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, ~~2022~~2023

☐ 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 ~~598.0~~598.3 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, 2022~~March 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, 2022~~March 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, 2022~~March 31, 2023 and December 31, ~~2021~~2022	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 ~~Nine~~Three 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, 2022~~March 31, 2023 and December 31, ~~2021~~2022	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 ~~2021~~2022	11
Condensed Consolidated Statements of ~~Capital~~Cash 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

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.

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.

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.

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.

~~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.~~

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.

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.

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.~~


	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 ~~will~~are 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 ~~our~~such 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 ~~437~~444 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, ~~2021~~2022 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, 2022~~March 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.

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~~

~~for changes disclosed in our Quarterly Report on Form 10-Q for the period ended March 31, 2022, there~~2022. 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 $~~625~~425 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 ~~2021~~2023 column includes ~~an £~~a $~~800~~23 million mortgage loan ~~advanced~~ to ~~the Priory Group~~Springstone Health Opco, LLC ("~~Priory"~~Springstone") ~~in the first quarter of 2021 and~~that was converted to fee simple ownership of 35 ~~properties in the second quarter of 2021~~one property as described below.

~~(2)~~2023 Activity

Lifepoint Transaction

On February 7, 2023, a subsidiary of Lifepoint Health, Inc. ("Lifepoint") acquired a majority interest in Springstone (the "Lifepoint Transaction") based on an enterprise value of $250 million. As part of the ~~2022 second quarter,~~transaction, we ~~increased~~received 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 was~~capital 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 a~~the first ~~lien on a California hospital.~~quarter of 2023. The loan ~~bears interest at a current market rate plus a component~~is

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

valued at approximately $400 million (included in the "Investments in unconsolidated real estate joint ventures" line of ~~the~~our 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 purchase~~shares of the real estate holding entities, ~~that~~which 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. We~~Priory 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~~.

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 these~~our 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 summary~~We 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

~~Disposals~~2023 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

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 ~~nine~~three 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 option~~and an ancillary property for ~~proceeds of $366~~ ~~million) and~~ ~~five~~ ~~ancillary properties for total proceeds of~~ approximately $~~522~~48 million, ~~and recognized~~resulting in a gain on real estate of approximately $~~100~~15 ~~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 $~~68.8~~79 million ~~and~~net impairment charge (including $~~536.8~~37.4 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.

~~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

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 total~~our net investment in direct financing leases ~~during the first nine months of~~since December 31, 2022, is ~~primarily related to financing leases associated with~~the 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, ~~two~~99% of our properties are occupied by tenants, leaving five properties ~~sold~~as vacant, representing less than 0.3% of total assets. We are in various stages of either releasing or selling these vacant properties, for one of which we received and recorded a significant termination fee in 2019.

As more fully described in “Item 1A. Risk Factors” in our Annual Report on ~~September 1, 2022 associated with~~Form 10-K, our tenants’ financial performance and resulting ability to satisfy their lease and loan obligations to us are material to our financial results and our ability to service our debt and make distributions to our stockholders. Our tenants operate in the ~~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 few~~certain tenants. Pursuant to our agreements with these tenants, we expect repayments of previously deferred rent to continue, with the remaining outstanding deferred rent balance of approximately $~~15.1~~12.2 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 above~~part of this charge, we reduced the carrying value of the underperforming Pennsylvania properties by approximately $170 million (to approximately $250 million) and reserved all unbilled rent accruals for a total of $112 million. In the first quarter of 2023, we began accounting for Prospect revenue on a cash basis and did not recognize any rent or interest revenue in the quarter.

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 approximately~~originated a $1350 ~~million. We~~million loan to PHP Holdings in March 2023 that is convertible into equity of PHP Holdings. At March 31, 2023, we believe our remaining investment in ~~these facilities is~~the 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 or~~further 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

~~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

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.

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 during~~change since December 31, 2022 primarily relates to the ~~first nine months~~payoff of ~~2022 is primarily due~~the Springstone loan in February 2023, partially offset by the loan made to ~~our investment in the Priory syndicated term loan as described~~PHP 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 $~~12.6~~4 million in favorable non-cash fair value ~~adjustment~~adjustments during the first ~~nine months~~quarter of ~~2022~~2023 as shown in the "Other (including fair value adjustments on securities)" line of the condensed consolidated statements of net income; whereas, this was aan $~~2.8~~8.0 million favorable non-cash fair value adjustment for the same period of ~~2021. We also earned approximately~~2022.

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~~ 19~~9.9% 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 applying~~We 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 receivables~~loans, based on historical credit losses of similar instruments.

The following table summarizes the activity in our credit loss reserves (in thousands):

For the Three Months
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


	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	%

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 approximately~~greater than ~~3.0~~3% of our total assets ~~similar to December~~as 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	%

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.~~

~~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.~~

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.)

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

(A)

Includes £119 million of GBP-denominated borrowings and €253 million of Euro-denominated borrowings that reflect the applicable exchange ~~rate~~rates at ~~September 30, 2022.~~March 31, 2023.

(B)

Non-U.S. dollar denominated debt reflects the exchange ~~rate~~rates at ~~September 30, 2022~~March 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.

~~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 $~~9.5~~8.8 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.

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.

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 fully~~Australia Transaction described in Note 3.

~~During~~ to the ~~2021 second~~condensed consolidated financial statements, we recorded a $5 million tax benefit in the first quarter ~~the United Kingdom enacted an increase in its corporate income tax rates from~~ 19~~% to~~ 25~~% effective April 1, 2023, which resulted in higher tax expense, from adjusting our net deferred tax liabilities,~~ of ~~approximately $~~43 ~~million.~~2023.

6. ~~Common Stock/Partners’ Capital~~

~~Medical Properties Trust, Inc.~~

~~On January 11, 2021, we completed an underwritten public offering of~~ ~~36.8~~ ~~million shares of our common stock, resulting in net proceeds of approximately $711~~ ~~million, after deducting underwriting discounts and commissions and offering expenses.~~

~~In addition, we sold~~ ~~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. The~~awards 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 of~~Directors, 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,~~ ~~19.3~~16.7 million shares remain available for future stock ~~awards.~~awards as of March 31, 2023. Share-based compensation expense totaled $~~33.0~~ ~~million and $38.6~~11.8 million for each of the ~~nine~~three months ended ~~September 30, 2022~~March 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.

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	)

(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 $~~159.0~~224.4 million and $~~70.1~~223.8 million of mortgage loans, a $~~289.3~~319.9 million and $~~335.6~~315.9 million shareholder loan included in investments in unconsolidated real estate joint ventures, $~~628.4~~693.0 million and $~~521.4~~640.4 million of loans that are part of our investments in unconsolidated operating entities, and $~~197.7~~273.9 million and $~~64.5~~225.5 million of other loans at ~~September 30, 2022~~March 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, 2022~~March 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 ~~investments~~investment in Springstone ~~and~~is 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 ~~are~~is recorded at fair value based on Level 3 inputs, by using a discounted cash flow model, which requires significant estimates of our investee such as projected revenue and expenses and appropriate consideration of the underlying risk profile of the forecasted assumptions associated with the investee. We classify our valuations of equity investments as Level 3, as we use certain unobservable inputs to the valuation methodology that are significant to the fair value measurement, and the valuations require management judgment due to absence of quoted market prices. For the cash flow models, our observable inputs include use of a capitalization rate and discount rate (which is based on a weighted-average cost of capital) ~~and our unobservable input includes an adjustment for a marketability discount (“DLOM”)~~. In ~~regards~~regard to the underlying projections used in the discounted cash flow model, such projections are provided

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 months~~quarter of ~~2022,~~2023, we ~~recorded~~had 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 months~~quarter 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

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

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

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%.

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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:

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;

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

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 ~~2021~~2022 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 ~~nine~~three 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 ~~unlock~~serve 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 ~~437~~444 properties leased or loaned to 5554 operators, of which ~~six~~seven 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.~~

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
%

~~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, 2022~~March 31, 2023 Compared to ~~September 30, 2021~~March 31, 2022

Net income for the three months ended ~~September 30, 2022,~~March 31, 2023, was ~~$221.8~~$32.8 million ($~~0.37~~0.05 per diluted share) compared to ~~$171.1~~$631.7 million ($~~0.29~~1.05 per diluted share) for the three months ended ~~September 30, 2021.~~March 31, 2022. This ~~30% increase~~decrease in net income is ~~primarily due to~~driven 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 of~~in Item 2 of this Quarterly Report on Form 10-Q), was ~~$272.3~~$222.2 million for the ~~2022 third~~2023 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 third~~2022 first quarter. This ~~4% increase~~decrease in Normalized FFO is primarily due to ~~increased earnings~~not 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 third~~2023 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 ~~from~~due 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 rent~~statements) 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, ~~made~~capital 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 $0.3~~down $38.6 million ~~as 2022 annual rent escalations exceeded lease contractual minimums~~primarily 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 offset~~above 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.

•

Interest and other income – ~~up $9.1~~down $1.4 million from the prior year due to the following:

Interest from loans – up ~~$7.5~~$0.7 million ~~over the prior year~~ due to ~~$14.1~~approximately $4 million of incremental revenue earned on new investments, ~~including Springstone in the 2021 fourth quarter, the Priory syndicated~~net 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 ~~$5.0~~a decrease of approximately $3.0 million ~~from loan payoffs, including less~~due to not recording any interest revenue ~~earned on the Priory loans from the conversion of the £800 million mortgage loan to fee simple assets~~for Prospect in the ~~second~~first quarter of ~~2021~~2023 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.

Other income – ~~up $1.6~~down $2.1 million from the prior year as we ~~received more~~had 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 ~~decrease~~increase 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, 2022~~March 31, 2023 is ~~similar to~~higher than the ~~weighted-average interest rate~~3.1% for the same period in ~~2021.~~2022.

Real estate depreciation and amortization during the ~~third~~first quarter of ~~2022~~2023 decreased to ~~$81.9~~$83.9 million from ~~$85.0~~$85.3 million in ~~2021~~2022 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 ~~third~~first quarter of 2023 and 2022, ~~and 2021,~~ approximately ~~$5.6~~$4.2 million and ~~$4.0~~$6.3 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 10.6% 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, general~~General and administrative expenses totaled ~~$37.3~~$41.7 million for the 2023 first quarter, relatively flat from the 2022 ~~third~~first 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.~~

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:~~

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~~

~~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.~~

~~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 four~~two 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 one~~an 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 months~~quarter 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 months~~quarter ended ~~September 30,~~March 31, 2022, ~~and 2021, respectively. The costs incurred in 2022 were~~as 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 ~~income~~expense for the first ~~nine~~three months of ~~2022~~2023 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 recovery~~lawsuit 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 a~~of favorable non-cash fair value ~~adjustment of $12.6 million~~adjustments on our investment in Aevis and other investments marked to fair value during 2023. For the first three months of 2022, ~~compared~~we 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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 is primarily based on the income generated by our investments in the United Kingdom, ~~Colombia, and Australia, as well as~~partially offset by a $5.0 million tax ~~expense associated with~~benefit recognized in the ~~Watsonville loan repayment (see~~ ~~Note 3~~ ~~and~~ ~~Note 5~~first 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~~

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.

In addition to presenting FFO in accordance with the Nareit definition, we disclose normalized FFO, which adjusts FFO for items that relate to unanticipated or non-core events or activities or accounting changes that, if not noted, would make comparison to prior period results and market expectations less meaningful to investors and analysts.

We believe that the use of FFO, combined with the required GAAP presentations, improves the understanding of our operating results among investors and the use of normalized FFO makes comparisons of our operating results with prior periods and other companies more meaningful. While FFO and normalized FFO are relevant and widely used supplemental measures of operating and financial performance of REITs, they should not be viewed as a substitute measure of our operating performance since the measures do not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs ~~necessary~~(if any are not paid by our tenants) to maintain the operating performance of our properties, which can be significant economic costs that could materially impact our results of operations. FFO and normalized FFO should not be considered an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.

The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and Normalized FFO for the three ~~and 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

~~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

LIQUIDITY AND CAPITAL RESOURCES

~~2022~~2023 Cash Flow Activity

During the first ~~nine~~three 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.

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, including~~expect to receive an additional $50 million from Steward as a result of their sale of the ~~£1.1 billion Priory Group Transaction in January 2021~~Utah properties to CommonSpirit (as more fully described in Note 10 to the condensed consolidated financial statements). In addition, we funded approximately $105 million for the acquisition of seven properties described in Note 10 to the condensed consolidated financial statements and expect to fund one additional property later in 2023.

2022 Cash Flow Activity

During the 2022 first quarter, we generated approximately $179.4 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $176.5 million and certain investment activities. During the quarter, we received approximately $1.3 billion of proceeds from the Macquarie Transaction and obtained a 50% interest in the real estate partnership valued at approximately $400 million (see Note 3 to ~~Item 1 of this Form 10-Q), using a combination of cash on-hand~~the 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 net~~pay 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 1~~the 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, ~~(including~~debt principal payments coming due in 2023, our ~~December 2023 debt maturity of approximately $450 million), our~~current firm commitments, ~~share repurchases, if any,~~ and dividends in order to comply with REIT ~~requirements for~~requirements. 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, 2022~~May 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 ~~2021~~2022 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-Q~~the 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-sensitive~~market 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, 2022~~March 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 ~~2022~~2023 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.

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

Item 1. Legal Proceedings.

From time-to-time, we may become involved in legal proceedings arising in the ordinary course of our business. Except as set forth below, we are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have an adverse effect on our business, operating results, or financial condition.

Securities Litigation

On April 12, 2023, we and certain of our executives were named as defendants in a putative federal securities class action lawsuit filed by a purported stockholder in the United States District Court for the Southern District of New York, Case No. 1:23-cv-03070. The complaint sought class certification on behalf of purchasers of our common stock between March 1, 2022 and February 22, 2023 and alleged false and/or misleading statements and/or omissions resulted in artificially inflated prices for our common stock. The complaint sought unspecified damages including interest and an award of reasonable costs and expenses. On May 9, 2023, the plaintiff voluntarily dismissed this lawsuit.

On April 13, 2023, we and certain of our executives were named as defendants in a second putative federal securities class action lawsuit, also alleging false and/or misleading statements and/or omissions resulted in artificially inflated prices for our common stock, filed by a purported stockholder in the United States District Court for the Northern District of Alabama, Case No. 2:23-cv-00486. The complaint seeks class certification on behalf of purchasers of our common stock between July 15, 2019 and February 22, 2023 and unspecified damages including interest and an award of reasonable costs and expenses.

We believe these claims are without merit and intend to defend the remaining open case vigorously. We have not recorded a liability because, at this time, we are unable to determine whether an unfavorable outcome is probable or to estimate reasonably possible losses.

Defamation Litigation

On March 30, 2023, we commenced an action in the United States District Court for the Northern District of Alabama, Case No. 2:23-cv-00408, against short-seller Viceroy Research LLC and its members. We are seeking injunctive relief and compensatory damages for defamation, civil conspiracy, tortious interference, private nuisance, and unjust enrichment based on defamatory statements expressed against us.

The information contained in Note 109 “Commitments and Contingencies” to the condensed consolidated financial statements is incorporated by reference into this Item 1.

Item 1A. Risk Factors.

There have been no material changes to the Risk Factors as presented in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(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 part~~directors of the Company authorized a ~~publicly announced program~~stock 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.

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, 2022~~May 10, 2023

4641


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


	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


	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