MEDICAL PROPERTIES TRUST INC

Previous wording

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can generally be identified by the use of forward-looking words such as "may", "will", "would", "could", "expect", "intend", "plan", "estimate", "target", "anticipate", "believe", "objectives", "outlook", "guidance", or other similar words, and include statements regarding our strategies, objectives, asset sales and other liquidity transactions (including the use of proceeds thereof), expected returns on investments and financial performance, expected trends and performance across our various markets, and expected outcomes from Steward's restructuring process. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K and as updated in our quarterly reports on Form 10-Q for future periods, and current reports on Form 8-K as we file them with the SEC under the Exchange Act. Such factors include, among others, the following:

Current wording

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can generally be identified by the use of forward-looking words such as "may", "will", "would", "could", "expect", "intend", "plan", "estimate", "target", "anticipate", "believe", "objectives", "outlook", "guidance", or other similar words, and include statements regarding our strategies, objectives, asset sales and other liquidity transactions (including the use of proceeds thereof), expected returns on investments and financial performance, expected trends and performance across our various markets, and expected outcomes from Prospect's bankruptcy process. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K and as updated in our quarterly reports on Form 10-Q for future periods, and current reports on Form 8-K as we file them with the SEC under the Exchange Act. Such factors include, among others, the following:

Previous wording

macroeconomic conditions, including due to geopolitical conditions and instability, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries, rising inflation and movements in currency exchange rates, and may negatively impact the financial condition of our tenants;

Current wording

macroeconomic conditions, including due to geopolitical instability and global trade disruptions, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries, rising inflation and movements in currency exchange rates, and may negatively impact the financial condition of our tenants;

Previous wording

the risk that property sales, loan repayments, and other capital recycling transactions do not occur as anticipated or at all, including the transactions described in Note 9 and Note 10 to the condensed consolidated financial statements;

Current wording

the risk that property sales, loan repayments, and other capital recycling transactions do not occur as anticipated or at all;

Previous wording

our ability to obtain debt financing on attractive terms or at all, as a result of changes in interest rates and other factors, which may adversely impact our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, or pursue acquisition and development opportunities;

Current wording

our ability to obtain debt financing on attractive terms or at all (including debt in our joint venture arrangements), as a result of changes in interest rates and other factors, which may adversely impact our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, or pursue acquisition and development opportunities;

Previous wording

the ability of our tenants and operators to operate profitably and generate positive cash flow, comply with applicable laws, rules and regulations in the operation of our properties, to deliver high-quality services, to attract and retain qualified personnel, and to attract patients;

Current wording

the ability of our tenants and operators to operate profitably and generate positive cash flow, remain solvent, comply with applicable laws, rules and regulations in the operation of our properties, to deliver high-quality services, to attract and retain qualified personnel, and to attract patients;

Previous wording

the economic, political and social impact of, and uncertainty relating to, the potential impact from health crises (like COVID-19), which may adversely affect our and our tenants’ business, financial condition, results of operations, and liquidity;

Current wording

the economic, political and social impact of, and uncertainty relating to, the potential impact from epidemics, pandemics or other public health crises (like COVID-19), which may adversely affect our and our tenants’ business, financial condition, results of operations, and liquidity;

Previous wording

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

Current wording

the accuracy of our methodologies and estimates regarding corporate responsibility metrics and targets, tenant willingness and ability to collaborate towards reporting such metrics and meeting such goals and targets, and the impact of governmental regulation on our and our tenants’ corporate responsibility efforts.

Previous wording

Our revenue is derived from rents we earn pursuant to the lease agreements with our tenants, from interest income from loans to our tenants and other facility owners, and from profits or equity interests in certain of our tenants’ operations. Our tenants operate in the healthcare industry, generally providing medical, surgical, rehabilitative, and behavioral health care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants’ operations are subject to economic, regulatory, market, and other conditions (such as the impact of the COVID-19 pandemic) that may affect their profitability, which could impact our results. Accordingly, we monitor certain key performance indicators that we believe provide us with early indications of conditions that could affect the level of risk in our portfolio.

Current wording

Our revenue is derived from rents we earn pursuant to the lease agreements with our tenants, from interest income from loans to our tenants and other facility owners, and from profits or equity interests in certain of our tenants’ operations. Our tenants operate in the healthcare industry, generally providing medical, surgical, rehabilitative, and behavioral health care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants’ operations are subject to economic, regulatory, market, and other conditions that may affect their profitability, which could impact our results. Accordingly, we monitor certain key performance indicators that we believe provide us with early indications of conditions that could affect the level of risk in our portfolio.

Previous wording

an evaluation of our operators’ administrative team, as applicable, including background and tenure within the healthcare industry;

Current wording

an evaluation of our operators’ management team, as applicable, including background and tenure within the healthcare industry;

Previous wording

trends in interest rates and other costs due to general inflation and availability and increased costs from labor shortages could adversely impact the operations of our tenants and their ability to meet their lease obligations;

Current wording

trends in interest rates and other costs due to general inflation and availability and increased costs from labor shortages could adversely impact the operations of our tenants and their ability to meet their lease/loan obligations;

Previous wording

Refer to our 2023 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include investments in real estate, purchase price allocation, loans, credit losses, losses from rent and interest receivables, investments accounted for under the fair value option election, and our accounting policy on consolidation. During the nine months ended September 30, 2024, there were no material changes to these policies.

Current wording

Refer to our 2024 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include investments in real estate, purchase price allocation, loans, credit losses, losses from rent and interest receivables, investments accounted for under the fair value option election, and our accounting policy on consolidation. During the three months ended March 31, 2025, there were no material changes to these policies.

Previous wording

At September 30, 2024, all of our investments are located in the U.S., Europe, and South America. Our total assets are made up of the following (dollars in thousands):

Current wording

At March 31, 2025, our portfolio consisted of 393 properties leased or loaned to 53 operators, of which three are under development. At March 31, 2025, all of our investments are located in the U.S., Europe, and South America. Our total assets are made up of the following (dollars in thousands):

Previous wording

Net loss for the nine months ended September 30, 2024, was ($2.0) billion, or ($3.33) per share compared to net income of $107.5 million, or $0.18 per diluted share, for the nine months ended September 30, 2023. This decrease in net income is primarily driven by the approximate $1.8 billion of impairment charges and negative fair value adjustments related to Steward and the international joint venture as further described in Note 3 to the condensed consolidated financial statements. In addition, we had an approximate $498 million unfavorable fair value adjustment to our investment in PHP Holdings in the first nine months of 2024 along with lower revenues from Steward and property sales. These decreases were partially offset by approximately $475 million of gains on real estate sales in the first nine months of 2024. Normalized funds from operations (“FFO”), after adjusting for certain items (as more fully described in the section titled “Reconciliation of Non-GAAP Financial Measures” in Item 2 of this Quarterly Report on Form 10-Q), was $375.0 million for the first nine months of 2024, or $0.62 per diluted share, as compared to $733.0 million, or $1.22 per diluted share, for the same period of 2023. This 49% decrease in Normalized FFO is primarily due to lower revenues from Steward moving to the cash basis of accounting on December 31, 2023, and as a result of various disposals in 2023 and 2024.

Current wording

Net loss for the three months ended March 31, 2025, was ($118.3) million, or ($0.20) per share compared to net loss of ($875.6) million, or ($1.46) per diluted share, for the three months ended March 31, 2024. This decrease in net loss is primarily driven by the $693 million of impairment charges in the first quarter of 2024 related to Steward and the international joint venture and an approximate $201 million unfavorable fair value adjustment to our investment in PHP Holdings in the first quarter of 2024, as compared to $76 million of impairment charges primarily related to Prospect and certain of our Colombia assets along with $30 million of unfavorable fair value adjustments primarily related to our investments in PHP Holdings and Aevis in the 2025 first quarter. See Note 3 to the condensed consolidated financial statements for further details. Normalized FFO, after adjusting for certain items (as more fully described in the section titled “Reconciliation of Non-GAAP Financial Measures” in Item 2 of this Quarterly Report on Form 10-Q), was $81.1 million for the 2025 first quarter, or $0.14 per diluted share, as compared to $141.8 million, or $0.24 per diluted share, for the 2024 first quarter. This 43% decrease in Normalized FFO is primarily due to lower revenues as a result of various disposals in 2024 and 2025 and higher interest expense from our recent refinancing activities.

Previous wording

Our total revenues for the 2024 third quarter are down $80.7 million, or 26%, over the same period in the prior year. This decrease is made up of the following:

Current wording

Our total revenues for the 2025 first quarter are down $47.5 million, or 18%, over the same period in the prior year. This decrease is made up of the following:

Previous wording

Income from financing leases – down $16.3 million primarily due to not receiving any cash for rent revenue from Prospect (cash basis tenant) in the third quarter of 2024, whereas we recorded $16.5 million of rent for this tenant in the 2023 third quarter as part of the Prospect Transaction as described in Note 3 to the condensed consolidated financial statements. These decreases were partially offset by $0.2 million from the increase in CPI above the lease contractual minimum escalations.

Current wording

Income from financing leases – down $6.5 million primarily due to not receiving any cash for rent revenue from Prospect (cash basis tenant) in the first quarter of 2025, whereas we received and recorded $6.6 million of rent for this tenant in the

Previous wording

Other income – down $0.8 million from the prior year as we had less direct reimbursements from our cash basis tenants for ground leases, property taxes, and insurance.

Current wording

Other income – down $0.4 million from the prior year as we had less direct reimbursements from our cash basis tenants for ground leases, property taxes, and insurance.

Previous wording

Real estate depreciation and amortization during the first nine months of 2024 decreased to $382.7 million from $526.1 million in 2023 due to accelerating the amortization of lease intangibles as part of the sale of hospital operations by Steward and re-leasing of five Steward Utah facilities to CommonSpirit in May 2023 (approximately $286 million) and the sale of various properties in 2024 and 2023. This decrease is partially offset by approximately $170 million of additional amortization expense recorded in 2024 primarily to fully amortize the intangibles associated with two master leases, including the Steward master lease that was terminated effective September 11, 2024.

Current wording

Real estate depreciation and amortization during the first quarter of 2025 decreased to $64.6 million from $75.6 million in 2024. This decrease is primarily due to the sale of various properties in 2024 and early 2025.

Previous wording

Property-related expenses totaled $5.0 million and $6.5 million for the quarters ended September 30, 2024 and 2023, respectively. Of the property expenses in the third quarter of 2024 and 2023, approximately $2.6 million and $3.3 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our condensed consolidated statements of net income.

Current wording

Property-related expenses totaled $7.0 million and $4.8 million for the quarters ended March 31, 2025 and 2024, respectively. Of the property expenses in the first quarter of 2025 and 2024, approximately $1.9 million and $2.3 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our condensed consolidated statements of net income. Net of reimbursement, our property-related expenses are higher than prior year due to having three additional vacant properties post Steward bankruptcy. We are in various stages of re-tenanting or selling our vacant properties, which make up less than 1% of our total assets.

Previous wording

During the three months ended September 30, 2024, the gain on sale of real estate of $91.8 million primarily relates to the sale of eight Dignity Health facilities and 11 UCHealth facilities as more fully described in Note 3 to the condensed consolidated financial statements.

Current wording

During the three months ended March 31, 2025, the gain on sale of real estate of $8.1 million relates to the sale of two facilities and an ancillary facility as described in Note 3 to the condensed consolidated financial statements. During the three months ended March 31, 2024, we disposed of three facilities and two ancillary facilities resulting in a net loss of $1.4 million.

Previous wording

Earnings from equity interests was $21.6 million for the quarter ended September 30, 2024 compared to the $11.3 million of earnings for the same period in 2023. This increase is primarily from our share of income in the Utah partnership that was formed in the 2024 second quarter, which included a $13.5 million positive fair value adjustment primarily related to the underlying real estate, (as further described in Note 3 to the condensed consolidated financial statements), partially offset by not recording any income in the third quarter of 2024 related to our Massachusetts-based partnership with Macquarie.

Current wording

Earnings from equity interests was $14.0 million for the quarter ended March 31, 2025, compared to $10.5 million for the same period in 2024. This increase is primarily from our share of income in the Utah partnership that was formed in the 2024 second quarter, which included a $6 million positive fair value adjustment primarily related to its interest rate swap, (as further described in Note 3 to the condensed consolidated financial statements).

Previous wording

Debt Refinancing and Unutilized Financing (Costs) Benefit

Current wording

Debt Refinancing and Unutilized Financing Costs

Previous wording

Other expense for the first nine months of 2024 was $566.8 million, compared to $25.4 million of income in the prior year. For 2024, we recognized an approximate $498 million unfavorable fair value adjustment to our investment in PHP Holdings. In addition, we incurred a $7.8 million economic loss from the sale of our interest in the Priory syndicated term loan and approximately $46.5 million of legal and other professional expenses associated with the Steward bankruptcy, responding to certain defamatory statements published by certain parties, including those who are defendants to a lawsuit we filed on March 30, 2023, among other things. For 2023, we had an approximate $30 million favorable non-cash fair value adjustment on our investment in PHP Holdings and a CHF 20 million (approximately $22 million) unrealized gain on our equity investment in Swiss Medical Network, partially offset by $13 million of expenses associated with responding to defamatory statements previously mentioned.

Current wording

Other expense for the first quarter of 2025 was $45.2 million, compared to expense of $229.3 million in the prior year. For 2025, we recognized approximately $30 million in unfavorable non-cash fair value adjustments from our investments marked to fair value, primarily due to an approximate $18 million unfavorable adjustment to our investment in PHP Holdings and approximately $12 million related to our investment in Aevis. For 2024, we recognized approximately $216 million in unfavorable non-cash fair value adjustments from our investments marked to fair value, primarily due to an approximate $201 million unfavorable adjustment to our investment in PHP Holdings. In the 2024 first quarter, we recognized a $7.8 million economic loss from the sale of our interest in the Priory syndicated term loan.

Previous wording

Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $9.0 million income tax expense for the three months ended September 30, 2024 is primarily based on the income generated by our investments in the U.K. and Germany and slightly less than the $10.1 million income tax expense in the third quarter of 2023.

Current wording

Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $9.4 million income tax expense for the three months ended March 31, 2025, is primarily based on the income generated by our investments in the U.K. and Germany and slightly less than the $10.9 million income tax expense in the first quarter of 2024.

Previous wording

We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $386 million should be reflected against certain of our international and domestic net deferred tax assets at September 30, 2024. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and potentially incur higher income tax expense in future periods as income is earned.

Current wording

We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $436 million should be reflected against certain of our international and domestic net deferred tax assets at March 31, 2025. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and potentially incur higher income tax expense in future periods as income is earned.

Previous wording

The following table presents a reconciliation of net (loss) income attributable to MPT common stockholders to FFO and Normalized FFO for the three and nine months ended September 30, 2024 and 2023 (in thousands except per share data):

Current wording

The following table presents a reconciliation of net loss attributable to MPT common stockholders to FFO and Normalized FFO for the three months ended March 31, 2025 and 2024 (in thousands except per share data):

Previous wording

As of September 30, 2024, we are in compliance with all such financial and operating covenants. However, as of September 30, 2024, we would not have been in compliance with certain covenants without the Amendments discussed above. Our ability to maintain compliance with our debt covenants, including the reset leverage and interest coverage requirements after the end of the Modified Covenant Period, depends primarily on reducing debt through asset sales, retention of cash generated from our monthly rent and interest receipts, extending maturities of certain debt instruments, and other access to capital. We expect to continue to comply with these covenants, but if we are not in compliance, including following the expiration of the Modified Covenant Period, we would have to seek additional amendments to our covenants. However, no assurances can be made that such amendments will be approved by our lenders. If an event of default occurs and is continuing under the Credit Facility, the entire outstanding balance may become immediately due and payable which could have a material adverse impact to the Company.

Current wording

As of May 7, 2025, we are in compliance with all such financial and operating covenants.

Previous wording

During the first nine months of 2023, we generated approximately $370.4 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows (along with cash on-hand and borrowings on our revolving credit facility) to fund our dividends of $524.2 million.

Current wording

During the first three months of 2024, we generated approximately $74.3 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. In addition, we received approximately $133 million during the quarter from sales of our interest in the syndicated Priory term loan, the remaining minority equity interest in Lifepoint Behavioral, and certain real estate properties. We used our operating cash flows, asset sale proceeds, and cash on-hand and borrowings under our revolving credit facility to fund our dividends of $92.8 million and certain investing activities.

Previous wording

As described previously, our monthly rent and interest receipts and distributions from our joint venture arrangements along with our current liquidity of approximately $1.2 billion at November 8, 2024, are typically enough to cover our short-term liquidity requirements. However, to address upcoming debt maturities (as outlined below), we may need to look to other sources, which may include one or a combination of the following:

Current wording

As described previously, our monthly rent and interest receipts and distributions from our joint venture arrangements along with our current liquidity of approximately $1.3 billion at May 7, 2025, are typically enough to cover our short-term liquidity requirements. However, to further improve cash flows and to fund future debt maturities, we may need to look to other sources, which may include one or a combination of the following:

Previous wording

further property sales or joint ventures, including the completion of the binding sale of three Connecticut facilities to Yale with a contract price of $355 million;

Current wording

further property sales or joint ventures;

Previous wording

monetizing our investment in operators, including our investment in PHP Holdings that is expected to close in the first half of 2025;

Current wording

monetizing our investment in operators, including our investment in PHP Holdings that is expected to close in 2025;

Previous wording

reducing our dividend (or moving to a stock dividend), while still complying with REIT requirements and credit facility covenants, as amended on August 6, 2024;

Current wording

reducing our dividend (or moving to a stock dividend), while still complying with REIT requirements and credit facility covenants;

Previous wording

However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful. As a result of our Quarterly Report on Form 10-Q for the period ended March 31, 2024, not being filed timely, we are currently ineligible to file a new shelf registration statement on Form S-3 or access our existing registration statement on Form S-3 for sales of securities, including under our ATM program, until June 1, 2025, which may impair our ability to raise capital in the public markets. While we are able to use other registration avenues for public offerings, such avenues are less expeditious and efficient than a shelf registration statement on Form S-3. See "Risk Factors" in our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

Current wording

As a result of our Quarterly Report on Form 10-Q for the period ended March 31, 2024, not being filed timely, we are currently ineligible to file a new shelf registration statement on Form S-3 for sales of securities, including under an ATM program. However, we will regain such eligibility on June 1, 2025.

Previous wording

We presented our contractual commitments in our 2023 Annual Report on Form 10-K and provided updates in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024. Except for the changes noted below, there have been no significant changes through November 8, 2024.

Current wording

We presented our contractual commitments in our 2024 Annual Report on Form 10-K, which factored in our debt refinancing activities in February 2025. There have been no significant changes through May 7, 2025 other than activity on the revolving portion of our Credit Facility as reflected in the table below as of May 7, 2025 (in thousands):

Previous wording

The table below is a summary of our distributions declared during the two year period ended September 30, 2024:

Current wording

The table below is a summary of our distributions declared (and paid in cash) during the two year period ended March 31, 2025:

Previous wording

It is our policy to make sufficient distributions to stockholders in order for us to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and to efficiently manage corporate income and excise taxes on undistributed income. However, our Credit Facility limits the amount of dividends we can make- see Note 4 to the condensed consolidated financial statements for further information.

Current wording

It is our policy to make sufficient distributions to stockholders in order for us to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and to efficiently manage corporate income and excise taxes on undistributed income. Although we have only made cash distributions historically, we may consider making stock dividends in the future for liquidity purposes, while still complying with REIT requirements. In addition, our Credit Facility limits the amount of cash dividends we can make- see Note 4 to the condensed consolidated financial statements for further information.