |
|
| $ | 369,972 |
|
| $ | (5,010 | ) |
| $ | 5,906 |
|
| $ | 8,919,359 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 189,597 |
|
|
| — |
|
|
| 467 |
|
|
| 190,064 |
| ||||||||||||||||||||||||||||||||||||
Unrealized gain on interest rate swaps, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,920 |
|
|
| — |
|
|
| 25,920 |
| ||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (104,341 | ) |
|
| — |
|
|
| (104,341 | ) | ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swaps, |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,325 | ) |
|
| — |
|
|
| (15,325 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,143 |
|
|
| — |
|
|
| 28,143 |
| ||||||||||||||||||||||||||||||||||||
Reclassification of interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,553 | ) |
|
| — |
|
|
| (28,553 | ) | ||||||||||||||||||||||||||||||||||||
Stock vesting and amortization of |
|
| — |
|
|
| — |
|
|
| 204 |
|
|
| — |
|
|
| 10,108 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,108 |
|
|
| — |
|
|
| — |
|
|
| 1,325 |
|
|
| 1 |
|
|
| 11,828 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,829 |
|
Stock vesting - satisfaction of tax |
|
| — |
|
|
| — |
|
|
| (41 | ) |
|
| — |
|
|
| (880 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (880 | ) |
|
| — |
|
|
| — |
|
|
| (499 | ) |
|
| — |
|
|
| (5,554 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,554 | ) |
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (335 | ) |
|
| (335 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (231 | ) |
|
| (231 | ) |
Dividends declared ($0.29 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (174,024 | ) |
|
| — |
|
|
| — |
|
|
| (174,024 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (174,492 | ) |
|
| — |
|
|
| — |
|
|
| (174,492 | ) |
Balance at June 30, 2022 |
|
| — |
|
| $ | — |
|
|
| 598,839 |
|
| $ | 599 |
|
| $ | 8,557,120 |
|
| $ | 385,545 |
|
| $ | (83,431 | ) |
| $ | 6,038 |
|
| $ | 8,865,871 |
| ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 |
|
| — |
|
| $ | — |
|
|
| 598,302 |
|
| $ | 598 |
|
| $ | 8,541,414 |
|
| $ | (25,413 | ) |
| $ | (74,919 | ) |
| $ | 1,574 |
|
| $ | 8,443,254 |
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
(In thousands, except per share amounts) |
| Shares |
|
| Par |
|
| Shares |
|
| Par |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||
Balance at December 31, 2020 |
|
| — |
|
| $ | — |
|
|
| 541,353 |
|
| $ | 541 |
|
| $ | 7,460,726 |
|
| $ | (71,411 | ) |
| $ | (51,324 | ) |
| $ | 5,325 |
|
| $ | 7,343,857 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 163,783 |
|
|
| — |
|
|
| 97 |
|
|
| 163,880 |
|
Unrealized gain on interest rate swaps, |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,504 |
|
|
| — |
|
|
| 15,504 |
|
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,900 | ) |
|
| — |
|
|
| (30,900 | ) |
Stock vesting and amortization of |
|
| — |
|
|
| — |
|
|
| 1,741 |
|
|
| 2 |
|
|
| 12,262 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,264 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (193 | ) |
|
| (193 | ) |
Proceeds from offering (net of |
|
| — |
|
|
| — |
|
|
| 39,949 |
|
|
| 40 |
|
|
| 779,201 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 779,241 |
|
Dividends declared ($0.28 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (163,443 | ) |
|
| — |
|
|
| — |
|
|
| (163,443 | ) |
Balance at March 31, 2021 |
|
| — |
|
| $ | — |
|
|
| 583,043 |
|
| $ | 583 |
|
| $ | 8,252,189 |
|
| $ | (71,071 | ) |
| $ | (66,720 | ) |
| $ | 5,229 |
|
| $ | 8,120,210 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 114,565 |
|
|
| — |
|
|
| 256 |
|
|
| 114,821 |
|
Unrealized gain on interest rate swaps, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,207 |
|
|
| — |
|
|
| 4,207 |
|
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,014 |
|
|
| — |
|
|
| 9,014 |
|
Stock vesting and amortization of |
|
| — |
|
|
| — |
|
|
| 176 |
|
|
| — |
|
|
| 12,771 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,771 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (142 | ) |
|
| (142 | ) |
Proceeds from offering (net of |
|
| — |
|
|
| — |
|
|
| 5,679 |
|
|
| 6 |
|
|
| 121,327 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 121,333 |
|
Dividends declared ($0.28 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (165,133 | ) |
|
| — |
|
|
| — |
|
|
| (165,133 | ) |
Balance at June 30, 2021 |
|
| — |
|
| $ | — |
|
|
| 588,898 |
|
| $ | 589 |
|
| $ | 8,386,287 |
|
| $ | (121,639 | ) |
| $ | (53,499 | ) |
| $ | 5,343 |
|
| $ | 8,217,081 |
|
|
| Preferred |
|
| Common |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
(In thousands, except per share amounts) |
| Shares |
|
| Par |
|
| Shares |
|
| Par |
|
| Additional |
|
| Retained |
|
| Accumulated |
|
| Non- |
|
| Total |
| |||||||||
Balance at December 31, 2021 |
|
| — |
|
| $ | — |
|
|
| 596,748 |
|
| $ | 597 |
|
| $ | 8,564,009 |
|
| $ | (87,691 | ) |
| $ | (36,727 | ) |
| $ | 5,483 |
|
| $ | 8,445,671 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 631,681 |
|
|
| — |
|
|
| 266 |
|
|
| 631,947 |
|
Unrealized gain on interest rate swaps, |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,932 |
|
|
| — |
|
|
| 44,932 |
|
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13,215 | ) |
|
| — |
|
|
| (13,215 | ) |
Stock vesting and amortization of |
|
| — |
|
|
| — |
|
|
| 3,107 |
|
|
| 3 |
|
|
| 11,801 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,804 |
|
Stock vesting - satisfaction of tax |
|
| — |
|
|
| — |
|
|
| (1,179 | ) |
|
| (1 | ) |
|
| (27,918 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,919 | ) |
Issuance of non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 929 |
|
|
| 929 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (772 | ) |
|
| (772 | ) |
Dividends declared ($0.29 per |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (174,018 | ) |
|
| — |
|
|
| — |
|
|
| (174,018 | ) |
Balance at March 31, 2022 |
|
| — |
|
| $ | — |
|
|
| 598,676 |
|
| $ | 599 |
|
| $ | 8,547,892 |
|
| $ | 369,972 |
|
| $ | (5,010 | ) |
| $ | 5,906 |
|
| $ | 8,919,359 |
|
See accompanying notes to condensed consolidated financial statements.
6
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Six Months |
|
| For the Three Months |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 822,011 |
|
| $ | 278,701 |
|
| $ | 33,030 |
|
| $ | 631,947 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 176,077 |
|
|
| 157,675 |
|
|
| 87,586 |
|
|
| 88,760 |
|
Amortization of deferred financing costs and debt discount |
|
| 9,219 |
|
|
| 7,692 |
|
|
| 4,014 |
|
|
| 5,285 |
|
Straight-line rent revenue and other |
|
| (145,725 | ) |
|
| (131,291 | ) |
|
| (58,566 | ) |
|
| (75,385 | ) |
Share-based compensation |
|
| 21,912 |
|
|
| 25,035 |
| ||||||||
Gain (loss) on sale of real estate and other, net |
|
| (467,993 | ) |
|
| 398 |
| ||||||||
Stock-based compensation |
|
| 11,829 |
|
|
| 11,804 |
| ||||||||
Gain on sale of real estate |
|
| (62 | ) |
|
| (451,638 | ) | ||||||||
Real estate and other impairment charges |
|
| 89,538 |
|
|
| 4,875 |
| ||||||||
Straight-line rent and other write-off (recovery) |
|
| 4,548 |
|
|
| (5,251 | ) |
|
| 2,192 |
|
|
| (2,271 | ) |
Debt refinancing and unutilized financing costs |
|
| 9,435 |
|
|
| 2,339 |
|
|
| — |
|
|
| 8,816 |
|
Tax rate changes |
|
| (825 | ) |
|
| 42,746 |
| ||||||||
Tax rate changes and other |
|
| (7,305 | ) |
|
| — |
| ||||||||
Other adjustments |
|
| (13,171 | ) |
|
| 12,909 |
|
|
| (8,505 | ) |
|
| (1,040 | ) |
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and rent receivables |
|
| (44,224 | ) |
|
| (24,999 | ) |
|
| (514 | ) |
|
| (12,431 | ) |
Other assets |
|
| (6,343 | ) |
|
| (2,633 | ) |
|
| (2,493 | ) |
|
| (41 | ) |
Accounts payable and accrued expenses |
|
| (15,558 | ) |
|
| 19,320 |
|
|
| (15,696 | ) |
|
| (21,648 | ) |
Deferred revenue |
|
| (5,347 | ) |
|
| (17,383 | ) |
|
| 600 |
|
|
| (7,646 | ) |
Net cash provided by operating activities |
|
| 344,016 |
|
|
| 365,258 |
|
|
| 135,648 |
|
|
| 179,387 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for acquisitions and other related investments |
|
| (946,243 | ) |
|
| (3,062,029 | ) |
|
| (72,900 | ) |
|
| (724,795 | ) |
Net proceeds from sale of real estate |
|
| 1,817,642 |
|
|
| 25,186 |
|
|
| 100 |
|
|
| 1,711,608 |
|
Principal received on loans receivable |
|
| 19,478 |
|
|
| 1,206,699 |
|
|
| 221,876 |
|
|
| 6,355 |
|
Investment in loans receivable |
|
| (175,734 | ) |
|
| (24,487 | ) |
|
| (50,000 | ) |
|
| (10,414 | ) |
Construction in progress and other |
|
| (91,167 | ) |
|
| (21,436 | ) |
|
| (13,292 | ) |
|
| (36,115 | ) |
Proceeds from return of equity investment |
|
| 775 |
|
|
| 11,000 |
| ||||||||
Capital additions and other investments, net |
|
| (90,623 | ) |
|
| (97,758 | ) |
|
| (68,606 | ) |
|
| (67,605 | ) |
Net cash provided by (used for) investing activities |
|
| 534,128 |
|
|
| (1,962,825 | ) | ||||||||
Net cash provided by investing activities |
|
| 17,178 |
|
|
| 879,034 |
| ||||||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from term debt, net of discount |
|
| 0 |
|
|
| 1,839,735 |
| ||||||||
Payments of term debt |
|
| (869,606 | ) |
|
| (689,450 | ) |
|
| — |
|
|
| (869,606 | ) |
Revolving credit facilities, net |
|
| 200,945 |
|
|
| 42,323 |
|
|
| 95,919 |
|
|
| (198,599 | ) |
Dividends paid |
|
| (350,519 | ) |
|
| (311,109 | ) |
|
| (176,580 | ) |
|
| (176,494 | ) |
Lease deposits and other obligations to tenants |
|
| 3,174 |
|
|
| 322 |
|
|
| (2,691 | ) |
|
| 15,168 |
|
Proceeds from sale of common shares, net of offering costs |
|
| 0 |
|
|
| 900,574 |
| ||||||||
Stock vesting - satisfaction of tax withholdings |
|
| (28,799 | ) |
|
| — |
|
|
| (5,554 | ) |
|
| (27,919 | ) |
Payment of debt refinancing, deferred financing costs, and other financing activities |
|
| (17,917 | ) |
|
| (23,489 | ) |
|
| (219 | ) |
|
| (6,366 | ) |
Net cash (used for) provided by financing activities |
|
| (1,062,722 | ) |
|
| 1,758,906 |
| ||||||||
(Decrease) increase in cash, cash equivalents, and restricted cash for period |
|
| (184,578 | ) |
|
| 161,339 |
| ||||||||
Net cash used for financing activities |
|
| (89,125 | ) |
|
| (1,263,816 | ) | ||||||||
Increase (decrease) in cash, cash equivalents, and restricted cash for period |
|
| 63,701 |
|
|
| (205,395 | ) | ||||||||
Effect of exchange rate changes |
|
| (14,786 | ) |
|
| 6,173 |
|
|
| 2,927 |
|
|
| (4,721 | ) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 461,882 |
|
|
| 556,369 |
|
|
| 241,538 |
|
|
| 461,882 |
|
Cash, cash equivalents, and restricted cash at end of period |
| $ | 262,518 |
|
| $ | 723,881 |
|
| $ | 308,166 |
|
| $ | 251,766 |
|
Interest paid |
| $ | 209,445 |
|
| $ | 160,985 |
|
| $ | 116,436 |
|
| $ | 111,012 |
|
Supplemental schedule of non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Dividends declared, unpaid |
| $ | 174,017 |
|
| $ | 165,133 |
|
| $ | 174,492 |
|
| $ | 174,018 |
|
Cash, cash equivalents, and restricted cash are comprised of the following: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning of period: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 459,227 |
|
| $ | 549,884 |
|
| $ | 235,668 |
|
| $ | 459,227 |
|
Restricted cash, included in Other assets |
|
| 2,655 |
|
|
| 6,485 |
|
|
| 5,870 |
|
|
| 2,655 |
|
|
| $ | 461,882 |
|
| $ | 556,369 |
|
| $ | 241,538 |
|
| $ | 461,882 |
|
End of period: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 257,269 |
|
| $ | 721,321 |
|
| $ | 302,321 |
|
| $ | 248,846 |
|
Restricted cash, included in Other assets |
|
| 5,249 |
|
|
| 2,560 |
|
|
| 5,845 |
|
|
| 2,920 |
|
|
| $ | 262,518 |
|
| $ | 723,881 |
|
| $ | 308,166 |
|
| $ | 251,766 |
|
See accompanying notes to condensed consolidated financial statements.
7
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
| June 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(In thousands) |
| (Unaudited) |
|
| (Note 2) |
|
| (Unaudited) |
|
| (Note 2) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Land, buildings and improvements, intangible lease assets, and other |
| $ | 13,696,681 |
|
| $ | 14,062,722 |
|
| $ | 13,092,510 |
|
| $ | 13,862,415 |
|
Investment in financing leases |
|
| 2,076,813 |
|
|
| 2,053,327 |
|
|
| 1,582,416 |
|
|
| 1,691,323 |
|
Real estate held for sale |
|
| — |
|
|
| 1,096,505 |
|
|
| 881,587 |
|
|
| — |
|
Mortgage loans |
|
| 314,681 |
|
|
| 213,211 |
|
|
| 346,446 |
|
|
| 364,101 |
|
Gross investment in real estate assets |
|
| 16,088,175 |
|
|
| 17,425,765 |
|
|
| 15,902,959 |
|
|
| 15,917,839 |
|
Accumulated depreciation and amortization |
|
| (1,109,592 | ) |
|
| (993,100 | ) |
|
| (1,207,699 | ) |
|
| (1,193,312 | ) |
Net investment in real estate assets |
|
| 14,978,583 |
|
|
| 16,432,665 |
|
|
| 14,695,260 |
|
|
| 14,724,527 |
|
Cash and cash equivalents |
|
| 257,269 |
|
|
| 459,227 |
|
|
| 302,321 |
|
|
| 235,668 |
|
Interest and rent receivables |
|
| 94,206 |
|
|
| 56,229 |
| ||||||||
Interest and rent receivables, net |
|
| 169,511 |
|
|
| 167,035 |
| ||||||||
Straight-line rent receivables |
|
| 702,683 |
|
|
| 728,522 |
|
|
| 810,911 |
|
|
| 787,166 |
|
Investments in unconsolidated real estate joint ventures |
|
| 1,460,373 |
|
|
| 1,152,927 |
|
|
| 1,506,474 |
|
|
| 1,497,903 |
|
Investments in unconsolidated operating entities |
|
| 1,439,910 |
|
|
| 1,289,434 |
|
|
| 1,310,460 |
|
|
| 1,444,872 |
|
Other loans |
|
| 213,897 |
|
|
| 67,317 |
|
|
| 276,367 |
|
|
| 227,839 |
|
Other assets |
|
| 596,163 |
|
|
| 333,480 |
|
|
| 578,853 |
|
|
| 572,990 |
|
Total Assets |
| $ | 19,743,084 |
|
| $ | 20,519,801 |
|
| $ | 19,650,157 |
|
| $ | 19,658,000 |
|
Liabilities and Capital |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt, net |
| $ | 10,138,774 |
|
| $ | 11,282,770 |
|
| $ | 10,438,151 |
|
| $ | 10,268,412 |
|
Accounts payable and accrued expenses |
|
| 387,848 |
|
|
| 430,908 |
|
|
| 420,387 |
|
|
| 444,354 |
|
Deferred revenue |
|
| 21,210 |
|
|
| 25,563 |
|
|
| 29,391 |
|
|
| 27,727 |
|
Obligations to tenants and other lease liabilities |
|
| 154,974 |
|
|
| 158,005 |
|
|
| 144,092 |
|
|
| 146,130 |
|
Payable due to Medical Properties Trust, Inc. |
|
| 174,017 |
|
|
| 176,494 |
|
|
| 174,492 |
|
|
| 176,580 |
|
Total Liabilities |
|
| 10,876,823 |
|
|
| 12,073,740 |
|
|
| 11,206,513 |
|
|
| 11,063,203 |
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General Partner — issued and outstanding — 5,988 units at |
|
| 89,511 |
|
|
| 84,847 |
| ||||||||
Limited Partners — issued and outstanding — 592,851 units at |
|
| 8,854,143 |
|
|
| 8,392,458 |
| ||||||||
General Partner — issued and outstanding — 5,984 units at |
|
| 85,244 |
|
|
| 86,599 |
| ||||||||
Limited Partners — issued and outstanding — 592,318 units at |
|
| 8,431,745 |
|
|
| 8,565,813 |
| ||||||||
Accumulated other comprehensive loss |
|
| (83,431 | ) |
|
| (36,727 | ) |
|
| (74,919 | ) |
|
| (59,184 | ) |
Total MPT Operating Partnership, L.P. capital |
|
| 8,860,223 |
|
|
| 8,440,578 |
|
|
| 8,442,070 |
|
|
| 8,593,228 |
|
Non-controlling interests |
|
| 6,038 |
|
|
| 5,483 |
|
|
| 1,574 |
|
|
| 1,569 |
|
Total Capital |
|
| 8,866,261 |
|
|
| 8,446,061 |
|
|
| 8,443,644 |
|
|
| 8,594,797 |
|
Total Liabilities and Capital |
| $ | 19,743,084 |
|
| $ | 20,519,801 |
|
| $ | 19,650,157 |
|
| $ | 19,658,000 |
|
See accompanying notes to condensed consolidated financial statements.
8
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Net Income
(Unaudited)
|
| For the Three Months |
|
| For the Six Months |
|
| For the Three Months |
| |||||||||||||||
(In thousands, except per unit amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Rent billed |
| $ | 241,209 |
|
| $ | 216,870 |
|
| $ | 504,611 |
|
| $ | 430,214 |
|
| $ | 248,157 |
|
| $ | 263,402 |
|
Straight-line rent |
|
| 58,518 |
|
|
| 55,465 |
|
|
| 119,562 |
|
|
| 110,338 |
|
|
| 56,693 |
|
|
| 61,044 |
|
Income from financing leases |
|
| 51,873 |
|
|
| 50,337 |
|
|
| 103,649 |
|
|
| 101,231 |
|
|
| 13,195 |
|
|
| 51,776 |
|
Interest and other income |
|
| 48,626 |
|
|
| 59,120 |
|
|
| 82,204 |
|
|
| 102,774 |
|
|
| 32,166 |
|
|
| 33,578 |
|
Total revenues |
|
| 400,226 |
|
|
| 381,792 |
|
|
| 810,026 |
|
|
| 744,557 |
|
|
| 350,211 |
|
|
| 409,800 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest |
|
| 87,730 |
|
|
| 92,305 |
|
|
| 178,913 |
|
|
| 179,277 |
|
|
| 97,654 |
|
|
| 91,183 |
|
Real estate depreciation and amortization |
|
| 84,334 |
|
|
| 76,369 |
|
|
| 169,650 |
|
|
| 152,011 |
|
|
| 83,860 |
|
|
| 85,316 |
|
Property-related |
|
| 21,135 |
|
|
| 18,684 |
|
|
| 29,733 |
|
|
| 24,137 |
|
|
| 7,110 |
|
|
| 8,598 |
|
General and administrative |
|
| 38,858 |
|
|
| 34,545 |
|
|
| 80,282 |
|
|
| 70,618 |
|
|
| 41,724 |
|
|
| 41,424 |
|
Total expenses |
|
| 232,057 |
|
|
| 221,903 |
|
|
| 458,578 |
|
|
| 426,043 |
|
|
| 230,348 |
|
|
| 226,521 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Gain (loss) on sale of real estate and other, net |
|
| 16,355 |
|
|
| (1,387 | ) |
|
| 467,993 |
|
|
| (398 | ) | ||||||||
Other (expense) income |
|
|
|
|
|
| ||||||||||||||||||
Gain on sale of real estate |
|
| 62 |
|
|
| 451,638 |
| ||||||||||||||||
Real estate and other impairment charges |
|
| (89,538 | ) |
|
| (4,875 | ) | ||||||||||||||||
Earnings from equity interests |
|
| 14,785 |
|
|
| 7,339 |
|
|
| 22,123 |
|
|
| 14,440 |
|
|
| 11,352 |
|
|
| 7,338 |
|
Debt refinancing and unutilized financing costs |
|
| (619 | ) |
|
| (70 | ) |
|
| (9,435 | ) |
|
| (2,339 | ) |
|
| — |
|
|
| (8,816 | ) |
Other (including fair value adjustments on securities) |
|
| 2,031 |
|
|
| (771 | ) |
|
| 11,918 |
|
|
| 7,023 |
|
|
| (5,166 | ) |
|
| 14,762 |
|
Total other income |
|
| 32,552 |
|
|
| 5,111 |
|
|
| 492,599 |
|
|
| 18,726 |
| ||||||||
Total other (expense) income |
|
| (83,290 | ) |
|
| 460,047 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income before income tax |
|
| 200,721 |
|
|
| 165,000 |
|
|
| 844,047 |
|
|
| 337,240 |
|
|
| 36,573 |
|
|
| 643,326 |
|
Income tax expense |
|
| (10,657 | ) |
|
| (50,179 | ) |
|
| (22,036 | ) |
|
| (58,539 | ) |
|
| (3,543 | ) |
|
| (11,379 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
|
| 190,064 |
|
|
| 114,821 |
|
|
| 822,011 |
|
|
| 278,701 |
|
|
| 33,030 |
|
|
| 631,947 |
|
Net income attributable to non-controlling interests |
|
| (467 | ) |
|
| (256 | ) |
|
| (733 | ) |
|
| (353 | ) |
|
| (236 | ) |
|
| (266 | ) |
Net income attributable to MPT Operating Partnership |
| $ | 189,597 |
|
| $ | 114,565 |
|
| $ | 821,278 |
|
| $ | 278,348 |
|
| $ | 32,794 |
|
| $ | 631,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Earnings per unit — basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income attributable to MPT Operating Partnership partners |
| $ | 0.32 |
|
| $ | 0.19 |
|
| $ | 1.37 |
|
| $ | 0.48 |
|
| $ | 0.05 |
|
| $ | 1.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted average units outstanding — basic |
|
| 598,827 |
|
|
| 587,514 |
|
|
| 598,751 |
|
|
| 581,877 |
|
|
| 598,302 |
|
|
| 598,676 |
|
Weighted average units outstanding — diluted |
|
| 599,026 |
|
|
| 589,053 |
|
|
| 598,979 |
|
|
| 583,297 |
|
|
| 598,310 |
|
|
| 598,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Dividends declared per unit |
| $ | 0.29 |
|
| $ | 0.28 |
|
| $ | 0.58 |
|
| $ | 0.56 |
|
| $ | 0.29 |
|
| $ | 0.29 |
|
See accompanying notes to condensed consolidated financial statements.
9
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| For the Three Months |
|
| For the Six Months |
|
| For the Three Months |
| |||||||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Net income |
| $ | 190,064 |
|
| $ | 114,821 |
|
| $ | 822,011 |
|
| $ | 278,701 |
|
| $ | 33,030 |
|
| $ | 631,947 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized gain on interest rate swaps, net of tax |
|
| 25,920 |
|
|
| 4,207 |
|
|
| 70,852 |
|
|
| 19,711 |
| ||||||||
Foreign currency translation (loss) gain |
|
| (104,341 | ) |
|
| 9,014 |
|
|
| (117,556 | ) |
|
| (21,886 | ) | ||||||||
Unrealized (loss) gain on interest rate swaps, net of tax |
|
| (15,325 | ) |
|
| 44,932 |
| ||||||||||||||||
Foreign currency translation gain (loss) |
|
| 28,143 |
|
|
| (13,215 | ) | ||||||||||||||||
Reclassification of interest rate swap gain from AOCI, net of tax |
|
| (28,553 | ) |
|
| — |
| ||||||||||||||||
Total comprehensive income |
|
| 111,643 |
|
|
| 128,042 |
|
|
| 775,307 |
|
|
| 276,526 |
|
|
| 17,295 |
|
|
| 663,664 |
|
Comprehensive income attributable to non-controlling interests |
|
| (467 | ) |
|
| (256 | ) |
|
| (733 | ) |
|
| (353 | ) |
|
| (236 | ) |
|
| (266 | ) |
Comprehensive income attributable to MPT Operating Partnership |
| $ | 111,176 |
|
| $ | 127,786 |
|
| $ | 774,574 |
|
| $ | 276,173 |
|
| $ | 17,059 |
|
| $ | 663,398 |
|
See accompanying notes to condensed consolidated financial statements.
10
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Capital
(Unaudited)
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| Partner |
|
| Common |
|
| Other |
|
| Non- |
|
|
|
|
| Partner |
|
| Common |
|
| Other |
|
| Non- |
|
|
|
| ||||||||||||||||||||||||||
(In thousands, except per unit amounts) |
| Units |
|
| Unit |
|
| Units |
|
| Unit |
|
| Comprehensive |
|
| Controlling |
|
| Total |
|
| Units |
|
| Unit |
|
| Units |
|
| Unit |
|
| Comprehensive |
|
| Controlling |
|
| Total |
| ||||||||||||||
Balance at December 31, 2021 |
|
| 5,968 |
|
| $ | 84,847 |
|
|
| 590,780 |
|
| $ | 8,392,458 |
|
| $ | (36,727 | ) |
| $ | 5,483 |
|
| $ | 8,446,061 |
| ||||||||||||||||||||||||||||
Balance at December 31, 2022 |
|
| 5,976 |
|
| $ | 86,599 |
|
|
| 591,500 |
|
| $ | 8,565,813 |
|
| $ | (59,184 | ) |
| $ | 1,569 |
|
| $ | 8,594,797 |
| ||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 6,317 |
|
|
| — |
|
|
| 625,364 |
|
|
| — |
|
|
| 266 |
|
|
| 631,947 |
|
|
| — |
|
|
| 328 |
|
|
| — |
|
|
| 32,466 |
|
|
| — |
|
|
| 236 |
|
|
| 33,030 |
|
Unrealized gain on interest rate swaps, |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,932 |
|
|
| — |
|
|
| 44,932 |
| ||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13,215 | ) |
|
| — |
|
|
| (13,215 | ) | ||||||||||||||||||||||||||||
Unit vesting and amortization of unit-based |
|
| 31 |
|
|
| 118 |
|
|
| 3,076 |
|
|
| 11,686 |
|
|
| — |
|
|
| — |
|
|
| 11,804 |
| ||||||||||||||||||||||||||||
Unit vesting - satisfaction of tax |
|
| (12 | ) |
|
| (279 | ) |
|
| (1,167 | ) |
|
| (27,640 | ) |
|
| — |
|
|
| — |
|
|
| (27,919 | ) | ||||||||||||||||||||||||||||
Acquisition of non-controlling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 929 |
|
|
| 929 |
| ||||||||||||||||||||||||||||
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (772 | ) |
|
| (772 | ) | ||||||||||||||||||||||||||||
Distributions declared ($0.29 per unit) |
|
| — |
|
|
| (1,740 | ) |
|
| — |
|
|
| (172,278 | ) |
|
| — |
|
|
| — |
|
|
| (174,018 | ) | ||||||||||||||||||||||||||||
Balance at March 31, 2022 |
|
| 5,987 |
|
| $ | 89,263 |
|
|
| 592,689 |
|
| $ | 8,829,590 |
|
| $ | (5,010 | ) |
| $ | 5,906 |
|
| $ | 8,919,749 |
| ||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 1,896 |
|
|
| — |
|
|
| 187,701 |
|
|
| — |
|
|
| 467 |
|
|
| 190,064 |
| ||||||||||||||||||||||||||||
Unrealized gain on interest rate swaps, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,920 |
|
|
| — |
|
|
| 25,920 |
| ||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (104,341 | ) |
|
| — |
|
|
| (104,341 | ) | ||||||||||||||||||||||||||||
Unrealized loss on interest rate swaps, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,325 | ) |
|
| — |
|
|
| (15,325 | ) | ||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,143 |
|
|
| — |
|
|
| 28,143 |
| ||||||||||||||||||||||||||||
Reclassification of interest rate swap gain to |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,553 | ) |
|
| — |
|
|
| (28,553 | ) | ||||||||||||||||||||||||||||
Unit vesting and amortization of unit-based |
|
| 2 |
|
|
| 101 |
|
|
| 202 |
|
|
| 10,007 |
|
|
| — |
|
|
| — |
|
|
| 10,108 |
|
|
| 13 |
|
|
| 118 |
|
|
| 1,312 |
|
|
| 11,711 |
|
|
| — |
|
|
| — |
|
|
| 11,829 |
|
Unit vesting - satisfaction of tax |
|
| (1 | ) |
|
| (9 | ) |
|
| (40 | ) |
|
| (871 | ) |
|
| — |
|
|
| — |
|
|
| (880 | ) |
|
| (5 | ) |
|
| (56 | ) |
|
| (494 | ) |
|
| (5,498 | ) |
|
| — |
|
|
| — |
|
|
| (5,554 | ) |
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (335 | ) |
|
| (335 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (231 | ) |
|
| (231 | ) |
Distributions declared ($0.29 per unit) |
|
| — |
|
|
| (1,740 | ) |
|
| — |
|
|
| (172,284 | ) |
|
| — |
|
|
| — |
|
|
| (174,024 | ) |
|
| — |
|
|
| (1,745 | ) |
|
| — |
|
|
| (172,747 | ) |
|
| — |
|
|
| — |
|
|
| (174,492 | ) |
Balance at June 30, 2022 |
|
| 5,988 |
|
| $ | 89,511 |
|
|
| 592,851 |
|
| $ | 8,854,143 |
|
| $ | (83,431 | ) |
| $ | 6,038 |
|
| $ | 8,866,261 |
| ||||||||||||||||||||||||||||
Balance at March 31, 2023 |
|
| 5,984 |
|
| $ | 85,244 |
|
|
| 592,318 |
|
| $ | 8,431,745 |
|
| $ | (74,919 | ) |
| $ | 1,574 |
|
| $ | 8,443,644 |
|
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
| |||||||||||||
|
| Partner |
|
| Common |
|
| Other |
|
| Non- |
|
|
|
| |||||||||||||
(In thousands, except per unit amounts) |
| Units |
|
| Unit |
|
| Units |
|
| Unit |
|
| Comprehensive |
|
| Controlling |
|
| Total |
| |||||||
Balance at December 31, 2021 |
|
| 5,968 |
|
| $ | 84,847 |
|
|
| 590,780 |
|
| $ | 8,392,458 |
|
| $ | (36,727 | ) |
| $ | 5,483 |
|
| $ | 8,446,061 |
|
Net income |
|
| — |
|
|
| 6,317 |
|
|
| — |
|
|
| 625,364 |
|
|
| — |
|
|
| 266 |
|
|
| 631,947 |
|
Unrealized gain on interest rate swaps, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44,932 |
|
|
| — |
|
|
| 44,932 |
|
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13,215 | ) |
|
| — |
|
|
| (13,215 | ) |
Unit vesting and amortization of unit-based |
|
| 31 |
|
|
| 118 |
|
|
| 3,076 |
|
|
| 11,686 |
|
|
| — |
|
|
| — |
|
|
| 11,804 |
|
Unit vesting - satisfaction of tax |
|
| (12 | ) |
|
| (279 | ) |
|
| (1,167 | ) |
|
| (27,640 | ) |
|
| — |
|
|
| — |
|
|
| (27,919 | ) |
Issuance of non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 929 |
|
|
| 929 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (772 | ) |
|
| (772 | ) |
Distributions declared ($0.29 per unit) |
|
| — |
|
|
| (1,740 | ) |
|
| — |
|
|
| (172,278 | ) |
|
| — |
|
|
| — |
|
|
| (174,018 | ) |
Balance at March 31, 2022 |
|
| 5,987 |
|
| $ | 89,263 |
|
|
| 592,689 |
|
| $ | 8,829,590 |
|
| $ | (5,010 | ) |
| $ | 5,906 |
|
| $ | 8,919,749 |
|
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
| |||||||||||||
|
| Partner |
|
| Common |
|
| Other |
|
| Non- |
|
|
|
| |||||||||||||
(In thousands, except per unit amounts) |
| Units |
|
| Unit |
|
| Units |
|
| Unit |
|
| Comprehensive |
|
| Controlling |
|
| Total |
| |||||||
Balance at December 31, 2020 |
|
| 5,414 |
|
| $ | 73,977 |
|
|
| 535,939 |
|
| $ | 7,316,269 |
|
| $ | (51,324 | ) |
| $ | 5,325 |
|
| $ | 7,344,247 |
|
Net income |
|
| — |
|
|
| 1,638 |
|
|
| — |
|
|
| 162,145 |
|
|
| — |
|
|
| 97 |
|
|
| 163,880 |
|
Unrealized gain on interest rate swaps, |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,504 |
|
|
| — |
|
|
| 15,504 |
|
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,900 | ) |
|
| — |
|
|
| (30,900 | ) |
Unit vesting and amortization of unit-based |
|
| 17 |
|
|
| 123 |
|
|
| 1,724 |
|
|
| 12,141 |
|
|
| — |
|
|
| — |
|
|
| 12,264 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (193 | ) |
|
| (193 | ) |
Proceeds from offering (net of offering |
|
| 399 |
|
|
| 7,792 |
|
|
| 39,550 |
|
|
| 771,449 |
|
|
| — |
|
|
| — |
|
|
| 779,241 |
|
Distributions declared ($0.28 per unit) |
|
| — |
|
|
| (1,634 | ) |
|
| — |
|
|
| (161,809 | ) |
|
| — |
|
|
| — |
|
|
| (163,443 | ) |
Balance at March 31, 2021 |
|
| 5,830 |
|
| $ | 81,896 |
|
|
| 577,213 |
|
| $ | 8,100,195 |
|
| $ | (66,720 | ) |
| $ | 5,229 |
|
| $ | 8,120,600 |
|
Net income |
|
| — |
|
|
| 1,146 |
|
|
| — |
|
|
| 113,419 |
|
|
| — |
|
|
| 256 |
|
|
| 114,821 |
|
Unrealized gain on interest rate swaps, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,207 |
|
|
| — |
|
|
| 4,207 |
|
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,014 |
|
|
| — |
|
|
| 9,014 |
|
Unit vesting and amortization of unit-based |
|
| 2 |
|
|
| 128 |
|
|
| 174 |
|
|
| 12,643 |
|
|
| — |
|
|
| — |
|
|
| 12,771 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (142 | ) |
|
| (142 | ) |
Proceeds from offering (net of offering |
|
| 58 |
|
|
| 1,213 |
|
|
| 5,621 |
|
|
| 120,120 |
|
|
| — |
|
|
| — |
|
|
| 121,333 |
|
Distributions declared ($0.28 per unit) |
|
| — |
|
|
| (1,651 | ) |
|
| — |
|
|
| (163,482 | ) |
|
| — |
|
|
| — |
|
|
| (165,133 | ) |
Balance at June 30, 2021 |
|
| 5,890 |
|
| $ | 82,732 |
|
|
| 583,008 |
|
| $ | 8,182,895 |
|
| $ | (53,499 | ) |
| $ | 5,343 |
|
| $ | 8,217,471 |
|
See accompanying notes to condensed consolidated financial statements.
11
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Six Months |
|
| For the Three Months |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 822,011 |
|
| $ | 278,701 |
|
| $ | 33,030 |
|
| $ | 631,947 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 176,077 |
|
|
| 157,675 |
|
|
| 87,586 |
|
|
| 88,760 |
|
Amortization of deferred financing costs and debt discount |
|
| 9,219 |
|
|
| 7,692 |
|
|
| 4,014 |
|
|
| 5,285 |
|
Straight-line rent revenue and other |
|
| (145,725 | ) |
|
| (131,291 | ) |
|
| (58,566 | ) |
|
| (75,385 | ) |
Unit-based compensation |
|
| 21,912 |
|
|
| 25,035 |
|
|
| 11,829 |
|
|
| 11,804 |
|
Gain on sale of real estate and other, net |
|
| (467,993 | ) |
|
| 398 |
| ||||||||
Gain on sale of real estate |
|
| (62 | ) |
|
| (451,638 | ) | ||||||||
Real estate and other impairment charges |
|
| 89,538 |
|
|
| 4,875 |
| ||||||||
Straight-line rent and other write-off (recovery) |
|
| 4,548 |
|
|
| (5,251 | ) |
|
| 2,192 |
|
|
| (2,271 | ) |
Debt refinancing and unutilized financing costs |
|
| 9,435 |
|
|
| 2,339 |
|
|
| — |
|
|
| 8,816 |
|
Tax rate changes |
|
| (825 | ) |
|
| 42,746 |
| ||||||||
Tax rate changes and other |
|
| (7,305 | ) |
|
| — |
| ||||||||
Other adjustments |
|
| (13,171 | ) |
|
| 12,909 |
|
|
| (8,505 | ) |
|
| (1,040 | ) |
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and rent receivables |
|
| (44,224 | ) |
|
| (24,999 | ) |
|
| (514 | ) |
|
| (12,431 | ) |
Other assets |
|
| (6,343 | ) |
|
| (2,633 | ) |
|
| (2,493 | ) |
|
| (41 | ) |
Accounts payable and accrued expenses |
|
| (15,558 | ) |
|
| 19,320 |
|
|
| (15,696 | ) |
|
| (21,648 | ) |
Deferred revenue |
|
| (5,347 | ) |
|
| (17,383 | ) |
|
| 600 |
|
|
| (7,646 | ) |
Net cash provided by operating activities |
|
| 344,016 |
|
|
| 365,258 |
|
|
| 135,648 |
|
|
| 179,387 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for acquisitions and other related investments |
|
| (946,243 | ) |
|
| (3,062,029 | ) |
|
| (72,900 | ) |
|
| (724,795 | ) |
Net proceeds from sale of real estate |
|
| 1,817,642 |
|
|
| 25,186 |
|
|
| 100 |
|
|
| 1,711,608 |
|
Principal received on loans receivable |
|
| 19,478 |
|
|
| 1,206,699 |
|
|
| 221,876 |
|
|
| 6,355 |
|
Investment in loans receivable |
|
| (175,734 | ) |
|
| (24,487 | ) |
|
| (50,000 | ) |
|
| (10,414 | ) |
Construction in progress and other |
|
| (91,167 | ) |
|
| (21,436 | ) |
|
| (13,292 | ) |
|
| (36,115 | ) |
Proceeds from return of equity investment |
|
| 775 |
|
|
| 11,000 |
| ||||||||
Capital additions and other investments, net |
|
| (90,623 | ) |
|
| (97,758 | ) |
|
| (68,606 | ) |
|
| (67,605 | ) |
Net cash provided by (used for) investing activities |
|
| 534,128 |
|
|
| (1,962,825 | ) | ||||||||
Net cash provided by investing activities |
|
| 17,178 |
|
|
| 879,034 |
| ||||||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from term debt, net of discount |
|
| 0 |
|
|
| 1,839,735 |
| ||||||||
Payments of term debt |
|
| (869,606 | ) |
|
| (689,450 | ) |
|
| — |
|
|
| (869,606 | ) |
Revolving credit facilities, net |
|
| 200,945 |
|
|
| 42,323 |
|
|
| 95,919 |
|
|
| (198,599 | ) |
Distributions paid |
|
| (350,519 | ) |
|
| (311,109 | ) |
|
| (176,580 | ) |
|
| (176,494 | ) |
Lease deposits and other obligations to tenants |
|
| 3,174 |
|
|
| 322 |
|
|
| (2,691 | ) |
|
| 15,168 |
|
Proceeds from sale of units, net of offering costs |
|
| 0 |
|
|
| 900,574 |
| ||||||||
Unit vesting - satisfaction of tax withholdings |
|
| (28,799 | ) |
|
| — |
|
|
| (5,554 | ) |
|
| (27,919 | ) |
Payment of debt refinancing, deferred financing costs, and other financing activities |
|
| (17,917 | ) |
|
| (23,489 | ) |
|
| (219 | ) |
|
| (6,366 | ) |
Net cash (used for) provided by financing activities |
|
| (1,062,722 | ) |
|
| 1,758,906 |
| ||||||||
(Decrease) increase in cash, cash equivalents, and restricted cash for period |
|
| (184,578 | ) |
|
| 161,339 |
| ||||||||
Net cash used for financing activities |
|
| (89,125 | ) |
|
| (1,263,816 | ) | ||||||||
Increase (decrease) in cash, cash equivalents, and restricted cash for period |
|
| 63,701 |
|
|
| (205,395 | ) | ||||||||
Effect of exchange rate changes |
|
| (14,786 | ) |
|
| 6,173 |
|
|
| 2,927 |
|
|
| (4,721 | ) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 461,882 |
|
|
| 556,369 |
|
|
| 241,538 |
|
|
| 461,882 |
|
Cash, cash equivalents, and restricted cash at end of period |
| $ | 262,518 |
|
| $ | 723,881 |
|
| $ | 308,166 |
|
| $ | 251,766 |
|
Interest paid |
| $ | 209,445 |
|
| $ | 160,985 |
|
| $ | 116,436 |
|
| $ | 111,012 |
|
Supplemental schedule of non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Distributions declared, unpaid |
| $ | 174,017 |
|
| $ | 165,133 |
|
| $ | 174,492 |
|
| $ | 174,018 |
|
Cash, cash equivalents, and restricted cash are comprised of the following: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning of period: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 459,227 |
|
| $ | 549,884 |
|
| $ | 235,668 |
|
| $ | 459,227 |
|
Restricted cash, included in Other assets |
|
| 2,655 |
|
|
| 6,485 |
|
|
| 5,870 |
|
|
| 2,655 |
|
|
| $ | 461,882 |
|
| $ | 556,369 |
|
| $ | 241,538 |
|
| $ | 461,882 |
|
End of period: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 257,269 |
|
| $ | 721,321 |
|
| $ | 302,321 |
|
| $ | 248,846 |
|
Restricted cash, included in Other assets |
|
| 5,249 |
|
|
| 2,560 |
|
|
| 5,845 |
|
|
| 2,920 |
|
|
| $ | 262,518 |
|
| $ | 723,881 |
|
| $ | 308,166 |
|
| $ | 251,766 |
|
See accompanying notes to condensed consolidated financial statements.
12
MEDICAL PROPERTIES TRUST, INC. AND MPT OPERATING PARTNERSHIP, L.P.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Medical Properties Trust, Inc., a Maryland corporation, was formed on August 27, 2003, under the Maryland General Corporation Law for the purpose of engaging in the business of investing in, owning, and leasing healthcare real estate. Our operating partnership subsidiary, MPT Operating Partnership, L.P. (the “Operating Partnership”), through which we conduct substantially all of our operations, was formed in September 2003. At present, we own all of the partnership interests in the Operating Partnership and have elected to report our required disclosures and that of the Operating Partnership on a combined basis, except where material differences exist.
We operate as a real estate investment trust (“REIT”). Accordingly, we willare generally not be subject to United States (“U.S.”) federal income tax on our REIT taxable income, provided that we continue to qualify as a REIT and our distributions to our stockholders equal or exceed oursuch taxable income. Certain non-real estate activities we undertake are conducted by entities which we elected to be treated as taxable REIT subsidiaries (“TRS”). Our TRS entities are subject to both U.S. federal and state income taxes. For our properties located outside the U.S., we are subject to the local taxes of the jurisdictions where our properties reside and/or legal entities are domiciled; however, we do not expect to incur additional taxes, of a significant nature, in the U.S. from foreign-based income as the majority of such income flows through our REIT.
Our primary business strategy is to acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases, which require the tenant to bear most of the costs associated with the property. The majority of our leased assets are owned 100%; however, we do own some leased assets through joint ventures with other partners that share our view that healthcare facilities are part of the infrastructure of any community, which we refer to as investments in unconsolidated real estate and improvements, primarily for long-term lease to providers of healthcare services, such as operators of general acute care hospitals, behavioral health facilities, inpatient physical rehabilitation facilities, long-term acute care hospitals, and freestanding ER/urgent care facilities.joint ventures. We also may make mortgage loans to healthcare operators collateralized by their real estate. In addition, we may make noncontrolling investments in our tenants (which we refer to as investments in unconsolidated operating entities), from time-to-time, typically in order toconjunction with larger real estate transactions with the tenant, which may enhance our overall return and provide for certain minority rights and protections.
Our business model facilitates acquisitions and recapitalizations, and allows operators of healthcare facilities to unlock the value of their real estate to fund facility improvements, technology upgrades, and other investments in operations. At June 30, 2022,March 31, 2023, we have investments in 447444 facilities in 3231 states in the U.S., in 7seven countries in Europe, 1one country in South America, and across Australia. Our properties consist of general acute care hospitals, behavioral health facilities, inpatient physical rehabilitation facilities, long-term acute care hospitals, and freestanding ER/urgent care facilities. We manage our business as a single business segment.
2. Summary of Significant Accounting Policies
Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information, including rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement have been included. Operating results for the three and six months ended June 30, 2022,March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.2023. The condensed consolidated balance sheet at December 31, 20212022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the U.S. for complete financial statements.
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We believe the estimates and assumptions underlying our condensed consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2022March 31, 2023 (particularly as it relates to our assessments of the recoverability of our real estate and the adequacy of our credit loss reserves on loans and financing receivables). Actual results could differ from these estimates for various reasons including the impact from COVID-19 and other risk factors as outlined in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
13
For information about significant accounting policies, (including any recent accounting developments), refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Except
13
for changes disclosed in our Quarterly Report on Form 10-Q for the period ended March 31, 2022, there2022. There have been no material changes to these significant accounting policies.
Reclassifications
Certain amounts in the condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation.
Variable Interest Entities
At June 30, 2022,March 31, 2023, we had loans and/or equity investments in certain variable interest entities approximating $620425 million, which represents our maximum exposure to loss as a result of our involvement in such entities. We have determined that we were not the primary beneficiary of any variable interest entity in which we hold a variable interest because we do not control the activities (such as the day-to-day operations) that most significantly impact the economic performance of these entities.
3. Real Estate and Other Activities
New Investments
We acquired or invested in the following net assets (in thousands):
|
| For the Six Months |
|
| For the Three Months |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Land and land improvements |
| $ | 34,204 |
|
| $ | 345,039 |
|
| $ | 9,313 |
|
| $ | 9,671 |
|
Buildings |
|
| 290,256 |
|
|
| 825,322 |
|
|
| 11,652 |
|
|
| 204,829 |
|
Intangible lease assets — subject to amortization (weighted-average useful |
|
| 16,949 |
|
|
| 96,455 |
| ||||||||
Mortgage loans(1)(2) |
|
| 100,000 |
|
|
| 1,090,400 |
| ||||||||
Intangible lease assets — subject to amortization (weighted-average useful |
|
| 1,935 |
|
|
| 5,461 |
| ||||||||
Investments in unconsolidated real estate joint ventures |
|
| 399,456 |
|
|
| — |
|
|
| — |
|
|
| 399,456 |
|
Investments in unconsolidated operating entities |
|
| 131,105 |
|
|
| 845,646 |
|
|
| 50,000 |
|
|
| 131,105 |
|
Liabilities assumed |
|
| (25,727 | ) |
|
| (65,411 | ) |
|
| — |
|
|
| (25,727 | ) |
|
|
| 946,243 |
|
|
| 3,137,451 |
|
| $ | 72,900 |
|
| $ | 724,795 |
|
Loans repaid(1) |
|
| — |
|
|
| (1,090,400 | ) |
|
| (22,900 | ) |
|
| — |
|
Total net assets acquired |
| $ | 946,243 |
|
| $ | 2,047,051 |
|
| $ | 50,000 |
|
| $ | 724,795 |
|
(2)2023 Activity
Lifepoint Transaction
On February 7, 2023, a subsidiary of Lifepoint Health, Inc. ("Lifepoint") acquired a majority interest in Springstone (the "Lifepoint Transaction") based on an enterprise value of $250 million. As part of the 2022 second quarter,transaction, we increasedreceived approximately $205 million in full satisfaction of our initial acquisition loan to Springstone, including accrued interest, and we retained our minority equity investment in the operations of Springstone. Separately, and as part of our acquisition in 2021 of Springstone's real estate assets, we converted a mortgage loan into the fee simple ownership of a property in Washington, which will be leased, along with the other 17 behavioral health hospitals already leased to Springstone, under the master lease agreement. In connection with the Lifepoint Transaction, Lifepoint extended its current lease with us on eight existing general acute care hospitals by five years to 2041.
Other Transactions
As part of an expected series of Prospect Medical Holdings, Inc. ("Prospect") that wascapital restructuring transactions, we originated a $50 million convertible loan to PHP Holdings, the managed care business of Prospect, in 2019 and that is secured by athe first lien on a California hospital.quarter of 2023. The loan bears interest at a current market rate plus a componentis
14
convertible into equity of additional interest upon repayment, which is anticipated during the fourth quarter.
2022 Activity
Macquarie Transaction
On March 14, 2022, we completed a transaction with Macquarie Asset Management (“MAM”), an unrelated party, to form a partnership (the “Macquarie Transaction”), pursuant to which we contributed eight Massachusetts-based general acute care hospitals that are leased to Steward Health Care System LLC ("Steward"), and a fund managed by MAM has acquired, for cash consideration, a 50% interest in the partnership. The transaction valued the portfolio at approximately $1.7 billion, and we recognized a gain on sale of real estate of approximately $600 million from this transaction, partially offset by the write-off of unbilled straight-line rent receivables. The partnership raised nonrecourse secured debt of 55% of asset value, and we received proceeds, including from the secured debt, of approximately $1.3 billion, virtually all of which was used to repay debt.billion. We obtained a 50% interest in the real estate partnership
14
valued at approximately $400 million (included in the "Investments in unconsolidated real estate joint ventures" line of theour condensed consolidated balance sheets), which is being accounted for under the equity method of accounting.
In connection with this transaction, we separated the eight Massachusetts-based facilities into a new master lease with terms generally identical to the other master lease, and the initial fixed lease term of both master leases was extended to 2041.
Other Transactions
On March 11, 2022, we acquired 4four general acute care hospitals in Finland for €178 million ($194 million). These hospitals are leased to Pihlajalinna pursuant to a long-term lease with annual inflation-based escalators. We acquired these facilities by purchasing the share purchaseshares of the real estate holding entities, thatwhich included deferred income tax and other liabilities of approximately $26 million.
On February 16, 2022, we agreed to participate in an existing syndicated term loan with a term of six years originated on behalf of Priory. WePriory Group ("Priory"), of which we funded £96.5 million towards a £100 million participation level in the variable rate loan, reflecting a loan.3.5% discount.
Other acquisitions in the first half of 2022 included 5 general acute care facilities. NaN general acute care facilities, located throughout Spain, were acquired on April 29, 2022 for €27 million and are leased to GenesisCare pursuant to a long-term lease with annual inflation-based escalators. The other 2 general acute care facilities, 1 in Arizona and the other in Florida, were acquired on April 18 and 25, 2022, respectively, for approximately $80 million and are leased to Steward pursuant to an already existing master lease agreement with annual inflation-based escalators.
2021 Activity
Priory Group Transaction
On January 19, 2021, we completed the first of two phases in the Priory transaction in which we funded an £800 million interim mortgage loan on an identified portfolio of Priory real estate assets in the United Kingdom. On June 25, 2021, we completed the second phase of the transaction in which we converted this interim mortgage loan to fee simple ownership in a portfolio of 35 select real estate assets from Priory (which is currently majority-owned by Waterland Private Equity Fund VII C.V. (“Waterland VII”)) in individual sale-and-leaseback transactions. Therefore, the net aggregate purchase price for the real estate assets we acquired from Priory was approximately £800 million, plus customary stamp duty, tax, and other transaction costs.
In addition to the real estate investment, on January 19, 2021, we made a £250 million interim acquisition loan to Waterland VII, in connection with the closing of Waterland VII’s acquisition of Priory, which was repaid in full plus interest on October 22, 2021.
In addition, we acquired a 9.9% equity interest in the Waterland VII affiliate that indirectly owns Priory.
Other Transactions
On April 16, 2021, we made a CHF 145 million investment in Swiss Medical Network, our tenant via our Infracore SA ("Infracore") equity investment.
On January 8, 2021, we made a $335 million loan to affiliates of Steward, all of the proceeds of which were used to pay to and redeem a similarly sized convertible loan from Steward’s former private equity sponsor. This loan now carries a 4 percent interest rate with possible additional returns based on the increase in the value of Steward. The initial term of the loan is seven years.
15
Development Activities
During the 2022 second quarter, we agreed to finance the development
See table below for a status summary of 4 new projects. One of theseour current development projects is a behavioral health facility in McKinney, Texas with a total budget of approximately $(in thousands):35
million. This facility will be leased to Springstone, LLC ("Springstone") pursuant to the existing long-term master lease. In addition, we agreed to finance the development of and lease 3 general acute care facilities located throughout Spain for a total commitment of approximately €120 million. These facilities will be leased to our existing tenant, IMED Hospitales ("IMED"), under a long-term master lease agreement.
Property |
| Commitment |
|
| Costs |
|
| Estimated Rent | ||
Ernest Health, Inc. ("Ernest") (Stockton, California) |
| $ | 47,700 |
|
| $ | 46,372 |
|
| 2Q 2023 |
IMED Hospitales ("IMED") (Spain) |
|
| 51,043 |
|
|
| 13,323 |
|
| 2Q 2023 |
Ernest (South Carolina) |
|
| 22,400 |
|
|
| 14,469 |
|
| 3Q 2023 |
IMED (Spain) |
|
| 45,976 |
|
|
| 37,568 |
|
| 3Q 2023 |
Springstone (Texas) |
|
| 31,600 |
|
|
| 4,099 |
|
| 1Q 2024 |
IMED (Spain) |
|
| 37,193 |
|
|
| 9,170 |
|
| 3Q 2024 |
Steward (Texas) |
|
| 169,408 |
|
|
| 57,059 |
|
| 1Q 2026 |
|
| $ | 405,320 |
|
| $ | 182,060 |
|
|
|
During the 2022 first quarter, we completed construction and began recording rental income on an inpatient rehabilitation facility located in Bakersfield, California. This facility commenced rent on March 1, 2022 and is being leased to Ernest Health, Inc. ("Ernest") pursuant to an existing long-term master lease.
See table below for a status summaryWe continue to fund the redevelopment of our current development projects (in thousands):Norwood facility in Massachusetts, and recovery receivables of approximately $150 million associated with the prior storm and flood damage to this facility are included in the "Other assets" line of our condensed consolidated balance sheets.
Disposals
Property |
| Commitment |
|
| Costs |
|
| Estimated Rent | ||
Steward (Texas) |
| $ | 169,408 |
|
| $ | 57,405 |
|
| 2Q 2024 |
IMED (Spain) |
|
| 49,371 |
|
|
| 12,542 |
|
| 2Q 2023 |
Ernest (California) |
|
| 47,700 |
|
|
| 42,073 |
|
| 3Q 2022 |
IMED (Spain) |
|
| 44,470 |
|
|
| 29,538 |
|
| 3Q 2023 |
IMED (Spain) |
|
| 35,975 |
|
|
| 8,000 |
|
| 3Q 2024 |
Springstone (Texas) |
|
| 34,600 |
|
|
| — |
|
| 1Q 2024 |
|
| $ | 381,524 |
|
| $ | 149,558 |
|
|
|
Disposals2023 Activity
On March 30, 2023, we entered into a definitive agreement to sell our 11 general acute care facilities located in Australia and operated by Healthscope Ltd. ("Healthscope") (the "Australia Transaction") to affiliates of HMC Capital for cash proceeds of approximately A$1.2 billion. As a result, we designated the Australian portfolio as held for sale and recorded an approximate $79
15
million net impairment charge, which included $37.4 million of straight-line rent receivables, an estimated $8 million in fees to sell the hospitals, and $13 million of accumulated other comprehensive loss related to foreign currency translation. This impairment charge was partially offset by approximately $29 million of deferred gains from our interest rate swap in accumulated other comprehensive income that was reclassified to earnings as part of this expected transaction. This transaction is expected to close in two phases with the first (and larger) phase expected to close in the second quarter and the full transaction expected to be complete by the end of 2023. We currently plan to use proceeds from the sale to prepay in full the Australian term loan.
On March 8, 2023, we received notice that Prime Healthcare Services, Inc. ("Prime") will exercise its right to repurchase from us during the third quarter of 2023 the real estate associated with one master lease for approximately $100 million. As such, we recorded an approximate $11 million non-cash impairment charge in the first quarter of 2023 related to unbilled rent on the three facilities expected to be sold.
Although we currently expect the Australia Transaction and Prime repurchase will occur as planned, no assurances can be given that the transactions will close as described above.
2022 Activity
On March 14, 2022, we completed the previously described partnership with MAM, in which we sold the real estate of 8eight Massachusetts-based general acute care hospitals, with a fair value of approximately $1.7 billion. See "New Investments" in this same Note 3 for further details on this transaction.
During the first halfthree months of 2022, we also completed the sale of 4two other facilities and 2an ancillary propertiesproperty for approximately $15448 million, resulting in a gain on real estate of approximately $3115 million.
Summary of Operations for Disposed (or to be Disposed) Assets in 2023 and 2022
The properties expected to be sold during 2023 and sold during 2022 do not meet the definition of discontinued operations. However, the following represents the operating results from these properties for the periods presented (in thousands):
|
| For the Three Months |
|
| For the Six Months |
|
| For the Three Months |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023(1) |
|
| 2022 |
| ||||||
Revenues |
| $ | (400 | ) |
| $ | 35,215 |
|
| $ | 20,948 |
|
| $ | 67,484 |
|
| $ | 18,877 |
|
| $ | 40,579 |
|
Real estate depreciation and amortization |
|
| (215 | ) |
|
| (8,205 | ) |
|
| (961 | ) |
|
| (16,254 | ) |
|
| (4,991 | ) |
|
| (5,247 | ) |
Property-related expenses |
|
| (1,310 | ) |
|
| (2,823 | ) |
|
| (1,854 | ) |
|
| (3,518 | ) |
|
| (1,413 | ) |
|
| (3,015 | ) |
Other income(3) |
|
| 16,348 |
|
|
| 63 |
|
|
| 467,957 |
|
|
| 135 |
| ||||||||
Real estate and other impairment charges(3) |
|
| (89,538 | ) |
|
| — |
| ||||||||||||||||
Other (expense) income(4) |
|
| (7,244 | ) |
|
| 444,268 |
| ||||||||||||||||
Income from real estate dispositions, net |
| $ | 14,423 |
|
| $ | 24,250 |
|
| $ | 486,090 |
|
| $ | 47,847 |
|
| $ | (84,309 | ) |
| $ | 476,585 |
|
16
2021 Activity
During the first half of 2021, we completed the sale of 5 facilities and an ancillary property for approximately $25 million, resulting in a net loss on real estate of approximately $0.4 million.
Leasing Operations (Lessor)
We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies. TheseThe initial fixed lease terms of these infrastructure-type assets generally require a longer term (typical initial fixed terms ofare typically at least 15 years),years, and most include renewal options at the election of our tenants, generally in five year increments. Over 99% of our leases provide annual rent escalations based on increases in the Consumer Price Index ("CPI") (or similar indices outside the U.S.) and/or fixed minimum annual rent escalations. Many of our domestic leases contain purchase options with pricing set at various terms but in no case less than our total initial investment. For 5 properties with a carrying value of approximately $230 million, our leases require a residual value guarantee from the tenant. Our leases typically require the tenant to handle and bear most of the costs associated with our properties including repair/maintenance, property taxes, and insurance. We routinely inspect our properties to ensure the residual value of each of our assets is being maintained. Except for leases classified as financing leases as noted below,
For all of our leasesproperties subject to lease, we are classifiedthe legal owner of the property, and the tenant's right to use and possess such property is guided by the terms of a lease. At March 31, 2023, we account for all of these leases as operating leases.
At June 30, 2022,leases, except where GAAP requires alternative classification, including leases on 13 Ernest facilities and 5 Prime Healthcare Services, Inc. ("Prime") facilitiesthat are accounted for as direct financing leases and
16
leases on 13 of our Prospect facilities and 5five of our Ernest facilities that are accounted for as a financing. The components of our total investment in financing leases consisted of the following (in thousands):
|
| As of June 30, |
|
| As of December 31, |
|
| As of March 31, |
|
| As of December 31, |
| ||||
Minimum lease payments receivable |
| $ | 1,160,820 |
|
| $ | 1,183,855 |
|
| $ | 626,721 |
|
| $ | 880,253 |
|
Estimated residual values |
|
| 203,818 |
|
|
| 203,818 |
| ||||||||
Estimated unguaranteed residual values |
|
| 203,818 |
|
|
| 203,818 |
| ||||||||
Less: Unearned income and allowance for credit loss |
|
| (893,158 | ) |
|
| (918,584 | ) |
|
| (588,097 | ) |
|
| (731,915 | ) |
Net investment in direct financing leases |
|
| 471,480 |
|
|
| 469,089 |
|
|
| 242,442 |
|
|
| 352,156 |
|
Other financing leases (net of allowance for credit loss) |
|
| 1,605,333 |
|
|
| 1,584,238 |
|
|
| 1,339,974 |
|
|
| 1,339,167 |
|
Total investment in financing leases |
| $ | 2,076,813 |
|
| $ | 2,053,327 |
|
| $ | 1,582,416 |
|
| $ | 1,691,323 |
|
COVID-19 Rent Deferrals
Due to the COVID-19 pandemic and its impact onThe decrease in our tenants' business, we agreed to defer collection of a certain amount of rent for a few tenants. Pursuant to our agreements with these tenants, we expect repayments of previously deferred rent to continue, with the remaining outstanding deferred rent balance of approximately $15.7 million as of June 30, 2022, to be paid over specified periods in the future with interest.
Halsen Healthcare
On September 30, 2019, we acquired the real estate of Watsonville Community Hospital in Watsonville, California for $40 million, which was then leased to Halsen Healthcare. In addition, we made a working capital loan to Halsen Healthcare. The hospital operator faced significant financial challenges over a two-year period that were worsened by revenue losses during the COVID-19 pandemic. During this time, we increased the loan in an effort to support the operator of this facility, allowing it to continue serving the community's needs. On December 5, 2021, Halsen Healthcare filed Chapter 11 bankruptcy in order to reorganize, while keeping the hospital open. As such, we have a credit loss reserve against the estimated uncollectible portion of the loan and have written off approximately $2.5 million of billed and straight-line rent receivables.
On February 23, 2022, the bankruptcy court approved the Pajaro Valley Healthcare District's bid to purchase the operations of the Watsonville Community Hospital and lease the real estate from us. Although there are certain hurdles still to be met, this transaction is progressing and expected to close during the third quarter of 2022. At June 30, 2022, we believe our currentnet investment in direct financing leases since December 31, 2022, is the Watsonville property, representing less than 0.3%result of total assets, is fully recoverable, but no assurances can be given that we will not have anyclassifying three Prime facilities as held for sale at March 31, 2023. See subsection above titled "Disposals" for further write-offs or impairments in future periods.information.
17
Other Leasing Activities
Prime has certain rights to repurchase from us during the third quarter the real estate associated with 2 master leases representing approximately $300 million of net book value at June 30, 2022. If this repurchase closes, we expect to receive cash proceeds approximating $370 million and recognize a gain, net of any straight-line rent write-offs.
At June 30, 2022,March 31, 2023, 99% of our properties are occupied by tenants, leaving 5five properties as vacant, representing less than 0.3% of total assets. We are in various stages of either releasing or selling these vacant properties, for one of which we received and recorded a significant termination fee in 2019.
As more fully described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K, our tenants’ financial performance and resulting ability to satisfy their lease and loan obligations to us are material to our financial results and our ability to service our debt and make distributions to our stockholders. Our tenants operate in the healthcare industry, which is highly regulated, and changes in regulation (or delays in enacting regulation) may temporarily impact our tenants’ operations until they are able to make the appropriate adjustments to their business. In addition, our tenants may experience operational challenges from time-to-time as a result of many factors, including those external to them, such as public health crises (like the coronavirus ("COVID-19") pandemic), economic issues resulting in high inflation and spikes in labor costs, and adverse market and political conditions. We monitor our tenants' operating results and the potential impact from these challenges. We may elect to provide support to our tenants from time-to-time in the form of short-term rent deferrals to be paid back in full (like as described below under COVID-19 Rent Deferrals and Pipeline Health System), or in the form of temporary loans (like as described below under Prospect Medical Holdings).
COVID-19 Rent Deferrals
Due to COVID-19 and its impact on our tenants' business, we agreed to defer collection of a certain amount of rent for certain tenants. Pursuant to our agreements with these tenants, we expect repayments of previously deferred rent to continue, with the remaining outstanding deferred rent balance of approximately $12.2 million as of March 31, 2023, to be paid over specified periods in the future with interest.
Pipeline Health System
On October 2, 2022, Pipeline filed for reorganization relief under Chapter 11 protection of the United States Bankruptcy Code in the Southern District of Texas, while keeping its hospitals open to continue providing care to the communities served. On February 6, 2023, Pipeline emerged from bankruptcy. Per the bankruptcy settlement, Pipeline's current lease of our California assets remains in place, and we were repaid on February 7, 2023 for all rent that was outstanding at December 31, 2022, along with what was due for the first quarter of 2023. We have agreed to defer $5.6 million, or approximately 30%, of rent in 2023 to be paid in 2024 with interest.
Prospect Medical Holdings
In August 2019, we invested in a portfolio of 14 acute care hospitals in three states (California, Pennsylvania, and Connecticut) operated by and master leased to or mortgaged by Prospect for a combined investment of approximately $1.5 billion. In addition, we originated a $112.9 million term loan cross-defaulted to the master lease and mortgage loan agreements and further secured by a parent guaranty. In the 2022 second quarter, we funded an additional $100 million towards the existing mortgage loan that is secured by a first lien on a California hospital.
Prospect's operations were negatively impacted by the COVID-19 global pandemic commencing in early 2020, but Prospect continued to remain current with respect to contractual rent and interest payments until the fourth quarter of 2022. Accordingly, and due further to termination of certain refinancing negotiations between Prospect and certain third parties, we recorded an approximate $280 million impairment charge in the 2022 fourth quarter. As part of this charge, we reduced the carrying value of the underperforming Pennsylvania properties by approximately $170 million (to approximately $250 million) and reserved all unbilled rent accruals for a total of $112 million. In the first quarter of 2023, we began accounting for Prospect revenue on a cash basis and did not recognize any rent or interest revenue in the quarter.
17
In late March 2023, Prospect received a binding commitment from several lenders that is expected to provide them with liquidity to pay down certain debt instruments. Along with these commitments from third-party lenders, we agreed to pursue certain transactions with Prospect that would result in the following: a) maintain the master lease covering six California hospitals with no changes in rental rates or escalator provisions, and with the expectation that Prospect will begin making cash payments for approximately 50% of the contractual monthly rent due on these California properties starting in September 2023, b) transition the Pennsylvania properties back to Prospect in return for a well-collateralized mortgage on the facilities, c) provide up to $75 million in a loan secured by a first lien on Prospect's accounts receivable and certain other assets, d) obtain a non-controlling ownership interest in Prospect's managed care business (PHP Holdings) equal in value to unpaid rent and interest, our $112.9 million term loan, and other obligations at the time of such investment, and e) complete the previously disclosed sale of the Connecticut properties to Yale New Haven ("Yale"), as more fully described in Note 9 to the condensed consolidated financial statements. As part of these capital restructuring steps (as discussed under "New Investments" in this same Note 3), we originated a $50 million loan to PHP Holdings in March 2023 that is convertible into equity of PHP Holdings. At March 31, 2023, we believe our remaining investment in the Prospect real estate and other assets are fully recoverable from the collateral available, but no assurances can be given that the transactions described above will occur or that we will not have any further impairments in future periods.
Investments in Unconsolidated Entities
Investments in Unconsolidated Real Estate Joint Ventures
Our primary business strategy is to acquire real estate and lease to providers of healthcare services. Typically, we directly own 100% of such fee simple real estate.investment. However, from time-to-time, we will co-invest with other investors that share a similar view that hospital real estate is a necessary infrastructure-type asset in communities. In these types of investments, we will own undivided interests of less than 100% of the real estate and share control over the assets through unconsolidated real estate joint ventures. The underlying real estate and leases in these unconsolidated real estate joint ventures are structured similarly and carry a similar risk profile to the rest of our real estate portfolio.
The following is a summary of our investments in unconsolidated real estate joint ventures by operator (amounts in thousands):
Operator |
| As of June 30, |
|
| As of December 31, |
|
| Ownership Percentage | As of March 31, |
|
| As of December 31, |
| ||||
Median Kliniken S.á.r.l ("MEDIAN") |
| $ | 477,509 |
|
| $ | 517,648 |
|
| 50% | $ | 483,706 |
|
| $ | 482,735 |
|
Swiss Medical Network |
|
| 434,323 |
|
|
| 476,193 |
|
| 70% |
| 461,952 |
|
|
| 454,083 |
|
Steward (Macquarie Transaction) |
|
| 408,681 |
|
|
| — |
|
| 50% |
| 416,068 |
|
|
| 417,701 |
|
Policlinico di Monza |
|
| 82,548 |
|
|
| 95,468 |
|
| 50% |
| 88,658 |
|
|
| 86,245 |
|
HM Hospitales |
|
| 57,312 |
|
|
| 63,618 |
|
| 45% |
| 56,090 |
|
|
| 57,139 |
|
Total |
| $ | 1,460,373 |
|
| $ | 1,152,927 |
|
|
| $ | 1,506,474 |
|
| $ | 1,497,903 |
|
See "New Investments" section in this same Note 3 for a discussion of the Macquarie Transaction. Through the first half of 2022, we earned approximately $50 million of dividends from these real estate joint ventures, including approximately $27 million of annual dividends from our joint venture in Switzerland.
Investments in Unconsolidated Operating Entities
Our investments in unconsolidated operating entities are noncontrolling investments that are typically made in conjunction with larger real estate transactions in which the operators are vetted as part of our overall underwriting process. In many cases, we would
18
not be able to acquire the larger real estate portfolio without such investments in operators. These investments also offer the opportunity to enhance our overall return and provide for certain minority rights and protections.
18
The following is a summary of our investments in unconsolidated operating entities (amounts in thousands):
Operator |
| As of June 30, |
|
| As of December 31, |
|
| As of March 31, |
|
| As of December 31, |
| ||||
Steward (loan investment) |
| $ | 362,821 |
|
| $ | 360,164 |
|
| $ | 362,586 |
|
| $ | 362,831 |
|
International joint venture |
|
| 231,402 |
|
|
| 219,387 |
|
|
| 230,153 |
|
|
| 231,402 |
|
Springstone |
|
| 196,768 |
|
|
| 187,450 |
| ||||||||
Priory |
|
| 156,389 |
|
|
| 42,315 |
|
|
| 159,668 |
|
|
| 156,575 |
|
Swiss Medical Network |
|
| 152,128 |
|
|
| 159,208 |
|
|
| 158,687 |
|
|
| 157,145 |
|
Steward (equity investment) |
|
| 139,000 |
|
|
| 139,000 |
|
|
| 125,862 |
|
|
| 125,862 |
|
Prospect |
|
| 112,772 |
|
|
| 112,283 |
|
|
| 112,701 |
|
|
| 112,777 |
|
Aevis Victoria SA ("Aevis") |
|
| 72,590 |
|
|
| 61,271 |
|
|
| 77,618 |
|
|
| 72,904 |
|
PHP Holdings |
|
| 49,895 |
|
|
| — |
| ||||||||
Aspris Children's Services ("Aspris") |
|
| 16,040 |
|
|
| 8,356 |
|
|
| 16,014 |
|
|
| 16,023 |
|
Springstone |
|
| 10,933 |
|
|
| 200,827 |
| ||||||||
Caremax |
|
| 6,343 |
|
|
| 8,526 |
| ||||||||
Total |
| $ | 1,439,910 |
|
| $ | 1,289,434 |
|
| $ | 1,310,460 |
|
| $ | 1,444,872 |
|
The increase duringchange since December 31, 2022 primarily relates to the 2022 first half is primarily duepayoff of the Springstone loan in February 2023, partially offset by the loan made to our investment in the Priory syndicated term loan as describedPHP Holdings. See "2023 Activity" under subsection titled "New Investments" in this same Note 3. for further details.
Pursuant to our approximate 5% stake in Aevis and other investments marked to fair value, we recorded aapproximately $9.04 million in favorable non-cash fair value adjustmentadjustments during the first halfquarter of 2022;2023 as shown in the "Other (including fair value adjustments on securities)" line of the condensed consolidated statements of net income; whereas, this was aan $1.98.0 million favorable non-cash fair value adjustment for the same period of 2021. We also earned2022.
Other Investment Activities
In conjunction with the redevelopment of Steward's Norwood hospital, we advanced $2.050 million, in the 2023 first quarter, that is secured by, among other things, proceeds from insurance claims in excess of dividend income during the first half of 2022.advance.
Pursuant to our existing 199.9% equity interest in Steward, we received an $11
million cash distribution during the first half of 2021, which was accounted for as a return of capital.
Credit Loss Reserves
Upon the adoption of Accounting Standards Update ("ASU") No. 2016-13 "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13") on January 1, 2020, we began applyingWe apply a forward-looking "expected loss" model to all of our financing receivables, including financing leases and loans. We are using ASU 2016-13 to establish credit loss reserves on all outstanding loans, based on historical credit losses of similar instruments.
The following table summarizes the activity in our credit loss reserves (in thousands):
|
| For the Three Months |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Balance at beginning of the period |
| $ | 53,933 |
|
| $ | 8,722 |
|
Provision (recovery) for credit loss |
|
| 1,345 |
|
|
| (939 | ) |
Expected credit losses related to financial instruments sold |
|
| (28 | ) |
|
| — |
|
Balance at end of the period |
| $ | 55,250 |
|
| $ | 7,783 |
|
|
| For the Six Months |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Balance at beginning of the year |
| $ | 48,527 |
|
| $ | 8,726 |
|
Provision (recovery) for credit loss |
|
| 6,757 |
|
|
| (939 | ) |
Expected credit losses related to financial instruments sold |
|
| (34 | ) |
|
| (4 | ) |
Balance at end of the period |
| $ | 55,250 |
|
| $ | 7,783 |
|
19
|
| For the Three Months |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Balance at beginning of the year |
| $ | 121,146 |
|
| $ | 48,527 |
|
Provision for credit loss, net |
|
| 986 |
|
|
| 5,412 |
|
Expected credit loss reserve related to financial instruments |
|
| (160 | ) |
|
| (6 | ) |
Balance at end of the period |
| $ | 121,972 |
|
| $ | 53,933 |
|
Other Investment Activities
In the 2022 second quarter, we loaned $150 million to Steward pursuant to a five-year secured loan. The loan bears interest at a current market rate (comparable to recent lease rates) plus a component of additional interest upon repayment. The loan is prepayable without penalty and is mandatorily prepayable upon certain sales of Steward assets and operations.
Concentrations of Credit Risk
We monitor concentration risk in several ways due to the nature of our real estate assets that are vital to the communities in which they are located and given our history of being able to replace inefficient operators of our facilities, if needed, with more effective operators:operators. See below for our concentration details (dollars in thousands):
1)Total Assets by Operator
Facility concentration – At June 30, 2022, our largest
|
| As of March 31, 2023 |
|
| As of December 31, 2022 |
| ||||||||||
Operators |
| Total Assets |
|
| Percentage of |
|
| Total Assets |
|
| Percentage of |
| ||||
Steward |
| $ | 4,800,594 |
|
|
| 24.4 | % |
| $ | 4,762,673 |
|
|
| 24.2 | % |
Circle Health Ltd ("Circle") |
|
| 2,092,822 |
|
|
| 10.7 | % |
|
| 2,062,474 |
|
|
| 10.5 | % |
Prospect |
|
| 1,533,412 |
|
|
| 7.8 | % |
|
| 1,483,599 |
|
|
| 7.5 | % |
Priory |
|
| 1,310,968 |
|
|
| 6.7 | % |
|
| 1,290,213 |
|
|
| 6.6 | % |
Springstone |
|
| 796,248 |
|
|
| 4.0 | % |
|
| 985,959 |
|
|
| 5.0 | % |
Other operators |
|
| 7,406,721 |
|
|
| 37.7 | % |
|
| 7,461,923 |
|
|
| 38.0 | % |
Other assets |
|
| 1,709,392 |
|
|
| 8.7 | % |
|
| 1,611,159 |
|
|
| 8.2 | % |
Total |
| $ | 19,650,157 |
|
|
| 100.0 | % |
| $ | 19,658,000 |
|
|
| 100.0 | % |
20
Total Assets by U.S. State and Country
|
| As of March 31, 2023 |
|
| As of December 31, 2022 |
| ||||||||||
U.S. States and Other Countries |
| Total Assets |
|
| Percentage of |
|
| Total Assets |
|
| Percentage of |
| ||||
Texas |
| $ | 2,008,146 |
|
|
| 10.2 | % |
| $ | 1,967,948 |
|
|
| 10.0 | % |
California |
|
| 1,502,060 |
|
|
| 7.7 | % |
|
| 1,450,112 |
|
|
| 7.4 | % |
Florida |
|
| 1,319,878 |
|
|
| 6.7 | % |
|
| 1,324,555 |
|
|
| 6.8 | % |
Utah |
|
| 1,218,883 |
|
|
| 6.2 | % |
|
| 1,224,484 |
|
|
| 6.2 | % |
Massachusetts |
|
| 763,555 |
|
|
| 3.9 | % |
|
| 761,694 |
|
|
| 3.9 | % |
All other states |
|
| 4,035,762 |
|
|
| 20.5 | % |
|
| 4,245,306 |
|
|
| 21.6 | % |
Other domestic assets |
|
| 1,087,136 |
|
|
| 5.5 | % |
|
| 1,028,946 |
|
|
| 5.2 | % |
Total U.S. |
| $ | 11,935,420 |
|
|
| 60.7 | % |
| $ | 12,003,045 |
|
|
| 61.1 | % |
United Kingdom |
| $ | 4,145,170 |
|
|
| 21.1 | % |
| $ | 4,083,244 |
|
|
| 20.8 | % |
Australia |
|
| 781,585 |
|
|
| 4.0 | % |
|
| 854,582 |
|
|
| 4.3 | % |
Switzerland |
|
| 763,711 |
|
|
| 3.9 | % |
|
| 748,947 |
|
|
| 3.8 | % |
Germany |
|
| 666,930 |
|
|
| 3.4 | % |
|
| 664,900 |
|
|
| 3.4 | % |
Spain |
|
| 226,800 |
|
|
| 1.1 | % |
|
| 222,316 |
|
|
| 1.1 | % |
All other countries |
|
| 508,285 |
|
|
| 2.6 | % |
|
| 498,753 |
|
|
| 2.5 | % |
Other international assets |
|
| 622,256 |
|
|
| 3.2 | % |
|
| 582,213 |
|
|
| 3.0 | % |
Total international |
| $ | 7,714,737 |
|
|
| 39.3 | % |
| $ | 7,654,955 |
|
|
| 38.9 | % |
Grand total |
| $ | 19,650,157 |
|
|
| 100.0 | % |
| $ | 19,658,000 |
|
|
| 100.0 | % |
On an individual property basis, we had no investment in any single property represented approximatelygreater than 2.83% of our total assets similar to Decemberas of March 31, 2021.2023.
Total Revenues by Operator
|
| For the Three Months Ended March 31, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
Operators |
| Total Revenues |
|
| Percentage of |
|
| Total Revenues |
|
| Percentage of |
| ||||
Steward |
| $ | 103,494 |
|
|
| 29.6 | % |
| $ | 121,244 |
|
|
| 29.6 | % |
Circle |
|
| 47,415 |
|
|
| 13.5 | % |
|
| 51,212 |
|
|
| 12.5 | % |
Prospect |
|
| — |
|
|
| 0.0 | % |
|
| 38,684 |
|
|
| 9.4 | % |
Priory |
|
| 24,740 |
|
|
| 7.1 | % |
|
| 19,070 |
|
|
| 4.7 | % |
Springstone |
|
| 20,167 |
|
|
| 5.8 | % |
|
| 21,664 |
|
|
| 5.3 | % |
Other operators |
|
| 154,395 |
|
|
| 44.0 | % |
|
| 157,926 |
|
|
| 38.5 | % |
Total |
| $ | 350,211 |
|
|
| 100.0 | % |
| $ | 409,800 |
|
|
| 100.0 | % |
21
Total Revenues by U.S. State and Country
|
| For the Three Months Ended March 31, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
U.S. States and Other Countries |
| Total Revenues |
|
| Percentage of |
|
| Total Revenues |
|
| Percentage of |
| ||||
Texas |
| $ | 44,116 |
|
|
| 12.6 | % |
| $ | 34,844 |
|
|
| 8.5 | % |
Utah |
|
| 35,641 |
|
|
| 10.2 | % |
|
| 33,768 |
|
|
| 8.2 | % |
Florida |
|
| 26,182 |
|
|
| 7.5 | % |
|
| 25,305 |
|
|
| 6.2 | % |
California |
|
| 19,495 |
|
|
| 5.6 | % |
|
| 41,291 |
|
|
| 10.1 | % |
Massachusetts |
|
| 6,816 |
|
|
| 1.8 | % |
|
| 32,631 |
|
|
| 8.0 | % |
All other states |
|
| 99,137 |
|
|
| 28.4 | % |
|
| 125,907 |
|
|
| 30.7 | % |
Total U.S. |
| $ | 231,387 |
|
|
| 66.1 | % |
| $ | 293,746 |
|
|
| 71.7 | % |
United Kingdom |
| $ | 84,206 |
|
|
| 24.0 | % |
| $ | 83,906 |
|
|
| 20.5 | % |
Australia |
|
| 15,237 |
|
|
| 4.4 | % |
|
| 17,031 |
|
|
| 4.1 | % |
All other countries |
|
| 19,381 |
|
|
| 5.5 | % |
|
| 15,117 |
|
|
| 3.7 | % |
Total international |
| $ | 118,824 |
|
|
| 33.9 | % |
| $ | 116,054 |
|
|
| 28.3 | % |
Grand total |
| $ | 350,211 |
|
|
| 100.0 | % |
| $ | 409,800 |
|
|
| 100.0 | % |
Total Revenues by Facility Type
|
| For the Three Months Ended March 31, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
Facility Types |
| Total Revenues |
|
| Percentage of |
|
| Total Revenues |
|
| Percentage of |
| ||||
General acute care hospitals |
| $ | 253,036 |
|
|
| 72.3 | % |
| $ | 316,019 |
|
|
| 77.0 | % |
Behavioral health facilities |
|
| 53,658 |
|
|
| 15.3 | % |
|
| 50,897 |
|
|
| 12.4 | % |
Inpatient rehabilitation facilities |
|
| 29,046 |
|
|
| 8.3 | % |
|
| 28,906 |
|
|
| 7.1 | % |
Long-term acute care hospitals |
|
| 8,251 |
|
|
| 2.4 | % |
|
| 8,302 |
|
|
| 2.1 | % |
Freestanding ER/urgent care facilities |
|
| 6,220 |
|
|
| 1.7 | % |
|
| 5,676 |
|
|
| 1.4 | % |
Total |
| $ | 350,211 |
|
|
| 100.0 | % |
| $ | 409,800 |
|
|
| 100.0 | % |
2)
OperatorFor geographic and facility type concentration – For the three and six months ended June 30, 2022 and 2021, revenue from Steward, Circle Health Ltd. ("Circle"), and Prospect individually represented more than 10% ofmetrics above, we allocate our total revenues.
At June 30, 2022, the assets leased under triple-net leases to Steward (our largest tenant), including our share of assets leased through the MAM partnership discussed above, represented less than 20% of our total assets.
22
4. Debt
The following is a summary of debt (dollar amounts in thousands):
|
| As of June 30, |
|
| As of December 31, |
|
| As of March 31, |
|
| As of December 31, |
| ||||
Revolving credit facility(A) |
| $ | 920,245 |
|
| $ | 730,000 |
|
| $ | 1,031,037 |
|
| $ | 929,584 |
|
Interim credit facility |
|
| — |
|
|
| 869,606 |
| ||||||||
Term loan |
|
| 200,000 |
|
|
| 200,000 |
|
|
| 200,000 |
|
|
| 200,000 |
|
British pound sterling term loan(B) |
|
| 852,460 |
|
|
| 947,240 |
| ||||||||
British pound sterling term loan due 2024(B) |
|
| 129,353 |
|
|
| 126,690 |
| ||||||||
British pound sterling term loan due 2025(B) |
|
| 863,590 |
|
|
| 845,810 |
| ||||||||
Australian term loan facility(B) |
|
| 828,360 |
|
|
| 871,560 |
|
|
| 802,200 |
|
|
| 817,560 |
|
2.550% Senior Unsecured Notes due 2023(B) |
|
| 487,120 |
|
|
| 541,280 |
|
|
| 493,480 |
|
|
| 483,320 |
|
3.325% Senior Unsecured Notes due 2025(B) |
|
| 524,200 |
|
|
| 568,500 |
|
|
| 541,950 |
|
|
| 535,250 |
|
0.993% Senior Unsecured Notes due 2026(B) |
|
| 524,200 |
|
|
| 568,500 |
|
|
| 541,950 |
|
|
| 535,250 |
|
2.500% Senior Unsecured Notes due 2026(B) |
|
| 608,900 |
|
|
| 676,600 |
|
|
| 616,850 |
|
|
| 604,150 |
|
5.250% Senior Unsecured Notes due 2026 |
|
| 500,000 |
|
|
| 500,000 |
|
|
| 500,000 |
|
|
| 500,000 |
|
5.000% Senior Unsecured Notes due 2027 |
|
| 1,400,000 |
|
|
| 1,400,000 |
|
|
| 1,400,000 |
|
|
| 1,400,000 |
|
3.692% Senior Unsecured Notes due 2028(B) |
|
| 730,680 |
|
|
| 811,920 |
|
|
| 740,220 |
|
|
| 724,980 |
|
4.625% Senior Unsecured Notes due 2029 |
|
| 900,000 |
|
|
| 900,000 |
|
|
| 900,000 |
|
|
| 900,000 |
|
3.375% Senior Unsecured Notes due 2030(B) |
|
| 426,230 |
|
|
| 473,620 |
|
|
| 431,795 |
|
|
| 422,905 |
|
3.500% Senior Unsecured Notes due 2031 |
|
| 1,300,000 |
|
|
| 1,300,000 |
|
|
| 1,300,000 |
|
|
| 1,300,000 |
|
|
| $ | 10,202,395 |
|
| $ | 11,358,826 |
|
| $ | 10,492,425 |
|
| $ | 10,325,499 |
|
Debt issue costs and discount, net |
|
| (63,621 | ) |
|
| (76,056 | ) |
|
| (54,274 | ) |
|
| (57,087 | ) |
|
| $ | 10,138,774 |
|
| $ | 11,282,770 |
|
| $ | 10,438,151 |
|
| $ | 10,268,412 |
|
20
As of June 30, 2022,March 31, 2023, principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) are as follows (amounts in thousands):
2022 |
| $ | 0 |
|
2023 |
|
| 487,120 |
|
2024 |
|
| 828,360 |
|
2025 |
|
| 1,376,660 |
|
2026 |
|
| 2,553,345 |
|
Thereafter |
|
| 4,956,910 |
|
Total |
| $ | 10,202,395 |
|
2022 Activity
2023 |
| $ | 493,480 |
|
2024 |
|
| 931,553 |
|
2025 |
|
| 1,405,540 |
|
2026 |
|
| 2,689,837 |
|
2027 |
|
| 1,600,000 |
|
Thereafter |
| �� | 3,372,015 |
|
Total |
| $ | 10,492,425 |
|
On May 6, 2022, we received commitments from certain of our credit facility syndicate members to increase the amount of our revolving credit facility by $500 million by exercising the accordion feature of our unsecured credit facility ("Credit Facility"). Additionally, our revolver and U.S. dollar term loan were modified with SOFR as a replacement reference rate to U.S. dollar LIBOR. With the closing of the accordion, our Credit Facility includes a $1.8 billion unsecured revolving loan facility and a $200 million unsecured term loan facility.
On June 29, 2022, we amended our Credit Facility. The amendment extended the maturity date of our revolving facility to June 30, 2026 with our option to extend for an additional 12 months. The maturity date of our $200 million unsecured term loan facility was extended to June 30, 2027. Additionally, we may request incremental term loan and/or revolving loan commitments in an aggregate amount not to exceed $1 billion, such that the aggregate amount of revolving commitments and term loans does not exceed $3 billion.
In addition to extending the maturity date and increasing the incremental borrowing capacity, the amendment improved interest rate spreads for both facilities. Under the amended Credit Facility and at our election, loans may be made as either ABR Loans or Term Benchmark Loans. The applicable margin for term loans that are ABR Loans is adjustable on a sliding scale from 0.00% to 0.70% based on current credit rating. The applicable margin for term loans that are Term Benchmark Loans is adjustable on a sliding scale from 0.875% to 1.70% based on current credit rating. The applicable margin for revolving loans that are ABR Loans is adjustable on a sliding scale from 0.00% to 0.50% based on current credit rating. The applicable margin for revolving loans that are Term Benchmark Loans or RFR Loans is adjustable on a sliding scale from 0.80% to 1.50% based on current credit rating. The facility fee is adjustable on a sliding scale from 0.125% to 0.30% (currently 0.25%) based on current credit rating and is payable on the revolving loan facility.
On March 15, 2022, we paid off and terminated our $1 billion interim credit facility that was entered into on July 27, 2021 ("July 2021 Interim Credit Facility") and paid down our revolving credit facility with proceeds from the Macquarie Transaction as more fully described in Note 3 to the condensed consolidated financial statements.
21
2021 Activity
Interim Credit Facility
On January 15, 2021, As part of this transaction, we entered into a $900 million interim credit facility (“January 2021 Interim Credit Facility”), of which we borrowed £500 million to partially fund the Priory Group Transaction. We paid off and terminated this facility on March 26, 2021 with proceeds from the issuance of the 2.500% Senior Unsecured Notes due 2026 and the 3.375% Senior Unsecured Notes due 2030.
Senior Unsecured Notes
On March 24, 2021, we completed an £850 million senior unsecured notes offering in two tranches. See below for details of each tranche:
2.500% Senior Unsecured Notes due 2026
On March 24, 2021, we completed a £500 million senior unsecured notes offering. The notes were issued at 99.937% of par value, and interest on the notes is payable annually on March 24 of each year, commencing on March 24, 2022. The notes pay interest in cash at a rate of 2.500% and mature on March 24, 2026.
3.375% Senior Unsecured Notes due 2030
On March 24, 2021, we completed a £350 million senior unsecured notes offering. The notes were issued at 99.448% of par value, and interest on the notes is payable annually on April 24 of each year, commencing on April 24, 2022. The notes pay interest in cash at a rate of 3.375% and mature on April 24, 2030.
We used proceeds from the £850 million senior unsecured notes offering to pay off the January 2021 Interim Credit Facility and reduce our revolving facility byincurred approximately £340 million on March 26, 2021.
Debt Refinancing and Unutilized Financing Costs
2022 Activity
With proceeds from the Macquarie Transaction on March 14, 2022, we fully paid off our July 2021 Interim Credit Facility. As a result, we incurred $8.8 million of debt refinancing costs. We also incurred approximately $0.6 million of debt refinancing costs in the 2022 second quarter due to the amendment of our Credit Facility on June 29, 2022.
2021 Activity
With the termination of our January 2021 Interim Credit Facility and other debt activity, we incurred approximately $2.3 million of debt refinancing costs in the first half of 2021.
Covenants
Our debt facilities impose certain restrictions on us, including restrictions on our ability to: incur debts; create or incur liens; provide guarantees in respect of obligations of any other entity; make redemptions and repurchases of our capital stock; prepay, redeem, or repurchase debt; engage in mergers or consolidations; enter into affiliated transactions; dispose of real estate or other assets; and change our business. In addition, the credit agreements governing our Credit Facility limit the amount of dividends we can pay as a percentage of normalized adjusted funds from operations (“NAFFO”), as defined in the agreements, on a rolling four quarter basis. At June 30, 2022,March 31, 2023, the dividend restriction was 95% of NAFFO. The indentures governing our senior unsecured notes also limit the amount of dividends we can pay based on the sum of 95% of NAFFO, proceeds of equity issuances, and certain other net cash proceeds. Finally, our senior unsecured notes require us to maintain total unencumbered assets (as defined in the related indenture) of not less than 150% of our unsecured indebtedness.
23
In addition to these restrictions, the Credit Facility contains customary financial and operating covenants, including covenants relating to our total leverage ratio, fixed charge coverage ratio, secured leverage ratio, consolidated adjusted net worth, unsecured leverage ratio, and unsecured interest coverage ratio. The Credit Facility also contains customary events of default, including among others, nonpayment of principal or interest, material inaccuracy of representations, and failure to comply with our covenants. If an event of default occurs and is continuing under the Credit Facility, the entire outstanding balance may become immediately due and payable. At June 30, 2022,March 31, 2023, we were in compliance with all such financial and operating covenants.
22
5. Income Taxes
DuringAs a result of the 2021 secondAustralia Transaction described in Note 3 to the condensed consolidated financial statements, we recorded a $5 million tax benefit in the first quarter the United Kingdom enacted an increase in its corporate income tax rates from 19% to 25% effective April 1, 2023, which resulted in higher tax expense, from adjusting our net deferred tax liabilities, of approximately $43 million.2023.
6. Common Stock/Partners’ Capital
Medical Properties Trust, Inc.
On January 11, 2021, we completed an underwritten public offering of 36.8 million shares of our common stock, resulting in net proceeds of approximately $711 million, after deducting underwriting discounts and commissions and offering expenses.
In addition, we sold 8.8 million shares of common stock under our at-the-market equity offering program during the first half of 2021, resulting in net proceeds of approximately $189 million.
MPT Operating Partnership, L.P.
At June 30, 2022, the Operating Partnership is made up of a general partner, Medical Properties Trust, LLC (“General Partner”) and limited partners, including the Company (which owns 100% of the General Partner) and MPT TRS, Inc. (which is 100% owned by the General Partner). By virtue of its ownership of the General Partner, the Company has a 100% ownership interest in the Operating Partnership. During the six months ended June 30, 2021, the Operating Partnership issued approximately 45.6 million units in direct response to the common stock offerings by Medical Properties Trust, Inc. during the same period.
7. Stock Awards
During the second quarter of 2022, we amended the 2019 Equity Incentive Plan (the “Equity Incentive Plan”), which authorizes the issuance of common stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights, performance units, and other stock-based awards. Theawards of interests in our Operating Partnership. Our Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. Among other things, the recent amendment increased the number ofDirectors, and we have reserved 28.9 million shares of common stock registered and reserved for stock awards, byof which 16 million to 28.9 million. As of June 30, 2022 (and adjusted for the August 8, 2022 registration), 19.216.7 million shares remain available for future stock awards.awards as of March 31, 2023. Share-based compensation expense totaled $21.9 million and $25.011.8 million for each of the sixthree months ended June 30, 2022March 31, 2023 and 2021, respectively.2022.
8.7. Fair Value of Financial Instruments
We have various assets and liabilities that are considered financial instruments. We estimate that the carrying value of cash and cash equivalents and accounts payable and accrued expenses approximate their fair values. We estimate the fair value of our interest and rent receivables using Level 2 inputs such as discounting the estimated future cash flows using the current rates at which similar receivables would be made to others with similar credit ratings and for the same remaining maturities. The fair value of our mortgage loans and other loans are estimated by using Level 2 inputs such as discounting the estimated future cash flows using the current rates which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. We determine the fair value of our senior unsecured notes using Level 2 inputs such as quotes from securities dealers and market makers. We estimate the fair value of our revolving credit facility and term loans using Level 2 inputs based on the present value of future payments, discounted at a rate which we consider appropriate for such debt.
Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be a prudent management decision.
24
The following table summarizes fair value estimates for our financial instruments (in thousands):
|
| As of June 30, 2022 |
|
| As of December 31, 2021 |
|
| As of March 31, 2023 |
|
| As of December 31, 2022 |
| ||||||||||||||||||||
Asset (Liability) |
| Book |
|
| Fair |
|
| Book |
|
| Fair |
|
| Book |
|
| Fair |
|
| Book |
|
| Fair |
| ||||||||
Interest and rent receivables |
| $ | 94,206 |
|
| $ | 94,296 |
|
| $ | 56,229 |
|
| $ | 56,564 |
| ||||||||||||||||
Interest and rent receivables, net |
| $ | 169,511 |
|
| $ | 160,947 |
|
| $ | 167,035 |
|
| $ | 163,101 |
| ||||||||||||||||
Loans |
|
| 1,319,002 |
| (1) |
| 1,312,882 |
|
|
| 991,609 |
| (1) |
| 991,954 |
|
|
| 1,511,182 |
| (2) |
| 1,456,753 |
|
|
| 1,405,615 |
| (2) |
| 1,360,113 |
|
Debt, net |
|
| (10,138,774 | ) |
|
| (9,201,093 | ) |
|
| (11,282,770 | ) |
|
| (11,526,388 | ) |
|
| (10,438,151 | ) |
|
| (8,594,584 | ) |
|
| (10,268,412 | ) |
|
| (8,697,042 | ) |
23
Items Measured at Fair Value on a Recurring Basis
Our equity investment and related loan to the international joint venture, our loan investment in the real estate of 3three hospitals operated by subsidiaries of the international joint venture in Colombia, and our equity investment and related loans in Springstone are measured at fair value on a recurring basis as we elected to account for these investments using the fair value option at the point of initial investment. For December 31, 2022, our acquisition and mortgage loans to Springstone (which were satisfied in full in February 2023 as described in Note 3 to the condensed consolidated financial statements) were also accounted for under the fair value option method. We elected to account for these investments at fair value due to the size of the investments and because we believe this method was more reflective of current values.
At June 30, 2022March 31, 2023 and December 31, 2021,2022, the amounts recorded under the fair value option method were as follows (in thousands):
|
| As of June 30, 2022 |
|
| As of December 31, 2021 |
|
|
| As of March 31, 2023 |
|
| As of December 31, 2022 |
|
| ||||||||||||||||||||||
Asset (Liability) |
| Fair Value |
|
| Original |
|
| Fair Value |
|
| Original |
|
| Asset Type Classification |
| Fair Value |
|
| Original |
|
| Fair Value |
|
| Original |
|
| Asset Type Classification | ||||||||
Mortgage loans |
| $ | 155,661 |
|
| $ | 155,661 |
|
| $ | 143,068 |
|
| $ | 143,068 |
|
| Mortgage loans |
| $ | 122,073 |
|
| $ | 122,073 |
|
| $ | 140,260 |
|
| $ | 140,260 |
|
| Mortgage loans |
Equity investment and other loans |
|
| 430,944 |
|
|
| 438,278 |
|
|
| 409,638 |
|
|
| 409,638 |
|
| Investments in unconsolidated operating entities/Other loans |
|
| 243,561 |
|
|
| 247,125 |
|
|
| 434,609 |
|
|
| 441,943 |
|
| Investments in unconsolidated operating entities/Other loans |
Our loans to Springstone and the international joint venture and its subsidiaries (as well as the Springstone loans at December 31, 2022) are recorded at fair value based on Level 2 inputs by discounting the estimated cash flows using the market rates at which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities, while also considering the value of the underlying collateral of each loan.the loans. Our equity investment in Springstone andis recorded at fair value based on Level 2 inputs by discounting the estimated cash flows expected to be realized as part of the Lifepoint Transaction described in Note 3 to the condensed consolidated financial statements. Our equity investment in the international joint venture is recorded at fair value based on Level 3 inputs, by using a discounted cash flow model, which requires significant estimates of our investee such as projected revenue and expenses and appropriate consideration of the underlying risk profile of the forecasted assumptions associated with the investee. We classify our valuations of equity investments as Level 3, as we use certain unobservable inputs to the valuation methodology that are significant to the fair value measurement, and the valuations require management judgment due to absence of quoted market prices. For the cash flow models, our observable inputs include use of a capitalization rate and discount rate (which is based on a weighted-average cost of capital) and our unobservable input includes an adjustment for a marketability discount (“DLOM”). In regardsregard to the underlying projections used in the discounted cash flow model, such projections are provided
25
by the investees. However, we will modify such projections as needed based on our review and analysis of historical results, meetings with key members of management, and our understanding of trends and developments within the healthcare industry.
In the first halfquarter of 2022,2023, we recordedhad a net favorable adjustment to the investments accounted for under the fair value option method, compared to an unfavorable fair value adjustment to our investments. NaN fair value adjustment was recorded in the first halfquarter of 2021.2022.
The DLOM on our Springstone equity investment was 40% at June 30, 2022. In arriving at the DLOM, we started with a DLOM range based on the results of studies supporting valuation discounts for other transactions or structures without a public market. To select the appropriate DLOM within the range, we then considered many qualitative factors, including the percent of control, the nature of the underlying investee’s business along with our rights as an investor pursuant to the operating agreement, the size of investment, expected holding period, number of shareholders, access to capital marketplace, etc. To illustrate the effect of movements in the DLOM, we performed a sensitivity analysis below by using basis point variations (dollars in thousands):
|
| |||
|
|
|
| |
|
|
24
Items Measured at Fair Value on a Nonrecurring Basis
In addition to items that are measured at fair value on a recurring basis, we have assets and liabilities that are measured, from time-to-time, at fair value on a nonrecurring basis, such as for long-lived asset impairment purposes. In these cases, fair value ismay be based on estimated cash flows discounted at a risk-adjusted rate of interest by using Level 2 inputs. For our real estate, including for the impairment analysis on our Prospect Pennsylvania real estate, we may use a market approach using Level 2 inputs, whereby we will divide the expected net operating income (i.e. rent revenue less expenses, if any) of the facility by a market capitalization rate.
9.8. Earnings Per Share/Unit
Medical Properties Trust, Inc.
Our earnings per share were calculated based on the following (amounts in thousands):
|
| For the Three Months |
|
| For the Three Months |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 190,064 |
|
| $ | 114,821 |
|
| $ | 33,030 |
|
| $ | 631,947 |
|
Non-controlling interests’ share in net income |
|
| (467 | ) |
|
| (256 | ) | ||||||||
Non-controlling interests’ share in earnings |
|
| (236 | ) |
|
| (266 | ) | ||||||||
Participating securities’ share in earnings |
|
| (345 | ) |
|
| (390 | ) |
|
| (515 | ) |
|
| (402 | ) |
Net income, less participating securities’ share in earnings |
| $ | 189,252 |
|
| $ | 114,175 |
|
| $ | 32,279 |
|
| $ | 631,279 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted-average common shares |
|
| 598,827 |
|
|
| 587,514 |
|
|
| 598,302 |
|
|
| 598,676 |
|
Dilutive potential common shares |
|
| 199 |
|
|
| 1,539 |
|
|
| 8 |
|
|
| 256 |
|
Diluted weighted-average common shares |
|
| 599,026 |
|
|
| 589,053 |
|
|
| 598,310 |
|
|
| 598,932 |
|
|
| For the Six Months |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net income |
| $ | 822,011 |
|
| $ | 278,701 |
|
Non-controlling interests’ share in net income |
|
| (733 | ) |
|
| (353 | ) |
Participating securities’ share in earnings |
|
| (747 | ) |
|
| (760 | ) |
Net income, less participating securities’ share in earnings |
| $ | 820,531 |
|
| $ | 277,588 |
|
Denominator: |
|
|
|
|
|
| ||
Basic weighted-average common shares |
|
| 598,751 |
|
|
| 581,877 |
|
Dilutive potential common shares |
|
| 228 |
|
|
| 1,420 |
|
Diluted weighted-average common shares |
|
| 598,979 |
|
|
| 583,297 |
|
MPT Operating Partnership, L.P.
Our earnings per unit were calculated based on the following (amounts in thousands):
|
| For the Three Months |
|
| For the Three Months |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 190,064 |
|
| $ | 114,821 |
|
| $ | 33,030 |
|
| $ | 631,947 |
|
Non-controlling interests’ share in net income |
|
| (467 | ) |
|
| (256 | ) | ||||||||
Non-controlling interests’ share in earnings |
|
| (236 | ) |
|
| (266 | ) | ||||||||
Participating securities’ share in earnings |
|
| (345 | ) |
|
| (390 | ) |
|
| (515 | ) |
|
| (402 | ) |
Net income, less participating securities’ share in earnings |
| $ | 189,252 |
|
| $ | 114,175 |
|
| $ | 32,279 |
|
| $ | 631,279 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted-average units |
|
| 598,827 |
|
|
| 587,514 |
|
|
| 598,302 |
|
|
| 598,676 |
|
Dilutive potential units |
|
| 199 |
|
|
| 1,539 |
|
|
| 8 |
|
|
| 256 |
|
Diluted weighted-average units |
|
| 599,026 |
|
|
| 589,053 |
|
|
| 598,310 |
|
|
| 598,932 |
|
25
|
| For the Six Months |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Numerator: |
|
|
|
|
|
| ||
Net income |
| $ | 822,011 |
|
| $ | 278,701 |
|
Non-controlling interests’ share in net income |
|
| (733 | ) |
|
| (353 | ) |
Participating securities’ share in earnings |
|
| (747 | ) |
|
| (760 | ) |
Net income, less participating securities’ share in earnings |
| $ | 820,531 |
|
| $ | 277,588 |
|
Denominator: |
|
|
|
|
|
| ||
Basic weighted-average units |
|
| 598,751 |
|
|
| 581,877 |
|
Dilutive potential units |
|
| 228 |
|
|
| 1,420 |
|
Diluted weighted-average units |
|
| 598,979 |
|
|
| 583,297 |
|
10.9. Commitments and Contingencies
Commitments
As disclosed in previous filings,On October 5, 2022, we entered into a definitive agreement that would result in the leasing ofagreements to sell 5three general acute care hospitalsProspect facilities located in UtahConnecticut to HCA Healthcare ("HCA") ifYale for approximately $457 million, of which we expect to receive the agreement by HCAmajority in cash and the remainder in equity securities of PHP
26
Holdings. This transaction is expected to purchaseclose in 2023 subject to certain regulatory approvals and the completion of Yale's acquisition of the hospital operations of these 5 facilities from Steward occurred. This agreement was terminated in June 2022 following a regulatory ruling, and these 5 hospitalsProspect. No assurances can be given that this transaction will continue to be leased to Steward.consummated as described or at all.
Contingencies
During and subsequent to the first quarter of 2023, the Company became party to various lawsuits as further described in Item 1 of Part II of this Quarterly Report on Form 10-Q. We have not recorded a liability related to these lawsuits because, at this time, we are unable to determine whether an unfavorable outcome is probable or to estimate reasonably possible losses.
We are a party to various other legal proceedings incidental to our business.business from time-to-time. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect our financial position, results of operations, or cash flows.
11.10. Subsequent Events
On July 29, 2022,April 14, 2023, we acquired a general acute care facilityfive behavioral health hospitals located in Colombiathe United Kingdom for $approximately £2644 million. This hospital isThese hospitals are leased to Fundación Cardiovascular de ColombiaPriory pursuant to five separate lease agreements with annual inflation-based escalators.
On April 19, 2023, we acquired two behavioral health hospitals and have a signed definitive agreement to acquire an additional facility, located in Germany, for a total of approximately €70 million. These hospitals will be leased to MEDIAN pursuant to a long-term master lease with annual inflation-based escalators.
On May 1, 2023, Catholic Health Initiatives Colorado ("CHIC"), a wholly owned subsidiary of CommonSpirit Health ("CommonSpirit"), acquired the Utah hospital operations of five general acute care facilities previously operated by Steward. As a result of this transaction, we expect to receive $150 million of proceeds from Steward to pay down outstanding loans, $100 million of which we received on May 1, 2023. The new lease with CHIC for these Utah assets will have an initial fixed term of 15 years with annual escalation provisions. As part of this transaction, we severed these facilities from the master lease with Steward, and accordingly will accelerate the amortization of the associated in-place lease intangibles (approximately $288 million at March 31, 2023) and write-off approximately $94 million of straight-line rent receivables. With this transaction, we expect to lower our overall asset concentration with Steward by approximately 4% and our revenue concentration by approximately 8%.
2627
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the consolidated financial condition and consolidated results of operations are presented on a combined basis for Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. as there are no material differences between these two entities. Such discussion and analysis should be read together with the condensed consolidated financial statements and notes thereto contained in this Form 10-Q and the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Forward-Looking Statements.
This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K and as updated in our quarterly reports on Form 10-Q for future periods, and current reports on Form 8-K as we file them with the SEC under the Exchange Act. Such factors include, among others, the following:
2728
Key Factors that May Affect Our Operations
Our revenue is derived from rents we earn pursuant to the lease agreements with our tenants, from interest income from loans to our tenants and other facility owners, and from profits or equity interests in certain of our tenants’ operations. Our tenants operate in the healthcare industry, generally providing medical, surgical, rehabilitative, and behavioral health care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants’ operations are subject to economic, regulatory, market, and other conditions (such as the impact of the COVID-19 pandemic, rising inflation, etc.)pandemic) that may affect their profitability, which could impact our results. Accordingly, we monitor certain key performance indicators that we believe provide us with early indications of conditions that could affect the level of risk in our portfolio.
Key factors that we may consider in underwriting prospective deals and in our ongoing monitoring of our tenants’ (and guarantors’) performance, as well as the condition of our properties, include, but are not limited to, the following:
29
Certain business factors, in addition to those described above that may directly affect our tenants and borrowers, will likely materially influence our future results of operations. These factors include:
28
CRITICAL ACCOUNTING POLICIES
Refer to our 20212022 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include investments in real estate, purchase price allocation, loans, credit losses, losses from rent and interest receivables, investments accounted for under the fair value option election, and our accounting policy on consolidation. During the sixthree months ended June 30, 2022,March 31, 2023, there were no material changes to these policies.
Overview
We are a self-advised REIT focused on investing in and owning net-leased healthcare facilities across the U.S. and selectively in foreign jurisdictions. Medical Properties Trust, Inc. was incorporated under Maryland law on August 27, 2003, and MPT Operating Partnership, L.P. was formed under Delaware law on September 10, 2003. We conduct substantially all of our business through MPT Operating Partnership, L.P. We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases, which require the tenant to bear most of the costs associated with the property. The majority of our leased assets are owned 100%; however, we do own some leased assets through joint ventures with other partners that share our view that healthcare facilities are part of the infrastructure of any community, which we refer to as investments in unconsolidated real estate joint ventures. We also make mortgage loans to healthcare operators collateralized by their real estate assets. In addition, we may make loans to certain of our operators through our TRS, the proceeds of which are typically used for working capital and other purposes. From time-to-time, we may make noncontrolling investments in our tenants, which we refer to as investments in unconsolidated operating entities. These investments are typically made in conjunction with larger real estate transactions with the tenant that givesgive us a right to share in such tenant’s profits and losses and provide for certain minority rights and protections. Our business model facilitates acquisitions and recapitalization,recapitalizations, and allows operators of healthcare facilities to unlockserve their communities by unlocking the value of their real estate assets to fund facility improvements, technology upgrades, and other investments in operations.
At June 30, 2022,March 31, 2023, our portfolio consisted of 447444 properties leased or loaned to 54 operators, of which sixseven are under development and four are in the form of mortgage loans. We manage our business as a single business segment.
At June 30, 2022,March 31, 2023, all of our investments are located in the U.S., Europe, Australia, and South America. Our total assets are made up of the following (dollars in thousands):
|
| As of |
|
| % of |
|
| As of |
|
| % of |
|
| As of |
|
| % of |
|
| As of |
|
| % of |
| ||||||||
Real estate assets - at cost |
| $ | 16,088,175 |
|
|
| 81.5 | % |
| $ | 17,425,765 |
|
|
| 84.9 | % |
| $ | 15,902,959 |
|
|
| 80.9 | % |
| $ | 15,917,839 |
|
|
| 81.0 | % |
Accumulated real estate depreciation and amortization |
|
| (1,109,592 | ) |
|
| -5.6 | % |
|
| (993,100 | ) |
|
| -4.8 | % |
|
| (1,207,699 | ) |
|
| -6.1 | % |
|
| (1,193,312 | ) |
|
| -6.1 | % |
Cash and cash equivalents |
|
| 257,269 |
|
|
| 1.3 | % |
|
| 459,227 |
|
|
| 2.2 | % |
|
| 302,321 |
|
|
| 1.5 | % |
|
| 235,668 |
|
|
| 1.2 | % |
Investments in unconsolidated real estate joint ventures |
|
| 1,460,373 |
|
|
| 7.4 | % |
|
| 1,152,927 |
|
|
| 5.6 | % |
|
| 1,506,474 |
|
|
| 7.7 | % |
|
| 1,497,903 |
|
|
| 7.6 | % |
Investments in unconsolidated operating entities |
|
| 1,439,910 |
|
|
| 7.3 | % |
|
| 1,289,434 |
|
|
| 6.3 | % |
|
| 1,310,460 |
|
|
| 6.7 | % |
|
| 1,444,872 |
|
|
| 7.4 | % |
Other |
|
| 1,606,949 |
|
|
| 8.1 | % |
|
| 1,185,548 |
|
|
| 5.8 | % |
|
| 1,835,642 |
|
|
| 9.3 | % |
|
| 1,755,030 |
|
|
| 8.9 | % |
Total assets |
| $ | 19,743,084 |
|
|
| 100.0 | % |
| $ | 20,519,801 |
|
|
| 100.0 | % |
| $ | 19,650,157 |
|
|
| 100.0 | % |
| $ | 19,658,000 |
|
|
| 100.0 | % |
29
Additional Concentration Details
On a pro forma gross asset basis (as defined in the “Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Quarterly Report on Form 10-Q), our concentration as of June 30, 2022 as compared to December 31, 2021 is as follows (dollars in thousands):
Total Pro Forma Gross Assets by Operator
|
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| ||||||||||
Operators |
| Total Pro Forma |
|
| Percentage of |
|
| Total Pro Forma |
|
| Percentage of |
| ||||
Steward |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Florida market |
| $ | 1,377,996 |
|
|
| 6.2 | % |
| $ | 1,304,353 |
|
|
| 5.8 | % |
Utah market(1) |
|
| 1,310,776 |
|
|
| 5.9 | % |
|
| 1,310,645 |
|
|
| 5.9 | % |
Massachusetts market |
|
| 1,152,118 |
|
|
| 5.1 | % |
|
| 1,145,493 |
|
|
| 5.1 | % |
Texas/Arkansas/Louisiana market |
|
| 1,115,557 |
|
|
| 5.0 | % |
|
| 1,112,664 |
|
|
| 5.0 | % |
Arizona market |
|
| 352,325 |
|
|
| 1.6 | % |
|
| 330,880 |
|
|
| 1.5 | % |
Ohio/Pennsylvania market |
|
| 138,345 |
|
|
| 0.6 | % |
|
| 138,274 |
|
|
| 0.6 | % |
Circle |
|
| 2,228,804 |
|
|
| 10.0 | % |
|
| 2,481,001 |
|
|
| 11.1 | % |
Prospect |
|
| 1,751,440 |
|
|
| 7.9 | % |
|
| 1,631,691 |
|
|
| 7.3 | % |
Swiss Medical Network |
|
| 1,272,123 |
|
|
| 5.7 | % |
|
| 1,300,431 |
|
|
| 5.8 | % |
MEDIAN |
|
| 1,079,940 |
|
|
| 4.8 | % |
|
| 1,165,927 |
|
|
| 5.2 | % |
Other operators |
|
| 9,263,644 |
|
|
| 41.6 | % |
|
| 9,487,405 |
|
|
| 42.6 | % |
Other assets |
|
| 1,241,351 |
|
|
| 5.6 | % |
|
| 920,573 |
|
|
| 4.1 | % |
Total |
| $ | 22,284,419 |
|
|
| 100.0 | % |
| $ | 22,329,337 |
|
|
| 100.0 | % |
Total Pro Forma Gross Assets by U.S. State and Country
|
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| ||||||||||
U.S. States and Other Countries |
| Total Pro Forma |
|
| Percentage of |
|
| Total Pro Forma |
|
| Percentage of |
| ||||
Texas |
| $ | 2,090,829 |
|
|
| 9.4 | % |
| $ | 2,158,797 |
|
|
| 9.7 | % |
California |
|
| 1,753,744 |
|
|
| 7.9 | % |
|
| 1,650,038 |
|
|
| 7.4 | % |
Florida |
|
| 1,377,996 |
|
|
| 6.2 | % |
|
| 1,304,353 |
|
|
| 5.8 | % |
Utah |
|
| 1,346,356 |
|
|
| 6.0 | % |
|
| 1,346,372 |
|
|
| 6.0 | % |
Massachusetts |
|
| 1,157,518 |
|
|
| 5.2 | % |
|
| 1,150,893 |
|
|
| 5.3 | % |
All other states |
|
| 5,088,441 |
|
|
| 22.8 | % |
|
| 5,117,756 |
|
|
| 22.9 | % |
Other domestic assets |
|
| 875,487 |
|
|
| 3.9 | % |
|
| 692,280 |
|
|
| 3.1 | % |
Total U.S. |
| $ | 13,690,371 |
|
|
| 61.4 | % |
| $ | 13,420,489 |
|
|
| 60.2 | % |
United Kingdom |
| $ | 4,041,683 |
|
|
| 18.1 | % |
| $ | 4,492,918 |
|
|
| 20.1 | % |
Switzerland |
|
| 1,272,123 |
|
|
| 5.7 | % |
|
| 1,300,431 |
|
|
| 5.8 | % |
Germany |
|
| 1,164,361 |
|
|
| 5.2 | % |
|
| 1,257,482 |
|
|
| 5.6 | % |
Australia |
|
| 916,603 |
|
|
| 4.1 | % |
|
| 1,043,399 |
|
|
| 4.7 | % |
Spain |
|
| 323,935 |
|
|
| 1.5 | % |
|
| 264,965 |
|
|
| 1.2 | % |
All other countries |
|
| 509,479 |
|
|
| 2.3 | % |
|
| 321,360 |
|
|
| 1.4 | % |
Other international assets |
|
| 365,864 |
|
|
| 1.7 | % |
|
| 228,293 |
|
|
| 1.0 | % |
Total international |
| $ | 8,594,048 |
|
|
| 38.6 | % |
| $ | 8,908,848 |
|
|
| 39.8 | % |
Grand total |
| $ | 22,284,419 |
|
|
| 100.0 | % |
| $ | 22,329,337 |
|
|
| 100.0 | % |
On an individual property basis, we had no investment in any single property greater than 3% of our total pro forma gross assets as of June 30, 2022.
30
On an adjusted revenues basis (as defined in the “Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Quarterly Report on Form 10-Q), concentration for the three months ended June 30, 2022 as compared to the prior year is as follows (dollars in thousands):
Total AdjustedRevenues by Operator
|
| For the Three Months Ended June 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
Operators |
| Total Adjusted |
|
| Percentage of |
|
| Total Adjusted |
|
| Percentage of |
| ||||
Steward |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Utah market |
| $ | 35,808 |
|
|
| 8.0 | % |
| $ | 32,693 |
|
|
| 7.9 | % |
Florida market |
|
| 28,263 |
|
|
| 6.3 | % |
|
| 6,211 |
|
|
| 1.5 | % |
Massachusetts market |
|
| 27,012 |
|
|
| 6.0 | % |
|
| 37,903 |
|
|
| 9.1 | % |
Texas/Arkansas/Louisiana market |
|
| 21,103 |
|
|
| 4.7 | % |
|
| 25,240 |
|
|
| 6.1 | % |
Arizona market |
|
| 9,185 |
|
|
| 2.0 | % |
|
| 8,532 |
|
|
| 2.0 | % |
Ohio/Pennsylvania market |
|
| 3,698 |
|
|
| 0.8 | % |
|
| 3,799 |
|
|
| 0.9 | % |
Circle |
|
| 47,539 |
|
|
| 10.6 | % |
|
| 53,584 |
|
|
| 12.9 | % |
Prospect |
|
| 42,364 |
|
|
| 9.4 | % |
|
| 41,197 |
|
|
| 9.9 | % |
Prime |
|
| 30,131 |
|
|
| 6.7 | % |
|
| 29,541 |
|
|
| 7.1 | % |
MEDIAN |
|
| 21,728 |
|
|
| 4.8 | % |
|
| 24,158 |
|
|
| 5.8 | % |
Other operators |
|
| 182,337 |
|
|
| 40.7 | % |
|
| 152,572 |
|
|
| 36.8 | % |
Total |
| $ | 449,168 |
|
|
| 100.0 | % |
| $ | 415,430 |
|
|
| 100.0 | % |
Total AdjustedRevenues by U.S. State and Country
|
| For the Three Months Ended June 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
U.S. States and Other Countries |
| Total Adjusted |
|
| Percentage of |
|
| Total Adjusted |
|
| Percentage of |
| ||||
California |
| $ | 48,109 |
|
|
| 10.7 | % |
| $ | 38,305 |
|
|
| 9.2 | % |
Texas |
|
| 41,310 |
|
|
| 9.2 | % |
|
| 41,868 |
|
|
| 10.1 | % |
Utah |
|
| 36,795 |
|
|
| 8.2 | % |
|
| 33,701 |
|
|
| 8.1 | % |
Florida |
|
| 28,263 |
|
|
| 6.3 | % |
|
| 6,786 |
|
|
| 1.6 | % |
Massachusetts |
|
| 27,175 |
|
|
| 6.0 | % |
|
| 38,062 |
|
|
| 9.2 | % |
All other states |
|
| 125,128 |
|
|
| 27.9 | % |
|
| 111,546 |
|
|
| 26.9 | % |
Total U.S. |
| $ | 306,780 |
|
|
| 68.3 | % |
| $ | 270,268 |
|
|
| 65.1 | % |
United Kingdom |
| $ | 79,415 |
|
|
| 17.7 | % |
| $ | 82,430 |
|
|
| 19.8 | % |
Germany |
|
| 23,642 |
|
|
| 5.3 | % |
|
| 26,271 |
|
|
| 6.3 | % |
All other countries |
|
| 39,331 |
|
|
| 8.7 | % |
|
| 36,461 |
|
|
| 8.8 | % |
Total international |
| $ | 142,388 |
|
|
| 31.7 | % |
| $ | 145,162 |
|
|
| 34.9 | % |
Grand total |
| $ | 449,168 |
|
|
| 100.0 | % |
| $ | 415,430 |
|
|
| 100.0 | % |
31
Total Adjusted Revenues by Facility Type
|
| For the Three Months Ended June 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
Facility Types |
| Total Adjusted |
|
| Percentage of |
|
| Total Adjusted |
|
| Percentage of |
| ||||
General acute care hospitals |
| $ | 339,106 |
|
|
| 75.5 | % |
| $ | 330,603 |
|
|
| 79.6 | % |
Behavioral health facilities |
|
| 51,763 |
|
|
| 11.5 | % |
|
| 25,155 |
|
|
| 6.0 | % |
Inpatient rehabilitation facilities |
|
| 44,201 |
|
|
| 9.8 | % |
|
| 45,711 |
|
|
| 11.0 | % |
Long-term acute care hospitals |
|
| 8,270 |
|
|
| 1.9 | % |
|
| 8,302 |
|
|
| 2.0 | % |
Freestanding ER/urgent care facilities |
|
| 5,828 |
|
|
| 1.3 | % |
|
| 5,659 |
|
|
| 1.4 | % |
Total |
| $ | 449,168 |
|
|
| 100.0 | % |
| $ | 415,430 |
|
|
| 100.0 | % |
Results of Operations
Three Months Ended June 30, 2022March 31, 2023 Compared to June 30, 2021March 31, 2022
Net income for the three months ended June 30, 2022,March 31, 2023, was $189.6$32.8 million ($0.05 per diluted share) compared to $114.6$631.7 million ($1.05 per diluted share) for the three months ended June 30, 2021.March 31, 2022. This 65% increasedecrease in net income is primarily due to incremental revenue from new investments made indriven by the second half of 2021 and first half of 2022, gainsgain on the sale of two facilitiesreal estate in the 2022 secondfirst quarter increased earnings from equity interests,the Macquarie Transaction and reduced income tax expense duethe 2023 impairment charge associated with the Australia Transaction, both as described in Note 3 to the unfavorable adjustment in the 2021 second quarter to recognize an increase in the United Kingdom corporate income tax rate, partially offset by higher depreciation expense and general and administrative costs.condensed consolidated financial statements. Normalized funds from operations (“FFO”), after adjusting for certain items (as more fully described in the section titled “Reconciliation of Non-GAAP Financial Measures” section ofin Item 2 of this Quarterly Report on Form 10-Q), was $274.7$222.2 million for the 2022 second2023 first quarter, or $0.46$0.37 per diluted share, as compared to $250.5$282.5 million, or $0.43$0.47 per diluted share, for the 2021 second2022 first quarter. This nearly 10% increasedecrease in Normalized FFO is primarily due to incrementalnot recognizing any revenue from new investments made in 2021 and the 2023 first half of 2022.quarter for Prospect - see Note 3 to the condensed consolidated financial statements for further discussion on Prospect.
A comparison of revenues for the three month periods ended June 30,March 31, 2023 and 2022 and 2021 is as follows (dollar amounts in thousands):
|
| 2022 |
|
| % of |
|
| 2021 |
|
| % of |
|
| Year over |
|
| 2023 |
|
| % of |
|
| 2022 |
|
| % of |
|
| Year over |
| ||||||||||
Rent billed |
| $ | 241,209 |
|
|
| 60.3 | % |
| $ | 216,870 |
|
|
| 56.8 | % |
|
| 11.2 | % |
| $ | 248,157 |
|
|
| 70.8 | % |
| $ | 263,402 |
|
|
| 64.3 | % |
|
| -5.8 | % |
Straight-line rent |
|
| 58,518 |
|
|
| 14.6 | % |
|
| 55,465 |
|
|
| 14.5 | % |
|
| 5.5 | % |
|
| 56,693 |
|
|
| 16.2 | % |
|
| 61,044 |
|
|
| 14.9 | % |
|
| -7.1 | % |
Income from financing leases |
|
| 51,873 |
|
|
| 13.0 | % |
|
| 50,337 |
|
|
| 13.2 | % |
|
| 3.1 | % |
|
| 13,195 |
|
|
| 3.8 | % |
|
| 51,776 |
|
|
| 12.6 | % |
|
| -74.5 | % |
Interest and other income |
|
| 48,626 |
|
|
| 12.1 | % |
|
| 59,120 |
|
|
| 15.5 | % |
|
| -17.8 | % |
|
| 32,166 |
|
|
| 9.2 | % |
|
| 33,578 |
|
|
| 8.2 | % |
|
| -4.2 | % |
Total revenues |
| $ | 400,226 |
|
|
| 100.0 | % |
| $ | 381,792 |
|
|
| 100.0 | % |
|
| 4.8 | % |
| $ | 350,211 |
|
|
| 100.0 | % |
| $ | 409,800 |
|
|
| 100.0 | % |
|
| -14.5 | % |
Our total revenues for the 2022 second2023 first quarter are up $18.4down $59.6 million, or 5%14.5%, over the same period in the prior year. This increasedecrease is made up of the following:
32
Interest expense for the quarters ended June 30,March 31, 2023 and 2022 and 2021 totaled $87.7$97.7 million and $92.3$91.2 million, respectively. This decreaseincrease is primarily related to lowering thean increase in interest raterates on our €500Credit Facility and term loans compared to the prior year and the issuance of a £105 million senior unsecured notes tranche in October 2021 from 4.000% to 0.993% and foreign currency fluctuations.sterling-denominated term loan on December 9, 2022. Our weighted-average interest rate of 3.3%3.7% for the quarter ended June 30, 2022March 31, 2023 is lowerhigher than the 3.5% in3.1% for the same period in 2021.2022.
Real estate depreciation and amortization during the secondfirst quarter of 2022 increased2023 decreased to $84.3$83.9 million from $76.4$85.3 million in 20212022 due to foreign currency fluctuations and property sales in 2022, partially offset by new investments made after June 30, 2021, partially offset by foreign currency fluctuations.March 31, 2022.
Property-related expenses totaled $21.1$7.1 million and $18.7$8.6 million for the quarters ended June 30,March 31, 2023 and 2022, and 2021, respectively. Of the property expenses in the secondfirst quarter of 2023 and 2022, and 2021, approximately $18.3$4.2 million and $15.5$6.3 million, respectively, represents
31
costs that were reimbursed by our tenants and included in the “Interest and other income” line on our condensed consolidated statements of net income.
As a percentage of revenue, general and administrative expenses represented 9.7% for the 2022 second quarter, slightly higher than 9.0% in the prior year. On a dollar basis, generalGeneral and administrative expenses totaled $38.9$41.7 million for the 2022 second2023 first quarter, which is a $4.3 million increaserelatively flat from the prior year second quarter. This increase is in line with our continued improvements in ESG, including further board diversification, increased charitable giving, and additional benefits to our employees, along with higher professional fees. These higher expenses were partially offset by a reduction in stock compensation expense by approximately $2 million related to adjusting our expectation from maximum payout to target payout on certain performance awards.2022 first quarter of $41.4 million.
During the three months ended June 30,March 31, 2022, we completed the Macquarie Transaction in which we sold the real estate of eight Massachusetts-based general acute care hospitals, resulting in a gain on real estate of approximately $600 million, partially offset by approximately $125 million of write-offs of non-cash straight-line rent receivables. We also disposed of two other facilities and an ancillary property resulting in a net gain of $16.4$15 million. During
In the first quarter of 2023, we recorded an $89.5 million net impairment charge, of which $79 million related to the Australia Transaction and $11 million was a non-cash impairment charge on the three months ended June 30, 2021,Prime properties as more fully described in Note 3 to the condensed consolidated financial statements. The 2022 first quarter impairment charge related to our Watsonville facility.
With the interest rate swap no longer classified as an effective cash flow hedge due to the Australia Transaction disclosed in Note 3 to the condensed consolidated financial statements, we sold four facilities resultingexpect some earnings volatility from marking the swap to fair value in a net loss of $1.4 million.future quarters until the related debt is extinguished.
Earnings from equity interests was $14.8$11.4 million for the quarter ended June 30, 2022,March 31, 2023, up $7.4$4.0 million from the same period in 2021,2022. This increase is primarily due to $5.3$2.1 million of additional income generated on our Massachusetts-based partnership with MAM entered into during March 2022 and $2.0 million of dividend income we received in the second quarter of 2022 from our Aevis investment (see Note 3 to the condensed consolidated financial statements for more detail). Earnings from our other real estate joint ventures were up quarter-over-quarter as well, which offset the loss of equity interest income from the remaining 50% interest of the IMED joint venture that we acquired during December 2021 and the impact from foreign currency fluctuations.2022.
Debt refinancing and unutilized financing costs were $0.6$8.8 million for the quarter ended June 30,March 31, 2022, as a result of costs incurred related to the amendmenttermination of our Credit Facility in the second quarter of 2022$1 billion interim credit facility (see Note 4 to the condensed consolidated financial statements for more detail).
InOther expense for the second quarterfirst three months of 2022,2023 was $5.2 million and included approximately $8 million of expenses associated with responding to certain defamatory statements published by certain parties, including those who are defendants to a lawsuit we recorded afiled on March 30, 2023. See Item 1 of Part II for further details on the lawsuit. This expense was partially offset by approximately $4 million of favorable non-cash fair value adjustment of $1.0 millionadjustments on our investment in Aevis comparedand other investments marked to a $2.1fair value during 2023. For the first three months of 2022, we had other income of $14.8 million unfavorable adjustment for the same periodprimarily from $8.0 million of favorable adjustments on our investment in 2021.Aevis and other investments marked to fair value.
Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $10.7$3.5 million income tax expense for the three months ended June 30, 2022March 31, 2023 is primarily based on the income generated by our investments in the United Kingdom, Colombia, and Australia.partially offset by a $5.0 million tax benefit recognized in the first quarter of 2023 related to the expected sale of our Australia facilities. In comparison, we incurred $50.2$11.4 million in income tax expense in the secondfirst quarter of 2021, including an adjustment to our net deferred tax liabilities of approximately $43 million to reflect an increase in the United Kingdom corporate tax rate from 19% to 25%.2022.
33
We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $76.7$74 million should be reflected against certain of our international and domestic net deferred tax assets at June 30, 2022.March 31, 2023. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income tax expense in future periods as income is earned.
Six Months Ended June 30, 2022 Compared to June 30, 2021
Net income for the six months ended June 30, 2022, was $821.3 million compared to $278.3 million for the six months ended June 30, 2021. This 195% increase in net income is primarily due to the gain on sale of real estate in the 2022 first quarter from the Macquarie Transaction as described in Note 3 to the condensed consolidated financial statements, incremental revenue from new investments, and lower tax expense due to the unfavorable adjustment in the 2021 second quarter to recognize an increase in the United Kingdom corporate income tax rate, partially offset by higher depreciation expense and general and administrative costs. Normalized funds from operations (“FFO”), after adjusting for certain items (as more fully described in the “Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Quarterly Report on Form 10-Q), was $557.2 million for the first six months of 2022, or $0.93 per diluted share, as compared to $494.5 million, or $0.85 per diluted share, for the first six months of 2021. This 13% increase in Normalized FFO is primarily due to incremental revenue from new investments made in 2021 and the first half of 2022.
A comparison of revenues for the six month periods ended June 30, 2022 and 2021 is as follows (dollar amounts in thousands):
|
| 2022 |
|
| % of |
|
| 2021 |
|
| % of |
|
| Year over |
| |||||
Rent billed |
| $ | 504,611 |
|
|
| 62.3 | % |
| $ | 430,214 |
|
|
| 57.8 | % |
|
| 17.3 | % |
Straight-line rent |
|
| 119,562 |
|
|
| 14.8 | % |
|
| 110,338 |
|
|
| 14.8 | % |
|
| 8.4 | % |
Income from financing leases |
|
| 103,649 |
|
|
| 12.8 | % |
|
| 101,231 |
|
|
| 13.6 | % |
|
| 2.4 | % |
Interest and other income |
|
| 82,204 |
|
|
| 10.1 | % |
|
| 102,774 |
|
|
| 13.8 | % |
|
| -20.0 | % |
Total revenues |
| $ | 810,026 |
|
|
| 100.0 | % |
| $ | 744,557 |
|
|
| 100.0 | % |
|
| 8.8 | % |
Our total revenues for the first six months of 2022 are up $65.5 million, or 9%, over the prior year. This increase is made up of the following:
34
Interest expense for the six months ended June 30, 2022 and 2021 totaled $178.9 million and $179.3 million, respectively. This decrease is related to lowering the interest rate on our €500 million senior unsecured notes tranche in October 2021 from 4.000% to 0.993% and foreign currency fluctuations. Overall, our weighted-average interest rate of 3.2% for the six months ended June 30, 2022 is lower than the 3.4% in the same period in 2021.
Real estate depreciation and amortization during the first six months of 2022 increased to $169.7 million from $152.0 million in the same period of 2021 due to new investments made after June 30, 2021, partially offset by foreign currency fluctuations.
Property-related expenses totaled $29.7 million and $24.1 million for the six months ended June 30, 2022 and 2021, respectively. Of the property expenses in the first six months of 2022 and 2021, approximately $24.6 million and $19.0 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our condensed consolidated statements of net income.
As a percentage of revenue, general and administrative expenses represented 9.9% for the first six months of 2022, slightly higher than 9.5% in the prior year. On a dollar basis, general and administrative expenses totaled $80.3 million for the first six months of 2022, which is a $9.7 million increase from the same period in 2021. This increase reflects continued ESG efforts in additional charitable giving, further board diversification, and additional benefits to our employees, along with higher professional expenses. Compensation expense was slightly lower overall compared to 2021 as the cost of additional non-executives headcount and benefits were more than offset by a reduction in stock compensation expense by $2 million from adjusting our payout expectations on certain performance awards.
During the six months ended June 30, 2022, we completed the partnership with MAM in which we sold the real estate of eight Massachusetts-based general acute care hospitals, resulting in a gain on real estate of approximately $600 million, partially offset by approximately $125 million of write-offs of non-cash straight-line rent receivables. We also disposed of four other facilities and two ancillary properties resulting in a net gain of $31 million. During the six months ended June 30, 2021, we sold five facilities and one ancillary property resulting in a net loss of $0.4 million.
Earnings from equity interests was $22.1 million for the six months ended June 30, 2022, up $7.7 million from the same period in 2021, primarily due to $6.5 million of income generated on our Massachusetts-based partnership with MAM entered into during March 2022 and $2.0 million of dividend income we received in the second quarter of 2022 from our Aevis investment (see Note 3 to the condensed consolidated financial statements for more detail). Earnings from our other real estate joint ventures were up compared to last year as well, which partially offset the loss of equity interest income from the remaining 50% interest of the IMED joint venture that we acquired during December 2021 and the impact from foreign currency fluctuations.
Debt refinancing and unutilized financing costs were $9.4 million and $2.3 million for the six months ended June 30, 2022 and 2021, respectively. The costs incurred in 2022 were a result of the termination of our $1 billion interim credit facility in March 2022 and the amendment of our Credit Facility in the second quarter of 2022 (see Note 4 to the condensed consolidated financial statements for more detail). The costs incurred in 2021 were primarily the result of the early termination of our $900 million interim credit facility (see Note 4 to the condensed consolidated financial statements for more detail).
In the first six months of 2022, we recorded a favorable non-cash fair value adjustment of $9.0 million on our investment in Aevis and other investments marked to fair value compared to a $1.9 million favorable adjustment for the same period in 2021.
Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $22.0 million income tax expense for the six months ended June 30, 2022 is primarily based on the income generated by our investments in the United Kingdom, Colombia, and Australia. In comparison, we incurred $58.5 million in income tax expense in the same period of 2021, including an adjustment to our net deferred tax liabilities of approximately $43 million to reflect an increase in the United Kingdom corporate tax rate from 19% to 25%.
We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and
35
recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $76.7 million should be reflected against certain of our international and domestic net deferred tax assets at June 30, 2022. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, andpotentially incur higher income tax expense in future periods as income is earned.
Reconciliation of Non-GAAP Financial Measures
Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. We compute FFO in accordance with the definition provided by the National Association of Real Estate Investment Trusts, or Nareit, which represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairment charges on real estate assets, plus real estate depreciation and amortization, including amortization related to in-place lease intangibles, and after adjustments for unconsolidated partnerships and joint ventures.
32
In addition to presenting FFO in accordance with the Nareit definition, we disclose normalized FFO, which adjusts FFO for items that relate to unanticipated or non-core events or activities or accounting changes that, if not noted, would make comparison to prior period results and market expectations less meaningful to investors and analysts.
We believe that the use of FFO, combined with the required GAAP presentations, improves the understanding of our operating results among investors and the use of normalized FFO makes comparisons of our operating results with prior periods and other companies more meaningful. While FFO and normalized FFO are relevant and widely used supplemental measures of operating and financial performance of REITs, they should not be viewed as a substitute measure of our operating performance since the measures do not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary(if any are not paid by our tenants) to maintain the operating performance of our properties, which can be significant economic costs that could materially impact our results of operations. FFO and normalized FFO should not be considered an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.
The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and Normalized FFO for the three and six months ended June 30,March 31, 2023 and 2022 and 2021 (amounts in thousands except per share data):
|
| For the Three Months Ended |
|
| For the Six Months Ended |
|
| For the Three Months Ended |
| |||||||||||||||
|
| June 30, 2022 |
|
| June 30, 2021 |
|
| June 30, 2022 |
|
| June 30, 2021 |
|
| March 31, 2023 |
|
| March 31, 2022 |
| ||||||
FFO information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income attributable to MPT common stockholders |
| $ | 189,597 |
|
| $ | 114,565 |
|
| $ | 821,278 |
|
| $ | 278,348 |
|
| $ | 32,794 |
|
| $ | 631,681 |
|
Participating securities’ share in earnings |
|
| (345 | ) |
|
| (390 | ) |
|
| (747 | ) |
|
| (760 | ) |
|
| (515 | ) |
|
| (402 | ) |
Net income, less participating securities’ share in earnings |
| $ | 189,252 |
|
| $ | 114,175 |
|
| $ | 820,531 |
|
| $ | 277,588 |
|
| $ | 32,279 |
|
| $ | 631,279 |
|
Depreciation and amortization |
|
| 101,976 |
|
|
| 90,061 |
|
|
| 201,435 |
|
|
| 178,597 |
|
|
| 101,960 |
|
|
| 99,459 |
|
(Gain) loss on sale of real estate and other, net |
|
| (16,355 | ) |
|
| 1,387 |
|
|
| (467,993 | ) |
|
| 398 |
| ||||||||
Gain on sale of real estate |
|
| (62 | ) |
|
| (451,638 | ) | ||||||||||||||||
Real estate impairment charges |
|
| 52,104 |
|
|
| — |
| ||||||||||||||||
Funds from operations |
| $ | 274,873 |
|
| $ | 205,623 |
|
| $ | 553,973 |
|
| $ | 456,583 |
|
| $ | 186,281 |
|
| $ | 279,100 |
|
Write-off (recovery) of straight-line rent and other |
|
| 977 |
|
|
| (13 | ) |
|
| 3,581 |
|
|
| (5,251 | ) | ||||||||
Write-off (recovery) of unbilled rent and other |
|
| 39,626 |
|
|
| (2,271 | ) | ||||||||||||||||
Other impairment charges |
|
| — |
|
|
| 4,875 |
| ||||||||||||||||
Litigation and other |
|
| 7,726 |
|
|
| — |
| ||||||||||||||||
Non-cash fair value adjustments |
|
| (943 | ) |
|
| 2,121 |
|
|
| (8,966 | ) |
|
| (1,944 | ) |
|
| (4,121 | ) |
|
| (8,023 | ) |
Tax rate changes |
|
| (825 | ) |
|
| 42,746 |
|
|
| (825 | ) |
|
| 42,746 |
| ||||||||
Tax rate changes and other |
|
| (7,305 | ) |
|
| — |
| ||||||||||||||||
Debt refinancing and unutilized financing costs |
|
| 619 |
|
|
| 70 |
|
|
| 9,435 |
|
|
| 2,339 |
|
|
| — |
|
|
| 8,816 |
|
Normalized funds from operations |
| $ | 274,701 |
|
| $ | 250,547 |
|
| $ | 557,198 |
|
| $ | 494,473 |
|
| $ | 222,207 |
|
| $ | 282,497 |
|
Per diluted share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income, less participating securities’ share in earnings |
| $ | 0.32 |
|
| $ | 0.19 |
|
| $ | 1.37 |
|
| $ | 0.48 |
|
| $ | 0.05 |
|
| $ | 1.05 |
|
Depreciation and amortization |
|
| 0.17 |
|
|
| 0.16 |
|
|
| 0.33 |
|
|
| 0.30 |
|
|
| 0.17 |
|
|
| 0.17 |
|
(Gain) loss on sale of real estate and other, net |
|
| (0.03 | ) |
|
| — |
|
|
| (0.78 | ) |
|
| — |
| ||||||||
Gain on sale of real estate |
|
| — |
|
|
| (0.75 | ) | ||||||||||||||||
Real estate impairment charges |
|
| 0.09 |
|
|
| — |
| ||||||||||||||||
Funds from operations |
| $ | 0.46 |
|
| $ | 0.35 |
|
| $ | 0.92 |
|
| $ | 0.78 |
|
| $ | 0.31 |
|
| $ | 0.47 |
|
Write-off (recovery) of straight-line rent and other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||
Write-off (recovery) of unbilled rent and other |
|
| 0.07 |
|
|
| — |
| ||||||||||||||||
Other impairment charges |
|
| — |
|
|
| — |
| ||||||||||||||||
Litigation and other |
|
| 0.01 |
|
|
| — |
| ||||||||||||||||
Non-cash fair value adjustments |
|
| — |
|
|
| — |
|
|
| (0.01 | ) |
|
| — |
|
|
| (0.01 | ) |
|
| (0.01 | ) |
Tax rate changes |
|
| — |
|
|
| 0.08 |
|
|
| — |
|
|
| 0.07 |
| ||||||||
Tax rate changes and other |
|
| (0.01 | ) |
|
| — |
| ||||||||||||||||
Debt refinancing and unutilized financing costs |
|
| — |
|
|
| — |
|
|
| 0.02 |
|
|
| — |
|
|
| — |
|
|
| 0.01 |
|
Normalized funds from operations |
| $ | 0.46 |
|
| $ | 0.43 |
|
| $ | 0.93 |
|
| $ | 0.85 |
|
| $ | 0.37 |
|
| $ | 0.47 |
|
36
Total Pro Forma Gross Assets
Total pro forma gross assets is total assets before accumulated depreciation/amortization (adjusted for our unconsolidated joint ventures) and assumes material real estate commitments on new investments are fully funded, and assumes cash on-hand at period-end and cash generated from or to be generated from financing activities subsequent to period-end are either used in these transactions or used to reduce debt. We believe total pro forma gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our commitments close. The following table presents a reconciliation of total assets to total pro forma gross assets (in thousands):
|
| As of |
|
| As of |
| ||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Total assets |
| $ | 19,743,084 |
|
| $ | 20,519,801 |
|
Add: |
|
|
|
|
|
| ||
Accumulated depreciation and amortization |
|
| 1,109,592 |
|
|
| 993,100 |
|
Incremental gross assets of our joint ventures and other(1) |
|
| 1,689,012 |
|
|
| 1,713,603 |
|
Less: |
|
|
|
|
|
| ||
Cash on hand(2) |
|
| (257,269 | ) |
|
| (897,167 | ) |
Total pro forma gross assets |
| $ | 22,284,419 |
|
| $ | 22,329,337 |
|
Total Adjusted Revenues
Total adjusted revenues are total revenues adjusted for our pro rata portion of similar revenues in our real estate joint venture arrangements. We believe total adjusted revenues are useful to investors as it provides a more complete view of revenues across all of our investments and allows for better understanding of our revenue concentration. The following table presents a reconciliation of total revenues to total adjusted revenues (in thousands):
|
| For the Three Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Total revenues |
| $ | 400,226 |
|
| $ | 381,792 |
|
Revenues from real estate properties owned through joint venture |
|
| 48,942 |
|
|
| 33,638 |
|
Total adjusted revenues |
| $ | 449,168 |
|
| $ | 415,430 |
|
LIQUIDITY AND CAPITAL RESOURCES
20222023 Cash Flow Activity
During the first halfthree months of 2022,2023, we generated approximately $344.0 million of cash flows from operating activities (which did not include approximately $27 million of dividends received early in the third quarter of 2022 related to our investments in unconsolidated real estate joint ventures), primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows along with cash on-hand to fund our dividends of $350.5 million. During the first six months of 2022, we received approximately $1.8 billion of proceeds from disposals (including the Macquarie Transaction as described in Note 3 to Item 1 of this Form 10-Q). We used these proceeds, along with additional advances from our revolver, to pay off our July 2021 Interim Credit Facility, fund $0.8 billion of new acquisitions, and make other investments. We exercised the $500 million accordion feature to our revolving credit facility during the first six months of 2022 and extended the term on both the revolver and term loan portions of our Credit Facility - see Note 4 to Item 1 of this Form 10-Q for additional details.
If the Prime purchase option described in Note 3 to Item 1 of this Form 10-Q is consummated, we expect to generate approximately $370 million of proceeds.
2021 Cash Flow Activity
During the first half of 2021, we generated $365.3$135.6 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows along(along with $11 million received from Steward as a
37
return of capital distribution,cash on-hand) to fund our dividends of $311.1$176.6 million.
As described in Note 3 and Note 9 to the condensed consolidated financial statements, we expect to receive in 2023 proceeds from the Australia Transaction, the repurchase of three facilities by Prime, and the sale of three Prospect facilities. The proceeds from the Australia Transaction will be used to fully prepay our A$1.2 billion term loan in advance of its maturity in 2024, while the proceeds from the Prime and Prospect transactions will be used to partially pay down our revolving credit facility.
33
Subsequent to March 31, 2023, we received $100 million and certain investment activities. In addition, we invested approximately $2.0 billion in real estate and other assets, includingexpect to receive an additional $50 million from Steward as a result of their sale of the £1.1 billion Priory Group Transaction in January 2021Utah properties to CommonSpirit (as more fully described in Note 10 to the condensed consolidated financial statements). In addition, we funded approximately $105 million for the acquisition of seven properties described in Note 10 to the condensed consolidated financial statements and expect to fund one additional property later in 2023.
2022 Cash Flow Activity
During the 2022 first quarter, we generated approximately $179.4 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $176.5 million and certain investment activities. During the quarter, we received approximately $1.3 billion of proceeds from the Macquarie Transaction and obtained a 50% interest in the real estate partnership valued at approximately $400 million (see Note 3 to Item 1 of this Form 10-Q), using a combination of cash on-hand generated from the $900.6 million of netcondensed consolidated financial statements for further details). We used these proceeds from the sales of stock during the first half of 2021to pay off our interim credit facility and £850 million from the issuance of senior unsecured notes.pay down our revolving credit facility, with remaining proceeds used for new investments.
Short-term Liquidity Requirements:
At AugustMay 5, 2022,2023, our liquidity approximates $1.1$1 billion. We believe this liquidity, along with our current monthly cash receipts from rent and loan interest and regular distributions from our joint venture arrangements, is sufficient to fund our operations, dividends in order to comply with REIT requirements, our current firm commitments (capital expenditures(including approximately $130 million funding for the acquisition of eight properties disclosed in Note 10 to the condensed consolidated financial statements along with capital additions and expected funding requirements on development projects), and debt service obligations for the next twelve months (including contractual interest payments)payments and our December 2023 debt maturity of approximately $500 million). If the sale of three Prospect facilities (as more fully described in Note 9 to the condensed consolidated financial statements), along with the expected repurchase of the three Prime were to exercise its purchase option onfacilities in the 11 propertiesthird quarter of 2023 (as more fully described in Note 3 to Item 1 of this Form 10-Q),the condensed consolidated financial statements) are consummated as expected in 2023, we would have $370 million of additional liquidity. We also expect to fully prepay our A$1.2 billion term loan, with cash proceeds from the Australia Transaction (as more fully described in Note 3 to the condensed consolidated financial statements), which we expect to be completed in two tranches during 2023.
Long-term Liquidity Requirements:
As of AugustMay 5, 2022,2023, our liquidity approximates $1.1$1 billion. We believe that ourthis liquidity, along with monthly cash receipts from rent and loan interest (of which 99% of such leases and mortgage loans include escalation provisions that compound annually), and regular distributions from our joint venture arrangements, is sufficient to fund our operations, debt and interest obligations, debt principal payments coming due in 2023, our current firm commitments, and dividends in order to comply with REIT requirements forrequirements. We also expect to fully prepay our A$1.2 billion term loan with cash proceeds from the foreseeable future. If Prime were to exercise its purchase option on the 11 propertiesAustralia Transaction (as more fully described in Note 3 to Item 1 of this Form 10-Q)the condensed consolidated financial statements), which we would have $370 million of additional liquidity.expect to be completed in two tranches during 2023.
However, in order to make additional investments, to fund other debt maturities coming due in 20232025 and beyond (as outlined below)below in our commitment schedule), to strategically refinance any existing debt in order to reduce interest rates, or to further improve our leverage ratios,make any new investments, we may need to access one or a combination of the following sources of capital:
However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful.
34
Principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) as of AugustMay 5, 20222023 are as follows (in thousands):
2022 |
| $ | — |
| ||||
2023 |
|
| 482,920 |
|
| $ | 505,440 |
|
2024 |
|
| 829,320 |
|
|
| 942,368 |
|
2025 |
|
| 1,354,260 |
|
|
| 1,435,470 |
|
2026 |
|
| 2,625,430 |
|
|
| 2,895,492 |
|
2027 |
|
| 1,600,000 |
| ||||
Thereafter |
|
| 4,946,935 |
|
|
| 3,400,421 |
|
Total |
| $ | 10,238,865 |
|
| $ | 10,779,191 |
|
Contractual Commitments
We presented our contractual commitments in our 20212022 Annual Report on Form 10-K and provided an update in our Quarterly Report on Form 10-Q for the period ended March 31, 2022. Except for changes to our debt as noted below, there10-K. There have been no other significant changes through AugustMay 5, 2022.2023.
The following table updates our contractual commitments schedule for these updates as of August 5, 2022 (in thousands):
Contractual Commitments |
| 2022(1) |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
| |||||||
Revolving credit facility |
| $ | 12,214 |
|
| $ | 30,115 |
|
| $ | 30,115 |
|
| $ | 30,115 |
|
| $ | 1,027,604 |
|
| $ | — |
|
| $ | 1,130,163 |
|
Term loan |
|
| 2,913 |
|
|
| 7,184 |
|
|
| 7,204 |
|
|
| 7,184 |
|
|
| 7,184 |
|
|
| 203,563 |
|
|
| 235,232 |
|
38
Distribution Policy
The table below is a summary of our distributions declared during the two year period ended June 30, 2022:March 31, 2023:
Declaration Date |
| Record Date |
| Date of Distribution |
| Distribution |
|
| Record Date |
| Date of Distribution |
| Distribution |
| ||
February 16, 2023 |
| March 16, 2023 |
| April 13, 2023 |
| $ | 0.29 |
| ||||||||
November 10, 2022 |
| December 8, 2022 |
| January 12, 2023 |
| $ | 0.29 |
| ||||||||
August 18, 2022 |
| September 15, 2022 |
| October 13, 2022 |
| $ | 0.29 |
| ||||||||
May 26, 2022 |
| June 16, 2022 |
| July 14, 2022 |
| $ | 0.29 |
|
| June 16, 2022 |
| July 14, 2022 |
| $ | 0.29 |
|
February 17, 2022 |
| March 17, 2022 |
| April 14, 2022 |
| $ | 0.29 |
|
| March 17, 2022 |
| April 14, 2022 |
| $ | 0.29 |
|
November 11, 2021 |
| December 9, 2021 |
| January 13, 2022 |
| $ | 0.28 |
|
| December 9, 2021 |
| January 13, 2022 |
| $ | 0.28 |
|
August 19, 2021 |
| September 16, 2021 |
| October 14, 2021 |
| $ | 0.28 |
|
| September 16, 2021 |
| October 14, 2021 |
| $ | 0.28 |
|
May 26, 2021 |
| June 17, 2021 |
| July 8, 2021 |
| $ | 0.28 |
|
| June 17, 2021 |
| July 8, 2021 |
| $ | 0.28 |
|
February 18, 2021 |
| March 18, 2021 |
| April 8, 2021 |
| $ | 0.28 |
| ||||||||
November 12, 2020 |
| December 10, 2020 |
| January 7, 2021 |
| $ | 0.27 |
| ||||||||
August 13, 2020 |
| September 10, 2020 |
| October 8, 2020 |
| $ | 0.27 |
|
On April 27, 2023, we announced that our Board of Directors declared a regular quarterly cash dividend of $0.29 per share of common stock to be paid on July 13, 2023 to stockholders of record on June 15, 2023.
It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and to efficiently manage corporate income and excise taxes on undistributed income. However, our Credit Facility limits the amount of dividends we can pay- see Note 4 in Item 1 to this Form 10-Qthe condensed consolidated financial statements for further information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, and other market changes that affect market-sensitivemarket sensitive instruments. We seek to mitigate the effects of fluctuations in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent possible. We may or may not elect to use financial derivative instruments to hedge interest rate or foreign currency exposure. For interest rate hedging, these decisions are principally based on our policy to match investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. For foreign currency hedging, these decisions are principally based on how our investments are financed, the long-term nature of our investments, the need to repatriate earnings back to the U.S., and the general trend in foreign currency exchange rates.
In addition, the value of our facilities will be subject to fluctuations based on changes in local and regional economic conditions and changes in the ability of our tenants to generate profits.
Our primary exposure to market risks relates to fluctuations in interest rates and foreign currency. The following analyses present the sensitivity of the market value, earnings, and cash flows of our significant financial instruments to hypothetical changes in interest rates and exchange rates as if these changes had occurred. The hypothetical changes chosen for these analyses reflect our view of changes that are reasonably possible over a one-year period. These forward looking disclosures are selective in nature and only address the potential impact from these hypothetical changes. They do not include other potential effects which could impact our business as a result of changes in market conditions. In addition, they do not include measures we may take to minimize our exposure such as entering into future interest rate swaps to hedge against interest rate increases on our variable rate debt.
35
Interest Rate Sensitivity
For fixed rate debt, interest rate changes affect the fair market value but do not impact net income to common stockholders or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact net income to common stockholders and cash flows, assuming other factors are held constant. At June 30, 2022,March 31, 2023, our outstanding debt totaled $10.1$10.4 billion, which consisted of fixed-rate debt of approximately $9.0$9.2 billion (after considering interest rate swaps in-place) and variable rate debt of $1.1$1.2 billion. If market interest rates increase by 10%, the fair value of our debt at June 30, 2022March 31, 2023 would decrease by approximately $206.9$239.5 million. Changes in the fair value of our fixed rate debt will not have any impact on us unless we decided to repurchase the debt in the open market.
If market rates of interest on our variable rate debt increase by 10%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by $2.4$7.2 million per year. If market rates of interest on our variable rate debt decrease by 10%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by $2.4$7.2 million per year. This assumes that the average amount outstanding under our variable rate debt for a year is $1.1$1.2 billion, the balance of such variable rate debt at June 30, 2022.March 31, 2023.
39
Foreign Currency Sensitivity
With our investments in the United Kingdom, Germany, Spain, Italy, Portugal, Switzerland, Finland, Australia, and Colombia, we are subject to fluctuations in the British pound, euro, Swiss franc, Australian dollar, and Colombian peso to U.S. dollar currency exchange rates. Although we generally deem investments in these countries to be of a long-term nature (other than Australia as previously discussed in Note 3 to the condensed consolidated financial statements), are typically able to match any non-U.S. dollar borrowings with investments in such currencies, and historically have not needed to repatriate a material amount of earnings back to the U.S., increases or decreases in the value of the respective non-U.S. dollar currencies to U.S. dollar exchange rates may impact our financial condition and/or our results of operations. Based solely on our 20222023 operating results to-date and on an annualized basis, a 10% change to the following exchange rates would have impacted our net income, FFO, and Normalized FFO by the amounts below (in thousands):
|
| Net Income Impact |
|
| FFO Impact |
|
| NFFO Impact |
|
| Net Income Impact |
|
| FFO Impact |
|
| NFFO Impact |
| ||||||
British pound (£) |
| $ | 9,452 |
|
| $ | 18,516 |
|
| $ | 18,667 |
|
| $ | 10,043 |
|
| $ | 19,184 |
|
| $ | 18,678 |
|
Euro (€) |
|
| 1,967 |
|
|
| 6,100 |
|
|
| 6,168 |
|
|
| 2,232 |
|
|
| 6,546 |
|
|
| 6,549 |
|
Swiss franc (CHF) |
|
| 4,796 |
|
|
| 7,042 |
|
|
| 3,597 |
|
|
| 3,314 |
|
|
| 5,639 |
|
|
| 3,632 |
|
Australian dollar (A$) |
|
| 1,293 |
|
|
| 3,397 |
|
|
| 3,397 |
| ||||||||||||
Colombian peso (COP) |
|
| 1,164 |
|
|
| 1,164 |
|
|
| 1,164 |
|
|
| 1,298 |
|
|
| 1,363 |
|
|
| 1,363 |
|
We have excluded the foreign currency sensitivity around Australian dollars in the table above due to the anticipated Australia Transaction as described in Note 3 to the condensed consolidated financial statements.
Item 4. Controls and Procedures.
Medical Properties Trust, Inc. and MPT Operating Partnership, L.P.
We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b), under the Securities Exchange Act of 1934, as amended, we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
36
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
4037
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
From time-to-time, we may become involved in legal proceedings arising in the ordinary course of our business. Except as set forth below, we are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results, or financial condition.
Securities Litigation
On April 12, 2023, we and certain of our executives were named as defendants in a putative federal securities class action lawsuit filed by a purported stockholder in the United States District Court for the Southern District of New York, Case No. 1:23-cv-03070. The complaint sought class certification on behalf of purchasers of our common stock between March 1, 2022 and February 22, 2023 and alleged false and/or misleading statements and/or omissions resulted in artificially inflated prices for our common stock. The complaint sought unspecified damages including interest and an award of reasonable costs and expenses. On May 9, 2023, the plaintiff voluntarily dismissed this lawsuit.
On April 13, 2023, we and certain of our executives were named as defendants in a second putative federal securities class action lawsuit, also alleging false and/or misleading statements and/or omissions resulted in artificially inflated prices for our common stock, filed by a purported stockholder in the United States District Court for the Northern District of Alabama, Case No. 2:23-cv-00486. The complaint seeks class certification on behalf of purchasers of our common stock between July 15, 2019 and February 22, 2023 and unspecified damages including interest and an award of reasonable costs and expenses.
We believe these claims are without merit and intend to defend the remaining open case vigorously. We have not recorded a liability because, at this time, we are unable to determine whether an unfavorable outcome is probable or to estimate reasonably possible losses.
Defamation Litigation
On March 30, 2023, we commenced an action in the United States District Court for the Northern District of Alabama, Case No. 2:23-cv-00408, against short-seller Viceroy Research LLC and its members. We are seeking injunctive relief and compensatory damages for defamation, civil conspiracy, tortious interference, private nuisance, and unjust enrichment based on defamatory statements expressed against us.
The information contained in Note 109 “Commitments and Contingencies” to the condensed consolidated financial statements is incorporated by reference into this Item 1.
Item 1A. Risk Factors.
There have been no material changes to the Risk Factors as presented in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Period |
| Total number of |
|
| Average price |
|
| Total number of shares |
|
| Approximate dollar |
| ||||
January 1-January 31, 2023 |
|
| 499 |
|
| $ | 11.14 |
|
|
| — |
|
| $ | 482,085 |
|
Period |
| Total number of |
|
| Average price |
|
| Total number of shares |
|
| Approximate dollar | |||
April 1-April 30, 2022 |
|
| 41,141 |
|
| $ | 21.38 |
|
|
| — |
|
| N/A |
38
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
4139
Item 6. Exhibits
Exhibit Number | Description | ||||
|
| ||||
| |||||
31.1* | |||||
31.2* | |||||
31.3* | |||||
31.4* | |||||
32.1** | |||||
32.2** | |||||
Exhibit 101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
Exhibit 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | ||||
Exhibit 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
Exhibit 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
Exhibit 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
Exhibit 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
Exhibit 104* | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
* Filed herewith.
** Furnished herewith.
*** Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to Medical Properties Trust, Inc.'s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 28, 2022.
(2) Incorporated by reference to Exhibit 1.1 of the Current Report on Form 8-K of Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. filed with the Securities and Exchange Commission on July 6, 2022.
4240
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
MEDICAL PROPERTIES TRUST, INC. | ||
By: | /s/ J. Kevin Hanna | |
J. Kevin Hanna | ||
Vice President, Controller, Assistant Treasurer, and Chief Accounting Officer (Principal Accounting Officer) |
MPT OPERATING PARTNERSHIP, L.P. | ||
By: | /s/ J. Kevin Hanna | |
J. Kevin Hanna | ||
Vice President, Controller, Assistant Treasurer, and Chief Accounting Officer of the sole member of the general partner of MPT Operating Partnership, L.P. (Principal Accounting Officer) |
Date: August 9, 2022May 10, 2023
4341