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 SeptemberJune 30, 20192020
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-32559
Commission file number 333-177186
MEDICAL PROPERTIES TRUST, INC.
MPT OPERATING PARTNERSHIP, L.P.
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
| 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
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 (§232.405 of this chapter) 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 ☒
Securities registered or to be 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 8, 2019,July 31, 2020, Medical Properties Trust, Inc. had 517,440,399528,829,474 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 ninesix months ended SeptemberJune 30, 20192020 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,” “our company,” “Medical Properties,” “MPT,” or “the company”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 “our operating partnership” or “the operating“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 SeptemberJune 30, 20192020
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
(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 |
| $ | 7,310,604 |
|
| $ | 5,268,459 |
|
| $ | 9,990,860 |
|
| $ | 8,102,754 |
|
Investment in financing leases |
|
| 2,078,209 |
|
|
| 2,060,302 |
| ||||||||
Mortgage loans |
|
| 1,268,563 |
|
|
| 1,213,322 |
|
|
| 1,339,258 |
|
|
| 1,275,022 |
|
Net investment in direct financing leases |
|
| 688,891 |
|
|
| 684,053 |
| ||||||||
Investment in sale leaseback transactions |
|
| 1,390,619 |
|
|
| — |
| ||||||||
Gross investment in real estate assets |
|
| 10,658,677 |
|
|
| 7,165,834 |
|
|
| 13,408,327 |
|
|
| 11,438,078 |
|
Accumulated depreciation and amortization |
|
| (571,589 | ) |
|
| (464,984 | ) |
|
| (684,444 | ) |
|
| (570,042 | ) |
Net investment in real estate assets |
|
| 10,087,088 |
|
|
| 6,700,850 |
|
|
| 12,723,883 |
|
|
| 10,868,036 |
|
Cash and cash equivalents |
|
| 461,622 |
|
|
| 820,868 |
|
|
| 374,962 |
|
|
| 1,462,286 |
|
Interest and rent receivables |
|
| 25,653 |
|
|
| 25,855 |
|
|
| 41,321 |
|
|
| 31,357 |
|
Straight-line rent receivables |
|
| 299,993 |
|
|
| 220,848 |
|
|
| 377,999 |
|
|
| 334,231 |
|
Equity investments |
|
| 777,102 |
|
|
| 520,058 |
|
|
| 841,098 |
|
|
| 926,990 |
|
Other loans |
|
| 521,398 |
|
|
| 373,198 |
|
|
| 792,011 |
|
|
| 544,832 |
|
Other assets |
|
| 279,297 |
|
|
| 181,966 |
|
|
| 296,796 |
|
|
| 299,599 |
|
Total Assets |
| $ | 12,452,153 |
|
| $ | 8,843,643 |
|
| $ | 15,448,070 |
|
| $ | 14,467,331 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net |
| $ | 6,096,232 |
|
| $ | 4,037,389 |
|
| $ | 7,795,890 |
|
| $ | 7,023,679 |
|
Accounts payable and accrued expenses |
|
| 249,642 |
|
|
| 204,325 |
|
|
| 443,453 |
|
|
| 291,489 |
|
Deferred revenue |
|
| 16,377 |
|
|
| 13,467 |
|
|
| 18,638 |
|
|
| 16,098 |
|
Obligations to tenants and other lease liabilities |
|
| 103,084 |
|
|
| 27,524 |
|
|
| 122,812 |
|
|
| 107,911 |
|
Total Liabilities |
|
| 6,465,335 |
|
|
| 4,282,705 |
|
|
| 8,380,793 |
|
|
| 7,439,177 |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value. Authorized 10,000 shares; 0 shares outstanding |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock, $0.001 par value. Authorized 500,000 shares; issued and outstanding — 459,778 shares at September 30, 2019 and 370,637 shares at December 31, 2018 |
|
| 460 |
|
|
| 371 |
| ||||||||
Common stock, $0.001 par value. Authorized 750,000 shares; issued and outstanding — 528,641 shares at June 30, 2020 and 517,522 shares at December 31, 2019 |
|
| 529 |
|
|
| 518 |
| ||||||||
Additional paid-in capital |
|
| 5,972,341 |
|
|
| 4,442,948 |
|
|
| 7,200,203 |
|
|
| 7,008,199 |
|
Retained earnings |
|
| 91,535 |
|
|
| 162,768 |
| ||||||||
Retained (deficit) earnings |
|
| (19,771 | ) |
|
| 83,012 |
| ||||||||
Accumulated other comprehensive loss |
|
| (90,019 | ) |
|
| (58,202 | ) |
|
| (113,013 | ) |
|
| (62,905 | ) |
Treasury shares, at cost |
|
| (777 | ) |
|
| (777 | ) |
|
| (777 | ) |
|
| (777 | ) |
Total Medical Properties Trust, Inc. Stockholders’ Equity |
|
| 5,973,540 |
|
|
| 4,547,108 |
| ||||||||
Total Medical Properties Trust, Inc. stockholders’ equity |
|
| 7,067,171 |
|
|
| 7,028,047 |
| ||||||||
Non-controlling interests |
|
| 13,278 |
|
|
| 13,830 |
|
|
| 106 |
|
|
| 107 |
|
Total Equity |
|
| 5,986,818 |
|
|
| 4,560,938 |
|
|
| 7,067,277 |
|
|
| 7,028,154 |
|
Total Liabilities and Equity |
| $ | 12,452,153 |
|
| $ | 8,843,643 |
|
| $ | 15,448,070 |
|
| $ | 14,467,331 |
|
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 June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||
(In thousands, except per share amounts) | 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent billed | $ | 124,361 |
|
| $ | 118,238 |
|
| $ | 343,841 |
|
| $ | 369,076 |
| $ | 173,557 |
|
| $ | 110,882 |
|
| $ | 345,324 |
|
| $ | 219,480 |
|
Straight-line rent |
| 31,026 |
|
|
| 18,293 |
|
|
| 76,813 |
|
|
| 49,157 |
|
| 21,151 |
|
|
| 25,136 |
|
|
| 52,572 |
|
|
| 45,787 |
|
Income from direct financing leases |
| 17,502 |
|
|
| 18,998 |
|
|
| 52,168 |
|
|
| 55,613 |
| |||||||||||||||
Income from financing leases |
| 52,489 |
|
|
| 17,386 |
|
|
| 104,925 |
|
|
| 34,666 |
| |||||||||||||||
Interest and other income |
| 51,867 |
|
|
| 41,467 |
|
|
| 124,937 |
|
|
| 130,098 |
|
| 44,645 |
|
|
| 39,145 |
|
|
| 83,153 |
|
|
| 73,070 |
|
Total revenues |
| 224,756 |
|
|
| 196,996 |
|
|
| 597,759 |
|
|
| 603,944 |
|
| 291,842 |
|
|
| 192,549 |
|
|
| 585,974 |
|
|
| 373,003 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
| 64,519 |
|
|
| 57,215 |
|
|
| 167,396 |
|
|
| 172,364 |
|
| 80,376 |
|
|
| 52,326 |
|
|
| 161,275 |
|
|
| 102,877 |
|
Real estate depreciation and amortization |
| 40,833 |
|
|
| 29,949 |
|
|
| 108,161 |
|
|
| 100,217 |
|
| 61,463 |
|
|
| 33,976 |
|
|
| 122,384 |
|
|
| 67,328 |
|
Property-related |
| 4,038 |
|
|
| 2,719 |
|
|
| 15,394 |
|
|
| 6,823 |
|
| 9,985 |
|
|
| 8,290 |
|
|
| 15,557 |
|
|
| 11,356 |
|
General and administrative |
| 23,286 |
|
|
| 20,982 |
|
|
| 69,009 |
|
|
| 58,352 |
|
| 32,018 |
|
|
| 22,272 |
|
|
| 65,403 |
|
|
| 45,723 |
|
Acquisition costs |
| — |
|
|
| 506 |
|
|
| — |
|
|
| 917 |
| |||||||||||||||
Total expenses |
| 132,676 |
|
|
| 111,371 |
|
|
| 359,960 |
|
|
| 338,673 |
|
| 183,842 |
|
|
| 116,864 |
|
|
| 364,619 |
|
|
| 227,284 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate and other, net |
| 209 |
|
|
| 647,204 |
|
|
| 62 |
|
|
| 672,822 |
| |||||||||||||||
Loss on sale of real estate |
| (3,101 | ) |
|
| (147 | ) |
|
| (1,776 | ) |
|
| (147 | ) | |||||||||||||||
Real estate impairment charges |
| — |
|
|
| — |
|
|
| (19,006 | ) |
|
| — |
| |||||||||||||||
Earnings from equity interests |
| 3,474 |
|
|
| 3,116 |
|
|
| 11,635 |
|
|
| 10,542 |
|
| 5,291 |
|
|
| 4,441 |
|
|
| 9,370 |
|
|
| 8,161 |
|
Unutilized financing fees |
| (3,959 | ) |
|
| — |
|
|
| (4,873 | ) |
|
| — |
|
| — |
|
|
| (914 | ) |
|
| (611 | ) |
|
| (914 | ) |
Other |
| (2,282 | ) |
|
| 2,595 |
|
|
| (1,497 | ) |
|
| (4,297 | ) | |||||||||||||||
Total other income |
| (2,558 | ) |
|
| 652,915 |
|
|
| 5,327 |
|
|
| 679,067 |
| |||||||||||||||
Other (including mark-to-market adjustments on equity securities) |
| 4,291 |
|
|
| 581 |
|
|
| (9,684 | ) |
|
| 785 |
| |||||||||||||||
Total other income (expense) |
| 6,481 |
|
|
| 3,961 |
|
|
| (21,707 | ) |
| �� | 7,885 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax |
| 89,522 |
|
|
| 738,540 |
|
|
| 243,126 |
|
|
| 944,338 |
|
| 114,481 |
|
|
| 79,646 |
|
|
| 199,648 |
|
|
| 153,604 |
|
Income tax benefit (expense) |
| 745 |
|
|
| (2,064 | ) |
|
| 3,352 |
|
|
| (4,802 | ) | |||||||||||||||
Income tax (expense) benefit |
| (4,829 | ) |
|
| 274 |
|
|
| (8,839 | ) |
|
| 2,607 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| 90,267 |
|
|
| 736,476 |
|
|
| 246,478 |
|
|
| 939,536 |
|
| 109,652 |
|
|
| 79,920 |
|
|
| 190,809 |
|
|
| 156,211 |
|
Net income attributable to non-controlling interests |
| (481 | ) |
|
| (442 | ) |
|
| (1,432 | ) |
|
| (1,334 | ) |
| (184 | ) |
|
| (482 | ) |
|
| (349 | ) |
|
| (951 | ) |
Net income attributable to MPT common stockholders | $ | 89,786 |
|
| $ | 736,034 |
|
| $ | 245,046 |
|
| $ | 938,202 |
| $ | 109,468 |
|
| $ | 79,438 |
|
| $ | 190,460 |
|
| $ | 155,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share — basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net income attributable to MPT common stockholders | $ | 0.20 |
|
| $ | 2.01 |
|
| $ | 0.60 |
|
| $ | 2.56 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Earnings per common share — diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Earnings per common share — basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net income attributable to MPT common stockholders | $ | 0.20 |
|
| $ | 2.00 |
|
| $ | 0.60 |
|
| $ | 2.56 |
| $ | 0.21 |
|
| $ | 0.20 |
|
| $ | 0.36 |
|
| $ | 0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding — basic |
| 439,581 |
|
|
| 365,024 |
|
|
| 404,902 |
|
|
| 364,934 |
|
| 527,781 |
|
|
| 394,574 |
|
|
| 524,428 |
|
|
| 387,563 |
|
Weighted average shares outstanding — diluted |
| 440,933 |
|
|
| 366,467 |
|
|
| 406,100 |
|
|
| 365,784 |
|
| 528,880 |
|
|
| 395,692 |
|
|
| 525,530 |
|
|
| 388,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share | $ | 0.26 |
|
| $ | 0.25 |
|
| $ | 0.76 |
|
| $ | 0.75 |
| $ | 0.27 |
|
| $ | 0.25 |
|
| $ | 0.54 |
|
| $ | 0.50 |
|
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 June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||
(In thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Net income |
| $ | 90,267 |
|
| $ | 736,476 |
|
| $ | 246,478 |
|
| $ | 939,536 |
|
| $ | 109,652 |
|
| $ | 79,920 |
|
| $ | 190,809 |
|
| $ | 156,211 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on interest rate swap |
|
| (15,441 | ) |
|
| — |
|
|
| (20,699 | ) |
|
| — |
|
|
| (7,908 | ) |
|
| (1,486 | ) |
|
| (33,011 | ) |
|
| (5,258 | ) |
Foreign currency translation loss |
|
| (8,048 | ) |
|
| (8,216 | ) |
|
| (11,118 | ) |
|
| (24,520 | ) | ||||||||||||||||
Foreign currency translation gain (loss) |
|
| 6,175 |
|
|
| 2,848 |
|
|
| (17,097 | ) |
|
| (3,070 | ) | ||||||||||||||||
Total comprehensive income |
|
| 66,778 |
|
|
| 728,260 |
|
|
| 214,661 |
|
|
| 915,016 |
|
|
| 107,919 |
|
|
| 81,282 |
|
|
| 140,701 |
|
|
| 147,883 |
|
Comprehensive income attributable to non-controlling interests |
|
| (481 | ) |
|
| (442 | ) |
|
| (1,432 | ) |
|
| (1,334 | ) |
|
| (184 | ) |
|
| (482 | ) |
|
| (349 | ) |
|
| (951 | ) |
Comprehensive income attributable to MPT common stockholders |
| $ | 66,297 |
|
| $ | 727,818 |
|
| $ | 213,229 |
|
| $ | 913,682 |
|
| $ | 107,735 |
|
| $ | 80,800 |
|
| $ | 140,352 |
|
| $ | 146,932 |
|
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 |
|
| Treasury Stock |
|
| Non- Controlling Interests |
|
| Total Equity |
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Additional Paid-in Capital |
|
| Retained Earnings (Deficit) |
|
| Accumulated Other Comprehensive Loss |
|
| Treasury Stock |
|
| Non- Controlling Interests |
|
| Total Equity |
| ||||||||||||||||||||
Balance at December 31, 2018 |
|
| — |
|
| $ | — |
|
|
| 370,637 |
|
| $ | 371 |
|
| $ | 4,442,948 |
|
| $ | 162,768 |
|
| $ | (58,202 | ) |
| $ | (777 | ) |
| $ | 13,830 |
|
| $ | 4,560,938 |
| ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
|
| — |
|
| $ | — |
|
|
| 517,522 |
|
| $ | 518 |
|
| $ | 7,008,199 |
|
| $ | 83,012 |
|
| $ | (62,905 | ) |
| $ | (777 | ) |
| $ | 107 |
|
| $ | 7,028,154 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 75,822 |
|
|
| — |
|
|
| — |
|
|
| 469 |
|
|
| 76,291 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 80,992 |
|
|
| — |
|
|
| — |
|
|
| 165 |
|
|
| 81,157 |
|
Unrealized loss on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,772 | ) |
|
| — |
|
|
| — |
|
|
| (3,772 | ) | ||||||||||||||||||||||||||||||||||||||||
Cumulative effect of change in accounting principles |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,399 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,399 | ) | ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,103 | ) |
|
| — |
|
|
| — |
|
|
| (25,103 | ) | ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,918 | ) |
|
| — |
|
|
| — |
|
|
| (5,918 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,272 | ) |
|
| — |
|
|
| — |
|
|
| (23,272 | ) |
Stock vesting and amortization of stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,055 |
|
|
| 1 |
|
|
| 6,714 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,715 |
|
|
| — |
|
|
| — |
|
|
| 2,312 |
|
|
| 2 |
|
|
| 10,034 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,036 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (645 | ) |
|
| (645 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (165 | ) |
|
| (165 | ) |
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| 20,147 |
|
|
| 20 |
|
|
| 354,010 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 354,030 |
|
|
| — |
|
|
| — |
|
|
| 2,601 |
|
|
| 2 |
|
|
| 61,680 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61,682 |
|
Dividends declared ($0.25 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97,163 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97,163 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 |
|
| — |
|
| $ | — |
|
|
| 391,839 |
|
| $ | 392 |
|
| $ | 4,803,672 |
|
| $ | 141,427 |
|
| $ | (67,892 | ) |
| $ | (777 | ) |
| $ | 13,654 |
|
| $ | 4,890,476 |
| ||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (141,580 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (141,580 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 |
|
| — |
|
| $ | — |
|
|
| 522,435 |
|
| $ | 522 |
|
| $ | 7,079,913 |
|
| $ | 14,025 |
|
| $ | (111,280 | ) |
| $ | (777 | ) |
| $ | 107 |
|
| $ | 6,982,510 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,438 |
|
|
| — |
|
|
| — |
|
|
| 482 |
|
|
| 79,920 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 109,468 |
|
|
| — |
|
|
| — |
|
|
| 184 |
|
|
| 109,652 |
|
Unrealized loss on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,486 | ) |
|
| — |
|
|
| — |
|
|
| (1,486 | ) | ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,908 | ) |
|
| — |
|
|
| — |
|
|
| (7,908 | ) | ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,848 |
|
|
| — |
|
|
| — |
|
|
| 2,848 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,175 |
|
|
| — |
|
|
| — |
|
|
| 6,175 |
|
Stock vesting and amortization of stock-based compensation |
|
| — |
|
|
| — |
|
|
| 119 |
|
|
| — |
|
|
| 6,317 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,317 |
|
|
| — |
|
|
| — |
|
|
| 189 |
|
|
| 1 |
|
|
| 12,191 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,192 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (670 | ) |
|
| (670 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (185 | ) |
|
| (185 | ) |
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| 2,467 |
|
|
| 2 |
|
|
| 45,321 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,323 |
|
|
| — |
|
|
| — |
|
|
| 6,017 |
|
|
| 6 |
|
|
| 108,099 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 108,105 |
|
Dividends declared ($0.25 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99,093 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99,093 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
|
| — |
|
| $ | — |
|
|
| 394,425 |
|
| $ | 394 |
|
| $ | 4,855,310 |
|
| $ | 121,772 |
|
| $ | (66,530 | ) |
| $ | (777 | ) |
| $ | 13,466 |
|
| $ | 4,923,635 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 89,786 |
|
|
| — |
|
|
| — |
|
|
| 481 |
|
|
| 90,267 |
| ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,441 | ) |
|
| — |
|
|
| — |
|
|
| (15,441 | ) | ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,048 | ) |
|
| — |
|
|
| — |
|
|
| (8,048 | ) | ||||||||||||||||||||||||||||||||||||||||
Stock vesting and amortization of stock-based compensation |
|
| — |
|
|
| — |
|
|
| 118 |
|
|
| — |
|
|
| 9,087 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,087 |
| ||||||||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (669 | ) |
|
| (669 | ) | ||||||||||||||||||||||||||||||||||||||||
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| 65,235 |
|
|
| 66 |
|
|
| 1,107,944 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,108,010 |
| ||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.26 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (120,023 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (120,023 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 |
|
| — |
|
| $ | — |
|
|
| 459,778 |
|
| $ | 460 |
|
| $ | 5,972,341 |
|
| $ | 91,535 |
|
| $ | (90,019 | ) |
| $ | (777 | ) |
| $ | 13,278 |
|
| $ | 5,986,818 |
| ||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (143,264 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (143,264 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 |
|
| — |
|
| $ | — |
|
|
| 528,641 |
|
| $ | 529 |
|
| $ | 7,200,203 |
|
| $ | (19,771 | ) |
| $ | (113,013 | ) |
| $ | (777 | ) |
| $ | 106 |
|
| $ | 7,067,277 |
|
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 |
|
| Treasury Stock |
|
| Non- Controlling Interests |
|
| Total Equity |
|
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Additional Paid-in Capital |
|
| Retained Earnings (Deficit) |
|
| Accumulated Other Comprehensive Loss |
|
| Treasury Stock |
|
| Non- Controlling Interests |
|
| Total Equity |
| ||||||||||||||||||||
Balance at December 31, 2017 |
|
| — |
|
| $ | — |
|
|
| 364,424 |
|
| $ | 364 |
|
| $ | 4,333,027 |
|
| $ | (485,932 | ) |
| $ | (26,049 | ) |
| $ | (777 | ) |
| $ | 14,572 |
|
| $ | 3,835,205 |
| ||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 |
|
| — |
|
| $ | — |
|
|
| 370,637 |
|
| $ | 371 |
|
| $ | 4,442,948 |
|
| $ | 162,768 |
|
| $ | (58,202 | ) |
| $ | (777 | ) |
| $ | 13,830 |
|
| $ | 4,560,938 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 90,601 |
|
|
| — |
|
|
| — |
|
|
| 442 |
|
|
| 91,043 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 75,822 |
|
|
| — |
|
|
| — |
|
|
| 469 |
|
|
| 76,291 |
|
Cumulative effect of change in accounting principles |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,938 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,938 |
| ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,088 |
|
|
| — |
|
|
| — |
|
|
| 16,088 |
| ||||||||||||||||||||||||||||||||||||||||
Stock vesting and amortization of stock-based compensation |
|
| — |
|
|
| — |
|
|
| 271 |
|
|
| 1 |
|
|
| 1,855 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,856 |
| ||||||||||||||||||||||||||||||||||||||||
Redemption of MOP units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (816 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (816 | ) | ||||||||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (620 | ) |
|
| (620 | ) | ||||||||||||||||||||||||||||||||||||||||
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (94 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (94 | ) | ||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.25 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,411 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,411 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018 |
|
| — |
|
| $ | — |
|
|
| 364,695 |
|
| $ | 365 |
|
| $ | 4,333,972 |
|
| $ | (484,804 | ) |
| $ | (9,961 | ) |
| $ | (777 | ) |
| $ | 14,394 |
|
| $ | 3,853,189 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 111,567 |
|
|
| — |
|
|
| — |
|
|
| 450 |
|
|
| 112,017 |
| ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,772 | ) |
|
| — |
|
|
| — |
|
|
| (3,772 | ) | ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32,392 | ) |
|
| — |
|
|
| — |
|
|
| (32,392 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,918 | ) |
|
| — |
|
|
| — |
|
|
| (5,918 | ) |
Stock vesting and amortization of stock-based compensation |
|
| — |
|
|
| — |
|
|
| 36 |
|
|
| — |
|
|
| 4,869 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,869 |
|
|
| — |
|
|
| — |
|
|
| 1,055 |
|
|
| 1 |
|
|
| 6,714 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,715 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (638 | ) |
|
| (638 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (645 | ) |
|
| (645 | ) |
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43 | ) |
|
| — |
|
|
| — |
|
|
| 20,147 |
|
|
| 20 |
|
|
| 354,010 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 354,030 |
|
Dividends declared ($0.25 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,547 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,547 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97,163 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97,163 | ) |
Balance at June 30, 2018 |
|
| — |
|
| $ | — |
|
|
| 364,731 |
|
| $ | 365 |
|
| $ | 4,338,798 |
|
| $ | (464,784 | ) |
| $ | (42,353 | ) |
| $ | (777 | ) |
| $ | 14,206 |
|
| $ | 3,845,455 |
| ||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 |
|
| — |
|
| $ | — |
|
|
| 391,839 |
|
| $ | 392 |
|
| $ | 4,803,672 |
|
| $ | 141,427 |
|
| $ | (67,892 | ) |
| $ | (777 | ) |
| $ | 13,654 |
|
| $ | 4,890,476 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 736,034 |
|
|
| — |
|
|
| — |
|
|
| 442 |
|
|
| 736,476 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,438 |
|
|
| — |
|
|
| — |
|
|
| 482 |
|
|
| 79,920 |
|
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,216 | ) |
|
| — |
|
|
| — |
|
|
| (8,216 | ) | ||||||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,486 | ) |
|
| — |
|
|
| — |
|
|
| (1,486 | ) | ||||||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,848 |
|
|
| — |
|
|
| — |
|
|
| 2,848 |
| ||||||||||||||||||||||||||||||||||||||||
Stock vesting and amortization of stock-based compensation |
|
| — |
|
|
| — |
|
|
| 127 |
|
|
| — |
|
|
| 4,970 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,970 |
|
|
| — |
|
|
| — |
|
|
| 119 |
|
|
| — |
|
|
| 6,317 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,317 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (630 | ) |
|
| (630 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (670 | ) |
|
| (670 | ) |
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| 2,467 |
|
|
| 2 |
|
|
| 45,321 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,323 |
| ||||||||||||||||||||||||||||||||||||||||
Dividends declared ($0.25 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,547 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,547 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99,093 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99,093 | ) |
Balance at September 30, 2018 |
|
| — |
|
| $ | — |
|
|
| 364,858 |
|
| $ | 365 |
|
| $ | 4,343,768 |
|
| $ | 179,703 |
|
| $ | (50,569 | ) |
| $ | (777 | ) |
| $ | 14,018 |
|
| $ | 4,486,508 |
| ||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
|
| — |
|
| $ | — |
|
|
| 394,425 |
|
| $ | 394 |
|
| $ | 4,855,310 |
|
| $ | 121,772 |
|
| $ | (66,530 | ) |
| $ | (777 | ) |
| $ | 13,466 |
|
| $ | 4,923,635 |
|
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 Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 246,478 |
|
| $ | 939,536 |
|
| $ | 190,809 |
|
| $ | 156,211 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 111,067 |
|
|
| 106,508 |
|
|
| 128,215 |
|
|
| 69,430 |
|
Amortization of deferred financing costs and debt discount |
|
| 6,293 |
|
|
| 5,543 |
|
|
| 6,438 |
|
|
| 3,816 |
|
Direct financing lease interest accretion |
|
| (6,858 | ) |
|
| (7,213 | ) | ||||||||
Straight-line rent revenue and other |
|
| (84,758 | ) |
|
| (64,840 | ) |
|
| (96,730 | ) |
|
| (54,070 | ) |
Share-based compensation |
|
| 22,119 |
|
|
| 11,695 |
|
|
| 22,228 |
|
|
| 13,032 |
|
Gain from sale of real estate, net |
|
| (62 | ) |
|
| (672,822 | ) | ||||||||
Straight-line rent and other write-off |
|
| 7,232 |
|
|
| 17,615 |
| ||||||||
Unutilized financing fees |
|
| 4,873 |
|
|
| — |
| ||||||||
Loss from sale of real estate and other |
|
| 1,776 |
|
|
| 147 |
| ||||||||
Impairment charges |
|
| 19,006 |
|
|
| — |
| ||||||||
Straight-line rent and other write-off, net of tax |
|
| 26,958 |
|
|
| 3,002 |
| ||||||||
Unutilized financing costs |
|
| 611 |
|
|
| 914 |
| ||||||||
Pre-acquisition rent collected - Circle Transaction |
|
| (35,020 | ) |
|
| — |
| ||||||||
Other adjustments |
|
| 16,052 |
|
|
| (21,354 | ) |
|
| 12,373 |
|
|
| 12,774 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and rent receivables |
|
| 528 |
|
|
| (10,158 | ) |
|
| 186 |
|
|
| (265 | ) |
Accounts payable and accrued expenses |
|
| 4,413 |
|
|
| (5,387 | ) |
|
| 12,216 |
|
|
| (6,885 | ) |
Net cash provided by operating activities |
|
| 327,377 |
|
|
| 299,123 |
|
|
| 289,066 |
|
|
| 198,106 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions and other related investments |
|
| (3,703,092 | ) |
|
| (1,166,618 | ) |
|
| (2,226,302 | ) |
|
| (1,402,315 | ) |
Net proceeds from sale of real estate |
|
| 4,859 |
|
|
| 1,513,666 |
|
|
| 78,764 |
|
|
| 3,449 |
|
Principal received on loans receivable |
|
| 920 |
|
|
| 531,772 |
|
|
| — |
|
|
| 420 |
|
Investment in loans receivable |
|
| (34,149 | ) |
|
| (174,494 | ) |
|
| (62,064 | ) |
|
| (2,992 | ) |
Construction in progress and other |
|
| (55,168 | ) |
|
| (32,425 | ) | ||||||||
Capital additions and other investments, net |
|
| (213,096 | ) |
|
| (63,080 | ) | ||||||||
Net cash (used for) provided by investing activities |
|
| (3,999,726 | ) |
|
| 608,821 |
| ||||||||
Other investments, net |
|
| 29,322 |
|
|
| (205,473 | ) | ||||||||
Net cash used for investing activities |
|
| (2,180,280 | ) |
|
| (1,606,911 | ) | ||||||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from term debt, net of discount |
|
| 1,732,740 |
|
|
| 759,735 |
| ||||||||
Proceeds from term debt |
|
| 915,950 |
|
|
| 837,240 |
| ||||||||
Revolving credit facilities, net |
|
| 417,089 |
|
|
| (818,116 | ) |
|
| — |
|
|
| 12,976 |
|
Distributions paid |
|
| (291,675 | ) |
|
| (272,360 | ) | ||||||||
Dividends paid |
|
| (279,741 | ) |
|
| (192,582 | ) | ||||||||
Lease deposits and other obligations to tenants |
|
| (8,349 | ) |
|
| (25,511 | ) |
|
| 5,001 |
|
|
| 3,485 |
|
Proceeds from sale of common shares, net of offering costs |
|
| 1,507,363 |
|
|
| — |
|
|
| 169,787 |
|
|
| 399,353 |
|
Other financing activities |
|
| (24,187 | ) |
|
| (3,106 | ) | ||||||||
Net cash provided by (used for) financing activities |
|
| 3,332,981 |
|
|
| (359,358 | ) | ||||||||
(Decrease) increase in cash, cash equivalents and restricted cash for period |
|
| (339,368 | ) |
|
| 548,586 |
| ||||||||
Payment of deferred financing costs and other financing activities |
|
| (7,005 | ) |
|
| (9,432 | ) | ||||||||
Net cash provided by financing activities |
|
| 803,992 |
|
|
| 1,051,040 |
| ||||||||
Decrease in cash, cash equivalents, and restricted cash for period |
|
| (1,087,222 | ) |
|
| (357,765 | ) | ||||||||
Effect of exchange rate changes |
|
| (16,645 | ) |
|
| (8,313 | ) |
|
| 155 |
|
|
| (8,050 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 822,425 |
|
|
| 172,247 |
| ||||||||
Cash, cash equivalents and restricted cash at end of period |
| $ | 466,412 |
|
| $ | 712,520 |
| ||||||||
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 1,467,991 |
|
|
| 822,425 |
| ||||||||
Cash, cash equivalents, and restricted cash at end of period |
| $ | 380,924 |
|
| $ | 456,610 |
| ||||||||
Interest paid |
| $ | 158,259 |
|
| $ | 175,715 |
|
| $ | 147,502 |
|
| $ | 97,184 |
|
Supplemental schedule of non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared, unpaid |
| $ | 120,023 |
|
| $ | 91,547 |
| ||||||||
Cash, cash equivalents and restricted cash are comprised of the following: |
|
|
|
|
|
|
|
| ||||||||
Dividends declared, unpaid |
| $ | 143,264 |
|
| $ | 99,093 |
| ||||||||
Cash, cash equivalents, and restricted cash are comprised of the following: |
|
|
|
|
|
|
|
| ||||||||
Beginning of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 820,868 |
|
| $ | 171,472 |
|
| $ | 1,462,286 |
|
| $ | 820,868 |
|
Restricted cash, included in Other assets |
|
| 1,557 |
|
|
| 775 |
|
|
| 5,705 |
|
|
| 1,557 |
|
|
| $ | 822,425 |
|
| $ | 172,247 |
|
| $ | 1,467,991 |
|
| $ | 822,425 |
|
End of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 461,622 |
|
| $ | 710,965 |
|
| $ | 374,962 |
|
| $ | 451,652 |
|
Restricted cash, included in Other assets |
|
| 4,790 |
|
|
| 1,555 |
|
|
| 5,962 |
|
|
| 4,958 |
|
|
| $ | 466,412 |
|
| $ | 712,520 |
|
| $ | 380,924 |
|
| $ | 456,610 |
|
See accompanying notes to condensed consolidated financial statements.
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
(In thousands) |
| (Unaudited) |
|
| (Note 2) |
|
| (Unaudited) |
|
| (Note 2) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land, buildings and improvements, intangible lease assets, and other |
| $ | 7,310,604 |
|
| $ | 5,268,459 |
|
| $ | 9,990,860 |
|
| $ | 8,102,754 |
|
Investment in financing leases |
|
| 2,078,209 |
|
|
| 2,060,302 |
| ||||||||
Mortgage loans |
|
| 1,268,563 |
|
|
| 1,213,322 |
|
|
| 1,339,258 |
|
|
| 1,275,022 |
|
Net investment in direct financing leases |
|
| 688,891 |
|
|
| 684,053 |
| ||||||||
Investment in sale leaseback transactions |
|
| 1,390,619 |
|
|
| — |
| ||||||||
Gross investment in real estate assets |
|
| 10,658,677 |
|
|
| 7,165,834 |
|
|
| 13,408,327 |
|
|
| 11,438,078 |
|
Accumulated depreciation and amortization |
|
| (571,589 | ) |
|
| (464,984 | ) |
|
| (684,444 | ) |
|
| (570,042 | ) |
Net investment in real estate assets |
|
| 10,087,088 |
|
|
| 6,700,850 |
|
|
| 12,723,883 |
|
|
| 10,868,036 |
|
Cash and cash equivalents |
|
| 461,622 |
|
|
| 820,868 |
|
|
| 374,962 |
|
|
| 1,462,286 |
|
Interest and rent receivables |
|
| 25,653 |
|
|
| 25,855 |
|
|
| 41,321 |
|
|
| 31,357 |
|
Straight-line rent receivables |
|
| 299,993 |
|
|
| 220,848 |
|
|
| 377,999 |
|
|
| 334,231 |
|
Equity investments |
|
| 777,102 |
|
|
| 520,058 |
|
|
| 841,098 |
|
|
| 926,990 |
|
Other loans |
|
| 521,398 |
|
|
| 373,198 |
|
|
| 792,011 |
|
|
| 544,832 |
|
Other assets |
|
| 279,297 |
|
|
| 181,966 |
|
|
| 296,796 |
|
|
| 299,599 |
|
Total Assets |
| $ | 12,452,153 |
|
| $ | 8,843,643 |
|
| $ | 15,448,070 |
|
| $ | 14,467,331 |
|
Liabilities and Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, net |
| $ | 6,096,232 |
|
| $ | 4,037,389 |
|
| $ | 7,795,890 |
|
| $ | 7,023,679 |
|
Accounts payable and accrued expenses |
|
| 129,289 |
|
|
| 108,574 |
|
|
| 299,861 |
|
|
| 152,999 |
|
Deferred revenue |
|
| 16,377 |
|
|
| 13,467 |
|
|
| 18,638 |
|
|
| 16,098 |
|
Obligations to tenants and other lease liabilities |
|
| 103,084 |
|
|
| 27,524 |
|
|
| 122,812 |
|
|
| 107,911 |
|
Payable due to Medical Properties Trust, Inc. |
|
| 119,963 |
|
|
| 95,361 |
|
|
| 143,202 |
|
|
| 138,100 |
|
Total Liabilities |
|
| 6,464,945 |
|
|
| 4,282,315 |
|
|
| 8,380,403 |
|
|
| 7,438,787 |
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner — issued and outstanding — 4,598 units at September 30, 2019 and 3,706 units at December 31, 2018 |
|
| 60,666 |
|
|
| 46,084 |
| ||||||||
General Partner — issued and outstanding — 5,287 units at June 30, 2020 and 5,176 units at December 31, 2019 |
|
| 71,831 |
|
|
| 70,939 |
| ||||||||
Limited Partners: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units — issued and outstanding — 455,180 units at September 30, 2019 and 366,931 units at December 31, 2018 |
|
| 6,003,283 |
|
|
| 4,559,616 |
| ||||||||
LTIP units — issued and outstanding — 232 units at September 30, 2019 and 232 units at December 31, 2018 |
|
| — |
|
|
| — |
| ||||||||
Common units — issued and outstanding — 523,354 units at June 30, 2020 and 512,346 units at December 31, 2019 |
|
| 7,108,743 |
|
|
| 7,020,403 |
| ||||||||
LTIP units — issued and outstanding — 232 units at June 30, 2020 and December 31, 2019 |
|
| — |
|
|
| — |
| ||||||||
Accumulated other comprehensive loss |
|
| (90,019 | ) |
|
| (58,202 | ) |
|
| (113,013 | ) |
|
| (62,905 | ) |
Total MPT Operating Partnership, L.P. capital |
|
| 5,973,930 |
|
|
| 4,547,498 |
|
|
| 7,067,561 |
|
|
| 7,028,437 |
|
Non-controlling interests |
|
| 13,278 |
|
|
| 13,830 |
|
|
| 106 |
|
|
| 107 |
|
Total capital |
|
| 5,987,208 |
|
|
| 4,561,328 |
| ||||||||
Total Capital |
|
| 7,067,667 |
|
|
| 7,028,544 |
| ||||||||
Total Liabilities and Capital |
| $ | 12,452,153 |
|
| $ | 8,843,643 |
|
| $ | 15,448,070 |
|
| $ | 14,467,331 |
|
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 June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||
(In thousands, except per unit amounts) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent billed |
| $ | 124,361 |
|
| $ | 118,238 |
|
| $ | 343,841 |
|
| $ | 369,076 |
|
| $ | 173,557 |
|
| $ | 110,882 |
|
| $ | 345,324 |
|
| $ | 219,480 |
|
Straight-line rent |
|
| 31,026 |
|
|
| 18,293 |
|
|
| 76,813 |
|
|
| 49,157 |
|
|
| 21,151 |
|
|
| 25,136 |
|
|
| 52,572 |
|
|
| 45,787 |
|
Income from direct financing leases |
|
| 17,502 |
|
|
| 18,998 |
|
|
| 52,168 |
|
|
| 55,613 |
| ||||||||||||||||
Income from financing leases |
|
| 52,489 |
|
|
| 17,386 |
|
|
| 104,925 |
|
|
| 34,666 |
| ||||||||||||||||
Interest and other income |
|
| 51,867 |
|
|
| 41,467 |
|
|
| 124,937 |
|
|
| 130,098 |
|
|
| 44,645 |
|
|
| 39,145 |
|
|
| 83,153 |
|
|
| 73,070 |
|
Total revenues |
|
| 224,756 |
|
|
| 196,996 |
|
|
| 597,759 |
|
|
| 603,944 |
|
|
| 291,842 |
|
|
| 192,549 |
|
|
| 585,974 |
|
|
| 373,003 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
| 64,519 |
|
|
| 57,215 |
|
|
| 167,396 |
|
|
| 172,364 |
|
|
| 80,376 |
|
|
| 52,326 |
|
|
| 161,275 |
|
|
| 102,877 |
|
Real estate depreciation and amortization |
|
| 40,833 |
|
|
| 29,949 |
|
|
| 108,161 |
|
|
| 100,217 |
|
|
| 61,463 |
|
|
| 33,976 |
|
|
| 122,384 |
|
|
| 67,328 |
|
Property-related |
|
| 4,038 |
|
|
| 2,719 |
|
|
| 15,394 |
|
|
| 6,823 |
|
|
| 9,985 |
|
|
| 8,290 |
|
|
| 15,557 |
|
|
| 11,356 |
|
General and administrative |
|
| 23,286 |
|
|
| 20,982 |
|
|
| 69,009 |
|
|
| 58,352 |
|
|
| 32,018 |
|
|
| 22,272 |
|
|
| 65,403 |
|
|
| 45,723 |
|
Acquisition costs |
|
| — |
|
|
| 506 |
|
|
| — |
|
|
| 917 |
| ||||||||||||||||
Total expenses |
|
| 132,676 |
|
|
| 111,371 |
|
|
| 359,960 |
|
|
| 338,673 |
|
|
| 183,842 |
|
|
| 116,864 |
|
|
| 364,619 |
|
|
| 227,284 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate and other, net |
|
| 209 |
|
|
| 647,204 |
|
|
| 62 |
|
|
| 672,822 |
| ||||||||||||||||
Loss on sale of real estate |
|
| (3,101 | ) |
|
| (147 | ) |
|
| (1,776 | ) |
|
| (147 | ) | ||||||||||||||||
Real estate impairment charges |
|
| — |
|
|
| — |
|
|
| (19,006 | ) |
|
| — |
| ||||||||||||||||
Earnings from equity interests |
|
| 3,474 |
|
|
| 3,116 |
|
|
| 11,635 |
|
|
| 10,542 |
|
|
| 5,291 |
|
|
| 4,441 |
|
|
| 9,370 |
|
|
| 8,161 |
|
Unutilized financing fees |
|
| (3,959 | ) |
|
| — |
|
|
| (4,873 | ) |
|
| — |
|
|
| — |
|
|
| (914 | ) |
|
| (611 | ) |
|
| (914 | ) |
Other |
|
| (2,282 | ) |
|
| 2,595 |
|
|
| (1,497 | ) |
|
| (4,297 | ) | ||||||||||||||||
Total other income |
|
| (2,558 | ) |
|
| 652,915 |
|
|
| 5,327 |
|
|
| 679,067 |
| ||||||||||||||||
Other (including mark-to-market adjustments on equity securities) |
|
| 4,291 |
|
|
| 581 |
|
|
| (9,684 | ) |
|
| 785 |
| ||||||||||||||||
Total other income (expense) |
|
| 6,481 |
|
|
| 3,961 |
|
|
| (21,707 | ) |
|
| 7,885 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax |
|
| 89,522 |
|
|
| 738,540 |
|
|
| 243,126 |
|
|
| 944,338 |
|
|
| 114,481 |
|
|
| 79,646 |
|
|
| 199,648 |
|
|
| 153,604 |
|
Income tax benefit (expense) |
|
| 745 |
|
|
| (2,064 | ) |
|
| 3,352 |
|
|
| (4,802 | ) | ||||||||||||||||
Income tax (expense) benefit |
|
| (4,829 | ) |
|
| 274 |
|
|
| (8,839 | ) |
|
| 2,607 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| 90,267 |
|
|
| 736,476 |
|
|
| 246,478 |
|
|
| 939,536 |
|
|
| 109,652 |
|
|
| 79,920 |
|
|
| 190,809 |
|
|
| 156,211 |
|
Net income attributable to non-controlling interests |
|
| (481 | ) |
|
| (442 | ) |
|
| (1,432 | ) |
|
| (1,334 | ) |
|
| (184 | ) |
|
| (482 | ) |
|
| (349 | ) |
|
| (951 | ) |
Net income attributable to MPT Operating Partnership partners |
| $ | 89,786 |
|
| $ | 736,034 |
|
| $ | 245,046 |
|
| $ | 938,202 |
|
| $ | 109,468 |
|
| $ | 79,438 |
|
| $ | 190,460 |
|
| $ | 155,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per unit — basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income attributable to MPT Operating Partnership partners |
| $ | 0.20 |
|
| $ | 2.01 |
|
| $ | 0.60 |
|
| $ | 2.56 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Earnings per unit — diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Earnings per unit — basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income attributable to MPT Operating Partnership partners |
| $ | 0.20 |
|
| $ | 2.00 |
|
| $ | 0.60 |
|
| $ | 2.56 |
|
| $ | 0.21 |
|
| $ | 0.20 |
|
| $ | 0.36 |
|
| $ | 0.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding — basic |
|
| 439,581 |
|
|
| 365,024 |
|
|
| 404,902 |
|
|
| 364,934 |
|
|
| 527,781 |
|
|
| 394,574 |
|
|
| 524,428 |
|
|
| 387,563 |
|
Weighted average units outstanding — diluted |
|
| 440,933 |
|
|
| 366,467 |
|
|
| 406,100 |
|
|
| 365,784 |
|
|
| 528,880 |
|
|
| 395,692 |
|
|
| 525,530 |
|
|
| 388,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per unit |
| $ | 0.26 |
|
| $ | 0.25 |
|
| $ | 0.76 |
|
| $ | 0.75 |
|
| $ | 0.27 |
|
| $ | 0.25 |
|
| $ | 0.54 |
|
| $ | 0.50 |
|
See accompanying notes to condensed consolidated financial statements.
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 June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||
(In thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Net income |
| $ | 90,267 |
|
| $ | 736,476 |
|
| $ | 246,478 |
|
| $ | 939,536 |
|
| $ | 109,652 |
|
| $ | 79,920 |
|
| $ | 190,809 |
|
| $ | 156,211 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on interest rate swap |
|
| (15,441 | ) |
|
| — |
|
|
| (20,699 | ) |
|
| — |
|
|
| (7,908 | ) |
|
| (1,486 | ) |
|
| (33,011 | ) |
|
| (5,258 | ) |
Foreign currency translation loss |
|
| (8,048 | ) |
|
| (8,216 | ) |
|
| (11,118 | ) |
|
| (24,520 | ) | ||||||||||||||||
Foreign currency translation gain (loss) |
|
| 6,175 |
|
|
| 2,848 |
|
|
| (17,097 | ) |
|
| (3,070 | ) | ||||||||||||||||
Total comprehensive income |
|
| 66,778 |
|
|
| 728,260 |
|
|
| 214,661 |
|
|
| 915,016 |
|
|
| 107,919 |
|
|
| 81,282 |
|
|
| 140,701 |
|
|
| 147,883 |
|
Comprehensive income attributable to non-controlling interests |
|
| (481 | ) |
|
| (442 | ) |
|
| (1,432 | ) |
|
| (1,334 | ) |
|
| (184 | ) |
|
| (482 | ) |
|
| (349 | ) |
|
| (951 | ) |
Comprehensive income attributable to MPT Operating Partnership partners |
| $ | 66,297 |
|
| $ | 727,818 |
|
| $ | 213,229 |
|
| $ | 913,682 |
|
| $ | 107,735 |
|
| $ | 80,800 |
|
| $ | 140,352 |
|
| $ | 146,932 |
|
See accompanying notes to condensed consolidated financial statements.
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Capital
(Unaudited)
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
| Partner |
|
| Common |
|
| LTIPs |
|
| Other |
|
| Non- |
|
|
|
|
|
| Partner |
|
| Common |
|
| LTIPs |
|
| Other |
|
| Non- |
|
|
|
|
| ||||||||||||||||||||||||||||||||||
(In thousands, except per unit amounts) |
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Comprehensive Loss |
|
| Controlling Interests |
|
| Total Capital |
|
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Comprehensive Loss |
|
| Controlling Interests |
|
| Total Capital |
| ||||||||||||||||||
Balance at December 31, 2018 |
|
| 3,706 |
|
| $ | 46,084 |
|
|
| 366,931 |
|
| $ | 4,559,616 |
|
|
| 232 |
|
| $ | — |
|
| $ | (58,202 | ) |
| $ | 13,830 |
|
| $ | 4,561,328 |
| ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
|
| 5,176 |
|
| $ | 70,939 |
|
|
| 512,346 |
|
| $ | 7,020,403 |
|
|
| 232 |
|
| $ | — |
|
| $ | (62,905 | ) |
| $ | 107 |
|
| $ | 7,028,544 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 758 |
|
|
| — |
|
|
| 75,064 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 469 |
|
|
| 76,291 |
|
|
| — |
|
|
| 810 |
|
|
| — |
|
|
| 80,182 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 165 |
|
|
| 81,157 |
|
Unrealized loss on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,772 | ) |
|
| — |
|
|
| (3,772 | ) | ||||||||||||||||||||||||||||||||||||
Cumulative effect of change in accounting principles |
|
| — |
|
|
| (84 | ) |
|
| — |
|
|
| (8,315 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,399 | ) | ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,103 | ) |
|
| — |
|
|
| (25,103 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,918 | ) |
|
| — |
|
|
| (5,918 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,272 | ) |
|
| — |
|
|
| (23,272 | ) |
Unit vesting and amortization of unit-based compensation |
|
| 11 |
|
|
| 68 |
|
|
| 1,044 |
|
|
| 6,647 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,715 |
|
|
| 23 |
|
|
| 100 |
|
|
| 2,289 |
|
|
| 9,936 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,036 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (645 | ) |
|
| (645 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (165 | ) |
|
| (165 | ) |
Proceeds from offering (net of offering costs) |
|
| 201 |
|
|
| 3,540 |
|
|
| 19,946 |
|
|
| 350,490 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 354,030 |
|
|
| 26 |
|
|
| 617 |
|
|
| 2,575 |
|
|
| 61,065 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61,682 |
|
Distributions declared ($0.25 per unit) |
|
| — |
|
|
| (972 | ) |
|
| — |
|
|
| (96,191 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97,163 | ) | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 |
|
| 3,918 |
|
| $ | 49,478 |
|
|
| 387,921 |
|
| $ | 4,895,626 |
|
|
| 232 |
|
| $ | — |
|
| $ | (67,892 | ) |
| $ | 13,654 |
|
| $ | 4,890,866 |
| ||||||||||||||||||||||||||||||||||||
Distributions declared ($0.27 per unit) |
|
| — |
|
|
| (1,416 | ) |
|
| — |
|
|
| (140,164 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (141,580 | ) | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 |
|
| 5,225 |
|
| $ | 70,966 |
|
|
| 517,210 |
|
| $ | 7,023,107 |
|
|
| 232 |
|
| $ | — |
|
| $ | (111,280 | ) |
| $ | 107 |
|
| $ | 6,982,900 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 794 |
|
|
| — |
|
|
| 78,644 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 482 |
|
|
| 79,920 |
|
|
| — |
|
|
| 1,095 |
|
|
| — |
|
|
| 108,373 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 184 |
|
|
| 109,652 |
|
Unrealized loss on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,486 | ) |
|
| — |
|
|
| (1,486 | ) | ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,908 | ) |
|
| — |
|
|
| (7,908 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,848 |
|
|
| — |
|
|
| 2,848 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,175 |
|
|
| — |
|
|
| 6,175 |
|
Unit vesting and amortization of unit-based compensation |
|
| 1 |
|
|
| 63 |
|
|
| 118 |
|
|
| 6,254 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,317 |
|
|
| 2 |
|
|
| 122 |
|
|
| 187 |
|
|
| 12,070 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,192 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (670 | ) |
|
| (670 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (185 | ) |
|
| (185 | ) |
Proceeds from offering (net of offering costs) |
|
| 25 |
|
|
| 453 |
|
|
| 2,442 |
|
|
| 44,870 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,323 |
|
|
| 60 |
|
|
| 1,081 |
|
|
| 5,957 |
|
|
| 107,024 |
|
|
| — |
|
|
| — | �� |
|
| — |
|
|
| — |
|
|
| 108,105 |
|
Distributions declared ($0.25 per unit) |
|
| — |
|
|
| (991 | ) |
|
| — |
|
|
| (98,102 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99,093 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
|
| 3,944 |
|
| $ | 49,797 |
|
|
| 390,481 |
|
| $ | 4,927,292 |
|
|
| 232 |
|
| $ | — |
|
| $ | (66,530 | ) |
| $ | 13,466 |
|
| $ | 4,924,025 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 898 |
|
|
| — |
|
|
| 88,888 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 481 |
|
|
| 90,267 |
| ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (15,441 | ) |
|
| — |
|
|
| (15,441 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,048 | ) |
|
| — |
|
|
| (8,048 | ) | ||||||||||||||||||||||||||||||||||||
Unit vesting and amortization of unit-based compensation |
|
| 1 |
|
|
| 91 |
|
|
| 117 |
|
|
| 8,996 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,087 |
| ||||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (669 | ) |
|
| (669 | ) | ||||||||||||||||||||||||||||||||||||
Proceeds from offering (net of offering costs) |
|
| 653 |
|
|
| 11,080 |
|
|
| 64,582 |
|
|
| 1,096,930 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,108,010 |
| ||||||||||||||||||||||||||||||||||||
Distributions declared ($0.26 per unit) |
|
| — |
|
|
| (1,200 | ) |
|
| — |
|
|
| (118,823 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (120,023 | ) | ||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 |
|
| 4,598 |
|
| $ | 60,666 |
|
|
| 455,180 |
|
| $ | 6,003,283 |
|
|
| 232 |
|
| $ | — |
|
| $ | (90,019 | ) |
| $ | 13,278 |
|
| $ | 5,987,208 |
| ||||||||||||||||||||||||||||||||||||
Distributions declared ($0.27 per unit) |
|
| — |
|
|
| (1,433 | ) |
|
| — |
|
|
| (141,831 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (143,264 | ) | ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 |
|
| 5,287 |
|
| $ | 71,831 |
|
|
| 523,354 |
|
| $ | 7,108,743 |
|
|
| 232 |
|
| $ | — |
|
| $ | (113,013 | ) |
| $ | 106 |
|
| $ | 7,067,667 |
|
See accompanying notes to condensed consolidated financial statements.
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Capital
(Unaudited)
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| General |
|
| Limited Partners |
|
| Accumulated |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
|
| Partner |
|
| Common |
|
| LTIPs |
|
| Other |
|
| Non- |
|
|
|
|
|
| Partner |
|
| Common |
|
| LTIPs |
|
| Other |
|
| Non- |
|
|
|
|
| ||||||||||||||||||||||||||||||||||
(In thousands, except per unit amounts) |
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Comprehensive Loss |
|
| Controlling Interests |
|
| Total Capital |
|
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Units |
|
| Unit Value |
|
| Comprehensive Loss |
|
| Controlling Interests |
|
| Total Capital |
| ||||||||||||||||||
Balance at December 31, 2017 |
|
| 3,644 |
|
| $ | 38,489 |
|
|
| 360,780 |
|
| $ | 3,808,583 |
|
|
| 292 |
|
| $ | — |
|
| $ | (26,049 | ) |
| $ | 14,572 |
|
| $ | 3,835,595 |
| ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2018 |
|
| 3,706 |
|
| $ | 46,084 |
|
|
| 366,931 |
|
| $ | 4,559,616 |
|
|
| 232 |
|
| $ | — |
|
| $ | (58,202 | ) |
| $ | 13,830 |
|
| $ | 4,561,328 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 906 |
|
|
| — |
|
|
| 89,695 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 442 |
|
|
| 91,043 |
|
|
| — |
|
|
| 758 |
|
|
| — |
|
|
| 75,064 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 469 |
|
|
| 76,291 |
|
Cumulative effect of change in accounting principles |
|
| — |
|
|
| 19 |
|
|
| — |
|
|
| 1,919 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,938 |
| ||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,088 |
|
|
| — |
|
|
| 16,088 |
| ||||||||||||||||||||||||||||||||||||
Unit vesting and amortization of unit-based compensation |
|
| 3 |
|
|
| 19 |
|
|
| 268 |
|
|
| 1,837 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,856 |
| ||||||||||||||||||||||||||||||||||||
Conversion of LTIP units to common units |
|
| — |
|
|
| — |
|
|
| 60 |
|
|
| — |
|
|
| (60 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||||||
Redemption of common units |
|
| — |
|
|
| — |
|
|
| (60 | ) |
|
| (816 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (816 | ) | ||||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (620 | ) |
|
| (620 | ) | ||||||||||||||||||||||||||||||||||||
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (93 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (94 | ) | ||||||||||||||||||||||||||||||||||||
Distributions declared ($0.25 per unit) |
|
| — |
|
|
| (914 | ) |
|
| — |
|
|
| (90,497 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,411 | ) | ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2018 |
|
| 3,647 |
|
| $ | 38,518 |
|
|
| 361,048 |
|
| $ | 3,810,628 |
|
|
| 232 |
|
| $ | — |
|
| $ | (9,961 | ) |
| $ | 14,394 |
|
| $ | 3,853,579 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 1,115 |
|
|
| — |
|
|
| 110,452 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 450 |
|
|
| 112,017 |
| ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,772 | ) |
|
| — |
|
|
| (3,772 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32,392 | ) |
|
| — |
|
|
| (32,392 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,918 | ) |
|
| — |
|
|
| (5,918 | ) |
Unit vesting and amortization of unit-based compensation |
|
| — |
|
|
| 49 |
|
|
| 36 |
|
|
| 4,820 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,869 |
|
|
| 11 |
|
|
| 68 |
|
|
| 1,044 |
|
|
| 6,647 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,715 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (638 | ) |
|
| (638 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (645 | ) |
|
| (645 | ) |
Proceeds from offering (net of offering costs) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43 | ) |
|
| 201 |
|
|
| 3,540 |
|
|
| 19,946 |
|
|
| 350,490 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 354,030 |
|
Distributions declared ($0.25 per unit) |
|
| — |
|
|
| (915 | ) |
|
| — |
|
|
| (90,632 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,547 | ) |
|
| — |
|
|
| (972 | ) |
|
| — |
|
|
| (96,191 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97,163 | ) |
Balance at June 30, 2018 |
|
| 3,647 |
|
| $ | 38,767 |
|
|
| 361,084 |
|
| $ | 3,835,225 |
|
|
| 232 |
|
| $ | — |
|
| $ | (42,353 | ) |
| $ | 14,206 |
|
| $ | 3,845,845 |
| ||||||||||||||||||||||||||||||||||||
Balance at March 31, 2019 |
|
| 3,918 |
|
| $ | 49,478 |
|
|
| 387,921 |
|
| $ | 4,895,626 |
|
|
| 232 |
|
| $ | — |
|
| $ | (67,892 | ) |
| $ | 13,654 |
|
| $ | 4,890,866 |
| ||||||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| 7,361 |
|
|
| — |
|
|
| 728,673 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 442 |
|
|
| 736,476 |
|
|
| — |
|
|
| 794 |
|
|
| — |
|
|
| 78,644 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 482 |
|
|
| 79,920 |
|
Foreign currency translation loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,216 | ) |
|
| — |
|
|
| (8,216 | ) | ||||||||||||||||||||||||||||||||||||
Unrealized loss on interest rate swap, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,486 | ) |
|
| — |
|
|
| (1,486 | ) | ||||||||||||||||||||||||||||||||||||
Foreign currency translation gain |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,848 |
|
|
| — |
|
|
| 2,848 |
| ||||||||||||||||||||||||||||||||||||
Unit vesting and amortization of unit-based compensation |
|
| 1 |
|
|
| 48 |
|
|
| 126 |
|
|
| 4,922 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,970 |
|
|
| 1 |
|
|
| 63 |
|
|
| 118 |
|
|
| 6,254 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,317 |
|
Distributions to non-controlling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (630 | ) |
|
| (630 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (670 | ) |
|
| (670 | ) |
Proceeds from offering (net of offering costs) |
|
| 25 |
|
|
| 453 |
|
|
| 2,442 |
|
|
| 44,870 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,323 |
| ||||||||||||||||||||||||||||||||||||
Distributions declared ($0.25 per unit) |
|
| — |
|
|
| (915 | ) |
|
| — |
|
|
| (90,632 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (91,547 | ) |
|
| — |
|
|
| (991 | ) |
|
| — |
|
|
| (98,102 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (99,093 | ) |
Balance at September 30, 2018 |
|
| 3,648 |
|
| $ | 45,261 |
|
|
| 361,210 |
|
| $ | 4,478,188 |
|
| $ | 232 |
|
| $ | — |
|
| $ | (50,569 | ) |
| $ | 14,018 |
|
| $ | 4,486,898 |
| ||||||||||||||||||||||||||||||||||||
Balance at June 30, 2019 |
|
| 3,944 |
|
| $ | 49,797 |
|
|
| 390,481 |
|
| $ | 4,927,292 |
|
|
| 232 |
|
| $ | — |
|
| $ | (66,530 | ) |
| $ | 13,466 |
|
| $ | 4,924,025 |
|
See accompanying notes to condensed consolidated financial statements.
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Nine Months Ended September 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
|
| (In thousands) |
|
| (In thousands) |
| ||||||||||
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 246,478 |
|
| $ | 939,536 |
|
| $ | 190,809 |
|
| $ | 156,211 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 111,067 |
|
|
| 106,508 |
|
|
| 128,215 |
|
|
| 69,430 |
|
Amortization of deferred financing costs and debt discount |
|
| 6,293 |
|
|
| 5,543 |
|
|
| 6,438 |
|
|
| 3,816 |
|
Direct financing lease interest accretion |
|
| (6,858 | ) |
|
| (7,213 | ) | ||||||||
Straight-line rent revenue and other |
|
| (84,758 | ) |
|
| (64,840 | ) |
|
| (96,730 | ) |
|
| (54,070 | ) |
Unit-based compensation |
|
| 22,119 |
|
|
| 11,695 |
|
|
| 22,228 |
|
|
| 13,032 |
|
Gain from sale of real estate, net |
|
| (62 | ) |
|
| (672,822 | ) | ||||||||
Straight-line rent and other write-off |
|
| 7,232 |
|
|
| 17,615 |
| ||||||||
Unutilized financing fees |
|
| 4,873 |
|
|
| — |
| ||||||||
Loss from sale of real estate and other |
|
| 1,776 |
|
|
| 147 |
| ||||||||
Impairment charges |
|
| 19,006 |
|
|
| — |
| ||||||||
Straight-line rent and other write-off, net of tax |
|
| 26,958 |
|
|
| 3,002 |
| ||||||||
Unutilized financing costs |
|
| 611 |
|
|
| 914 |
| ||||||||
Pre-acquisition rent collected - Circle Transaction |
|
| (35,020 | ) |
|
| — |
| ||||||||
Other adjustments |
|
| 16,052 |
|
|
| (21,354 | ) |
|
| 12,373 |
|
|
| 12,774 |
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and rent receivables |
|
| 528 |
|
|
| (10,158 | ) |
|
| 186 |
|
|
| (265 | ) |
Accounts payable and accrued expenses |
|
| 4,413 |
|
|
| (5,387 | ) |
|
| 12,216 |
|
|
| (6,885 | ) |
Net cash provided by operating activities |
|
| 327,377 |
|
|
| 299,123 |
|
|
| 289,066 |
|
|
| 198,106 |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions and other related investments |
|
| (3,703,092 | ) |
|
| (1,166,618 | ) |
|
| (2,226,302 | ) |
|
| (1,402,315 | ) |
Net proceeds from sale of real estate |
|
| 4,859 |
|
|
| 1,513,666 |
|
|
| 78,764 |
|
|
| 3,449 |
|
Principal received on loans receivable |
|
| 920 |
|
|
| 531,772 |
|
|
| — |
|
|
| 420 |
|
Investment in loans receivable |
|
| (34,149 | ) |
|
| (174,494 | ) |
|
| (62,064 | ) |
|
| (2,992 | ) |
Construction in progress and other |
|
| (55,168 | ) |
|
| (32,425 | ) | ||||||||
Capital additions and other investments, net |
|
| (213,096 | ) |
|
| (63,080 | ) | ||||||||
Net cash (used for) provided by investing activities |
|
| (3,999,726 | ) |
|
| 608,821 |
| ||||||||
Other investments, net |
|
| 29,322 |
|
|
| (205,473 | ) | ||||||||
Net cash used for investing activities |
|
| (2,180,280 | ) |
|
| (1,606,911 | ) | ||||||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from term debt, net of discount |
|
| 1,732,740 |
|
|
| 759,735 |
| ||||||||
Proceeds from term debt |
|
| 915,950 |
|
|
| 837,240 |
| ||||||||
Revolving credit facilities, net |
|
| 417,089 |
|
|
| (818,116 | ) |
|
| — |
|
|
| 12,976 |
|
Distributions paid |
|
| (291,675 | ) |
|
| (272,360 | ) |
|
| (279,741 | ) |
|
| (192,582 | ) |
Lease deposits and other obligations to tenants |
|
| (8,349 | ) |
|
| (25,511 | ) |
|
| 5,001 |
|
|
| 3,485 |
|
Proceeds from sale of units, net of offering costs |
|
| 1,507,363 |
|
|
| — |
|
|
| 169,787 |
|
|
| 399,353 |
|
Other financing activities |
|
| (24,187 | ) |
|
| (3,106 | ) | ||||||||
Net cash provided by (used for) financing activities |
|
| 3,332,981 |
|
|
| (359,358 | ) | ||||||||
(Decrease) increase in cash, cash equivalents and restricted cash for period |
|
| (339,368 | ) |
|
| 548,586 |
| ||||||||
Payment of deferred financing costs and other financing activities |
|
| (7,005 | ) |
|
| (9,432 | ) | ||||||||
Net cash provided by financing activities |
|
| 803,992 |
|
|
| 1,051,040 |
| ||||||||
Decrease in cash, cash equivalents, and restricted cash for period |
|
| (1,087,222 | ) |
|
| (357,765 | ) | ||||||||
Effect of exchange rate changes |
|
| (16,645 | ) |
|
| (8,313 | ) |
|
| 155 |
|
|
| (8,050 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 822,425 |
|
|
| 172,247 |
| ||||||||
Cash, cash equivalents and restricted cash at end of period |
| $ | 466,412 |
|
| $ | 712,520 |
| ||||||||
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 1,467,991 |
|
|
| 822,425 |
| ||||||||
Cash, cash equivalents, and restricted cash at end of period |
| $ | 380,924 |
|
| $ | 456,610 |
| ||||||||
Interest paid |
| $ | 158,259 |
|
| $ | 175,715 |
|
| $ | 147,502 |
|
| $ | 97,184 |
|
Supplemental schedule of non-cash financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared, unpaid |
| $ | 120,023 |
|
| $ | 91,547 |
|
| $ | 143,264 |
|
| $ | 99,093 |
|
Cash, cash equivalents, and restricted cash are comprised of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 820,868 |
|
| $ | 171,472 |
|
| $ | 1,462,286 |
|
| $ | 820,868 |
|
Restricted cash, included in Other assets |
|
| 1,557 |
|
|
| 775 |
|
|
| 5,705 |
|
|
| 1,557 |
|
|
| $ | 822,425 |
|
| $ | 172,247 |
|
| $ | 1,467,991 |
|
| $ | 822,425 |
|
End of period: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 461,622 |
|
| $ | 710,965 |
|
| $ | 374,962 |
|
| $ | 451,652 |
|
Restricted cash, included in Other assets |
|
| 4,790 |
|
|
| 1,555 |
|
|
| 5,962 |
|
|
| 4,958 |
|
|
| $ | 466,412 |
|
| $ | 712,520 |
|
| $ | 380,924 |
|
| $ | 456,610 |
|
See accompanying notes to condensed consolidated financial statements.
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 commercial real estate. Our operating partnership subsidiary, MPT Operating Partnership, L.P., (the “Operating Partnership”) through which we conduct all of our operations, was formed in September 2003. Through another wholly-owned subsidiary, Medical Properties Trust, LLC, we are the sole general partner of the Operating Partnership. At present, we directly own substantially all of the limited 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 have operated as a real estate investment trust (“REIT”) since April 6, 2004, and accordingly, elected REIT status upon the filing in September 2005 of the calendar year 2004 federal income tax return. Accordingly, we will generally not be subject to federal income tax in the United States (“U.S.”), federal income tax, provided that we continue to qualify as a REIT and our distributions to our stockholders equal or exceed our 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 in the U.S. as the majority of such income flows through our REIT.
Our primary business strategy is to acquire and develop real estate and improvements, primarily for long-term lease to providers of healthcare services, such as operators of general acute care hospitals, inpatient physical rehabilitation hospitals, and long-term acute care hospitals. We also make mortgage and other loans to operators of similar facilities. In addition, we may obtain profits or equity interests in our tenants, from time to time, in order to enhance our overall return.
Our business model facilitates acquisitions and recapitalizations, and allows operators of healthcare facilities to unlock the value of their real estate to fund facility improvements, technology upgrades, and other investments in operations. At June 30, 2020, we have investments in 387 facilities in 34 states in the U.S., in 6 countries in Europe, and across Australia. We manage our business as a single business segment. All of our properties are currently located in the U.S., Europe, and Australia.
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 ninesix months ended SeptemberJune 30, 2019,2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020. The condensed consolidated balance sheet at December 31, 20182019 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 consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. During the first half of 2020, the global outbreak of a novel coronavirus, or COVID-19, has spread all over the world including countries where we own and lease facilities. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the U.S., have declared national emergencies with respect to COVID-19. As the global impact of the outbreak evolved, many countries reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trade- including requiring medically necessary elective surgeries at hospitals to be deferred. Although hospitals are back accepting patients and performing medically necessary elective surgeries, many of these trade restrictions are still in place. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2020 (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). However, the ultimate impact to our tenants’ results of operations and liquidity and their ability to pay our rent and interest due to the impact of COVID-19 cannot be predicted with 100% confidence, particularly given we are still learning the full scope, severity, and duration of the pandemic and the actions needed to contain the pandemic or mitigate its impact. This makes any estimates and assumptions as of June 30, 2020 inherently less certain than they would be absent the potential impact of COVID-19. Actual results may ultimately differ from our estimates.
For information about significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. There have been no material changes to these significant accounting policies other than the following:
On January 1, 2019,2020, we adopted Accounting Standards Update (“ASU”) 2016-02, “Leases”, (“ASU 2016-02”). ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). We adopted this standard using the modified retrospective approach and have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits the following: no reassessment of whether existing contracts are or contain a lease; no reassessment of lease classification for existing leases; and no reassessment of initial direct costs for existing leases. Additionally, we made certain elections permitted in accordance with ASU 2018-11, “Leases (Topic 842): – Targeted Improvements.” which (1) permits entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) permits lessors to account for lease and non-lease components as a single lease component in a contract if certain criteria are met.
The standard requires lessees to apply a dual approach, classifying leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method (for finance leases) or on a straight-line basis (for operating leases) over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will remain off balance sheet with lease expense recognized on a straight-line basis over the lease term, similar to previous guidance for operating leases. The standard requires lessors to account for leases using an approach that is substantially equivalent to previous guidance for sales-type leases, direct financing leases and operating leases.
For our leases in which we are the lessee, including ground leases on which certain of our facilities reside, along with corporate office and equipment leases, we recorded a right-of-use asset and offsetting lease liability of approximately $84 million upon adoption of this standard – resulting in no material cumulative effect adjustment. From a lessor perspective, we did not change the classification or accounting of our existing leases except, we are now grossing up our income statement for certain operating expenses, such as property taxes and insurance, that the tenants of our facilities are required to reimburse us for pursuant to our “triple-net” leases.
Recent Accounting Developments:
Measurement of Credit Losses on Financial Instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). This standard requires a new forward-looking “expected loss” model measured over the contractual life of an asset that considers forecasts of future economic conditions, as well as past and current events, to be used for our financing receivables, including direct financing leases investments in sale leaseback transactions, and loan receivables,loans, which the FASBFinancial Accounting Standards Board believes will result in more timely recognition of such losses. Additionally, we have made the accounting policy election to exclude interest receivables from the credit loss reserve analysis and will continue to timely reserve or write-off such short-term receivables.
Pursuant to ASU 2016-13, is effectivewe grouped our financial instruments into two primary pools of similar credit risk: secured and unsecured. The secured instruments include investment in financing leases and mortgage loans, as all are secured by the underlying real estate among other collateral. The unsecured instruments include acquisition, working capital, and shareholder loans. Within these two major pools, we further grouped our instruments into sub-pools based on several tenant/borrower characteristics, including years of experience in the healthcare industry and in a particular market or region and overall capitalization. We then determined a credit loss percentage per pool based on our history of credit losses incurred on similar instruments. We used an historical period of time in determining such loss rates that closely matches the remaining terms of the financial instruments being analyzed in the respective pools, since our underwriting process has been consistent over this time. Finally, we made specific modifications for us beginning January 1, 2020. We are still evaluating the impactcurrent trends, as appropriate.
Upon adoption of this standard, but we do not believe such impact will be material.recorded a credit loss reserve of $8.4 million with the effect recorded in equity as a cumulative effect of a change in accounting principle.
Reclassifications
Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform to the current period presentation.
3. Real Estate and Lending Activities
AcquisitionsNew Investments
We acquired or invested in the following net assets (in thousands):
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Assets Acquired |
|
|
|
|
|
|
|
|
Land and land improvements |
| $ | 375,721 |
|
| $ | 57,452 |
|
Building |
|
| 1,320,449 |
|
|
| 467,164 |
|
Intangible lease assets — subject to amortization (weighted average useful life 18.7 years for 2019 and 27.8 years for 2018) |
|
| 149,201 |
|
|
| 60,277 |
|
Investment in sale leaseback transactions |
|
| 1,386,797 |
|
|
| — |
|
Equity investments |
|
| 284,399 |
|
|
| 245,267 |
|
Mortgage loans |
|
| 51,267 |
|
|
| — |
|
Other loans |
|
| 135,258 |
|
|
| 336,458 |
|
Total assets acquired |
| $ | 3,703,092 |
|
| $ | 1,166,618 |
|
Loans repaid |
|
| — |
|
|
| (525,426 | ) |
Total net assets acquired |
| $ | 3,703,092 |
|
| $ | 641,192 |
|
|
| For the Six Months Ended June 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
|
|
Land and land improvements |
| $ | 265,991 |
|
| $ | 242,682 |
|
Buildings |
|
| 1,608,771 |
|
|
| 784,184 |
|
Intangible lease assets — subject to amortization (weighted average useful life 30.8 years for 2020 and 18.5 years for 2019) |
|
| 231,774 |
|
|
| 91,050 |
|
Equity investments |
|
| — |
|
|
| 284,399 |
|
Mortgage loans |
|
| 47,641 |
|
|
| — |
|
Other assets |
|
| 1,328 |
|
|
| — |
|
Other loans |
|
| 205,000 |
|
|
| — |
|
Liabilities assumed |
|
| (134,203 | ) |
|
| — |
|
Total |
| $ | 2,226,302 |
|
| $ | 1,402,315 |
|
20192020 Activity
ProspectCircle Transaction
On August 23, 2019,January 8, 2020, we invested inacquired a portfolio of 1430 acute care hospitals and 2 behavioral health facilities operated by Prospect Medical Holdings,located throughout the United Kingdom for approximately £1.5 billion from affiliates of BMI Healthcare, Inc. (“Prospect”BMI”). In a related transaction, affiliates of Circle Health Ltd. (“Circle”) for a combined purchase priceentered into definitive agreements to acquire BMI and assume operations of approximately $1.55 billion. Our investment includes the acquisition of the real estate of 11 acute care hospitals and 2 behavioral healthits 52 facilities for $1.4 billion. We are accounting for these properties as a financing receivable (as presented in the InvestmentUnited Kingdom subject to customary regulatory conditions. As part of our acquisition, we inherited 30 existing leases with the operator that had initial fixed terms ending in sale leaseback transactions line of2050, with no renewal options but with annual inflation-based escalators. Once final regulatory approval was received in the condensed consolidated balance sheet) under2020 second quarter, these 30 leases with Circle were amended (effective June 16, 2020) to include 2 five-year renewal options and improve the new lease accounting rules due to certain lessee end-of-term purchase options. In addition, we originated a $51.3 million mortgage loan, secured by a first mortgage on an acute care hospital, and a $112.9 million term loan which we expect will be converted into the acquisition of 2 additional acute care hospitals upon the satisfaction of certain conditions. The masterannual inflation-based escalators. These 30 leases mortgage loan and term loan are cross-defaulted and cross-collateralized. The master leases and mortgage loan have substantially similar terms, with a 15-year fixed term subject to 3 extension options, plus annual increases based on inflation.guaranteed by Circle.
The agreements provide for the potential for a future purchase price adjustment of up to an additional $250.0 million, based on achievement of certain performance thresholds over a three-year period; any such adjustment will be added to the lease base upon which we will earn a return in accordance with the master leases.
Other Transactions
On August 30, 2019,June 24, 2020, we invested inoriginated a portfolio of facilities throughout various states for approximately $254 million. The properties are leasedCHF 45 million secured loan to Vibra Healthcare, LLCInfracore SA (“Vibra”Infracore”) pursuant to a new master lease agreement with an initial lease term of 20 years. The lease provides for annual escalations at the greater of 2% or the change in Consumer Price Index (“CPI”) and includes 3 five-year extension options. The facilities acquired include 3 inpatient rehabilitation hospitals and 7 long-term acute care hospitals..
On August 16, 2019,May 13, 2020, we acquired freehold interestsformed a joint venture for the purpose of investing in 8 acute care hospitals located throughout Englandthe operations of international hospitals. As part of the formation, we originated a $205 million acquisition loan. We have a 49% interest in this joint venture and are accounting for an aggregate purchase price of approximately £347 million.our investment using the fair value option election. The hospitals are leased to Ramsayjoint venture simultaneously purchased from Steward Health Care, pursuantInc.
(“Steward”) the rights and existing assets related to in-place net leases with approximately 18-year remaining lease termsall present and include annual fixedfuture international opportunities previously owned by Steward for strategic, regulatory, and periodic market-based escalations.risk management purposes.
2019 Activity
On June 10, 2019, we acquired 7 community hospitals in Kansas for approximately $145.4 million. The properties are leased to an affiliate of Saint Luke’s Health System (“SLHS”) pursuant to seven individual in-place leases that havehad an average remaining lease term of 14 years.years upon our acquisition. The leases provide for fixed escalations every five years and include 2 five-year extension options. All 7 hospitals were constructed in either 2018 or 2019, and the leases are guaranteed by SLHS.
On June 6, 2019, we acquired 11 hospitals in Australia for a purchase price of approximately AUD$1.2AUD $1.2 billion plus stamp duties and registration fees of AUD$66.6AUD $66.6 million. The properties are leased to Healthscope, Ltd. (“Healthscope”), pursuant to master lease agreements that havehad an average initial term of 20 years, upon our acquisition, with annual fixed escalations of 2.5% and multiple extension options. Healthscope was acquired in a simultaneous transaction by Brookfield Business Partners L.P. and certain of its institutional partners.
On May 27, 2019, we invested in a portfolio of 13 acute care campuses and 2 additional properties in Switzerland for an aggregate purchase price of approximately CHF 236.6 million. The investment was effected through our purchase of a 46% stake in a Swiss healthcare real estate company, Infracore, SA, from the previous majority shareholder, Aevis Victoria SA (“Aevis”). The facilities are leased to Swiss Medical Network, a wholly-owned Aevis subsidiary, pursuant to leases withthat had an average 23-year remaining term upon our acquisition and are subject to annual escalation provisions. We are accounting for our 46%40% interest in this joint venture under the equity method. Additionally, we purchased a 4.9% stake in Aevis for approximately CHF 47 million on June 28, 2019 that we are marking to fair value through income each quarter.
Other acquisitions throughout the first nine monthshalf of 2019 included 32 acute care hospitals and 1 inpatient rehabilitation hospital for an aggregate investment of approximately $135$80 million. NaN
Development Activities
On May 15, 2020, we agreed to finance the development of the acute care hospitals, acquired on April 12, 2019 and locatedlease an inpatient rehabilitation facility in Big Spring, Texas, isBakersfield, California for $47.9 million. This facility will be leased to StewardErnest Health, Care System LLCInc. (“Steward”Ernest”) pursuant to the Steward master lease. The second facility, located in Poole, England, was acquired on April 3, 2019 and is leasedexpected to BMI Healthcare pursuant to an in-place lease with 14 years remainingcommence rent in the fourth quarter of 2021.
During the 2020 second quarter, we completed construction on its term and fixed 2.5% annual escalators. The third1 general acute care facility was acquired on September 30, 2019,and 1 inpatient rehabilitation facility, both located in Watsonville, California, and is leased to Halsen Healthcare. The inpatient rehabilitation hospital, acquiredBirmingham, England. We began recognizing revenue on February 8, 2019, is located in Germany and leased to affiliates of Median Kliniken S.à.r.l. (“MEDIAN”).
2018 Activity
Joint Venture Transaction
On August 31, 2018, we completed a joint venture arrangement with Primotop Holdings S.à.r.l. (“Primotop”) pursuant to which we contributed 71 of our post-acute hospitals in Germany, with an aggregate fair value of €1.635 billion, for a 50% interest, while Primotop contributed cash for its 50% interest in the joint venture. As part of the transaction, we received an aggregate amount of approximately €1.14 billion, from the proceeds of the cash contributed by Primotop and the secured debt financing placedthese two properties on the joint venture’s real estate, and we recognized an approximate €500 million gain on sale. Our interest in the joint venture is made up of a 50% equity investment valued at approximately €211 million, which is being accounted for under the equity method of accounting, and a €290 million shareholder loan (with terms identical to Primotop’s shareholder loan).
Other Transactions
During the second and third quarters of 2018, we acquired the fee simple real estate of 4 general acute care hospitals, 3 of which are located in Massachusetts and 1 located in Texas, from Steward in exchange for the reduction of $525.4 million of mortgage loans made to Steward in October 2016 and March 2018, along with additional cash consideration.June 29, 2020. These propertiesfacilities are being leased to StewardCircle pursuant to a long-term lease.
During the original master lease from October 2016.
In addition,2020 first quarter, we acquired 1completed construction and began recording rental income on a general acute care facility and 3 inpatient rehabilitation hospitals during the first nine months of 2018 for an aggregate investment of approximately $38 million. The acute care hospital, acquired on August 31, 2018 and located in Pasco, Washington,Idaho Falls, Idaho. This facility commenced rent on January 21, 2020 and is being leased to LifePoint Health,Surgery Partners, Inc. (“LifePoint”) pursuant to the masteran existing long-term lease. The inpatient rehabilitation hospitals, acquired on August 28, 2018, are located in Germany and leased to MEDIAN.
Development Activities
See table below for a status update on our current development projects (in thousands):
Property |
| Commitment |
|
| Costs Incurred as of September 30, 2019 |
|
| Estimated Rent Commencement Date | ||
Circle Health (Birmingham, England) |
| $ | 44,061 |
|
| $ | 35,108 |
|
| 2Q 2020 |
Circle Health Rehabilitation (Birmingham, England) |
|
| 19,862 |
|
|
| 16,320 |
|
| 2Q 2020 |
Surgery Partners (Idaho Falls, Idaho) |
|
| 113,468 |
|
|
| 82,651 |
|
| 1Q 2020 |
|
| $ | 177,391 |
|
| $ | 134,079 |
|
|
|
Property |
| Commitment |
|
| Costs Incurred as of June 30, 2020 |
|
| Estimated Rent Commencement Date | ||
NeuroPsychiatric Hospitals (Houston, Texas) |
| $ | 27,500 |
|
| $ | 16,586 |
|
| 4Q 2020 |
Ernest (Bakersfield, California) |
|
| 47,929 |
|
|
| 11,088 |
|
| 4Q 2021 |
|
| $ | 75,429 |
|
| $ | 27,674 |
|
|
|
Disposals
On August 31, 2018,During the first half of 2020, we completed the previously described joint venture arrangement with Primotop, in which we contributed the real estatedisposition of 71 of our post-acute hospitals in Germany, with a fair value of5 facilities and 4 ancillary properties for approximately €1.635 billion, resulting in a gain of approximately €500 million. See “Acquisitions” in this Note 3 for further details on this transaction.
On August 31, 2018, we sold a general acute care hospital located in Houston, Texas that was leased and operated by North Cypress for $148$79 million. The transactiontransactions resulted in a gain on sale of $102.4 million, which was partially offset by a net $2.5 million non-cash charge to revenue to write-off related straight-line rent receivables.
On June 4, 2018, we sold 3 long-term acute care hospitals located in California, Texas, and Oregon, that were leased and operated by Vibra, which included our equity investment in operations of the Texas facility. Total proceeds from the transaction were $53.3 million in cash, a mortgage loan in the amount of $18.3 million, and a $1.5 million working capital loan. The transaction resulted in a gainloss on real estate of $24.2 million, which was partially offset by a $5.1 million non-cash charge to revenue to write-off related straight-line rent receivables.$1.8 million.
On March 1, 2018, we sold the real estate of St. Joseph Medical Center in Houston, Texas, for approximately $148 million to Steward. In return, we received a mortgage loan equal to the purchase price, with such loan secured by the underlying real estate. The mortgage loan had terms consistent with the other mortgage loans in the Steward portfolio. This transaction resulted in a gain of $1.5 million, offset by a $1.7 million non-cash charge to revenue to write-off related straight-line rent receivables on this property.
The properties sold during 2018 did not meet the definition of discontinued operations. However, the following represents the operating results from these properties (excluding the St. Joseph sale in March 2018) for the periods presented (in thousands):
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||
|
| 2018 |
|
| 2018 |
| ||
Revenues(1) |
| $ | 20,115 |
|
| $ | 88,838 |
|
Real estate depreciation and amortization |
|
| (237 | ) |
|
| (15,849 | ) |
Property-related expenses |
|
| (265 | ) |
|
| (531 | ) |
Other(2) |
|
| 692,362 |
|
|
| 715,246 |
|
Income from real estate dispositions, net |
| $ | 711,975 |
|
| $ | 787,704 |
|
|
|
|
|
Leasing Operations (Lessor)
As noted earlier, weWe acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases (typical initial fixed terms ranging from 10 to 1520 years) and most include renewal options at the election of our tenants, generally in five year increments. More than 95%97% of our leases provide annual rent escalations based on increases in the CPIConsumer Price Index (or similar index outside the U.S.) and/or fixed minimum annual escalations ranging from 0.5% to 3.0%. Many of our domestic leases contain purchase options with pricing set at various terms but in no case less than our total investment. For 5 properties with
a carrying value of $210$216.3 million, our leases require a residual value guarantee from the tenant. Our leases typically require the tenant to handle and bear most of the costs associated with our properties including repair/repairs/maintenance, property taxes, and insurance. We routinely inspect our properties to ensure the residual value of each of our assets is being maintained. Except for leases noted belowclassified as direct financefinancing leases, (“DFLs”), all of our leases are classified as operating leases.
The following table summarizes future minimum lease payments to be received, excluding operating expense reimbursements, from tenants under noncancelable leases as of September 30, 2019 (in thousands):
|
| Total Under Operating Leases |
|
| Total Under DFLs |
|
| Total |
| |||
2019 (three months only) |
| $ | 129,235 |
|
| $ | 15,214 |
|
| $ | 144,449 |
|
2020 |
|
| 542,989 |
|
|
| 62,072 |
|
|
| 605,061 |
|
2021 |
|
| 557,352 |
|
|
| 63,313 |
|
|
| 620,665 |
|
2022 |
|
| 563,977 |
|
|
| 64,579 |
|
|
| 628,556 |
|
2023 |
|
| 573,798 |
|
|
| 65,871 |
|
|
| 639,669 |
|
Thereafter |
|
| 12,247,074 |
|
|
| 1,400,026 |
|
|
| 13,647,100 |
|
|
| $ | 14,614,425 |
|
| $ | 1,671,075 |
|
| $ | 16,285,500 |
|
Direct Financing Leases
At SeptemberJune 30, 2019,2020, leases on 14 Ernest Health (“Ernest”) facilities and 10 Prime Healthcare Services, Inc. (“Prime”) facilities are accounted for as direct financing leases and 2 Alecto Healthcare Services LLCleases on 13 of our Prospect Medical Holdings, Inc. (“Alecto”Prospect”) facilities are accounted for as DFLs.a financing. The components of our nettotal investment in DFLsfinancing leases consisted of the following (in thousands):
|
| As of September 30, 2019 |
|
| As of December 31, 2018 |
|
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||
Minimum lease payments receivable |
| $ | 2,049,738 |
|
| $ | 2,091,504 |
|
| $ | 1,853,967 |
|
| $ | 1,884,921 |
|
Estimated residual values |
|
| 419,753 |
|
|
| 424,719 |
|
|
| 394,195 |
|
|
| 394,195 |
|
Less: Unearned income |
|
| (1,780,600 | ) |
|
| (1,832,170 | ) | ||||||||
Less: Unearned income and allowance for credit loss |
|
| (1,584,334 | ) |
|
| (1,618,252 | ) | ||||||||
Net investment in direct financing leases |
| $ | 688,891 |
|
| $ | 684,053 |
|
|
| 663,828 |
|
|
| 660,864 |
|
Other financing leases (net of allowance for credit loss) |
|
| 1,414,381 |
|
|
| 1,399,438 |
| ||||||||
Total investment in financing leases |
| $ | 2,078,209 |
|
| $ | 2,060,302 |
|
Rent Deferrals
Due to the COVID-19 pandemic and its impact on our tenants’ business during the first six months of 2020, we agreed to defer approximately 2% of our rent. The amount of this deferral is approximately $7 million as of June 30, 2020. Pursuant to our agreements with the tenants, we expect such deferred rent to be paid over specified periods with interest. Although we expect similar deferrals for third quarter rent, all of our rent and interest is expected to be paid on time starting October 1, 2020.
Adeptus Health Transition Properties
As notedDue to a decline in previous filings,operating results of 20 freestanding emergency facilities and 1 acute care facility caused by a reduction in volumes from COVID-19 and other factors, we had 16 properties transitioning away fromentered into agreements to sever the remaining leases with Adeptus Health, Inc. (“Adeptus”) in stages over, despite being current on their rent obligations. As a two year period as partresult, we recorded an approximately $20 million net charge, primarily all of Adeptus’ confirmed planwhich was for the write off of reorganization under Chapter 11straight-line rent, partially offset by approximately $9 million of the Bankruptcy Code. At November 8, 2019, 11proceeds received from a letter of these properties have been re-leased and 2 propertiescredit in the Dallas marketfirst half of 2020. Additionally, we recorded a $9.9 million real estate impairment charge on these severed facilities in the first half of 2020. At June 30, 2020, we no longer lease any properties to Adeptus and our net book value on those properties that were sold in April 2019 and in July 2019 at their approximate book value. The remaining 3 facilities (representingpreviously leased to Adeptus but are currently vacant approximates less than 0.1%1% of our total assets. At June 30, 2020, we believe our investment in these real estate assets at September 30, 2019) are vacant.
At September 30, 2019, Adeptus is current on its rent obligations to us. Althoughfully recoverable, but no assurances can be made that we will not recognize a loss in the future, we believe, at September 30, 2019, that the sale or re-leasing of the remaining three transition facilities will not result in any material loss or additional impairment.
Gilbert Facility
In the first quarter of 2018, we terminated the lease at our Gilbert, Arizona facility due to the tenant not meeting its rent obligations pursuant to the lease. As a result of the lease terminating, we recorded a charge to reserve against the straight-line rent receivables. All outstanding receivables due from the former tenant of Gilbert are completely reserved. At September 30, 2019, our Gilbert facility is vacant. Although no assurances can be madegiven that we will not have any impairment charges in the future we believe our investment in the Gilbert facility (less than 0.1% of total assets at September 30, 2019), is fully recoverable.periods.
Alecto Facilities
At SeptemberJune 30, 2019,2020, we own 4lease 1 acute care facilitiesfacility to Alecto Healthcare Services LLC (“Alecto”) and have a mortgage loan on a fifth property. In the 2018 third quarter, we lowered the carrying value of the 4 owned properties to fair value resulting in a $30 million charge. With the decline in the operating results of the facility tenant, we recorded a charge to reserve against the straight-line rent and other receivables outstanding in the 2019 first quarter and did 0t recognize any rent revenue in the three months ended September 30, 2019.
At September 30, 2019, our total overall investment in these properties issecond property, representing less than 1%0.4% of our total assets. On August 7, 2019, Alecto announced closureDuring the second quarter of 2 facilities2020, we re-leased 1 acute care facility to West Virginia University and sold another facility previously leased to Alecto. In addition, we donated the Wheeling facility to a local municipality, resulting in a $9.1 million real estate impairment charge in the Ohio Valley region, which we have an investment infirst quarter of approximately $30 million. Although no assurances can be made that we will not recognize any impairment charges in the future, we believe our investment in these properties at September 30, 2019 is fully recoverable.2020.
Loans
The following is a summary of our loans (in thousands)(net of allowance for credit loss in 2020):
|
| As of September 30, 2019 |
|
| As of December 31, 2018 |
| ||||||||||
(in thousands) |
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||||||||
Mortgage loans |
| $ | 1,268,563 |
|
| $ | 1,213,322 |
|
| $ | 1,339,258 |
|
| $ | 1,275,022 |
|
Investment in sale leaseback transactions |
|
| 1,390,619 |
|
|
| — |
| ||||||||
Acquisition loans |
|
| 330,792 |
|
|
| 123,893 |
| ||||||||
Other loans |
|
| 521,398 |
|
|
| 373,198 |
|
|
| 461,219 |
|
|
| 420,939 |
|
Total |
| $ | 3,180,580 |
|
| $ | 1,586,520 |
|
| $ | 2,131,269 |
|
| $ | 1,819,854 |
|
The investment in sale leaseback transactions, along with the majority of the increase in mortgage and otheracquisition loans relates to the Prospect transaction. See subheading “Acquisitions”$205 million loan to the new joint venture described under “New Investments” in this same Note 3 for further details..
Other loans typically consist of loans to our tenants for acquisitionsworking capital and working capitalother purposes and include our shareholder loan made to the joint venture with Primotop Holdings S.à.r.l. (“Primotop”) in the amount of €290 million.
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:
| 1) | Facility concentration – At |
| 2) | Operator concentration – For the |
| 3) | Geographic concentration – At |
| 4) | Facility type concentration – For the |
4. Debt
The following is a summary of debt (dollar amounts in thousands):
|
| As of September 30, 2019 |
|
| As of December 31, 2018 |
|
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||
Revolving credit facility |
| $ | 451,006 |
|
| $ | 28,059 |
|
| $ | — |
|
| $ | — |
|
USD term loan |
|
| 200,000 |
|
|
| 200,000 |
| ||||||||
Australian term loan facility(B) |
|
| 810,000 |
|
|
| — |
| ||||||||
4.000% Senior Unsecured Notes due 2022(C) |
|
| 544,950 |
|
|
| 573,350 |
| ||||||||
Term loan |
|
| 200,000 |
|
|
| 200,000 |
| ||||||||
British pound sterling term loan(A) |
|
| 868,070 |
|
|
| — |
| ||||||||
Australian term loan facility(A) |
|
| 828,360 |
|
|
| 842,520 |
| ||||||||
4.000% Senior Unsecured Notes due 2022(A) |
|
| 561,700 |
|
|
| 560,650 |
| ||||||||
2.550% Senior Unsecured Notes due 2023(A) |
|
| 496,040 |
|
|
| 530,280 |
| ||||||||
5.500% Senior Unsecured Notes due 2024 |
|
| 300,000 |
|
|
| 300,000 |
|
|
| 300,000 |
|
|
| 300,000 |
|
6.375% Senior Unsecured Notes due 2024 |
|
| 500,000 |
|
|
| 500,000 |
|
|
| 500,000 |
|
|
| 500,000 |
|
3.325% Senior Unsecured Notes due 2025(C) |
|
| 544,950 |
|
|
| 573,350 |
| ||||||||
3.325% Senior Unsecured Notes due 2025(A) |
|
| 561,700 |
|
|
| 560,650 |
| ||||||||
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(A) |
|
| 744,060 |
|
|
| 795,420 |
| ||||||||
4.625% Senior Unsecured Notes due 2029 |
|
| 900,000 |
|
|
| — |
|
|
| 900,000 |
|
|
| 900,000 |
|
|
| $ | 6,150,906 |
|
| $ | 4,074,759 |
|
| $ | 7,859,930 |
|
| $ | 7,089,520 |
|
Debt issue costs, net and discount |
|
| (54,674 | ) |
|
| (37,370 | ) | ||||||||
Debt issue costs and discount, net |
|
| (64,040 | ) |
|
| (65,841 | ) | ||||||||
|
| $ | 6,096,232 |
|
| $ | 4,037,389 |
|
| $ | 7,795,890 |
|
| $ | 7,023,679 |
|
(A) |
|
|
|
|
|
As of SeptemberJune 30, 2019,2020, principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):
2019 |
| $ | — |
| ||||
2020 |
|
| — |
|
| $ | — |
|
2021 |
|
| 451,006 |
|
|
| — |
|
2022 |
|
| 744,950 |
|
|
| 761,700 |
|
2023 |
|
| — |
|
|
| 496,040 |
|
2024 |
|
| 1,628,360 |
| ||||
Thereafter |
|
| 4,954,950 |
|
|
| 4,973,830 |
|
Total |
| $ | 6,150,906 |
|
| $ | 7,859,930 |
|
2020 Activity
British Pound Sterling Term Loan
On January 6, 2020, we entered into a £700 million unsecured sterling-denominated term loan facility with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions as the lender. The term loan facility matures on January 15, 2025. We used the proceeds under the facility to help finance our acquisition of the Circle transaction described in Note 3. The applicable margin under the term loan is adjustable based on a pricing grid from 0.85% to 1.65% dependent on our current credit rating. On March 4, 2020, we entered into an interest rate swap transaction (effective March 6, 2020) to fix the interest rate to approximately 0.70% for the duration of the loan. The current applicable margin for the pricing grid (which can vary based on our credit rating) is 1.25% for an all-in fixed rate of 1.95%.
2019 Activity
4.625% Senior Unsecured Notes due 2029
On July 26, 2019, we completed a $900 million senior unsecured notes offering (“4.625% Senior Unsecured Notes due 2029”). Interest on the notes is payable semi-annually on February 1 and August 1 of each year, commencing on February 1, 2020. The notes were issued at 99.5% of par value, pay interest at a rate of 4.625% per year and mature on August 1, 2029. We may redeem some or all of the notes at any time prior to August 1, 2024 at a “make whole” redemption price. On or after August 1, 2024, we may redeem some or all of the notes at a premium that will decrease over time. In addition, at any time prior to August 1, 2022, we may redeem up to 40% of the notes at a redemption price equal to 104.625% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, using proceeds from one or more equity offerings. In the event of a change in control, each holder of the notes may require us to repurchase some or all of the notes at a repurchase price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest to the date of purchase.
We used the net proceeds from the 4.625% Senior Unsecured Notes due 2029 offering along with the proceeds from our July 2019 equity offering to finance the Prospect transaction described in Note 3. As a result of these offerings, we canceled the $1.55 billion senior unsecured bridge loan facility commitment from Barclays Bank PLC that we received on July 10, 2019. With this commitment, we paid $4.0 million of underwriting and other fees, which we fully expensed upon the cancellation of the commitment during the 2019 third quarter.
Australian Term Loan Facility
On May 23, 2019, we entered into an AUD$1.2AUD $1.2 billion term loan facility agreement with Bank of America, N.A., as administrative agent, and several lenders from time-to-time are parties thereto.a syndicate of financial institutions as the lender. The term loan facility matures on May 23, 2024. We used the proceeds under the facility to finance our acquisition of the Healthscope portfolio. The interest rate under the term loan is adjustable based on a pricing grid from 0.85% to 1.65%, dependent on our current senior unsecured credit rating. On June 27, 2019, we entered into an interest rate swap transaction (effective July 3, 2019) to fix the interest rate to approximately 1.20% for the duration of the loan. The current applicable margin for the pricing grid (which can vary based on the Company’sour credit rating) is 1.25% for an all-in fixed rate of 2.45%. We paid approximately $8 million in one-time structuring and underwriting fees associated with this term loan facility.
2018 Activity
In preparation of the joint venture with Primotop described under “Acquisitions” in Note 3, we issued secured debt on August 3, 2018, resulting in gross proceeds of €655 million. Subsequently, on August 31, 2018, the secured debt was contributed along with the related real estate of 71 properties to form the joint venture. Provisions of the secured debt include a term of seven years and a swapped fixed rate of approximately 2.3%.
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 revolving credit and term loan agreement (“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 SeptemberJune 30, 2019,2020, the dividend restriction was 95% of normalized adjusted funds from operations (“NAFFO”).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. This 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 SeptemberJune 30, 2019,2020, we were in compliance with all such financial and operating covenants.
5. Common Stock/Partners’ Capital
Medical Properties Trust, Inc.
In the first nine monthshalf of 2019,2020, we sold 36.18.6 million shares of common stock under our at-the-market equity offering program, resulting in net proceeds of approximately $649 million.
On July 18,$170 million; while, in the first half of 2019, we completed an underwritten public offering of 51.75sold 22.6 million shares (including the exercise of the underwriters’ 30-day option to purchase an additional 6.75 million shares) of our common stock under our at-the-market equity offering program, resulting in net proceeds of $858.1 million, after deducting underwriting discounts and commissions and estimated offering expenses.approximately $399 million.
MPT Operating Partnership, L.P.
At SeptemberJune 30, 2019,2020, the Companycompany has a 99.9% ownership interest in the Operating Partnership, with the remainder owned by 2 other partners, whichwho are employees.
During the ninesix months ended SeptemberJune 30, 2020 and 2019, the Operating Partnership issued approximately 87.98.6 million and 22.6 million units, respectively, in direct response to the common stock at-the-market offerings by Medical Properties Trust, Inc. during the same period.periods.
6. Stock Awards
We adopted the 2019 Equity Incentive Plan (the “Equity Incentive Plan”) during the second quarter of 2019, 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 Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors, and we have reserved 12.9 million shares of common stock for awards, out of which 11.48.4 million shares remain
available for future stock awards as of SeptemberJune 30, 2019.2020. Share-based compensation expense totaled $22.1 $22.2 million and $11.7 $13.0 million for the ninesix months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively.
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 (including the financing receivable from the sale leaseback transaction) 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 loanloans 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 possible and may not be a prudent management decision. The following table summarizes fair value estimates for our financial instruments (in thousands):
|
| As of |
|
| As of |
|
| As of |
|
| As of |
| ||||||||||||||||||||
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||||
Asset (Liability) |
| Book Value |
|
| Fair Value |
|
| Book Value |
|
| Fair Value |
|
| Book Value |
|
| Fair Value |
|
| Book Value |
|
| Fair Value |
| ||||||||
Interest and rent receivables |
| $ | 25,653 |
|
| $ | 24,793 |
|
| $ | 25,855 |
|
| $ | 24,942 |
|
| $ | 41,321 |
|
| $ | 40,496 |
|
| $ | 31,357 |
|
| $ | 30,472 |
|
Loans(1) |
|
| 3,065,580 |
|
|
| 3,112,717 |
|
|
| 1,471,520 |
|
|
| 1,490,758 |
|
|
| 1,811,269 |
|
|
| 1,879,511 |
|
|
| 1,704,854 |
|
|
| 1,742,153 |
|
Debt, net |
|
| (6,096,232 | ) |
|
| (6,352,115 | ) |
|
| (4,037,389 | ) |
|
| (3,947,795 | ) |
|
| (7,795,890 | ) |
|
| (7,935,142 | ) |
|
| (7,023,679 | ) |
|
| (7,331,816 | ) |
| (1) | Excludes $115 million of mortgage loans related to Ernest |
Items Measured at Fair Value on a Recurring Basis
Our Ernest mortgage loans are measured at fair value on a recurring basis as we elected to account for these investments using the fair value option method in 2012 when we acquired an equity interest in and made an acquisition loan to Ernest. Such equity interest was sold and the acquisition loan was paid off in October 2018. 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. We have not made a similar election for other investments existing at September 30, 2019.
At September 30, 2019, these amounts were as follows (in thousands):
Asset Type |
| Fair Value |
|
| Original Cost |
|
| Asset Type Classification | ||
Mortgage loans |
| $ | 115,000 |
|
| $ | 115,000 |
|
| Mortgage loans |
Our mortgage loans with Ernest are recorded at fair value based on Level 2 inputs by discounting the estimated cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities.
During the first nine months of 2018, we recognized an unrealized loss on our investment in Ernest. There was 0 gain or loss recorded during the first nine months of 2019.
8. Earnings Per Share
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 June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 90,267 |
|
| $ | 736,476 |
|
| $ | 109,652 |
|
| $ | 79,920 |
|
Non-controlling interests’ share in net income |
|
| (481 | ) |
|
| (442 | ) |
|
| (184 | ) |
|
| (482 | ) |
Participating securities’ share in earnings |
|
| (432 | ) |
|
| (290 | ) |
|
| (487 | ) |
|
| (446 | ) |
Net income, less participating securities’ share in earnings |
| $ | 89,354 |
|
| $ | 735,744 |
|
| $ | 108,981 |
|
| $ | 78,992 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares |
|
| 439,581 |
|
|
| 365,024 |
|
|
| 527,781 |
|
|
| 394,574 |
|
Dilutive potential common shares |
|
| 1,352 |
|
|
| 1,443 |
|
|
| 1,099 |
|
|
| 1,118 |
|
Dilutive weighted-average common shares |
|
| 440,933 |
|
|
| 366,467 |
|
|
| 528,880 |
|
|
| 395,692 |
|
|
| For the Nine Months Ended September 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 246,478 |
|
| $ | 939,536 |
|
| $ | 190,809 |
|
| $ | 156,211 |
|
Non-controlling interests’ share in net income |
|
| (1,432 | ) |
|
| (1,334 | ) |
|
| (349 | ) |
|
| (951 | ) |
Participating securities’ share in earnings |
|
| (1,354 | ) |
|
| (808 | ) |
|
| (951 | ) |
|
| (922 | ) |
Net income, less participating securities’ share in earnings |
| $ | 243,692 |
|
| $ | 937,394 |
|
| $ | 189,509 |
|
| $ | 154,338 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares |
|
| 404,902 |
|
|
| 364,934 |
|
|
| 524,428 |
|
|
| 387,563 |
|
Dilutive potential common shares |
|
| 1,198 |
|
|
| 850 |
|
|
| 1,102 |
|
|
| 1,120 |
|
Dilutive weighted-average common shares |
|
| 406,100 |
|
|
| 365,784 |
|
|
| 525,530 |
|
|
| 388,683 |
|
MPT Operating Partnership, L.P.
Our earnings per common unit were calculated based on the following (amounts in thousands):
|
| For the Three Months Ended September 30, |
|
| For the Three Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 90,267 |
|
| $ | 736,476 |
|
| $ | 109,652 |
|
| $ | 79,920 |
|
Non-controlling interests’ share in net income |
|
| (481 | ) |
|
| (442 | ) |
|
| (184 | ) |
|
| (482 | ) |
Participating securities’ share in earnings |
|
| (432 | ) |
|
| (290 | ) |
|
| (487 | ) |
|
| (446 | ) |
Net income, less participating securities’ share in earnings |
| $ | 89,354 |
|
| $ | 735,744 |
|
| $ | 108,981 |
|
| $ | 78,992 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average units |
|
| 439,581 |
|
|
| 365,024 |
|
|
| 527,781 |
|
|
| 394,574 |
|
Dilutive potential units |
|
| 1,352 |
|
|
| 1,443 |
|
|
| 1,099 |
|
|
| 1,118 |
|
Diluted weighted-average units |
|
| 440,933 |
|
|
| 366,467 |
|
|
| 528,880 |
|
|
| 395,692 |
|
|
| For the Nine Months Ended September 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 246,478 |
|
| $ | 939,536 |
|
| $ | 190,809 |
|
| $ | 156,211 |
|
Non-controlling interests’ share in net income |
|
| (1,432 | ) |
|
| (1,334 | ) |
|
| (349 | ) |
|
| (951 | ) |
Participating securities’ share in earnings |
|
| (1,354 | ) |
|
| (808 | ) |
|
| (951 | ) |
|
| (922 | ) |
Net income, less participating securities’ share in earnings |
| $ | 243,692 |
|
| $ | 937,394 |
|
| $ | 189,509 |
|
| $ | 154,338 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average units |
|
| 404,902 |
|
|
| 364,934 |
|
|
| 524,428 |
|
|
| 387,563 |
|
Dilutive potential units |
|
| 1,198 |
|
|
| 850 |
|
|
| 1,102 |
|
|
| 1,120 |
|
Diluted weighted-average units |
|
| 406,100 |
|
|
| 365,784 |
|
|
| 525,530 |
|
|
| 388,683 |
|
9. Commitments and Contingencies
Commitments
We entered into agreements to invest $300 million for the purpose of acquiring the real estate of St. Francis Medical Center in Lynwood, California. This acute care facility is expected to be leased to Prime.
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.
10. Leases (Lessee)Subsequent Events
We have leased land on which certainOn July 7, 2020, we acquired the fee simple real estate of our facilities reside, along with corporate office2 general acute care hospitals located in the Salt Lake City, Utah area, Davis Hospital & Medical Center and equipment. Our leases have remaining lease terms of 4.8 years to 47.3 years, some of which may include options to extendJordan Valley Medical Center, in exchange for the leases up to, or just beyond, the depreciable lifereduction of the properties that occupy the leased land. Renewal options that we are reasonably certainmortgage loans made to exercise are recognized in our right-of-use assetsSteward and lease liabilities. As mostadditional cash consideration of our leases do not provide an implicit rate, we use our incremental borrowing rate$200 million based on their relative fair value. The approximate $950 million investment in the information available at lease commencement date in determining the present value of future payments.
PropertiesDavis and Jordan Valley facilities is now subject to ground leases are subleasedthe Steward master lease.
Our 5 San Antonio, Texas free standing emergency facilities (with a total investment of approximately $30 million) have been re-leased to our tenants, except for two Adeptus transition properties.
The following isMethodist Healthcare System of San Antonio, a summaryjoint venture between HCA Healthcare and Methodist Healthcare Ministries of our lease expense (in thousands):
|
| Classification |
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
Operating lease cost (1) |
| (2) |
| $ | 2,163 |
|
| $ | 6,725 |
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
| Real estate depreciation and amortization |
|
| 13 |
|
|
| 38 |
|
Interest on lease liabilities |
| Interest expense |
|
| 32 |
|
|
| 85 |
|
Sublease income |
| Interest and other income |
|
| (873 | ) |
|
| (2,682 | ) |
Total lease cost |
|
|
| $ | 1,335 |
|
| $ | 4,166 |
|
|
|
|
|
Fixed minimum payments due over the remaining lease term under non-cancelable leases of more than one year and amounts to be received in the future from non-cancelable subleases over their remaining lease term at September 30, 2019 are as follows (amounts in thousands):
|
| Operating Leases |
|
| Finance Leases |
|
| Amounts to be Received From Subleases |
|
| Net Payments |
|
| ||||
2019 (1) |
| $ | 1,487 |
|
| $ | 31 |
|
| $ | (816 | ) |
| $ | 702 |
|
|
2020 |
|
| 6,040 |
|
|
| 125 |
|
|
| (3,322 | ) |
|
| 2,843 |
|
|
2021 |
|
| 6,219 |
|
|
| 126 |
|
|
| (3,439 | ) |
|
| 2,906 |
|
|
2022 |
|
| 6,407 |
|
|
| 128 |
|
|
| (3,567 | ) |
|
| 2,968 |
|
|
2023 |
|
| 6,470 |
|
|
| 129 |
|
|
| (3,568 | ) |
|
| 3,031 |
|
|
Thereafter |
|
| 183,294 |
|
|
| 5,045 |
|
|
| (92,095 | ) |
|
| 96,244 |
| (2) |
Total undiscounted minimum lease payments |
| $ | 209,917 |
|
| $ | 5,584 |
|
| $ | (106,807 | ) |
| $ | 108,694 |
|
|
Less: interest |
|
| (134,274 | ) |
|
| (3,653 | ) |
|
|
|
|
|
|
|
|
|
Present value of lease liabilities |
| $ | 75,643 |
|
| $ | 1,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental balance sheet information is as follows (in thousands, except lease terms and discount rate):
|
| Classification |
| September 30, 2019 |
| |
Right of use assets: |
|
|
|
|
|
|
Operating leases - real estate |
| Land, buildings and improvements, intangible lease assets, and other |
| $ | 58,753 |
|
Finance leases - real estate |
| Land, buildings and improvements, intangible lease assets, and other |
|
| 1,900 |
|
Real estate right of use assets, net |
|
|
|
| 60,653 |
|
Operating leases - corporate |
| Other assets |
|
| 10,261 |
|
Total right of use assets, net |
|
|
| $ | 70,914 |
|
|
|
|
|
|
|
|
Lease liabilities: |
|
|
|
|
|
|
Operating leases |
| Obligations to tenants and other lease liabilities |
| $ | 75,643 |
|
Financing leases |
| Obligations to tenants and other lease liabilities |
|
| 1,931 |
|
Total lease liabilities |
|
|
| $ | 77,574 |
|
|
|
|
|
|
|
|
Weighted average remaining lease term: |
|
|
|
|
|
|
Operating leases |
|
|
|
| 31.9 |
|
Finance leases |
|
|
|
| 37.2 |
|
Weighted average discount rate: |
|
|
|
|
|
|
Operating leases |
|
|
|
| 6.3 | % |
Finance leases |
|
|
|
| 6.6 | % |
The following is supplemental cash flow information (in thousands):
|
| Nine Months Ended September 30, 2019 |
| |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
Operating cash flows from operating leases |
| $ | 4,408 |
|
Operating cash flows from finance leases |
|
| 83 |
|
Financing cash flows from finance leases |
|
| 10 |
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
Operating leases |
|
| 1,575 |
|
Finance leases |
|
| — |
|
11. Subsequent Events
Investments
On October 25, 2019, we entered into an agreement to finance the development of and lease an acute care hospital in Clear Lake,South Texas for $27.5 million. This facility will be leased to NeuroPsychiatric Hospitalson July 24, 2020, pursuant to a long-term leasemaster lease. These properties were previously leased to Steward.
Other acquisitions subsequent to June 30, 2020 included 1 inpatient rehabilitation hospital and 1 general acute care hospital. The inpatient rehabilitation facility, located in Dahlen, Germany, was acquired on August 5 for €12.5 million and is expectedleased to open in the third quarter of 2020.
On November 5, 2019, we entered into definitive agreementsMEDIAN Kliniken S.à.r.l. pursuant to which we will acquire a portfolio of 10the existing master lease. The general acute care hospitals ownedfacility, located in Darlington, United Kingdom, was acquired on August 7 for £29.4 million and operated by LifePoint for a combined purchase price of approximately $700.0 million. Underis leased to Circle pursuant to the terms of the agreements, we will lease back the hospitals to LifePoint under 1existing master lease agreement. The master lease will have a 20-year initial term and 2 five-year extension options, plus annual escalators at the greater of 2% or the change in the applicable CPI, with a cap of 4%.
On November 5, 2019, we completed the sale of the real estate of 2 acute care hospitals for net proceeds to us of approximately $93.0 million, which is in excess of our net book value.
Financing
On November 4, 2019, we filed Articles of Amendment to our charter with the Maryland State Department of Assessments and Taxation increasing the number of authorized shares of common stock, par value $0.001 per share, available for issuance from 500,000,000 to 750,000,000.
On November 8, 2019, we completed an underwritten public offering of 57.5 million shares (including the exercise of the underwriters’ 30-day option to purchase an additional 7.5 million shares) of our common stock, resulting in net proceeds of $1.026 billion, after deducting underwriting discounts and commissions and estimated offering expenses.
lease.
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 and MPT Operating Partnership, L.P. as there are no material differences between these two entities.
The following discussion and analysis of the consolidated financial condition and consolidated results of operations 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, 2018.2019.
During the first six months of 2020, COVID-19’s impact on our business was limited as we received approximately 98% of our rent and interest payments in a timely manner. For the 2% not collected, we have agreements in place to collect such deferred amounts plus interest. Our tenants were impacted by the governmental mandates to defer elective surgeries, the takeover of certain facilities by the government in certain countries like the United Kingdom, and the overall downturn in the economy in general. We currently expect to receive a similar amount of our rent and interest in the third quarter as we did in the second quarter but then expect all rent and interest to be collected timely starting in October 2020. However, no assurances can be made that if the pandemic continues for an extended period of time that our rent and interest payments will not be delayed into the future until our tenants can recover.
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. 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 Securities Exchange Act of 1934, as amended. Such factors include, among others, the following:
| • | the political, economic, business, real estate, and other market conditions of the U.S. (both national and local), Europe (in particular Germany, the United Kingdom, Spain, Italy, Portugal, and Switzerland), Australia, and other foreign jurisdictions; |
• | the risk that a condition to closing under the agreements governing any or all of our outstanding transactions that have not closed as of the date hereof |
| • | the possibility that the anticipated benefits from any or all of the transactions we enter into will 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; |
| • | 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 MPT’s status as a REIT for federal and state income tax purposes; |
| • | our ability to attract and retain qualified personnel; |
| • | the impact of COVID-19 on our business, our joint ventures, and the business of our tenants/borrowers and the economy in general and other factors that may affect our business, our joint ventures, or that of our tenants/borrowers that are beyond our control, including natural disasters, other health crises, or pandemics along with each individual government’s actions to such matters; |
• | changes in foreign currency exchange rates; |
| • | changes in federal, state, or local tax laws in the U.S., Europe, Australia, or other jurisdictions in which we may own healthcare |
| • | healthcare and other regulatory requirements of the U.S., Europe, Australia, and other foreign countries; and |
| • | the political, economic, business, real estate, and other market conditions of the U.S., Europe, Australia, and other foreign jurisdictions in which 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, 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 properties or on an unsecured basis. |
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, and rehabilitative 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 marketother conditions (such as the impact caused by COVID-19 in the form of requirements to defer elective surgeries, government takeover of facilities in certain of our international locations, and overall negative impact to the economy in general) that may affect their profitability, which could impact our results. Accordingly, we monitor certain key factors, changes to which we believe may provide early indications of conditions that may affect the level of risk in our portfolio.
Key factors that we consider in underwriting prospective tenants and borrowers and in monitoring the performance of existing tenants and borrowers include the following:
| • | admission levels and surgery/procedure/diagnosis volumes by type; |
| • | the current, historical, and prospective operating margins (measured by earnings before interest, taxes, depreciation, amortization, and facility rent) of each tenant or borrower and at each facility; |
| • | the ratio of our tenants’ or borrowers’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs; |
| • | changes in revenue sources of our tenants’ or borrowers’ revenue, including the relative mix of public payors (including Medicare, Medicaid/MediCal, |
| • | trends in tenants’ cash collections, including comparison to recorded net patient service revenues; |
| • | tenants’ free cash flows; |
| • | the effect of evolving healthcare legislation and other regulations on our tenants’ or borrowers’ profitability and liquidity; and |
| • | the competition and demographics of the local and surrounding areas in which the tenants or borrowers operate. |
Certain business factors, in addition to those described above that directly affect our tenants and borrowers, will likely materially influence our future results of operations. These factors include:
| • | trends in the cost and availability of capital, including market interest rates, that our prospective tenants may use for their real estate assets instead of financing their real estate assets through lease structures; |
| • | changes in healthcare regulations that may limit the opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate; |
| • | reductions in reimbursements from Medicare, state healthcare programs, and commercial insurance providers that may reduce our tenants’ or borrowers’ profitability and our lease rates; |
| • | 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 20182019 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include revenue recognition, investments in real estate, purchase price allocation, loans, losses from rent and interest receivables, stock-based
compensation, our fair value option election, and our accounting policy on consolidation. During the ninesix months ended SeptemberJune 30, 2019,2020, there were no material changes to these policies except for those described in Note 2 to Item 1 of this Form 10-Q.our condensed consolidated financial statements.
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. We have operated as a REIT since April 6, 2004, and accordingly, elected REIT status upon the filing of our calendar year 2004 federal income tax return. 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. We also make mortgage loans to healthcare operators collateralized by their real estate assets. In addition, we selectively make loans to certain of our operators through our taxable REIT subsidiaries, the proceeds of which are typically used for acquisitions and working capital. Finally, from time to time, we acquire a profits or other equity interest in our tenants that gives us a right to share in such tenant’s profits and losses.
At SeptemberJune 30, 2019,2020, our portfolio consisted of 348387 properties leased or loaned to 3844 operators, of which threetwo are under development and 1113 are in the form of mortgage loans.
Our investments in healthcare real estate, including mortgage and other loans, as well as any equity investments in our tenants are considered a single reportable segment. AllAt June 30, 2020, all of our investments are currently located in the U.S., Europe, and Australia. Our total assets are made up of the following (dollars in thousands):
|
| As of September 30, 2019 |
|
| % of Total |
|
| As of December 31, 2018 |
|
| % of Total |
| ||||
Real estate owned (gross)(1) |
| $ | 9,256,035 |
|
|
| 74.3 | % |
| $ | 5,868,340 |
|
|
| 66.4 | % |
Mortgage loans |
|
| 1,268,563 |
|
|
| 10.2 | % |
|
| 1,213,322 |
|
|
| 13.7 | % |
Other loans |
|
| 521,398 |
|
|
| 4.2 | % |
|
| 373,198 |
|
|
| 4.2 | % |
Construction in progress |
|
| 134,079 |
|
|
| 1.1 | % |
|
| 84,172 |
|
|
| 1.0 | % |
Equity investments |
|
| 777,102 |
|
|
| 6.2 | % |
|
| 520,058 |
|
|
| 5.9 | % |
Other assets |
|
| 494,976 |
|
|
| 4.0 | % |
|
| 784,553 |
|
|
| 8.8 | % |
Total assets |
| $ | 12,452,153 |
|
|
| 100.0 | % |
| $ | 8,843,643 |
|
|
| 100.0 | % |
|
|
|
| As of June 30, 2020 |
|
| % of Total |
|
| As of December 31, 2019 |
|
| % of Total |
| ||||
Real estate owned (gross) |
| $ | 12,041,395 |
|
|
| 77.9 | % |
| $ | 9,994,844 |
|
|
| 69.1 | % |
Mortgage loans |
|
| 1,339,258 |
|
|
| 8.7 | % |
|
| 1,275,022 |
|
|
| 8.8 | % |
Other loans |
|
| 792,011 |
|
|
| 5.1 | % |
|
| 544,832 |
|
|
| 3.8 | % |
Construction in progress |
|
| 27,674 |
|
|
| 0.2 | % |
|
| 168,212 |
|
|
| 1.2 | % |
Cash and cash equivalents |
|
| 374,962 |
|
|
| 2.4 | % |
|
| 1,462,286 |
|
|
| 10.1 | % |
Equity investments |
|
| 841,098 |
|
|
| 5.4 | % |
|
| 926,990 |
|
|
| 6.4 | % |
Other |
|
| 31,672 |
|
|
| 0.3 | % |
|
| 95,145 |
|
|
| 0.6 | % |
Total assets |
| $ | 15,448,070 |
|
|
| 100.0 | % |
| $ | 14,467,331 |
|
|
| 100.0 | % |
Additional Concentration Details
On a pro forma gross asset basis (as defined in the “Reconciliation“Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Quarterly Report on Form 10-Q)), our concentration as of SeptemberJune 30, 20192020 as compared to December 31, 20182019 is as follows (dollars in thousands):
Total Pro Forma Gross Assets by Operator
|
| As of September 30, 2019 |
|
| As of December 31, 2018 |
|
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||||||||||||||||||
Operators |
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
|
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
|
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
|
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
| ||||||||
Steward |
| $ | 3,953,099 |
|
|
| 29.2 | % |
| $ | 3,823,625 |
|
|
| 38.0 | % |
| $ | 4,205,056 |
|
|
| 24.3 | % |
| $ | 4,052,162 |
|
|
| 24.5 | % |
Circle |
|
| 2,135,865 |
|
|
| 12.4 | % |
|
| 2,152,951 |
|
|
| 13.0 | % | ||||||||||||||||
Prospect |
|
| 1,554,823 |
|
|
| 11.5 | % |
|
| — |
|
|
| — |
|
|
| 1,577,552 |
|
|
| 9.1 | % |
|
| 1,563,642 |
|
|
| 9.5 | % |
Prime |
|
| 1,143,557 |
|
|
| 8.4 | % |
|
| 1,124,711 |
|
|
| 11.2 | % |
|
| 1,445,557 |
|
|
| 8.4 | % |
|
| 1,144,705 |
|
|
| 6.9 | % |
MEDIAN |
|
| 999,732 |
|
|
| 7.4 | % |
|
| 1,075,504 |
|
|
| 10.7 | % | ||||||||||||||||
Healthscope |
|
| 863,002 |
|
|
| 6.4 | % |
|
| 858,569 |
|
|
| 8.5 | % | ||||||||||||||||
LifePoint Health, Inc. ("LifePoint") |
|
| 1,202,435 |
|
|
| 7.0 | % |
|
| 1,202,319 |
|
|
| 7.3 | % | ||||||||||||||||
Other operators |
|
| 4,131,153 |
|
|
| 30.4 | % |
|
| 2,647,369 |
|
|
| 26.3 | % |
|
| 5,995,289 |
|
|
| 34.7 | % |
|
| 5,509,952 |
|
|
| 33.4 | % |
Other assets |
|
| 908,969 |
|
|
| 6.7 | % |
|
| 528,669 |
|
|
| 5.3 | % |
|
| 716,118 |
|
|
| 4.1 | % |
|
| 903,543 |
|
|
| 5.4 | % |
Total |
| $ | 13,554,335 |
|
|
| 100.0 | % |
| $ | 10,058,447 |
|
|
| 100.0 | % |
| $ | 17,277,872 |
|
|
| 100.0 | % |
| $ | 16,529,274 |
|
|
| 100.0 | % |
Total Pro Forma Gross Assets by U.S. State and Country
|
| As of September 30, 2019 |
|
| As of December 31, 2018 |
|
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||||||||||||||||||
U.S. States and Other Countries |
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
|
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
|
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
|
| Total Pro Forma Gross Assets |
|
| Percentage of Total Pro Forma Gross Assets |
| ||||||||
Massachusetts |
| $ | 1,489,359 |
|
|
| 11.0 | % |
| $ | 1,469,423 |
|
|
| 14.6 | % | ||||||||||||||||
California |
|
| 1,294,937 |
|
|
| 9.6 | % |
|
| 522,753 |
|
|
| 5.2 | % |
| $ | 1,650,520 |
|
|
| 9.6 | % |
| $ | 1,298,244 |
|
|
| 7.9 | % |
Texas |
|
| 1,254,397 |
|
|
| 9.3 | % |
|
| 1,126,217 |
|
|
| 11.2 | % |
|
| 1,622,600 |
|
|
| 9.4 | % |
|
| 1,390,835 |
|
|
| 8.4 | % |
Massachusetts |
|
| 1,497,182 |
|
|
| 8.7 | % |
|
| 1,497,182 |
|
|
| 9.1 | % | ||||||||||||||||
Utah |
|
| 1,065,674 |
|
|
| 7.9 | % |
|
| 1,054,539 |
|
|
| 10.5 | % |
|
| 1,286,423 |
|
|
| 7.4 | % |
|
| 1,087,743 |
|
|
| 6.6 | % |
Pennsylvania |
|
| 575,264 |
|
|
| 4.2 | % |
|
| 141,893 |
|
|
| 1.4 | % |
|
| 858,853 |
|
|
| 5.0 | % |
|
| 905,887 |
|
|
| 5.5 | % |
All other states |
|
| 3,850,836 |
|
|
| 28.4 | % |
|
| 2,972,116 |
|
|
| 29.5 | % |
|
| 4,007,474 |
|
|
| 23.2 | % |
|
| 4,022,909 |
|
|
| 24.2 | % |
Other domestic assets |
|
| 710,512 |
|
|
| 5.2 | % |
|
| 482,992 |
|
|
| 4.8 | % |
|
| 623,716 |
|
|
| 3.6 | % |
|
| 798,990 |
|
|
| 4.8 | % |
Total U.S. |
| $ | 10,240,979 |
|
|
| 75.6 | % |
| $ | 7,769,933 |
|
|
| 77.2 | % |
| $ | 11,546,768 |
|
|
| 66.9 | % |
| $ | 11,001,790 |
|
|
| 66.5 | % |
United Kingdom |
| $ | 2,570,106 |
|
|
| 14.9 | % |
| $ | 2,617,158 |
|
|
| 15.8 | % | ||||||||||||||||
Germany |
| $ | 1,088,936 |
|
|
| 8.0 | % |
| $ | 1,164,973 |
|
|
| 11.6 | % |
|
| 1,225,378 |
|
|
| 7.1 | % |
|
| 1,117,539 |
|
|
| 6.8 | % |
Australia |
|
| 863,002 |
|
|
| 6.4 | % |
|
| 858,569 |
|
|
| 8.5 | % |
|
| 898,328 |
|
|
| 5.2 | % |
|
| 897,915 |
|
|
| 5.4 | % |
United Kingdom |
|
| 582,521 |
|
|
| 4.3 | % |
|
| 100,823 |
|
|
| 1.0 | % | ||||||||||||||||
Switzerland |
|
| 467,351 |
|
|
| 3.4 | % |
|
| — |
|
|
| — |
|
|
| 611,796 |
|
|
| 3.5 | % |
|
| 505,172 |
|
|
| 3.1 | % |
Italy and Spain |
|
| 113,089 |
|
|
| 0.8 | % |
|
| 118,472 |
|
|
| 1.2 | % | ||||||||||||||||
Spain |
|
| 202,042 |
|
|
| 1.2 | % |
|
| 159,451 |
|
|
| 1.0 | % | ||||||||||||||||
All other countries |
|
| 131,052 |
|
|
| 0.7 | % |
|
| 125,696 |
|
|
| 0.8 | % | ||||||||||||||||
Other international assets |
|
| 198,457 |
|
|
| 1.5 | % |
|
| 45,677 |
|
|
| 0.5 | % |
|
| 92,402 |
|
|
| 0.5 | % |
|
| 104,553 |
|
|
| 0.6 | % |
Total International |
| $ | 3,313,356 |
|
|
| 24.4 | % |
| $ | 2,288,514 |
|
|
| 22.8 | % | ||||||||||||||||
Grand Total |
| $ | 13,554,335 |
|
|
| 100.0 | % |
| $ | 10,058,447 |
|
|
| 100.0 | % | ||||||||||||||||
Total international |
| $ | 5,731,104 |
|
|
| 33.1 | % |
| $ | 5,527,484 |
|
|
| 33.5 | % | ||||||||||||||||
Grand total |
| $ | 17,277,872 |
|
|
| 100.0 | % |
| $ | 16,529,274 |
|
|
| 100.0 | % |
On an individual property basis, we had noour largest investment in any single property greater than 2.7%approximated 3% of our total pro forma gross assets as of SeptemberJune 30, 2019.2020.
On an adjusted revenue 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 ninesix months ended SeptemberJune 30, 20192020 as compared to the prior year is as follows (dollars in thousands):
Total Adjusted Revenue by Operator
|
| For the Nine Months Ended September 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
Operators |
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
| ||||||||
Steward |
| $ | 265,060 |
|
|
| 40.2 | % |
| $ | 225,989 |
|
|
| 36.6 | % |
| $ | 179,780 |
|
|
| 28.2 | % |
| $ | 176,290 |
|
|
| 43.0 | % |
Prospect |
|
| 76,500 |
|
|
| 12.0 | % |
|
| — |
|
|
| — | % | ||||||||||||||||
Circle |
|
| 68,030 |
|
|
| 10.7 | % |
|
| 2,597 |
|
|
| 0.6 | % | ||||||||||||||||
Prime |
|
| 95,961 |
|
|
| 14.6 | % |
|
| 95,439 |
|
|
| 15.5 | % |
|
| 64,381 |
|
|
| 10.1 | % |
|
| 63,996 |
|
|
| 15.6 | % |
MEDIAN |
|
| 66,231 |
|
|
| 10.1 | % |
|
| 99,924 |
|
|
| 16.2 | % | ||||||||||||||||
Ernest |
|
| 38,744 |
|
|
| 5.9 | % |
|
| 52,752 |
|
|
| 8.5 | % | ||||||||||||||||
LifePoint |
|
| 34,420 |
|
|
| 5.2 | % |
|
| 31,484 |
|
|
| 5.1 | % |
|
| 53,198 |
|
|
| 8.4 | % |
|
| 22,960 |
|
|
| 5.6 | % |
Other operators |
|
| 157,762 |
|
|
| 24.0 | % |
|
| 112,104 |
|
|
| 18.1 | % |
|
| 194,575 |
|
|
| 30.6 | % |
|
| 144,047 |
|
|
| 35.2 | % |
Total |
| $ | 658,178 |
|
|
| 100.0 | % |
| $ | 617,692 |
|
|
| 100.0 | % |
| $ | 636,464 |
|
|
| 100.0 | % |
| $ | 409,890 |
|
|
| 100.0 | % |
Total Adjusted Revenue by U.S. State and Country
|
| For the Nine Months Ended September 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
U.S. States and Other Countries |
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
| ||||||||
California |
| $ | 70,339 |
|
|
| 11.1 | % |
| $ | 32,362 |
|
|
| 7.9 | % | ||||||||||||||||
Massachusetts |
| $ | 102,893 |
|
|
| 15.6 | % |
| $ | 85,054 |
|
|
| 13.8 | % |
|
| 69,946 |
|
|
| 11.0 | % |
|
| 68,553 |
|
|
| 16.7 | % |
Texas |
|
| 88,818 |
|
|
| 13.5 | % |
|
| 87,588 |
|
|
| 14.2 | % |
|
| 48,674 |
|
|
| 7.7 | % |
|
| 58,504 |
|
|
| 14.3 | % |
Utah |
|
| 65,128 |
|
|
| 9.9 | % |
|
| 62,598 |
|
|
| 10.1 | % |
|
| 45,705 |
|
|
| 7.2 | % |
|
| 43,409 |
|
|
| 10.6 | % |
California |
|
| 56,143 |
|
|
| 8.5 | % |
|
| 45,326 |
|
|
| 7.3 | % | ||||||||||||||||
Arizona |
|
| 37,590 |
|
|
| 5.7 | % |
|
| 35,204 |
|
|
| 5.7 | % | ||||||||||||||||
Pennsylvania |
|
| 38,606 |
|
|
| 6.1 | % |
|
| 7,577 |
|
|
| 1.9 | % | ||||||||||||||||
All other states |
|
| 196,616 |
|
|
| 29.9 | % |
|
| 184,091 |
|
|
| 29.8 | % |
|
| 187,453 |
|
|
| 29.3 | % |
|
| 139,071 |
|
|
| 33.9 | % |
Total U.S. |
| $ | 547,188 |
|
|
| 83.1 | % |
| $ | 499,861 |
|
|
| 80.9 | % |
| $ | 460,723 |
|
|
| 72.4 | % |
| $ | 349,476 |
|
|
| 85.3 | % |
United Kingdom |
| $ | 80,891 |
|
|
| 12.7 | % |
| $ | 2,597 |
|
|
| 0.6 | % | ||||||||||||||||
Germany |
| $ | 72,135 |
|
|
| 11.0 | % |
| $ | 106,198 |
|
|
| 17.2 | % |
|
| 47,445 |
|
|
| 7.5 | % |
|
| 48,326 |
|
|
| 11.8 | % |
Australia, United Kingdom, Switzerland, Italy, and Spain |
|
| 38,855 |
|
|
| 5.9 | % |
|
| 11,633 |
|
|
| 1.9 | % | ||||||||||||||||
Total International |
| $ | 110,990 |
|
|
| 16.9 | % |
| $ | 117,831 |
|
|
| 19.1 | % | ||||||||||||||||
Grand Total |
| $ | 658,178 |
|
|
| 100.0 | % |
| $ | 617,692 |
|
|
| 100.0 | % | ||||||||||||||||
All other countries |
|
| 47,405 |
|
|
| 7.4 | % |
|
| 9,491 |
|
|
| 2.3 | % | ||||||||||||||||
Total international |
| $ | 175,741 |
|
|
| 27.6 | % |
| $ | 60,414 |
|
|
| 14.7 | % | ||||||||||||||||
Grand total |
| $ | 636,464 |
|
|
| 100.0 | % |
| $ | 409,890 |
|
|
| 100.0 | % |
Total Adjusted Revenue by Facility Type
|
| For the Nine Months Ended September 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
Facility Types |
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
|
| Total Adjusted Revenue |
|
| Percentage of Total Adjusted Revenue |
| ||||||||
General acute care hospitals |
| $ | 530,383 |
|
|
| 80.6 | % |
| $ | 449,445 |
|
|
| 72.8 | % |
| $ | 538,040 |
|
|
| 84.5 | % |
| $ | 326,677 |
|
|
| 79.7 | % |
Rehabilitation hospitals |
|
| 105,369 |
|
|
| 16.0 | % |
|
| 145,442 |
|
|
| 23.5 | % |
|
| 81,295 |
|
|
| 12.8 | % |
|
| 68,555 |
|
|
| 16.7 | % |
Long-term acute care hospitals |
|
| 22,426 |
|
|
| 3.4 | % |
|
| 22,805 |
|
|
| 3.7 | % |
|
| 17,129 |
|
|
| 2.7 | % |
|
| 14,658 |
|
|
| 3.6 | % |
Total |
| $ | 658,178 |
|
|
| 100.0 | % |
| $ | 617,692 |
|
|
| 100.0 | % |
| $ | 636,464 |
|
|
| 100.0 | % |
| $ | 409,890 |
|
|
| 100.0 | % |
Results of Operations
Three Months Ended SeptemberJune 30, 20192020 Compared to SeptemberJune 30, 20182019
Net income for the three months ended SeptemberJune 30, 2019,2020, was $89.8$109.5 million, compared to $736.0$79.4 million for the three months ended SeptemberJune 30, 2018.2019. This decreaseincrease is primarily due to the $695.2 million of gains on sales of real estate in the 2018 third quarter, including the joint venture transaction with Primotop and the North Cypress disposal described in Note 3 to Item 1 of this Form 10-Q. This decrease is partially offset by incremental revenue from new investments made in 20182019 and 2019.additional revenue from the Circle transaction in January 2020, partially offset by higher interest (from additional debt to partially finance these new investments) and depreciation expense along with additional general and administrative costs due to the growth of the company. Funds from operations (“FFO”), after adjusting for certain items (as more fully described in Reconciliationthe “Reconciliation of Non-GAAP Financial Measures)Measures”), was $147.5$199.6 million for the 2020 second quarter as compared to $120.9 million for the 2019 third quarter as comparedsecond quarter. Similar to $127.2 million for the 2018 third quarter. Thisnet income, this increase in FFO is primarily due to incremental revenue from new investments in 20182019 and 2019.early 2020.
A comparison of revenues for the three month periods ended SeptemberJune 30, 20192020 and 20182019 is as follows (dollar amounts in thousands):
|
| 2019 |
|
| % of Total |
|
| 2018 |
|
| % of Total |
|
| Year over Year Change |
| |||||
Rent billed |
| $ | 124,361 |
|
|
| 55.3 | % |
| $ | 118,238 |
|
|
| 60.0 | % |
|
| 5.2 | % |
Straight-line rent |
|
| 31,026 |
|
|
| 13.8 | % |
|
| 18,293 |
|
|
| 9.3 | % |
|
| 69.6 | % |
Income from direct financing leases |
|
| 17,502 |
|
|
| 7.8 | % |
|
| 18,998 |
|
|
| 9.7 | % |
|
| -7.9 | % |
Interest and other income |
|
| 51,867 |
|
|
| 23.1 | % |
|
| 41,467 |
|
|
| 21.0 | % |
|
| 25.1 | % |
Total revenues |
| $ | 224,756 |
|
|
| 100.0 | % |
| $ | 196,996 |
|
|
| 100.0 | % |
|
| 14.1 | % |
Our total revenue for the 2019 third quarter is up $27.8 million, or 14%, from the prior year. This increase is made up of the following:
|
|
|
|
|
|
|
|
|
|
Interest expense, for the quarters ended September 30, 2019 and 2018, totaled $64.5 million and $57.2 million, respectively. This increase is primarily related to additional interest from the $900 million senior unsecured notes offering in the third quarter of 2019.
Real estate depreciation and amortization during the third quarter of 2019 increased to $40.8 million from $29.9 million in 2018 due to the new investments made in 2019, partially offset by property sales in 2018 and the conversion of the five Steward mortgage loans to fee simple assets.
Property-related expenses totaled $4.0 million and $2.7 million for the quarters ended September 30, 2019 and 2018, respectively. As noted above under the caption “Other income,” this increase was primarily due to the grossing up of certain expenses (such as ground lease, property taxes and insurance) as part of our implementation of the lease accounting standard on January 1, 2019.
General and administrative expenses totaled $23.3 million for the 2019 third quarter, which is a $2.3 million increase from the prior year third quarter. The majority of the increase relates to stock compensation expense from our performance-based awards. Given our strong performance in 2018 with a total shareholder return of 25% along with our performance to-date in 2019, we believe it is more likely that such performance awards will be earned and have adjusted our stock compensation expense accordingly. We do expect a quarterly run-rate for general and administrative expenses to be in the $23 million to $25 million range.
During the three months ended September 30, 2018, we completed the joint venture transaction with Primotop (as more fully described in Note 3 to Item 1 of this Form 10-Q), in which we sold 71 inpatient rehabilitation hospitals by way of a joint venture arrangement, as well as one general acute care hospital located in Texas, resulting in a total gain of $695.2 million. This gain was partially offset by a $48 million adjustment to lower the carrying value of the real estate to fair value on seven of our transitioning Adeptus Health facilities and four of our Alecto facilities – see Note 3 to Item 1 of this Form 10-Q for further details. During the three months ended September 30, 2019, we sold one Adeptus transition facility that was vacant for a gain of $0.2 million.
Earnings from equity interests totaled $3.5 million for the quarter ended September 30, 2019, a $0.4 million increase from the same period in 2018 due to our investment in the Primotop joint venture made in the third quarter of 2018 and our investment in Switzerland made at the end of the second quarter of 2019, partially offset by a lower return year-over-year in our Hoboken investment.
In the third quarter of 2019, we recognized a $4.0 million unutilized financing fee charge related to the commitment fee paid on the unused bridge loan for the Prospect transaction. There was no similar charge in the 2018 third quarter.
Income tax expense typically 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 $0.7 million income tax benefit for the three months ended September 30, 2019, represents the benefit from our TRS in the quarter. The benefit is partially offset by tax expense from our international investments. 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 full valuation allowance of $3 million should continue to be recorded against certain of our international net deferred tax assets at September 30, 2019. 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 taxes in future periods as income earned.
Nine Months Ended September 30, 2019 Compared to September 30, 2018
Net income for the nine months ended September 30, 2019, was $245.0 million, compared to $938.2 million for the nine months ended September 30, 2018. This decrease is primarily due to the $720.8 million of gains on sales of real estate during the first nine months of 2018 from the disposal of five properties and the joint venture transaction with Primotop, partially offset by the $48 million adjustment to lower the carrying value of certain real estate to fair value in 2018- see Note 3 to Item 1 of this form 10-Q for additional details. FFO, after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was $386.2 million for the first nine months of 2019 as compared to $388.6 million for the first nine months of 2018. This decrease in FFO is primarily due to lower revenue from the property sales in 2018, partially offset by revenues from new investments in 2019.
A comparison of revenues for the nine month periods ended September 30, 2019 and 2018 is as follows (dollar amounts in thousands):
|
| 2019 |
|
| % of Total |
|
| 2018 |
|
| % of Total |
|
| Year over Year Change |
|
| 2020 |
|
| % of Total |
|
| 2019 |
|
| % of Total |
|
| Year over Year Change |
| ||||||||||
Rent billed |
| $ | 343,841 |
|
|
| 57.5 | % |
| $ | 369,076 |
|
|
| 61.1 | % |
|
| -6.8 | % |
| $ | 173,557 |
|
|
| 59.5 | % |
| $ | 110,882 |
|
|
| 57.6 | % |
|
| 56.5 | % |
Straight-line rent |
|
| 76,813 |
|
|
| 12.9 | % |
|
| 49,157 |
|
|
| 8.1 | % |
|
| 56.3 | % |
|
| 21,151 |
|
|
| 7.2 | % |
|
| 25,136 |
|
|
| 13.1 | % |
|
| -15.9 | % |
Income from direct financing leases |
|
| 52,168 |
|
|
| 8.7 | % |
|
| 55,613 |
|
|
| 9.2 | % |
|
| -6.2 | % | ||||||||||||||||||||
Income from financing leases |
|
| 52,489 |
|
|
| 18.0 | % |
|
| 17,386 |
|
|
| 9.0 | % |
|
| 201.9 | % | ||||||||||||||||||||
Interest and other income |
|
| 124,937 |
|
|
| 20.9 | % |
|
| 130,098 |
|
|
| 21.6 | % |
|
| -4.0 | % |
|
| 44,645 |
|
|
| 15.3 | % |
|
| 39,145 |
|
|
| 20.3 | % |
|
| 14.1 | % |
Total revenues |
| $ | 597,759 |
|
|
| 100.0 | % |
| $ | 603,944 |
|
|
| 100.0 | % |
|
| -1.0 | % |
| $ | 291,842 |
|
|
| 100.0 | % |
| $ | 192,549 |
|
|
| 100.0 | % |
|
| 51.6 | % |
Our total revenue for the first nine months of 20192020 second quarter is down $6.2up $99.3 million, or 1%52%, fromover the prior year. This decreaseincrease is made up of the following:
| • | Operating lease revenue (includes rent billed and straight-line rent) – up |
relates to the Circle acquisition in January 2020 as described in Note 3 to the condensed consolidated financial statements and $15.1 million of which relates to |
| - | As discussed in Note 3 to Item 1 of the Form 10-Q, we received final regulatory approval of the Circle/BMI lease variations and amended such leases accordingly on June 16, 2020. We expect our operating lease revenue from these leases to improve by approximately $8 million in the third quarter versus the 2020 second quarter with a full quarter of such lease variations in place. |
• | Income from |
| • | Interest and other income (including $5.2 million in the 2020 second quarter to gross up the tenant reimbursement of certain expenses) – |
|
|
|
|
Interest expense for the nine monthsquarters ended SeptemberJune 30, 2020 and 2019 and 2018, totaled $167.4$80.4 million and $172.4$52.3 million, respectively. This decreaseincrease is primarily related to new debt issuances post June 30, 2019 to fund new investments, including the lower average revolving debt balance during the first nine months of 2019 compared to the first nine months of 2018 as we paid down our revolver with proceeds from property sales in 2018. This decrease was partially offset by additional interest from the Australian£700 million term loan issued in January 2020, the £1 billion senior unsecured notes issued in December 2019, and the $900 million of senior unsecured notes offering duringissued in July 2019. In the first nine2019 second quarter, we incurred $0.9 million of accelerated commitment fee amortization expense associated with the new Australian term loan facility. No such expense was incurred in the 2020 second quarter. Our weighted-average interest rate was 3.9% for the three months ofended June 30, 2020, as compared to 4.7% in the same period in 2019.
Real estate depreciation and amortization during the first nine monthssecond quarter of 20192020 increased to $108.2$61.5 million from $100.2$34.0 million in the same period of 2018,2019 due to new investments made in 2018 and 2019 and the conversion of the five Steward mortgage loans to fee simple assets, partially offset by property sales in 2018.after June 30, 2019.
Property-related expenses totaled $15.4$10.0 million and $6.8$8.3 million for the nine monthsquarters ended SeptemberJune 30, 2020 and 2019, and 2018, respectively. As noted above under the caption “Other income,” thisThis increase wasis primarily due to the grossing up of certain expenses (such as ground lease, property taxes incurred related to the severed Adeptus properties as described in Note 3 to the condensed consolidated financial statements.
As a percentage of revenue, general and insurance) as part of our implementation ofadministrative expenses represent 11.0% for the lease accounting standard on January 1, 2019.
General2020 second quarter, which is lower than the 11.6% in the prior year. On a dollar basis, general and administrative expenses totaled $69.0$32.0 million for the first nine months of 2019,2020 second quarter, which is a $10.7$9.7 million increase from the prior year. The majority of theyear second quarter. Of this increase, $6.7 million relates to compensation primarily related to higher stock compensation expense from our performance-based awards. Given our strong performance in 2018 with2019 including a 39% total shareholder return and significant growth from $4.5 billion of 25%new investments, along with our performance to-datelargest ever one-time acquisition in 2019,January 2020, we believe it is more likely that suchcertain performance awards will be earned and have adjusted our stock compensation expense accordingly. The balance of the increase is primarily related to other corporate expenses, which are higher due to the growth of the company.
During the ninethree months ended SeptemberJune 30, 2018,2020, we sold one acute care property (operated by Steward),disposed of three long-term acute carefacilities and two ancillary properties (operated by Vibra), 71 inpatient rehabilitation hospitals (operated by MEDIAN) by way of a joint venture arrangement, and one general acute care hospital located in Texas (operated by North Cypress), resulting in a total net gainloss of $720.8$3.1 million. This gain was partially offset by a $48 million adjustment to lower the carrying value of the real estate to fair value on seven of our transitioning Adeptus Health facilities and four of our Alecto facilities – see Note 3 to Item 1 of this Form 10-Q for further details.
Earnings from equity interests was $11.6$5.3 million for the first nine months of 2019,quarter ended June 30, 2020, up $1.1$0.9 million from the same period of 2018in 2019 due to our investmentinvestments in the Primotop joint ventureInfracore and HM Hospitales made in the third quartersecond and fourth quarters of 2018 and our investment in Switzerland made at the end2019, respectively.
Other income of $4.3 million for the second quarter of 2019, partially offset by a lower return year-over-year in our Hoboken investment.
During the first nine months of 2019, we recognized a $4.0 million unutilized financing fee charge2020 was generated primarily from non-cash fair value adjustments related to the commitment fee paid on the unused bridge loan for the Prospect transaction.marking of our investment in Aevis Victoria SA stock to market. We also incurred a $0.9 million chargeacquired this stock as part of accelerated commitment fee amortization expenseour overall Switzerland investment in the 2019 second quarter associated with our Australian term loan facility. There were no similar charges during the first nine months of 2018.May 2019.
Income tax expense typically includes U.S. federal and state income taxes on our domestic TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $3.4$4.8 million income tax expense for the three monthsended June 30, 2020 is primarily from our investments in the United Kingdom, particularly the recent Circle/BMI transaction. In comparison, we recorded a $0.3 million income tax benefit forin the nine months ended September 30,second quarter of 2019 represents the benefit from straight-line rent and other write-offs onone-time tax benefits recognized by our domestic TRS in this period. The benefit is partially offset by tax expense from our international investments. .
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 full valuation allowance of $3$29.9 million should continue to be recordedreflected against certain of our international and domestic net deferred tax assetsat SeptemberJune 30, 2019.2020. 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 taxes in future periods as income is earned.
Six Months Ended June 30, 2020 Compared to June 30, 2019
Net income for the six months ended June 30, 2020, was $190.5 million, compared to $155.3 million for the six months ended June 30, 2019. This increase is due to incremental revenue from new investments made in 2019 and additional revenue from the Circle transaction in January 2020, partially offset by $58 million in increased interest expense from new debt incurred to partially fund those new investments, $55 million of higher depreciation expense, and about $30 million in non-cash impairment charges and fair value adjustments on equity securities along with higher general and administrative and income tax expenses due to the growth of the company. Funds from operations (“FFO”), after adjusting for certain items (as more fully described in the “Reconciliation of Non-GAAP Financial Measures”), was $390.8 million for the first six months of 2020 as compared to $238.7 million for the first six months of 2019. Similar to net income, this increase in FFO is primarily due to incremental revenue from new investments post June 30, 2019.
A comparison of revenues for the six month periods ended June 30, 2020 and 2019 is as follows (dollar amounts in thousands):
|
| 2020 |
|
| % of Total |
|
| 2019 |
|
| % of Total |
|
| Year over Year Change |
| |||||
Rent billed |
| $ | 345,324 |
|
|
| 58.9 | % |
| $ | 219,480 |
|
|
| 58.8 | % |
|
| 57.3 | % |
Straight-line rent |
|
| 52,572 |
|
|
| 9.0 | % |
|
| 45,787 |
|
|
| 12.3 | % |
|
| 14.8 | % |
Income from financing leases |
|
| 104,925 |
|
|
| 17.9 | % |
|
| 34,666 |
|
|
| 9.3 | % |
|
| 202.7 | % |
Interest and other income |
|
| 83,153 |
|
|
| 14.2 | % |
|
| 73,070 |
|
|
| 19.6 | % |
|
| 13.8 | % |
Total revenues |
| $ | 585,974 |
|
|
| 100.0 | % |
| $ | 373,003 |
|
|
| 100.0 | % |
|
| 57.1 | % |
Our total revenue for the first six months of 2020 is up $213.0 million, or 57%, from the prior year. This increase is made up of the following:
• | Operating lease revenue (includes rent billed and straight-line rent) – up $132.6 million over the prior year of which approximately $152.7 million is incremental revenue from acquisitions made post June 30, 2019 ($64.2 million of which relates to the Circle acquisition as described in Note 3 to the condensed consolidated financial statements and $30.2 million of which relates to the LifePoint acquisition completed in the fourth quarter of 2019) and $4.7 million is from the commencement of rent on the Idaho Falls development property. This increase is partially offset by more straight-line rent write-offs than in 2019 (as described in Note 3 to the condensed consolidated financial statements) and approximately $0.5 million from unfavorable foreign currency fluctuations. |
- | As discussed in Note 3 to the condensed consolidated financial statements, we received final regulatory approval of the Circle/BMI lease variations and amended such leases accordingly on June 16, 2020. If such amended leases were in place at the closing date of our acquisition on January 8, 2020, lease revenue would have been approximately $17 million higher in the first half of 2020. |
• | Income from financing leases – up $70.3 million due to $69.6 million of revenue from the Prospect acquisition in the 2019 third quarter. |
• | Interest and other income – up $10.1 million from the prior year due to the following: |
- | Interest from loans – up $10.9 million over the prior year due to approximately $9.3 million of incremental revenue earned on new loan investments, including $6.1 million related to Prospect loans made in August 2019 and $2.1 million earned on the loan made to the new international joint venture in May 2020 (see Note 3 for additional details), and $1.9 million from our annual escalations in interest rates in accordance with loan provisions. This increase is partially offset by $0.2 million from unfavorable foreign currency fluctuations. |
- | Other income – down $0.8 million from the prior year due to an approximate $1 million write-off of straight-line rent related to ground leases on certain Adeptus facilities in the first quarter of 2020 (as described in Note 3 to condensed consolidated financial statements). |
Interest expense for the six months ended June 30, 2020 and 2019, totaled $161.3 million and $102.9 million, respectively. This increase is primarily related to new debt issuances post June 30, 2019 including the £700 million term loan issued in January 2020, the £1 billion senior unsecured notes issued in December 2019, and the $900 million of senior unsecured notes issued in July 2019. In addition, we incurred $0.6 million of accelerated commitment fee amortization expense associated with our GBP term loan facility in the first six months of 2020 and $0.9 million of similar expense associated with our Australian term loan facility in the first six months of 2019. Our weighted-average interest rate was 4.0% for the six months ended June 30, 2020, as compared to 4.7% in the same period in 2019.
Real estate depreciation and amortization during the first six months of 2020 increased to $122.4 million from $67.3 million in the same period of 2019, due to new investments made after June 30, 2019.
Property-related expenses totaled $15.6 million and $11.4 million for the six months ended June 30, 2020 and 2019, respectively. This increase is primarily due to property taxes and other expenses incurred on the severed Adeptus properties in the first half of 2020 and the two Alecto properties that were disposed of in the second quarter of 2020 (as described in Note 3 to the condensed consolidated financial statements).
As a percentage of revenue, general and administrative expenses represent 11.2% for the first six months of 2020, a decline from the 12.3% in the prior year same period. On a dollar basis, general and administrative expenses totaled $65.4 million for the first six months of 2020, which is a $19.7 million increase from the same period of 2019. Of this increase, $12.6 million relates to compensation primarily related to higher stock compensation expense from our performance-based awards. Given our strong performance in 2019 including a 39% total shareholder return and significant growth from $4.5 billion of new investments, along with our largest ever one-time acquisition in January 2020, we believe it is more likely that certain performance awards will be earned and have adjusted our stock compensation expense accordingly. The balance of the increase is primarily related to other corporate expenses, which are higher due to the growth of the company.
During the six months ended June 30, 2020, we disposed of five facilities and four ancillary properties resulting in a net loss of $1.8 million. In addition, we made a $19.0 million adjustment to lower the carrying value of the real estate on certain Adeptus properties and one Alecto facility in the first quarter of 2020 (see Note 3 to condensed consolidated financial statements for further details).
Earnings from equity interests was $9.4 million for the first six months of 2020, up $1.2 million from the same period of 2019, primarily due to our investments in Infracore and HM Hospitales made in the second and fourth quarters of 2019, respectively.
Other expense of $9.7 million for the first six months of 2020 represents non-cash fair value adjustments primarily related to the marking of our investment in Aevis Victoria SA stock to market. This stock, like most stocks, declined during the first half of 2020 due to the COVID-19 pandemic. We acquired this stock as part of our overall Switzerland investment in May 2019.
Income tax expense typically 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 $8.8 million income tax expense for the six months ended June 30, 2020, is primarily from our investments in the United Kingdom, particularly the recent Circle/BMI transaction. In comparison, we recorded a $2.6 million income tax benefit in the first six months of 2019 from non-recurring tax benefits recognized by our domestic TRS.
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 $29.9 million should be reflected against certain of our international and domestic net deferred tax assetsat June 30, 2020. 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 taxes 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 and after adjustments for unconsolidated partnerships and joint ventures.
In addition to presenting FFO in accordance with the Nareit definition, we also 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 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 for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 (in thousands, except per share data):
|
| For the Three Months Ended |
|
| For the Nine Months Ended |
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||||||||||||
|
| September 30, 2019 |
|
| September 30, 2018 |
|
| September 30, 2019 |
|
| September 30, 2018 |
|
| June 30, 2020 |
|
| June 30, 2019 |
|
| June 30, 2020 |
|
| June 30, 2019 |
| ||||||||
FFO information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to MPT common stockholders |
| $ | 89,786 |
|
| $ | 736,034 |
|
| $ | 245,046 |
|
| $ | 938,202 |
|
| $ | 109,468 |
|
| $ | 79,438 |
|
| $ | 190,460 |
|
| $ | 155,260 |
|
Participating securities’ share in earnings |
|
| (432 | ) |
|
| (290 | ) |
|
| (1,354 | ) |
|
| (808 | ) |
|
| (487 | ) |
|
| (446 | ) |
|
| (951 | ) |
|
| (922 | ) |
Net income, less participating securities’ share in earnings |
| $ | 89,354 |
|
| $ | 735,744 |
|
| $ | 243,692 |
|
| $ | 937,394 |
|
| $ | 108,981 |
|
| $ | 78,992 |
|
| $ | 189,509 |
|
| $ | 154,338 |
|
Depreciation and amortization |
|
| 50,163 |
|
|
| 32,641 |
|
|
| 130,424 |
|
|
| 104,314 |
|
|
| 71,823 |
|
|
| 40,407 |
|
|
| 142,325 |
|
|
| 80,261 |
|
Gain on sale of real estate and other, net |
|
| (209 | ) |
|
| (647,204 | ) |
|
| (62 | ) |
|
| (672,822 | ) | ||||||||||||||||
Loss on sale of real estate |
|
| 3,101 |
|
|
| 147 |
|
|
| 1,776 |
|
|
| 147 |
| ||||||||||||||||
Real estate impairment charges |
|
| — |
|
|
| — |
|
|
| 19,006 |
|
|
| — |
| ||||||||||||||||
Funds from operations |
| $ | 139,308 |
|
| $ | 121,181 |
|
| $ | 374,054 |
|
| $ | 368,886 |
|
| $ | 183,905 |
|
| $ | 119,546 |
|
| $ | 352,616 |
|
| $ | 234,746 |
|
Write-off of straight-line rent and other, net of tax benefit |
|
| 4,230 |
|
|
| 4,321 |
|
|
| 7,232 |
|
|
| 17,615 |
| ||||||||||||||||
Write-off of straight-line rent and other, net of tax |
|
| 19,241 |
|
|
| 406 |
|
|
| 26,958 |
|
|
| 3,002 |
| ||||||||||||||||
Non-cash fair value adjustments |
|
| (3,590 | ) |
|
| — |
|
|
| 10,605 |
|
|
| — |
| ||||||||||||||||
Unutilized financing fees |
|
| 3,959 |
|
|
| — |
|
|
| 4,873 |
|
|
| — |
|
|
| — |
|
|
| 914 |
|
|
| 611 |
|
|
| 914 |
|
Acquisition costs, net of tax benefit |
|
| — |
|
|
| 1,661 |
|
|
| — |
|
|
| 2,072 |
| ||||||||||||||||
Normalized funds from operations |
| $ | 147,497 |
|
| $ | 127,163 |
|
| $ | 386,159 |
|
| $ | 388,573 |
|
| $ | 199,556 |
|
| $ | 120,866 |
|
| $ | 390,790 |
|
| $ | 238,662 |
|
Per diluted share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, less participating securities’ share in earnings |
| $ | 0.20 |
|
| $ | 2.00 |
|
| $ | 0.60 |
|
| $ | 2.56 |
|
| $ | 0.21 |
|
| $ | 0.20 |
|
| $ | 0.36 |
|
| $ | 0.40 |
|
Depreciation and amortization |
|
| 0.12 |
|
|
| 0.09 |
|
|
| 0.32 |
|
|
| 0.29 |
|
|
| 0.14 |
|
|
| 0.10 |
|
|
| 0.27 |
|
|
| 0.20 |
|
Gain on sale of real estate and other, net |
|
| — |
|
|
| (1.76 | ) |
|
| — |
|
|
| (1.84 | ) | ||||||||||||||||
Loss on sale of real estate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Real estate impairment charges |
|
| — |
|
|
| — |
|
|
| 0.04 |
|
|
| — |
| ||||||||||||||||
Funds from operations |
| $ | 0.32 |
|
| $ | 0.33 |
|
| $ | 0.92 |
|
| $ | 1.01 |
|
| $ | 0.35 |
|
| $ | 0.30 |
|
| $ | 0.67 |
|
| $ | 0.60 |
|
Write-off of straight-line rent and other, net of tax benefit |
|
| 0.01 |
|
|
| 0.01 |
|
|
| 0.02 |
|
|
| 0.04 |
| ||||||||||||||||
Write-off of straight-line rent and other, net of tax |
|
| 0.03 |
|
|
| — |
|
|
| 0.05 |
|
|
| 0.01 |
| ||||||||||||||||
Non-cash fair value adjustments |
|
| — |
|
|
| — |
|
|
| 0.02 |
|
|
| — |
| ||||||||||||||||
Unutilized financing fees |
|
| — |
|
|
| — |
|
|
| 0.01 |
|
|
| — |
|
|
| — |
|
|
| 0.01 |
|
|
| — |
|
|
| — |
|
Acquisition costs, net of tax benefit |
|
| — |
|
|
| 0.01 |
|
|
| — |
|
|
| 0.01 |
| ||||||||||||||||
Normalized funds from operations |
| $ | 0.33 |
|
| $ | 0.35 |
|
| $ | 0.95 |
|
| $ | 1.06 |
|
| $ | 0.38 |
|
| $ | 0.31 |
|
| $ | 0.74 |
|
| $ | 0.61 |
|
Pro Forma Gross Assets
Pro forma gross assets is total assets before accumulated depreciation/amortization (adjusted for our unconsolidated joint ventures) and assumes all real estate binding commitments on new investments and unfunded amounts on development deals and commenced capital improvement projects as of the applicable reporting periods are fully funded, and assumes cash on hand is used in these transactions. We believe total pro forma gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our binding commitments close and our other commitments are fully funded. The following table presents a reconciliation of total assets to total pro forma gross assets (in thousands):
|
| As of |
|
| As of |
|
| As of |
|
| As of |
| ||||
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
Total assets |
| $ | 12,452,153 |
|
| $ | 8,843,643 |
|
| $ | 15,448,070 |
|
| $ | 14,467,331 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Binding real estate commitments on new investments(1) |
|
| 27,500 |
|
|
| 865,165 |
|
|
| 514,042 |
|
|
| 1,988,550 |
|
Unfunded amounts on development deals and commenced capital improvement projects(2) |
|
| 130,096 |
|
|
| 229,979 |
|
|
| 154,760 |
|
|
| 163,370 |
|
Accumulated depreciation and amortization |
|
| 571,589 |
|
|
| 464,984 |
|
|
| 684,444 |
|
|
| 570,042 |
|
Incremental gross assets of our joint ventures(3) |
|
| 530,593 |
|
|
| 375,544 |
|
|
| 851,518 |
|
|
| 563,911 |
|
Proceeds from new debt subsequent to period-end |
|
| — |
|
|
| 927,990 |
| ||||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
| (157,596 | ) |
|
| (720,868 | ) | ||||||||
Cash used for funding the transactions above (including proceeds from new debt subsequent to period-end) |
|
| (374,962 | ) |
|
| (2,151,920 | ) | ||||||||
Total pro forma gross assets |
| $ | 13,554,335 |
|
| $ | 10,058,447 |
|
| $ | 17,277,872 |
|
| $ | 16,529,274 |
|
(1) | The |
(2) | Includes |
(3) | Adjustment |
Adjusted revenue
Adjusted revenue isrevenues are total revenues adjusted for our pro rata portion of similar revenues in our real estate joint venture arrangements. We believe adjusted revenue is useful to investors as it provides a more complete view of revenue 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 revenuerevenues (in thousands):
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Total revenues |
| $ | 597,759 |
|
| $ | 603,944 |
|
Revenue from properties owned through joint venture arrangements |
|
| 60,419 |
|
|
| 13,748 |
|
Total adjusted revenues |
| $ | 658,178 |
|
| $ | 617,692 |
|
|
| For the Six Months Ended June 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
Total revenues |
| $ | 585,974 |
|
| $ | 373,003 |
|
Revenue from real estate properties owned through joint venture arrangements |
|
| 50,490 |
|
|
| 36,887 |
|
Total adjusted revenue |
| $ | 636,464 |
|
| $ | 409,890 |
|
LIQUIDITY AND CAPITAL RESOURCES
2020 Cash Flow Activity
During the first half of 2020, we generated $289 million of cash flows from operating activities (which did not include approximately $35 million of revenue earned on our new Circle/BMI investment as such rent was prepaid before the acquisition closed), primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $280 million. In addition, we invested $2.3 billion in real estate and other assets, including the £1.5 billion Circle acquisition of 30 properties in January 2020 (as more fully described in Note 3 to Item 1 of this Form 10-Q), using a combination of cash on-hand, and proceeds from a £700 million British pound sterling term loan and the sale of 8.6 million shares of common stock under our at-the-market equity offering program, resulting in net proceeds of approximately $170 million.
2019 Cash Flow Activity
During the nine months ended September 30,first half of 2019, we generated approximately $330$198.1 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 $291.7$192.6 million.
Certain investing and financing activities in the first nine monthshalf of 2019 included:
| a) | Purchased |
| b) | Funded approximately |
| c) | Sold |
| d) | Closed on an Australian term loan facility for approximately $837 million to help fund the Healthscope |
|
|
Subsequent to quarter-end, we completed an underwritten public offering of 57.5 million shares resulting in net proceeds of approximately $1.026 billion. We plan to use these proceeds to finance the commitments described in Note 11 in Item 1 of this Form 10-Q.
2018 Cash Flow Activity
During the nine months ended September 30, 2018, we generated $299.1 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 with cash on-hand to fund our dividends of $272.4 million and certain investing and financing activities.
Certain investing and financing activities in the first nine months of 2018 included:
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Liquidity Requirements:
As of September 30, 2019,July 31, 2020, we have no debt principal payments due in the next twelve months — see debt maturity schedule below.between now and February 2021 when our revolving credit facility, with a current outstanding amount of $100 million, comes due (which we can extend by one year). At November 8, 2019, and subsequent to our equity offering in which we raised $1.026 billion,July 31, 2020, our availability under our revolving credit facility plus cash on-hand approximated $2$1.4 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, and availability under our at-the-market equity program is sufficient to fund our operations, debt and interest obligations, our firm commitments, (including expected funding requirements on our development projects and the LifePoint transaction), and dividends in order to comply with REIT requirements for the next twelve months.
As noted previously, we received 98% of rent and interest payments through the first six months of 2020. Although we expect to receive a similar level of rent and interest in the second half of the year, no assurances can be made at this time that such payments will be made in a timely manner if the impact from COVID-19 on our tenants’ cash flows significantly worsens. If such rent and interest payments are delayed, we believe such delay will be temporary and we can rely on our current liquidity of $1.4 billion to cover our cash needs until our tenants are able to pay in full.
Long-term Liquidity Requirements:
As of September 30, 2019,July 31, 2020, we have no debt principal payments due between now and JanuaryFebruary 2021 when our revolving credit facility, with a current outstanding amount of $100 million, comes due (which we can be extendedextend by one year). OurWith our liquidity at November 8, 2019, and subsequent to our equity offering that raised $1.026 billion in proceeds,July 31, 2020 of approximately $2$1.4 billion, along with our current monthly cash receipts from rent and loan interest, and regular distributions from our joint venture arrangements, and availability under our at-the-market equity program, we believe such liquidity is sufficient to fund our operations, debt and interest obligations, our firm commitments, (including expected funding requirements on our development projects and the LifePoint transaction), and dividends in order to comply with REIT requirements for the next twelve months.foreseeable future.
However, our acquisition pipeline continues to remain strong, so in order to fund our acquisitions andadditional investments, to fund debt maturities coming due in later years, we will need additional capital, and we believe the following sources of capital are generally availableor to strategically refinance any existing debt (including our Credit Facility coming due in the market and2022) in order to reduce interest rates, we may need to access one or a combination of them:the following sources of capital:
• | sale of equity securities; |
| • | issuance of new USD, EUR, or GBP denominated debt securities, including senior unsecured notes; |
| • |
|
| amending or entering into a new revolving credit facility and/or bank term |
| • | placing new secured loans on real estate located |
| • | proceeds from strategic property |
However, there is no assurance that conditions will be favorable for such possible transactions (particularly in light of the ongoing COVID-19 pandemic) or that our plans will be successful.
As of September 30, 2019, principalPrincipal payments due on our debt (which excludes the effects of any discounts, premiums, or debt issue costs recorded) as of July 31, 2020 are as follows (in thousands):
2019 |
| $ | — |
| ||||
2020 |
|
| — |
|
| $ | — |
|
2021 |
|
| 451,006 |
|
|
| 100,000 |
|
2022 |
|
| 744,950 |
|
|
| 788,900 |
|
2023 |
|
| — |
|
|
| 523,400 |
|
2024 |
|
| 1,657,160 |
| ||||
Thereafter |
|
| 4,954,950 |
|
|
| 5,089,950 |
|
Total |
| $ | 6,150,906 |
|
| $ | 8,159,410 |
|
Disclosure of Contractual Obligations
We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 and updated the schedule in the first two quartersquarter of 2019.2020. Except for changes to our debt,purchase obligations, as more fully described in Note 9 to Item 1 of this Form 10-Q, there have been no other significant changes as of SeptemberJune 30, 2019.2020. However, see Note 1110 for activities subsequent to SeptemberJune 30, 2019.2020.
The following table updates our contractual obligations schedule for these updates to our debt (in thousands):
Contractual Obligations |
| Less Than 1 Year (1) |
|
| 1-3 Years |
|
| 3-5 Years |
|
| After 5 Years |
|
| Total |
|
| Less Than 1 Year(1) |
|
| 1-3 Years |
|
| 3-5 Years |
|
| After 5 Years |
|
| Total |
| ||||||||||
4.625% Senior Unsecured Notes due 2029 |
| $ | — |
|
| $ | 83,828 |
|
| $ | 83,250 |
|
| $ | 1,149,750 |
|
| $ | 1,316,828 |
| ||||||||||||||||||||
Purchase obligations |
| $ | 684,486 |
|
| $ | 104,450 |
|
| $ | 68,784 |
|
| $ | 189,155 |
|
| $ | 1,046,875 |
|
(1) | This column represents the remaining |
Distribution Policy
The table below is a summary of our distributions declared during the two year period ended SeptemberJune 30, 2019:2020:
Declaration Date |
| Record Date |
| Date of Distribution |
| Distribution per Share |
|
| Record Date |
| Date of Distribution |
| Distribution per Share |
| ||
May 21, 2020 |
| June 18, 2020 |
| July 16, 2020 |
| $ | 0.27 |
| ||||||||
February 14, 2020 |
| March 12, 2020 |
| April 9, 2020 |
| $ | 0.27 |
| ||||||||
November 21, 2019 |
| December 12, 2019 |
| January 9, 2020 |
| $ | 0.26 |
| ||||||||
August 15, 2019 |
| September 12, 2019 |
| October 10, 2019 |
| $ | 0.26 |
|
| September 12, 2019 |
| October 10, 2019 |
| $ | 0.26 |
|
May 23, 2019 |
| June 13, 2019 |
| July 11, 2019 |
| $ | 0.25 |
|
| June 13, 2019 |
| July 11, 2019 |
| $ | 0.25 |
|
February 14, 2019 |
| March 14, 2019 |
| April 11, 2019 |
| $ | 0.25 |
|
| March 14, 2019 |
| April 11, 2019 |
| $ | 0.25 |
|
November 15, 2018 |
| December 13, 2018 |
| January 10, 2019 |
| $ | 0.25 |
|
| December 13, 2018 |
| January 10, 2019 |
| $ | 0.25 |
|
August 16, 2018 |
| September 13, 2018 |
| October 11, 2018 |
| $ | 0.25 |
|
| September 13, 2018 |
| October 11, 2018 |
| $ | 0.25 |
|
May 24, 2018 |
| June 14, 2018 |
| July 12, 2018 |
| $ | 0.25 |
| ||||||||
February 15, 2018 |
| March 15, 2018 |
| April 12, 2018 |
| $ | 0.25 |
| ||||||||
November 9, 2017 |
| December 7, 2017 |
| January 11, 2018 |
| $ | 0.24 |
|
We intend to pay to our stockholders, within the time periods prescribed by the Internal Revenue Code of 1986, as amended (“Code”), all or substantially all of our annual taxable income, including taxable gains from the sale of real estate and recognized gains on the sale of securities. It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid 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 ofto this Form 10-Q 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 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 our variable rate 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, all of which may affect our ability to refinance our debt, if necessary. The changes in the value of our facilities would be impacted also by changes in “cap” rates, which is measured by the current base rent divided by the current market value of a facility.
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.conditions (such as the impact caused by COVID-19 in the form of greater volatility in exchange rates). 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.
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 SeptemberJune 30, 2019,2020, our outstanding debt totaled $6.1$7.8 billion, which consisted of fixed-rate debt after considering the interest rate swap on the Australian term loan, of approximately $5.4$7.6 billion and variable rate debt of $0.7$0.2 billion. If market interest rates increase by 1%, the fair value of our debt at SeptemberJune 30, 20192020 would decrease by $6.0$9.2 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 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by $0.2less than $0.1 million per year. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by $0.2less than $0.1 million per year. This assumes that the average amount outstanding under our variable rate debt for a year is $0.7$0.2 billion, the balance of such variable rate debt at SeptemberJune 30, 2019.2020.
Foreign Currency Sensitivity
With our investments in Germany, Spain, Italy, Portugal, the United Kingdom, Spain, Italy, Switzerland, and Australia, we are subject to fluctuations in the euro, British pound, Swiss franc, and Australian dollar to U.S. dollar currency exchange rates. IncreasesAlthough we generally deem investments in these countries to be of a long-term nature, are 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 2020 operating results, to-date in 2019 and on an annualized basis, a 5% change to the following exchange rates would impacthave impacted our net income and FFO by the amounts below (in thousands):
|
| Net Income Impact |
|
| FFO Impact |
|
| Net Income Impact |
|
| FFO Impact |
| ||||
Euro (€) |
| $ | 172 |
|
| $ | 1,367 |
|
| $ | 96 |
|
| $ | 1,745 |
|
British pound (£) |
|
| 304 |
|
|
| 725 |
|
|
| 958 |
|
|
| 3,885 |
|
Swiss franc (CHF) |
|
| 418 |
|
|
| 978 |
|
|
| 179 |
|
|
| 774 |
|
Australian dollar (AUD $) |
|
| 508 |
|
|
| 1,482 |
|
|
| 596 |
|
|
| 1,536 |
|
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.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The information contained in Note 9 “Contingencies” of Part I, Item 1 of this Quarterly Report on Form 10-Q “Commitments and Contingencies” to condensed consolidated financial statements is incorporated by reference into this Item 1.
Item 1A. Risk Factors.
Please review the risk factors disclosed under the section entitled “Risk Factors” beginning on page 1517 of our Annual Report on Form 10-K for the year ended December 31, 20182019 and filed with the SEC on March 1, 2019,February 27, 2020, in our Current Report on Form 8-K filed with the SEC on April 8, 2020, as well as the supplementaladditional risk factor below.disclosed on page 32 in our Quarterly Report on Form 10-Q filed with the SEC on May 11, 2020. There have been no other material changes to the Risk Factors as presented in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
We have experienced and expect to continue to experience rapid growth, and our failure to effectively manage our growth may adversely impact our financial condition, results of operations and cash flows, which could negatively affect our ability to make distributions to our stockholders.
We have experienced and expect to continue to experience rapid growth through prior acquisitions and the potential acquisition of healthcare properties we are currently evaluating. Year-to-date, our total assets have grown by over 40%, and we have expanded our presence to seven countries. In addition, we continually evaluate property acquisition and development opportunities as they arise, and we typically have a number of potential acquisition and development transactions under active consideration.
There is no assurance that we will be able to adapt our management, administrative, accounting and operational systems, or hire and retain sufficient operational staff, to manage the facilities we have acquired and those that we may acquire or develop in the future. Additionally, investing in real estate located in foreign countries creates risks associated with the uncertainty of foreign laws, economies and markets, and exposes us to local economic downturns and adverse market developments.
Our failure to manage such growth effectively may adversely impact our financial condition, results of operations and cash flows, which could negatively affect our ability to make distributions to our stockholders. Our rapid growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and/or incur additional debt.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) | None. |
(b) | Not applicable. |
(c) | None. |
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
(a) | None. |
(b) | None. |
Item 6. Exhibits
Exhibit Number |
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31.1* |
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31.2* |
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31.3* |
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31.4* |
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32.1** |
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32.2** |
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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. | |
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Exhibit 101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document | |
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Exhibit 101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
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Exhibit 101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document | |
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Exhibit 101.LAB* |
| Inline XBRL Taxonomy Extension Label Linkbase Document | |
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Exhibit 101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
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Exhibit 104* |
| Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*) |
* | Filed herewith. |
** | Furnished herewith. |
(1) | Incorporated by reference to |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant hasregistrants have duly caused this report to be signed on itstheir behalf by the undersigned thereunto duly authorized.
MEDICAL PROPERTIES TRUST, INC. | ||
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By: |
| /s/ J. Kevin Hanna |
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| J. Kevin Hanna |
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| Vice President, Controller, Assistant Treasurer, and Chief Accounting Officer (Principal Accounting Officer) |
MPT OPERATING PARTNERSHIP, L.P. | ||
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By: |
| /s/ J. Kevin Hanna |
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| J. Kevin Hanna |
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| 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 12, 2019August 7, 2020
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