A
n
n
u
a
l
R
e
p
o
r
t
3
Letter to Investors
Wins + Results
Market + Influence
5
13
21
33
People + Progress
World + Community + Social Responsibility
39
Reports + Numbers
“
WITH MORE HOSPITAL ACQUISITIONS
THAN IN ANY OTHER SINGLE YEAR
IN MPT’S HISTORY, 2019 SET A NEW
STANDARD FOR WHAT WE CAN
ACHIEVE, AND WE HAVE STARTED
2020 BY HITTING THE GROUND
RUNNING, ALREADY COMPLETING
MORE THAN $1.9 BILLION IN
ADDITIONAL ACQUISITIONS.
”
GLOBAL LEADERSHIP
2019 WAS A RECORD-BREAKING YEAR
Medical Properties Trust cemented itself
as the clear global leader in providing
capital to acute care facilities in 2019. In
a truly marquee year, MPT built upon the
strong financial and strategic foundation
laid since its early years.
Among MPT’s accomplishments, our team
completed a record $4.5 billion in domestic
and international acquisitions with new and
existing operators, highlighted by several
landmark transactions. In May and June,
we entered two exciting new countries as
we acquired interests in 13 Swiss and 11
Australian hospitals for an aggregate dollar-
equivalent investment of $1.3 billion. Our
attention was then immediately turned back
to the United States when we announced
a further $1.75 billion in acquisitions of 24
hospitals from several operators, all new to us,
in California, Pennsylvania and Kansas. Just
past the halfway mark of 2019, we had already
surpassed our acquisition guidance and
established new records for the full year. With
the addition of these outstanding hospitals
to our portfolio, we initiated new operator
relationships, extended into new geographic
markets and expanded service lines, including
not-for-profit and behavioral.
In November, we announced a $700 million
transaction with LifePoint Health and
Apollo Global Management for 10 acute care
hospitals in six U.S. states, strengthening
our relationship with both strategically
important parties and bringing our total
investment with LifePoint to 17 acute care
hospitals and $1.2 billion. Late in the fourth
quarter, we announced that in early 2020
we would complete a $2 billion acquisition
of 30 hospital facilities in the U.K., adding
to the eight U.K. hospitals we acquired in
August for $434 million. MPT has assembled
an irreplaceable portfolio of private hospitals
that are critical to the delivery of acute health
services across the U.K.
These major transactions join numerous
others made over the course of the year.
When combined, these transactions bring
the company’s pro forma total gross assets to
approximately $16.5 billion, including $13.5
billion in general acute care hospitals, $1.8
billion in inpatient rehabilitation hospitals
and $0.4 billion in long-term acute care
hospitals. Our portfolio—which includes
approximately 390 properties and more than
41,000 licensed beds in 34 states and eight
countries, and relationships with 41 hospital
operating companies―is one of the strongest
in the REIT world.
Our performance in 2019 has proven more
than ever MPT’s ability to execute multiple
large transactions simultaneously and
seamlessly, providing us a key competitive
advantage. Our commanding market share
is a direct result of this focus and strong,
strategic execution, which we will continue to
deploy as we advance our leadership position
in the market.
NEW RELATIONSHIPS AND NEW PROPERTIES
IN GROWING INTERNATIONAL MARKETS
We made exciting progress this year to enhance
our international presence with new portfolio
properties and new relationships with world-
class operators. With approximately $3.8 billion
in international acquisitions in 2019 and in
early 2020, MPT now has hospitals located in
the United States, U.K., Germany, Switzerland,
Spain, Italy, Portugal and Australia.
The first large transaction we closed this
year expanded MPT’s business into a third
continent. Our $0.9 billion transaction with
Healthscope for 11 hospitals in Australia
added critical assets in the country’s
strongest markets to the MPT portfolio.
This transaction also established an
important new relationship with Australia’s
second largest private hospital operator, with
Healthscope becoming one of MPT’s leading
operators by size and rental revenue.
In May, we entered the Swiss healthcare
market by acquiring a 46% interest in a Swiss
healthcare real estate company, Infracore
SA, representing approximately $410 million
in real estate value as Infracore’s largest
shareholder. This transaction presented a
unique opportunity for MPT to partner with
Switzerland’s second largest private hospital
operator and establish a new long-term
relationship with Swiss Medical Network.
In Spain, MPT made an approximately $130
million equity investment for a 45% stake
in two joint venture entities. These entities
own the real estate of two Madrid acute care
hospitals leased to and operated by HM
Hospitales, one of the largest private hospital
operators in Spain.
We also made our first hospital investment
in Portugal. For approximately $31 million,
MPT acquired a newly constructed hospital in
Viseu operated by the José de Mello Group,
Portugal’s largest private operator. This
was particularly exciting for MPT given the
opportunities in the Portuguese healthcare
market to fill increasing coverage gaps in
the public system. It also allowed MPT to
establish itself in an increasingly consumer-
driven healthcare marketplace with a leading,
growth-oriented hospital operator.
In addition to our completed acquisition of 30
U.K. hospital facilities in January 2020, MPT
acquired eight Ramsay Health Care hospitals
for $434 million and BMI The Harbour Hospital
for $45 million in the U.K.
To support our geographic expansion, we
have grown our international office space as
well, expanding our operations in Luxembourg
and naming Luke Savage, vice president,
International Acquisitions, as the senior head
there. And we expect to open an Australian
office, in Sydney, in the second quarter of 2020.
DELIVERING ACCELERATED VALUE GROWTH
AND SIGNIFICANT SHAREHOLDER RETURNS
This was a year of unprecedented growth for
MPT. We increased our enterprise value from
approximately $10 billion at the end of 2018
to $19 billion―a remarkable 90% increase.
Our portfolio generates strong, stable cash
flows, with 81% of our rent and interest
expiring beyond 2029, positioning us with
the right calibration of financial flexibility and
investments to continue generating immense
value for shareholders.
We are proud to have delivered a market-
leading 39% return to shareholders in 2019.
From our IPO in 2005 through the end of
2019, we delivered to our shareholders cash
dividends and increased share value exceeding
$6.6 billion. We are proud of this extraordinary
creation of real value for our investors and are
excited about the opportunities we see in the
future for additional value creation in the form
of growing cash dividends and share value.
LEADING THE GLOBAL MARKET IN 2020
AND BEYOND
As the single largest year of acquisition
growth in MPT’s history, 2019 set a new
standard for what we can achieve. We
have started 2020 by hitting the ground
running with completed acquisitions
already approximating $1.9 billion and by
announcing an annual normalized FFO per
share guidance increase of more than 25%
over actual 2019 results.
In the year ahead, we are focused on
developing a vibrant pipeline that exceeds
$3 billion of property to meet a full $5 billion
in 2020. We still see tremendous unmet need
for behavioral hospitals in the U.S., and as
we see growing recognition of the benefits of
long-term lease financing of core hospital real
estate, we expect MPT to be at the forefront
of meeting those financing needs.
I am incredibly proud of the enormous
drive of our team and all that we have
accomplished over such an exciting year.
With a continued focus on deliberate, value-
creating actions, I am confident 2020 will be
another great chapter in the MPT story.
On behalf of everyone at MPT, I thank you
for your continued support of Medical
Properties Trust. We hope to continue driving
outstanding value for our shareholders for
years to come.
Sincerely,
Edward K. Aldag, Jr.
Chairman, President and CEO
3
Letter to Investors
4
Medical Properties Trust Annual Report 2019 WINS +
RESULTS
In 2019, we strengthened an already strong position in the
marketplace. Key moves acted as a springboard that propelled
us into a new decade. See how our leadership guided us
toward a bigger global influence and into a new era of our
company history.
5
6
Medical Properties Trust Annual Report 2019 “
A
BANNER
YEAR, LONG
IN THE
MAKING
Y E A R S F R O M N O W , 2 0 1 9 W I L L
S T A N D O U T A S A M O M E N T O U S
Y E A R I N M P T ' S H I S T O R Y. B U T A L L
T H A T T H E C O M P A N Y A C H I E V E D
W A S S E T I N M O T I O N F R O M M P T ' S
B E G I N N I N G S .
The year 2019 was unlike any other,”
says Edward K. Aldag, Jr., chairman,
president and CEO of MPT, ticking off just a
few accomplishments in 2019. In one single,
remarkable year, MPT:
• Achieved 64% growth in assets year
over year
• Delivered a 39% return to shareholders
• Grew from a $10 billion company to a
$19 billion company shortly after year-
end―a stunning 90% leap that vaulted
the enterprise from a mid-cap to large-cap
player in its marketplace
“But even prior to that, we had achieved more
than almost 30% compound annual growth
over the last six or seven years leading up to
2019,” Aldag says. “We had truly exceeded
anything anybody thought we could do.”
After building on consistent, unmatched
growth since its inception, Aldag anticipated
the possibility of an extraordinary 2019.
The company had laid the groundwork for
blockbuster acquisitions―such as the $700
million purchase of LifePoint Health, Inc.,
properties in the U.S. and the expansion to
Australia with 11 Healthscope, Ltd., hospitals.
Steadfast in its mission to invest in premier,
acute care hospitals and build relationships
with best-in-class operators, MPT always has
had an international presence in mind.
“We've been consciously planning for years
to be able to achieve the results we did in
2019,” Aldag says. “Acquisitions of complicated
hospital systems can take a long time—and we
foresaw a rapid expansion in the hospital real
estate market. So when operators, investors,
private equity sponsors and conditions
converged in 2019, MPT had the people,
the capital, the industry relationships and
the systems that could execute multiple
transactions across the globe—clearly
establishing MPT as the undisputed global
leader in hospital real estate finance.”
More than ever, the industry can clearly see
MPT as the undisputed global leader in
hospital real estate financing.
KEY DRIVERS IN 2019
The laudable 2019 performance of the
company resulted from these key goals:
1. To increase geographic diversification. MPT
now operates in eight countries across three
continents. With approximately 390 total
facilities in its portfolio, MPT grew its presence
internationally in 2019 with key transactions
in Switzerland and Australia, along with new
holdings in Madrid, Spain, and Viseu, Portugal.
It also grew domestically, leveraging past
relationships to acquire LifePoint hospitals
across six states and Prospect hospitals in the
West and East regions of the U.S.
2. To increase operator diversification.
With any operator MPT considers, it does due
diligence, not just in vetting the company
itself, but vetting every individual property
that’s part of a potential deal. And in 2019,
MPT added new operators, going from 30 to 41
world-class operators.
With so many new first-class operators, MPT
improved the position of its valued operator
2 0 1 9 A S S E T S C L O S E D
$4.5B
An increase of almost 600% in 2019
E N T E R P R I S E V A L U E
+90%
since 2018
N U M B E R O F O P E R A T O R S
2019
2018
41
30
$19B in early 2020 vs. $10B in 2018
Accounting for 95% of assets
Steward Health Care as a percentage of its
overall portfolio so that it went from 40% to
less than 25% only 12 months later. Now, no
single property accounts for more than 2.3%
of the MPT portfolio.
3. To take advantage of greatly improved cost
of capital. Financial conditions were right to
facilitate the record amount of transactions
MPT closed on in 2019. “A lot of things came
together last year,” says Charles Lambert,
treasurer and managing director, Capital
Markets. “It was a good time to borrow money,
rates were low in the U.S. and they were lower
outside the U.S. Moreover, our cost of equity
capital declined as our share price and dividend
yield continued their recent trend of substantial
improvement. The stars aligned between
available inventory that fit strategically into our
overall plans and attractive financial rates.”
MPT’S MISSION FROM THE START
“ What happened in 2019 wasn’t by accident,”
says Steve Hamner, MPT’s chief financial
officer. “Everything converged last year—all
of our efforts, going back to when we formed
the company.”
MPT held its initial public offering in 2005,
and no other company was doing exactly
what MPT set out to do. “Our investment
thesis is that we’re only going to invest in
hospitals,” says Aldag. “And that strategy has
been a brilliant success.”
The strategy has worked in large part because
so many of MPT’s executives and senior
leadership have backgrounds in hospitals
and other healthcare businesses, which
sets MPT apart from competing real estate
investors. This hospital expertise has always
given the company an advantage in the
underwriting process.
MPT invests not only with financial
advantages in mind, but also with a sincere
desire to improve the quality of healthcare in
communities around the globe. That mindset
has guided MPT in every decision. The
associations among the company, private
equity investors, shareholders and top-tier
operators have worked to everyone’s favor.
“There has been no one who has done this,”
Hamner says. “ We established this market
over the last 15 years, building a market that
manifested itself in a huge way in 2019. Now
there are so many operators, equity sponsors,
sovereign wealth funds and investment
banks who are looking at these types of
transactions, who see that we have proven
the value of this model.” MPT has the most
experience and best track record using this
strategy and is best positioned for more
success in executing it on a global scale.
After guiding MPT to unprecedented success,
company founders Aldag, Hamner and
Emmett E. McLean, executive vice president,
chief operating officer, know they can’t dwell
on all they have achieved. “ We don’t sit
around and spend time thinking about what
we’ve done,” McLean says. “ You’re only as
good as what you’re doing now.”
With a great position on the international
stage and a robust pipeline, MPT qualifies
as good—very good. In fact, 2019 showed
definitively that no one leads this industry
like this company does.
7
Wins + Results
8
Medical Properties Trust Annual Report 2019 From left to right: Charles R. Lambert, treasurer and managing director of Capital Markets;
Rosa H. Hooper – vice president, managing director of Asset Management and Underwriting; R. Lucas Savage – vice president, International Acquisitions;
Edward K. Aldag, Jr. – chairman, president and chief executive officer; R. Steven Hamner – executive vice president and chief financial officer;
Emmett E. McLean – executive vice president, chief operating officer and secretary; J. Kevin Hanna – vice president, controller and chief accounting officer
SEASONED EXPERTISE,
HANDS-ON LEADERSHIP
T H E F O U N D E R S O F M P T C O N T I N U E T O G U I D E T H E C O M PA N Y ’ S G L O B A L G R O W T H W I T H
AT T E N T I O N T O T H E D E T A I L S O F E V E R Y M O V E , E V E R Y D E C I S I O N , E V E R Y M I L E S T O N E .
Avisionary leader, Edward K. Aldag, Jr., founded MPT with the clear mission of
providing capital for hospitals. As chairman, president and chief executive officer,
he has the experience and insight that has been vital to MPT’s unprecedented growth,
and his hands-on approach ensures its continued success.
Aldag and his co-founders, Steve Hamner and Emmett E. McLean, stay involved with
every aspect of the business. This trio provides leadership and learning opportunities
for talented senior leaders and their teams, imparting all they know from running this
business for so many years. But as they pass on all their experience, they stay intimately
involved in the day-to-day. “ We have really smart people, and we’re bringing them
along. But we built this business in an industry that’s focused on hospital capital
solutions, and it requires significant input from the founding executives,” says Hamner.
As MPT embarks on a new decade, these three will continue to roll up their sleeves.
EDWARD K. ALDAG, JR.
CH A I R M A N , P R E S I D E N T
A N D CH I E F E X E CU T I V E O F F I CE R
R. STEVEN HAMNER
E X E CU T I V E V I CE P R E S I D E N T
A N D CH I E F F I N A N CI A L O F F I CE R
EMMETT E. McLEAN
E X E CU T I V E V I CE P R E S I D E N T
A N D CH I E F O P E R AT I N G O F F I CE R
From his office at the MPT headquarters,
Aldag feels just as energized by the MPT
mission today as he did when he founded
the company. But he doesn’t stay in his office
often. A believer in dealing face to face with
potential business partners, he orchestrated
key transactions in 2019 by staying on the road
and in the air, willing to go wherever he could
to learn more about prospective operators
and share more about why MPT makes such a
strong business partner.
From the beginning, Aldag envisioned a
company that focuses on hospitals alone, and
he’s steered the enterprise to a global force in
an industry that MPT pioneered. “I’ve had a lot
of different jobs. This is the proudest I’ve ever
been,” Aldag says.
With an eagle eye on the details, Hamner did
not delegate the execution of the landmark
transactions that made 2019 such a banner
year. A certified public accountant by trade,
Hamner brought years of business skill
and prowess as a founder of MPT, and he’s
demonstrated his talents and belief in the
company’s mission for 17 years. As Hamner
shares his experience with senior leaders and
underwriters, he has no plans to scale back
his involvement. “Hospitals are big, expensive
assets. The deals we do are all different from
other real estate acquisitions. There’s nothing
cookie-cutter about them,” Hamner explains.
Being a founding partner in MPT came as a
natural extension of McLean’s background in
healthcare finance and investment banking.
His finance skills and insight, paired with a
strong interest in community and civic causes,
have guided MPT to astute business decisions
that keep compassionate care at its heart.
“Seeing the company increase its presence in
areas where we already were doing business
and expand our holdings as well has been
gratifying,” McLean says. And by growing the
company, MPT feels greater responsibility to
give back.
In 2019, McLean helped the MPT Charity
Committee make a record number of financial
contributions to causes in Alabama and
abroad, and the company gave a record
amount. “MPT has always contributed and
supported great causes,” McLean says, “but
now we’re able to make a real difference in the
world—in the industry as a whole and in the
communities where we have assets.”
9
Wins + Results
10
Medical Properties Trust Annual Report 2019 Properties
389
Operators
41
Countries
8
Continents
3
U.S. States
34
MPT
PORTFOLIO
Strong domestically, growing internationally, MPT continues
to build and maintain strategic relationships in the U.S.,
Europe and now Australia.
Pro forma portfolio statistics are as of December 31, 2019,
and assume fully funded commitments.
66.5%
United States
Global Portfolio Mix
15.8%
United Kingdom
2.4%
Spain, Italy,
Portugal &
Other
International
Assets
6.8%
Germany
5.4%
Australia
3.1%
Switzerland
9
8
2
,
1
4
7
3
4
,
3
3
1
2
5
,
2
3
2
4
1
,
7
2
0
0
3
,
1
2
3
2
8
,
9
1
Beds
41,289
8
6
6
,
9
7
3
5
,
6
1
5
3
,
5
5
1
1
3 5
5
4
,
,
3
2
7
5
,
4
4
7
6
,
4
2
4
1
0 2
3
0
,
,
1
5
6
4
HOSPITAL BEDS OWNED (2004 – 2019)
11
12
Medical Properties Trust Annual Report 2019 MARKET +
INFLUENCE
We’ve built our business on the acute care market, but it’s
not a small space. As the medical community sees how our
strategy works in the right places, we’re excited about our
future. Here’s why you should be, too.
13
14
Medical Properties Trust Annual Report 2019 84Number of years men who
were age 65 on April 1, 2019,
can expect to live
1 3in
Number of 65-year-olds
who will live past age 90
1 7in
Number of 65-year-olds
who will live past age 96
AHEAD OF
INDUSTRY
TRENDS
E V E R Y T H I N G H A P P E N I N G
I N H E A LT H C A R E C O N V I N C E S
M P T L E A D E R S H I P T O R E M A I N
U N W A V E R I N G I N I T S M I S S I O N
T O P U R S U E T H E A C U T E
C A R E S E C T O R .
MPT’s intentional choice to focus on the
acute care sector has proven the secret
to incredible growth, benefiting communities
around the world—and benefiting MPT
shareholders as well.
it is presently financed by parties such as
MPT,” says Edward K. Aldag, Jr., chairman,
president and CEO of MPT and its primary
founder. “ We have many years of growth
potential ahead of us.”
Guided by this singular mission, MPT has
strategically read the healthcare landscape
and ascended to its preeminent position on
the world stage. The company is responding
to a need for hospital financing, and that
need is not going to wane. Hospitals are
central to the delivery of healthcare in the
communities they serve, wherever they are in
the world. That’s why MPT’s 2019 investments
in new markets such as Portugal, Switzerland
and Australia, along with new relationships
with innovative operators in the U.S., further
position it for even greater growth.
Trends related to demographics, technology
and healthcare best practices all support
MPT’s mission and point toward rapid future
growth. “The global market for hospital
real estate is so large as to be almost
immeasurable. And only a small fraction of
READY FOR THE “ SILVER TSUNAMI”
“ You can hardly overestimate the general
trend of the demographics in healthcare,”
says Emmett E. McLean, chief operating
officer at MPT, as he rattles off stats about
baby boomers aging. For instance, on
average, people ages 65-74 spend four
times the number of days in hospitals as the
under-65 population. And every single day
in the U.S. alone, 10,000 people turn 65. It
follows that those ages 75-84 and 85-plus use
hospitals 6.4 times and 8.7 times the rate of
the under-65 group, respectively.
These utilization statistics bode well for
hospitals. The so-called “Silver Tsunami”
of aging boomers is still breaking over the
industry, so the need for acute care is urgent
and ongoing. And the coming generations
will require care eventually, too. In fact, in
meetings with older investors, MPT talks
about how hospitals are good for these
investors for two reasons: 1) hospitals take
care of them, and 2) they generate cash
flows that allow MPT shareholders to receive
a growing amount of dividends in their
retirement years.
Use by older Americans also means that
hospitals have a steady payment source due to
Medicare reimbursement, providing revenue
to help pay rent to MPT and dividends to its
shareholders. As technology improves and
people live longer, there will be a need for
quality facilities, and MPT capital will help
ensure hospitals are prepared to serve.
Indeed, many surgeries and procedures that
once required an overnight stay now happen
with same-day service, allowing hospitals
to treat more patients more efficiently. “As a
result, hospitals are helping additional people,
doing more in their communities and reducing
the overall cost of healthcare,” says Aldag.
Some hospital systems are even providing
outpatient services via stand-alone ERs or
clinics in suburban areas, boosting their roles
in their communities. MPT is seeing a general
rise in hospital revenues, and a percentage
of that higher revenue is coming from non-
overnight, outpatient care. MPT tenants are
taking advantage of that trend, responding to
interest in this type of same-day service.
BENEFITING FROM OFFERING
OUTPATIENT CARE
The improved technology helping patients
enjoy longer lives also means that hospitals can
now provide more frequent outpatient services.
FINDING SUCCESS IN NEW MARKETS
In addition to MPT’s acquisitions of new
European and Australian hospitals in 2019, its
$700 million acquisition of 10 LifePoint Health
hospitals illustrates how MPT has grown its
presence in a broader range of U.S. markets.
Source: Social Security Administration
Along with properties in large American cities,
investors can now see MPT properties dotting
cities and towns that may be a two-hour
drive from large urban centers. Rosa Hooper,
vice president and managing director, Asset
Management and Underwriting, explains that
MPT appreciates the critical role these hospitals
play in their communities, serving residents
looking for quality care without having to drive
to larger cities. “We’re proud to own these
properties—some of the top hospitals and
strongest performers in their areas,” she says.
The newly acquired LifePoint facilities are just
one way the company improved the geographic
diversity of the MPT portfolio in 2019. And the
capital solutions MPT provided these and other
hospitals allow them to function better and
meet more healthcare needs within their local
populations.
Achieving that in more places in the U.S. and
around the world is what MPT is all about.
15
Market + Influence
16
Medical Properties Trust Annual Report 2019 “WE HIRE PEOPLE THAT CAME OUT
OF THE HEALTHCARE INDUSTRY
SO THAT WE COULD LITERALLY
OPERATE ANY ONE OF OUR
HOSPITALS IF WE HAD TO.”
Emmett E. McLean
Chief Operating Officer, MPT
One key reason for MPT’s past success
emerges from the details of how the company
runs its day-to-day operations. Aldag tells
of one California hospital that MPT acquired
after the operator grew frustrated with its
previous landlord’s inability to relate to its
needs. The landlord took six months to make
a decision about a bed configuration change
request. “ We make those types of decisions
in 30 minutes,” Aldag says.
He and the company’s underwriting staff have
intimate knowledge of the healthcare industry
that fuels every transaction MPT makes,
every lease it signs and every relationship
it maintains. And MPT’s healthcare industry
insight foretells the company’s future success,
no matter which direction on the globe it
goes next. “There’s no one with our expertise,”
Aldag adds. “ We understand all facets of this
business―finance, real estate and, most
important, healthcare.”
UNDERSTANDING HEALTHCARE
experience that there are good days
and bad days.”
LEADING THE MARKET
When Aldag established MPT, the goal was
to root the whole enterprise in healthcare
expertise that focused exclusively on
hospitals. “That was the whole intent,” says
Emmett E. McLean, executive vice president
and chief operating officer, “to hire people
who came out of the healthcare industry so
that we could literally operate any one of our
hospitals if we had to.”
One of those individuals, Luke Savage, MPT
vice president, International Acquisitions,
sees the benefits of this philosophy play out
just about every day. “ We have many people
who worked in healthcare or at hospitals
before they came to MPT. So during the
underwriting process, we’re asking key
questions that show we understand hospital
operations,” Savage says. “ We’re able to
connect with people who do hospital work,
and we’re going to be an easy financing
source to deal with because we know from
NEW BUSINESS ON A GLOBAL SCALE
It’s MPT’s healthcare know-how that allows
it to maintain such strong relationships with
its 389 facilities and 41 operators. It’s what
helps the company draw new business, with
essentially unlimited potential.
From its commanding position as leader of the
world in hospital real estate finance, MPT has
a vibrant pipeline of acquisition opportunities.
Aldag says first-time transactions in Latin
America are on the horizon and he looks
forward to further transactions in Europe.
MPT’s brand-new presence in Australia gives
the company a foothold in a vast country in
and of itself, but also in the Pacific Rim.
MPT takes great pride in helping hospitals
unlock capital and put it to work to
better serve their patients. They use it for
renovations, new equipment, recapitalizations,
new doctors and staff, and other needs. As
more and more hospital systems see how well
such a model works, the market will continue
to grow.
Demonstrating that MPT has tapped just a
fraction of America’s hospital real estate,
Charles Lambert, MPT treasurer and managing
director, Capital Markets, estimates there
are about 5,000 hospitals in the U.S., and of
them, MPT only has about 250 properties.
Globally, he points to the many different
types of operators in different countries with
different healthcare systems. Across all of
these geographies and hospital operators, a
commonality is that MPT’s creativity in putting
together real estate finance solutions can
benefit a large portion of existing hospitals.
WHAT’S
NEXT
A F T E R A M A R Q U E E Y E A R W I T H
M O R E M O M E N T U M T H A N E V E R ,
M P T I S P O I S E D F O R A N E W
D E C A D E , A N E W P I P E L I N E ,
A N D A N E W P O S I T I O N T O
S H O W C A S E I T S E X P E R T I S E O N
T H E G L O B A L S T A G E .
Coming off a year of unprecedented
growth, MPT’s 2019 accomplishments
show just how far the company has come
since it started in 2003.
MPT has catapulted into a new position
on the world stage: It ended 2019 with an
enterprise value of almost $19 billion—after
growing from $10 billion at the start of
the year. New leases with new operators
in the U.S. and elsewhere have diversified
the company’s holdings. An MPT office in
Luxembourg positions it for more penetration
in Europe. A new office in Sydney, Australia,
will help it monitor new acquisitions with
best-in-class operators “down under” and
network on and around a third continent.
“ We’re a global company. You can’t get farther
away from Alabama than Australia,” says
Chairman, President and CEO Edward K.
Aldag, Jr. “There’s no geographic boundary
on where we can go.”
17
Market + Influence
18
Medical Properties Trust Annual Report 2019 “THERE’S NO ONE WITH OUR
EXPERTISE. WE UNDERSTAND
ALL FACETS OF THIS BUSINESS—
FINANCE, REAL ESTATE AND,
MOST IMPORTANT, HEALTHCARE.”
Edward K. Aldag, Jr.
Chairman, President and CEO, MPT
will fluctuate with the timing of opportunities
in various markets.
“ We look for very good opportunities,” McLean
says. “ We were the first ones doing what we’re
doing, and now there are more opportunities
than ever out there.”
That strong potential is why private equity
investors and shareholders alike continue to be
attracted to MPT. There is a growing recognition
that the company serves a vast and growing
need in the hospital industry around the globe.
And there is acknowledgment that MPT knows
how to manage its growing portfolio with true
expertise in the hospital industry.
Becoming so sought-after portends a bright
future for a fast-growing company that’s
looking to extend its global reach to places
where its model works. That means that
during the next year and the next decade,
MPT is looking to work with leading hospital
operators and investors. It’s looking in the
strongest markets. When an opportunity is
identified and MPT’s executives decide to
invest, the company moves rapidly.
WORKING WITH OLD AND NEW FRIENDS
In 2019, MPT saw a host of new relationships
with new operators, but many were rooted
in the past, stemming from interactions and
transactions with operators and equity firms
that have dealt with MPT and its management
before. “They come to us for a reason,” McLean
says. “We’ve helped fuel their growth.”
“ Where we go internationally depends on
where the opportunities are, and MPT will
gauge the situation to see if it makes sense,”
McLean says. As of early in 2020, MPT’s
portfolio was based approximately 66% in the
U.S. and 34% internationally. In the future, the
company expects to maintain a range between
60% and 70% allocated to the U.S., and this
19
Market + Influence
20
Medical Properties Trust Annual Report 2019 PEOPLE +
PROGRESS
From acquisitions in Europe to properties stateside, we’re
meeting the needs of people far and near. Success depends on
our deep understanding of the medical community and its
patients. We’re excelling and growing—and people are talking.
21
22
Medical Properties Trust Annual Report 2019 “WE’RE OPEN TO FINDING
GOOD PEOPLE WHO RUN GOOD
HOSPITALS IN COMMUNITIES
WHERE THEY’RE TRULY NEEDED.
WE DON’T DO EVERY DEAL.”
Luke Savage
Vice President, International Acquisitions, MPT
HAVING
A GLOBAL
VISION
F R O M P R I S T I N E F A C I L I T I E S
A M I D T H E S W I S S A L P S T O
P R E M I E R A S S E T S D O W N
U N D E R , M P T ’ S L A N D M A R K
T R A N S A C T I O N S I N 2 0 1 9
D E M O N S T R A T E T H E C O M P A N Y ’ S
A G I L I T Y A N D E X P E R T I S E . M P T
I S A L W A Y S E V A L U A T I N G T H E
M A R K E T F O R T H E N E X T, B E S T
O P P O R T U N I T Y — W I T H T H E
C A P I T A L A N D C A P A B I L I T Y T O
M A K E T H E M H A P P E N .
When Edward K. Aldag, Jr., MPT’s
chairman, president and CEO,
learned about a new opportunity for MPT
in Switzerland that required swift action,
he didn’t hesitate. “Call the owner of the
company and tell him I’ll be in Switzerland
tomorrow,” he said.
Within 24 hours, Aldag was on the ground
in Europe, ready to assess the opportunity
for the company he founded to acquire a share
in a Swiss healthcare real estate company,
Infracore SA. Infracore owns a network of
state-of-the-art hospitals across Switzerland
operated by the country’s second largest
private operator, Swiss Medical Network―a
subsidiary of Aevis Victoria SA, also an investor
in Infracore.
Just three days later, Aldag got to know the
Infracore management team face to face and
hashed out initial plans for the transaction.
On his return trip to the U.S., he asked MPT’s
executive vice president and chief financial
officer, Steve Hamner, who was already flying
over, to handle the contract details and alert
the underwriting team. “Steve and I passed in
the night,” Aldag recalls, “and we closed the
deal in 30 days.”
The result of such agility? MPT is now the
largest shareholder in a $900 million Swiss
portfolio that includes 13 stellar acute
care properties. MPT also made a 4.9%
equity investment in Aevis, giving it an
indirect ownership stake in the network and
positioning MPT for longer-term opportunities.
On his initial visit to Switzerland, Aldag
immediately recognized the excellent quality
of the facilities under review, and he’s proud
of MPT’s ability to quickly act on the
opportunity. “ We look for high-quality
facilities every time we make an investment
decision, and we’re glad to have a presence
now in Switzerland,” he says.
EXPERIENCE AND EXPERTISE
MPT can make such moves and quickly judge
the viability of opportunities because of
16 years’ worth of experience and depth of
expertise in the acute care hospital sector.
If anyone can assess an opportunity, it’s
Aldag and the leaders who work under him,
as many have backgrounds directly in the
healthcare industry.
“Anybody can find money and put it together
and invest in real estate,” Hamner says.
“Hospital operators that do business with MPT
know that we understand their business.”
That combination―ready capital and
expertise in hospital healthcare―sets MPT
apart in the U.S. and internationally. When
it came to the blockbuster Swiss transaction,
it’s how MPT made the transaction happen
so quickly. Investors had already lined up
in Europe for the opportunity to acquire the
Aevis shares of Infracore by the time Aldag
met with Infracore, which was looking to
close the transaction within 30 days. Aldag
directed his team to make it happen. With the
average lease remaining set at 23 years, the
Infracore relationship will be ongoing.
QUALITY RECOGNIZING QUALITY
Luke Savage, MPT vice president,
International Acquisitions, says it’s rare that
someone in Switzerland would build such a
network of high-quality hospitals and want
to sell. He’s proud that the company tapped
MPT. After all, he says, quality and precision
are Swiss hallmarks, from watches to tennis
players. And those traits are what the Swiss
look for in business partners. As excellent as
the Swiss facilities are, MPT’s No. 1 interest
when generating new deals is finding quality
assets in attractive markets and skilled people
to align with. “It’s a bonus to have awesome
buildings,” Savage says.
Regarding personal relationships and trusted
finance and healthcare industry acumen, MPT
tops the list of potential landlords. And now
the company’s presence in Switzerland sets it
up for other business there and across Europe,
where MPT has grown its holdings to more
than 150 hospitals. “It’s an honor when groups
in Switzerland want to partner with you,”
Savage says. “For [the Swiss] to know MPT
knows hospitals and that we can do the deal
quickly, that carries us forward to the future.”
ON THE LOOKOUT FOR NEW OPPORTUNITIES
From his MPT office in Luxembourg,
Savage has a chance to get to know the
cultures and ways of doing business in
each European country, and he and his
team adapt to international styles as they
interact with industry players and potential
investors. “Once you recognize other cultures’
personalities, it’s important to adjust,” Savage
says, noting flexibility is required for the
23
People + Progress
24
Medical Properties Trust Annual Report 2019 financial side of things, too. “You’ve got to
have creativity and flexibility with the way
to fund and structure deals. Every country
is different, and the EU has 27 countries and
there are others not in the EU. There are
different ways of thinking.”
He views his team as a front line, maintaining
existing relationships in Europe and looking
out for potential new opportunities for MPT.
And the company’s philosophy is simple,
no matter where in the world MPT does
research and underwriting. “ We’re open to
finding good people who run good hospitals
in communities where they’re truly needed,”
Savage says.
MAKING THE MOVE DOWN UNDER
Shortly after the Swiss transaction was
announced in May 2019, the company
completed a deal further east—in Australia.
The transaction culminated last June after
more than a decade of exploration there.
“That’s what I would call the highlight of the
year,” says COO Emmett E. McLean, touting
the $0.9 billion investment in 11 hospitals
operated by Healthscope, Ltd.
Long eyeing the Australian market, MPT had
become knowledgeable about the Australian
hospital economy. So after preliminary
discussions in 2018, circumstances converged
in 2019 and MPT completed the deal by
June, securing valuable relationships with
Healthscope, the second largest private
hospital operator in Australia, and Brookfield
Business Partners, L.P., one of the largest asset
management companies in the world. The
relationships with these companies will help
MPT establish itself in a new part of the globe.
The Healthscope purchase and lease-back
arrangement solidifies a long-term presence
in the country and the “Australasia” region.
Furthermore, MPT announced plans to open
a new office in Sydney, a very public statement
that MPT is officially open for business and
open to new opportunities in Australia and in
other countries in the region.
IMPROVING OPERATOR DIVERSITY
As MPT increased its geographic footprint
and diversity, it also improved operator
diversification. One of the company’s
largest operators, Steward Health Care
LLC, now takes up a less dominant space
in the overall portfolio.
even greater global growth and expansion.
In 2019, investors and shareholders alike
saw more evidence than ever that the
company can do business on a global scale
with alacrity, ingenuity and street smarts
that come from 16 years of recognizing great
investment opportunities.
Steward Health Care LLC Share of MPT Portfolio
40%
24.5%
2018
2019
COMMITTING RESOURCES
AND PERSONNEL IN AUSTRALIA
Longtime Birmingham, Alabama-area
commercial real estate professional Bob
McLean joined MPT last fall and will move
to Sydney in 2020 to man the new office
there. “ We’ve had a relationship with Bob for
years, and his experience will serve us well in
Australia,” Aldag says.
In addition to furthering relations with
Brookfield and Healthscope, McLean will
be working to strengthen ties with other
hospital operators in Australia. “ We feel like
this initial acquisition is just the tip of the
iceberg,” McLean says. “Australia is a huge
country with lots of potential, and we believe
MPT can have a positive impact on the
country and the healthcare system. We want
to share our resources and expertise to make
healthcare in Australia even better.”
MPT also committed up to $350 million
in development and expansion funds for
the 11 Australian hospitals. One of them,
The Geelong Clinic outside of Melbourne,
has already claimed $20 million to add
services and physician suites. “ We’re using
MPT funds to help upgrade these facilities,
which ultimately helps our shareholders
by increasing returns on investment
and demonstrating our commitment to
Healthscope,” Savage says.
He compares the Australian deal to the
acquisitions MPT made seven years ago
in Germany, where MPT started with 11
hospitals and now has 81. “The Australia
move gives us a presence in a whole other
part of the world. It’s exciting,” Savage says,
“and people are going to know who MPT is.”
GLOBAL SPRINGBOARDS
Savage explains that as part of the lease
arrangements in the Healthscope deal,
The Swiss and Australian deals symbolize the
larger expansion of MPT as a company set for
25
People + Progress
26
Medical Properties Trust Annual Report 2019
ALIGN
AND EXCEL
M P T ’ S L O N G T I M E R E L A T I O N S H I P S
I N B O T H P R I V A T E E Q U I T Y A N D
H E A LT H C A R E S E C T O R S R E S U LT E D
I N A N I M P R E S S I V E $ 7 0 0 M I L L I O N
A C Q U I S I T I O N I N 2 0 1 9 — A
T E X T B O O K E X A M P L E O F H O W
B U I L D I N G G O O D W I L L L E A D S T O
N E W O P P O R T U N I T I E S .
The headlines sounded impressive. MPT
closed on a $700 million acquisition
of 10 U.S. hospitals involving top players in
the healthcare industry and in the world of
investment finance. Yet when MPT acquired
the group of hospitals from LifePoint Health,
Inc., one of the largest hospital operators in
the U.S., and worked with esteemed private
equity firm Apollo Global Management, Inc., to
do it, the transaction felt more like a natural
progression. It stemmed from years of MPT’s
solid business dealings with each company,
making this impressive transaction almost
expected, even inevitable.
“It’s really a relationship story to the fullest,”
says Edward K. Aldag, Jr., chairman, president
and CEO of MPT. Aldag has been well
acquainted with Marty Rash, a longtime CEO
of healthcare operators and a current LifePoint
board member, and MPT CFO Steve Hamner
has forged strong relationships with leading
executives at Apollo. The LifePoint transaction
contributed to an unprecedented year of 64%
growth for MPT, all resulting from previous
endeavors and relationship-building.
MPT’s emphasis on personalizing business
relations helped produce the head-turning
results in 2019, including the fourth quarter
LifePoint acquisition. The 10-hospital
purchase reflected the spirit of collaboration
in the company that extends from the top
executives down through the underwriting
and asset management teams. “ We got the
hospitals we wanted, they got the financial
resources they wanted, and we’re dealing with
people we’ve known for years,” says Aldag.
MAINTAINING MUTUAL RESPECT
When Apollo was interested in generating
capital with the sale of LifePoint real estate,
Aldag says it called one entity: MPT.
27
People + Progress
28
Medical Properties Trust Annual Report 2019 CONFIDENT THREE-WAY PARTNERSHIP
With existing relationships with each company, MPT knows
LifePoint is a high-quality operator backed by a high-quality
equity group. “We’re very comfortable and confident in that
long-term relationship and that LifePoint will do a great job
managing and operating these facilities,” says Scott Heald,
director, Asset Management and Underwriting at MPT.
MPT
Real Estate Owner
$700MM
Acquisition
LIFEPOINT
Healthcare Operator
APOLLO
Private Equity Group
Matt Lyden, director, Asset Management and
Underwriting at MPT.
that weren’t the case, they wouldn’t
continue to look to us to finance and build
on the relationship.”
“ We have a tremendous relationship with
Apollo because we have always been
straightforward with them,” he adds. “ We
were able to do this transaction with them as a
‘hey, let’s work this out,’ friendly type of deal.”
Yet friendly relations didn’t mean MPT let up
on the extensive underwriting process it uses
to assess potential properties, and LifePoint
and Apollo wouldn’t have it any other way.
The due diligence MPT is known for is one
reason why there’s mutual respect among
this trio of companies.
MPT and Apollo first collaborated in 2016,
when the MPT-owned real estate holdings
of Capella Healthcare, Inc., and the
operator itself merged with Apollo-affiliated
RegionalCare Hospital Partners. The newly
formed company moved forward as RCCH,
and then in November 2018, RCCH merged
with LifePoint. MPT maintained close relations
with the changing management through all
those transitions.
MPT selected and purchased the 10 facilities
in six states, leasing them back to LifePoint
under long-term agreements. “ We visited a
number of facilities to determine which best
fit with our existing LifePoint assets,” says
“It’s rewarding to look back at the history, how
our relationship goes back and how it’s grown,”
says Lyden. “ We’ve always been able to
transition in a way that I hope feels seamless,
and that’s the feedback we’ve always gotten. If
DEVELOPING SYNERGY WITH LIFEPOINT
Building on the existing relationship with
healthcare operators is always an ultimate
goal, but asset managers must create the
relationship first. With LifePoint, it’s been
a natural fit. “LifePoint has a strategic and
execution-oriented culture on their end. I think
what they’ve found is that we are the same,”
says Scott Heald, director, Asset Management
and Underwriting at MPT.
That’s possible, in part, because so many at MPT
have healthcare-related backgrounds. Heald,
THE BENEFITS OF
MPT FINANCING
Through its sale-and-leaseback arrangements, MPT helps hospitals
explore better ways of providing service. They enjoy cash infusions
that allow them to hire more staff, recruit skilled physicians, invest
in renovations and new technology, expand service lines and more.
healthcare world has become with the finance
sector and how private equity firms are
taking notice. “This $700 million transaction
potentially opens up opportunities with
others in the sector who see how that triangle
between the private equity, the healthcare
operator and the real estate owner has worked
very well,” Heald says.
for instance, worked in healthcare finance,
including healthcare mergers and acquisitions,
prior to joining MPT. A certified public
accountant, he finds it satisfying to continue
working in a health-related sphere. Similarly,
Heald’s colleague, Lyden, can offer LifePoint
more than a typical asset manager does
because he is a former hospital CEO armed with
an understanding about an operator’s literal
day-to-day needs.
Heald’s and Lyden’s expertise helps them
assess properties during the underwriting
process. Sometimes the hard questions that
they know to ask the operators actually help
operators fine-tune their business plans.
“ We’re not just a company that owns a bunch
of real estate,” says Heald. “ We work very hard
to understand what our tenants are doing
operationally and what they’re doing from a
healthcare perspective. We can talk the same
language.” Lyden agrees, adding, “There’s
mutual respect between MPT and LifePoint.
That’s what we’re hoping to accomplish with
all of the operators we serve.”
MPT pursues close relationships with
operators who typically sign 20- to 30-year
leases because the company understands
that personal connections can help
weather any rough patches during these
long-term commitments.
OPENING NEW OPPORTUNITIES
The LifePoint transaction makes a great
case study about how interconnected the
29
People + Progress
30
Medical Properties Trust Annual Report 2019 see additional hospital systems implement
the systems, synergies and efficiencies
necessary to profitably treat these patients,
looking to Prospect for examples.”
It’s treatment that MPT finds rewarding
to facilitate via the company’s financing
capability. “People have healthcare because
we made a difference,” MPT Chairman,
President and CEO Edward K. Aldag, Jr., says.
“ We’re very proud of that.”
HOW PROSPECT MAKES IT WORK
The Prospect hospitals that MPT acquired are
clustered in a handful of markets, including
Southern California in the West and Delaware
County, Pennsylvania, in the East. The
underwriting and asset management team
examined every property purchased and is
now charged with day-to-day matters related
to the lease. “Through regular calls with CFOs
and CEOs, we know what’s going on at each
hospital. They have the autonomy to operate,
but we are very in tune with them,” Hooper
says, noting how diligently MPT reviews
financial and operating data supplied by
its tenants. “ We will get on their last, good
nerve,” she adds, laughing.
The California regional Prospect hospitals
operate as a system, with a group that
includes a 453-bed hospital in Culver City
on one end of the spectrum and the 50-
bed hospital in East L.A. on the other. They
leverage referrals to one another, along
with physician group relationships, as they
operate under managed-care contracts.
“It’s the system in which they operate and
the unique leverage among each other
that have made them a success,” says Lou
Cohen, director, Asset Management and
Underwriting, adding that value-based
purchasing helps make the budget work and
keeps the operator profitable. “Prospect’s
model in the East L.A. facility is set up so
they have a low-cost infrastructure, just
taking care of essential medical needs of that
population. They can refer patients to sister
hospitals with more capabilities, as needed.”
U.S., says Hamner, who adds that even
more of these types of facilities are needed
in America. “ We’ve made a $1 billion-plus
investment in Prospect for good reason,”
Hamner says. “MPT believes we need more
operators like Prospect. Otherwise, our larger
healthcare system would face demands it is
unequipped to satisfy.”
Prospect provides much-needed, convenient,
quality care, and MPT prides itself on offering
a long-term financing arrangement that will
keep Prospect facilities operating for years to
come. It goes back to what MPT looks for in
any transaction: that a hospital is serving local
needs. And MPT saw it in Prospect facilities.
Prospect takes a proactive stance on
improving the health and wellness of area
residents. Through prevention tips and
health screenings, it’s making a difference
in a community that struggles with diabetes,
hypertension and other chronic diseases. “If
your incentive is to keep the population
healthy, you’re going to provide those types
of services to the community,” Cohen explains,
noting the goal is to prevent hospital visits in
the first place and to address the behavioral
health needs the hospital sees among its
patients. And Prospect facilities help fill a
gap in hospital care. “The larger, academic
medical centers don’t necessarily want to
serve mental health needs, for instance, and
they don’t want the acute care clogging their
ERs,” he says. “Prospect will deliver those
services. They have chosen to provide them.”
In Delaware County, Pennsylvania, four
Prospect hospitals play just as vital a role in
their communities. From a large, 400-bed
hospital to three smaller ones, the group
has the highest market share. “They’re a
close-knit group that creates a system in that
market,” Cohen says.
INVESTING IN AMERICA’S
HEALTHCARE FUTURE
Prospect’s successful strategy is a promising
model for other hospital systems in the
Prospect’s intriguing business model touts
“Coordinated-Regional-Care,” which it says
“prefigures the objectives of healthcare
reform—to improve quality, reduce cost and
enhance overall patient care.”
“Prospect has developed a business plan that
includes successful and profitable treatment
of patients whose treatment costs are
reimbursed by state-based and other sources
that many other hospitals are less equipped
to handle,” explains Steve Hamner, MPT chief
financial officer. “This specialized expertise
is critical to the long-term success of the
U.S. hospital system because we expect the
proportion of these patients will continue to
increase in future years.”
Prospect provides dignified, quality care
and also maintains a healthy profit margin.
“Prospect found a way to consistently and
sustainably treat those patients over the long
term,” Hamner says. “And those patients get
excellent treatment. We actually expect to
A SMART
MODEL FOR
GREAT CARE
T H E H E A R T B E H I N D M P T ’ S
C A P I T A L S H O N E T H R O U G H
W I T H I T S $ 1 . 5 5 B I L L I O N
A C Q U I S I T I O N O F A N E T W O R K
O F U . S . - B A S E D H O S P I T A L S
T H A T P R O V I D E Q U A L I T Y C A R E
W H E R E I T ’ S N E E D E D M O S T.
In East Los Angeles, there’s a hospital that
stands as more than a healthcare facility. It
represents a safe harbor for medical needs
and is a trusted resource for preventive
medicine, with proactive healthcare
programming and services. It’s a strong,
quality hospital vital to this underserved
section of L.A.
Run by Prospect Medical Holdings, Inc.,
it is also one of a collection of 14 U.S.
hospitals and two behavioral health hospital
properties that MPT acquired in 2019 as part
of a significant $1.55 billion acquisition and
then leased back to the operator. “Prospect
is a new operator for us, and we like the
role its hospitals play in their communities,”
says Rosa Hooper, vice president and
managing director, Asset Management
and Underwriting at MPT. “ We look at
diversification in a number of ways, including
operator diversification and geographic
diversification. We also look at how hospitals
strengthen communities.”
31
People + Progress
32
Medical Properties Trust Annual Report 2019 WORLD +
COMMUNITY +
SOCIAL
RESPONSIBILITY
In all we do, we consider how our business impacts the world,
exploring good citizenship on a global and local level. From
our employees to people who live and work where we operate,
we serve with informed responsibility. Here’s how.
33
34
Medical Properties Trust Annual Report 2019 “IT’S GREAT THE THINGS WE’VE
DONE FOR CHARITIES IN THE PAST,
BUT WE’RE LOOKING AT WHAT’S
OUT THERE FOR THE FUTURE.
WE’RE FORTUNATE TO BE IN A
POSITION TO BE IMPACTFUL.”
Emmett E. McLean
Chief Operating Officer and Charity Committee Member, MPT
facilities. Employees can use concierge
doctor services for the best care at their
convenience, and they have access to top-tier
insurance coverage for health, secondary
health, vision, dental and life. “ We’re getting
people the best plans we can at prudent,
affordable prices,” notes Cassie Cates, MPT
human resources manager.
Employees enjoy other perks too, including
stock-based compensation. But access to such
great benefits doesn’t come easy. First, the
employees have to get hired by MPT. “I’m glad
I didn’t know what a rigorous process it was
when I started,” says Bob McLean, laughing.
He recently came on board to head MPT’s new
office in Sydney, Australia.
Each prospective MPT employee undergoes
a rigorous interview process to assess how
well the candidate will fit into the culture and
perform. The on-staff hiring process includes
time with an industrial psychologist who
not only assesses prospects as employees
but also helps them craft professional
goals and development plans when they’re
hired. Cates points out that as employees
grow in their roles at MPT, they’re also given
professional development training, including
seminars on topics that range from diversity
training to sexual harassment. They also
have opportunities to grow their skills and
maintain certifications, whether it’s a CPA
designation or a law degree.
BOLD CORPORATE GOVERNANCE
The MPT mission, mindset and positive
workplace environment filter down from Aldag,
who believes business is ultimately about
people. As chairman of the board of directors
and president and CEO of the company, he
has implemented best practices of corporate
governance, including a 75% independent
board of directors, unclassified board structure
and majority voting in uncontested elections.
The board has a history of diversity and is
currently composed of 25% female members
(fully 33% of non-founder directors). It
is committed to frequent refreshment of
independent directors, and almost two-
thirds of its members have a tenure of five
years or less and an average age of about 58.
Made up of members with a mix of business
experience and skills, the board has adopted
bold governance standards that include a
mandatory retirement age for directors.
FOSTERING A GIVING AND GENEROUS SPIRIT
other worthy causes. MPT helps by giving a
paid-time-off day each year for employees to
devote to the charitable organization of their
choice. “We have really good people with really
good values, and they really care about the
community,” says Tom Schultz, MPT director of
healthcare and a member of the MPT Charity
Committee. “There’s a culture and attitude of
giving here, and it goes from the top down.”
Schultz points to MPT COO Emmett E. McLean’s
heavy involvement with charitable work
in Birmingham. In turn, McLean recounts
the instance when Aldag upped a planned
and already sizable contribution to the
Kiwanis Club because he wanted to provide
leadership in the community to champion the
organization’s worthy cause.
MPT’s care for its employees helps them enjoy
life away from the office too, where most
do volunteer work with area nonprofits or
Following Aldag’s lead, the MPT Charity
Committee awards funds in large and small
amounts to worthy groups in Birmingham
GIVE WELL.
LIVE WELL.
F R O M T A K I N G C A R E O F
E M P L O Y E E S T O C O N T R I B U T I N G
T O H E A R T F E LT C A U S E S ,
M P T U S E S I T S R E S O U R C E S
F O R F A R M O R E T H A N T H E
N E X T T R A N S A C T I O N .
Investing in premier healthcare systems
around the world isn’t just a way to create
a profitable enterprise. It’s a way to have
the presence, the platform and the means
to help people at home and abroad. “ We’re
in a position where we can actually make a
difference,” says MPT Chairman, President
and CEO Edward K. Aldag, Jr., “whether we’re
doing it with our financial resources or our
people resources.”
ENSURING EMPLOYEE HEALTH, WELLNESS
AND PROFESSIONAL DEVELOPMENT
MPT starts within the walls of its offices,
ensuring employees feel valued with
great benefits and plenty of health and
wellness options. At its headquarters in
Birmingham, Alabama, employees can access
a convenient and safe gym, and they get an
allowance for membership at other workout
35
World + Community + Social Responsibility
36
Medical Properties Trust Annual Report 2019 “WE GIVE BACK BECAUSE IT’S
THE RIGHT THING TO DO.”
Edward K. Aldag, Jr.
Chairman, President and CEO, MPT
and in far-flung places. In Chad, for instance,
a new well provides a community with clean
drinking water, thanks to a $6,000 gift MPT
made to a nonprofit called Neverthirst. Closer
to home, MPT committed to fund $3.5 million
over three years to help build a hospital in
rural Alabama without which residents in the
surrounding communities would go without
hospital healthcare. The company has made
a similar commitment to the University of
Alabama at Birmingham (UAB).
The spirit of giving at MPT overflows to
individual contributions of time and talent.
“ You’d be hard-pressed to find someone at
MPT who doesn’t do volunteer work of some
type in our community,” says Schultz.
HELPING IN MPT’S OWN BACKYARD
The company prides itself on supporting
a broad spectrum of Birmingham-based
institutions and organizations—from
Children’s of Alabama and the respected
research hospital at UAB to educational
groups like the Jones Valley Teaching
Farm, which offers a food-based, hands-on
curriculum to 4,500 public school students
to enrich their understanding of food,
farming and the culinary arts. “ What they’re
really doing is changing kids’ lives,” McLean
says. “They’re providing after-school
internships, career path opportunities and
even college scholarships.”
“It’s proven if you can get in the school and do
things for children, then it’s going to impact
their health forever,” adds Alison Schmidt,
MPT managing director, Financial Planning
and a member of the Charity Committee.
Schmidt’s also on the board of The Bell
Center, which offers early intervention for
children up to age 3 who have a range of
diagnoses and special needs. “It’s really,
really unique. There are not very many
places in the country that do what they do.
The results that they have achieved are just
magnificent,” Schmidt says. She’s proud that
MPT helped fund a new facility for the center
so it can better serve the 105 children in its
program. In addition to a substantial capital
gift toward construction costs of the new
building, MPT made a $15,000 commitment
to the center’s operating budget in 2019 and
funded its annual $3,000 scholarship for one
child to attend the program.
MPT also contributes to the community
through efforts such as buying jerseys for
local youth sports teams and supporting
the arts via organizations like the Alabama
Symphony Orchestra and the Birmingham
Museum of Art. “ We do it because it’s good
for the community,” McLean says. Such
disparate causes all affect the well-being of
the community, physically, emotionally
and fiscally.
From providing challenge grants for groups
such as the neonatal intensive care unit at
St. Vincent’s Hospital, an endeavor that
raised about $25,000, to offering starter funds
for locals who present their cases before the
Charity Committee, MPT looks for strategic
ways to help local people trying to make a
difference. “The only way you’re going to
start something and make it bigger is to start
small,” says McLean about why MPT makes
$1,000 and $2,000 contributions to startup
nonprofits. He and the members of the
Charity Committee relish the times when a
group that received startup funds returns to
MPT five years later, still growing and with
bigger goals and bigger results. It means
the Charity Committee at MPT made a wise
decision to help them in the first place.
INCREASING INTERNATIONAL
CONTRIBUTIONS
“ We do most of our charity locally, but it has
international impact,” Schultz says, pointing
to contributions to the American Heart
Association and to the UAB Comprehensive
Diabetes Center, both of which can have
international influence. Zac Riddle, MPT
assistant controller and Charity Committee
member, notes that the Luxembourg office
brought a great project to MPT: Chaîne
de l’Espoir, or The Chain of Hope. This
organization flies children into Luxembourg
for life-changing surgeries. MPT has helped
support the operation almost from the initial
opening of its Luxembourg office, with a
single employee.
“So, as we go around the world, we do that
kind of thing,” Schultz says. With the new
presence in Australia, Schultz and Bob
McLean, who’ll run the office there, will meet
with new partner Healthscope to discuss not
only operations, but also ways the Charity
Committee could help Down Under. In the
Caribbean, MPT has helped fund a mobile
medical clinic in Haiti, part of a nonprofit
called LiveBeyond that’s run by the physician
son-in-law of former University of Alabama
Head Football Coach Gene Stallings.
Many of the good works and contributions
funded by MPT have an Alabama connection
or personal ties to the employees of MPT.
“If it’s important to our employees, it’s
important to MPT,” Schmidt says.
FOLLOWING THE LEAD OF EMPLOYEES
By following the hearts and leads of the
people MPT hires, the company discovers the
worthiest of causes and ways to make the
biggest of differences. The company vets the
groups seeking their support, even conducting
site visits, to ensure every dollar MPT gives
will be well spent. That gives shareholders
confidence that the same care taken with
business acquisitions and day-to-day
operations goes into decisions about giving.
37
World + Community + Social Responsibility
38
Medical Properties Trust Annual Report 2019 REPORTS +
NUMBERS
41
Selected Financial Data
42
Reconciliation of Non-GAAP Financial Measures
45
Forward-Looking Statements
47
Report of Independent Registered Public Accounting Firm
49
Consolidated Balance Sheets
50
Consolidated Statements of Net Income
51
Consolidated Statements of Comprehensive Income
52
Consolidated Statements of Equity
53
Consolidated Statements of Cash Flows
55
Notes to Consolidated Financial Statements
78
Corporate and Shareholder Information
39
40
Medical Properties Trust Annual Report 2019 SELECTED FINANCIAL DATA
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following table sets forth selected financial and operating information on a historical basis:
The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and normalized FFO for the years
ended December 31, 2019, 2018, 2017, 2016 and 2015 ($ amounts in thousands except per share data):
[In thousands, except per share amounts]
2019
2018
2017
2016
2015
$ 854,197
$ 784,522
$ 704,745
$ 541,137
$ 441,878
FFO INFORMATION
OPERATING DATA
Total revenues
Expenses:
Interest
Real estate depreciation and amortization
Property-related
General and administrative
Acquisition costs
Total expenses
Other income (expense):
Gain on sale of real estate and other
Impairment charges
Earnings from equity interests
Debt refinancing and unutilized financing costs
Other
Income tax benefit (expense)
Net income
Net income attributable to non-controlling interests
237,830
152,313
23,992
96,411
—
510,546
41,560
(21,031)
16,051
(6,106)
(345)
2,621
376,401
(1,717)
223,274
133,083
9,237
80,086
917
446,597
719,392
(48,007)
14,165
—
(4,071)
(927)
1,018,477
(1,792)
176,954
125,106
5,811
58,599
29,645
396,115
7,431
—
10,058
(32,574)
374
(2,681)
291,238
(1,445)
159,597
94,374
2,712
48,911
46,273
351,867
61,224
(7,229)
(1,116)
(22,539)
(503)
6,830
225,937
(889)
120,884
69,867
3,792
43,639
61,342
299,524
3,268
—
2,849
(4,367)
(2,674)
(1,503)
139,927
(329)
Net income attributable to MPT common stockholders
Participating securities’ share in earnings
Net income, less participating securities’ share in earnings
Depreciation and amortization
Gain on sale of real estate
Real estate impairment charges
Funds from operations
Write-off of straight-line rent and other
Debt refinancing and unutilized financing costs
Release of income tax valuation allowance
Acquisition and other transaction costs, net of tax benefit
Non-real estate impairment charges
Normalized funds from operations
PER DILUTED SHARE DATA
For the Years Ended December 31,
2019
2018
2017
2016
2015
$ 374,684
$ 1,016,685
$ 289,793
$ 225,048
$ 139,598
(2,308)
(3,685)
(1,409)
(559)
(1,029)
$ 372,376
$ 1,013,000
$ 288,384
$ 224,489
$ 138,569
183,921
143,720
127,559
96,157
69,867
(41,560)
(719,392)
(7,431)
(67,168)
(3,268)
21,031
48,007
—
—
—
$ 535,768
$ 485,335
$ 408,512
$ 253,478
$ 205,168
15,539
18,002
5,340
3,063
6,106
—
32,574
22,539
(4,405)
—
(3,956)
3,928
4,367
—
2,072
28,453
52,473
61,342
—
—
7,229
—
$ 557,413
$ 501,004
$ 474,879
$ 334,826
$ 274,805
—
—
—
Net income attributable to MPT common stockholders
$ 374,684
$ 1,016,685
$ 289,793
$ 225,048
$ 139,598
Net income attributable to MPT common stockholders per diluted share
$ 0.87
$ 2.76
$ 0.82
$ 0.86
$ 0.63
Weighted-average shares outstanding — diluted
428,299
366,271
350,441
261,072
218,304
OTHER DATA
Dividends declared per common share
$ 1.02
$ 1.00
$ 0.96
$ 0.91
$ 0.88
FFO(1)
Normalized FFO(1)
Normalized FFO per share(1)
$ 535,768
$ 485,335
$ 408,512
$ 253,478
$ 205,168
$ 557,413
$ 501,004
$ 474,879
$ 334,826
$ 274,805
$ 1.30
$ 1.37
$ 1.35
$ 1.28
$ 1.26
Cash paid for acquisitions and other related investments
$ 4,565,594
$ 666,548
$ 2,246,788
$ 1,489,147
$ 1,833,018
Net income, less participating securities’ share in earnings
$ 0.87
$ 2.76
$ 0.82
$ 0.86
$ 0.63
Depreciation and amortization
Gain on sale of real estate
Real estate impairment charges
Funds from operations
Write-off of straight-line rent and other
Debt refinancing and unutilized financing costs
Release of income tax valuation allowance
Acquisition and other transaction costs, net of tax benefit
Non-real estate impairment charges
Normalized funds from operations
0.43
(0.10)
0.05
0.39
(1.96)
0.13
0.37
(0.02)
—
0.37
(0.26)
—
0.32
(0.01)
—
$ 1.25
$ 1.32
$ 1.17
$ 0.97
$ 0.94
0.04
0.01
—
—
—
0.05
—
(0.01)
0.01
—
0.01
0.09
—
0.08
—
0.01
0.09
(0.02)
0.20
0.03
0.02
0.02
—
0.28
—
$ 1.30
$ 1.37
$ 1.35
$ 1.28
$ 1.26
BALANCE SHEET DATA
Real estate assets — at cost
Real estate accumulated depreciation/amortization
Mortgage and other loans
Cash and cash equivalents
Other assets
Total assets
Debt, net
Other liabilities
Total Medical Properties Trust, Inc. stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
December 31, 2019
December 31, 2018
December 31, 2017
December 31, 2016
December 31, 2015
$ 10,163,056
$ 5,952,512
$ 6,642,947
$ 4,965,968
$ 3,924,701
Investors and analysts following the real estate
In addition to presenting FFO in accordance with the
performance of REITs, they should not be viewed as a
(570,042)
1,819,854
1,462,286
1,592,177
(464,984)
1,586,520
820,868
948,727
(455,712)
1,928,525
171,472
733,056
(325,125)
1,216,121
83,240
478,332
(257,928)
1,422,403
195,541
324,634
$ 14,467,331
$ 8,843,643
$ 9,020,288
$ 6,418,536
$ 5,609,351
$ 7,023,679
$ 4,037,389
$ 4,898,667
$ 2,909,341
$ 3,322,541
415,498
7,028,047
107
7,028,154
245,316
4,547,108
13,830
4,560,938
286,416
3,820,633
14,572
3,835,205
255,967
3,248,378
4,850
3,253,228
179,545
2,102,268
4,997
2,107,265
industry utilize funds from operations, or FFO, as a
NAREIT definition, we also disclose normalized FFO,
substitute measure of our operating performance since
supplemental performance measure. FFO, reflecting
the assumption that real estate asset values rise or
which adjusts FFO for items that relate to unanticipated
or non-core events or activities or accounting changes
the measures do not reflect either depreciation and
amortization costs or the level of capital expenditures
fall with market conditions, principally adjusts for the
that, if not noted, would make comparison to prior
and leasing costs necessary to maintain the operating
effects of GAAP depreciation and amortization of real
period results and market expectations potentially less
performance of our properties, which can be significant
estate assets, which assumes that the value of real
meaningful to investors and analysts.
economic costs that could materially impact our
estate diminishes predictably over time. We compute
results of operations. FFO and normalized FFO should
FFO in accordance with the definition provided by
We believe that the use of FFO, combined with
not be considered an alternative to net income (loss)
the National Association of Real Estate Investment
the required GAAP presentations, improves the
(computed in accordance with GAAP) as indicators
Trusts, or NAREIT, which represents net income (loss)
understanding of our operating results among
of our financial performance or to cash flow from
(computed in accordance with GAAP), excluding gains
investors and the use of normalized FFO makes
operating activities (computed in accordance with
$ 14,467,331
$ 8,843,643
$ 9,020,288
$ 6,418,536
$ 5,609,351
(losses) on sales of real estate and impairment charges
comparisons of our operating results with prior periods
GAAP) as an indicator of our liquidity.
(1) See section titled “Reconciliation of Non-GAAP Financial Measures” for an explanation of why these non-GAAP financial measures are useful along with a reconciliation to our GAAP earnings.
on real estate assets, plus real estate depreciation and
and other companies more meaningful. While FFO
amortization and after adjustments for unconsolidated
and normalized FFO are relevant and widely used
partnerships and joint ventures.
supplemental measures of operating and financial
41
42
Reports + NumbersMedical Properties Trust Annual Report 2019 TOTAL PRO FORMA GROSS ASSETS
ADJUSTED REVENUES
[In thousands, except per share amounts]
As of December 31, 2019
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,467,331
Add:
Binding real estate commitments on new
investments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unfunded amounts on development deals and
commenced capital improvement projects(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated depreciation and amortization
Incremental gross assets of our joint ventures(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from new £700 million 5-year term loan
effective January 6, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,988,550
163,370
570,042
563,911
927,990
Less:
Cash used for funding the transactions above
(including proceeds from the £700 million term loan in 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,151,920)
Total Pro Forma Gross Assets(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 16,529,274
(1) Reflects the acquisition of 30 facilities in the United Kingdom on January 8, 2020.
(2) Includes $41.7 million of unfunded amounts on ongoing development projects and $121.7 million of unfunded amounts on capital improvement projects and development projects that
have commenced rent, as of December 31, 2019.
(3) Adjustment needed to reflect our share of our joint ventures’ gross assets.
(4) 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.
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 854,197
Revenue from real estate properties owned through joint venture arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,962
Total adjusted revenues(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 938,159
For the year ended
December 31, 2019
(1) Adjusted revenues are total revenues adjusted for our pro rata portion of similar revenues in our 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.
43
44
Reports + NumbersMedical Properties Trust Annual Report 2019 FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this Annual Report that are
subject to risks and uncertainties. These forward-looking statements
include information about possible or assumed future results of our
business, financial condition, liquidity, results of operations, plans
and objectives. Statements regarding the following subjects, among
others, are forward-looking by their nature:
• our business strategy;
• our projected operating results;
• our ability to acquire, develop and/or manage additional facilities in
the United States (“U.S.”), Europe, Australia or other foreign locations;
• availability of suitable facilities to acquire or develop;
• our ability to enter into, and the terms of, our prospective leases and
loans;
an investment decision with respect to our common stock and other
securities, along with, among others, the following factors that could
cause actual results to vary from our forward-looking statements:
• the factors referenced in the sections captioned “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Business” in our Form 10-K for the year
ended December 31, 2019;
• 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 (including the transactions described in Note 8 of
this Annual Report) may not be satisfied;
• our ability to raise additional funds through offerings of debt and
equity securities, joint venture arrangements and/or property
disposals;
• 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;
• our ability to obtain future financing arrangements;
• the competitive environment in which we operate;
• estimates relating to, and our ability to pay, future distributions;
• the execution of our business plan;
• our ability to service our debt and comply with all of our
• financing risks;
debt covenants;
• our ability to compete in the marketplace;
• lease rates and interest rates;
• market trends;
• projected capital expenditures; and
• the impact of technology on our facilities, operations and business.
The forward-looking statements are based on our beliefs, assumptions
and expectations of our future performance, taking into account
information currently available to us. These beliefs, assumptions
and expectations can change as a result of many possible events
or factors, not all of which are known to us. If a change occurs, our
business, financial condition, liquidity and results of operations
may vary materially from those expressed in our forward-looking
statements. You should carefully consider these risks before you make
• 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;
• 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 facilities;
• 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, 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.
When we use the words “believe,” “expect,” “may,” “potential,”
“anticipate,” “estimate,” “plan,” “will,” “could,” “intend” or similar
expressions, we are identifying forward-looking statements. You
should not place undue reliance on these forward-looking statements.
Except as required by law, we disclaim any obligation to update such
statements or to publicly announce the result of any revisions to any of
the forward-looking statements contained in this Annual Report.
45
46
Reports + NumbersMedical Properties Trust Annual Report 2019 REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Medical Properties
Trust, Inc.
OPINIONS ON THE FINANCIAL STATEMENTS AND INTERNAL
CONTROL OVER FINANCIAL REPORTING
We have audited the accompanying consolidated balance sheets of
Medical Properties Trust, Inc. and its subsidiaries (the “Company”)
as of December 31, 2019 and 2018, and the related consolidated
statements of net income, of comprehensive income, of equity and of
cash flows for each of the three years in the period ended December
31, 2019 (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control
over financial reporting as of December 31, 2019, based on criteria
established in Internal Control - Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
the Company as of December 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 2019, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion,
the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
BASIS FOR OPINIONS
The Company’s management is responsible for these consolidated
financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in Management’s
Report on Internal Control over Financial Reporting presented
within the 2019 Annual Report to Shareholders. Our responsibility
is to express opinions on the Company’s consolidated financial
statements and on the Company’s internal control over financial
reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included
performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements.
Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER
FINANCIAL REPORTING
A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management
and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
CRITICAL AUDIT MATTERS
The critical audit matter communicated below is a matter arising from
the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved
our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
ACQUIRED REAL ESTATE PURCHASE PRICE ALLOCATIONS
Management allocates the purchase price of acquired properties
to tangible and identified lease intangible assets based on their fair
values. In 2019, the Company acquired a total of $2.6 billion of land,
building, and intangible lease assets. In making estimates of fair
values for purposes of allocating purchase prices of acquired real
estate to tangible and identified lease intangible assets, management
utilizes information from a number of sources including available
real estate broker data, independent appraisals that may be obtained
in connection with the acquisition or financing of the respective
property, internal data from previous acquisitions or developments,
other market data, and significant assumptions such as capitalization
and discount rates, market rental rates, and carrying costs during
hypothetical lease-up periods.
The principal considerations for our determination that performing
procedures relating to the acquired real estate purchase price
allocations is a critical audit matter are (i) there was significant
judgment by management when developing the fair value
measurements and allocating the purchase price of the acquired
properties to the tangible and lease intangible assets acquired, which
in turn led to a high degree of auditor judgment and subjectivity in
performing procedures and evaluating audit evidence relating to
the fair value estimates, (ii) significant audit effort was required in
evaluating the reasonableness of significant assumptions such as
capitalization and discount rates, market rental rates, and carrying
costs during hypothetical expected lease-up periods used by
management to estimate the fair value of each tangible and lease
intangible asset component, and (iii) the audit effort involved the
use of professionals with specialized skill and knowledge to assist in
evaluating the reasonableness of the significant assumptions.
Addressing the matter involved performing procedures and evaluating
audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s acquired real
estate purchase price allocations, including controls over the fair value
of each tangible and lease intangible asset acquired. These procedures
also included, among others, testing management’s process by
evaluating the significant assumptions, including capitalization
and discount rates, market rental rates, and carrying costs during
the hypothetical lease-up periods; and the methodology used by
management in developing the estimated fair values and allocations of
the purchase price to the tangible and lease intangible assets acquired.
Testing management’s process included using professionals with
specialized skill and knowledge to assist in evaluating the valuation
methodologies and significant assumptions used by management,
such as capitalization and discount rates, market rental rates, and
carrying costs during hypothetical lease-up periods, for certain
acquisitions. Evaluating the reasonableness of assumptions involved
considering internal data from previous acquisitions, where relevant.
Birmingham, Alabama
February 26, 2020
We have served as the Company’s auditor since 2008.
47
48
Reports + NumbersMedical Properties Trust Annual Report 2019
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
C O N S O L I D A T E D B A L A N C E S H E E T S
C O N S O L I D A T E D S T A T E M E N T S O F N E T I N C O M E
ASSETS
Real estate assets
Land
Buildings and improvements
Construction in progress
Intangible lease assets
Investment in financing leases
Mortgage loans
Gross investment in real estate assets
Accumulated depreciation
Accumulated amortization
Net investment in real estate assets
Cash and cash equivalents
Interest and rent receivables
Straight-line rent receivables
Equity investments
Other loans
Other assets
Total Assets
LIABILITIES AND EQUITY
Liabilities
Debt, net
Accounts payable and accrued expenses
Deferred revenue
Obligations to tenants and other lease liabilities
Total Liabilities
Commitments and Contingencies
Equity
Preferred stock, $0.001 par value. Authorized 10,000 shares; no shares outstanding
Common stock, $0.001 par value. Authorized 750,000 shares; issued and outstanding —
517,522 shares at December 31, 2019 and 370,637 shares at December 31, 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury shares, at cost
Total Medical Properties Trust, Inc. stockholders’ equity
Non-controlling interests
Total Equity
Total Liabilities and Equity
See accompanying notes to consolidated financial statements.
49
December 31,
2019
2018
(Amounts in thousands, except for per share data)
$ 1,017,402
$ 547,894
6,295,084
168,212
622,056
2,060,302
1,275,022
11,438,078
(504,651)
(65,391)
10,868,036
1,462,286
31,357
334,231
926,990
544,832
299,599
4,233,255
84,172
403,138
684,053
1,213,322
7,165,834
(414,331)
(50,653)
6,700,850
820,868
25,855
220,848
520,058
373,198
181,966
$ 14,467,331
$ 8,843,643
$ 7,023,679
$ 4,037,389
291,489
16,098
107,911
7,439,177
–
518
7,008,199
83,012
(62,905)
(777)
7,028,047
107
7,028,154
204,325
13,467
27,524
4,282,705
–
371
4,442,948
162,768
(58,202)
(777)
4,547,108
13,830
4,560,938
$ 14,467,331
$ 8,843,643
Revenues
Rent billed
Straight-line rent
Income from financing leases
Interest and other income
Total revenues
Ex penses
Interest
Real estate depreciation and amortization
Property-related
General and administrative
Acquisition costs
Total expenses
Other income (ex pense)
Gain on sale of real estate and other
Impairment charges
Earnings from equity interests
Debt refinancing and unutilized financing costs
Other
Total other income (expense)
Income before income tax
Income tax benefit (expense)
Net income
Net income attributable to non-controlling interests
Net income attributable to MPT common stockholders
Earnings per share — basic
Net income attributable to MPT common stockholders
Weighted-average shares outstanding — basic
Earnings per share — diluted
Net income attributable to MPT common stockholders
Weighted-average shares outstanding — diluted
See accompanying notes to consolidated financial statements.
For the Years Ended December 31,
2019
2018
2017
(Amounts in thousands, except for per share data)
$ 474,151
$ 473,343
$ 435,782
110,456
119,617
149,973
854,197
237,830
152,313
23,992
96,411
–
74,741
73,983
162,455
784,522
223,274
133,083
9,237
80,086
917
65,468
74,495
129,000
704,745
176,954
125,106
5,811
58,599
29,645
510,546
446,597
396,115
41,560
(21,031)
16,051
(6,106)
(345)
30,129
373,780
2,621
376,401
(1,717)
719,392
(48,007)
14,165
–
(4,071)
681,479
1,019,404
(927)
1,018,477
(1,792)
7,431
–
10,058
(32,574)
374
(14,711)
293,919
(2,681)
291,238
(1,445)
$ 374,684
$ 1,016,685
$ 289,793
$ 0.87
$ 2.77
$ 0.82
427,075
365,364
349,902
$ 0.87
$ 2.76
$ 0.82
428,299
366,271
350,441
50
Reports + NumbersMedical Properties Trust Annual Report 2019
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
C O N S O L I D A T E D S T A T E M E N T S O F C O M P R E H E N S I V E I N C O M E
C O N S O L I D A T E D S T A T E M E N T S O F E Q U I T Y
F O R T H E Y E A R S E N D E D D E C E M B E R 3 1 , 2 0 1 9 , 2 0 1 8 A N D 2 0 1 7
(In thousands)
Net income
Other comprehensive income (loss):
Unrealized loss on interest rate swap
Foreign currency translation gain (loss)
Total comprehensive income
Comprehensive income attributable to non-controlling interests
Comprehensive income attributable to MPT common stockholders
See accompanying notes to consolidated financial statements.
For the Years Ended December 31,
2019
2018
2017
$ 376,401
$ 1,018,477
$ 291,238
(9,033)
4,330
371,698
(1,717)
(3,317)
(28,836)
986,324
(1,792)
—
66,854
358,092
(1,445)
$ 369,981
$ 984,532
$ 356,647
Preferred
Common
Shares
Par Value
Shares
Par Value
Additional
Paid-in Capital
Related
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury Shares
Non-Controlling
Interests
Total Equity
(Amounts in thousands, except for per share data)
Balance at December 31, 2016
—
$ —
320,514
$ 321
$ 3,775,336
$ (434,114)
$ (92,903)
$ (262)
$ 4,850
$ 3,253,228
Net income
Sale of non-controlling interests
Foreign currency translation gain
Stock vesting and amortization
of stock-based compensation
Treasury shares acquired
(41,270 shares)
Distributions to non-controlling interests
Proceeds from offering
(net of offering costs)
Dividends declared
($0.96 per common share)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
785
—
—
43,125
—
—
—
—
—
—
—
43
—
—
—
—
9,949
—
—
547,742
289,793
—
—
—
—
—
—
—
(341,611)
—
—
66,854
—
—
—
—
—
—
—
—
—
(515)
—
—
—
1,445
291,238
10,000
—
—
—
10,000
66,854
9,949
(515)
(1,723)
(1,723)
—
—
547,785
(341,611)
Balance at December 31, 2017
—
$ —
364,424
$ 364
$ 4,333,027
$ (485,932)
$ (26,049)
$ (777)
$ 14,572
$ 3,835,205
Net income
Cumulative effect of change
in accounting principles
Unrealized loss on interest rate swap
Foreign currency translation loss
Stock vesting and amortization
of stock-based compensation
Redemption of MOP units
Distributions to non-controlling interests
Proceeds from offering
(net of offering costs)
Dividends declared
($1.00 per common share)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
599
—
—
5,614
—
—
—
—
—
1
—
—
6
—
—
—
—
—
16,504
(816)
—
94,233
1,016,685
1,938
—
—
—
—
—
—
—
(369,923)
—
—
(3,317)
(28,836)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,792
1,018,477
—
—
—
—
—
(2,534)
—
—
1,938
(3,317)
(28,836)
16,505
(816)
(2,534)
94,239
(369,923)
Balance at December 31, 2018
—
$ —
370,637
$ 371
$ 4,442,948
$ 162,768
$ (58,202)
$ (777)
$ 13,830
$ 4,560,938
Net income
Unrealized loss on interest rate swap
Foreign currency translation gain
Stock vesting and amortization
of stock-based compensation
Distributions to non-controlling interests, net
Proceeds from offering (net of offering costs)
Dividends declared ($1.02 per common share)
Balance at December 31, 2019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,536
—
145,349
—
—
—
—
2
—
145
—
—
—
—
32,186
—
2,533,065
374,684
—
—
—
—
—
—
(454,440)
—
(9,033)
4,330
—
—
—
—
—
—
—
—
—
—
—
1,717
376,401
—
—
—
(9,033)
4,330
32,188
(15,440)
(15,440)
—
—
2,533,210
(454,440)
$ —
517,522
$ 518
$ 7,008,199
$ 83,012
$ (62,905)
$ (777)
$ 107
$ 7,028,154
See accompanying notes to consolidated financial statements.
51
52
Reports + NumbersMedical Properties Trust Annual Report 2019
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S ( C O N T I N U E D )
Operating activ ities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred financing costs and debt discount
Straight-line rent revenue and other
Share-based compensation
Gain from sale of real estate and other
Impairment charges
Straight-line rent and other write-off
Debt refinancing and unutilized financing costs
Other adjustments
Changes in:
Interest and rent receivables
Other assets
Accounts payable and accrued expenses
Deferred revenue
Net cash provided by operating activities
Investing activ ities
For the Years Ended December 31,
Interest paid, including capitalized interest of $3,936 in 2019, $1,480 in 2018, and $840 in 2017
$ 211,163
$ 221,779
$ 149,798
2019
2018
2017
Supplemental schedule of non-cash financing activities:
(Amounts in thousands, except for per share data)
Dividends declared, unpaid
$ 138,161
$ 95,419
$ 89,403
$ 376,401
$ 1,018,477
$ 291,238
Beginning of period:
Cash, cash equivalents, and restricted cash are comprised of the following:
Cash and cash equivalents
Restricted cash, included in Other assets
End of period:
Cash and cash equivalents
Restricted cash, included in Other assets
See accompanying notes to consolidated financial statements.
156,575
8,881
(138,806)
32,188
(41,560)
21,031
15,539
6,106
4,637
12,906
(4,992)
39,630
5,581
494,117
141,492
7,363
(100,594)
16,505
(719,392)
48,007
18,002
—
(3,768)
46,498
(18,051)
(5,596)
145
449,088
131,979
6,521
(80,741)
9,949
(7,431)
—
5,340
32,574
(1,204)
(21,116)
(5,318)
2,494
(2,050)
362,235
$ 820,868
$ 171,472
$ 83,240
1,557
775
1,641
$ 822,425
$ 172,247
$ 84,881
$ 1,462,286
$ 820,868
$ 171,472
5,705
1,557
775
$ 1,467,991
$ 822,425
$ 172,247
Cash paid for acquisitions and other related investments
(4,565,594)
(1,430,995)
(2,246,788)
Net proceeds from sale of real estate
Principal received on loans receivable
Investment in loans receivable
Construction in progress and other
Capital additions and other investments, net
Net cash (used for) provided by investing activities
Financing activ ities
Proceeds from term debt, net of discount
Payments of term debt
Payment of deferred financing costs
Revolving credit facilities, net
Distributions paid
Lease deposits and other obligations to tenants
Proceeds from sale of common shares, net of offering costs
Other financing activities
Net cash provided by (used for) financing activities
Increase in cash, cash equivalents, and restricted cash for the year
Effect of exchange rate changes
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
111,766
920
(54,088)
(83,798)
(293,163)
(4,883,957)
1,513,666
885,917
(212,002)
(53,967)
(138,441)
64,362
8,480
(19,338)
(73,812)
(94,970)
564,178
(2,362,066)
3,048,424
759,735
2,355,280
—
(30,186)
(65,736)
(411,697)
(12,260)
2,533,210
(19,871)
5,041,884
652,044
(6,478)
822,425
—
—
(811,718)
(363,906)
(20,606)
94,239
(3,614)
(1,038,221)
(32,794)
550,415
(326,729)
27,525
547,785
(12,984)
(345,870)
2,070,277
667,396
(17,218)
172,247
70,446
16,920
84,881
$ 1,467,991
$ 822,425
$ 172,247
53
54
Reports + NumbersMedical Properties Trust Annual Report 2019
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
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., 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.
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation: Property holding entities and other
subsidiaries of which we own 100% of the equity or have a controlling
financial interest evidenced by ownership of a majority voting interest
are consolidated. All inter-company balances and transactions are
eliminated. For entities in which we own less than 100% of the equity
interest, we consolidate the property if we have the direct or indirect
ability to control the entities’ activities based upon the terms of the
respective entities’ ownership agreements. For these entities, we
record a non-controlling interest representing equity held by non-
controlling interests.
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 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.
We continually evaluate all of our transactions and investments to
determine if they represent variable interests in a variable interest
entity. If we determine that we have a variable interest in a variable
interest entity, we then evaluate if we are the primary beneficiary of
the variable interest entity. The evaluation is a qualitative assessment
as to whether we have the ability to direct the activities of a variable
interest entity that most significantly impact the entity’s economic
performance. We consolidate each variable interest entity in which
we, by virtue of or transactions with our investments in the entity, are
considered to be the primary beneficiary. At December 31, 2019 and
2018, we determined that we were not the primary beneficiary of any
variable interest entity in which we hold a variable interest because we
do not control the activities (such as the day-to-day operations) that
most significantly impact the economic performance of these entities.
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.
We manage our business as a single business segment. All of our
properties are located in the U.S., Europe, and Australia.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the U.S. requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
Investments in Unconsolidated Entities: Investments in entities in
which we have the ability to significantly influence (but not control)
are accounted for by the equity method, such as our joint venture with
Primotop Holdings S.à.r.l. (“Primotop”) as discussed in Note 3. Under
the equity method of accounting, our share of the investee’s earnings
or losses are included in the “Earnings from equity interests” line of our
consolidated statements of net income. Except for our joint venture
with Primotop, we have elected to record our share of such investee’s
earnings or losses on a lag basis. The initial carrying value of investments
in unconsolidated entities is based on the amount paid to purchase
the interest in the investee entity. Subsequently, our investments are
increased/decreased by our share in the investees’ earnings/losses and
decreased by cash distributions from our investees. To the extent that
our cost basis is different from the basis reflected at the investee entity
level, the basis difference is generally amortized over the lives of the
related assets and liabilities, and such amortization is included in our
share of equity in earnings of the investee.
We evaluate our equity method investments for impairment based
upon a comparison of the fair value of the equity method investment
to its carrying value, when impairment indicators exist. If we determine
a decline in the fair value of an investment in an unconsolidated
investee entity below its carrying value is other-than-temporary, an
impairment is recorded.
Investments in entities in which we do not control nor do we have
the ability to significantly influence and for which there is no readily
determinable fair value (such as our investments in Steward Health
Care System LLC (“Steward”) and Median Kliniken S.á.r.l. (“MEDIAN”)
are accounted for at cost, less any impairment, plus or minus changes
resulting from observable price changes in orderly transactions
involving the investee. For similar investments but for which there are
readily determinable fair values, such investments are measured at fair
value quarterly, with unrealized gains and losses recorded in income.
Cash and Cash Equivalents: Certificates of deposit, short-term
investments with original maturities of three months or less, and
money-market mutual funds are considered cash equivalents.
The majority of our cash and cash equivalents are held at major
commercial banks, which at times may exceed the Federal Deposit
Insurance Corporation limit. We have not experienced any losses to-
date on our invested cash. Cash and cash equivalents which have been
restricted as to its use are recorded in other assets.
Revenue Recognition: Our revenues are primarily from leases
and mortgage loans. On January 1, 2019, 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 and
no reassessment of lease classification for existing leases. In addition,
we made certain elections permitted 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 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. For
lessors, this new standard of accounting for leases is substantially
equivalent to previous guidance, but there are some differences which
we highlight below:
OPERATING LEASE REVENUE
We receive income from operating leases based on the fixed, minimum
required rents (base rents) per the lease agreements. Rent revenue
from base rents is recorded on the straight-line method over the terms
of the related lease agreements for new leases and the remaining
terms of existing leases for those acquired as part of a property
acquisition. The straight-line method records the periodic average
amount of base rent earned over the term of a lease, taking into
account contractual rent increases over the lease term. The straight-
line method typically has the effect of recording more rent revenue
from a lease than a tenant is required to pay early in the term of the
lease. During the later parts of a lease term, this effect reverses with
less rent revenue recorded than a tenant is required to pay. Rent
revenue, as recorded on the straight-line method, in the consolidated
statements of net income is presented as two amounts: rent billed
and straight-line rent revenue. Rent billed revenue is the amount of
base rent actually billed to our tenants each period as required by the
lease. Straight-line rent revenue is the difference between rent revenue
earned based on the straight-line method and the amount recorded as
rent billed revenue. We record the difference between rent revenues
earned and amounts due per the respective lease agreements, as
applicable, as an increase or decrease to straight-line rent receivable.
Rental payments received prior to their recognition as income are
classified as deferred revenue.
FINANCING LEASE REVENUE
Under the new lease accounting rules adopted on January 1, 2019, if an
acquisition and subsequent lease of a property to the seller does not
meet the definition of a sale, we must account for the transaction as a
financing with income recognized using the imputed interest method.
Another type of financing lease that we carried forward from the
previous lease accounting guidance is a direct financing lease (“DFL”).
For leases accounted for as DFLs, the future minimum lease payments
are recorded as a receivable. The difference between the future
minimum lease payments and the estimated residual values less the
cost of the properties is recorded as unearned income. Unearned
income is deferred and amortized to income over the lease terms to
provide a constant yield when collectability of the lease payments
is reasonably assured. Investments in DFLs are presented net of
unearned income.
55
56
Reports + NumbersMedical Properties Trust Annual Report 2019 OTHER LEASING REVENUE
We begin recording base rent income from our development projects
when the lessee takes physical possession of the facility, which
may be different from the stated start date of the lease. Also, during
construction of our development projects, we may be entitled to
accrue rent based on the cost paid during the construction period
(construction period rent). We accrue construction period rent as a
receivable with a corresponding offset to deferred revenue during the
construction period. When the lessee takes physical possession of the
facility, we begin recognizing the deferred construction period revenue
on the straight-line method over the term of the lease.
We also receive additional rent (contingent rent) under some leases
based on increases in the consumer price index (“CPI”) (or similar
index outside the U.S.) or when CPI exceeds the annual minimum
percentage increase as stipulated in the lease. Contingent rents are
recorded as rent billed revenue in the period earned.
Starting January 1, 2019 (with the adoption of ASU 2016-02), tenant
payments for ground leases along with other operating expenses,
such as property taxes and insurance, that are paid directly by us and
reimbursed by our tenants are presented on a gross basis with the
related revenues recorded in “Interest and other income” and the
related expenses in “Property-related” in our consolidated statements
of net income. All payments of other operating expenses made directly
by the tenant to the applicable government or appropriate third-party
vendor are recorded on a net basis, consistent with how all tenant
payments or reimbursements pursuant to our “triple-net” leases were
accounted for prior to ASU 2016-02.
INTEREST REVENUE
We receive interest income from our tenants/borrowers on mortgage
loans, working capital loans, and other long-term loans. Interest
income from these loans is recognized as earned based upon the
principal outstanding and terms of the loans.
OTHER REVENUE
Commitment fees received from lessees for development and leasing
services are initially recorded as deferred revenue and recognized as
income over the initial term of a lease to produce a constant effective
yield on the lease (interest method). Commitment and origination
fees from lending services are also recorded as deferred revenue
initially and recognized as income over the life of the loan using the
interest method.
Acquired Real Estate Purchase Price Allocation: Since January 1,
2018 with adoption of ASU No. 2017-01, “Clarifying the Definition of a
Business” (“ASU 2017-01”), all of our property acquisitions have been
accounted for as asset acquisitions. Prior to 2018, properties acquired
for leasing purposes were accounted for using business combination
accounting rules. The primary impact to us from this change in
accounting is the capitalization of third party transaction costs that are
directly related to the acquisition as these costs were expensed under
business combination accounting rules. Under either accounting
method, we allocate the purchase price of acquired properties to
tangible and identified intangible assets acquired and liabilities
assumed (if any) based on their fair values. In making estimates of
fair values for purposes of allocating purchase prices of acquired
real estate, we may utilize a number of sources, from time to time,
including available real estate broker data, independent appraisals
that may be obtained in connection with the acquisition or financing
of the respective property, internal data from previous acquisitions or
developments, and other market data, including market comparables
for significant assumptions such as market rental, capitalization and
discount rates. We also consider information obtained about each
property as a result of our pre-acquisition due diligence, marketing,
and leasing activities in estimating the fair value of the tangible and
intangible assets acquired.
We measure the aggregate value of lease intangible assets acquired
based on the difference between (i) the property valued with new or
in-place leases adjusted to market rental rates and (ii) the property
valued as if vacant. Management’s estimates of value are made using
methods similar to those used by independent appraisers (e.g.,
discounted cash flow analysis). Factors considered by management in
our analysis include an estimate of carrying costs during hypothetical
expected lease-up periods, considering current market conditions,
and costs to execute similar leases. We also consider information
obtained about each targeted facility as a result of our pre-acquisition
due diligence, marketing, and leasing activities in estimating the
fair value of the intangible assets acquired. In estimating carrying
costs, management includes real estate taxes, insurance, and other
operating expenses and estimates of lost rentals at market rates
during the expected lease-up periods, which we expect to be about six
months depending on specific local market conditions. Management
also estimates costs to execute similar leases including leasing
commissions, legal costs, and other related expenses to the extent
that such costs are not already incurred in connection with a new lease
origination as part of the transaction.
We record above-market and below-market in-place lease values, if any,
for our facilities, which are based on the present value of the difference
between (i) the contractual amounts to be paid pursuant to the in-place
leases and (ii) management’s estimate of fair market lease rates for the
corresponding in-place leases, measured over a period equal to the
remaining non-cancelable term of the lease. We amortize any resulting
capitalized above-market lease values as a reduction of rental income
over the lease term. We amortize any resulting capitalized below-
market lease values as an increase to rental income over the lease term.
Other intangible assets acquired may include customer relationship
intangible values which are based on management’s evaluation of
the specific characteristics of each prospective tenant’s lease and our
overall relationship with that tenant. Characteristics to be considered
by management in allocating these values include the nature and
extent of our existing business relationships with the tenant, growth
prospects for developing new business with the tenant, the tenant’s
credit quality, and expectations of lease renewals, including those
existing under the terms of the lease agreement, among other factors.
We amortize the value of these intangible assets to expense over
the term of the respective leases. If a lease is terminated early, the
unamortized portion of the lease intangibles are charged to expense.
Real Estate and Depreciation: Real estate, consisting of land, buildings
and improvements, are maintained at cost. Although typically paid
by our tenants, any expenditure for ordinary maintenance and repairs
that we pay are expensed to operations as incurred. Significant
renovations and improvements which improve and/or extend the
useful life of the asset are capitalized and depreciated over their
estimated useful lives. We record impairment losses on long-lived
assets used in operations when events and circumstances indicate
that the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets, including an estimated
liquidation amount, during the expected holding periods are less than
the carrying amounts of those assets. Impairment losses are measured
as the difference between carrying value and fair value of the assets.
For assets held for sale, we cease recording depreciation expense
and adjust the assets’ value to the lower of its carrying value or fair
value, less cost of disposal. Fair value is based on estimated cash flows
discounted at a risk-adjusted rate of interest. We classify real estate
assets as held for sale when we have commenced an active program
to sell the assets, and in the opinion of management, it is probable the
asset will be sold within the next 12 months.
Construction in progress includes the cost of land, the cost of
construction of buildings, improvements, and fixed equipment,
and costs for design and engineering. Other costs, such as interest,
legal, property taxes, and corporate project supervision, which can
be directly associated with the project during construction, are also
included in construction in progress. We commence capitalization of
costs associated with a development project when the development
of the future asset is probable and activities necessary to get the
underlying property ready for its intended use have been initiated.
We stop the capitalization of costs when the property is substantially
complete and ready for its intended use.
Depreciation is calculated on the straight-line method over the
estimated useful lives of the related real estate and other assets. Our
weighted-average useful lives at December 31, 2019 are as follows:
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.0 years
Tenant lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.7 years
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.0 years
Furniture, equipment, and other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.7 years
Losses from Rent Receivables: For all leases, we continuously monitor
the performance of our existing tenants including, but not limited to:
admission levels and surgery/procedure volumes by type; current
operating margins; ratio of our tenants’ operating margins both to
facility rent and to facility rent plus other fixed costs; trends in cash
collections; trends in revenue and patient mix; and the effect of
evolving healthcare regulations on tenants’ profitability and liquidity.
LOSSES FROM OPERATING LEASE RECEIVABLES: We utilize the
information above along with the tenant’s payment and default
history in evaluating (on a property-by-property basis) whether
or not a provision for losses on outstanding billed rent and/or
straight-line rent receivables is needed. A provision for losses
on rent receivables (including straight-line rent receivables) is
ultimately recorded when it becomes probable that the receivable
will not be collected in full. The provision is an amount which
reduces the receivable to its estimated net realizable value based
on a determination of the eventual amounts to be collected either
from the debtor or from existing collateral, if any.
LOSSES ON FINANCING LEASE RECEIVABLES: Allowances are
established for financing lease receivables based upon an estimate
of probable losses on a property-by-property basis. Financing
lease receivables are impaired when it is deemed probable that we
will be unable to collect all amounts due in accordance with the
contractual terms of the lease. Like operating lease receivables,
the need for an allowance is based upon our assessment of the
lessee’s overall financial condition; economic resources and
payment record; the prospects for support from any financially
responsible guarantors; and, if appropriate, the realizable value
of any collateral. These estimates consider all available evidence
including the expected future cash flows discounted at the effective
interest rate of the financing lease, fair value of collateral, and other
relevant factors, as appropriate. Financing leases are placed on
non-accrual status when we determine that the collectability of
contractual amounts is not reasonably assured. If on non-accrual
status, we generally account for the financing leases on a cash
basis, in which income is recognized only upon receipt of cash.
Loans: Loans consist of mortgage loans, working capital loans, and
other long-term loans. Mortgage loans are collateralized by interests in
real property. Working capital and other long-term loans are generally
collateralized by interests in receivables and corporate and individual
guarantees. We record loans at cost. We evaluate the collectability of
both interest and principal on a loan-by-loan basis (using the same
57
58
Reports + NumbersMedical Properties Trust Annual Report 2019 process as we do for assessing the collectability of rents) to determine
whether they are impaired. A loan is considered impaired when, based
on current information and events, it is probable that we will be
unable to collect all amounts due according to the existing contractual
terms. When a loan is considered to be impaired, the amount of the
allowance is calculated by comparing the recorded investment to
either the value determined by discounting the expected future cash
flows using the loan’s effective interest rate or to the fair value of the
collateral, if the loan is collateral dependent. If a loan is deemed to be
impaired, we generally place the loan on non-accrual status and record
interest income only upon receipt of cash.
Earnings Per Share: Basic earnings per common share is computed by
dividing net income applicable to common shares by the weighted-
average number of shares of common stock outstanding during the
period. Diluted earnings per common share is calculated by including
the effect of dilutive securities.
Our unvested restricted stock awards contain non-forfeitable rights
to dividends, and accordingly, these awards are deemed to be
participating securities. These participating securities are included in
the earnings allocation in computing both basic and diluted earnings
per common share.
Income Taxes: We conduct our business as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (“the
Code”). To qualify as a REIT, we must meet certain organizational and
operational requirements, including a requirement to distribute to
stockholders at least 90% of our REIT’s ordinary taxable income. As a
REIT, we generally pay little U.S. federal and state income tax because
of the dividends paid deduction that we are allowed to take. If we
fail to qualify as a REIT in any taxable year, we will then be subject to
U.S. federal income taxes on our taxable income at regular corporate
rates and will not be permitted to qualify for treatment as a REIT for
federal income tax purposes for four years following the year during
which qualification is lost, unless the Internal Revenue Service grants us
relief under certain statutory provisions. Such an event could materially
adversely affect our net income and net cash available for distribution to
stockholders. However, we intend to operate in such a manner so that
we will remain qualified as a REIT for U.S. federal income tax purposes.
Our financial statements include the operations of a TRS, MPT
Development Services, Inc. (“MDS”), and with many other entities,
which are single member LLCs that are disregarded for tax purposes
and are reflected in the tax returns of MDS. MDS is not entitled to a
dividends paid deduction and is subject to U.S. federal, state, and local
income taxes. MDS is authorized to provide property development,
leasing, and management services for third-party owned properties,
and we will make non-mortgage loans to and/or investments in our
lessees through this entity.
With the property acquisitions and investments in Europe and
Australia, we are subject to income taxes internationally. However,
we do not expect to incur any additional income taxes in the U.S. as
such income from our international properties flows through our REIT
income tax returns. For our TRS and international subsidiaries, we
determine deferred tax assets and liabilities based on the differences
between the financial reporting and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences
are expected to reverse. Any increase or decrease in our deferred
tax assets/liabilities that results from a change in circumstances
and that causes us to change our judgment about expected future
tax consequences of events, is reflected in our tax provision when
such changes occur. Deferred income taxes also reflect the impact
of operating loss carryforwards. A valuation allowance is provided
if we believe it is more likely than not that all or some portion of our
deferred tax assets will not be realized. Any increase or decrease in the
valuation allowance that results from a change in circumstances, and
that causes us to change our judgment about our ability to realize the
related deferred tax asset, is reflected in our tax provision when such
changes occur.
The calculation of our income taxes involves dealing with uncertainties
in the application of complex tax laws and regulations in a multitude of
jurisdictions across our global operations. An income tax benefit from
an uncertain tax position may be recognized when it is more likely than
not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, on the basis
of technical merits. However, if a more likely than not position cannot
be reached, we record a liability as an offset to the tax benefit and
adjust the liabilities when our judgment changes as a result of the
evaluation of new information not previously available. Because of
the complexity of some of these uncertainties, the ultimate resolution
may result in a payment that is materially different from our current
estimate of the uncertain tax position liabilities. These differences will
be reflected as increases or decreases to income tax expense in the
period in which new information is available.
Stock-Based Compensation: We adopted the 2019 Equity Incentive
Plan (the “Equity Incentive Plan”) during the second quarter of 2019.
Awards of restricted stock and other equity-based awards with service
conditions are valued at the average stock price per share on the date
of grant and are amortized to compensation expense over the service
periods (typically three years), using the straight-line method. Awards
that contain market conditions are valued on the grant date using
a Monte Carlo valuation model and are amortized to compensation
expense over the derived service periods, which correspond to the
periods over which we estimate the awards will be earned, which
generally range from three to five years, using the straight-line
method. Awards with performance conditions are valued at the
average stock price per share on the date of grant and are amortized
using the straight-line method over the service period, adjusted for
the probability of achieving the performance conditions. Forfeitures of
stock-based awards are recognized as they occur.
Deferred Costs: Costs incurred that directly relate to the offerings of
stock are deferred and netted against proceeds received from the
offering. Leasing commissions and other leasing costs that would not
have been incurred if the lease was not obtained are capitalized as
deferred leasing costs and amortized on the straight-line method over
the terms of the related lease agreements. Costs identifiable with loans
made to borrowers are capitalized and recognized as a reduction in
interest income over the life of the loan.
Deferred Financing Costs: We generally capitalize financing costs
incurred in connection with new financings and refinancings of
debt. These costs are amortized over the lives of the related debt
as an addition to interest expense. For debt with defined principal
re-payment terms, the deferred costs are amortized to produce a
constant effective yield on the debt (interest method) and are included
within Debt, net on our consolidated balance sheets. For debt without
defined principal repayment terms, such as our revolving credit
facility, the deferred costs are amortized on the straight-line method
over the term of the debt and are included as a component of “Other
assets” on our consolidated balance sheets.
Foreign Currency Translation and Transactions: Certain of our
international subsidiaries’ functional currencies are the local
currencies of their respective countries. We translate the results of
operations of our foreign subsidiaries into U.S. dollars using average
rates of exchange in effect during the period, and we translate balance
sheet accounts using exchange rates in effect at the end of the period.
We record resulting currency translation adjustments in “Accumulated
other comprehensive income (loss)”, a component of stockholders’
equity on our consolidated balance sheets.
Certain of our U.S. subsidiaries will enter into short-term and long-term
transactions denominated in a foreign currency from time-to-time.
Gains or losses resulting from these foreign currency transactions
are translated into U.S. dollars at the rates of exchange prevailing
at the dates of the transactions. The effects of transaction gains or
losses on our short-term transactions are included in other income in
the consolidated statements of income, while the translation effects
on our long-term investments are recorded in “Accumulated other
comprehensive income (loss)” on our consolidated balance sheets.
Derivative Financial Investments and Hedging Activities: During our
normal course of business, we may use certain types of derivative
instruments for the purpose of managing interest rate and/or foreign
currency risk. We record our derivative and hedging instruments at
fair value on the balance sheet. Changes in the estimated fair value
of derivative instruments that are not designated as hedges or that
do not meet the criteria for hedge accounting are recognized in
earnings. For derivatives designated as cash flow hedges, the change
in the estimated fair value of the effective portion of the derivative
is recognized in “Accumulated other comprehensive income (loss)”
on our consolidated balance sheets, whereas the change in the
estimated fair value of the ineffective portion is recognized in earnings.
For derivatives designated as fair value hedges, the change in the
estimated fair value of the effective portion of the derivatives offsets
the change in the estimated fair value of the hedged item, whereas
the change in the estimated fair value of the ineffective portion is
recognized in earnings.
To qualify for hedge accounting, we formally document all
relationships between hedging instruments and hedged items, as
well as our risk management objective and strategy for undertaking
the hedge prior to entering into a derivative transaction. This process
includes specific identification of the hedging instrument and the
hedge transaction, the nature of the risk being hedged and how
the hedging instrument’s effectiveness in hedging the exposure to
the hedged transaction’s variability in cash flows attributable to the
hedged risk will be assessed. Both at the inception of the hedge and on
an ongoing basis, we assess whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in cash
flows or fair values of hedged items. In addition, for cash flow hedges,
we assess whether the underlying forecasted transaction will occur.
We discontinue hedge accounting if a derivative is not determined to
be highly effective as a hedge or that it is probable that the underlying
forecasted transaction will not occur.
Fair Value Measurement: We measure and disclose the estimated fair
value of financial assets and liabilities utilizing a hierarchy of valuation
techniques based on whether the inputs to a fair value measurement
are considered to be observable or unobservable in a marketplace.
Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect our market assumptions.
This hierarchy requires the use of observable market data when
available. These inputs have created the following fair value hierarchy:
•
•
•
Level 1 — quoted prices for identical instruments in active markets;
Level 2 — quoted prices for similar instruments in active markets;
quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations in which significant
inputs and significant value drivers are observable in active
markets; and
Level 3 — fair value measurements derived from valuation
techniques in which one or more significant inputs or significant
value drivers are unobservable.
We measure fair value using a set of standardized procedures that
are outlined herein for all assets and liabilities which are required
59
60
Reports + NumbersMedical Properties Trust Annual Report 2019 to be measured at their estimated fair value on either a recurring or
non-recurring basis. When available, we utilize quoted market prices
from an independent third party source to determine fair value and
classify such items in Level 1. In some instances where a market price
is available, but the instrument is in an inactive or over-the-counter
market, we apply the dealer (market maker) pricing estimate and
classify the asset or liability in Level 2.
If quoted market prices or inputs are not available, fair value
measurements are based upon valuation models that utilize current
market or independently sourced market inputs, such as interest rates,
option volatilities, credit spreads, market capitalization rates, etc.
Items valued using such internally-generated valuation techniques
are classified according to the lowest level input that is significant to
the fair value measurement. As a result, the asset or liability could
be classified in either Level 2 or 3 even though there may be some
significant inputs that are readily observable. Internal fair value
models and techniques that have been used by us include discounted
cash flow and Monte Carlo valuation models. We also consider
counterparty’s and our own credit risk on derivatives and other
liabilities measured at their estimated fair value.
Fair Value Option Election: For our equity interest in Ernest Health, Inc.
(“Ernest”) along with any related loans (all of which other than the
mortgage loans were sold or paid off on October 4, 2018 - see Note 3
for more details), we have elected to account for these investments at
fair value due to the size of the investments and because we believe
this method is more reflective of current values. We have not made
a similar election for other equity interests or loans that existed at
December 31, 2019.
Leases (Lessee)
Pursuant to ASU 2016-02, we are required 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 determines 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. Starting January 1, 2019, we are 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 are off balance sheet with lease expense recognized on
a straight-line basis over the lease term, similar to previous guidance
for 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.
Reclassifications: Certain amounts in the consolidated financial
statements for prior periods have been reclassified to conform to the
current period presentation.
2019 ACTIVITY
LifePoint Acquisition
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 to be used for our financing receivables,
including financing leases and loans, which the FASB believes will
result in more timely recognition of such losses. ASU 2016-13 is
effective for us on January 1, 2020. Upon adoption of this standard, we
expect to record a credit loss reserve on January 1, 2020, of between
$5 million and $15 million with the effect recorded as a cumulative
adjustment in retained earnings.
3. REAL ESTATE ACTIVITIES
ACQUISITIONS
For the years ended December 31, 2019, 2018, and 2017, we acquired
the following assets:
Assets Acquired
2019
2018
2017
(Amounts in thousands)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 400,539
$ 71,880
$ 240,993
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,951,066
686,739
Inta ngible lease assets – subject to amortization
227,468
90,651
(weighted-average useful life of 19.1 years in 2019,
27.9 years in 2018, and 27.7 years in 2017) . . . . .
Investment in financing leases . . . . . . . . . . . . . .
1,386,797
Mortgage loans . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity investments and other assets. . . . . . . . . . .
Liabilit ies assumed . . . . . . . . . . . . . . . . . . . . .
51,267
135,258
415,836
(2,637)
—
—
336,458
245,267
985,219
181,004
40,450
700,000
—
100,000
—
(878)
Total assets acquired . . . . . . . . . . . . . . . . .
$ 4,565,594
$ 1,430,995
$ 2,246,788
Loans repaid(1) . . . . . . . . . . . . . . . . . . .
—
(764,447)
—
Total net assets acquired . . . . . . . . . . . . . . .
$ 4,565,594
$ 666,548
$ 2,246,788
(1)The 2018 column includes $0.8 billion of loans advanced to Steward in 2016 and repaid in 2018 as part of
sale leaseback conversion described below.
On December 17, 2019, we acquired a portfolio of 10 acute care
hospitals owned and operated by LifePoint Health, Inc. (“LifePoint”)
for a combined purchase price of approximately $700.0 million. The
properties are leased to LifePoint under one master lease agreement.
The master lease has a 20-year initial term and two five-year extension
options, plus annual inflation-based escalators.
Prospect Transaction
On August 23, 2019, we invested in a portfolio of 14 acute care
hospitals and two behavioral health facilities operated by Prospect
Medical Holdings, Inc. (“Prospect”) for a combined purchase price of
approximately $1.55 billion. Our investment includes the acquisition
of the real estate of 11 acute care hospitals and two behavioral health
facilities for $1.4 billion. We are accounting for these properties as a
financing (as presented in the “Investment in financing leases” line of
the consolidated balance sheets) under 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 two additional acute
care hospitals upon the satisfaction of certain conditions. The master
leases and mortgage loan have substantially similar terms, with a
15-year fixed term subject to three extension options, plus annual
inflation-based escalators.
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.
Ramsay Acquisition
On August 16, 2019, we acquired freehold interests in eight acute
care hospitals located throughout England for an aggregate purchase
price of approximately £347 million. The hospitals are leased to
Ramsay pursuant to in-place net leases with approximate 18-year
remaining lease terms and include annual fixed and periodic market-
based escalations.
Australia Transaction
On June 6, 2019, we acquired 11 hospitals in Australia for a purchase
price of approximately AUD $1.2 billion plus stamp duties and
registration fees of AUD $66.6 million. The properties are leased
to Healthscope, pursuant to master lease agreements that have
an average initial term of 20 years with annual fixed escalations
and multiple extension options. Healthscope was acquired in a
simultaneous transaction by Brookfield Business Partners L.P. and
certain of its institutional partners.
Switzerland Transactions
On May 27, 2019, we invested in a portfolio of 13 acute care campuses
and two 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 with an average 23-year remaining term subject to annual
escalation provisions. We are accounting for our 46% 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 Transactions
On December 3, 2019, we invested in two acute care hospitals in Spain
for a purchase price of approximately €117.3 million. The investment
was effected through our purchase of a 45% stake in a Spanish entity.
The facilities are leased to HM Hospitales pursuant to a master lease
with an initial lease term of 25 years. The lease provides for annual
inflation-based escalators. We are accounting for our 45% interest in this
joint venture under the equity method.
On November 28, 2019, we acquired an acute care hospital in Portugal
for approximately €28.2 million. This facility is leased to José de Mello
pursuant to an in-place lease with 17 years remaining on its initial term.
The lease provides for annual inflation-based escalators.
On August 30, 2019, we invested in a portfolio of facilities throughout
various states for approximately $254 million. The properties are leased
to Vibra Healthcare, LLC (“Vibra”) pursuant to a new master lease
agreement with an initial lease term of 20 years. The lease provides for
annual inflation-based escalators and includes three five-year extension
options. The facilities acquired include three inpatient rehabilitation
hospitals and seven long-term acute care hospitals.
On June 10, 2019, we acquired seven 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 have an average remaining lease term of 14 years. The
leases provide for fixed escalations every five years and include two five-
year extension options. All seven hospitals were constructed in either
2018 or 2019, and the leases are guaranteed by SLHS.
61
62
Reports + NumbersMedical Properties Trust Annual Report 2019 Other acquisitions during 2019 included three acute care hospitals and
one inpatient rehabilitation hospital for an aggregate investment of
approximately $135 million. One of the acute care hospitals, acquired
on April 12, 2019 and located in Big Spring, Texas, is leased to Steward
pursuant to the Steward master lease. The second facility, located
in Poole, England, was acquired on April 3, 2019 and is leased to BMI
Healthcare (“BMI”) pursuant to an in-place lease with 14 years remaining
on its term and fixed 2.5% annual escalators. The third acute care facility
was acquired on September 30, 2019, located in Watsonville, California,
and is leased to Halsen Healthcare. The inpatient rehabilitation hospital,
acquired on February 8, 2019, is located in Germany and leased to
affiliates of MEDIAN. This acquisition was the final property acquired as
part of a four-hospital portfolio transaction that we signed with MEDIAN
in June 2018.
2018 ACTIVITY
Joint Venture Transaction
On August 31, 2018, we completed a joint venture arrangement with
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 placed on
the joint venture’s real estate, and we recognized an approximate
€500 million gain on sale. At inception, our interest in the joint venture
was made up of a 50% equity investment valued at approximately
€210 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
On August 31, 2018, we acquired an acute care facility in Pasco,
Washington, for $17.5 million. The property is leased to LifePoint,
pursuant to the existing long-term master lease.
On August 28, 2018, we acquired three inpatient rehabilitation hospitals
in Germany for €17.3 million (including real estate transfer taxes). These
hospitals are part of a four-hospital portfolio that we agreed to purchase
for an aggregate amount of €23 million (including real estate transfer
taxes) in June 2018. The properties are leased to MEDIAN, pursuant to a
new 27-year master lease with annual inflation-based escalators.
During 2018, we acquired the fee simple real estate of five general acute
care hospitals, four of which are located in Massachusetts and one
located in Texas, from Steward in exchange for the reduction of $764.4
million of mortgage loans made to Steward in October 2016 and March
2018, along with additional cash consideration. These properties are
being leased to Steward pursuant to the original master lease from
October 2016.
2017 ACTIVITY
Steward Transactions
On September 29, 2017, we acquired, from IASIS Healthcare LLC
(“IASIS”), a portfolio of ten acute care hospitals and one behavioral
health facility, along with ancillary land and buildings that are located
in Arizona, Utah, Texas, and Arkansas. The portfolio is now operated by
Steward which separately completed its acquisition of the operations of
IASIS on September 29, 2017. Our investment in the portfolio includes
the acquisition of eight acute care hospitals and one behavioral health
facility for approximately $700 million, the making of $700 million
in mortgage loans on two acute care hospitals, and a $100 million
minority equity contribution in Steward, for a combined investment of
approximately $1.5 billion.
On May 1, 2017, we acquired eight hospitals previously affiliated with
Community Health Systems, Inc. in Florida, Ohio, and Pennsylvania for
an aggregate purchase price of $301.3 million.
MEDIAN Transactions
On November 29, 2017, we acquired three rehabilitation hospitals in
Germany for an aggregate purchase price of €80 million. The facilities are
leased to affiliates of MEDIAN, pursuant to a new long-term master lease.
The lease began on November 30, 2017, and the term is for 27 years
(ending in November 2044). The lease provides for annual inflation-
based escalators.
During the third quarter of 2017, we acquired two rehabilitation
hospitals in Germany for an aggregate purchase price of €39.2 million,
in addition to 11 rehabilitation hospitals in Germany that we acquired
in the second quarter of 2017 for an aggregate purchase price of €127
million. These 13 properties are leased to affiliates of MEDIAN, pursuant
to a third master lease entered into in 2016. These acquisitions are
the final properties of the portfolio of 20 properties in Germany that
we agreed to acquire in July 2016 for €215.7 million, of which seven
properties totaling €49.5 million closed in December 2016.
On June 22, 2017, we acquired an acute care hospital in Germany for a
purchase price of €19.4 million, of which €18.6 million was paid upon
closing with the remainder being paid over four years. This property
is leased to affiliates of MEDIAN, pursuant to an existing master lease
agreement that ends in December 2042 with annual inflation-
based escalators.
On January 30, 2017, we acquired an inpatient rehabilitation hospital in
Germany for €8.4 million. This acquisition was the final property to close
as part of the six hospital portfolio that we agreed to buy in September
2016 for an aggregate amount of €44.1 million. This property is leased
to affiliates of MEDIAN pursuant to the original long-term master lease
agreement reached with MEDIAN in 2015.
Other Transactions
On June 1, 2017, we acquired the real estate assets of Ohio Valley
Medical Center located in Wheeling, West Virginia, and the East Ohio
Regional Hospital in Martins Ferry, Ohio, from Ohio Valley Health
Services, a not-for-profit entity in West Virginia, for an aggregate
purchase price of approximately $40 million. We simultaneously leased
the facilities to Alecto Healthcare Services LLC (“Alecto”).
On May 1, 2017, we acquired the real estate of St. Joseph Regional
Medical Center, a 145-bed acute care hospital in Lewiston, Idaho,
for $87.5 million. This facility is leased to LifePoint, pursuant to the
existing long-term master lease entered into with LifePoint in
April 2016.
DEVELOPMENT ACTIVITIES
2019 Activity
On October 25, 2019, we entered into an agreement to finance the
development of and lease a behavioral hospital in Houston, Texas, for
$27.5 million. This facility will be leased to NeuroPsychiatric Hospitals
pursuant to a long-term lease and is expected to commence rent in the
fourth quarter of 2020.
2018 Activity
During the year ended December 31, 2018, we completed the
construction on Ernest Flagstaff. This $25.5 million inpatient
rehabilitation facility located in Flagstaff, Arizona opened on March
1, 2018 and is being leased to Ernest pursuant to a stand-alone lease,
with terms similar to the original master lease.
2017 Activity
During 2017, we completed construction and began recording rental
income on the following facilities:
Adeptus Health, Inc. (“Adeptus”) — We completed four acute care
facilities totaling approximately $68 million in development costs.
•
•
facility is effected through a joint venture between us and clients
of AXA Real Estate, in which we own a 50% interest.
See table below for a status summary of our current development
projects (in thousands):
Property
Commitment
Costs
Incurred as of
December 31,
2019
Estimated Rent
Commencement
Date
Circle (Birmingham, England) . . . . . . . . . . . . . .
$ 47,532
$ 41,920
Circle Rehabilitation (Birmingham, England) . . . .
21,427
Surgery Partners (Idaho Falls, Idaho) . . . . . . . . .
113,468
NeuroPsychiatric Hospitals (Houston, Texas) . . . .
27,500
17,385
96,639
12,268
2Q 2020
2Q 2020
1Q 2020
4Q 2020
$ 209,927
$ 168,212
DISPOSALS
2019 Activity
During 2019, we completed the sale of five facilities for net proceeds to
us of approximately $97.0 million. The transactions resulted in a gain
on real estate of $41.6 million.
2018 Activity
On October 4, 2018, we finalized a recapitalization agreement in which
we sold our investment in the operations of Ernest and were repaid
for our outstanding acquisition loans, working capital loans, and
any unpaid interest. Total proceeds received from this transaction
approximated $176 million. We retained ownership of the real estate
and secured mortgage loans of our Ernest properties.
On August 31, 2018, we completed the previously described joint
venture arrangement with Primotop, in which we contributed the real
estate of 71 of our post-acute hospitals in Germany, with a fair value of
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 million. The transaction 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.
IMED Group (“IMED”) — A general acute facility located in
Valencia, Spain opened on March 31, 2017, and is being leased
to IMED pursuant to a 30-year lease that provides for quarterly
fixed rent payments that started on October 1, 2017 with annual
increases of 1% beginning April 1, 2020. Our ownership in this
On June 4, 2018, we sold three 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
63
64
Reports + NumbersMedical Properties Trust Annual Report 2019 working capital loan. The transaction resulted in a gain 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.
2018, and 2017, respectively, and expect to recognize amortization
expense from existing lease intangible assets as follows (amounts
in thousands):
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.
Summary of Operations for Disposed Assets in 2018
The following represents the operating results (excluding the St.
Joseph sale in March 2018) of the properties sold in 2018 for the
periods presented (in thousands):
For the Year Ended
2018
2017
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 88,838
$ 132,039
Real estate depreciation and amortization . . . . . . . . . . . . . . . . . .
(15,849)
(31,870)
Property-related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(531)
(404)
Other(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
709,717
(14,168)
Income from real estate dispositions, net . . . . . . . . . . . . . . . . . . .
$ 782,175
$ 85,597
(1) Includes approximately $720 million of gains on sale for the twelve months ended December 31, 2018.
2017 Activity
On March 31, 2017, we sold the EASTAR Health System real estate
located in Muskogee, Oklahoma, which was leased to LifePoint.
Total proceeds from this transaction were approximately $64 million
resulting in a gain of $7.4 million, partially offset by a $0.6 million
non-cash charge to revenue to write-off related straight-line rent
receivables on this property.
The property disposals in 2019, 2018, and 2017 were not strategic
shifts in our operations and therefore the results of operations of those
properties were not reclassified to discontinued operations.
INTANGIBLE ASSETS
At December 31, 2019 and 2018, our intangible lease assets were
$622.1 million ($556.7 million, net of accumulated amortization) and
$403.1 million ($352.5 million, net of accumulated amortization),
respectively.`We recorded amortization expense related to intangible
lease assets of $21.5 million, $17.6 million, and $15.8 million in 2019,
For the Year Ended December 31:
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,795
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,781
27,767
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,702
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,668
As of December 31, 2019, capitalized lease intangibles have a
weighted-average remaining life of 21.6 years.
At December 31, 2019, leases on 14 Ernest facilities and ten Prime
Healthcare Services, Inc. (“Prime”) facilities are accounted for as
DFLs, and leases on 13 of our Prospect facilities are accounted for as a
financing. The components of our total investment in financing leases
consisted of the following (in thousands):
As of December
31, 2019
As of December
31, 2018
Minimum lease payments receivable . . . . . . . . . . . . . . . .
$ 1,884,921
$ 2,091,504
Estimated residual values . . . . . . . . . . . . . . . . . . . . . . .
394,195
424,719
Less unearned income . . . . . . . . . . . . . . . . . . . . . . . . .
(1,618,252)
(1,832,170)
Net investment in direct financing leases . . . . . . . . . . .
$ 660,864
$ 684,053
Other financing leases . . . . . . . . . . . . . . . . . . . . . . . . .
1,399,438
—
Our mortgage loans cover 11 of our properties with five operators with
the increase year-over-year related to the $51.3 million mortgage loan
on a Prospect property.
Acquisition loans are primarily related to the $112.9 million loan to
Prospect, which we expect will be converted into the acquisition of
two acute care hospitals upon the satisfaction of certain conditions.
Other loans consist of loans to our tenants for working capital and
other purposes and include our shareholder loan made to the joint
venture with Primotop on August 31, 2018 (as more fully described
above in this Note 3) in the amount of €290 million.
Total investment in financing leases . . . . . . . . . . . . . . .
$ 2,060,302
$ 684,053
CONCENTRATION OF CREDIT RISKS
LEASING OPERATIONS (LESSOR)
Adeptus Health Transition Properties
As noted earlier, we 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 15 years) and
most include renewal options at the election of our tenants, generally
in five year increments. More than 97% of our leases provide annual
rent escalations based on increases in the CPI (or similar index outside
the U.S.) and/or fixed minimum annual rent 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 five properties with a carrying value of $210 million,
our leases require a residual value guarantee from the tenant. Our
leases typically require the tenant to handle and bear most of the costs
associated with our properties including repair/maintenance, property
taxes, and insurance. We routinely inspect our properties to ensure
the residual value of each of our assets is being maintained. Except for
leases classified as financing leases, all of our leases are classified as
operating leases.
The following table summarizes total future minimum lease payments
to be received, excluding operating expense reimbursements, from
tenants under noncancelable leases as of December 31, 2019 (amounts
in thousands):
As noted in previous filings and effective October 2, 2017, we had
16 properties transitioning away from Adeptus in stages over a two
year period as part of Adeptus’ confirmed plan of reorganization
under Chapter 11 of the Bankruptcy Code. Due to this transition,
we accelerated the amortization of the straight-line rent receivables
resulting in a $1.5 million and $6.1 million impact to 2019 and 2018,
respectively, and recorded a $0.5 million and $18 million real estate
impairment charge in 2019 and 2018, respectively, on certain of these
facilities. At December 31, 2019, three of the original 16 properties
(representing less than 0.1% of our total assets) are vacant.
Alecto Healthcare facilities
At December 31, 2019, we own four acute care facilities and have a
mortgage loan on a fifth property, representing less than 0.6% of our
total assets. During the fourth quarter of 2019, we terminated the
lease on two Alecto facilities in Ohio and West Virginia resulting in a
real estate impairment charge of approximately $20.0 million. This
adjustment was in addition to the $30 million impairment recorded on
Alecto properties in 2018.
LOANS
Total Under
Operating
Leases
Total Under
Financing
Leases
Total
The following is a summary of our loans ($ amounts in thousands):
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 589,140
$ 166,067
$ 755,207
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
604,653
169,388
774,041
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
612,427
172,776
785,203
As of December 31, 2019
As of December 31, 2018
Weighted-
Average
Interest Rate
Weighted-
Average
Interest Rate
Balance
Balance
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
623,590
176,231
799,821
Mortgage loans . . . . . . . . . . . . .
$ 1,275,022
9.0% $ 1,213,322
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
633,197
179,756
812,953
Thereafter
12,779,610
4,902,534
17,682,144
$ 15,842,617
$ 5,766,752
$ 21,609,369
Acquisition loans . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . .
123,893
420,939
7.7%
5.7%
3,454
369,744
$ 1,819,854
$ 1,586,520
8.8%
10.8%
5.4%
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 December 31, 2019, we had no
investment in any single property greater than 2.6% of our total
assets, compared to 4% at December 31, 2018.
2) Operator concentration – For the year ended December 31, 2019,
revenue from Steward and Prime represented 42% and 15%,
respectively, of our total revenues. In comparison, these operators
represented 39% and 16%, respectively, of our total revenues
for the year ended December 31, 2018. Due to new investments
made during 2019, Steward (when including leases and mortgage
loans) represents 24% of our total assets at December 31, 2019,
compared to 38% at December 31, 2018.
3) Geographic concentration – At December 31, 2019, investments
in the U.S, Europe, and Australia represented approximately
74%, 20%, and 6%, respectively, of our total assets. In
comparison, investments in the U.S. and Europe represented
approximately 80% and 20%, respectively, of our total assets at
December 31, 2018.
4) Facility type concentration – For the year ended December 31,
2019, approximately 87% of our revenues are from our general
acute care facilities, while rehabilitation and long-term acute
care facilities made up 10% and 3%, respectively. In comparison,
general acute care, rehabilitation, and long-term acute care
facilities made up 76%, 20%, and 4%, respectively, of our total
revenues for the year ended December 31, 2018.
65
66
Reports + NumbersMedical Properties Trust Annual Report 2019
RELATED PARTY TRANSACTIONS
CREDIT FACILITY
4.000% SENIOR UNSECURED NOTES DUE 2022
Lease and interest revenue earned from tenants in which we have or
had an equity interest in during the year were $451.1 million, $501.4
million, and $422.4 million in 2019, 2018, and 2017, respectively.
4. DEBT
The following is a summary of debt ($ amounts in thousands):
As of
December
31, 2019
As of
December
31, 2018
Revolving credit facility(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ 28,059
Term loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
200,000
200,000
Australian term loan facility(B) . . . . . . . . . . . . . . . . . . . . . . . . . .
842,520
—
4.000% Senior Unsecured Notes due 2022(B) . . . . . . . . . . . . . . . . .
560,650
573,350
2.550% Senior Unsecured Notes due 2023(B) . . . . . . . . . . . . . . . . .
530,280
—
5.500% Senior Unsecured Notes due 2024 . . . . . . . . . . . . . . . . . . .
300,000
300,000
6.375% Senior Unsecured Notes due 2024 . . . . . . . . . . . . . . . . . . .
500,000
500,000
3.325% Senior Unsecured Notes due 2025(B) . . . . . . . . . . . . . . . . .
560,650
573,350
5.250% Senior Unsecured Notes due 2026 . . . . . . . . . . . . . . . . . . .
500,000
500,000
5.000% Senior Unsecured Notes due 2027 . . . . . . . . . . . . . . . . . . .
1,400,000
1,400,000
3.692% Senior Unsecured Notes due 2028(B) . . . . . . . . . . . . . . . . .
4.625% Senior Unsecured Notes due 2029 . . . . . . . . . . . . . . . . . . .
795,420
900,000
—
—
$ 7,089,520
$ 4,074,759
Debt issue costs and discount, net . . . . . . . . . . . . . . . . . . . . . . . .
(65,841)
(37,370)
$ 7,023,679
$ 4,037,389
(A) Includes £22 million of GBP-denominated borrowings that reflect the exchange rate
at December 31, 2018.
(B) Non-U.S. dollar denominated debt that reflects the exchange rate at period end.
As of December 31, 2019, principal payments due on our debt (which
exclude the effects of any discounts, premiums, or debt issue costs
recorded) are as follows ($ amounts in thousands):
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
760,650
530,280
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,642,520
Total
4,156,070
$ 7,089,520
Thereafter
Total
67
On February 1, 2017, we replaced our previous unsecured credit
facility with a new revolving credit and term loan agreement. The new
agreement included a $1.3 billion unsecured revolving loan facility,
a $200 million unsecured term loan facility, and a new €200 million
unsecured term loan facility. The unsecured revolving loan facility
matures in February 2021 and can be extended for an additional 12
months at our option. The $200 million unsecured term loan facility
matures on February 1, 2022, and the €200 million unsecured term
loan facility had a maturity date of January 31, 2020; however, it
was paid off on March 30, 2017 — see below. The term loan and/
or revolving loan commitments may be increased in an aggregate
amount not to exceed $500 million.
At our election, loans under the Credit Facility may be made as either
ABR Loans or Eurodollar Loans. The applicable margin for term loans
that are ABR Loans is adjustable on a sliding scale from 0.00% to 0.95%
based on our current credit rating. The applicable margin for term
loans that are Eurodollar Loans is adjustable on a sliding scale from
0.90% to 1.95% based on our current credit rating. The applicable
margin for revolving loans that are ABR Loans is adjustable on a
sliding scale from 0.00% to 0.65% based on our current credit rating.
The applicable margin for revolving loans that are Eurodollar Loans
is adjustable on a sliding scale from 0.875% to 1.65% based on our
current credit rating. The commitment fee is adjustable on a sliding
scale from 0.125% to 0.30% based on our current credit rating and is
payable on the revolving loan facility.
At December 31, 2019 and 2018, we had $0 and $28.1 million,
respectively, outstanding on the revolving credit facility. At December
31, 2019, our availability under our revolving credit facility was $1.3
billion. The weighted-average interest rate on this facility was 2.0% and
2.7% during 2019 and 2018, respectively.
At December 31, 2019 and 2018, the interest rate in effect on our term
loan was 3.30% and 3.89%, respectively.
AUSTRALIAN TERM LOAN FACILITY
On May 23, 2019, we entered into an AUD $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.
The term loan facility matures on May 23, 2024. 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’s credit rating) is
1.25% for an all-in fixed rate of 2.45%.
On August 19, 2015, we completed a €500 million senior unsecured
notes offering (“4.000% Senior Unsecured Notes due 2022”). Interest
on the notes is payable annually on August 19 of each year. The notes
pay interest in cash at a rate of 4.000% per year. The notes mature on
August 19, 2022. We may redeem some or all of the 4.000% Senior
Unsecured Notes due 2022 at any time. If the notes are redeemed
prior to 90 days before maturity, the redemption price will be 100%
of their principal amount, plus a make-whole premium, plus accrued
and unpaid interest to, but excluding, the applicable redemption date.
Within the period beginning on or after 90 days before maturity, the
notes may be redeemed, in whole or in part, at a redemption price
equal to 100% of their principal amount, plus accrued and unpaid
interest to, but excluding, the applicable redemption date. The 4.000%
Senior Unsecured Notes due 2022 are fully and unconditionally
guaranteed on an unsecured basis by us. In the event of a change of
control, each holder of the notes may require us to repurchase some
or all of our 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 the purchase.
2.550% SENIOR UNSECURED NOTES DUE 2023
On December 5, 2019, we completed a £400 million senior unsecured
notes offering (“2.550% Senior Unsecured Notes due 2023”). Interest
on the notes is payable annually on December 5 of each year. The notes
pay interest in cash at a rate of 2.550% per year. The notes mature on
December 5, 2023. We may redeem some or all of the 2.550% Senior
Unsecured Notes due 2023 at any time. If the notes are redeemed
prior to 30 days before maturity, the redemption price will be equal
to 100% of the principal amount, plus a make-whole premium,
plus accrued and unpaid interest to, but excluding, the applicable
redemption date. The 2.550% Senior Unsecured Notes due 2023 are
fully and unconditionally guaranteed on an unsecured basis by us. In
the event of change of control, each holder of the notes may require us
to repurchase some or all of our 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 the purchase.
5.500% SENIOR UNSECURED NOTES DUE 2024
On April 17, 2014, we completed a $300 million senior unsecured
notes offering (“5.500% Senior Unsecured Notes due 2024”). Interest
on the notes is payable semi-annually on May 1 and November 1 of
each year. The notes pay interest in cash at a rate of 5.500% per year.
The notes mature on May 1, 2024. We may redeem some or all of the
notes at any time prior to May 1, 2019 at a “make-whole” redemption
price. On or after May 1, 2019, we may redeem some or all of the notes
at a premium that will decrease over time. In the event of a change of
control, each holder of the notes may require us to repurchase some
or all of our 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.
6.375% SENIOR UNSECURED NOTES DUE 2024
On February 22, 2016, we completed a $500 million senior unsecured
notes offering (“6.375% Senior Unsecured Notes due 2024”). Interest
on the notes is payable on March 1 and September 1 of each year.
Interest on the notes is paid in cash at a rate of 6.375% per year. The
notes mature on March 1, 2024. We may redeem some or all of the
notes at any time prior to March 1, 2019 at a “make whole” redemption
price. On or after March 1, 2019, we may redeem some or all of the
notes at a premium that will decrease over time. In addition, at any
time prior to March 1, 2019, we may redeem up to 35% of the notes
at a redemption price equal to 106.375% 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.
3.325% SENIOR UNSECURED NOTES DUE 2025
On March 24, 2017, we completed a €500 million senior unsecured
notes offering (“3.325% Senior Unsecured Notes due 2025”). Interest
on the notes is payable annually on March 24 of each year. The notes
pay interest in cash at a rate of 3.325% per year. The notes mature
on March 24, 2025. We may redeem some or all of the 3.325% Senior
Unsecured Notes due 2025 at any time. If the notes are redeemed prior
to 90 days before maturity, the redemption price will be equal to 100%
of their principal amount, plus a make-whole premium, plus accrued
and unpaid interest up to, but excluding, the applicable redemption
date. Within the period beginning on or after 90 days before maturity,
the notes may be redeemed, in whole or in part, at a redemption price
equal to 100% of their principal amount, plus accrued and unpaid
interest to, but excluding, the applicable redemption date. The 3.325%
Senior Unsecured Notes due 2025 are fully and unconditionally
guaranteed on a senior unsecured basis by us. In the event of a change
of control, each holder of the notes may require us to repurchase some
or all of our notes at a repurchase price equal to 101% of the aggregate
principal amount of the notes plus accrued and unpaid interest up to,
but excluding, the date of the purchase.
5.250% SENIOR UNSECURED NOTES DUE 2026
On July 22, 2016, we completed a $500 million senior unsecured notes
offering (“5.250% Senior Unsecured Notes due 2026”). Interest on the
notes is payable on February 1 and August 1 of each year. Interest on
the notes is to be paid in cash at a rate of 5.250% per year. The notes
68
Reports + NumbersMedical Properties Trust Annual Report 2019
4.625% SENIOR UNSECURED NOTES DUE 2029
2017
mature on August 1, 2026. We may redeem some or all of the notes at
any time prior to August 1, 2021 at a “make whole” redemption price.
On or after August 1, 2021, 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, 2019, we may redeem up to 35% of the notes at a redemption
price equal to 105.250% 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.
5.000% SENIOR UNSECURED NOTES DUE 2027
On September 7, 2017, we completed a $1.4 billion senior unsecured
notes offering (“5.000% Senior Unsecured Notes due 2027”). Interest
on the notes is payable on April 15 and October 15 of each year. The
notes pay interest in cash at a rate of 5.000% per year. The notes
mature on October 15, 2027. We may redeem some or all of the notes
at any time prior to October 15, 2022 at a “make whole” redemption
price. On or after October 15, 2022, we may redeem some or all of
the notes at a premium that will decrease over time. In addition, at
any time prior to October 15, 2020, we may redeem up to 40% of the
notes at a redemption price equal to 105% 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.
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 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.
OTHER ACTIVITY
In preparation of the joint venture with Primotop described under
“2018 Activity” in Note 3, we issued secured debt on August 3, 2018,
resulting in gross proceeds of €655 million. Provisions of the secured
debt included a term of seven years and a swapped fixed rate of
approximately 2.3%. Subsequently, on August 31, 2018, the secured
debt was contributed along with the related real estate of 71 properties
to form the joint venture.
DEBT REFINANCING AND UNUTILIZED FINANCING COSTS
3.692% SENIOR UNSECURED NOTES DUE 2028
2019
On December 5, 2019, we completed a £600 million senior unsecured
notes offering (“3.692% Senior Unsecured Notes due 2028”). The notes
were issued at 99.998% of par value. Interest on the notes is payable on
June 5 of each year. The notes pay interest in cash at a rate of 3.692%
per year. The notes mature on June 5, 2028. We may redeem some or
all of the 3.692% Senior Unsecured Notes due 2028 at any time. If the
notes are redeemed prior to 30 days before maturity, the redemption
price will be equal to 100% of the principal amount, plus a make-whole
premium, plus accrued and unpaid interest to, but excluding, the
applicable redemption date. The 3.692% Senior Unsecured Notes due
2028 are fully and unconditionally guaranteed on an unsecured basis
by us. In the event of change of control, each holder of the notes may
require us to repurchase some or all of our 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 the purchase.
On July 10, 2019, we received a commitment to provide a senior
unsecured bridge loan facility to fund our investment in Prospect.
With this commitment, we paid $4.2 million of underwriting and other
fees. However, this commitment was canceled with the completion
of the debt and equity offerings in July 2019, which resulted in fully
expensing the total amount of underwriting and other fees that
were paid.
In anticipation of funding our Australian acquisition in June 2019
and the Circle Health Ltd. (“Circle”) transaction in January 2020,
we entered into term loans on the date these deals were signed that
had a delayed draw feature. This feature allowed for us to not draw
on the term loans until needed to fund these transactions. However,
with this type of structure, we incurred approximately $2.0 million in
accelerated debt issue cost amortization expense during 2019.
With the replacement of our previous credit facility, the early
redemption of senior unsecured notes, the payoff of our €200
million term loan, the cancellation of a $1.0 billion term loan facility
commitment, and the pre-payment of a $12.9 million mortgage loan,
we incurred a charge of $32.6 million (including redemption premiums
and accelerated amortization of deferred debt issuance cost and
commitment fees) during the year ended December 31, 2017.
Covenants
Our debt facilities impose certain restrictions on us, including
restrictions on our ability to: incur debts; create or incur liens;
provide guarantees in respect of obligations of any other entity; make
redemptions and repurchases of our capital stock; prepay, redeem,
or repurchase debt; engage in mergers or consolidations; enter into
affiliated transactions; dispose of real estate or other assets; and
change our business. In addition, the credit agreements governing
our Credit Facility limit the amount of dividends we can pay as a
percentage of normalized adjusted funds from operations (“NAFFO”),
as defined in the agreements, on a rolling four quarter basis. Through
2019, the dividend restriction was 95% of NAFFO. The indentures
governing our senior unsecured notes also limit the amount of
dividends we can pay based on the sum of 95% of NAFFO, proceeds
of equity issuances and certain other net cash proceeds. Finally, our
senior unsecured notes require us to maintain total unencumbered
assets (as defined in the related indenture) of not less than 150% of our
unsecured indebtedness.
In addition to these restrictions, the Credit Facility contains customary
financial and operating covenants, including covenants relating to
our total leverage ratio, fixed charge coverage ratio, secured leverage
ratio, consolidated adjusted net worth, unsecured leverage ratio, and
unsecured interest coverage ratio. The Credit Facility also contains
customary events of default, including among others, nonpayment
of principal or interest, material inaccuracy of representations, and
failure to comply with our covenants. If an event of default occurs and
is continuing under the Credit Facility, the entire outstanding balance
may become immediately due and payable. At December 31, 2019, we
were in compliance with all such financial and operating covenants.
5. INCOME TAXES
We have maintained and intend to maintain our election as a REIT
under the Code. To qualify as a REIT, we must meet a number of
organizational and operational requirements, including a requirement
to distribute at least 90% of our taxable income to our stockholders. As
a REIT, we generally will not be subject to U.S. federal income tax if we
distribute 100% of our taxable income to our stockholders and satisfy
certain other requirements; instead, income tax is paid directly by
our stockholders on the dividends distributed to them. If our taxable
income exceeds our dividends in a tax year, REIT tax rules allow us to
designate dividends from the subsequent tax year in order to avoid
current taxation on undistributed income. If we fail to qualify as a
REIT in any taxable year, we will be subject to federal income taxes at
regular corporate rates, including any applicable alternative minimum
tax. Taxable income from non-REIT activities managed through our
TRS is subject to applicable U.S. federal, state, and local income taxes.
Our international subsidiaries are also subject to income taxes in the
jurisdictions in which they operate.
From our TRS and our foreign operations, income tax benefit (expense)
were as follows (in thousands):
For the Years Ended December 31,
2019
2018
2017
Current income tax benefit (expense):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 61
$ 125
$ 41
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,669)
(1,608)
(3,294)
(3,169)
(3,062)
(3,021)
Deferred income tax benefit (expense):
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,490
3,713
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,261)
(1,471)
4,229
2,242
233
107
340
Income tax benefit (expense)
$ 2,621
$ (927)
$ (2,681)
A reconciliation of the income tax benefit (expense) at the statutory
income tax rate and the effective tax rate for income before income
taxes for the years ended December 31, 2019, 2018, and 2017 is as
follows (in thousands):
For the Years Ended December 31,
2019
2018
2017
Income before income tax . . . . . . . . . . . . . . . . .
$ 373,780
$ 1,019,404
$ 293,919
Income tax at the U.S. statutory federal rate (21% in
2019 and 2018 and 35% in 2017) . . . . . . . . . . . . .
Decrease (increase) in income tax resulting from:
(78,494)
(214,075)
(102,872)
Foreign rate differential . . . . . . . . . . . . . . . .
State income taxes, net of federal benefit . . . . .
438
1,621
2,643
(379)
U.S. earnings not subject to federal income tax . .
85,495
208,472
Equity investments . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . .
Other items, net . . . . . . . . . . . . . . . . . . . . .
1,091
(7,911)
381
46
2,668
(302)
2,326
—
98,026
(3,293)
5,391
(2,259)
Total income tax benefit (expense)
$ 2,621
$ (927)
$ (2,681)
The foreign provision for income taxes is based on foreign profit before
income taxes of $10.7 million in 2019 as compared with foreign profit
before income taxes of $18.6 million in 2018, and foreign losses before
income taxes of $(0.1) million in 2017.
69
70
Reports + NumbersMedical Properties Trust Annual Report 2019 The domestic provision for income taxes is based on a loss before
income taxes of $(44.1) million in 2019 from our TRS as compared with
income before income taxes of $8.0 million in 2018 and $13.9 million
in 2017.
At December 31, 2019 and 2018, components of our deferred tax assets
and liabilities were as follows (in thousands):
2019
2018
Deferred tax assets:
Operating loss and interest deduction carry forwards . . . . . . .
$ 28,684
$ 21,984
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . .
1,711
30,395
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,355)
277
22,261
(3,444)
Total net deferred tax assets . . . . . . . . . . . . . . . . . . . . . .
$ 19,040
$ 18,817
Deferred tax liabilities:
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . .
$ (7,324)
$ (12,359)
Net unbilled revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,449)
(1,633)
Partnership investments . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(737)
—
(300)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . .
(9,510)
(14,292)
Net deferred tax asset (liability) . . . . . . . . . . . . . . . . . . . .
$ 9,530
$ 4,525
During 2019, a valuation allowance of $5.9 million has been recorded
against a portion of our domestic deferred tax assets to recognize only
the components of the deferred tax assets that is more likely than not
to be realized. The valuation allowance was primarily recorded against
deferred tax assets for federal and state NOLs that we believe will not
be realized due to the economic cost that would be incurred to realize
these assets. This includes NOLs in states where we no longer maintain
nexus and federal and state NOLs that are only available for partial
offset of future taxable income.
We also evaluated the need for a valuation allowance on our foreign
deferred income tax assets. In doing so, we considered all available
evidence to determine whether it is more likely than not that the
foreign deferred income tax assets will be realized. Based on our
review of all positive and negative evidence, we recorded a partial
valuation allowance of $2 million against certain foreign deferred
income tax assets generated during the year. Furthermore, we
determined the partial valuation allowances recorded in previous
years should remain against certain foreign deferred income tax
assets that are not expected to be realized through future sources of
taxable income.
We have no material uncertain tax position liabilities and related
interest or penalties.
At December 31, 2019, we had net NOL carryforwards as follows
(in thousands):
REIT STATUS
U.S.
Luxembourg
Germany
U.K.
Australia
Gross NOL carryforwards . . . .
$ 192,358
$ 9,946
$ 1,426
$ 5,416
$ 12,939
Tax-effected NOL carryforwards . .
22,960
2,481
226
921
1,941
Valuation allowance . . . . . . .
(6,212)
(2,481)
(226)
(921)
—
Net deferred tax asset -
NOL carryforwards . . . . . . .
$ 16,748
$ —
$ —
$ —
$ 1,941
Expiration periods . . . . . . . .
2027-
indefinite
2034-
indefinite
Indefinite
Indefinite
Indefinite
VALUATION ALLOWANCE
A valuation allowance has been recorded on foreign and domestic
net operating loss carryforwards and other net deferred tax assets
that may not be realized. As of each reporting date, we consider all
new evidence that could impact the future realization of our deferred
tax assets. In the evaluation of the need for a valuation allowance on
our deferred income tax assets, we consider all available positive and
negative evidence, including scheduled reversals of deferred income
tax liabilities, carryback of future period losses to prior periods,
projected future taxable income, tax planning strategies, and recent
financial performance.
We have met the annual REIT distribution requirements by payment of
at least 90% of our taxable income in 2019, 2018, and 2017. Earnings
and profits, which determine the taxability of such distributions, will
differ from net income reported for financial reporting purposes due
primarily to differences in cost basis, differences in the estimated
useful lives used to compute depreciation, and differences between
the allocation of our net income and loss for financial reporting
purposes and for tax reporting purposes.
A schedule of per share distributions we paid and reported to our
stockholders is set forth in the following:
For the Years Ended December 31,
2019
2018
2017
Common share distribution . . . . . . . . . . . . . . . .
$ 1.010000
$ 0.990000
$ 0.950000
Ordinary income . . . . . . . . . . . . . . . . . . . . . . .
0.701910
0.438792
0.655535
Capital gains(1) . . . . . . . . . . . . . . . . . . . . . . . .
0.275040
0.551208
0.021022
Unrecaptured Sec. 1250 gain . . . . . . . . . . . . . . .
0.041160
0.132280
0.004647
Section 199A Dividends . . . . . . . . . . . . . . . . . . .
0.701910
0.438792
—
Return of capital . . . . . . . . . . . . . . . . . . . . . . .
0.033050
—
0.273443
(1) Capital gains include unrecaptured Sec. 1250 gains.
6. EARNINGS PER SHARE
Our earnings per share were calculated based on the following
(amounts in thousands):
For the Years Ended December 31,
2019
2018
2017
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . .
$ 376,401
$ 1,018,477
$ 291,238
Non-controlling interests’ share in earnings . . . .
Participating securities’ share in earnings . . . . .
(1,717)
(2,308)
(1,792)
(3,685)
(1,445)
(1,409)
hurdles, and market-based awards. See below for further details on
each of these stock-based awards:
Service-Based Awards
In 2019, 2018, and 2017, the Compensation Committee granted
service-based awards to employees and non-employee directors.
Service-based awards vest as the employee/director provides the
required service (typically over three years). Dividends are generally
paid on these awards prior to vesting.
Net income, less participating securities’ share in
earnings . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator:
$ 372,376
$ 1,013,000
$ 288,384
Performance-Based Awards
Basic weighted-average common shares . . . . . .
427,075
365,364
349,902
Dilutive potential common shares . . . . . . . . . .
1,224
907
539
Diluted weighted-average common shares . . . .
428,299
366,271
350,441
In 2019, 2018, and 2017, the Compensation Committee granted
performance-based awards to employees. Generally, dividends are not
paid on performance awards until the award is earned. See below for
details of such performance-based award grants:
7. STOCK AWARDS
STOCK AWARDS
Our Equity Incentive Plan, adopted during the second quarter of 2019
and replaced the previous plan, authorizes the issuance of common
stock options, restricted stock, restricted stock units, deferred stock
units, stock appreciation rights, performance units, and awards of
interests in our Operating Partnership. Our Equity Incentive Plan
is administered by the Compensation Committee of the Board of
Directors. We have reserved 12,900,000 shares of new common stock
for awards under the Equity Incentive Plan, out of which 10,800,039
shares remain available for future stock awards as of December 31,
2019. The Equity Incentive Plan contains a limit of 5,000,000 shares
as the maximum number of shares of common stock that may
be awarded to an individual in any fiscal year. Awards under the
Equity Incentive Plan are subject to forfeiture due to termination
of employment prior to vesting and/or from not achieving the
respective performance/market conditions. In the event of a change
in control, outstanding and unvested options will immediately vest,
unless otherwise provided in the participant’s award or employment
agreement, and restricted stock, restricted stock units, deferred stock
units, and other stock-based awards will vest if so provided in the
participant’s award agreement. The term of the awards is set by the
Compensation Committee, though Incentive Stock Options may not
have terms of more than ten years. Forfeited awards are returned to
the Equity Incentive Plan and are then available to be re-issued as
future awards.
For the past three years, we have only granted restricted stock and
restricted stock units pursuant to our Equity Incentive Plan. These
stock-based awards have been granted in the form of service-based
awards, performance awards based on company-specific performance
2019 and 2018
In 2019 and 2018, a target number of stock awards were granted to
employees that could be earned based on the achievement of specific
performance thresholds as set by our Compensation Committee that
included return on equity, EBITDA, and acquisitions. The performance
thresholds were based on a three-year period with the opportunity to
earn a portion of the award earlier. More or less shares than the target
number of shares are available to be earned based on our performance
compared to the set thresholds. At the end of each of the performance
periods, any earned shares during such period will vest on January 1 of
the following calendar year.
Certain performance awards granted in 2019 and 2018 were subject to
a modifier (which increases or decreases the actual shares earned in
each performance period) based on how our total shareholder return
compared to the SNL U.S. REIT Healthcare Index (“SNL Index”).
2017
In 2017, a target number of stock awards were granted to certain
employees that could be earned based on the achievement of specific
performance thresholds as set by our Compensation Committee that
included return on equity and general and administrative expenses as
a percentage of revenue. The performance thresholds were based on a
one-year period. More or less shares than the target number of shares
were available to be earned based on our performance compared to
the set thresholds. At the end of the performance period, any earned
shares during such period vested ratably on an annual basis over the
next three years starting on January 1, 2018.
71
72
Reports + NumbersMedical Properties Trust Annual Report 2019
MARKET-BASED AWARDS
In 2017, the Compensation Committee granted three-types of market-
based awards to certain employees. Generally, dividends are not paid
on market-based awards until the award is earned.
The first award included a target number of stock awards that could be
earned based on how our total shareholder return performed against
the SNL Index for the year. More or less shares than the target number
of shares were available to be earned based on our performance
compared to the set thresholds. At the end of the performance period,
any earned shares during such period vested ratably on an annual
basis over the next three years starting on January 1, 2018. The fair
value of this award was estimated on the grant date using a Monte
Carlo valuation model that assumed the following: risk free interest
rate of 1%; expected volatility of 25%; expected dividend yield of 6.9%;
and expected service period of three years.
The second market-based award was based on the achievement of
a multi-year cumulative total shareholder return as compared to
pre-established returns set by our Compensation Committee. The
performance period was five years ending December 31, 2021 with
the option to earn a portion of the award earlier. At the end of the
performance period, any earned shares during such period vest on
January 1 of the following calendar year. The fair value of this award
was estimated on the grant date using a Monte Carlo valuation model
that assumed the following: risk free interest rate of 1.9%; expected
volatility of 25%; expected dividend yield of 6.9%; and expected
service period of five years.
The third market-based award could be earned based on how our total
shareholder return performed against the SNL Index over a three-
year period ending December 31, 2019. At the end of the performance
period, any earned shares during such period vested ratably on an
annual basis over the next three years starting on January 1, 2020. The
fair value of this award was estimated on the grant date using a Monte
Carlo valuation model that assumed the following: risk free interest
rate of 1.5%; expected volatility of 25%; expected dividend yield of
6.9%; and expected service period of three years.
For the Year Ended December 31, 2019:
Vesting Based
on Service
Vesting Based on
Market/Performance
Conditions
Weighted-
Average
Value at
Award Date
Weighted-
Average
Value at
Award Date
Shares
Shares
Nonvested awards at beginning
of the year . . . . . . . . . . . . . . . .
923,848
$ 14.29
4,133,435
$ 9.21
Awarded . . . . . . . . . . . . . . . . .
681,378
$ 19.24
2,438,292
$ 15.25
Vested . . . . . . . . . . . . . . . . . .
(478,104)
$ 14.73
(1,051,637)
$ 10.43
Forfeited . . . . . . . . . . . . . . . . .
(4,682)
$ 13.44
(38,935)
$ 10.13
Nonvested awards at end of year . .
1,122,440
$ 17.11
5,481,155
$ 11.66
For the Year Ended December 31, 2018:
Vesting Based
on Service
Vesting Based on
Market/Performance
Conditions
Weighted-
Average
Value at
Award Date
Weighted-
Average
Value at
Award Date
Shares
Shares
Nonvested awards at beginning
of the year . . . . . . . . . . . . . . . .
276,280
$ 12.68
2,676,755
$ 7.86
Awarded . . . . . . . . . . . . . . . . .
958,480
$ 14.31
1,750,834
$ 11.61
Vested . . . . . . . . . . . . . . . . . .
(307,275)
$ 12.92
(288,404)
$ 11.25
Forfeited . . . . . . . . . . . . . . . . .
(3,637)
$ 13.05
(5,750)
$ 9.35
Nonvested awards at end of year . .
923,848
$ 14.29
4,133,435
$ 9.21
The value of stock-based awards is charged to compensation expense
over the service periods. For the years ended December 31, 2019, 2018,
and 2017, we recorded $32.2 million, $16.5 million, and $9.9 million,
respectively, of non-cash compensation expense. The remaining
unrecognized cost from stock-based awards at December 31, 2019, is
$53.2 million, which will be recognized over a weighted-average period
of 1.6 years. Stock-based awards that vested in 2019, 2018, and 2017,
had a value of $25.9 million, $8.4 million, and $10.4 million, respectively.
The following summarizes stock-based award activity in 2019 and
2018 (which includes awards granted in 2019, 2018, 2017, and any
applicable prior years), respectively:
8. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
On December 23, 2019, we entered into definitive agreements to
acquire a portfolio of 30 acute care hospitals located throughout the
United Kingdom for approximately £1.5 billion from affiliates of BMI.
In a related transaction, affiliates of Circle entered into definitive
agreements to acquire BMI and assume operations of its 52 facilities
in the United Kingdom. Upon closing of the transaction on January 8,
2020, we leased back the hospitals to affiliates of Circle under 30 cross-
defaulted leases guaranteed by Circle. The leases have initial fixed
terms ending in 2050, with two five-year extension options and annual
inflation-based escalators. To help fund this acquisition, we entered
into a five-year term loan for £700 million on January 6, 2020.
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 these proceedings is not
presently expected to materially affect our financial position, results
of operations, or cash flows.
9. COMMON STOCK
2019 ACTIVITY
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 million to 750 million.
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 offering expenses.
On July 18, 2019, we completed an underwritten public offering of 51.75
million shares (including the exercise of the underwriters’ 30-day option
to purchase an additional 6.75 million shares) of our common stock,
resulting in net proceeds of $858.1 million, after deducting underwriting
discounts and commissions and offering expenses.
In 2019, we sold 36.1 million shares of common stock under our
at-the-market equity offering program, resulting in net proceeds of
approximately $650 million.
On December 27, 2019, we entered into a new at-the-market equity
offering program, which gives us the ability to sell up to $1.0 billion of
stock with a commission rate up to 2.0%. Through February 21, 2020, we
have sold 2.4 million shares of our common stock under this program.
2018 ACTIVITY
2017 ACTIVITY
On May 1, 2017, we completed an underwritten public offering of 43.1
million shares (including the exercise of the underwriters’ 30-day
option to purchase an additional 5.6 million shares) of our common
stock, resulting in net proceeds of approximately $548 million, after
deducting offering expenses.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
We have various assets and liabilities that are considered financial
instruments. We estimate that the carrying value of cash and cash
equivalents and accounts payable and accrued expenses approximate
their fair values. We estimate the fair value of our interest and rent
receivables using Level 2 inputs such as discounting the estimated
future cash flows using the current rates at which similar receivables
would be made to others with similar credit ratings and for the same
remaining maturities. The fair value of our mortgage loans and other
loans are estimated by using Level 2 inputs such as discounting the
estimated future cash flows using the current rates which similar loans
would be made to borrowers with similar credit ratings and for the
same remaining maturities. We determine the fair value of our senior
unsecured notes using Level 2 inputs such as quotes from securities
dealers and market makers. We estimate the fair value of our revolving
credit facility and term loans using Level 2 inputs based on the present
value of future payments, discounted at a rate which we consider
appropriate for such debt.
Fair value estimates are made at a specific point in time, are subjective
in nature, and involve uncertainties and matters of significant
judgment. Settlement of such fair value amounts may not be a prudent
management decision.
The following table summarizes fair value estimates for our financial
instruments (in thousands):
Asset (Liability)
December 31, 2019
December 31, 2018
Book
Value
Fair
Value
Book
Value
Fair
Value
Interest and rent receivables . . . .
$ 31,357
$ 30,472
$ 25,855
$ 24,942
Loans(1) . . . . . . . . . . . . . . . . .
1,704,854
1,742,153
1,471,520
1,490,758
Debt, net . . . . . . . . . . . . . . . . .
(7,023,679)
(7,331,816)
(4,037,389)
(3,947,795)
(1) Excludes mortgage loans related to Ernest since they are recorded at fair value and discussed below.
In the 2018 fourth quarter, we sold 5.6 million shares of common stock
under our at-the-market equity offering program, resulting in net
proceeds of approximately $95 million.
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
73
74
Reports + NumbersMedical Properties Trust Annual Report 2019
Operating lease cost (1) . . . . . . . . . . . . . . .
(2)
$ 9,262
Right of use assets:
Income Statement Classification
For the Year Ended
December 31, 2019
Balance Sheet
Classification
December 31, 2019
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 reflected
of current values. We have not made a similar election for other
investments existing at December 31, 2019 or December 31, 2018.
At December 31, 2019 and 2018, the amounts recorded under the fair
value option method were as follows (in thousands):
As of December 31, 2019
As of December 31, 2018
Asset (Liability)
Fair Value
Original
Cost
Fair Value
Original
Cost
Asset Type
Classification
Mortgage Loans . .
$ 115,000
$ 115,000
$ 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.
ITEMS MEASURED AT FAIR VALUE ON A NONRECURRING BASIS
In addition to items that are measured at fair value on a recurring
basis, we have assets and liabilities that are measured at fair value on
a nonrecurring basis, such as long-lived asset impairments (see Note
3). Fair value is based on estimated cash flows discounted at a risk-
adjusted rate of interest by using either Level 2 or 3 inputs as more fully
described in Note 2.
11. LEASES (LESSEE)
We lease the land underlying certain of our facilities (for which we
sublease to our tenants), along with corporate office and equipment.
Our leases have remaining lease terms ranging from 4.5 years to 54
years, and some of the leases include options to extend the leases up
to, or just beyond, the depreciable life of the properties that occupy
the leased land. Renewal options that we are reasonably certain to
exercise are recognized in our right-of-use assets and lease liabilities.
As most of our leases do not provide an implicit rate, we use our
incremental borrowing rate based on the information available at
lease commencement date in determining the present value of
future payments.
The following is a summary of our lease expense (in thousands):
Finance lease cost:. . . . . . . . . . . . . . . . . .
Amortization of
right-of-use assets . . . . . . . . . . . . . . . .
Real estate depreciation
and amortization
Interest on lease liabilities . . . . . . . . . . .
Sublease income . . . . . . . . . . . . . . . . . . .
Total lease cost . . . . . . . . . . . . . . . . . . . .
Interest
Other
51
117
(3,478)
$ 5,952
(1) Includes short-term leases.
(2) $5.8 million included in “Property-related”, with the remainder reflected in the “General and
administrative” line of our consolidated statements of net income.
For 2018 and 2017, our total lease expense was $9.4 million and $9.8
million, respectively, which was offset by sublease rental income of
$4.3 million and $6.6 million, respectively.
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 December 31, 2019 are as follows (amounts
in thousands):
Operating
Leases
Finance
Leases
Amounts To
Be Received
From
Subleases
Net
Payments
2020 . . . . . . . . . . . . . . . . . .
$ 6,098
$ 125
$ (3,156)
$ 3,067
2021 . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . .
6,279
6,470
6,533
5,635
126
128
129
130
(3,498)
(3,630)
(3,632)
(3,651)
2,907
2,968
3,030
2,114
Thereafter . . . . . . . . . . . . . . .
180,280
4,915
(90,199)
94,996 (1)
Total undiscounted minimum
lease payments . . . . . . . . . . . .
$ 211,295
$ 5,553
$ (107,766)
$ 109,082
Less: interest . . . . . . . . . . . . .
(134,942)
(3,621)
Present value of lease liabilities . .
$ 76,353
$ 1,932
(1)Reflects certain ground leases, in which we are the lessee, that have longer initial fixed terms than
our existing sublease to our tenants. However, we would expect to either renew the related sublease,
enter into a lease with a new tenant, or early terminate the ground lease to reduce or avoid any
significant impact from such ground leases.
Supplemental balance sheet information is as follows (in thousands,
except lease terms and discount rate):
Operating leases - real estate . . . . . . . . .
Finance leases - real estate . . . . . . . . . .
Real estate right of use assets, net . . . .
Land
Land
$ 59,492
1,888
$ 61,380
Operating leases - corporate . . . . . . . . .
Other assets
9,866
Total right of use assets, net . . . . . . . . . . . .
$ 71,246
Other corporate assets include leasehold improvements associated
with our corporate offices, furniture and fixtures, equipment, software,
deposits, right-of-use assets associated with corporate leases, etc.
Included in prepaids and other assets is prepaid insurance, prepaid
taxes, deferred income tax assets (net of valuation allowances, if any),
and lease inducements made to tenants, among other items.
In addition to the assets above, we have equity investments of $927
million and $520 million at December 31, 2019 and 2018, respectively.
Our largest equity investment is in the joint venture with Primotop.
Lease liabilities:
Operating leases . . . . . . . . . . . . . . . . .
Financing leases . . . . . . . . . . . . . . . . .
Obligations to tenants and
other lease liabilities
Obligations to tenants and
other lease liabilities
$ 76,353
1,932
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
Total lease liabilities . . . . . . . . . . . . . . . . .
$ 78,285
Weighted-average remaining lease term:
Operating leases . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . .
Weighted-average discount rate:
Operating leases . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . .
31.9
36.9
6.3%
6.6%
The following is supplemental cash flow information (in thousands):
For the Year Ended
December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases . . . . . . . . . . . . . . . . . .
$ 5,937
Operating cash flows from finance leases. . . . . . . . . . . . . . . . . . . .
Financing cash flows from finance leases . . . . . . . . . . . . . . . . . . . .
Right-of-use assets obtained in exchange for lease obligations:
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
10
1,818
—
12. OTHER ASSETS
The following is a summary of our other assets on our consolidated
balance sheets (in thousands):
At December 31,
2019
2018
Debt issue costs, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,492
$ 4,793
Other corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
206,765
115,416
Prepaids and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90,342
61,757
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 299,599
$ 181,966
(1) Relates to revolving credit facility
The following is a summary of the unaudited quarterly financial
information for the years ended December 31, 2019 and 2018:
(amounts in thousands, except for per share data)
For the Three Month Periods in 2019 Ended
March 31
June 30
September 30
December 31
$ 180,454
$ 192,549
$ 224,756
$ 256,438
76,291
75,822
79,920
79,438
90,267
89,786
129,923
129,638
$ 0.20
$ 0.20
$ 0.20
$ 0.26
380,551
394,574
439,581
493,593
$ 0.20
$ 0.20
$ 0.20
$ 0.26
381,675
395,692
440,933
494,893
For the Three Month Periods in 2018 Ended
March 31
June 30
September 30
December 31
$ 205,046
$ 201,902
$ 196,996
$ 180,578
91,043
90,601
112,017
111,567
736,476
736,034
78,941
78,483
$ 0.25
$ 0.30
$ 2.01
$ 0.21
364,882
364,897
365,024
366,655
$ 0.25
$ 0.30
$ 2.00
$ 0.21
365,343
365,541
366,467
367,732
Revenues
Net income
Net income attributable to
MPT common stockholders
Net income attributable to
MPT common stockholders
per share — basic
Weighted-average shares
outstanding — basic
Net income attributable to
MPT common stockholders
per share — diluted
Weighted-average shares
outstanding — diluted
Revenues
Net income
Net income attributable to
MPT common stockholders
Net income attributable to
MPT common stockholders
per share — basic
Weighted-average shares
outstanding — basic
Net income attributable to
MPT common stockholders
per share — diluted
Weighted-average shares
outstanding — diluted
75
76
Reports + NumbersMedical Properties Trust Annual Report 2019
CORPORATE & SHAREHOLDER INFORMATION
CONTROLS AND PROCEDURES
as of December 31, 2019, the internal control over financial reporting
for Medical Properties Trust, Inc. was effective.
OFFICERS
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Medical Properties Trust, Inc. maintains disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act) designed to provide reasonable assurance that
information required to be disclosed in its Exchange Act reports
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 its management,
including its Chief Executive Officer (principal executive officer) and
Chief Financial Officer (principal financial officer), as appropriate, to
allow timely decisions regarding required disclosure. In designing
and evaluating the disclosure controls and procedures, we recognize
that no controls and procedures, no matter how well designed and
operated, can provide absolute assurance of achieving the desired
control objectives. As required by Rule 13a-15(b) under the Exchange
Act, the management of Medical Properties Trust, Inc., with the
participation of its Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of our disclosure controls
and procedures. Based on the foregoing, the Chief Executive Officer
and Chief Financial Officer concluded that these disclosure controls
and procedures are effective as of the end of the period covered by
this report.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
The management of Medical Properties Trust, Inc. is responsible for
establishing and maintaining adequate internal control over financial
reporting for Medical Properties Trust, Inc. (as such term is defined
in Rule 13a-15(f) of the Exchange Act). Internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation
of Medical Properties Trust, Inc.’s financial statements for external
reporting purposes in accordance with GAAP.
Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management has undertaken an assessment of the effectiveness of the
internal control over financial reporting for Medical Properties Trust,
Inc. as of December 31, 2019 based upon the framework established
in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management has concluded that,
The effectiveness of the internal control over financial reporting
for Medical Properties Trust, Inc. as of December 31, 2019 has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which appears in this
Annual Report on Form 10-K.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There has been no change in the internal control over financial
reporting for Medical Properties Trust, Inc. during its most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, its internal control over financial reporting.
PERFORMANCE GRAPH
The following graph provides comparison of cumulative total
stockholder return for the period from December 31, 2014 through
December 31, 2019, among us, the Russell 2000 Index, NAREIT All
Equity REIT Index, and SNL US REIT Healthcare Index. The stock
performance graph assumes an investment of $100 in us and the three
indices, and the reinvestment of dividends. The historical information
below is not indicative of future performance.
TOTAL RETURN PERFORMANCE
250
Medical Properties Trust, Inc.
Russell 2000
200
NAREIT All Equity REIT Index
SNL US REIT Healthcare
e
u
l
a
V
x
e
d
n
I
150
100
50
Edward K. Aldag, Jr.
Chairman, President and Chief Executive Officer
R. Steven Hamner
Executive Vice President and Chief Financial Officer
Emmett E. McLean
Executive Vice President, Chief Operating Officer and Secretary
J. Kevin Hanna
Vice President, Controller and Chief Accounting Officer
Rosa H. Hooper
Vice President, Managing Director of Asset Management
and Underwriting
Charles R. Lambert
Treasurer and Managing Director of Capital Markets
R. Lucas Savage
Vice President, International Acquisitions
DIRECTORS
Edward K. Aldag, Jr.
Chairman, President and Chief Executive Officer
G. Steven Dawson
Private Investor
R. Steven Hamner
Executive Vice President and Chief Financial Officer
Caterina A. Mozingo, CPA, PFS
Shareholder, Taxation at Aldridge, Borden & Company, PC
Elizabeth N. Pitman, JD, CHPC
Partner at Waller Lansden Dortch & Davis, LLP
D. Paul Sparks, Jr.
Retired Senior Vice President, Energen Corporation
Michael G. Stewart
Private Investor
C. Reynolds Thompson III
Chairman and Chief Investment Officer of Select Strategies Realty
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
LEGAL COUNSEL
Index
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC – Birmingham, AL
Medical Properties Trust, Inc. . . . . .
100.00
89.72
102.73
123.84
154.83
214.49
Goodwin Procter, LLP – New York, NY
Period Ending
Russell 2000 . . . . . . . . . . . . . . . .
100.00
95.59
115.95
132.94
118.30
148.49
NAREIT All Equity REIT Index . . . . .
100.00
102.83
111.70
121.39
116.48
149.86
SNL US REIT Healthcare . . . . . . . .
100.00
92.73
99.61
99.46
105.83
128.59
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP – Birmingham, AL
ANNUAL MEETING
The Annual Meeting of Shareholders of Medical Properties Trust, Inc.,
is scheduled for May 21, 2020, at 10:30 a.m. CDT at the Company’s
Headquarters located at 1000 Urban Center Drive, Suite 501,
Birmingham, Alabama, 35242
CERTIFICATIONS
Medical Properties Trust, Inc.’s Chief Executive Officer and Chief
Financial Officer have filed their certifications required by the SEC
regarding the quality of the company’s public disclosure (these
are included in the 2019 Annual Report on Form 10-K filed with the
Securities and Exchange Commission). Further, the company’s Chief
Executive Officer has certified to the NYSE that he is not aware of
any violation by Medical Properties Trust, Inc., of NYSE corporate
governance listing standards, as required by Section 303A.12(a) of the
NYSE listing standards.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company, LLC
6201 15th Avenue, Brooklyn, NY 11219
(800) 937-5449 help@astfinancial.com
www.amstock.com
TTY: (Teletypewriter for the hearing impaired)
(718) 921-8386 or (866) 703-9077
CORPORATE OFFICE
Medical Properties Trust, Inc.
1000 Urban Center Drive, Suite 501
Birmingham, AL 35242
(205) 969-3755 (205) 969-3756 fax
www.medicalpropertiestrust.com
77
78
Reports + NumbersMedical Properties Trust Annual Report 2019
MPT PROPERTIES SHOWCASE
Circle Health
Circle Birmingham Hospital
Birmingham, UK
Page 1
Healthscope
Northpark Private Hospital
Bundoora, Victoria, Australia
Pages 5, 17, 18, 21, 25
Healthscope
Knox Private Hospital
Wantirna, Victoria, Australia
Page 13
LifePoint
Conemaugh Memorial
Johnstown, PA
Pages 15, 27, 28
Swiss Medical Network
Clinique de Genolier
Genolier, Switzerland
Pages 19, 20, 23
Swiss Medical Network
Clinique de Valère
Sion, Switzerland
Page 24
Group IMED Hospitals
IMED Valencia Hospital
Burjassot, Valencia, Spain
Page 30
Prospect Medical Holdings
Southern California Hospital at Culver City
Culver City, CA
Pages 31
Circle Health
Circle Bath Hospital
Bath, UK
Page 39
SPECIAL
STATEMENT
REGARDING
COVID-19
As we prepare to go to print with our 2019 Annual Report,
I want to address the coronavirus as it stands today,
April 6, 2020. The pandemic known officially as COVID-19 has
hit the world hard and fast. By the time you get this annual
report, many of you will have been infected or know someone
who has been.
MPT’s investment thesis has always been that the world
needs hospitals. Hospitals are at the top of the delivery chain
for healthcare around the globe. I feel such gratitude to the
doctors, nurses, administrators and others working in our
almost 400 hospitals around the world to provide care and
comfort to those infected with the virus and others who need
healthcare during these trying times. We thank you all from
the bottom of our hearts, and we are forever grateful for the
care given by our hundreds of hospitals.
God bless us all, and may all of humanity come together as
one to overcome this pandemic.
Sincerely,
Ed
This report was printed using lean manufacturing methods, responsibly sourced
paper with 10% recycled fiber, and vegetable-based, zero-VOC inks.
79
80
Medical Properties Trust Annual Report 2019 Medical Properties Trust, Inc.
1000 Urban Center Drive, Suite 501
Birmingham, AL 35242
(205) 969-3755
medicalpropertiestrust.com
NYSE: MPW