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 September 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 November 4, 2022,May 5, 2023, Medical Properties Trust, Inc. had 598.0598.3 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 nine months ended September 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 September 30, 2022March 31, 2023

Table of Contents

Page

PART I — FINANCIAL INFORMATION

3

Item 1 Financial Statements

3

Medical Properties Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets at September 30, 2022March 31, 2023 and December 31, 20212022

3

Condensed Consolidated Statements of Net Income for the Three and Nine Months Ended September 30,March 31, 2023 and 2022 and 2021

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30,March 31, 2023 and 2022 and 2021

5

Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30,March 31, 2023 and 2022 and 2021

6

Condensed Consolidated Statements of Cash Flows for the NineThree Months Ended September 30,March 31, 2023 and 2022 and 2021

87

MPT Operating Partnership, L.P. and Subsidiaries

Condensed Consolidated Balance Sheets at September 30, 2022March 31, 2023 and December 31, 20212022

98

Condensed Consolidated Statements of Net Income for the Three and Nine Months Ended September 30,March 31, 2023 and 2022 and 2021

109

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30,March 31, 2023 and 2022

10

Condensed Consolidated Statements of Capital for the Three Months Ended March 31, 2023 and 20212022

11

Condensed Consolidated Statements of CapitalCash Flows for the Three and Nine Months Ended September 30,March 31, 2023 and 2022 and 2021

12

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

14

Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1513

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

2928

Item 3 Quantitative and Qualitative Disclosures about Market Risk

4235

Item 4 Controls and Procedures

4336

PART II — OTHER INFORMATION

4438

Item 1 Legal Proceedings

4438

Item 1A Risk Factors

4438

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

4438

Item 3 Defaults Upon Senior Securities

4439

Item 4 Mine Safety Disclosures

4439

Item 5 Other Information

4439

Item 6 Exhibits

4540

SIGNATURE

4641

2


PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

September 30,
2022

 

 

December 31,
2021

 

 

March 31,
2023

 

 

December 31,
2022

 

(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

 

$

13,083,292

 

 

$

14,062,722

 

 

$

13,092,510

 

 

$

13,862,415

 

Investment in financing leases

 

 

1,965,021

 

 

 

2,053,327

 

 

 

1,582,416

 

 

 

1,691,323

 

Real estate held for sale

 

 

 

 

 

1,096,505

 

 

 

881,587

 

 

 

 

Mortgage loans

 

 

305,504

 

 

 

213,211

 

 

 

346,446

 

 

 

364,101

 

Gross investment in real estate assets

 

 

15,353,817

 

 

 

17,425,765

 

 

 

15,902,959

 

 

 

15,917,839

 

Accumulated depreciation and amortization

 

 

(1,088,912

)

 

 

(993,100

)

 

 

(1,207,699

)

 

 

(1,193,312

)

Net investment in real estate assets

 

 

14,264,905

 

 

 

16,432,665

 

 

 

14,695,260

 

 

 

14,724,527

 

Cash and cash equivalents

 

 

299,171

 

 

 

459,227

 

 

 

302,321

 

 

 

235,668

 

Interest and rent receivables

 

 

117,555

 

 

 

56,229

 

Interest and rent receivables, net

 

 

169,511

 

 

 

167,035

 

Straight-line rent receivables

 

 

710,082

 

 

 

728,522

 

 

 

810,911

 

 

 

787,166

 

Investments in unconsolidated real estate joint ventures

 

 

1,422,010

 

 

 

1,152,927

 

 

 

1,506,474

 

 

 

1,497,903

 

Investments in unconsolidated operating entities

 

 

1,428,061

 

 

 

1,289,434

 

 

 

1,310,460

 

 

 

1,444,872

 

Other loans

 

 

200,245

 

 

 

67,317

 

 

 

276,367

 

 

 

227,839

 

Other assets

 

 

601,387

 

 

 

333,480

 

 

 

578,853

 

 

 

572,990

 

Total Assets

 

$

19,043,416

 

 

$

20,519,801

 

 

$

19,650,157

 

 

$

19,658,000

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Debt, net

 

$

9,476,144

 

 

$

11,282,770

 

 

$

10,438,151

 

 

$

10,268,412

 

Accounts payable and accrued expenses

 

 

569,017

 

 

 

607,792

 

 

 

595,269

 

 

 

621,324

 

Deferred revenue

 

 

18,569

 

 

 

25,563

 

 

 

29,391

 

 

 

27,727

 

Obligations to tenants and other lease liabilities

 

 

146,438

 

 

 

158,005

 

 

 

144,092

 

 

 

146,130

 

Total Liabilities

 

 

10,210,168

 

 

 

12,074,130

 

 

 

11,206,903

 

 

 

11,063,593

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value. Authorized 10,000 shares;
no shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value. Authorized 750,000 shares;
issued and outstanding —
598,983 shares at September 30, 2022 and
596,748 shares at December 31, 2021

 

 

599

 

 

 

597

 

Common stock, $0.001 par value. Authorized 750,000 shares;
issued and outstanding —
598,302 shares at March 31, 2023 and
597,476 shares at December 31, 2022

 

 

598

 

 

 

597

 

Additional paid-in capital

 

 

8,537,145

 

 

 

8,564,009

 

 

 

8,541,414

 

 

 

8,535,140

 

Retained earnings (deficit)

 

 

433,339

 

 

 

(87,691

)

Retained (deficit) earnings

 

 

(25,413

)

 

 

116,285

 

Accumulated other comprehensive loss

 

 

(139,301

)

 

 

(36,727

)

 

 

(74,919

)

 

 

(59,184

)

Total Medical Properties Trust, Inc. stockholders’ equity

 

 

8,831,782

 

 

 

8,440,188

 

 

 

8,441,680

 

 

 

8,592,838

 

Non-controlling interests

 

 

1,466

 

 

 

5,483

 

 

 

1,574

 

 

 

1,569

 

Total Equity

 

 

8,833,248

 

 

 

8,445,671

 

 

 

8,443,254

 

 

 

8,594,407

 

Total Liabilities and Equity

 

$

19,043,416

 

 

$

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
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

For the Three Months
Ended March 31,

 

(In thousands, except per share amounts)

2022

 

 

2021

 

 

2022

 

 

2021

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent billed

$

232,418

 

 

$

242,211

 

 

$

737,029

 

 

$

672,425

 

$

248,157

 

 

$

263,402

 

Straight-line rent

 

26,552

 

 

 

64,637

 

 

 

146,114

 

 

 

174,975

 

 

56,693

 

 

 

61,044

 

Income from financing leases

 

51,011

 

 

 

50,667

 

 

 

154,660

 

 

 

151,898

 

 

13,195

 

 

 

51,776

 

Interest and other income

 

42,358

 

 

 

33,264

 

 

 

124,562

 

 

 

136,038

 

 

32,166

 

 

 

33,578

 

Total revenues

 

352,339

 

 

 

390,779

 

 

 

1,162,365

 

 

 

1,135,336

 

 

350,211

 

 

 

409,800

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

88,076

 

 

 

94,132

 

 

 

266,989

 

 

 

273,409

 

 

97,654

 

 

 

91,183

 

Real estate depreciation and amortization

 

81,873

 

 

 

85,039

 

 

 

251,523

 

 

 

237,050

 

 

83,860

 

 

 

85,316

 

Property-related

 

8,265

 

 

 

7,128

 

 

 

37,998

 

 

 

31,265

 

 

7,110

 

 

 

8,598

 

General and administrative

 

37,319

 

 

 

36,694

 

 

 

117,601

 

 

 

107,312

 

 

41,724

 

 

 

41,424

 

Total expenses

 

215,533

 

 

 

222,993

 

 

 

674,111

 

 

 

649,036

 

 

230,348

 

 

 

226,521

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate and other, net

 

68,795

 

 

 

9,294

 

 

 

536,788

 

 

 

8,896

 

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

 

11,483

 

 

 

7,193

 

 

 

33,606

 

 

 

21,633

 

 

11,352

 

 

 

7,338

 

Debt refinancing and unutilized financing costs

 

(17

)

 

 

 

 

 

(9,452

)

 

 

(2,339

)

 

 

 

 

(8,816

)

Other (including fair value adjustments on securities)

 

23,532

 

 

 

(2,276

)

 

 

35,450

 

 

 

4,747

 

 

(5,166

)

 

 

14,762

 

Total other income

 

103,793

 

 

 

14,211

 

 

 

596,392

 

 

 

32,937

 

Total other (expense) income

 

(83,290

)

 

 

460,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax

 

240,599

 

 

 

181,997

 

 

 

1,084,646

 

 

 

519,237

 

 

36,573

 

 

 

643,326

 

Income tax expense

 

(18,579

)

 

 

(10,602

)

 

 

(40,615

)

 

 

(69,141

)

 

(3,543

)

 

 

(11,379

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

222,020

 

 

 

171,395

 

 

 

1,044,031

 

 

 

450,096

 

 

33,030

 

 

 

631,947

 

Net income attributable to non-controlling interests

 

(227

)

 

 

(258

)

 

 

(960

)

 

 

(611

)

 

(236

)

 

 

(266

)

Net income attributable to MPT common stockholders

$

221,793

 

 

$

171,137

 

 

$

1,043,071

 

 

$

449,485

 

$

32,794

 

 

$

631,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share — basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to MPT common stockholders

$

0.37

 

 

$

0.29

 

 

$

1.74

 

 

$

0.76

 

$

0.05

 

 

$

1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding — basic

 

598,980

 

 

 

595,119

 

 

 

598,828

 

 

 

586,291

 

 

598,302

 

 

 

598,676

 

Weighted average shares outstanding — diluted

 

599,339

 

 

 

597,320

 

 

 

599,099

 

 

 

587,971

 

 

598,310

 

 

 

598,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

$

0.29

 

 

$

0.28

 

 

$

0.87

 

 

$

0.84

 

$

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
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

(In thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Net income

 

$

222,020

 

 

$

171,395

 

 

$

1,044,031

 

 

$

450,096

 

 

$

33,030

 

 

$

631,947

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on interest rate swaps, net of tax

 

 

52,975

 

 

 

8,847

 

 

 

123,827

 

 

 

28,558

 

Foreign currency translation loss

 

 

(108,845

)

 

 

(25,191

)

 

 

(226,401

)

 

 

(47,077

)

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

 

 

166,150

 

 

 

155,051

 

 

 

941,457

 

 

 

431,577

 

 

 

17,295

 

 

 

663,664

 

Comprehensive income attributable to non-controlling interests

 

 

(227

)

 

 

(258

)

 

 

(960

)

 

 

(611

)

 

 

(236

)

 

 

(266

)

Comprehensive income attributable to MPT common
stockholders

 

$

165,923

 

 

$

154,793

 

 

$

940,497

 

 

$

430,966

 

 

$

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
Value

 

 

Shares

 

 

Par
Value

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings
(Deficit)

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Non-
Controlling
Interests

 

 

Total
Equity

 

 

Shares

 

 

Par
Value

 

 

Shares

 

 

Par
Value

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings
(Deficit)

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Non-
Controlling
Interests

 

 

Total
Equity

 

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,
net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,932

 

 

 

 

 

 

44,932

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,215

)

 

 

 

 

 

(13,215

)

Stock vesting and amortization of
stock-based compensation

 

 

 

 

 

 

 

 

3,107

 

 

 

3

 

 

 

11,801

 

 

 

 

 

 

 

 

 

 

 

 

11,804

 

Stock vesting - satisfaction of tax
withholdings

 

 

 

 

 

 

 

 

(1,179

)

 

 

(1

)

 

 

(27,918

)

 

 

 

 

 

 

 

 

 

 

 

(27,919

)

Issuance of non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

929

 

 

 

929

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(772

)

 

 

(772

)

Dividends declared ($0.29 per
common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 earnings, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,553

)

 

 

 

 

 

(28,553

)

Stock vesting and amortization of
stock-based compensation

 

 

 

 

 

 

 

 

204

 

 

 

 

 

 

10,108

 

 

 

 

 

 

 

 

 

 

 

 

10,108

 

 

 

 

 

 

 

 

 

1,325

 

 

 

1

 

 

 

11,828

 

 

 

 

 

 

 

 

 

 

 

 

11,829

 

Stock vesting - satisfaction of tax
withholdings

 

 

 

 

 

 

 

 

(41

)

 

 

 

 

 

(880

)

 

 

 

 

 

 

 

 

 

 

 

(880

)

 

 

 

 

 

 

 

 

(499

)

 

 

 

 

 

(5,554

)

 

 

 

 

 

 

 

 

 

 

 

(5,554

)

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(335

)

 

 

(335

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(231

)

 

 

(231

)

Dividends declared ($0.29 per
common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

221,793

 

 

 

 

 

 

227

 

 

 

222,020

 

Unrealized gain on interest rate swaps,
net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,975

 

 

 

 

 

 

52,975

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108,845

)

 

 

 

 

 

(108,845

)

Stock vesting and amortization of
stock-based compensation

 

 

 

 

 

 

 

 

185

 

 

 

 

 

 

11,089

 

 

 

 

 

 

 

 

 

 

 

 

11,089

 

Stock vesting - satisfaction of tax
withholdings

 

 

 

 

 

 

 

 

(41

)

 

 

 

 

 

(636

)

 

 

 

 

 

 

 

 

 

 

 

(636

)

Acquisition of non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,428

)

 

 

 

 

 

 

 

 

(4,594

)

 

 

(35,022

)

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(205

)

 

 

(205

)

Dividends declared ($0.29 per
common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(173,999

)

 

 

 

 

 

 

 

 

(173,999

)

Balance at September 30, 2022

 

 

 

 

$

 

 

 

598,983

 

 

$

599

 

 

$

8,537,145

 

 

$

433,339

 

 

$

(139,301

)

 

$

1,466

 

 

$

8,833,248

 

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
Value

 

 

Shares

 

 

Par
Value

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings
(Deficit)

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Non-
Controlling
Interests

 

 

Total
Equity

 

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,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,932

 

 

 

 

 

 

44,932

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,215

)

 

 

 

 

 

(13,215

)

Stock vesting and amortization of
   stock-based compensation

 

 

 

 

 

 

 

 

3,107

 

 

 

3

 

 

 

11,801

 

 

 

 

 

 

 

 

 

 

 

 

11,804

 

Stock vesting - satisfaction of tax
   withholdings

 

 

 

 

 

 

 

 

(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
   common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 Equity

(Unaudited)

 

 

Preferred

 

 

Common

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands, except per share amounts)

 

Shares

 

 

Par
Value

 

 

Shares

 

 

Par
Value

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings
(Deficit)

 

 

Accumulated
Other
Comprehensive
Loss

 

 

Non-
Controlling
Interests

 

 

Total
Equity

 

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,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,504

 

 

 

 

 

 

15,504

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,900

)

 

 

 

 

 

(30,900

)

Stock vesting and amortization of
   stock-based compensation

 

 

 

 

 

 

 

 

1,741

 

 

 

2

 

 

 

12,262

 

 

 

 

 

 

 

 

 

 

 

 

12,264

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

(193

)

Proceeds from offering (net of
   offering costs)

 

 

 

 

 

 

 

 

39,949

 

 

 

40

 

 

 

779,201

 

 

 

 

 

 

 

 

 

 

 

 

779,241

 

Dividends declared ($0.28 per
   common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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
   of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,207

 

 

 

 

 

 

4,207

 

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,014

 

 

 

 

 

 

9,014

 

Stock vesting and amortization of
   stock-based compensation

 

 

 

 

 

 

 

 

176

 

 

 

 

 

 

12,771

 

 

 

 

 

 

 

 

 

 

 

 

12,771

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(142

)

 

 

(142

)

Proceeds from offering (net of
   offering costs)

 

 

 

 

 

 

 

 

5,679

 

 

 

6

 

 

 

121,327

 

 

 

 

 

 

 

 

 

 

 

 

121,333

 

Dividends declared ($0.28 per
   common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(165,133

)

 

 

 

 

 

 

 

 

(165,133

)

Balance at June 30, 2021

 

 

 

 

$

 

 

 

588,898

 

 

$

589

 

 

$

8,386,287

 

 

$

(121,639

)

 

$

(53,499

)

 

$

5,343

 

 

$

8,217,081

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

171,137

 

 

 

 

 

 

258

 

 

 

171,395

 

Unrealized gain on interest rate swaps, net
   of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,847

 

 

 

 

 

 

8,847

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,191

)

 

 

 

 

 

(25,191

)

Stock vesting and amortization of
   stock-based compensation

 

 

 

 

 

 

 

 

218

 

 

 

 

 

 

13,555

 

 

 

 

 

 

 

 

 

 

 

 

13,555

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

(202

)

Proceeds from offering (net of
   offering costs)

 

 

 

 

 

 

 

 

6,963

 

 

 

7

 

 

 

140,473

 

 

 

 

 

 

 

 

 

 

 

 

140,480

 

Dividends declared ($0.28 per
   common share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(167,231

)

 

 

 

 

 

 

 

 

(167,231

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

596,079

 

 

$

596

 

 

$

8,540,315

 

 

$

(117,733

)

 

$

(69,843

)

 

$

5,399

 

 

$

8,358,734

 

See accompanying notes to condensed consolidated financial statements.

7


MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

For the Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

(In thousands)

 

 

(In thousands)

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,044,031

 

 

$

450,096

 

 

$

33,030

 

 

$

631,947

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

260,717

 

 

 

246,117

 

 

 

87,586

 

 

 

88,760

 

Amortization of deferred financing costs and debt discount

 

 

13,123

 

 

 

12,079

 

 

 

4,014

 

 

 

5,285

 

Straight-line rent revenue and other

 

 

(214,435

)

 

 

(208,756

)

 

 

(58,566

)

 

 

(75,385

)

Share-based compensation

 

 

33,001

 

 

 

38,590

 

Gain on sale of real estate and other, net

 

 

(536,788

)

 

 

(8,896

)

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)

 

 

28,411

 

 

 

(1,601

)

 

 

2,192

 

 

 

(2,271

)

Debt refinancing and unutilized financing costs

 

 

9,452

 

 

 

2,339

 

 

 

 

 

 

8,816

 

Tax rate changes

 

 

(825

)

 

 

42,746

 

Tax rate changes and other

 

 

(7,305

)

 

 

 

Other adjustments

 

 

(2,137

)

 

 

15,468

 

 

 

(8,505

)

 

 

(1,040

)

Changes in:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and rent receivables

 

 

(68,929

)

 

 

(19,150

)

 

 

(514

)

 

 

(12,431

)

Other assets

 

 

(7,551

)

 

 

516

 

 

 

(2,493

)

 

 

(41

)

Accounts payable and accrued expenses

 

 

8,030

 

 

 

25,527

 

 

 

(15,696

)

 

 

(21,648

)

Deferred revenue

 

 

(8,185

)

 

 

(17,588

)

 

 

600

 

 

 

(7,646

)

Net cash provided by operating activities

 

 

557,915

 

 

 

577,487

 

 

 

135,648

 

 

 

179,387

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for acquisitions and other related investments

 

 

(972,243

)

 

 

(4,279,147

)

 

 

(72,900

)

 

 

(724,795

)

Net proceeds from sale of real estate

 

 

2,185,574

 

 

 

66,891

 

 

 

100

 

 

 

1,711,608

 

Principal received on loans receivable

 

 

52,317

 

 

 

1,234,839

 

 

 

221,876

 

 

 

6,355

 

Investment in loans receivable

 

 

(179,542

)

 

 

(38,921

)

 

 

(50,000

)

 

 

(10,414

)

Construction in progress and other

 

 

(97,783

)

 

 

(30,291

)

 

 

(13,292

)

 

 

(36,115

)

Proceeds from return of equity investment

 

 

14,295

 

 

 

21,998

 

Capital additions and other investments, net

 

 

(144,307

)

 

 

(195,298

)

 

 

(68,606

)

 

 

(67,605

)

Net cash provided by (used for) investing activities

 

 

858,311

 

 

 

(3,219,929

)

Net cash provided by investing activities

 

 

17,178

 

 

 

879,034

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from term debt, net of discount

 

 

 

 

 

2,489,735

 

Payments of term debt

 

 

(869,606

)

 

 

(689,450

)

 

 

 

 

 

(869,606

)

Revolving credit facilities, net

 

 

(64,055

)

 

 

80,963

 

 

 

95,919

 

 

 

(198,599

)

Dividends paid

 

 

(524,536

)

 

 

(476,242

)

 

 

(176,580

)

 

 

(176,494

)

Lease deposits and other obligations to tenants

 

 

(2,591

)

 

 

14,819

 

 

 

(2,691

)

 

 

15,168

 

Proceeds from sale of common shares, net of offering costs

 

 

 

 

 

1,041,054

 

Stock vesting - satisfaction of tax withholdings

 

 

(29,457

)

 

 

 

 

 

(5,554

)

 

 

(27,919

)

Payment of debt refinancing, deferred financing costs, and other financing activities

 

 

(53,444

)

 

 

(24,245

)

 

 

(219

)

 

 

(6,366

)

Net cash (used for) provided by financing activities

 

 

(1,543,689

)

 

 

2,436,634

 

Decrease in cash, cash equivalents, and restricted cash for period

 

 

(127,463

)

 

 

(205,808

)

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

 

 

(29,739

)

 

 

1,748

 

 

 

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

 

$

304,680

 

 

$

352,309

 

 

$

308,166

 

 

$

251,766

 

Interest paid

 

$

285,417

 

 

$

256,724

 

 

$

116,436

 

 

$

111,012

 

Supplemental schedule of non-cash financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared, unpaid

 

$

173,999

 

 

$

167,231

 

 

$

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

 

$

299,171

 

 

$

349,652

 

 

$

302,321

 

 

$

248,846

 

Restricted cash, included in Other assets

 

 

5,509

 

 

 

2,657

 

 

 

5,845

 

 

 

2,920

 

 

$

304,680

 

 

$

352,309

 

 

$

308,166

 

 

$

251,766

 

See accompanying notes to condensed consolidated financial statements.

87


MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 

September 30,
2022

 

 

December 31,
2021

 

 

March 31,
2023

 

 

December 31,
2022

 

(In thousands)

 

(Unaudited)

 

 

(Note 2)

 

 

(Unaudited)

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Real estate assets

 

 

 

 

 

 

 

 

 

 

 

 

Land, buildings and improvements, intangible lease assets, and other

 

$

13,083,292

 

 

$

14,062,722

 

 

$

13,092,510

 

 

$

13,862,415

 

Investment in financing leases

 

 

1,965,021

 

 

 

2,053,327

 

 

 

1,582,416

 

 

 

1,691,323

 

Real estate held for sale

 

 

 

 

 

1,096,505

 

 

 

881,587

 

 

 

 

Mortgage loans

 

 

305,504

 

 

 

213,211

 

 

 

346,446

 

 

 

364,101

 

Gross investment in real estate assets

 

 

15,353,817

 

 

 

17,425,765

 

 

 

15,902,959

 

 

 

15,917,839

 

Accumulated depreciation and amortization

 

 

(1,088,912

)

 

 

(993,100

)

 

 

(1,207,699

)

 

 

(1,193,312

)

Net investment in real estate assets

 

 

14,264,905

 

 

 

16,432,665

 

 

 

14,695,260

 

 

 

14,724,527

 

Cash and cash equivalents

 

 

299,171

 

 

 

459,227

 

 

 

302,321

 

 

 

235,668

 

Interest and rent receivables

 

 

117,555

 

 

 

56,229

 

Interest and rent receivables, net

 

 

169,511

 

 

 

167,035

 

Straight-line rent receivables

 

 

710,082

 

 

 

728,522

 

 

 

810,911

 

 

 

787,166

 

Investments in unconsolidated real estate joint ventures

 

 

1,422,010

 

 

 

1,152,927

 

 

 

1,506,474

 

 

 

1,497,903

 

Investments in unconsolidated operating entities

 

 

1,428,061

 

 

 

1,289,434

 

 

 

1,310,460

 

 

 

1,444,872

 

Other loans

 

 

200,245

 

 

 

67,317

 

 

 

276,367

 

 

 

227,839

 

Other assets

 

 

601,387

 

 

 

333,480

 

 

 

578,853

 

 

 

572,990

 

Total Assets

 

$

19,043,416

 

 

$

20,519,801

 

 

$

19,650,157

 

 

$

19,658,000

 

Liabilities and Capital

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Debt, net

 

$

9,476,144

 

 

$

11,282,770

 

 

$

10,438,151

 

 

$

10,268,412

 

Accounts payable and accrued expenses

 

 

394,628

 

 

 

430,908

 

 

 

420,387

 

 

 

444,354

 

Deferred revenue

 

 

18,569

 

 

 

25,563

 

 

 

29,391

 

 

 

27,727

 

Obligations to tenants and other lease liabilities

 

 

146,438

 

 

 

158,005

 

 

 

144,092

 

 

 

146,130

 

Payable due to Medical Properties Trust, Inc.

 

 

173,999

 

 

 

176,494

 

 

 

174,492

 

 

 

176,580

 

Total Liabilities

 

 

10,209,778

 

 

 

12,073,740

 

 

 

11,206,513

 

 

 

11,063,203

 

Capital

 

 

 

 

 

 

 

 

 

 

 

 

General Partner — issued and outstanding — 5,990 units at
September 30, 2022 and
5,968 units at December 31, 2021

 

 

89,790

 

 

 

84,847

 

Limited Partners — issued and outstanding — 592,993 units at
September 30, 2022 and
590,780 units at December 31, 2021

 

 

8,881,683

 

 

 

8,392,458

 

General Partner — issued and outstanding — 5,984 units at
March 31, 2023 and
5,976 units at December 31, 2022

 

 

85,244

 

 

 

86,599

 

Limited Partners — issued and outstanding — 592,318 units at
March 31, 2023 and
591,500 units at December 31, 2022

 

 

8,431,745

 

 

 

8,565,813

 

Accumulated other comprehensive loss

 

 

(139,301

)

 

 

(36,727

)

 

 

(74,919

)

 

 

(59,184

)

Total MPT Operating Partnership, L.P. capital

 

 

8,832,172

 

 

 

8,440,578

 

 

 

8,442,070

 

 

 

8,593,228

 

Non-controlling interests

 

 

1,466

 

 

 

5,483

 

 

 

1,574

 

 

 

1,569

 

Total Capital

 

 

8,833,638

 

 

 

8,446,061

 

 

 

8,443,644

 

 

 

8,594,797

 

Total Liabilities and Capital

 

$

19,043,416

 

 

$

20,519,801

 

 

$

19,650,157

 

 

$

19,658,000

 

See accompanying notes to condensed consolidated financial statements.

98


MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Net Income

(Unaudited)

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

(In thousands, except per unit amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rent billed

 

$

232,418

 

 

$

242,211

 

 

$

737,029

 

 

$

672,425

 

 

$

248,157

 

 

$

263,402

 

Straight-line rent

 

 

26,552

 

 

 

64,637

 

 

 

146,114

 

 

 

174,975

 

 

 

56,693

 

 

 

61,044

 

Income from financing leases

 

 

51,011

 

 

 

50,667

 

 

 

154,660

 

 

 

151,898

 

 

 

13,195

 

 

 

51,776

 

Interest and other income

 

 

42,358

 

 

 

33,264

 

 

 

124,562

 

 

 

136,038

 

 

 

32,166

 

 

 

33,578

 

Total revenues

 

 

352,339

 

 

 

390,779

 

 

 

1,162,365

 

 

 

1,135,336

 

 

 

350,211

 

 

 

409,800

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

88,076

 

 

 

94,132

 

 

 

266,989

 

 

 

273,409

 

 

 

97,654

 

 

 

91,183

 

Real estate depreciation and amortization

 

 

81,873

 

 

 

85,039

 

 

 

251,523

 

 

 

237,050

 

 

 

83,860

 

 

 

85,316

 

Property-related

 

 

8,265

 

 

 

7,128

 

 

 

37,998

 

 

 

31,265

 

 

 

7,110

 

 

 

8,598

 

General and administrative

 

 

37,319

 

 

 

36,694

 

 

 

117,601

 

 

 

107,312

 

 

 

41,724

 

 

 

41,424

 

Total expenses

 

 

215,533

 

 

 

222,993

 

 

 

674,111

 

 

 

649,036

 

 

 

230,348

 

 

 

226,521

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate and other, net

 

 

68,795

 

 

 

9,294

 

 

 

536,788

 

 

 

8,896

 

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

 

 

11,483

 

 

 

7,193

 

 

 

33,606

 

 

 

21,633

 

 

 

11,352

 

 

 

7,338

 

Debt refinancing and unutilized financing costs

 

 

(17

)

 

 

 

 

 

(9,452

)

 

 

(2,339

)

 

 

 

 

 

(8,816

)

Other (including fair value adjustments on securities)

 

 

23,532

 

 

 

(2,276

)

 

 

35,450

 

 

 

4,747

 

 

 

(5,166

)

 

 

14,762

 

Total other income

 

 

103,793

 

 

 

14,211

 

 

 

596,392

 

 

 

32,937

 

Total other (expense) income

 

 

(83,290

)

 

 

460,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income tax

 

 

240,599

 

 

 

181,997

 

 

 

1,084,646

 

 

 

519,237

 

 

 

36,573

 

 

 

643,326

 

Income tax expense

 

 

(18,579

)

 

 

(10,602

)

 

 

(40,615

)

 

 

(69,141

)

 

 

(3,543

)

 

 

(11,379

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

222,020

 

 

 

171,395

 

 

 

1,044,031

 

 

 

450,096

 

 

 

33,030

 

 

 

631,947

 

Net income attributable to non-controlling interests

 

 

(227

)

 

 

(258

)

 

 

(960

)

 

 

(611

)

 

 

(236

)

 

 

(266

)

Net income attributable to MPT Operating Partnership
partners

 

$

221,793

 

 

$

171,137

 

 

$

1,043,071

 

 

$

449,485

 

 

$

32,794

 

 

$

631,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per unit — basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to MPT Operating Partnership partners

 

$

0.37

 

 

$

0.29

 

 

$

1.74

 

 

$

0.76

 

 

$

0.05

 

 

$

1.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average units outstanding — basic

 

 

598,980

 

 

 

595,119

 

 

 

598,828

 

 

 

586,291

 

 

 

598,302

 

 

 

598,676

 

Weighted average units outstanding — diluted

 

 

599,339

 

 

 

597,320

 

 

 

599,099

 

 

 

587,971

 

 

 

598,310

 

 

 

598,932

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per unit

 

$

0.29

 

 

$

0.28

 

 

$

0.87

 

 

$

0.84

 

 

$

0.29

 

 

$

0.29

 

See accompanying notes to condensed consolidated financial statements.

109


MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

(In thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Net income

 

$

222,020

 

 

$

171,395

 

 

$

1,044,031

 

 

$

450,096

 

 

$

33,030

 

 

$

631,947

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on interest rate swaps, net of tax

 

 

52,975

 

 

 

8,847

 

 

 

123,827

 

 

 

28,558

 

Foreign currency translation loss

 

 

(108,845

)

 

 

(25,191

)

 

 

(226,401

)

 

 

(47,077

)

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

 

 

166,150

 

 

 

155,051

 

 

 

941,457

 

 

 

431,577

 

 

 

17,295

 

 

 

663,664

 

Comprehensive income attributable to non-controlling interests

 

 

(227

)

 

 

(258

)

 

 

(960

)

 

 

(611

)

 

 

(236

)

 

 

(266

)

Comprehensive income attributable to MPT Operating Partnership
partners

 

$

165,923

 

 

$

154,793

 

 

$

940,497

 

 

$

430,966

 

 

$

17,059

 

 

$

663,398

 

See accompanying notes to condensed consolidated financial statements.

1110


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
Value

 

 

Units

 

 

Unit
Value

 

 

Comprehensive
Loss

 

 

Controlling
Interests

 

 

Total
Capital

 

 

Units

 

 

Unit
Value

 

 

Units

 

 

Unit
Value

 

 

Comprehensive
Loss

 

 

Controlling
Interests

 

 

Total
Capital

 

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,
net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,932

 

 

 

 

 

 

44,932

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,215

)

 

 

 

 

 

(13,215

)

Unit vesting and amortization of unit-based
compensation

 

 

31

 

 

 

118

 

 

 

3,076

 

 

 

11,686

 

 

 

 

 

 

 

 

 

11,804

 

Unit vesting - satisfaction of tax
withholdings

 

 

(12

)

 

 

(279

)

 

 

(1,167

)

 

 

(27,640

)

 

 

 

 

 

 

 

 

(27,919

)

Issuance 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
of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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
earnings, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,553

)

 

 

 

 

 

(28,553

)

Unit vesting and amortization of unit-based
compensation

 

 

2

 

 

 

101

 

 

 

202

 

 

 

10,007

 

 

 

 

 

 

 

 

 

10,108

 

 

 

13

 

 

 

118

 

 

 

1,312

 

 

 

11,711

 

 

 

 

 

 

 

 

 

11,829

 

Unit vesting - satisfaction of tax
withholdings

 

 

(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

 

Net income

 

 

 

 

 

2,218

 

 

 

 

 

 

219,575

 

 

 

 

 

 

227

 

 

 

222,020

 

Unrealized gain on interest rate swaps, net
of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,975

 

 

 

 

 

 

52,975

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108,845

)

 

 

 

 

 

(108,845

)

Unit vesting and amortization of unit-based
compensation

 

 

2

 

 

 

111

 

 

 

183

 

 

 

10,978

 

 

 

 

 

 

 

 

 

11,089

 

Unit vesting - satisfaction of tax
withholdings

 

 

 

 

 

(6

)

 

 

(41

)

 

 

(630

)

 

 

 

 

 

 

 

 

(636

)

Acquisition of non-controlling interest

 

 

 

 

 

(304

)

 

 

 

 

 

(30,124

)

 

 

 

 

 

(4,594

)

 

 

(35,022

)

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(205

)

 

 

(205

)

Distributions declared ($0.29 per unit)

 

 

 

 

 

(1,740

)

 

 

 

 

 

(172,259

)

 

 

 

 

 

 

 

 

(173,999

)

Balance at September 30, 2022

 

 

5,990

 

 

$

89,790

 

 

 

592,993

 

 

$

8,881,683

 

 

$

(139,301

)

 

$

1,466

 

 

$

8,833,638

 

Balance at March 31, 2023

 

 

5,984

 

 

$

85,244

 

 

 

592,318

 

 

$

8,431,745

 

 

$

(74,919

)

 

$

1,574

 

 

$

8,443,644

 

See accompanying notes to condensed consolidated financial statements.

12


 

 

General

 

 

Limited Partners

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Partner

 

 

Common

 

 

Other

 

 

Non-

 

 

 

 

(In thousands, except per unit amounts)

 

Units

 

 

Unit
Value

 

 

Units

 

 

Unit
Value

 

 

Comprehensive
Loss

 

 

Controlling
Interests

 

 

Total
Capital

 

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
   compensation

 

 

31

 

 

 

118

 

 

 

3,076

 

 

 

11,686

 

 

 

 

 

 

 

 

 

11,804

 

Unit vesting - satisfaction of tax
   withholdings

 

 

(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

 

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Capital

(Unaudited)

 

 

General

 

 

Limited Partners

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Partner

 

 

Common

 

 

Other

 

 

Non-

 

 

 

 

(In thousands, except per unit amounts)

 

Units

 

 

Unit
Value

 

 

Units

 

 

Unit
Value

 

 

Comprehensive
Loss

 

 

Controlling
Interests

 

 

Total
Capital

 

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,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,504

 

 

 

 

 

 

15,504

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,900

)

 

 

 

 

 

(30,900

)

Unit vesting and amortization of unit-based
   compensation

 

 

17

 

 

 

123

 

 

 

1,724

 

 

 

12,141

 

 

 

 

 

 

 

 

 

12,264

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

(193

)

Proceeds from offering (net of offering
   costs)

 

 

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 of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,207

 

 

 

 

 

 

4,207

 

Foreign currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,014

 

 

 

 

 

 

9,014

 

Unit vesting and amortization of unit-based
   compensation

 

 

2

 

 

 

128

 

 

 

174

 

 

 

12,643

 

 

 

 

 

 

 

 

 

12,771

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(142

)

 

 

(142

)

Proceeds from offering (net of offering
   costs)

 

 

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

 

Net income

 

 

 

 

 

1,711

 

 

 

 

 

 

169,426

 

 

 

 

 

 

258

 

 

 

171,395

 

Unrealized gain on interest rate swaps,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,847

 

 

 

 

 

 

8,847

 

Foreign currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,191

)

 

 

 

 

 

(25,191

)

Unit vesting and amortization of unit-based
   compensation

 

 

2

 

 

 

136

 

 

 

216

 

 

 

13,419

 

 

 

 

 

 

 

 

 

13,555

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

(202

)

Proceeds from offering (net of offering
   costs)

 

 

70

 

 

 

1,405

 

 

 

6,893

 

 

 

139,075

 

 

 

 

 

 

 

 

 

140,480

 

Distributions declared ($0.28 per unit)

 

 

 

 

 

(1,672

)

 

 

 

 

 

(165,559

)

 

 

 

 

 

 

 

 

(167,231

)

Balance at September 30, 2021

 

 

5,962

 

 

$

84,312

 

 

 

590,117

 

 

$

8,339,256

 

 

$

(69,843

)

 

$

5,399

 

 

$

8,359,124

 

See accompanying notes to condensed consolidated financial statements.

1311


MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

For the Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

(In thousands)

 

 

(In thousands)

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

1,044,031

 

 

$

450,096

 

 

$

33,030

 

 

$

631,947

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

260,717

 

 

 

246,117

 

 

 

87,586

 

 

 

88,760

 

Amortization of deferred financing costs and debt discount

 

 

13,123

 

 

 

12,079

 

 

 

4,014

 

 

 

5,285

 

Straight-line rent revenue and other

 

 

(214,435

)

 

 

(208,756

)

 

 

(58,566

)

 

 

(75,385

)

Unit-based compensation

 

 

33,001

 

 

 

38,590

 

 

 

11,829

 

 

 

11,804

 

Gain on sale of real estate and other, net

 

 

(536,788

)

 

 

(8,896

)

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)

 

 

28,411

 

 

 

(1,601

)

 

 

2,192

 

 

 

(2,271

)

Debt refinancing and unutilized financing costs

 

 

9,452

 

 

 

2,339

 

 

 

 

 

 

8,816

 

Tax rate changes

 

 

(825

)

 

 

42,746

 

Tax rate changes and other

 

 

(7,305

)

 

 

 

Other adjustments

 

 

(2,137

)

 

 

15,468

 

 

 

(8,505

)

 

 

(1,040

)

Changes in:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and rent receivables

 

 

(68,929

)

 

 

(19,150

)

 

 

(514

)

 

 

(12,431

)

Other assets

 

 

(7,551

)

 

 

516

 

 

 

(2,493

)

 

 

(41

)

Accounts payable and accrued expenses

 

 

8,030

 

 

 

25,527

 

 

 

(15,696

)

 

 

(21,648

)

Deferred revenue

 

 

(8,185

)

 

 

(17,588

)

 

 

600

 

 

 

(7,646

)

Net cash provided by operating activities

 

 

557,915

 

 

 

577,487

 

 

 

135,648

 

 

 

179,387

 

Investing activities

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for acquisitions and other related investments

 

 

(972,243

)

 

 

(4,279,147

)

 

 

(72,900

)

 

 

(724,795

)

Net proceeds from sale of real estate

 

 

2,185,574

 

 

 

66,891

 

 

 

100

 

 

 

1,711,608

 

Principal received on loans receivable

 

 

52,317

 

 

 

1,234,839

 

 

 

221,876

 

 

 

6,355

 

Investment in loans receivable

 

 

(179,542

)

 

 

(38,921

)

 

 

(50,000

)

 

 

(10,414

)

Construction in progress and other

 

 

(97,783

)

 

 

(30,291

)

 

 

(13,292

)

 

 

(36,115

)

Proceeds from return of equity investment

 

 

14,295

 

 

 

21,998

 

Capital additions and other investments, net

 

 

(144,307

)

 

 

(195,298

)

 

 

(68,606

)

 

 

(67,605

)

Net cash provided by (used for) investing activities

 

 

858,311

 

 

 

(3,219,929

)

Net cash provided by investing activities

 

 

17,178

 

 

 

879,034

 

Financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from term debt, net of discount

 

 

 

 

 

2,489,735

 

Payments of term debt

 

 

(869,606

)

 

 

(689,450

)

 

 

 

 

 

(869,606

)

Revolving credit facilities, net

 

 

(64,055

)

 

 

80,963

 

 

 

95,919

 

 

 

(198,599

)

Distributions paid

 

 

(524,536

)

 

 

(476,242

)

 

 

(176,580

)

 

 

(176,494

)

Lease deposits and other obligations to tenants

 

 

(2,591

)

 

 

14,819

 

 

 

(2,691

)

 

 

15,168

 

Proceeds from sale of units, net of offering costs

 

 

 

 

 

1,041,054

 

Unit vesting - satisfaction of tax withholdings

 

 

(29,457

)

 

 

 

 

 

(5,554

)

 

 

(27,919

)

Payment of debt refinancing, deferred financing costs, and other financing activities

 

 

(53,444

)

 

 

(24,245

)

 

 

(219

)

 

 

(6,366

)

Net cash (used for) provided by financing activities

 

 

(1,543,689

)

 

 

2,436,634

 

Decrease in cash, cash equivalents, and restricted cash for period

 

 

(127,463

)

 

 

(205,808

)

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

 

 

(29,739

)

 

 

1,748

 

 

 

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

 

$

304,680

 

 

$

352,309

 

 

$

308,166

 

 

$

251,766

 

Interest paid

 

$

285,417

 

 

$

256,724

 

 

$

116,436

 

 

$

111,012

 

Supplemental schedule of non-cash financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared, unpaid

 

$

173,999

 

 

$

167,231

 

 

$

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

 

$

299,171

 

 

$

349,652

 

 

$

302,321

 

 

$

248,846

 

Restricted cash, included in Other assets

 

 

5,509

 

 

 

2,657

 

 

 

5,845

 

 

 

2,920

 

 

$

304,680

 

 

$

352,309

 

 

$

308,166

 

 

$

251,766

 

See accompanying notes to condensed consolidated financial statements.

1412


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 conjunction 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 September 30, 2022,March 31, 2023, we have investments in 437444 facilities in 31 states in the U.S., in seven countries in Europe, one 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 nine months ended September 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 September 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

15


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 September 30, 2022,March 31, 2023, we had loans and/or equity investments in certain variable interest entities approximating $625425 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 Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

Land and land improvements

 

$

34,925

 

 

$

562,742

 

 

$

9,313

 

 

$

9,671

 

Buildings

 

 

312,645

 

 

 

1,670,741

 

 

 

11,652

 

 

 

204,829

 

Intangible lease assets — subject to amortization (weighted-average useful
life of
20.4 years for 2022 and 36.1 years for 2021)

 

 

19,839

 

 

 

197,735

 

Mortgage loans(1)(2)

 

 

100,000

 

 

 

1,090,400

 

Intangible lease assets — subject to amortization (weighted-average useful
life of
28.8 years for 2023 and 13.2 years for 2022)

 

 

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

)

 

 

(65,525

)

 

 

 

 

 

(25,727

)

 

 

972,243

 

 

 

4,301,739

 

 

$

72,900

 

 

$

724,795

 

Loans repaid(1)

 

 

 

 

 

(1,090,400

)

 

 

(22,900

)

 

 

 

Total net assets acquired

 

$

972,243

 

 

$

3,211,339

 

 

$

50,000

 

 

$

724,795

 

(1)
The 20212023 column includes an £a $80023 million mortgage loan advanced to the Priory GroupSpringstone Health Opco, LLC ("Priory"Springstone") in the first quarter of 2021 andthat was converted to fee simple ownership of 35 properties in the second quarter of 2021one property as described below.

(2)2023 Activity

In

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.

PHP Holdings. See subsection titled "Leasing Operations (Lessor)" in this same Note 3 for further information on Prospect.

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 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

16


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 four 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 ($131 million) towards a £100 million participation level in the variable rate loan, reflecting a loan.3.5% discount.

Other acquisitions in the first nine months of 2022 included six general acute care facilities. Three 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. Two general acute care facilities, one 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. The other general acute care facility, located in Colombia, was acquired on July 29, 2022 for $26 million and is leased to Fundación Cardiovascular de Colombia pursuant to a long-term lease with 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 August 1, 2021, we completed the acquisition of five general acute care hospitals located in South Florida for approximately $900 million, plus closing and other transaction costs. These hospitals are leased to Steward pursuant to a master lease that has an initial fixed term ending in 2041 with annual inflation-based escalators.

On July 6, 2021, we acquired four acute care hospitals and two on-campus medical office buildings in Los Angeles, California for $215 million. These hospitals are leased to Pipeline Health System ("Pipeline") pursuant to a long-term lease with annual inflation-based escalators.

On July 6, 2021, we also acquired an acute care hospital in Stirling, Scotland for £15.6 million. This hospital is leased to Circle Health Ltd. ("Circle") pursuant to a long-term lease with annual inflation-based escalators.

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 four 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.

17


Development Activities

During the 2022 second quarter, we agreed to finance the development

See table below for a status summary of four 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 three 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
Incurred as of
March 31, 2023

 

 

Estimated Rent
Commencement
Date

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
Incurred as of
September 30, 2022

 

 

Estimated Rent
Commencement
Date

Steward (Texas)

 

$

169,408

 

 

$

57,911

 

 

4Q 2025

Ernest (Stockton, California)

 

 

47,700

 

 

 

43,785

 

 

4Q 2022

IMED (Spain)

 

 

46,159

 

 

 

11,809

 

 

2Q 2023

IMED (Spain)

 

 

41,577

 

 

 

29,182

 

 

3Q 2023

Springstone (Texas)

 

 

34,600

 

 

 

1,144

 

 

1Q 2024

IMED (Spain)

 

 

33,635

 

 

 

7,535

 

 

3Q 2024

 

 

$

373,079

 

 

$

151,366

 

 

 

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 eight 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 ninethree months of 2022, we also completed the sale of 15two other facilities (including 11 properties sold on September 1, 2022 related to the Prime Healthcare Services, Inc. ("Prime") repurchase optionand an ancillary property for proceeds of $366 million) and five ancillary properties for total proceeds of approximately $52248 million, and recognizedresulting in a gain on real estate of approximately $10015 million, along with a $42 million write-off of straight-line rent receivables due to the early termination of certain properties' expected lease terms.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
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

2023(1)

 

 

2022

 

Revenues(1)(2)

 

$

(27,026

)

 

$

44,963

 

 

$

17,831

 

 

$

135,392

 

 

$

18,877

 

 

$

40,579

 

Real estate depreciation and amortization(2)

 

 

(929

)

 

 

(7,245

)

 

 

(4,683

)

 

 

(26,292

)

 

 

(4,991

)

 

 

(5,247

)

Property-related expenses

 

 

156

 

 

 

(778

)

 

 

(1,752

)

 

 

(4,330

)

 

 

(1,413

)

 

 

(3,015

)

Other income(3)

 

 

68,867

 

 

 

47

 

 

 

536,823

 

 

 

181

 

Real estate and other impairment charges(3)

 

 

(89,538

)

 

 

 

Other (expense) income(4)

 

 

(7,244

)

 

 

444,268

 

Income from real estate dispositions, net

 

$

41,068

 

 

$

36,987

 

 

$

548,219

 

 

$

104,951

 

 

$

(84,309

)

 

$

476,585

 

(1)
The 2023 column consists of assets designated as held for sale in the first quarter of 2023 as a result of the transactions described in the "2023 Activity" subsection above.
(2)
Includes approximately $35 million and $424.5 million of straight-line rent and other write-offs associated with the non-Macquarie disposal transactions for the three and nine months ended September 30, 2022, respectively.March 31, 2022.
(2)
Lower in 2022 as we stopped depreciating the properties making up the Macquarie Transaction once deemed held for sale in September 2021.
(3)
Includes an approximate $68.879 million andnet impairment charge (including $536.837.4 million of straight-line rent write-offs) associated with the Australia Transaction and an approximate $11 million non-cash impairment charge associated with the repurchase of three Prime facilities for the three months ended March 31, 2023.
(4)
Includes $451.6 million of gains (net of $125 million write-off of straight-line rent receivables related to the Macquarie Transaction) for the three and nine months ended September 30, 2022, respectively.March 31, 2022.

18


2021 Activity

During the first nine months of 2021, we completed the sale of nine facilities and an ancillary property for approximately $67 million, resulting in a net gain on real estate of approximately $9 million.

Leasing Operations (Lessor)

We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies. The initial fixed lease terms of these infrastructure-type assets are typically at least 15 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 three properties with a carrying value of approximately $110 million at September 30, 2022, 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 our assets are being maintained properly and in compliance with the terms of our leases.

For all of our properties subject to lease, we are the 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 September 30, 2022,March 31, 2023, we account for all of these leases as operating leases, except where GAAP requires alternative classification, including leases on 13 Ernest facilities and three Prime facilities that are accounted for as direct financing leases and

16


leases on 13 of our Prospect facilities and five 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 September 30,
   2022

 

 

As of December 31,
   2021

 

 

As of March 31,
   2023

 

 

As of December 31,
   2022

 

Minimum lease payments receivable

 

$

888,308

 

 

$

1,183,855

 

 

$

626,721

 

 

$

880,253

 

Estimated unguaranteed residual values

 

 

203,818

 

 

 

203,818

 

 

 

203,818

 

 

 

203,818

 

Less: Unearned income and allowance for credit loss

 

 

(741,083

)

 

 

(918,584

)

 

 

(588,097

)

 

 

(731,915

)

Net investment in direct financing leases

 

 

351,043

 

 

 

469,089

 

 

 

242,442

 

 

 

352,156

 

Other financing leases (net of allowance for credit loss)

 

 

1,613,978

 

 

 

1,584,238

 

 

 

1,339,974

 

 

 

1,339,167

 

Total investment in financing leases

 

$

1,965,021

 

 

$

2,053,327

 

 

$

1,582,416

 

 

$

1,691,323

 

The decrease in the totalour net investment in direct financing leases during the first nine months ofsince December 31, 2022, is primarily related to financing leases associated withthe result of classifying three Prime facilities as held for sale at March 31, 2023. See subsection above titled "Disposals" for further information.

Other Leasing Activities

At March 31, 2023, two99% of our properties are occupied by tenants, leaving five properties soldas 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 September 1, 2022 associated withForm 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 Prime repurchase transaction.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 the COVID-19 pandemic and its impact on our tenants' business, we agreed to defer collection of a certain amount of rent for a fewcertain 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 $15.112.2 million as of September 30, 2022,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 mentioned abovepart 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), all of the facilities we lease to Pipeline are located in California, representing 1% of our total assets. At September 30, 2022, Pipeline has made all of its required rental payments, and we have on-hand cash deposits of approximatelyoriginated a $1350 million. Wemillion 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 these facilities isthe Prospect real estate and other assets are fully recoverable at this time,from the collateral available, but no assurances can be given that the transactions described above will occur or that we will not have any write-offs orfurther impairments in future periods.

Watsonville Community Hospital

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 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 recorded a credit loss reserve against the estimated uncollectible portion of the loan and wrote off approximately $2.5 million of billed and straight-line rent receivables.

On February 23, 2022, the bankruptcy court approved the bid by Pajaro Valley Healthcare District Corporation ("Pajaro") to purchase the operations of the Watsonville Community Hospital and lease the real estate from us. On August 31, 2022, Pajaro completed this purchase of the operations of the Watsonville Community Hospital. As a result of this transaction, we were repaid

19


approximately $32 million of the loans previously provided to the hospital. This loan repayment resulted in a credit loss recovery of approximately $20 million in the 2022 third quarter as shown in the "Other (including fair value adjustments on securities)" line of the condensed consolidated statements of net income. To date, Pajaro has been current on its monthly rental payments to us.

Other Leasing Activities

At September 30, 2022, 99% of our properties are occupied by tenants, leaving five 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.

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 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 September 30,
   2022

 

 

As of December 31,
   2021

 

 

Ownership Percentage

As of March 31,
   2023

 

 

As of December 31,
   2022

 

Median Kliniken S.á.r.l ("MEDIAN")

 

$

449,226

 

 

$

517,648

 

 

50%

$

483,706

 

 

$

482,735

 

Swiss Medical Network

 

 

422,731

 

 

 

476,193

 

 

70%

 

461,952

 

 

 

454,083

 

Steward (Macquarie Transaction)

 

 

419,040

 

 

 

 

 

50%

 

416,068

 

 

 

417,701

 

Policlinico di Monza

 

 

78,057

 

 

 

95,468

 

 

50%

 

88,658

 

 

 

86,245

 

HM Hospitales

 

 

52,956

 

 

 

63,618

 

 

45%

 

56,090

 

 

 

57,139

 

Total

 

$

1,422,010

 

 

$

1,152,927

 

 

 

$

1,506,474

 

 

$

1,497,903

 

For the increase in our investments in unconsolidated real estate joint ventures since December 31, 2021, see "New Investments" section in this same Note 3 for a discussion of the Macquarie Transaction. Through the first nine months of 2022, we received approximately $66 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.

20


The following is a summary of our investments in unconsolidated operating entities (amounts in thousands):

Operator

 

As of September 30,
   2022

 

 

As of December 31,
   2021

 

 

As of March 31,
   2023

 

 

As of December 31,
   2022

 

Steward (loan investment)

 

$

362,825

 

 

$

360,164

 

 

$

362,586

 

 

$

362,831

 

International joint venture

 

 

231,402

 

 

 

219,387

 

 

 

230,153

 

 

 

231,402

 

Springstone

 

 

200,827

 

 

 

187,450

 

Priory

 

 

144,266

 

 

 

42,315

 

 

 

159,668

 

 

 

156,575

 

Swiss Medical Network

 

 

147,189

 

 

 

159,208

 

 

 

158,687

 

 

 

157,145

 

Steward (equity investment)

 

 

139,000

 

 

 

139,000

 

 

 

125,862

 

 

 

125,862

 

Prospect

 

 

112,774

 

 

 

112,283

 

 

 

112,701

 

 

 

112,777

 

Aevis Victoria SA ("Aevis")

 

 

73,746

 

 

 

61,271

 

 

 

77,618

 

 

 

72,904

 

PHP Holdings

 

 

49,895

 

 

 

 

Aspris Children's Services ("Aspris")

 

 

16,032

 

 

 

8,356

 

 

 

16,014

 

 

 

16,023

 

Springstone

 

 

10,933

 

 

 

200,827

 

Caremax

 

 

6,343

 

 

 

8,526

 

Total

 

$

1,428,061

 

 

$

1,289,434

 

 

$

1,310,460

 

 

$

1,444,872

 

The increase duringchange since December 31, 2022 primarily relates to the first nine monthspayoff of 2022 is primarily duethe 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 $12.64 million in favorable non-cash fair value adjustmentadjustments during the first nine monthsquarter of 20222023 as shown in the "Other (including fair value adjustments on securities)" line of the condensed consolidated statements of net income; whereas, this was aan $2.88.0 million favorable non-cash fair value adjustment for the same period of 2021. We also earned approximately2022.

Other Investment Activities

In conjunction with the redevelopment of Steward's Norwood hospital, we advanced $450 million, in the 2023 first quarter, that is secured by, among other things, proceeds from insurance claims in excess of dividend income from our Switzerland investments during the first nine months of 2022.advance.

Pursuant to our existing 199.9% equity interest in Steward, we received an $11


 million cash distribution during the first nine months 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 financing receivablesloans, 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
Ended September 30,

 

 

 

2022

 

 

2021

 

Balance at beginning of the period

 

$

55,250

 

 

$

7,783

 

Provision (recovery) for credit loss

 

 

(19,677

)

 

 

1,829

 

Expected credit loss reserve related to financial instruments
     sold, repaid, or satisfied

 

 

(26,362

)

 

 

(85

)

Balance at end of the period

 

$

9,211

 

 

$

9,527

 

 

 

For the Nine Months
Ended September 30,

 

 

 

2022

 

 

2021

 

Balance at beginning of the year

 

$

48,527

 

 

$

8,726

 

Provision (recovery) for credit loss

 

 

(12,920

)

 

 

890

 

Expected credit loss reserve related to financial instruments
     sold, repaid, or satisfied

 

 

(26,396

)

 

 

(89

)

Balance at end of the period

 

$

9,211

 

 

$

9,527

 

21


 

 

For the Three Months
Ended March 31,

 

 

 

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
     sold, repaid, or satisfied

 

 

(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 September 30, 2022, our largest

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

Operators

 

Total Assets

 

 

Percentage of
Total Assets

 

 

Total Assets

 

 

Percentage of
Total Assets

 

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

 

 

Total Assets

 

 

Percentage of
Total Assets

 

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 3.03% of our total assets similar to Decemberas of March 31, 2021.2023.

2)Total Revenues by Operator

Operator concentration – For the three

 

 

For the Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Operators

 

Total Revenues

 

 

Percentage of
Total Revenues

 

 

Total Revenues

 

 

Percentage of
Total Revenues

 

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 nine months ended September Country

 

 

For the Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

U.S. States and Other Countries

 

Total Revenues

 

 

Percentage of
Total Revenues

 

 

Total Revenues

 

 

Percentage of
Total Revenues

 

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

%

30, 2022, revenue from each of Steward, Circle, and Prospect individually represented more than 10% of our total revenues. In comparison, Steward and Circle, individually, represented more than 10% of our total revenues for the three and nine months ended September 30, 2021.

3)
Geographic concentration – At September 30, 2022 and December 31, 2021, investments in the U.S., Europe, Australia, and South America represented approximately 64%, 30%, 5%, and 1%, respectively, of our total assets.
4)
Total Revenues by Facility type concentration – For the three and nine months ended September 30, 2022, approximately Type

75% of our revenues were generated from our general acute care facilities, while revenues from our behavioral and rehabilitation facilities made up 14% and 8%, respectively. Freestanding ER/urgent care facilities and long-term acute care facilities combined to make up the remaining 3%. In comparison, general acute care and rehabilitation facilities made up 80% and 10%, respectively, of our total revenues for the three and nine months ended September 30, 2021, while revenues from our behavioral health, freestanding ER/urgent care, and long-term acute care facilities combined to make up approximately 10% of our revenues for the same periods.

 

 

For the Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Facility Types

 

Total Revenues

 

 

Percentage of
Total Revenues

 

 

Total Revenues

 

 

Percentage of
Total Revenues

 

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

%

(

For geographic and facility type concentration metrics above, we allocate our investments in operating entities pro rata based on the gross book value of the real estate. Such pro rata allocations are subject to change from period to period.)

22


4. Debt

The following is a summary of debt (dollar amounts in thousands):

 

As of September 30,
2022

 

 

As of December 31,
2021

 

 

As of March 31,
2023

 

 

As of December 31,
2022

 

Revolving credit facility(A)

 

$

637,991

 

 

$

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)

 

 

781,900

 

 

 

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)

 

 

768,000

 

 

 

871,560

 

 

 

802,200

 

 

 

817,560

 

2.550% Senior Unsecured Notes due 2023(B)

 

 

446,800

 

 

 

541,280

 

 

 

493,480

 

 

 

483,320

 

3.325% Senior Unsecured Notes due 2025(B)

 

 

490,100

 

 

 

568,500

 

 

 

541,950

 

 

 

535,250

 

0.993% Senior Unsecured Notes due 2026(B)

 

 

490,100

 

 

 

568,500

 

 

 

541,950

 

 

 

535,250

 

2.500% Senior Unsecured Notes due 2026(B)

 

 

558,500

 

 

 

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)

 

 

670,200

 

 

 

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)

 

 

390,950

 

 

 

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

 

 

$

9,534,541

 

 

$

11,358,826

 

 

$

10,492,425

 

 

$

10,325,499

 

Debt issue costs and discount, net

 

 

(58,397

)

 

 

(76,056

)

 

 

(54,274

)

 

 

(57,087

)

 

$

9,476,144

 

 

$

11,282,770

 

 

$

10,438,151

 

 

$

10,268,412

 

22


(A)
Includes £119 million of GBP-denominated borrowings and253 million of Euro-denominated borrowings that reflect the applicable exchange raterates at September 30, 2022.March 31, 2023.
(B)
Non-U.S. dollar denominated debt reflects the exchange raterates at September 30, 2022March 31, 2023 and December 31, 2021.2022.

As of September 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

 

$

 

2023

 

 

446,800

 

2024

 

 

768,000

 

2025

 

 

1,272,000

 

2026

 

 

2,186,591

 

Thereafter

 

 

4,861,150

 

Total

 

$

9,534,541

 

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 increased the amount of our unsecured credit facility ("Credit Facility") by $500 million by exercising the accordion feature. In addition, our revolver and U.S. dollar term loan were modified with Secured Overnight Financing Rate as a replacement reference rate to U.S. dollar LIBOR. Currently, 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.

In addition, 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") with proceeds from the Macquarie Transaction as more fully described in Note 3 to the condensed consolidated financial statements.

23


2021 Activity

On January 15, 2021, we entered into a $900 million interim credit facility (“January 2021 Interim Credit Facility”), As part 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.

Debt Refinancing and Unutilized Financing Costs

2022 Activity

In the first nine months of 2022,transaction, we incurred approximately $9.58.8 million of debt refinancing costs. These costs were incurred as a result of the payoff of our July 2021 Interim Credit Facility with proceeds from the Macquarie Transaction on March 14, 2022, along with 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 nine months 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 September 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 September 30, 2022,March 31, 2023, we were in compliance with all such financial and operating covenants.

24


5. Income Taxes

InAs a result of the 2022 third quarter, we incurred approximately $5 million of income tax expense from the credit loss recovery on loans made to the Watsonville Community Hospital, as more fullyAustralia Transaction described in Note 3.

During to the 2021 secondcondensed 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 15.8 million shares of common stock under our at-the-market equity offering program during the first nine months of 2021, resulting in net proceeds of approximately $330 million.

MPT Operating Partnership, L.P.

At September 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 nine months ended September 30, 2021, the Operating Partnership issued approximately 52.6 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 September 30, 2022, 19.316.7 million shares remain available for future stock awards.awards as of March 31, 2023. Share-based compensation expense totaled $33.0 million and $38.611.8 million for each of the ninethree months ended September 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 September 30, 2022

 

 

As of December 31, 2021

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

Asset (Liability)

 

Book
Value

 

 

Fair
Value

 

 

Book
Value

 

 

Fair
Value

 

 

Book
Value

 

 

Fair
Value

 

 

Book
Value

 

 

Fair
Value

 

Interest and rent receivables

 

$

117,555

 

 

$

115,426

 

 

$

56,229

 

 

$

56,564

 

Interest and rent receivables, net

 

$

169,511

 

 

$

160,947

 

 

$

167,035

 

 

$

163,101

 

Loans(1)

 

 

1,274,424

 

(2)

 

1,231,734

 

 

 

991,609

 

(2)

 

991,954

 

 

 

1,511,182

 

(2)

 

1,456,753

 

 

 

1,405,615

 

(2)

 

1,360,113

 

Debt, net

 

 

(9,476,144

)

 

 

(8,095,633

)

 

 

(11,282,770

)

 

 

(11,526,388

)

 

 

(10,438,151

)

 

 

(8,594,584

)

 

 

(10,268,412

)

 

 

(8,697,042

)

25


(1)
Excludes the acquisition loan and mortgage loan made in October 2021 for our Springstone investment and the acquisition loan made in May 2020 related to our investment in the international joint venture, along with the related subsequent investment in the real estate of three hospitals in Colombia, as these assets are accounted for under the fair value option method, as noted below. In addition for December 31, 2022 only, this excludes the acquisition and mortgage loans made to Springstone, which were satisfied in full in February 2023 as further described in Note 3 to the condensed consolidated financial statements.
(2)
Includes $159.0224.4 million and $70.1223.8 million of mortgage loans, a $289.3319.9 million and $335.6315.9 million shareholder loan included in investments in unconsolidated real estate joint ventures, $628.4693.0 million and $521.4640.4 million of loans that are part of our investments in unconsolidated operating entities, and $197.7273.9 million and $64.5225.5 million of other loans at September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively.

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 three 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 September 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 September 30, 2022

 

 

As of December 31, 2021

 

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

 

Asset (Liability)

 

Fair Value

 

 

Original
Cost

 

 

Fair Value

 

 

Original
Cost

 

 

Asset Type Classification

 

Fair Value

 

 

Original
Cost

 

 

Fair Value

 

 

Original
Cost

 

 

Asset Type Classification

Mortgage loans

 

$

146,482

 

 

$

146,482

 

 

$

143,068

 

 

$

143,068

 

 

Mortgage loans

 

$

122,073

 

 

$

122,073

 

 

$

140,260

 

 

$

140,260

 

 

Mortgage loans

Equity investment and other loans

 

 

434,735

 

 

 

442,069

 

 

 

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 investmentsinvestment 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 areis 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 nine monthsquarter 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. No fair value adjustment was recorded in the first nine monthsquarter of 2021.2022.

The DLOM on our Springstone equity investment was 40% at September 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):

Basis Point Change in Marketability Discount

Estimated
Increase
(Decrease)
In Fair Value

+100 basis points

$

(43

)

- 100 basis points

43

26


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
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

222,020

 

 

$

171,395

 

 

$

33,030

 

 

$

631,947

 

Non-controlling interests’ share in net income

 

 

(227

)

 

 

(258

)

Non-controlling interests’ share in earnings

 

 

(236

)

 

 

(266

)

Participating securities’ share in earnings

 

 

(288

)

 

 

(328

)

 

 

(515

)

 

 

(402

)

Net income, less participating securities’ share in earnings

 

$

221,505

 

 

$

170,809

 

 

$

32,279

 

 

$

631,279

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average common shares

 

 

598,980

 

 

 

595,119

 

 

 

598,302

 

 

 

598,676

 

Dilutive potential common shares

 

 

359

 

 

 

2,201

 

 

 

8

 

 

 

256

 

Diluted weighted-average common shares

 

 

599,339

 

 

 

597,320

 

 

 

598,310

 

 

 

598,932

 

 

 

For the Nine Months
Ended September 30,

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net income

 

$

1,044,031

 

 

$

450,096

 

Non-controlling interests’ share in net income

 

 

(960

)

 

 

(611

)

Participating securities’ share in earnings

 

 

(1,035

)

 

 

(1,088

)

Net income, less participating securities’ share in earnings

 

$

1,042,036

 

 

$

448,397

 

Denominator:

 

 

 

 

 

 

Basic weighted-average common shares

 

 

598,828

 

 

 

586,291

 

Dilutive potential common shares

 

 

271

 

 

 

1,680

 

Diluted weighted-average common shares

 

 

599,099

 

 

 

587,971

 

MPT Operating Partnership, L.P.

Our earnings per unit were calculated based on the following (amounts in thousands):

 

For the Three Months
Ended September 30,

 

 

For the Three Months
Ended March 31,

 

 

2022

 

 

2021

 

 

2023

 

 

2022

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

222,020

 

 

$

171,395

 

 

$

33,030

 

 

$

631,947

 

Non-controlling interests’ share in net income

 

 

(227

)

 

 

(258

)

Non-controlling interests’ share in earnings

 

 

(236

)

 

 

(266

)

Participating securities’ share in earnings

 

 

(288

)

 

 

(328

)

 

 

(515

)

 

 

(402

)

Net income, less participating securities’ share in earnings

 

$

221,505

 

 

$

170,809

 

 

$

32,279

 

 

$

631,279

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average units

 

 

598,980

 

 

 

595,119

 

 

 

598,302

 

 

 

598,676

 

Dilutive potential units

 

 

359

 

 

 

2,201

 

 

 

8

 

 

 

256

 

Diluted weighted-average units

 

 

599,339

 

 

 

597,320

 

 

 

598,310

 

 

 

598,932

 

27


 

 

For the Nine Months
Ended September 30,

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net income

 

$

1,044,031

 

 

$

450,096

 

Non-controlling interests’ share in net income

 

 

(960

)

 

 

(611

)

Participating securities’ share in earnings

 

 

(1,035

)

 

 

(1,088

)

Net income, less participating securities’ share in earnings

 

$

1,042,036

 

 

$

448,397

 

Denominator:

 

 

 

 

 

 

Basic weighted-average units

 

 

598,828

 

 

 

586,291

 

Dilutive potential units

 

 

271

 

 

 

1,680

 

Diluted weighted-average units

 

 

599,099

 

 

 

587,971

 

9. Commitments and Contingencies

10. Commitments and Contingencies

Commitments

On August 26, 2022, a subsidiary of LifePoint Health, Inc. ("LifePoint") agreed to acquire a majority interest in Springstone Health Opco, LLC (the "LifePoint Transaction") based on an enterprise value of $250 million. Pursuant to the anticipated closing of this transaction in the first half of 2023, we expect to be paid approximately $200 million in full satisfaction of our initial acquisition loan to Springstone. We will retain our minority equity interest in the operations of Springstone and will continue to own and lease Springstone's behavioral hospitals. As part of the LifePoint Transaction, LifePoint has agreed to extend the current lease with us on eight existing general acute care hospitals by five years to 2041. The consummation of the LifePoint Transaction is subject to customary closing conditions, and no assurances can be given that the transaction will be consummated as described or at all.

As disclosed in previous filings, we entered into a definitive agreement that would result in the leasing of five general acute care hospitals located in Utah to HCA Healthcare ("HCA") if the agreement by HCA to purchase the operations of these five facilities from Steward occurred. This agreement was terminated in June 2022 following a regulatory ruling, and these five hospitals continue to be leased to Steward.

Contingencies

We are a party to various legal proceedings incidental to our business. 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. Subsequent Events

On October 9, 2022, the board of directors of the Company authorized a stock repurchase program (the "Stock Repurchase Program") for up to $500 million of common stock, par value $0.001 per share. Through November 4, 2022, we repurchased 1.3 million shares of common stock for approximately $14 million. The Stock Repurchase Program expires on October 10, 2023.

On October 5, 2022, we entered into definitive agreements to sell three Prospect facilities located in Connecticut to Yale New Haven Health ("Yale") for approximately $457 million.million, of which we expect to receive the majority in cash and the remainder in equity securities of PHP

26


Holdings. This transaction is expected to close in 2023 subject to certain regulatory approvals and the completion of Yale's acquisition of the hospital operations from Prospect. No assurances can be given that this transaction will be 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 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.

10. Subsequent Events

On April 14, 2023, we acquired five behavioral health hospitals located in the United Kingdom for approximately £44 million. These hospitals are leased to Priory 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%.

2827


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:

the political, economic, business, real estate, and other market conditions in the U.S. (both national and local), Europe (in particular the United Kingdom, Germany, Switzerland, Spain, Italy, Finland, and Portugal), Australia, South America (in particular Colombia), and other foreign jurisdictions where we may own healthcare facilities or transact business, which may have a negative effect on the following, among other things:
o
the financial condition of our tenants, our lenders, or institutions that hold our cash balances or are counterparties to certain hedge agreements, which may expose us to increased risks of default by these parties;
o
our ability to obtain equity or debt financing on attractive terms or at all, which may adversely impact our ability to pursue acquisition and development opportunities, refinance existing debt, and our future interest expense; and
o
the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our real estate assets or on an unsecured basis;
the impact of COVID-19 on our business, our joint ventures, and the business of our tenants/borrowers and the economy in general, as well as the impact of other factors that may affect our business, our joint ventures or the business of our tenants/borrowers that are beyond our control, including natural disasters, health crises, or other pandemics (such as COVID-19) and subsequent government actions in reaction to such matters;
the risk that a condition to closing under the agreements governing any or all of our pending transactions (including the transactions described in Note 3, Note 9, and Note 10 to the condensed consolidated financial statements) that have not closed as of the date hereof may not be satisfied;
the possibility that the anticipated benefits from any or all of the transactions we have entered into or will enter into may take longer to realize than expected or will not be realized at all;
the competitive environment in which we operate;
the execution of our business plan;
financing risks, including due to rising inflation;inflation and interest rates;
acquisition and development risks;
potential environmental contingencies and other liabilities;
adverse developments affecting the financial health of one or more of our tenants, including insolvency;
other factors affecting the real estate industry generally or the healthcare real estate industry in particular;
our ability to maintain our status as a REIT for U.S. federal and state income tax purposes;
our ability to attract and retain qualified personnel;
changes in foreign currency exchange rates;
changes in federal, state, or local tax laws in the U.S., Europe, Australia, South America, or other jurisdictions in which we may own healthcare facilities or transact business;
healthcare and other regulatory requirements of the U.S., Europe, Australia, South America, and other foreign countries; and

2928


the accuracy of our methodologies and estimates regarding environmental, social, and governance ("ESG") metrics and targets, tenant willingness and ability to collaborate towards reporting ESG metrics and meeting ESG goals and targets, and the impact of governmental regulation on our and our tenants' ESG efforts.

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:

the scope and breadth of clinical services and programs, including utilization trends (both inpatient and outpatient) by service type;
the size and composition of medical staff and physician leadership at our facilities, including specialty, tenure, and number of procedures performed and/or referrals;
an evaluation of our operators’ administrative team, as applicable, including background and tenure within the healthcare industry;
staffing trends, including ratios, turnover metrics, recruitment and retention strategies at corporate and individual facility levels;
facility operating performance measured by current, historical, and prospective operating margins (measured by a tenant's earnings before interest, taxes, depreciation, amortization, management fees, and facility rent) of each tenant and at each facility;
the ratio of our tenants' operating earnings to facility rent and to other fixed costs, including debt costs;
changes in revenue sources of our tenants, including the relative mix of public payors (including Medicare, Medicaid/MediCal, and managed care in the U.S., as well as equivalent payors in Europe, Australia, and South America) and private payors (including commercial insurance and private pay patients);
historical support (financial or otherwise) from governments and/or other public payor systems during major economic downturns/depressions;
trends in tenants' cash collections, including comparison to recorded net patient service revenues;revenues, knowing and assessing current revenue cycle management systems and potential future planned upgrades or replacements;
tenants’ free cash flow;
the potential impact of healthcare pandemics/epidemics, legislation, and other regulations (including changes in reimbursement) on our tenants’ or, borrowers’, and guarantors' profitability and liquidity;
the potential impact of any legal, regulatory, or compliance proceedings with our tenants;tenants (including at the facility level);
the potential impact of supply chain and inflation-related challenges as they relate to new developments or capital addition projects;
an ongoing assessment of the operating environment of our tenants, including demographics, competition, market position, status of compliance, accreditation, quality performance, and health outcomes as measured by The Centers for Medicare and Medicaid Services, Joint Commission, and other governmental bodies in which our tenants operate;
the level of investment in the hospital infrastructure and health IT systems; and
physical real estate due diligence, typically including property condition and Phase 1 environmental assessments, along with annual property inspections thereafter.
 

3029


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:

trends in interest rates and other costs due to general inflation and availability and increased costs from labor shortages could adversely impact the operations of our tenants and their ability to meet their lease obligations;
changes in healthcare regulations that may limit the opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate;
reductions (or non-timely increases) in reimbursements from Medicare, state healthcare programs, and commercial insurance providers that may reduce our tenants’ or borrowers’ profitability and our revenues;
competition from other financing sources; and
the ability of our tenants and borrowers to access funds in the credit markets.

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 ninethree months ended September 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 give 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 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 September 30, 2022,March 31, 2023, our portfolio consisted of 437444 properties leased or loaned to 5554 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 September 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
September 30,
2022

 

 

% of
Total

 

 

As of
December 31,
2021

 

 

% of
Total

 

 

As of
March 31,
2023

 

 

% of
Total

 

 

As of
December 31,
2022

 

 

% of
Total

 

Real estate assets - at cost

 

$

15,353,817

 

 

 

80.6

%

 

$

17,425,765

 

 

 

84.9

%

 

$

15,902,959

 

 

 

80.9

%

 

$

15,917,839

 

 

 

81.0

%

Accumulated real estate depreciation and amortization

 

 

(1,088,912

)

 

 

-5.7

%

 

 

(993,100

)

 

 

-4.8

%

 

 

(1,207,699

)

 

 

-6.1

%

 

 

(1,193,312

)

 

 

-6.1

%

Cash and cash equivalents

 

 

299,171

 

 

 

1.6

%

 

 

459,227

 

 

 

2.2

%

 

 

302,321

 

 

 

1.5

%

 

 

235,668

 

 

 

1.2

%

Investments in unconsolidated real estate joint ventures

 

 

1,422,010

 

 

 

7.5

%

 

 

1,152,927

 

 

 

5.6

%

 

 

1,506,474

 

 

 

7.7

%

 

 

1,497,903

 

 

 

7.6

%

Investments in unconsolidated operating entities

 

 

1,428,061

 

 

 

7.5

%

 

 

1,289,434

 

 

 

6.3

%

 

 

1,310,460

 

 

 

6.7

%

 

 

1,444,872

 

 

 

7.4

%

Other

 

 

1,629,269

 

 

 

8.5

%

 

 

1,185,548

 

 

 

5.8

%

 

 

1,835,642

 

 

 

9.3

%

 

 

1,755,030

 

 

 

8.9

%

Total assets

 

$

19,043,416

 

 

 

100.0

%

 

$

20,519,801

 

 

 

100.0

%

 

$

19,650,157

 

 

 

100.0

%

 

$

19,658,000

 

 

 

100.0

%

3130


Additional Concentration Details

On an adjusted 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 September 30, 2022 as compared to December 31, 2021 is as follows (dollars in thousands):

Total Adjusted Gross Assets by Operator

 

 

As of September 30, 2022

 

 

As of December 31, 2021

 

Operators

 

Total Adjusted
Gross Assets

 

 

Percentage of
Total Adjusted
Gross Assets

 

 

Total Adjusted
Gross Assets

 

 

Percentage of
Total Adjusted
Gross Assets

 

Steward

 

 

 

 

 

 

 

 

 

 

 

 

Florida market

 

$

1,379,515

 

 

 

6.5

%

 

$

1,304,353

 

 

 

5.8

%

Utah market(1)

 

 

1,311,322

 

 

 

6.2

%

 

 

1,310,645

 

 

 

5.9

%

Massachusetts market

 

 

1,166,357

 

 

 

5.5

%

 

 

1,145,493

 

 

 

5.1

%

Texas/Arkansas/Louisiana market

 

 

1,143,074

 

 

 

5.4

%

 

 

1,112,664

 

 

 

5.0

%

Arizona market

 

 

354,681

 

 

 

1.7

%

 

 

330,880

 

 

 

1.5

%

Ohio/Pennsylvania market

 

 

138,345

 

 

 

0.7

%

 

 

138,274

 

 

 

0.6

%

Circle

 

 

2,044,259

 

 

 

9.7

%

 

 

2,481,001

 

 

 

11.1

%

LifePoint(2)

 

 

1,405,194

 

 

 

6.7

%

 

 

658,084

 

 

 

2.9

%

Prospect(2)

 

 

1,266,565

 

 

 

6.0

%

 

 

1,631,691

 

 

 

7.3

%

Swiss Medical Network

 

 

1,215,813

 

 

 

5.8

%

 

 

1,300,431

 

 

 

5.8

%

Other operators

 

 

8,049,413

 

 

 

38.1

%

 

 

9,995,248

 

 

 

44.9

%

Other assets

 

 

1,615,504

 

 

 

7.7

%

 

 

920,573

 

 

 

4.1

%

Total

 

$

21,090,042

 

 

 

100.0

%

 

$

22,329,337

 

 

 

100.0

%

(1)
The 2021 columns reflect Steward's concentration post termination of their agreement with HCA as discussed in Note 10 to Item 1 of this Form 10-Q.
(2)
See Note 10 and Note 11 to Item 1 of this Form 10-Q along with the footnotes to the total adjusted gross assets reconciliation table on page 39 for additional information on expected transactions that have resulted in adjustments made in this table for this operator.

Total Adjusted Gross Assets by U.S. State and Country

 

 

As of September 30, 2022

 

 

As of December 31, 2021

 

U.S. States and Other Countries

 

Total Adjusted
Gross Assets

 

 

Percentage of
Total Adjusted
Gross Assets

 

 

Total Adjusted
Gross Assets

 

 

Percentage of
Total Adjusted
Gross Assets

 

Texas

 

$

2,119,353

 

 

 

10.1

%

 

$

2,158,797

 

 

 

9.7

%

California

 

 

1,524,532

 

 

 

7.2

%

 

 

1,650,038

 

 

 

7.4

%

Florida

 

 

1,379,515

 

 

 

6.5

%

 

 

1,304,353

 

 

 

5.8

%

Utah

 

 

1,346,968

 

 

 

6.4

%

 

 

1,346,372

 

 

 

6.0

%

Massachusetts

 

 

1,171,757

 

 

 

5.6

%

 

 

1,150,893

 

 

 

5.3

%

All other states

 

 

4,250,059

 

 

 

20.1

%

 

 

5,117,756

 

 

 

22.9

%

Other domestic assets

 

 

1,240,358

 

 

 

5.9

%

 

 

692,280

 

 

 

3.1

%

Total U.S.

 

$

13,032,542

 

 

 

61.8

%

 

$

13,420,489

 

 

 

60.2

%

United Kingdom

 

$

3,709,224

 

 

 

17.6

%

 

$

4,492,918

 

 

 

20.1

%

Switzerland

 

 

1,215,813

 

 

 

5.8

%

 

 

1,300,431

 

 

 

5.8

%

Germany

 

 

1,098,247

 

 

 

5.2

%

 

 

1,257,482

 

 

 

5.6

%

Australia

 

 

857,766

 

 

 

4.1

%

 

 

1,043,399

 

 

 

4.7

%

Spain

 

 

304,960

 

 

 

1.4

%

 

 

264,965

 

 

 

1.2

%

All other countries

 

 

496,344

 

 

 

2.3

%

 

 

321,360

 

 

 

1.4

%

Other international assets

 

 

375,146

 

 

 

1.8

%

 

 

228,293

 

 

 

1.0

%

Total international

 

$

8,057,500

 

 

 

38.2

%

 

$

8,908,848

 

 

 

39.8

%

Grand total

 

$

21,090,042

 

 

 

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 adjusted gross assets as of September 30, 2022.

32


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 September 30, 2022 as compared to the prior year is as follows (dollars in thousands):

Total AdjustedRevenues by Operator

 

 

For the Three Months Ended September 30,

 

 

 

2022

 

 

2021

 

Operators

 

Total Adjusted
Revenues

 

 

Percentage of
Total Adjusted
Revenues

 

 

Total Adjusted
Revenues

 

 

Percentage of
Total Adjusted
Revenues

 

Steward

 

 

 

 

 

 

 

 

 

 

 

 

Utah market

 

$

34,192

 

 

 

8.6

%

 

$

31,879

 

 

 

7.5

%

Florida market

 

 

26,079

 

 

 

6.6

%

 

 

16,929

 

 

 

4.0

%

Massachusetts market

 

 

22,688

 

 

 

5.7

%

 

 

35,965

 

 

 

8.5

%

Texas/Arkansas/Louisiana market

 

 

22,027

 

 

 

5.5

%

 

 

21,740

 

 

 

5.1

%

Arizona market

 

 

8,826

 

 

 

2.2

%

 

 

8,126

 

 

 

1.9

%

Ohio/Pennsylvania market

 

 

3,589

 

 

 

0.9

%

 

 

3,236

 

 

 

0.8

%

Circle

 

 

45,531

 

 

 

11.5

%

 

 

52,612

 

 

 

12.4

%

Prospect

 

 

44,505

 

 

 

11.2

%

 

 

37,864

 

 

 

8.9

%

Springstone

 

 

21,960

 

 

 

5.5

%

 

 

 

 

 

 

MEDIAN

 

 

20,605

 

 

 

5.2

%

 

 

23,689

 

 

 

5.6

%

Other operators

 

 

147,334

 

 

 

37.1

%

 

 

191,868

 

 

 

45.3

%

Total

 

$

397,336

 

 

 

100.0

%

 

$

423,908

 

 

 

100.0

%

Total AdjustedRevenues by U.S. State and Country

 

 

For the Three Months Ended September 30,

 

 

 

2022

 

 

2021

 

U.S. States and Other Countries

 

Total Adjusted
Revenues

 

 

Percentage of
Total Adjusted
Revenues

 

 

Total Adjusted
Revenues

 

 

Percentage of
Total Adjusted
Revenues

 

Texas

 

$

41,572

 

 

 

10.5

%

 

$

38,007

 

 

 

9.0

%

Utah

 

 

34,701

 

 

 

8.7

%

 

 

32,837

 

 

 

7.7

%

Florida

 

 

25,572

 

 

 

6.4

%

 

 

17,479

 

 

 

4.1

%

Massachusetts

 

 

22,776

 

 

 

5.7

%

 

 

36,123

 

 

 

8.5

%

Pennsylvania

 

 

19,450

 

 

 

4.9

%

 

 

19,972

 

 

 

4.7

%

All other states

 

 

116,871

 

 

 

29.5

%

 

 

128,038

 

 

 

30.3

%

Total U.S.

 

$

260,942

 

 

 

65.7

%

 

$

272,456

 

 

 

64.3

%

United Kingdom

 

$

76,191

 

 

 

19.2

%

 

$

90,141

 

 

 

21.3

%

Germany

 

 

22,414

 

 

 

5.6

%

 

 

25,755

 

 

 

6.1

%

All other countries

 

 

37,789

 

 

 

9.5

%

 

 

35,556

 

 

 

8.3

%

Total international

 

$

136,394

 

 

 

34.3

%

 

$

151,452

 

 

 

35.7

%

Grand total

 

$

397,336

 

 

 

100.0

%

 

$

423,908

 

 

 

100.0

%

33


Total Adjusted Revenues by Facility Type

 

 

For the Three Months Ended September 30,

 

 

 

2022

 

 

2021

 

Facility Types

 

Total Adjusted
Revenues

 

 

Percentage of
Total Adjusted
Revenues

 

 

Total Adjusted
Revenues

 

 

Percentage of
Total Adjusted
Revenues

 

General acute care hospitals

 

$

290,627

 

 

 

73.1

%

 

$

334,239

 

 

 

78.8

%

Behavioral health facilities

 

 

50,243

 

 

 

12.7

%

 

 

32,843

 

 

 

7.8

%

Inpatient rehabilitation facilities

 

 

42,566

 

 

 

10.7

%

 

 

44,825

 

 

 

10.6

%

Long-term acute care hospitals

 

 

7,950

 

 

 

2.0

%

 

 

8,120

 

 

 

1.9

%

Freestanding ER/urgent care facilities

 

 

5,950

 

 

 

1.5

%

 

 

3,881

 

 

 

0.9

%

Total

 

$

397,336

 

 

 

100.0

%

 

$

423,908

 

 

 

100.0

%

Results of Operations

Three Months Ended September 30, 2022March 31, 2023 Compared to September 30, 2021March 31, 2022

Net income for the three months ended September 30, 2022,March 31, 2023, was $221.8$32.8 million ($0.370.05 per diluted share) compared to $171.1$631.7 million ($0.291.05 per diluted share) for the three months ended September 30, 2021.March 31, 2022. This 30% increasedecrease in net income is primarily due todriven by the gain on sale of real estate in the 2022 first quarter from the Prime repurchase transaction, net of straight-line rent write-offs;Macquarie Transaction and the Watsonville Community Hospital recovery, net of income tax expense; reduced interest expense, and increased earnings from equity interests.2023 impairment charge associated with the Australia Transaction, both as described in Note 3 to the 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 $272.3$222.2 million for the 2022 third2023 first quarter, or $0.45$0.37 per diluted share, as compared to $262.8$282.5 million, or $0.44$0.47 per diluted share, for the 2021 third2022 first quarter. This 4% increasedecrease in Normalized FFO is primarily due to increased earningsnot recognizing any revenue in equity interests and reduced interest expense.the 2023 first 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 September 30,March 31, 2023 and 2022 and 2021 is as follows (dollar amounts in thousands):

 

2022

 

 

% of
Total

 

 

2021

 

 

% of
Total

 

 

Year over
Year
Change

 

 

2023

 

 

% of
Total

 

 

2022

 

 

% of
Total

 

 

Year over
Year
Change

 

Rent billed

 

$

232,418

 

 

 

66.0

%

 

$

242,211

 

 

 

62.0

%

 

 

-4.0

%

 

$

248,157

 

 

 

70.8

%

 

$

263,402

 

 

 

64.3

%

 

 

-5.8

%

Straight-line rent

 

 

26,552

 

 

 

7.5

%

 

 

64,637

 

 

 

16.5

%

 

 

-58.9

%

 

 

56,693

 

 

 

16.2

%

 

 

61,044

 

 

 

14.9

%

 

 

-7.1

%

Income from financing leases

 

 

51,011

 

 

 

14.5

%

 

 

50,667

 

 

 

13.0

%

 

 

0.7

%

 

 

13,195

 

 

 

3.8

%

 

 

51,776

 

 

 

12.6

%

 

 

-74.5

%

Interest and other income

 

 

42,358

 

 

 

12.0

%

 

 

33,264

 

 

 

8.5

%

 

 

27.3

%

 

 

32,166

 

 

 

9.2

%

 

 

33,578

 

 

 

8.2

%

 

 

-4.2

%

Total revenues

 

$

352,339

 

 

 

100.0

%

 

$

390,779

 

 

 

100.0

%

 

 

-9.8

%

 

$

350,211

 

 

 

100.0

%

 

$

409,800

 

 

 

100.0

%

 

 

-14.5

%

Our total revenues for the 2022 third2023 first quarter are down $38.4$59.6 million, or 10%14.5%, over the same period in the prior year. This decrease is made up of the following:

Operating lease revenue (includes rent billed and straight-line rent) – down $47.9$19.6 million over the prior year of which approximately $72.7$30 million of lower revenues is fromdue to disposals in 2021 and the first nine months of 2022 (including a $31.1 million decrease from the properties disposed of in(primarily related to the Macquarie Transaction as described in Note 3 to the condensed consolidated financial statements, along with lower revenues due to Prime's repurchase transaction, including approximately $35 million of straight-line rentstatements) and other write-offs) and $13.9$8.9 million of unfavorable foreign currency fluctuations. This decrease is partially offset by approximately $29$11 million in incremental revenue from acquisitions, madecapital additions, and the commencement of rent on a development property in 2021 (including approximately $17.5 million from Springstone) and 2022 (primarily our Finland acquisition).the first quarter of 2022. In addition, rent revenues are up approximately $7$8 million quarter-over-quarter from increases in CPI above the contractual minimum escalations in our leases, $0.2 million from capital additions in 2022, and $1.4 million from the commencement of rent on a development property in the first quarter of 2022.leases.
Income from financing leases – up $0.3down $38.6 million as 2022 annual rent escalations exceeded lease contractual minimumsprimarily due to not recording any revenue on Prospect in the first quarter of 2023, compared to $35.3 million of revenue recorded in the first quarter of 2022. This decrease is partially offset by the increase in CPI partially offsetabove the lease contractual minimum escalations by $1.2 million of lower revenues from the disposal of two financing leases related to the Prime repurchase transaction.approximately $0.5 million.

34


Interest and other income – up $9.1down $1.4 million from the prior year due to the following:
o
Interest from loans – up $7.5$0.7 million over the prior year due to $14.1approximately $4 million of incremental revenue earned on new investments, including Springstone in the 2021 fourth quarter, the Priory syndicatednet of loan in February 2022, and the Prospect and Steward loans made in the 2022 second quarter,payoffs, along with $0.3 million of higher income from annual escalations due to increases in CPI. This increase is partially offset by $5.0a decrease of approximately $3.0 million from loan payoffs, including lessdue to not recording any interest revenue earned on the Priory loans from the conversion of the £800 million mortgage loan to fee simple assetsfor Prospect in the secondfirst quarter of 20212023 and the repayment of the £250 million acquisition loan in the 2021 fourth quarter as described in Note 3 to the condensed consolidated financial statements, and $1.8$0.9 million of unfavorable foreign currency fluctuations.
o
Other income – up $1.6down $2.1 million from the prior year as we received morehad less direct reimbursements from our tenants for ground leases, property taxes, and insurance.

Interest expense for the quarters ended September 30,March 31, 2023 and 2022 and 2021 totaled $88.1$97.7 million and $94.1$91.2 million, respectively. This decreaseincrease is primarily related to lowering the interest rate on our €500 million senior unsecured notes tranche in October 2021 from 4.000% to 0.993%, the payoff of our July 2021 Interim Credit Facility (which resulted in $1.6 million of interest expense in the 2021 third quarter) in March 2022 with proceeds from the Macquarie Transaction, and foreign currency fluctuations, partially offset by an increase in interest rates on our Credit Facility and term loans compared to the prior year.year and the issuance of a £105 million unsecured sterling-denominated term loan on December 9, 2022. Our weighted-average interest rate of 3.4%3.7% for the quarter ended September 30, 2022March 31, 2023 is similar tohigher than the weighted-average interest rate3.1% for the same period in 2021.2022.

Real estate depreciation and amortization during the thirdfirst quarter of 20222023 decreased to $81.9$83.9 million from $85.0$85.3 million in 20212022 due to foreign currency fluctuations and property sales in 2022, as described in Note 3 to the condensed consolidated financial statements, partially offset by new investments made after September 30, 2021.March 31, 2022.

Property-related expenses totaled $8.3$7.1 million and $7.1$8.6 million for the quarters ended September 30,March 31, 2023 and 2022, and 2021, respectively. Of the property expenses in the thirdfirst quarter of 2023 and 2022, and 2021, approximately $5.6$4.2 million and $4.0$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 10.6% for the 2022 third quarter, slightly higher than 9.4% in the prior year due to lower revenues from the property sales in 2022 (including $35 million of write-offs of straight-line rent) as described in Note 3 to the condensed consolidated financial statements. On a dollar basis, generalGeneral and administrative expenses totaled $37.3$41.7 million for the 2023 first quarter, relatively flat from the 2022 thirdfirst quarter basically flat with the prior year third quarter.of $41.4 million.

During the three months ended September 30,March 31, 2022, we disposed of 11 facilities as part of the Prime repurchase transaction and three ancillary properties resulting in a net gain of $68.8 million. During the three months ended September 30, 2021, we sold four facilities resulting in a net gain of $9.3 million.

Earnings from equity interests was $11.5 million for the quarter ended September 30, 2022, up $4.3 million from the same period in 2021, primarily due to $3.6 million of income generated on our Massachusetts-based partnership with MAM entered into during March 2022 (part ofcompleted the Macquarie Transaction) and approximately $2.0 million of dividend income we received in the third quarter of 2022 from our equity interest in Swiss Medical Network. These earnings were partially offset by 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.

Other income for the 2022 third quarter included a credit loss recovery of approximately $20 million related to loans repaid by Watsonville Community Hospital (see Note 3 for more detail). In addition, we recorded a favorable non-cash fair value adjustment of $3.6 million on our investment in Aevis compared to a $0.8 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 $18.6 million income tax expense for the three months ended September 30, 2022 is primarily based on the income generated by our investments in the United Kingdom, Colombia, and Australia, as well as approximately $5 million of income tax expense associated with the Watsonville loan repayment in the third quarter of 2022 (see Note 3 and Note 5 to the condensed consolidated financial statements for more detail). In comparison, we incurred $10.6 million in income tax expense in the third quarter of 2021.

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 $74.1 million should be reflected against certain of our international and domestic net deferred tax assets at September 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, and incur higher income tax expense in future periods as income is earned.

Nine Months Ended September 30, 2022 Compared to September 30, 2021

Net income for the nine months ended September 30, 2022, was $1.0 billion ($1.74 per diluted share) compared to $449.5 million ($0.76 per diluted share) for the nine months ended September 30, 2021. This 132% increase in net income is primarily due to gains on sales of real estate in 2022 (including 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 $829.5 million for the first nine months of 2022, or $1.38 per diluted share, as compared to $757.3 million, or $1.29 per diluted share, for the first nine months of 2021. This 10% increase in Normalized FFO is primarily due to incremental revenue from new investments made in 2021 and the first nine months of 2022.

A comparison of revenues for the nine month periods ended September 30, 2022 and 2021 is as follows (dollar amounts in thousands):

 

 

2022

 

 

% of
Total

 

 

2021

 

 

% of
Total

 

 

Year over
Year
Change

 

Rent billed

 

$

737,029

 

 

 

63.4

%

 

$

672,425

 

 

 

59.2

%

 

 

9.6

%

Straight-line rent

 

 

146,114

 

 

 

12.6

%

 

 

174,975

 

 

 

15.4

%

 

 

-16.5

%

Income from financing leases

 

 

154,660

 

 

 

13.3

%

 

 

151,898

 

 

 

13.4

%

 

 

1.8

%

Interest and other income

 

 

124,562

 

 

 

10.7

%

 

 

136,038

 

 

 

12.0

%

 

 

-8.4

%

Total revenues

 

$

1,162,365

 

 

 

100.0

%

 

$

1,135,336

 

 

 

100.0

%

 

 

2.4

%

Our total revenues for the first nine months of 2022 are up $27.0 million, or 2%, over the prior year. This increase is made up of the following:

Operating lease revenue (includes rent billed and straight-line rent) – up $35.7 million over the prior year of which approximately $160 million is incremental revenue from acquisitions made in 2021 (including approximately $50 million from Springstone) and the first nine months of 2022 (primarily our Finland acquisition). In addition, rent revenues are up approximately $18 million period-over-period from increases in CPI above the contractual minimum escalations in our leases, $1.2 million from capital additions in 2022, and $3.3 million from the commencement of rent on a development property in the first quarter of 2022. This increase is partially offset by approximately $127.4 million of lower revenues from disposals in 2021 and the first nine months of 2022 (including a $65.7 million decrease from the properties disposed of in the Macquarie Transaction as described in Note 3 to the condensed consolidated financial statements and approximately $42 million of straight-line rent and other write-offs associated with non-Macquarie Transaction disposals in the first nine months of 2022) and $23.6 million of unfavorable foreign currency fluctuations.
Income from financing leases – up $2.8 million as 2022 annual rent escalations exceeded lease contractual minimums due to the increase in CPI, partially offset by $1.2 million of lower revenues from the disposal of two financing leases related to the Prime repurchase transaction in the 2022 third quarter.
Interest and other income – down $11.5 million from the prior year due to the following:
o
Interest from loans – down $18.7 million over the prior year due to approximately $40.4 million from loan payoffs, including $36.7 million of less interest revenue earned on the Priory loans from the conversion of the £800 million mortgage loan to fee simple assets in the second quarter of 2021 and the repayment of the £250 million acquisition loan in the 2021 fourth quarter as described in Note 3, and approximately $6 million of unfavorable foreign currency fluctuations. This decrease is partially offset by $27.2 million of incremental

36


revenue earned on new investments including Springstone in the 2021 fourth quarter and the Priory syndicated loan in February 2022 and higher income from annual escalations due to increases in CPI.
o
Other income – up $7.2 million from the prior year as we received more direct reimbursements from our tenants for ground leases, property taxes, and insurance.

Interest expense for the nine months ended September 30, 2022 and 2021 totaled $267.0 million and $273.4 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, partially offset by increasing interest rates on our Credit Facility during 2022. Overall, our weighted-average interest rate of 3.3% for the nine months ended September 30, 2022 is lower than the 3.4% in the same period in 2021.

Real estate depreciation and amortization during the first nine months of 2022 increased to $251.5 million from $237.1 million in the same period of 2021 due to new investments made after September 30, 2021, partially offset by a decrease due to property sales in 2022 as described in Note 3 to the condensed consolidated financial statements and foreign currency fluctuations.

Property-related expenses totaled $38.0 million and $31.3 million for the nine months ended September 30, 2022 and 2021, respectively. Of the property expenses in the first nine months of 2022 and 2021, approximately $30.2 million and $23.1 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 10.1% for the first nine months of 2022, slightly higher than 9.5% in the prior year. On a dollar basis, general and administrative expenses totaled $117.6 million for the first nine months of 2022, which is a $10.3 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-executive headcount and benefits were more than offset by a reduction in stock compensation expense from adjusting our payout expectations on certain performance awards.

During the nine months ended September 30, 2022, we realized $536.8 million from the sales of real estate, including the completion of 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 11 facilities related to the Prime repurchase transaction, resulting in a gain on real estate of approximately $67 million. In addition, we disposed of fourtwo other facilities and five ancillary properties, resulting in a net gain of $33 million. During the nine months ended September 30, 2021, we sold nine facilities and onean ancillary property resulting in a net gain of $9.0$15 million.

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 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 expect some earnings volatility from marking the swap to fair value in future quarters until the related debt is extinguished.

Earnings from equity interests was $33.6$11.4 million for the nine monthsquarter ended September 30, 2022,March 31, 2023, up $12.0$4.0 million from the same period in 2021.2022. This increase is primarily due to $10.1$2.1 million of additional income generated on our Massachusetts-based partnership with MAM entered into during March 2022 (part of the Macquarie Transaction) and approximately $4 million of dividend income we received in 2022 from our Switzerland investments, partially offset by 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 $9.5 million and $2.3$8.8 million for the nine monthsquarter ended September 30,March 31, 2022, and 2021, respectively. The costs incurred in 2022 wereas 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).

Other incomeexpense for the first ninethree months of 20222023 was $35.5$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 credit loss recoverylawsuit we filed on March 30, 2023. See Item 1 of Part II for further details on the lawsuit. This expense was partially offset by approximately $20$4 million related to loans repaid by Watsonville Community Hospital (see Note 3 to the condensed consolidated financial statements for more detail). In addition, we recorded aof favorable non-cash fair value adjustment of $12.6 millionadjustments on our investment in Aevis and other investments marked to fair value during 2023. For the first three months of 2022, comparedwe had other income of $14.8 million primarily from $8.0 million of favorable adjustments on our investment in Aevis and other investments marked to a $2.8 million favorable adjustment for the same period in 2021.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 $40.6$3.5 million income tax expense for the ninethree months ended September 30, 2022March 31, 2023 is primarily based on the income generated by our investments in the United Kingdom, Colombia, and Australia, as well aspartially offset by a $5.0 million tax expense associated withbenefit recognized in the Watsonville loan repayment (see Note 3 and Note 5first quarter of 2023 related to the condensed consolidated financial statements for more detail).expected sale of our Australia facilities. In comparison, we incurred $69.1$11.4 million in income tax expense in the same period

37


first 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.

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 $74.1$74 million should be reflected against certain of our international and domestic net deferred tax assets at September 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 potentially 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.

38


The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and Normalized FFO for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 (amounts in thousands except per share data):

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30, 2022

 

 

September 30, 2021

 

 

September 30, 2022

 

 

September 30, 2021

 

FFO information:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to MPT common stockholders

 

$

221,793

 

 

$

171,137

 

 

$

1,043,071

 

 

$

449,485

 

Participating securities’ share in earnings

 

 

(288

)

 

 

(328

)

 

 

(1,035

)

 

 

(1,088

)

Net income, less participating securities’ share in earnings

 

$

221,505

 

 

$

170,809

 

 

$

1,042,036

 

 

$

448,397

 

Depreciation and amortization

 

 

99,296

 

 

 

98,492

 

 

 

300,731

 

 

 

277,089

 

Gain on sale of real estate and other, net

 

 

(68,795

)

 

 

(9,294

)

 

 

(536,788

)

 

 

(8,896

)

Funds from operations

 

$

252,006

 

 

$

260,007

 

 

$

805,979

 

 

$

716,590

 

Write-off (recovery) of straight-line rent and other, net of tax

 

 

23,863

 

(1)

 

3,650

 

 

 

27,444

 

 

 

(1,601

)

Non-cash fair value adjustments

 

 

(3,597

)

 

 

(819

)

 

 

(12,563

)

 

 

(2,763

)

Tax rate changes

 

 

 

 

 

 

 

 

(825

)

 

 

42,746

 

Debt refinancing and unutilized financing costs

 

 

17

 

 

 

 

 

 

9,452

 

 

 

2,339

 

Normalized funds from operations

 

$

272,289

 

 

$

262,838

 

 

$

829,487

 

 

$

757,311

 

Per diluted share data:

 

 

 

 

 

 

 

 

 

 

 

 

Net income, less participating securities’ share in earnings

 

$

0.37

 

 

$

0.29

 

 

$

1.74

 

 

$

0.76

 

Depreciation and amortization

 

 

0.16

 

 

 

0.17

 

 

 

0.50

 

 

 

0.48

 

Gain on sale of real estate and other, net

 

 

(0.11

)

 

 

(0.02

)

 

 

(0.90

)

 

 

(0.02

)

Funds from operations

 

$

0.42

 

 

$

0.44

 

 

$

1.34

 

 

$

1.22

 

Write-off (recovery) of straight-line rent and other, net of tax

 

 

0.04

 

 

 

 

 

 

0.04

 

 

 

 

Non-cash fair value adjustments

 

 

(0.01

)

 

 

 

 

 

(0.02

)

 

 

 

Tax rate changes

 

 

 

 

 

 

 

 

 

 

 

0.07

 

Debt refinancing and unutilized financing costs

 

 

 

 

 

 

 

 

0.02

 

 

 

 

Normalized funds from operations

 

$

0.45

 

 

$

0.44

 

 

$

1.38

 

 

$

1.29

 

(1)
Includes the write-off of non-cash rent related to the Prime repurchase transaction, partially offset by the credit loss recovery on the loans made to the Watsonville Community Hospital, net of income tax expense.

 

 

For the Three Months Ended

 

 

 

March 31, 2023

 

 

March 31, 2022

 

FFO information:

 

 

 

 

 

 

Net income attributable to MPT common stockholders

 

$

32,794

 

 

$

631,681

 

Participating securities’ share in earnings

 

 

(515

)

 

 

(402

)

Net income, less participating securities’ share in earnings

 

$

32,279

 

 

$

631,279

 

Depreciation and amortization

 

 

101,960

 

 

 

99,459

 

Gain on sale of real estate

 

 

(62

)

 

 

(451,638

)

Real estate impairment charges

 

 

52,104

 

 

 

 

Funds from operations

 

$

186,281

 

 

$

279,100

 

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

 

 

(4,121

)

 

 

(8,023

)

Tax rate changes and other

 

 

(7,305

)

 

 

 

Debt refinancing and unutilized financing costs

 

 

 

 

 

8,816

 

Normalized funds from operations

 

$

222,207

 

 

$

282,497

 

Per diluted share data:

 

 

 

 

 

 

Net income, less participating securities’ share in earnings

 

$

0.05

 

 

$

1.05

 

Depreciation and amortization

 

 

0.17

 

 

 

0.17

 

Gain on sale of real estate

 

 

 

 

 

(0.75

)

Real estate impairment charges

 

 

0.09

 

 

 

 

Funds from operations

 

$

0.31

 

 

$

0.47

 

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

)

Tax rate changes and other

 

 

(0.01

)

 

 

 

Debt refinancing and unutilized financing costs

 

 

 

 

 

0.01

 

Normalized funds from operations

 

$

0.37

 

 

$

0.47

 

Total Adjusted Gross Assets

Total adjusted gross assets is total assets before accumulated depreciation/amortization (adjusted for our investments in unconsolidated real estate joint ventures), assumes material transaction commitments are completed, and assumes cash on hand at period-end and cash generated from or to be generated from transaction commitments or financing activities subsequent to period-end are either used in these transactions or used to reduce debt. We believe total adjusted 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 adjusted gross assets (in thousands):

 

 

As of

 

 

As of

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Total assets

 

$

19,043,416

 

 

$

20,519,801

 

Add: Accumulated depreciation and amortization

 

 

1,088,912

 

 

 

993,100

 

Add: Incremental gross assets of our Investments in
     Unconsolidated Real Estate Joint Ventures(1)

 

 

1,604,762

 

 

 

1,713,603

 

Net: Reclassification between operators(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Gross book value of the transactions, net(3)

 

 

(686,057

)

 

 

(437,940

)

Increase (decrease) in cash from the transactions(4)

 

 

39,009

 

 

 

(459,227

)

Total adjusted gross assets

 

$

21,090,042

 

 

$

22,329,337

 

(1)
Reflects an addition to total assets to present our total share of each joint venture's gross assets. See below for details of the calculation. While we do not control any of our unconsolidated real estate joint venture arrangements and do not have direct legal claim to the underlying assets of the unconsolidated real estate joint ventures, we believe this adjustment allows investors to view certain concentration information on a basis comparable to the remainder of our real estate

39


portfolio. This presentation is also consistent with how our management team reviews our portfolio (dollar amounts in thousands):

 

 

As of

 

 

As of

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Real estate joint venture total gross real estate and other assets

 

$

5,519,058

 

 

$

5,898,342

 

Weighted-average equity ownership percentage

 

 

55

%

 

 

55

%

 

 

 

3,026,772

 

 

 

3,242,505

 

Investments in Unconsolidated Real Estate Joint Ventures
     (including $0.4 billion for the Macquarie Transaction
     for the 2021 column)

 

 

(1,422,010

)

 

 

(1,528,902

)

Incremental gross assets of our Investments in Unconsolidated
     Real Estate Joint Ventures

 

$

1,604,762

 

 

$

1,713,603

 

(2)
The 2022 column reflects a reclass of $0.8 billion of gross assets between Springstone and LifePoint as part of the commitment described in Note 10 to the condensed consolidated financial statements.
(3)
Represents the gross book value of assets sold or written off due to the committed transactions, partially offset by the addition of new gross assets from the committed transactions. See detail below (in thousands):

 

 

As of

 

 

As of

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Gross book value of assets in transactions as
     described in Notes 10 and 11

 

$

(659,168

)

 

$

 

Book value of Massachusetts assets held-for-sale

 

 

 

 

 

(1,096,505

)

Expected book value of our 50% interest in the
     Massachusetts joint venture

 

 

 

 

 

375,975

 

Unfunded amounts on development deals and
     commenced capital improvement projects

 

 

 

 

 

480,132

 

Non-cash rent write-offs related to disposals

 

 

(26,889

)

 

 

(197,542

)

Gross book value of the transactions, net

 

$

(686,057

)

 

$

(437,940

)

(4)
Represents cash expected from the proceeds generated by the transactions along with cash on hand to fund the transactions or reduce debt as detailed below (in thousands):

 

 

As of

 

 

As of

 

 

 

September 30, 2022

 

 

December 31, 2021

 

Expected cash proceeds generated by the
     transactions as described in Notes 3, 10 and 11

 

$

677,000

 

 

$

1,280,000

 

Paydown of July 2021 Interim Credit Facility

 

 

 

 

 

(869,606

)

Reduction of revolver balance

 

 

(637,991

)

 

 

(389,489

)

Unfunded amounts on development deals and
     commenced capital improvement projects

 

 

 

 

 

(480,132

)

Increase (decrease) in cash from the transactions

 

$

39,009

 

 

$

(459,227

)

Total Adjusted Revenues

Total adjusted revenues are total revenues adjusted for our pro rata portion of similar revenues in our unconsolidated 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 September 30,

 

 

 

2022

 

 

2021

 

Total revenues

 

$

352,339

 

 

$

390,779

 

Revenues from investments in unconsolidated real estate joint ventures

 

 

44,997

 

 

 

33,129

 

Total adjusted revenues

 

$

397,336

 

 

$

423,908

 

40


LIQUIDITY AND CAPITAL RESOURCES

20222023 Cash Flow Activity

During the first ninethree months of 2022,2023, we generated approximately $560 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans, of which we used $525 million to fund our dividends. In addition, we received approximately $2.2 billion of proceeds from disposals (including the Macquarie Transaction as described in Note 3 to Item 1 of this Form 10-Q) and approximately $360 million from the property sales to Prime. We used these proceeds to pay off our July 2021 Interim Credit Facility, partially pay down the outstanding balance on our Credit Facility, fund $1.0 billion of new acquisitions, and make other investments. We exercised the $500 million accordion feature to our revolving credit facility during the first nine 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.

2021 Cash Flow Activity

During the first nine months of 2021, we generated approximately $577$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 return of capital distribution,cash on-hand) to fund our dividends of $476$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 $3.2 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-handthe condensed consolidated financial statements for further details). We used these proceeds to pay off our interim credit facility and cash generated from the $1.0 billion of netpay down our revolving credit facility, with remaining proceeds from the sales of stock during the first nine months of 2021, £850 million from the issuance of senior unsecured notes, approximately $140 million in loan principal repayments, and $650 million in borrowings under the July 2021 Interim Credit Facility.used for new investments.

Short-term Liquidity Requirements:

At November 4, 2022,May 5, 2023, our liquidity approximates $1.2$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), share repurchases, if any, 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 LifePoint Transaction (as more fully described in Note 10 to Item 1 of this Form 10-Q) and the sale of three Prospect facilities (as more fully described in Note 119 to Item 1the condensed consolidated financial statements), along with the expected repurchase of this Form 10-Q)the three Prime facilities in the third quarter of 2023 (as more fully described in Note 3 to the condensed consolidated financial statements) are consummated as expected in 2023, we would have approximately $650 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 November 4, 2022,May 5, 2023, our liquidity approximates $1.2$1 billion. We believe that this 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, (includingdebt principal payments coming due in 2023, our December 2023 debt maturity of approximately $450 million), ourcurrent firm commitments, share repurchases, if any, 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.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.

However, in order to make additional investments, to fund other debt maturities coming due after 2023,in 2025 and beyond (as outlined 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:

strategic property sales or joint ventures (including the LifePoint Transaction as described in Note 10 and the sale of three Prospect facilities as described in Note 119) to the condensed consolidated financial statements and the repurchase of three facilities by Prime as described in Note 3 to the condensed consolidated financial statements);
sale of equity securities;
new bank term loans;
new USD, EUR, or GBP denominated debt securities, including senior unsecured notes; and/or
new secured loans on real estate.

However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful.

4134


Principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) as of November 4, 2022May 5, 2023 are as follows (in thousands):

2022

 

$

 

2023

 

 

455,160

 

 

$

505,440

 

2024

 

 

776,400

 

 

 

942,368

 

2025

 

 

1,294,380

 

 

 

1,435,470

 

2026

 

 

2,388,712

 

 

 

2,895,492

 

2027

 

 

1,600,000

 

Thereafter

 

 

4,881,005

 

 

 

3,400,421

 

Total

 

$

9,795,657

 

 

$

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 Reports on Form 10-Q for the periods ended June 30, 2022 and March 31, 2022.10-K. There have been no other significant changes through November 4, 2022.May 5, 2023.

Distribution Policy

The table below is a summary of our distributions declared during the two year period ended September 30, 2022:March 31, 2023:

Declaration Date

 

Record Date

 

Date of Distribution

 

Distribution
per Share

 

 

Record Date

 

Date of Distribution

 

Distribution
per Share

 

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

 

 

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

 

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.

4235


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 September 30, 2022,March 31, 2023, our outstanding debt totaled $9.5$10.4 billion, which consisted of fixed-rate debt of approximately $8.7$9.2 billion (after considering interest rate swaps in-place) and variable rate debt of $0.8$1.2 billion. If market interest rates increase by 10%, the fair value of our debt at September 30, 2022March 31, 2023 would decrease by approximately $218.1$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 $2.8$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 $2.8$7.2 million per year. This assumes that the average amount outstanding under our variable rate debt for a year is $0.8$1.2 billion, the balance of such variable rate debt at September 30, 2022.March 31, 2023.

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 (£)

 

$

9,504

 

 

$

18,293

 

 

$

18,390

 

 

$

10,043

 

 

$

19,184

 

 

$

18,678

 

Euro (€)

 

 

2,028

 

 

 

6,151

 

 

 

6,167

 

 

 

2,232

 

 

 

6,546

 

 

 

6,549

 

Swiss franc (CHF)

 

 

4,197

 

 

 

6,411

 

 

 

3,664

 

 

 

3,314

 

 

 

5,639

 

 

 

3,632

 

Australian dollar (A$)

 

 

1,285

 

 

 

3,357

 

 

 

3,357

 

Colombian peso (COP)

 

 

1,147

 

 

 

1,163

 

 

 

1,163

 

 

 

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.

4337


PART II — OTHER INFORMATION

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.

(a)
None.
(b)
Not applicable.
(c)
Stock repurchase:

Period

 

Total number of
shares purchased(1)
(in thousands)

 

 

Average price
per share

 

 

Total number of shares
purchased as part of
publicly announced
programs(2)

 

 

Approximate dollar
value of shares that
may yet be
purchased under the
plans or programs
(in thousands)

 

January 1-January 31, 2023

 

 

499

 

 

$

11.14

 

 

 

 

 

$

482,085

 

Period

 

Total number of
shares purchased(1)

 

 

Average price
per share

 

 

Total number of shares
purchased as part of
publicly announced
programs

 

 

Approximate dollar
value of shares that
may yet be
purchased under the
plans or programs

July 1-July 31, 2022

 

 

41,141

 

 

$

15.46

 

 

 

 

 

N/A

(1)
The number of shares purchased consists of shares of common stock tendered by employees to satisfy the employees' tax withholding obligations arising as a result of vesting of restricted stock awards under the Equity Incentive Plan, which shares were purchased based on their fair market value on the vesting date. None
(2)
On October 9, 2022, the board of these share purchases were partdirectors of the Company authorized a publicly announced programstock repurchase plan for up to purchase$500 million of common stock, ofpar value $0.001 per share. The repurchase authorization expires October 10, 2023. No shares were repurchased under this plan during the Company. MPT Operating Partnership, L.P. redeemed 41,141 units of limited partnership interest from the Company in connection with the tendered shares of common stock.2023 first quarter.

38


Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

(a)
None.
(b)
None.

4439


Item 6. Exhibits

Exhibit Number

Description

31.1*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (Medical Properties Trust, Inc.)

31.2*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (Medical Properties Trust, Inc.)

31.3*

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (MPT Operating Partnership, L.P.)

31.4*

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (MPT Operating Partnership, L.P.)

32.1**

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Medical Properties Trust, Inc.)

32.2**

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (MPT Operating Partnership, L.P.)

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.

4540


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: November 9, 2022May 10, 2023

4641