Medical Properties Trust Annual Report 2020

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FY2020 Annual Report · Medical Properties Trust

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CAPABLE
R E A D Y
S T R O N G
S T E A D Y
& T R U E

S T R O N G
R E S U LTS
,
ST E L L A R
RETURNS

As the world paused to confront a pandemic, MPT’s

hospital operators never stopped working to help as

many patients as possible. MPT didn’t stop either,

with continued support for the healthcare community

and with key transactions that further expanded the

company’s global reach.

LETTER TO INVESTORS

2020 was an unbelievably
successful and transformational
year for MPT, and while many
will remember the year for other
reasons, I am proud that the
original idea behind MPT and the
evolution of its model created
success for the company and
for shareholders.

2020 SHOWED THE STRENGTH OF
MPT’S INVESTMENT STRATEGY

In a year defined by the pandemic,
Medical Properties Trust will remember
2020 as a year when MPT hospitals
met acute care needs around the
globe and showed their essential and
undeniable value. I also will remember it
as a signature year when MPT increased
its position for even more growth,
outperforming peers on nearly every
financial metric available for comparison.
This was the year that the very foundation
of MPT’s business model—investing
in hospitals—garnered a new level of
attention as the world rallied around its
hospital care infrastructure. I couldn’t be
more proud.

Indeed, the 2020 stress test that was
forced upon healthcare providers
demonstrated why MPT invests in
hospitals: They are the top of the pyramid
of the healthcare delivery system. They
are critical to a local community’s
infrastructure. They are absolutely
essential, and the performance of
front-line workers within them is
extraordinary—during a pandemic and
every single day. And very importantly,
we know hospitals.

In 2020, MPT showed just how
essential it has become for investors
in the healthcare sector, too, and its
outperformance and global growth were
truly extraordinary, by any standard in
any year. I was proud to see operators of
MPT hospitals perform flawlessly during
the fight against a virus no one could

have seen coming and prouder still to
give them the company’s unwavering
support through it all.

ACCOMPLISHMENTS AMID A PANDEMIC

The pandemic environment makes
what MPT achieved in 2020 even more
impressive, outperforming benchmark
indices such as the SNL U.S. REIT
Healthcare Index and the SNL U.S. REIT
Equity Index by substantial percentages
of 15% and 14%, respectively. MPT also
delivered investors a total shareholder
return (TSR) of 9% in 2020, bringing TSR
since MPT’s 2005 initial public offering
(IPO) to an incomparable 566%.

The company continued its unrelenting
growth, investing in almost $3.6 billion
in domestic and international assets.
MPT started the year with an almost $2
billion acquisition of 30 BMI Healthcare
hospitals. By May, the company had
established a joint venture for investing in
the operations of international hospitals.
This move laid the groundwork for a
November $135 million investment in
three acute care hospitals in Colombia,
an exciting expansion to South
America that adds a fourth continent
to MPT’s portfolio.

Among other key transactions, MPT
increased its ownership of Infracore
SA, which owns the real estate assets
of Swiss Medical Network, the second-
largest private operator in Switzerland.
Additionally, the company acquired

EDWARD K. ALDAG, JR.
Chairman, President and CEO

quality hospitals with established
operators, such as Prime Healthcare,
Circle Health Group and MEDIAN Kliniken,
while opening new relationships with
operators that include the National
Health Service in the United Kingdom
and Curahealth Hospitals, a leading
U.S. operator of inpatient rehabilitation
hospitals. MPT also commenced
promising development projects in
the U.S., including construction of two
inpatient rehabilitation facilities in
California that are pre-leased to
Ernest Health.

Throughout 2020, the acquisitions team
diligently worked toward a landmark
transaction that closed in early 2021:
For approximately $1.1 billion, MPT
purchased interests in 35 behavioral
health facilities operated by the Priory
Group, a leading behavioral health
operator in the United Kingdom, from
Priory’s U.S. parent. As part of our
joint bid with affiliates of Waterland
Private Equity, the sponsor of our highly
successful German post-acute operator
MEDIAN Kliniken, we also acquired 9.9%
of Priory Group operations. Expanding
MPT’s footprint in the U.K. healthcare
real estate market in a bold way, this

acquisition brings diversity to its portfolio
by growing the company’s position in the
behavioral health sector. MPT expects
to develop a significant presence in this
valuable area as more patients search
for quality services and care for mental
health needs.

Overall, MPT hospitals performed
exceptionally well in 2020, with strong
coverage ratios despite the forced
shutdowns for elective surgeries and
other disruptions caused by COVID-19.
Inclusive of $706 million in grants
through the CARES Act fund, MPT’s
same-store portfolio EBITDARM coverage
for all sectors for the trailing 12 months
ending the third quarter of 2020 was
3.1x. This represents a 19.2% increase
year over year. But remarkably, even
when those grants are removed, the
same-store portfolio EBITDARM coverage
for all sectors for the trailing 12 months
ending the third quarter of 2020 was
still an incredibly strong 2.0x. These are
impressive coverage ratio figures that
demonstrate why paying the rent was
never an issue for our tenants, even
though normal operations at their
facilities were essentially shut down for
two to three months.

What I’m most proud of in 2020 is that the
business model MPT envisioned nearly 20
years ago, and has continuously refined,
put the company in a position to thrive
in an adverse environment that could
not have been predicted. Communities
need the hospitals in which MPT chooses
to invest, its operators are the best in the
business, and MPT is excited to continue
executing on what is a very exciting pipeline
of opportunities in 2021 and beyond.

ONE OF THE STRONGEST,
MOST DIVERSIFIED PORTFOLIOS

The transactions MPT executed during
2020 resulted in MPT pro forma total gross
assets of approximately $20.4 billion—up
from $16.5 billion one year earlier. That
includes $15.1 billion in general acute
care hospitals, $2.2 billion in inpatient
rehabilitation hospitals, $1.7 billion in
behavioral health facilities, and $0.6
billion in long-term acute care hospitals
and other facilities. By year’s end, MPT’s
portfolio included 392 properties, and
MPT increased that number to 430 after
a robust start to the new year. MPT now
operates in 33 U.S. states, nine countries
and on four continents, with 43,895
licensed beds.

I’m proud to have improved MPT’s
concentration metrics so that no single
property accounts for more than 3%
of its total pro forma gross assets. The
acquisitions and asset management
teams painstakingly underwrite every
individual hospital in which the company
invests, and part of this process is
developing specific local market
contingencies for the rare day in which
a tenant is in danger of not meeting its
financial obligations. There will always be
an operator willing and able to profitably
operate an essential hospital.

Without a doubt, MPT has built one of the
most enviable and formidable portfolios
in the REIT universe. And I’m proud it has
a 2020 market-leading normalized funds
from operations per share growth rate
of 21% year over year. That’s the highest
growth rate among U.S. Equity REITs with
over $5 billion in market cap.

FEELING OUR INTERNATIONAL
PRESENCE

The challenges of not only maintaining
constant contact with existing MPT
operators around the world during
a pandemic but also achieving the
second largest investment total in the
company’s history in that same year
made it clear to me that further investing
in people, relationships and office
space internationally since our entry
into Europe in 2013 was an important
move. The physical presence of MPT’s
Luxembourg office was critical in working
with governments across Europe to
ensure that MPT facilities and operators
were available to best care for local
populations. Simultaneously, the same
personnel were executing successful
transactions in the U.K., Switzerland and

Germany throughout 2020 and were
ready to spring to action when the Priory
Group portfolio came to market later in
the year.

In the same spirit, MPT has opened
an office in Sydney, Australia, which I
expect to anchor an expanding presence
in the Asia-Pacific region. The ability
to make face-to-face contact with key
relationships is a critical advantage in
pursuing growth opportunities, and I am
confident that the exponential growth
the company has experienced in Europe
through its long-established presence in
Luxembourg will echo over to what MPT
is doing in Australia. While the company’s
initial investments in South America do
not yet necessitate a physical presence,
I am certainly excited to see what the
future may bring.

The heart of everything MPT does is to
make better healthcare available to more
people around the world. I have no plans
to stop the company’s growth trajectory,
and MPT will continue to invest in physical
and human assets as it expands its reach.

SHARING SUCCESS WITH INVESTORS

I’m grateful to the investors who have
shared in the benefits of a more than
doubling of MPT’s pro forma total gross
assets to well above $20 billion since the
end of 2018. While sheer scale has its
benefits, the company grew in a manner
that significantly increased earnings
and dividends for shareholders. This
is nothing new, as MPT has created an
astounding $6.9 billion in shareholder
value since its 2005 IPO and has
increased its dividend at a 4% annual
rate over the past 10 years, including a
near 6% increase in 2020. I look forward

to executing on a promising pipeline of
similar opportunities going forward.

MPT’s value proposition relies on
its people, its relationships and its
unwavering focus on investing in the
essential hospital infrastructure of
the world. 2020 was an unbelievably
successful and transformational year for
MPT, and while many will remember the
year for other reasons, I am proud that
the original idea behind MPT and the
evolution of its model created success
for the company and for shareholders.
The bottom line is that MPT’s same-store
portfolio, with government-mandated
shutdowns of elective procedures for
nearly a full quarter and prior to receipt
of any related grant funds, earned double
the amount of income necessary to pay
the rent. This is not luck nor coincidence
but a testament to the quality of the MPT
portfolio, assembled over the course of
almost two decades, and to the nimble
operating mentality of MPT operators.

The world now knows without a doubt
that hospitals are the only environment
in which the most acute medical care can
be delivered, period. This is logic long
embedded in the culture at MPT. The
culture and practices we have built over
the past 18 years served us very well
in 2020 and will continue to do so in
the future.

Edward K. Aldag, Jr.
Chairman, President and CEO

St. Francis Medical Center
Lynwood, California

STRONG LEADERSHIP, STELLAR RESULTS

With strong leadership during a pandemic-influenced year, the leadership of MPT led the

company to new growth and greater global influence.

Edward K. Aldag, Jr., founded MPT with
a singular, unwavering belief: It’s smart
to invest in hospitals. That bedrock tenet
vaulted MPT to a leadership position in
the healthcare sector long before the
pandemic. Now the company’s value
proposition is more attractive than ever.

indispensable,” Hamner says, “every
bit as permanent and required in a
community as any other part of the
infrastructure, whether it’s the utility
systems or road systems. Investors have
been rewarded for that and will be in
the future.”

Co-founders R. Steven Hamner and
Emmett E. McLean have helped cast this
vision of a hospital-centric investment
strategy, watching the company
outperform with continual growth and
success. “2020 absolutely proved that
what we’ve been saying all these years
has been accurate: Our facilities are

In 2020, Aldag, Hamner and McLean kept
the company on track for intentional
growth in the U.S., the U.K., Western
Europe, Australia and now Colombia and
beyond. Looking ahead, the company
will rely on what it knows: hospitals.
MPT hospitals are vital to the health of
their communities.

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 and
Chief Operating Officer

Like every chief executive facing COVID-19,
Aldag never could have imagined how
the pandemic would shape the year. In
February, he was scouting acquisitions in
the U.K., but by March he was directing a
fully functional, virtual workplace ahead
of many other businesses. Despite the
lockdown, MPT still outperformed, still
grew and still set the table for more
deliberate expansion in 2021. “I’m
proudest of the business model we
established over the 18 years leading up
to the pandemic, when our model was
so obviously validated,” Aldag says.
“Our focus has always been acute care,
and in good times and bad, the acute
care hospital is going to stay at the
top of the pyramid when it comes to
healthcare delivery.”

With compassionate leadership,
grounded in personal knowledge of the
healthcare industry, Aldag led MPT to
achieve even more in 2020, at the same
time caring more deeply than ever about
how the world best delivers healthcare.

With a background as a certified public
accountant and having oversight of the
company’s finances, Hamner naturally
watched the year unfold with a sharp eye
on financial performance. As a co-founder
of MPT, he also was gratified to see that
MPT’s properties were fulfilling their
mission. “Our buildings were being used
to treat millions of patients,” he says.

The hospitals remained in constant
operation. Because governments
required hospitals to stop providing
nonessential care to patients and focus
on pandemic victims, many supplied
hospitals with funding to ensure they
remained fully operational. “This is
why MPT offers such a great investment
opportunity—because somebody is going
to pay to have these hospitals open. The
people demand it,” Hamner says.

The hospitals performed well, and so did
MPT. According to Hamner, years from
now, when outsiders look back at MPT’s
numbers from 2020, they won’t be able to
tell there was a pandemic. “We continued
to grow, and we continued to collect
our rent,” he says. Despite the year’s
circumstances, it was, in many ways,
business as usual for MPT.

According to McLean, MPT has met
obstacles with a can-do attitude
throughout its history, including during
the pandemic. “Think back to your
mindset in March, April, May 2020—the
uncertainty and fear,” he says. “Yet, it’s
what you do with a challenge that
matters more than what the challenge is.
That perspective is ingrained in our way of
doing business for the past 18 years and
in how we deal with different challenges.
The pandemic just happened to be an
extraordinary example, and I’m hopeful it
had a once-in-a-century kind of impact.”

When McLean joined MPT, he brought
investment banking and healthcare
finance skills to the trio, along with a
heart for civic and charitable causes. An
integral part of every potential acquisition,
McLean brings a keen eye for assessing
medical facilities to every site visit. He
points to the strength of the hospital
operators MPT has partnered with and to
the talented MPT employees as reasons
the company performed so well in 2020.
He witnessed remarkable dedication and
mission-minded work at MPT all year long.
“Maybe it’s our culture, but we believe
in working together as a team. You do
better if you’re all marching in the same
direction,” he says. “In 2020, we just kept
on doing what we do.”

From left to right: Charles R. Lambert – vice president, treasurer and managing director of
Capital Markets; Rosa H. Hooper – vice president, managing director of Asset Management and
Underwriting; R. Lucas Savage – vice president, head of Global Acquisitions; Edward K. Aldag, Jr. –
chairman, president and CEO; 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

PROPERTIES

430

COUNTRIES

U.S. STATES

CONTINENTS

MPT PORTFOLIO

EX PA NS ION & GROW TH CONTINUE

With an ever-increasing global presence, MPT forged new
relationships and planted a stake in South America in 2020.
Now poised for more opportunities in Colombia and within
Australia, Western Europe and the U.S., the company continues
to partner with world-class operators around the world.

Pro forma portfolio statistics are as of December 31, 2020, and assume fully funded commitments.

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OPERATORS

BEDS

43,895

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IMPRESSIVE OUTPERFORMANCE

MPT showed more than resilience during a challenging year. It showed stunning results that

prove the company’s way of investing in the healthcare sector delivers for its investors—

convincingly, as it has from the start.

“Our business model is the reason
why MPT performed so well in
2020. Hospitals are, without a
doubt, essential.”

– Edward K. Aldag, Jr.,
Chairman, President and CEO

MPT burst from the worldwide economic
uncertainty caused by the pandemic to
outperform on virtually every measure.
That included cash flow, investment
dollars, stock price and MPT’s consistently
impressive total shareholder return
(TSR), according to Edward K. Aldag, Jr.,
chairman, president and CEO.

Indeed, MPT boasts a stunning 566%
TSR since its initial public offering in
2005, eclipsing the performance of the
S&P 500 and REIT benchmark indices
for the same period. Notes R. Steven
Hamner, executive vice president and

chief financial officer, “In whatever period
you look, MPT’s outperformance in TSR
is just extraordinary. Those are objective
numbers that measure the cash value we
have created over the life of the company.”
Beyond those impressive returns, MPT
takes pride in the reasons behind them:
sustained financial performance and
perpetual growth and profitability. “We
know better than anybody how to grow
through hospital real estate investment,”
Hamner says, “and as the market that
we helped create has expanded, MPT is
leading the way.” The numbers prove it.

REMARKABLE RETURNS, SUSTAINED OUTPERFORMANCE

Sustained Total Stockholder Return Outperformance Relative to Healthcare and Broader
REIT Industries

MEDICAL
PROPERTIES
TRUST TSR

+9%

ONE-YEAR

+89%

THREE-YEAR

+161%

FIVE-YEAR

+566%

SINCE-IPO

SNL US REIT
Healthcare Index

Outperformed by
+15%

Outperformed by
+68%

Outperformed by
+131%

Outperformed by
+274%

SNL US REIT
Equity Index

Outperformed by
+14%

Outperformed by
+73%

Outperformed by
+124%

Outperformed by
+364%

MARKET-LEADING NORMALIZED
FUNDS FROM OPERATIONS (NFFO)
PER SHARE GROWTH RATE

21%

Year Over Year*

The highest growth rate among
U.S. equity REITs with over $5 billion
in market cap.

*As of December 31, 2020

“We expect continued,
double-digit per share
NFFO growth as we
go into 2021.”

– R. Steven Hamner,
Executive Vice President
and Chief Financial Officer

MPT GROWTH &
PROFITABILITY
CONTINUE

2020 ASSETS CLOSED

Almost

$3.6B

2020 PRO FORMA TOTAL
GROSS ASSETS

$20.4B

Up from $16.5B in 2019

103%

INCREASE IN PRO FORMA
TOTAL GROSS ASSETS
SINCE 2018

B
4
.
0
2
$

B
5
.
6
1
$

B
1
.
0
1
$

8
1
0
2

9
1
0
2

0
2
0
2

NUMBER OF
HOSPITAL
OPERATORS

2018

2019

2020

PRO FORMA TOTAL GROSS ASSETS

Increased at a

31%

Compound Annual Growth Rate
(CAGR) from 2010-2020

IMPRESSIVE COMP ON NFFO CAGR

Approximately 9%
MPT’s Normalized Funds From
Operations Per Share CAGR
over past 10 years

Approximately 3%
Peer healthcare REITs (public
companies) over past 10 years

DIVIDEND GROWTH IN 2020

Almost

C E N T E R
O F T H E
A C T I O N

MPT built its business plan on the cornerstone of

investments in acute care hospitals. As 2020 revealed,

it’s a foundation that serves the company—and the

healthcare needs of global communities—very well.

Indeed, during the pandemic, the world relied on first-

rate facilities owned by MPT. Company leadership is

proud of the hospital operators’ performance—and MPT’s.

WORLD VIEW

Look through the lens of MPT hospitals to see how the front-
line fight against COVID-19 unfolded. Each story shows their
brave and vital roles.

MPT’s position as a leader in the
healthcare real estate sector gave the
company a unique perspective on how
the pandemic swept across continental
Europe and the United Kingdom—and
on what was coming to the U.S. and
other parts of the globe. As the disease
crept across borders and moved in on
unsuspecting emergency rooms, it found
formidable battalions of medical workers
and hospital personnel who stood up to
it—and who are fighting still.

“The worldwide response to COVID-19
could not have been done without
MPT facilities, where countless patients
were treated,” says Edward K. Aldag, Jr.,
chairman, president and CEO of MPT.
R. Steven Hamner, MPT executive vice
president and chief financial officer,
agrees, adding, “There isn’t another
company or institution that has the
breadth of vision into hospitals that
we do.” In touch almost daily during
the height of the pandemic, Aldag
and counterparts at many hospital
operators around the globe kept each
other informed. Hospital administrators
shared with Aldag and MPT what was
happening in the corridors of their own
facilities and how they were adapting to
wage the 24-hour-per-day battle. Aldag in
turn reassured them that the healthcare
industry experts at MPT understood the
fight and would support them in it.

MPT is proud to share three compelling
firsthand accounts from executives
at valued MPT hospitals in the United
Kingdom, Italy and Spain. “These
remarkable leaders and their hospitals
are a testament to the quality of the
facilities where MPT invests,” Aldag says.

PAOLO PIERI, CEO
CIRCLE HEALTH, UNITED KINGDOM

Paolo Pieri had some early clues about
how COVID could affect his hospital
system in the U.K., thanks to information
coming out of two hospitals operated by
Circle Health in China, where the virus
originated. “It was helpful to get that early
feedback, to see the level of intensive
care unit usage, the number of incubators
and hospital beds needed,” he says. It
was also alarming.

“The need for hospitals—and for hospital
beds—was staggering,” Pieri says.
Projections showed the government’s
National Health Service (NHS) hospitals
would need 200,000 beds. Circle had
additional capacity that could help fill any
gaps. “We went to the NHS early on—not
just about helping COVID-19 patients, but
about helping non-COVID patients in our
hospitals across the U.K.,” he explains.

Circle played the valiant role of
supporting the national effort to
battle the pandemic by providing

Circle Reading Hospital
Reading, U.K.

safe, specialized care for thousands.
Specifically, it took in maternity
patients, along with cancer and other
immunosuppressed patients, providing
a COVID-free environment in its private
hospitals so NHS facilities could focus on
COVID patients. Circle also shared staff
with NHS facilities and welcomed NHS
medical staffers to its hospitals.

During the COVID crisis, Circle Health has:

• Logged more than 50,000 NHS patient
admissions across its 53 hospitals,

• Made more than 280,000 NHS patient
contacts during visits that included
appointments, diagnostics and
treatments, and

Pieri is proud of data points that show
how Circle interacted with NHS patients,
introducing its services to citizens who
may never have experienced care at a
Circle Health hospital. And what’s more
impressive, Circle made this contribution
requesting only that the NHS cover
costs during the period. “We did not ask
for any premium or profit,” Pieri says.
“Basically, we said we’re just going to be
an extension of the NHS during
this pandemic.”

• Used more than 16 million units of
personal protective equipment in
providing care to patients.

In addition, Circle has been recognized
in the medical community for its role in
cancer care during the pandemic. “We
believe we were the largest facility for
esophageal cancer treatment, having
essentially taken over that specialty
area for the NHS during the pandemic,”
Pieri says. He adds that Circle has
demonstrated expertise in treating other

types of cancer as well, and patient
outcomes to date have been excellent.

He remembers one patient who came
to a Circle hospital in Nottingham for
a cancer-related surgery in May 2020.
Because NHS facilities were overstretched
with the virus, she chose Circle rather
than postponing care. “She probably
wouldn’t have been treated so timely
otherwise,” Pieri says. Throughout the
pandemic, the leadership of MPT said yes
to every innovation and reconfiguration
that Circle proposed.

“I remember phoning Ed [Aldag] about
24 hours after talking with the NHS
and telling him about repurposing our
hospitals for the cause, including tearing
down walls and bringing in other services
and staff. He was very supportive, and
immediately available in our subsequent
conversations,” Pieri says.

Circle Reading Hospital
Reading, U.K.

As the U.K. endures more lockdown
conditions, Circle is very conscious of
another issue: the non-COVID backlog.
Numbers show the U.K. population has
had 5 to 6 million fewer primary care visits
since the pandemic started. Eventually
these patients will need to be seen, and
when that happens, there may be a whole
new round of diagnoses to treat.

Circle stands ready and available. The
company has shown just how much it can
do—and how well it can do it.

MASSIMO DE SALVO, PRESIDENT
GRUPPO POLICLINICO DI MONZA, ITALY

The pandemic hit Italy in early February,
and it affected Lombardy first, where de
Salvo heads many hospitals. “I remember
the first case, and then it seemed like one
second later there were hundreds,” he
says. “Before this, the pandemic seemed
like a faraway situation that would not
touch [us], but suddenly, it was right
next door.”

Gruppo Policlinico di Monza began
working with the government to mitigate
the situation, transforming four of its
hospitals into facilities dedicated to
treating COVID-19 patients. He recalls
one thing clearly: everyone’s sense of
fear. “For the first time, I saw many of my
colleagues cry,” de Salvo says. “What you
saw in the U.S. about Italy, watching it on
the news, is one thing, but I have goose
bumps remembering what it was like to
live it.”

But amid the memories of sad and lonely
goodbyes, of nurses holding smartphones
so loved ones could exchange final words,
he remembers “beautiful moments” that
gave his staffers hope—the first patient
who woke up after a long stay in intensive
care and a 19-year-old COVID patient
who was reunited with his family as a
result of the illness. At first, the patient

refused to share family information but
later admitted he had run away from
home. He allowed the hospital to contact
his family in another region of Italy, and
now he lives with them again. “To this day,
the mother still sends cakes and flowers
to thank the hospital staff,” de Salvo
says. “She does it not only because they
rescued him, but because they helped
recover the relationship.”

Another bright spot came when nurses
produced a video of their “happy dance”
while shutting down a COVID-19 unit that
was no longer needed. The video went
viral. “They showed the Italian spirit—one
of perseverance,” de Salvo says.

During the darkest days, de Salvo says
that Aldag and MPT team members
always stood beside Gruppo Policlinico
di Monza, encouraging it to proceed
with the logistics of adding more beds
to accommodate COVID patients, and
he notes that approximately 3,000
pandemic-related patients received care
at his company’s facilities. “MPT is not just
a company. In every communication and
conversation, MPT shows that it has a
heart at the center of their work, and it is
very conscious of the role that hospitals
play in the world,” de Salvo says. “Anyone
who collaborates with MPT knows that
its heart is in the right place and they’re
working hard. That image of the heart
and hard work—together—is what I think
of when I think of MPT, and I feel this
more than ever.”

As de Salvo and his colleagues continue
battling COVID and running their hospitals
to meet other patient needs, de Salvo
says their strength comes from within.
“We are rolling up our sleeves and working
as hard as we can,” he says.

Clinica La Vialarda
Biella, Italy

DR. JUAN ABARCA, PRESIDENT
HM HOSPITALES, SPAIN

Dr. Juan Abarca remembers the date
when the Spanish government sounded
the alarm on COVID-19: March 14, 2020.
The rumblings heard and tremors felt
about the fast-moving contagion became
real. “There’s a tsunami coming,” Abarca
thought at the time.

HM Hospitales immediately formed a
COVID-19 committee to try to manage the
impending flood of critically ill patients.
The pandemic affected the country in
three waves, with the first wave catching
everyone by surprise. Hospitals were
forced to put many everyday surgeries
on hold and focus attention on the
escalating crisis. “All other non-COVID
activities had to be stopped,” Abarca
says, adding that by the time the later
waves hit, the hospitals had devised
ways to keep COVID patients separate
so that other operations could resume.
“Managing the two kinds of patients
became very important,” he says.

Though HM Hospitales represents private
hospitals in a country where government-
run hospitals are common, the two types
of facilities came together. “It didn’t
become a competition, it became a
collaboration,” Abarca says.

To help manage the overwhelming flow
of patients, HM Hospitales found creative
ways to use every bit of square footage
within its hospitals’ walls, even turning
a library into an intensive care unit for a
time. The company managed to increase
capacity 100% for ICUs and 50% for other
types of units, all in a heroic effort to
treat anyone in need. For months, the HM
Hospitales team held morning meetings
seven days a week to determine
pandemic-related needs and to marshal
resources. “The hospitals started working
in tandem, moving staff and exchanging
ventilators and other equipment as
needed,” Abarca says.

Abarca became a familiar figure to many
Spaniards, with his social media posts,
media appearances and blog chronicling
the crisis as it spread from Madrid and
Barcelona to smaller towns. His words
gave readers hard truth tinged with an
inspiring charge to persevere and follow
protocols. On March 31, 2020, he wrote in
his blog, “One day less ... these days go by
very slowly. I’m looking forward to …
the victory ... and it will come, but we
still have some very hard days, possibly
more than the last.” And on December 22,
2020, as hope of the vaccine lifted spirits,
Abarca reminded the public not to let
down their guard: “Let’s not get distracted
from what we have to do: mask, social
distance, hand washing and ventilation. It
all depends on each one of us.”

“I tried to keep it realistic and honest,”
says Abarca. People listened, knowing
he was a medical doctor and hospital
administrator with contacts in the
pharmaceutical industry, government
and in healthcare-focused companies
like MPT. The leadership at HM Hospitales
appreciated that MPT could pass along
information about the struggles and
small triumphs other MPT properties
were experiencing. Today, it’s difficult
for Abarca to celebrate all HM Hospitales
achieved; he primarily remembers the
“overwhelming suffering and patients’
fear.” He says, “All my memories are of
the fatigue, the anguish.”

Yet at year’s end, HM Hospitales was able
to create a bonus system to thank its
hospital workers, from the maintenance
staff to physicians, for their dedication in
the battle against COVID-19. And because
it was one of the first hospital groups to
make anonymous patient data public
for other healthcare companies, new
strategies for treating COVID-19 emerged,
along with a greater willingness in the
international medical community to work
together to solve problems (see sidebar,
facing page). “That is a silver lining,”
Abarca says.

Hospital Universitario HM Sanchinarro
Madrid, Spain

Hospital HM Torrelodones
Madrid, Spain

LEARNING TO SHARE

MPT marvels at the quality of the operators
that run the hospitals MPT owns. One
achievement of HM Hospitales stands out.

The effort resulted in new technologies in the
pandemic fight, such as the use of artificial
intelligence (AI) and algorithms to:

Early in the pandemic, the Spanish operator
embarked on a “COVID-19 Data Saves Lives”
initiative, which made anonymous patient
results available to the international medical
community. “There had to be a mental
revolution that helped everyone overcome their
tendencies to protect their own research, and
that led to open sharing of the data,” says Dr.
Juan Abarca, HM Hospitales president. “No one
knew how to deal with this virus. There was no
treatment. Everything was new for everyone.”

As the medical community worked to
determine how to help patients, one of the
best solutions was to create an online pool of
patient data and make it available to experts
across industry and international lines. “HM
Hospitales was the first [hospital system]
in the world to do it, to put aside protective
tendencies about our research and data, and
to share,” Abarca says. “Now we have learned
that sharing information about health is how
you solve the problem.”

• Track the evolution of the disease,

• Analyze patient prognoses and determine

effective treatment, and

• Help doctors differentiate COVID from

other diseases.

The sharing of data opened the medical
community’s mind about how to work together,
and it’s inspiring new ideas about how to
approach other medical dilemmas. “People are
saying, let’s do this with cancer,” Abarca says.

Now the best minds in the technology and AI
industries are in league with the doctors and
researchers to fight medical battles beyond
COVID-19. “Data saves lives,” Abarca says.

St. Francis Medical Center
Lynwood, California

DOING BUSINESS IN A YEAR LIKE NO OTHER

Strong relationships forged prior to the pandemic, a seamless transition to a virtual workplace
and a rock-solid business plan elevated MPT to its strongest global position yet.

Amid circumstances that had much
of the business world out of sync,
MPT maintained strong cash flow and
executed key transactions in 2020. While
the company monitored the health crisis
closely, its own business plan proceeded
uninterrupted. “Not only did we not miss
a beat in conducting business, but our
employees truly rose to the occasion,”
says Emmett E. McLean, executive vice
president and chief operating officer of
MPT. “Our most important assets are
our people, and you find out how good
people are when there’s a crisis.”

Working from home became the reality
for the MPT workforce by mid-March after
a swift transition led by MPT Chairman,
President and CEO Edward K. Aldag, Jr.,
who focused on employee safety. But
that situation did little to hinder capable
employees from assessing new business,
maintaining existing relationships and
facilitating day-to-day operations. “Early
on, I was concerned our employees
would feel disconnected and isolated,
but leaders across the company did an
incredible job of keeping everybody
connected,” Aldag says.

The result was another standout year
for MPT. “We did what we needed to
do to maintain contact with operators
and global markets, and that led to a
tremendous year of growth, even during
the depths of the pandemic,” says
R. Steven Hamner, executive vice president
and chief financial officer of MPT.

HOW THE YEAR UNFOLDED

In January, MPT completed a $2 billion
acquisition of 30 BMI Healthcare hospitals
in the United Kingdom and helped
facilitate a related transaction in which
trusted MPT operator Circle Health
acquired BMI and assumed operation
of 52 BMI facilities. The first quarter also
saw MPT executives and acquisition
teams deploy to the U.K. and Colombia
to research additional investment
opportunities. Then the pandemic
locked down travel.

While many U.S.-based employees at MPT
faced travel restrictions, the MPT office in
Luxembourg gave the company a way to
continue due diligence efforts in Western
Europe, as employees based there were
still able to travel with precautions.

St. Francis Medical Center
Lynwood, California

Asset managers dealing with limited
travel became adept at checking in with
operators often via the virtual world. “We
always stay in contact with our tenants,”
says Rosa H. Hooper, vice president,
managing director of Asset Management
and Underwriting of MPT. “We want to
know how they are doing from a business
standpoint, but we’ve also developed a
genuine relationship with these people.”
Hooper missed the face-to-face contact,
but she and her team stayed in even
closer touch with tenants and clients in
the virtual world. “Naturally, there was
more emphasis on how people were
doing personally during the height of the
pandemic,” she says.

At the same time, new relationships were
getting established. “We announced
new business decisions starting in
May—significant transactions,” Hamner
says, alluding to the formation of a joint
venture for investing in international
hospital operations and to several other
transactions. “We accomplished all
of that through maintaining as much
face-to-face contact as was reasonable

and safe and pivoting when necessary to
remote conversations.”

Midyear acquisitions included
investments in hospital real estate in Salt
Lake City and Los Angeles, an inpatient
rehabilitation facility in Germany, and
a new acute care facility in the U.K. In
November, MPT entered the South
American continent with a $135 million
investment in three hospitals in Colombia.
That transaction occurred after Aldag
had spent nearly two years visiting the
country, getting to know the markets, the
providers and the current presidential
administration, and after Hooper, McLean
and teams from MPT had spent weeks
there learning about the market needs
and the facilities.

“The transaction stream was constant,”
says R. Lucas Savage, vice president,
head of Global Acquisitions of MPT. He
sensed the pandemic would disrupt
the business world and life in general
when a March flight to Australia kept
getting rescheduled due to COVID
concerns. Based in MPT’s Luxembourg

office at the time, Savage oversaw the
work conducted by colleagues focused
on Western Europe. “Acquisitions take
years to develop, so everything we were
planning to do in 2020 was in process
long before, and we really saw no
slowdown,” he says.

Throughout the year, MPT continued
its work in Australia, exploring new
opportunities via existing and new
operator relationships. In the U.K.,
MPT formed a first-time relationship
with the National Health Service with
the acquisition of a historic property-
turned-acute care hospital in London’s
Cavendish Square.

All told, MPT closed on nearly $3.6
billion in assets in 2020. In addition, the
company laid the groundwork for a
significant investment in the behavioral
health sector that closed in January
2021―a $1.1 billion acquisition of
select facilities operated by the U.K.’s
Priory Group.

HOW RELATIONSHIPS
INFLUENCE RESULTS

MPT was ready for the unusual business
climate of 2020 because of relationships
established in years past. “I do business
with people, not with companies,”
Aldag says.

He recalls the initial 2019 meeting in
Australia with his Brookfield counterpart
when MPT was eager to invest in
Brookfield-affiliated Healthscope
hospitals. “He asked me why I had flown
from Alabama to Australia to meet, and
I told him, ‘MPT wants to invest billions
with you―not with your company, but
with you. And I wanted to look you in
the eye.’” After establishing that kind of
candid rapport and trust, MPT now owns
11 Healthscope hospitals and has an
office in Sydney. When COVID lockdowns
struck, and Australian operators were
discussing reimbursement with state
governments, the personal relationship
Aldag had established allowed for open
conversations as the companies worked
through the situation.

Similarly, one reason behind MPT’s
2020 investment in Colombia was the
interaction Aldag had with Colombia’s
president, Iván Duque, in 2019. After
years exploring the business climate
in Colombia, Aldag met with Duque
in Cartagena, Colombia, in early 2019
and saw the leader’s earnest desire to
facilitate foreign investments and his
commitment to the healthcare of the
people of Colombia. In December 2019,
just before the pandemic, Aldag returned
to visit with the president and the health
minister in Bogatá.

When more conversations began taking
place online in 2020, the virtual world of
teleconference platforms even offered
a new dimension to MPT relationships
with clients and investors. “We saw a new
side of people,” Aldag says. “We know
their families and pets now, and we have
been through this pandemic catastrophe
together, with many losing loved ones.
That added a very human element to
our interactions.”

HOW QUALITY OPERATORS SHOWED
THEIR STRENGTH

In frequent phone calls with top operators
in the U.S., U.K., continental Europe and
Australia, Aldag gained insight into how
stressed the healthcare systems were.
“When COVID-19 first started, it was very
frightening for everyone,” Aldag says. Yet
on call after call, when Aldag checked
on his counterparts’ personal welfare
and the front-line situation, the operator
CEOs assured him of their ability to serve
patients and to ultimately meet financial
obligations. “This is an incredible bunch
of people running our hospitals,” Aldag
says. “We have a great group of operators
established over the last 18 years. I truly
couldn’t be prouder of the way each of
them handled the COVID-19 pandemic.”

Hamner points to the basic role of
hospitals in a community’s infrastructure
as one reason for MPT operators’ financial
security throughout the pandemic. “For
most real estate companies during
the pandemic, their tenants struggled
financially and with rent, but MPT saw
almost 100% collection,” he says.

The operators’ financial stability in facing
the pandemic added to MPT’s success in
2020―a year truly like no other.

Bakersfield Rehabilitation Hospital
Bakersfield, California

PREPARED FOR VIRTUAL WORK

After a 2011 tornado outbreak knocked out
internet at MPT headquarters for 10 days,
Chairman, President and CEO Edward K. Aldag,
Jr., directed the IT department to prepare
the company to transition to a virtual work
situation at a moment’s notice. “I didn’t plan for
a pandemic, but we were ready with a plan in
place,” Aldag says.

An email went out on Sunday, March 15,
asking MPT employees to gather their things
from the office the next morning. “Everybody
was set up to work from home by Monday
afternoon,” says Rosa H. Hooper, vice president,
managing director of Asset Management and
Underwriting. She wasn’t surprised by the
move. “One of the wonderful things about
working at MPT is Ed’s concern for our safety,”
she says.

In 2014, the MPT accountants made a cloud-
based, technological upgrade to aid the
company’s international growth, and that

new platform prepped the team for a virtual
workplace, according to J. Kevin Hanna, vice
president, controller and chief accounting
officer of MPT. In addition, the company’s
disciplined, team-oriented employees, many of
whom are accustomed to working on the road,
made it an easy transition, with the accounting
group setting up a structured method of
working together remotely. “We stuck to our
routines, which meant much less chance for
error,” Hanna says, adding that regular,
online meetings may even have improved
internal communications.

Getting to know co-workers via
videoconferencing from home, with spouses
and dogs and children in the background, only
added to the supportive company culture. And
though face-to-face relationship-building
is a hallmark of how MPT does business,
the company used virtual meetings to its
advantage all year long.

R E L A T E
CONNECT
PARTNER

MPT prides itself on building strong bonds with

longtime partners and forging lasting relationships

with new, long-term tenants. Lots of equity in face-

to-face relationships prior to 2020 paid off last year

and prepared the company for continued growth

and expansion.

Hospital Universitario
HM Sanchinarro
Madrid, Spain

MANAGING GLOBAL GROWTH

As MPT expands its portfolio and influence around the globe, find out how the company
maintains a lean and agile infrastructure to support its success.

Having an international enterprise with
an investment base of $20.4 billion
and that consistently delivers strong
shareholder returns makes onlookers
marvel. “How do they do it?” some
might ask. “We get that question often,”
says Charles R. Lambert, vice president,
treasurer and managing director of
Capital Markets. Even in 2020, when
many businesses struggled, MPT closed
on approximately $3.6 billion in new
assets and continued international and
domestic growth.

“It’s amazing to work for a company that
can flourish during a pandemic,” says J.
Kevin Hanna, vice president, controller
and chief accounting officer. “That tells
you that the business model is right, the
company structure is right, the executive
team is right, and you’ve got great people
working for you.”

All of those components have worked
in MPT’s favor since the company was
founded in 2003 by Edward K. Aldag, Jr.,
chairman, president and CEO, joined
later that year by co-founders R. Steven
Hamner, executive vice president and

chief financial officer, and Emmett E.
McLean, executive vice president and
chief operating officer. The trio developed
a plan for growth that positions the right
people in the right places, developing
strategic infrastructure that has
supported the company’s reputation as a
global leader in healthcare real estate.

THE RIGHT PLACES

MPT orchestrates its business plan and
manages its pipeline from its Birmingham,
Alabama, headquarters, but it has offices
in key locations: New York, which keeps
MPT connected to the heart of the U.S.
financial markets; Luxembourg, which
provides quick access to Western Europe
and the United Kingdom; and Sydney,
Australia, which positions the company
for more opportunities after it acquired
11 hospitals across Australia in 2019. With
MPT’s growing presence in the United
Kingdom, a new London office will soon
play a vital role in future growth. “We
want to have a permanent presence
there with permanent personnel in place,”
says Hamner.

The adversity that the
business world experienced
in 2020 allowed MPT’s
skillful management of its
assets and international
presence to stand out—
thanks to its business
model, use of technology
and talented employees.

With employees in each location, these
international offices give MPT a significant
advantage. They allow MPT to deploy
teams for key meetings, conduct site
visits at medical facilities and make
business decisions swiftly. According
to Hamner, simply having a physical
presence signals a commitment that
investors and potential business partners
recognize. Plus, it helps with logistics.
“It’s nice to have personnel conducting
business in the same time zones,”
Hamner says.

Moreover, the investment of time and
money in setting up these offices and
in building relationships in a region or a
country have profitable results. “That’s
the way our business model works,”
he says. “We have great leverage in
developing the infrastructure to
support our global growth, which
includes offices, but mainly includes
having people on the ground to maintain
year-after-year relationships.”

Having those relationships may not yield
new business transactions in the short
term, but MPT has the patience and

fortitude to wait. “We’re in the game for
the long term,” says R. Lucas Savage, vice
president, head of Global Acquisitions.

THE RIGHT PEOPLE

Under the experience and success of its
founders, MPT has a sterling reputation
that draws top talent. According to
Savage, the company’s organization chart
might show who reports to whom, but
many departments function more like
a huddle on a football team. “There may
be one person calling the play, but
everyone has an important part in
executing it,” he says.

Because of the company’s relatively
small employee base, staffers find less
bureaucracy and more opportunities
once they come on board. “Getting new
hires involved quickly is a philosophical
commitment that the three founders
share, especially on the client-facing,
acquisitions side,” Hamner says. “MPT
has our way of doing business, and it’s
different than most others. There’s no
better way to learn than to observe.”

The Royal Marsden Private Care Unit – Cavendish Square
London, U.K.

“We love to meet people face to
face and to go see hospitals.”

– Anderson Aldag, Manager of
Acquisitions at MPT

Anderson Aldag, manager of Acquisitions,
had the opportunity to watch and learn
when he first started at the company
three years ago. He was dispatched to the
Luxembourg office, where he observed
Savage and Steve Nitschke, managing
director, head of European Acquisitions,
in action and saw firsthand that, given the
chance to explain the financial freedom
that MPT can offer with real estate-related
financing, the company wins business. “In
the U.S., that type of financing is more
familiar, but in Europe it’s less so,” says
Anderson Aldag, son of MPT’s chairman,
president and CEO, Edward K. Aldag, Jr.
The pre-pandemic Luxembourg office
positioned the MPT acquisitions team
with quick access to Western Europe
and to the United Kingdom for in-person
meetings. They could explain how
MPT’s financial arrangements work and
respond to more and more frequent
requests from entities interested in doing
business with the company. “I had a lot of
immediate, hands-on experience seeing
how transactions that we manage unfold,
those we proceeded with and those that
didn’t go through—and I learned the
difference between the two,” Anderson
Aldag says. “The first year I was in
Luxembourg, I traveled every single week
for the first 10 months.”

Now back in the U.S., and after a
short period of pandemic-mandated
travel curtailment, he and the other
Acquisitions team members have begun
visiting customers again. “We’re looking
forward to getting back out there and
looking people in the eye,” Savage
says. In the meantime, Anderson Aldag
is still learning from Savage, whom
he’s supporting from the Birmingham
headquarters. The whole team’s
relationship skills and business acumen
shine through via phone calls and video
conferences, laying the groundwork for
a future pipeline of potential projects.
“Acquisitions is a long-term, deliberate
process,” Nitschke says, echoing Hamner.
“One transaction may take five years to
develop, and all along, we’re regularly
talking to people about what we are
looking for to keep the pipeline going.”

The types of medical properties in that
pipeline change little. “We’re consistent:
MPT is interested in hospitals,” Savage
says. “We build a business relationship
with the operators running them, and
then we grow that relationship as much
as possible.”

Sydney Southwest Private Hospital
Liverpool, Australia

THE MPT WAY

To develop and maintain its incredible
portfolio of more than 400 medical
facilities around the world, MPT has
established offices in strategic locations―
Sydney, Australia; Luxembourg; New York;
and now London. But beyond office
space, MPT manages its global growth by
making sure employees understand the
company’s way of doing business:

• Focusing on building and maintaining

strong relationships

•

Identifying quality operators and top
facilities through due diligence with the
highest of standards

Involving the company’s founders with
every potential acquisition, so that their
expertise and experience is on display
to advance any business at hand and
to help others at MPT learn more about
the company’s decision-making process

• Keeping the MPT mission in mind: to

continue as the world’s leading source
of capital for hospitals and to remain at
the very heart of healthcare

Hospital HM Torrelodones
Madrid, Spain

COLOMBIA: A STRATEGIC CHOICE

MPT’s entry into South America showcases the company’s
thoughtful underwriting process and its deliberate approach
to global growth.

When MPT acquired a three-hospital
portfolio in Colombia in November of
2020, it was the culmination of a lengthy
discovery process and the start of a new
phase of the company’s international
exploration. Widening MPT’s global
footprint to a fourth continent, the
relatively modest $135 million transaction
gives the company an official foothold
within Colombia’s healthcare community.

“The government of Colombia has been
committed for many years to being a very
pro-business, pro-foreign investment
country,” says Edward K. Aldag, Jr.,
chairman, president and CEO of MPT.
“Most importantly, it is committed to the
healthcare of the people of Colombia.”

A RESULT OF LONG-TERM RESEARCH

Along with the MPT Asset Management
and Underwriting team, Aldag has spent
time in Colombia over several years
exploring various opportunities. He’s
convinced that now is the right time to
establish MPT’s presence there with this
particular investment.

Aldag has talked with insiders who
know where the country has been
politically and how stable it has become
for business operations. He’s visited
with the country’s president and other
government leaders, and he’s led MPT
teams on tours of hospitals there. What
he and other MPT executives learned
gave them confidence to make this initial
investment in the three hospitals―Clínica
Centenario and Hospital Universitario
Clínica San Rafael located in the capital
city of Bogotá, population 2.7 million, and
Clínica Los Nevados in Pereira, a city of
almost 500,000 located west of Bogatá in
the coffee-producing region known as the
Coffee Axis.

Hospital Universitario
Clínica San Rafael
Bogotá, Colombia

PROFITABLE HEALTHCARE SOLUTIONS

With the potential for physical upgrades
and new technical systems that could
overhaul the Colombian hospitals’ paper-
reliant accounting and other systems,
MPT’s investment will benefit local
patients and the hospitals’ owner and
operator. In this instance, MPT itself has a
49% share in a new entity that both owns
and operates this trio of facilities. The
Colombia transaction represents the first
effort of this independent group.

MPT’s ownership in the recently acquired
hospitals adds to the strong business
case for pursuing more opportunities in
Colombia. Emmett E. McLean, executive
vice president and chief operating officer
at MPT, saw the obvious need for quality
hospitals firsthand during his site visit in
early 2020. “It was clear that the hospitals
were very, very busy,” McLean says. “It
also was clear that they were very well
run. It made me a believer in

investing here.” Adds Rosa H. Hooper,
vice president, managing director of
Asset Management and Underwriting,
“I’ve been in hundreds of hospitals in my
career. The hospital I toured in Bogatá
had, without a doubt, the busiest ER
I have seen.”

Hooper learned that Bogatá and the
entire country of Colombia has a need
for additional hospital beds. “I was
greatly impressed by the need,” she says.
MPT has the means to help meet those
needs, along with the relationships in
the healthcare sector to bring valuable
expertise to Colombia. “I think we could
substantially increase our investment in
Colombia by the end of 2021,” Aldag says.

“Some companies look to grow
to put dots on a map. That’s not
what we’re doing. We’re looking
for the right type of investments,
and we’re going to be selective
wherever we go.”

– Emmett E. McLean,
Executive Vice President and
Chief Operating Officer at MPT

COLOMBIA
UNDERWRITING CHECKLIST

MPT intends for every transaction
to create shareholder value,
and it underwrites each with a
consistent process that earns
investor trust. “We are very
careful with our shareholders’
capital,” says Rosa H. Hooper,
vice president, managing director
of Asset Management and
Underwriting. The 2020 Colombia
hospital transaction ticks all the
boxes on MPT underwriters’
list of requirements.

Clínica Centenario
Bogotá, Colombia

FULFILLING A GLOBAL MISSION

MPT’s tried-and-true method for
assessing medical facilities mitigates the
risks of any new venture in any country.
“The Colombia transaction is not that
dissimilar from what we’ve done in
Europe,” McLean says, pointing to initial
MPT investments in Germany that paved
the way for doing business in Italy, Spain
and Portugal—and even to new business
MPT is considering with its Australian
operator. “You go see the assets, and you
understand their value. As Ed says, ‘All
underwriting is local.’”

Stepping into South America simply
furthers MPT’s original vision of becoming
an international company. Adds Hooper,
“If a country has respect for rule of law,
strong social commitment to providing
hospital healthcare to its people and a
sustainable reimbursement system, we
think it deserves our attention.”

FAST FACTS: COLOMBIA

• Colombia offers universal public

and private coverage.

• Citizens are entitled to a

comprehensive health benefit
package.

• Private health insurance is available

for purchase through private
companies.

•

In 2019, health expenditures were
7.3% of gross domestic product.

• As of 2016, 32% of Colombia’s 1,124
hospitals and clinics were private.

A LANDMARK YEAR IN THE UNITED KINGDOM

With milestone acquisitions from start to finish during 2020, MPT boosted
its U.K. presence in a significant way. Now the company is poised to have
an ever-increasing role in the healthcare delivery system there.

MPT first acquired two hospitals in the
United Kingdom in 2014. Today, it has
more than 75, leased to some of the U.K.’s
most respected operators and venerable
healthcare institutions.

THE FIRST MOVE IN 2020

In early January 2020, the company
acquired 30 hospitals from BMI
Healthcare for $2 billion, the largest
transaction in company history.
Acquisition of the facilities was part of a
hand-in-hand transaction that included
the purchase of BMI by MPT’s trusted,
long-term tenant, Circle Health. “When
I toured these private hospitals with the
CEO of Circle, I learned that they played
a critical role in the health delivery
system within the U.K.,” says Edward K.
Aldag, Jr., chairman, president and CEO
of MPT. “What I didn’t know was that the
pandemic would come along and prove
how right I was.”

The private hospitals that MPT had
just acquired soon played an essential
role during the pandemic, admitting
cancer and other high-risk patients in an

agreement with National Health Service
(NHS) hospitals, which were crowded
with COVID-19 patients. Thousands of
NHS patients experienced private hospital
care at Circle hospitals as a result, and the
NHS was able to rely on this important
component of the overall healthcare
delivery system in the U.K.

For more than five years, MPT executives
and acquisition managers had
maintained frequent contact with the
owners of BMI, even informally advising
its real estate group about how best to
restructure its lease relationships. When
BMI’s financial advisors commenced a
process to sell the company and its highly
attractive real estate, they made an early
call to solicit MPT’s participation—and
soon thereafter, MPT and Circle combined
for the successful winning bid. “We know
how they think, they know what we’re
looking for, and we both knew that MPT
could start putting numbers together and
help facilitate the process,” says R. Lucas
Savage, vice president and head of Global
Acquisitions at MPT.

Along with Aldag, Savage and teams of
other MPT executives and underwriters
who toured the potential BMI acquisitions
across the U.K., Steve Nitschke, managing
director, head of European Acquisitions,
recognized the significance of the
opportunity and how swiftly MPT needed
to act to take advantage of it. “It was a
complex deal that needed a sophisticated
counterparty to help lubricate the
transaction and make it happen,”
Nitschke says. “It grew our presence
significantly with a great operator and a
great tenant.”

DEEPENING OLD RELATIONSHIPS,
ESTABLISHING NEW ONES

MPT acquired and leased back two
additional general acute care facilities
to Circle in 2020. But its £50 million
November acquisition of The Royal
Marsden Private Care Unit, leased to and
operated by The Royal Marsden NHS
Foundation Trust, marks an exciting new
operator relationship for MPT.

This Royal Marsden facility, located in
the heart of London’s medical district

The Royal Marsden Private Care Unit –
Cavendish Square
London, U.K.

“The U.K. health system is poised for
growth. The private need in the U.K.
is large. The downstream potential
with private and public operators
is significant.”

– Steve Nitschke, Managing Director,
Head of European Acquisitions

The decision to make such a sizable
investment in a collection of U.K.
hospitals that addresses psychiatric
problems, addictions and other mental
health issues came after years of looking
for the right opportunity to increase
MPT’s holdings in that sector. “We’ve
been looking into this sector for a long
time, and there’s an absolute need
for this type of care,” Savage says. “It’s
essential for this day and time.”

LOOKING AHEAD

With the U.K. now representing MPT’s
largest non-U.S. market, the company
recently opened a permanent office
there from which to continue to grow
its investments and manage its critical
relationships. “The United Kingdom
continues to offer highly attractive
investment opportunities for MPT, and we
are committed there for years to come,”
Savage says.

The Royal Marsden Private Care Unit –
Cavendish Square
London, U.K.

at Cavendish Square, is housed within
a renovated historic building that has
the latest diagnostic technology and
treatment services. Nitschke calls it a
“trophy asset.”

Aldag goes on to explain what a
relationship with the NHS means for
MPT’s future in the U.K. The NHS, the
government-funded institution beloved
by the people of the U.K. for consistently
tending to their healthcare needs, has
capital requirements and a backlog of
patients, as the pandemic showed more
clearly than ever. “The Cavendish Square
facility is going to be a great entry for us
with the NHS,” says Aldag, glad to have
established what he views as only the
beginning of a great collaboration.

ANNOUNCING GROWTH IN A NEW
SECTOR AT YEAR’S END

MPT ended 2020 by paving the way for
what would become a landmark, £800
million acquisition of 35 behavioral
health hospitals operated by the U.K.’s
largest behavioral health provider,
Priory Group. That transaction closed
in early 2021, giving MPT a high-quality
investment in an important component
of the nation’s hospital care delivery
infrastructure. “I’m very proud of these
facilities, and we got to pick the best
of the best” Aldag says. “Sadly, there is
growing need for mental healthcare in our
world today, and I’m glad to have quality
behavioral health assets find a place in
our overall portfolio.”

The Royal Marsden Private Care Unit – Cavendish Square
London, U.K.

CROWN JEWEL: THE ROYAL MARSDEN

London has its crown jewels, but this is one of
MPT’s―an impressive acute care hospital in
Cavendish Square that’s new to its portfolio.

Several years ago, MPT’s R. Lucas Savage, vice
president and head of Global Acquisitions,
found himself walking around Cavendish
Square near Harley Street. Long a hub of
medical facilities in the heart of London, it
is a prized location with enviable medical
buildings, but he never imagined that MPT
would own a hospital there one day. Now, the
company counts The Royal Marsden Private
Care Unit, a respected cancer center located
at the edge of the square, as one of its most
prestigious tenants.

This impressive hospital, housed in a historic
building outfitted with the latest technology,
is an expansion of the London locations of
The Royal Marsden, Europe’s largest cancer
center known for award-winning care. MPT
leases the facilities to the National Health
Service (NHS) under a long-term lease, and
marks MPT’s first ever transaction with the
NHS. Operating under a partnership between
the NHS and private care services, The Royal
Marsden ensures the highest standard of care
for NHS and private patients.

FAST FACTS: THE UNITED KINGDOM

• All English residents are entitled to

public healthcare through the National
Health Service, including hospital,
physician and mental health care.

•

In 2015, 10.5% of the U.K. population
carried voluntary supplemental
insurance to gain more rapid access
to elective care.

• Approximately 515 private hospitals
were located in the United Kingdom
as of 2017.

•

In 2019, the U.K. spent 10.3% of its
gross domestic product on healthcare,
which ranked seventh out of all
European countries.

In 2018, 75% of private healthcare for
United Kingdom-based patients was
funded by private insurance.

G I V I N G
C A R I N G
SHARING

Never has MPT’s charitable work and contribution

to society been more important. When people

were required to isolate or to work from home, the

company’s initiatives to help communities where it

does business had more impact. It may have looked

different in 2020, but MPT honored its commitments

to colleagues, to communities and to the world.

“MPT had the resources to
help during a trying year.”

– Emmett E. McLean,
Executive Vice President
and Chief Operating Officer
at MPT

COMMUNITY SUPPORT IN A TIME OF COVID

MPT consistently gives back, but its charitable contributions and community support have
never had more of an impact than in 2020.

In 2020, MPT charitable dollars stretched
farther than ever―throughout its
headquarters city of Birmingham,
Alabama, to the front lines of its hospitals
across the U.S. and even to the global
frontier of medical research in the fight
against COVID-19. “It’s consistent with
what we’ve done as a charitably minded
company,” says Emmett E. McLean,
executive vice president and chief
operating officer. “We’re very gratified
to be in a position to help.”

HELPING AT HOME

In Birmingham, where MPT is known for
its philanthropic support, springtime sees
a flurry of fundraisers and events that
benefit area charities and civic groups.
In early 2020, the pandemic put a stop
to all the golf tournaments, festivals and
black-tie galas. The Birmingham Museum
of Art’s Museum Ball, for instance, was
postponed for an entire year until
September 2021. The YWCA’s Purse &
Passion luncheon became a virtual affair.
The Jones Valley Teaching Farm canceled
its magical Twilight Supper altogether.
Yet those organizations didn’t lose any of
the 2020 charitable dollars that MPT had
promised them.

“We increased our giving compared
to 2019, and all the sponsorships we
committed to for 2020 were honored,
whether a benefit ball became a virtual
fundraiser or the funds applied to
next year’s postponed event or the

sponsorship amount became a donation,”
says McLean. “We said, ‘We don’t care
whether you have the event or not. We
want to support your mission.’” That
heartfelt, action-oriented attitude
translated into more than $300,000
in MPT contributions to more than 25
groups that rescheduled events, almost
$75,000 to fund virtual events, and almost
$40,000 in donations for canceled events.

MPT also maintained its presenting
sponsorship of Racing for Children’s, a
benefit for pediatric cancer patients that
is normally held at Barber Motorsports
Park each year, but there was a twist.
“Racing for Children’s became Drive-In for
a Cure,” McLean says, explaining that the
new family event was held at a drive-in
theater with options to watch Talladega
Nights or Madagascar. “It allowed
Alabamians to gather safely and to keep
up awareness of the Alabama Center for
Childhood Cancer and Blood Disorders at
Children’s of Alabama hospital.”

“On behalf of the staff of West
Anaheim Medical Center, please
accept our heartfelt thanks
for your donation of over 800
Freshly meals. Your generosity
and kindness warms our hearts
and helps boost the morale of
the staff as they care for our
community. Your investment
in hospitals, as well as your
care for the people who work in
them, is commendable.”

– Allen Stefanek,
CEO, and
Barbara Tenneson,
RN, Chief Nursing Officer

Beyond those donations, which
matched or exceeded MPT’s regular
annual giving to area nonprofits and key
cultural organizations in the city, MPT
gave more than $1.1 million in response
to specific COVID-19 needs and requests.
“I don’t remember any group or not-for-
profit organization coming to MPT during
the pandemic and asking for some help
that didn’t get it,” says Rosa H. Hooper,
vice president, managing director of Asset
Management and Underwriting, noting
that she appreciated the MPT funds that
went to Jones Valley Teaching Farm and
Red Mountain Theatre Company. She
serves on the boards of the two groups
and says, “They’re both dear to my heart.”

BANDING TOGETHER FOR MORE
GIVING POWER

True to its reputation for generous giving
and reliable support, MPT also jumped
at the opportunity to join about 40 top
Birmingham foundations, corporations
and companies that banded together
to meet suddenly urgent, pandemic-
related needs across the city and state.
“It was good for the community to come
together, and it was good for MPT to
participate,” McLean says.

On teleconference calls for months during
the height of the pandemic, MPT worked
with the Community Foundation of
Greater Birmingham, Regions Bank, the
Protective Life Foundation, United Way
and many other organizations to meet
pandemic-induced emergency funding
needs. “MPT participated, and we brought
some needs to the group,” McLean says,
“with the idea that if everyone chips in, we
can really make a difference.” As part of

this collaborative group, MPT helped fund
initiatives such as the following:

SENDING SUPPORT TO THE HOSPITAL
FRONT LINES

In 2020, MPT gave
$1.1 million earmarked for
pandemic-related needs to
charitable causes.

• The Black Belt Community

Foundation’s effort to loan money to
smaller Alabama cities so they could
purchase medical equipment and
then qualify for reimbursement via the
CARES Act. “These towns were required
to spend cash up front before they
could take advantage of the available
CARES funds, but they didn’t have that
money,” McLean says. “We helped fund
loans organized by Black Belt, and said,
‘If you have any left over, keep it.’”

• The YMCA’s emergency childcare for

first responders and healthcare workers
fighting the pandemic.

• The United Way’s Community Crisis
Fund, which helped low-income and
jobless Alabamians buy food and pay
rent and utilities during the crisis.

As much as MPT did to help Alabamians
and statewide nonprofits respond to
the healthcare crisis, the company’s
chairman, president and CEO, Edward K.
Aldag, Jr., also wanted to help front-line
workers at acute care hospitals in MPT’s
portfolio. Moved by the stories he was
hearing from operators firsthand and
by images on TV of exhausted nurses,
doctors and hospital personnel, he
wondered if there was a way to send
these medical professionals a warm,
delicious meal to help get them through
another day. He turned to Freshly, a
leader in the prepared foods industry that
specializes in chef-prepared, individually
packaged, frozen meals. Soon, thousands
of nutritious dinners were being shipped
to MPT’s hospitals to fuel workers across
the U.S.

“Ed thinks big,” says McLean, who has
often seen Aldag green-light charitable
dollars for opportunities presented to
the MPT Charity Committee. In this case,
the Freshly initiative called for a $350,000
expenditure that McLean says was worth
every cent. “Rosa Hooper at MPT helped
coordinate the logistics of the project,
and it was just staggering—around
40,000 meals went out to these front-line
workers,” McLean says, noting that details
for shipping, receiving and coordinating
freezer space in countless hospitals had
to be researched and executed.

“We were in touch with our U.S. operators
and also gave meals to Children’s of
Alabama hospital locally, even though
it’s not one of our own,” Hooper says.
“The idea was that at the end of their
shift, workers could take home an easy,
nutritious meal, without having to stop
somewhere, and rest and recuperate.”

Whether charitable dollars from
MPT helped fill someone’s pantry in
Birmingham or fund medical research
that helped save someone’s life, the
money made a powerful impact. “The
pandemic did not negatively affect our
business at all, and not everyone could
say that,” McLean says. “MPT had the
resources to help during a trying year.”

FUNDING MEDICAL RESEARCH WITH
INTERNATIONAL IMPACT

One of MPT’s most significant acts
of philanthropy during 2020 was a
$250,000 contribution to the COVID-19
clinical research fund of the University
of Alabama at Birmingham (UAB) School
of Medicine. “UAB was on the cutting
edge, with their experts in the thick of the
COVID response,” McLean says, noting
UAB’s pioneering research on the antiviral
drug remdesivir, the first FDA-approved
medication used to treat COVID-19.

Back in 2014, remdesivir’s maker, Gilead
Sciences, began a collaboration with
the UAB-led Antiviral Drug Discovery
and Development Center, headed by
UAB professor Richard Whitley. They
worked to examine the drug’s effect on
coronaviruses similar to COVID-19. So
when the pandemic hit in 2020, UAB was
tapped as the site for a global clinical trial
of remdesivir sponsored by the National
Institutes of Health. “Giving those
clinical research dollars went a long way,”
McLean says.

USING OUR INFLUENCE

As MPT’s global footprint grows, so do its efforts to practice and encourage
environmental responsibility—especially now that the pandemic has reminded
everyone that they breathe the same air and share the same resources.

As one of the largest owners of hospitals
and medical real estate in the world,
MPT has a unique perspective on
environmental sustainability in the
healthcare sector.

“It’s just absolutely crucial that we have
conversations with our operators about
green initiatives, model great corporate
sustainability practices in our own
operations, and recognize the great
things our tenants are doing in this area,”
says Edward K. Aldag, Jr., chairman,
president and CEO of MPT.

Due to the absolute or triple-net lease
structure used by MPT, its tenants
around the globe bear responsibility
for their own environmental footprint
and sustainability initiatives. However,
MPT has long done due diligence on
environmental risk management as part
of its underwriting process for potential
acquisitions and has ongoing discussions
about environmental stewardship with
long-term tenants and when initiating
new development projects. The
company has a mitigation plan in place
should any environmental issues at its
facilities come to light. And when MPT
discovers innovative environmental
efforts and achievements by its tenants,
the company applauds them and helps
spread the news.

10 MPT OPERATORS MAKING A
DIFFERENCE

Here’s a look at recent environmental
successes among MPT operators:

Steward Health Care – In 2020, this
longtime MPT operator achieved greater
than 15% in energy savings, reducing
operating expenses by $3.8 million, cut
electricity demands by 52.5 gigawatt-
hours and eliminated carbon dioxide
emissions by 87,140 metric tons per year.

Healthscope – With many environmental
initiatives, such as the installation of LED
lighting and water-efficient showerheads,
the company has earned spots on the
Dow Jones Sustainability Index and the
FTSE4GOOD Index, which recognizes
leading sustainability performance.

Prospect Medical Holdings –
Improvement projects at MPT hospitals
resulted in a reduction of more than
11,000 carbon metric tons in 2020, thanks
to LED lighting upgrades, high-efficiency
air handling unit replacement or
upgrades, and roof replacements.

Ernest Health – At an inpatient
rehabilitation facility currently under
construction in Bakersfield, California,
Ernest plans for this MPT-owned building
to be solar-panel ready, use low-flow
irrigation and offer 10 electric car

chargers. The property also will have
high-efficiency LED lighting and HVAC
systems with economizer cycles, features
already in use at Ernest’s Elgin, South
Carolina, rehabilitation hospital, which
achieves substantial annual energy
savings through a host of building and
design choices.

LifePoint Health – As part of LifePoint’s
Energy Optimization Plan, 2020 projects
implemented at certain MPT hospitals
will result in an expected annual energy
savings of $613,000. Other in-progress
initiatives include an energy analytics
tool, a conservation education program
for staffers, and a consolidation plan for
waste removal and recycling efforts.

Prime Healthcare – Installation of
combustion-free, low-oxide fuel cells
at multiple California facilities will save
hundreds of thousands of dollars at
each. Two fuel cell projects at MPT-owned
locations are expected to save more than
$12 million over the length of the 20-year
power purchase agreement. Together,
these California fuel cell projects will save
51 million pounds in carbon emissions
over the life of the contracts.

Surgery Partners – At Surgery Partners’
Idaho Falls Community Hospital, the
many sustainability features include
water-saving flow restrictors that will save
30%-60% of water used; variable volume

Over
200,000
kWh

reduction in energy use at
MPT corporate headquarters

THREE WAYS MPT KEEPS THE
ENVIRONMENT TOP OF MIND

1. Makes environmental improvements at MPT

facilities. Its headquarters earned Energy Star
ratings in 2017 and 2018, increased recycling
rates across multiple waste streams and
reduced energy use by more than 200,000
kilowatt-hours from 2019 to 2020.

2. Engages in environmental and climate
change risk management. MPT makes
sustainability part of the conversation for
any development project and considers
climate change-related risk for MPT facilities
around the globe.

3. Talks with MPT tenants about environmental

improvements. Across its hospital
portfolio, MPT makes sustainability part
of the ongoing conversation, with an
environmental section on its regular
questionnaire and time on the agenda to
discuss it during engagement meetings.

MPT’s Environmental Social and Governance
Committee, established in 2019, regularly drives
the company’s commitment to sustainability
and environmental risk management.

80%

of MPT revenue comes from tenants
who are actively working to reduce
their carbon footprint

air handlers that will save about 35%
of the horsepower needed to operate;
boilers with an 85% efficiency ratio; and
LED lighting that will reduce the lighting
load by at least 50%.

Circle Health – This operator complies
with reporting requirements of the
Streamlined Energy and Carbon
Reporting framework in the United
Kingdom. Among many environmental
efforts, Circle oversees group-wide
energy reduction initiatives, conducts
inspections of oil storage equipment
to stay within regulation, and tests for
refrigerant gas leaks that could harm
the environment.

MEDIAN – The “Green Median”
sustainability initiative established by
MEDIAN includes strategies such as LED
lighting conversions, use of geothermal
energy at certain facilities and electric
vehicle transportation for patients.

Infracore SA – This healthcare
infrastructure company based in
Switzerland has committed to reaching
a 20% increase in energy management
efficiency over the next 10 years. It’s
also committed to energy-efficient
measures in new construction and
development projects.

For more on how MPT
prioritizes environmental
practices, please visit the
Responsibility section at
medicalpropertiestrust.com
and see the Environmental tab.

TRANSPARENCY & TRUST

MPT demonstrates great corporate governance and excellent management
of its most valuable resource: human capital.

standards for how we operate Medical
Properties Trust,” says Aldag.

• Established strong governance

provisions and

A STRONG, DIVERSE BOARD

• Helped create an executive

A strong and respected board of directors
led by MPT Chairman, President and
CEO Edward K. Aldag, Jr., and on which
Executive Vice President and Chief
Financial Officer R. Steven Hamner also
sits, sets the highest of standards for MPT.
Its members, who have a wide range of
expertise and experience, oversee the
integrity of MPT business practices. The
strength of the board pairs with the depth
of the company’s employee pool, drawn
from exemplary talent across many
disciplines. With high retention rates
and enviable benefits, MPT has a
reputation as a prestigious place to
work where employees know they are
valued and each contributes to the
company’s success.

From the governing body to the newest
hires, the people involved with the
company are its strongest asset. “It’s our
highest honor to establish impeccable

MPT’s board represents experience across
industries as varied as healthcare systems,
finance, investment in publicly traded
companies, real estate, corporate law,
accounting, energy and legal counsel for
healthcare systems. Members bring their
own viewpoints and experience to the
table, where they make decisions that
impact the company’s outperformance.

With oversight of every key decision, the
board has:

• Supported management and the

company throughout its evolution into
one of the world’s leading hospital real
estate platforms,

compensation program that has
averaged more than 95% say-on-pay
approval over the past five years.

From inception, MPT has made board
diversity a priority, ensuring the broadest
range of perspectives as the company
grows. Women have always made up
a strong percentage of the board and
currently represent 25% of its members.
Of those women, one is Latina and
adds a 13% minority component. The
majority of members are independent of
MPT, bringing unbiased perspectives to
agenda items. Half of the board members
have served less than six years, which
allows fresh takes on the company’s
strategy. And with a median age of 59,
the membership brings both years of
experience and vitality to the boardroom.

GREAT CULTURE, GREAT BENEFITS

At MPT, approximately 120 full-time
employees have built and manage the
company’s portfolio of hospitals and
$20.4 billion in pro forma total gross
assets. They represent some of the best
talent in the U.S. and overseas, from
valued, longtime employees to brand-
new workers who quickly contribute to
the company’s growth. “We are known
as pioneers in our industry, and people
want to come work for MPT,” says J. Kevin
Hanna, vice president, controller and
chief accounting officer.

BOARD OF DIRECTORS: BY THE NUMBERS

GENDER

TENURE

AGE

25%
FEMALE

50%

6 YEARS
OR LESS

59.4

AVERAGE
AGE

The MPT board of directors has a 13% minority component, with one Latina female
member who is a native of Costa Rica.

See links to policies
and learn more in the
Responsibility section at
medicalpropertiestrust.com

MPT demonstrates from the start how
much it cares for its workforce. When
recruiting, a corporate psychologist who
has worked with Aldag for more than 34
years is part of the hiring process to ensure
MPT is a mutual fit. During onboarding,
training opportunities help equip
employees for success. And a competitive
benefits package offers top-tier insurance,
including coverages for health, secondary
health, dental, vision and life, with no-cost
individual plans; a 401(k) with employer
match; stock awards; a monthly fitness
allowance; reimbursement for concierge
physician services; and an employee
assistance program at no cost to the
employee. Employees also get a full day
of paid time off to participate in volunteer
work of their choice.

With investments in countries throughout
the world, it’s imperative that the
employees of MPT reflect diverse cultures
and backgrounds. The company has
increased its diversity ratio, and it also
emphasizes opportunities for women,
who currently make up 41% of the MPT
workforce. Plus, 40% of all MPT employees
report to a female manager or director.

Once they are part of the MPT family,
employees find security in the company’s
financial stability and ongoing success, as
demonstrated with strong compensation
plans and a strong bonus structure.

TRAINING, HIGH EXPECTATIONS
AND FEEDBACK

The employees at MPT each understand
their mission as part of the company’s
goal to be “at the very heart of healthcare.”
Professional development plans ensure
long-term personal growth and job
satisfaction, and employees may
receive specialized training in their
areas of expertise.

MPT leaves nothing to guesswork when
it comes to expectations for professional
conduct. It publishes strong policies
and codes of conduct in writing, but

the expectations are not one-way. The
company leadership also wants to know
what employees expect, conducting
periodic employee surveys and acting on
the feedback.

Training for employees extends beyond
workplace issues and job performance
to lessons on the intangibles of how
MPT does business, mostly learned
by observation during the day-to-day
meetings and tasks. “We instill an MPT
culture, an MPT way of doing things, and
we help employees understand how we
treat each other and how we treat people
outside of MPT,” says Aldag.

A DIVERSE,
INCLUSIVE
WORKFORCE

41%

FEMALE

40%

REPORT TO
FEMALE
MANAGER

39%

WORKING
PARENTS

21%

UNDER 30

27%

OVER 50

C H A R T S
REPORTS
AND DATA

Everything MPT did prior to 2020 prepared the company

for a challenging year. While much of the business

world locked down or took a pause, MPT led its industry

sector and beyond. The data shows just how strong

MPT fundamentals truly are. The company’s results and

growth impress, and its potential seems limitless.

Selected Financial Data

Non-GAAP Financial Measures

Forward-Looking Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Net Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Corporate and Shareholder Information

SELECTED FINANCIAL DATA
The following sets forth selected financial and operating information on a historical basis (in thousands except per share data):

For the Years Ended December 31,

2020

2019

2018

OPERATING DATA

Total revenues

Expenses:

Interest

Real estate depreciation and amortization

Property-related

General and administrative

Total expenses

Other income (expense):

(Loss) gain on sale of real estate

Real estate impairment charges

Earnings from equity interests

Debt refinancing and unutilized financing costs

Other (including mark-to-market adjustments on equity securities)

Income tax (expense) benefit

Net income

Net income attributable to non-controlling interests

Net income attributable to MPT common stockholders

Net income attributable to MPT common stockholders per diluted share

Weighted-average shares outstanding – diluted

OTHER DATA

Dividends declared per common share

FFO(1)

Normalized FFO(1)

Normalized FFO per share(1)

Cash paid for acquisitions and other related investments

BALANCE SHEET DATA

Real estate assets – at cost

Real estate accumulated depreciation/amortization

Cash and cash equivalents

Equity investments

Other loans

Other assets

Total assets

Debt, net

Other liabilities

Total Medical Properties Trust, Inc. stockholders’ equity

Non-controlling interests

Total equity

Total liabilities and equity

1,249,238

854,197

784,522

328,728

264,245

24,890

131,663

749,526

(2,833)

(19,006)

20,417

(28,180)

(6,782)

(31,056)

432,272

(822)

431,450

0.81

530,461

1.08

757,677

831,209

1.57

3,414,437

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)

374,684

0.87

428,299

1.02

535,768

557,413

1.30

4,565,594

223,274

133,083

9,237

81,003

446,597

719,392

(48,007)

14,165

—

(4,071)

(927)

1,018,477

(1,792)

1,016,685

2.76

366,271

1.00

485,335

501,004

1.37

666,548

December 31, 2020

December 31, 2019

December 31, 2018

14,337,929

11,438,078

(833,529)

549,884

1,123,623

858,368

792,739

16,829,014

8,865,458

619,699

7,338,532

5,325

7,343,857

(570,042)

1,462,286

926,990

544,832

665,187

14,467,331

7,023,679

415,498

7,028,047

107

7,028,154

7,165,834

(464,984)

820,868

520,058

373,198

428,669

8,843,643

4,037,389

245,316

4,547,108

13,830

4,560,938

16,829,014

14,467,331

8,843,643

(1) See section titled “Non-GAAP Financial Measures” for an explanation of why these non-GAAP financial measures are useful along with a reconciliation to our GAAP earnings.

NON-GAAP FINANCIAL MEASURES

We consider non-GAAP financial measures to be useful supplemental
measures of our operating performance. A non-GAAP financial measure is
a measure of financial performance, financial position, or cash flows that
excludes or includes amounts that are not so excluded from or included in
the most directly comparable measure calculated and presented in
accordance with GAAP. Described below are the non-GAAP financial
measures used by management to evaluate our operating performance
and that we consider most useful to investors, together with reconciliations
of these measures to the most directly comparable GAAP measures.

Funds From Operations and Normalized Funds From Operations
Investors and analysts following the real estate industry utilize funds
from operations, or FFO, as a supplemental performance measure. FFO,
reflecting the assumption that real estate asset values rise or fall with
market conditions, principally adjusts for the effects of GAAP
depreciation and amortization of real estate assets, which assumes that
the value of real estate diminishes predictably over time. We compute
FFO in accordance with the definition provided by the National
Association of Real Estate Investment Trusts, or Nareit, which represents
net income (loss) (computed in accordance with GAAP), excluding gains
(losses) on sales of real estate and impairment charges on real estate
assets, plus real estate depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures.

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

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

The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and Normalized FFO for the years ended
December 31, 2020, 2019, and 2018 (amounts in thousands except per share data):

For the Years Ended December 31,

FFO INFORMATION

2020

2019

2018

Net income attributable to MPT common stockholders

Participating securities’ share in earnings

Net income, less participating securities’ share in earnings

431,450

374,684

1,016,685

(2,105)

(2,308)

(3,685)

429,345

372,376

1,013,000

Depreciation and amortization

Loss (gain) on sale of real estate

Real estate impairment charges

Funds from operations

Write-off of straight-line rent and other

Non-cash fair value adjustments

Income taxes – rate change/release of valuation allowance

Debt refinancing and unutilized financing costs

Normalized funds from operations

PER DILUTED SHARE DATA

Net income, less participating securities’ share in earnings

Depreciation and amortization

Loss (gain) on sale of real estate

Real estate impairment charges

Funds from operations

Write-off of straight-line rent and other

Non-cash fair value adjustments

Income taxes – rate change/release of valuation allowance

Debt refinancing and unutilized financing costs

Normalized funds from operations

306,493

2,833

19,006

183,921

(41,560)

21,031

757,677

535,768

26,415

9,642

9,295

28,180

22,447

(6,908)

—

6,106

143,720

(719,392)

48,007

485,335

20,074

—

(4,405)

—

831,209

557,413

501,004

0.81

0.87

0.57

0.01

0.04

0.43

(0.10)

0.05

1.43

1.25

0.05

0.02

0.05

(0.01)

—

0.01

1.57

1.30

2.76

0.39

(1.96)

0.13

1.32

0.06

—

(0.01)

—

1.37

The change in net income per share was (7%) from 2019 to 2020, whereas Normalized FFO per share increased by 21% for the same period.

TOTAL PRO FORMA GROSS ASSETS

Pro forma gross assets is total assets before accumulated depreciation/amortization (adjusted for our unconsolidated joint ventures) and assumes all
real estate 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 commitments close
and our other commitments are fully funded. The following table presents a reconciliation of total assets to total pro forma gross assets (in thousands):

As of December 31,

Total assets

Add:

2020

2019

2018

16,829,014

14,467,331

8,843,643

Real estate commitments on new investments (1)

1,901,087

1,988,550

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 debt and equity subsequent to period-end

Less:

166,258

833,529

1,287,077

1,479,961

163,370

570,042

563,911

927,990

865,165

229,979

464,984

375,544

–

Cash used for funding the transactions above (4)

(2,067,345)

(2,151,920)

(720,868)

Total pro forma gross assets

20,429,581

16,529,274

10,058,447

(1) The 2020 column reflects investments made in 2021 including the Priory transaction that was funded on January 19, 2021. The 2019 column reflects the acquisition of 30
facilities in the United Kingdom on January 8, 2020. The 2018 column reflects the acquisition of 11 facilities in Australia and one facility in Germany post December 31, 2018.

(2) Includes $65.5 million, $41.7 million, and $94.1 million of unfunded amounts on ongoing development projects and $100.8 million, $121.7 million, and $135.9 million of
unfunded amounts on capital improvement projects and development projects that have commenced rent, as of December 31, 2020, 2019, and 2018, respectively.

(3) Adjustment to reflect our share of our joint ventures’ gross assets.

(4) Includes cash available on-hand plus cash generated from activities subsequent to period-end including proceeds from new debt, equity, and loan repayments.

ADJUSTED REVENUES

Adjusted revenues are total revenues adjusted for our pro rata portion of similar revenues in our real estate joint venture arrangements. We believe
adjusted revenue is useful to investors as it provides a more complete view of revenue across all of our investments and allows for better understanding
of our revenue concentration. The following table presents a reconciliation of total revenues to total adjusted revenues (in thousands):

For the Years Ended December 31,

Total revenues

Revenue from real estate properties owned
through joint venture arrangements

Total adjusted revenues

2020

2019

2018

1,249,238

854,197

784,522

105,758

83,962

1,354,996

938,159

32,343

816,865

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 close on any pending transactions discussed
herein on the time schedule or terms described or at all;

• our ability to acquire, develop, and/or manage additional

facilities in the United States (“U.S.”), Europe, Australia, South
America, 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;

• our ability to raise additional funds through offerings of debt
and equity securities, joint venture arrangements, and/or
property disposals;

• our ability to obtain future financing arrangements;

• estimates relating to, and our ability to pay, future

distributions;

• our ability to service our debt and comply with all of our 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.

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 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, 2020;

• the political, economic, business, real estate, and other

market conditions in the U.S. (both national and local), Europe
(in particular the United Kingdom, Germany, Switzerland,
Spain, Italy, and Portugal), Australia, South America (in
particular Colombia), and other foreign jurisdictions where we
may own healthcare facilities or transact business, which may
have a negative effect on the following, among other things:

• the financial condition of our tenants, our lenders,
or institutions that hold our cash balances or are
counterparties to certain hedge agreements, which may
expose us to increased risks of default by these parties;

• our ability to obtain equity or debt financing on attractive
terms or at all, which may adversely impact our ability
to pursue acquisition and development opportunities,
refinance existing debt, and our future interest expense;
and

• the value of our real estate assets, which may limit our

ability to dispose of assets at attractive prices or obtain or
maintain debt financing secured by our real estate assets or
on an unsecured basis.

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.

• the impact of the COVID-19 pandemic on our business, our
joint ventures, and the business of our tenants/borrowers
and the economy in general, as well as other factors that
may affect our business, our joint ventures or that of our
tenants/borrowers that are beyond our control, including
natural disasters, health crises, or pandemics and subsequent
government actions in reaction to such matters;

• the risk that a condition to closing under the agreements
governing any or all of our pending transactions that have
not closed as of the date hereof (including the transactions
described in Note 8 of this Annual Report) may not be satisfied;

• the possibility that the anticipated benefits from any or all of
the transactions we enter into will take longer to realize than
expected or will not be realized at all;

• the competitive environment in which we operate;

• the execution of our business plan;

• financing risks;

• acquisition and development risks;

• potential environmental contingencies and other liabilities;

• adverse developments affecting the financial health of one or

more of our tenants, including insolvency;

• other factors affecting the real estate industry generally or the

healthcare real estate industry in particular;

• our ability to maintain our status as a REIT for income tax

purposes;

• our ability to attract and retain qualified personnel;

• changes in foreign currency exchange rates;

• changes in federal, state, or local tax laws in the U.S., Europe,
Australia, South America, or other jurisdictions in which we
may own healthcare facilities or transact business; and

• healthcare and other regulatory requirements in the U.S.,

Europe, Australia, South America, and other foreign countries.

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, 2020 and 2019, 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, 2020 (collectively referred to as
the “consolidated financial statements”). We also have audited
the Company’s internal control over financial reporting as of
December 31, 2020, 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, 2020 and 2019, and
the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2020 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, 2020, 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 2020 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.

assessing the reasonableness of significant assumptions such as
capitalization rates and market rental rates 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.

Addressing the matter involved performing procedures and
evaluating audit evidence in connection with forming our overall
opinion on the 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 related to capitalization rates and market rental
rates, 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 rates and market rental
rates, for certain acquisitions. Evaluating the reasonableness of
assumptions involved considering internal data from previous
acquisitions, where relevant.

Birmingham, Alabama

March 1, 2021

We have served as the Company’s auditor since 2008.

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 2020, the Company acquired a total of $3.6
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 of the respective property, internal data from
previous acquisitions or developments, other market data, and
significant assumptions such as capitalization rates and market
rental rates.

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) the
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, (ii) significant audit effort was required in

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BA LAN CE SHEETS

December 31,

(Amounts in thousands, except for per share data)

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 —
541,419 shares at December 31, 2020 and 517,522 shares at December 31, 2019

Additional paid-in capital

Retained (deficit) 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

2020

2019

1,463,200

9,286,507

30,139

1,299,081

2,010,922

248,080

14,337,929

(728,176)

(105,353)

13,504,400

549,884

46,208

490,462

1,123,623

858,368

256,069

1,017,402

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

16,829,014

14,467,331

8,865,458

7,023,679

438,750

36,177

144,772

291,489

16,098

107,911

9,485,157

7,439,177

—

541

—

518

7,461,503

7,008,199

(71,411)

(51,324)

(777)

7,338,532

5,325

7,343,857

16,829,014

83,012

(62,905)

(777)

7,028,047

107

7,028,154

14,467,331

See accompanying notes to consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STAT EMENTS OF NET I NCO M E

For the Years Ended December 31,

2020

2019

2018

(Amounts in thousands, except for per share data)

741,311

474,151

REVENUES

Rent billed

Straight-line rent

Income from financing leases

Interest and other income

Total revenues

EXPENSES

Interest

Real estate depreciation and amortization

Property-related

General and administrative

Total expenses

OTHER INCOME (EXPENSE)

(Loss) gain on sale of real estate

Real estate impairment charges

Earnings from equity interests

Debt refinancing and unutilized financing costs

Other (including mark-to-market adjustments on equity securities)

Total other income (expense)

Income before income tax

Income tax (expense) benefit

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

158,881

206,550

142,496

1,249,238

328,728

264,245

24,890

131,663

749,526

(2,833)

(19,006)

20,417

(28,180)

(6,782)

(36,384)

463,328

(31,056)

432,272

(822)

110,456

119,617

149,973

854,197

237,830

152,313

23,992

96,411

510,546

41,560

(21,031)

16,051

(6,106)

(345)

30,129

373,780

2,621

376,401

(1,717)

473,343

74,741

73,983

162,455

784,522

223,274

133,083

9,237

81,003

446,597

719,392

(48,007)

14,165

—

(4,071)

681,479

1,019,404

(927)

1,018,477

(1,792)

431,450

374,684

1,016,685

0.81

0.87

529,239

427,075

0.81

0.87

Weighted-average shares outstanding – diluted

530,461

428,299

See accompanying notes to consolidated financial statements.

2.77

365,364

2.76

366,271

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMP RE H E N S I VE I NCO M E

For the Years Ended December 31,

2020

2019

2018

(In thousands)

Net income

Other comprehensive income:

Unrealized loss on interest rate swap, net of tax

Foreign currency translation gain (loss)

Total comprehensive income

Comprehensive income attributable to non-controlling interests

432,272

376,401

1,018,477

(33,091)

44,672

443,853

(822)

(9,033)

4,330

371,698

(1,717)

(3,317)

(28,836)

986,324

(1,792)

984,532

Comprehensive income attributable to MPT common stockholders

443,031

369,981

See accompanying notes to consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY FO R T H E Y E A RS E ND E D DE CEM B ER 31, 2020, 2019 AN D 20 1 8
(Amounts in thousands, except per share data)

Balance at December 31, 2017

Net income

Cumulative effect of change in accounting
principles

Unrealized loss on interest rate swap, net of tax

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)

Balance at December 31, 2018

Net income

Unrealized loss on interest rate swap, net of tax

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

Net income

Cumulative effect of change in accounting
principles

Unrealized loss on interest rate swap, net of tax

Foreign currency translation gain

Stock vesting and amortization of stock-based
compensation

Sale of non-controlling interests

Redemption of MOP units

Distributions to non-controlling interests

Proceeds from offering (net of offering costs)

Dividends declared ($1.08 per common share)

Balance at December 31, 2020

Preferred

Common

Par
Value

Additional
Paid-in
Capital

Retained
Earnings
(Deficit)

Accumulated
Other
Comprehensive
Loss

Treasury
Shares

Non-
Controlling
Interests

Total
Equity

—

$ —

364,424

$ 364

$ 4,333,027

$ (485,932)

(26,049)

(777)

14,572

$ 3,835,205

—

599

—

5,614

—

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)

$ —

370,637

$ 371

$ 4,442,948

$ 162,768

(58,202)

(777)

13,830

$ 4,560,938

—

1,536

—

145,349

—

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)

—

2,533,210

(454,440)

$ —

517,522

$ 518

$ 7,008,199

83,012

(62,905)

(777)

107

$ 7,028,154

—

2,893

—

21,004

—

47,152

—

(4,928)

—

411,080

431,450

(8,399)

—

(577,474)

—

(33,091)

44,672

—

822

—

5,097

—

(701)

—

432,272

(8,399)

(33,091)

44,672

47,154

5,097

(4,928)

(701)

411,101

(577,474)

$ —

541,419

$ 541

$ 7,461,503

(71,411)

(51,324)

(777)

5,325

$ 7,343,857

See accompanying notes to consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CA S H F LOWS

For the Years Ended December 31,

(Amounts in thousands)

OPERATING ACTIVITIES

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

Loss (gain) from sale of real estate

Impairment charges

Straight-line rent and other write-off

Debt refinancing and unutilized financing costs

Pre-acquisition rent collected – Circle Transaction

Other adjustments

Changes in:

Interest and rent receivables

Other assets

Accounts payable and accrued expenses

Deferred revenue

Net cash provided by operating activities

INVESTING ACTIVITIES

2020

2019

2018

432,272

376,401

1,018,477

275,953

13,099

(226,906)

47,154

2,833

19,006

26,415

28,180

(35,020)

17,429

(2,438)

18,264

(18,424)

19,819

617,636

156,575

8,881

(138,806)

32,188

(41,560)

21,031

22,447

6,106

—

(2,271)

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

Cash paid for acquisitions and other related investments

(4,249,180)

(4,565,594)

(1,430,995)

Net proceeds from sale of real estate

Principal received on loans receivable

Investment in loans receivable

Construction in progress and other

Return of equity investment

Capital additions and other investments, net

94,177

1,306,187

(62,651)

(68,350)

69,224

(36,180)

920

(54,088)

(83,798)

—

(293,163)

Net cash (used for) provided by investing activities

(2,946,773)

(4,883,957)

FINANCING ACTIVITIES

885,917

(212,002)

(53,967)

—

(138,441)

564,178

111,766

1,513,666

Proceeds from term debt, net of discount

2,215,950

3,048,424

759,735

Payments of term debt

Revolving credit facilities, net

Dividends paid

Lease deposits and other obligations to tenants

Proceeds from sale of common shares, net of offering costs

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

(800,000)

162,633

(567,969)

21,706

411,101

(42,347)

—

(65,736)

(411,697)

(12,260)

2,533,210

(50,057)

Net cash provided by (used for) financing activities

1,401,074

5,041,884

(Decrease) 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

(928,063)

16,441

1,467,991

652,044

(6,478)

822,425

—

(811,718)

(363,906)

(20,606)

94,239

(3,614)

(345,870)

667,396

(17,218)

172,247

Cash, cash equivalents, and restricted cash at end of year

556,369

1,467,991

822,425

See accompanying notes to consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STAT EMENTS OF CA SH F LOWS ( CO N T IN U E D )

For the Years Ended December 31,

2020

2019

2018

Interest paid, including capitalized interest of $3,030 in 2020, $3,936 in 2019,
and $1,480 in 2018

Supplemental schedule of non-cash financing activities:

Dividends declared, unpaid

Cash, cash equivalents, and restricted cash are comprised of the following:

309,920

211,163

221,779

147,666

138,161

95,419

Beginning of period:

Cash and cash equivalents

Restricted cash, included in Other assets

End of period:

Cash and cash equivalents

Restricted cash, included in Other assets

1,462,286

820,868

171,472

5,705

1,557

775

1,467,991

822,425

172,247

549,884

1,462,286

820,868

6,485

5,705

1,557

556,369

1,467,991

822,425

See accompanying notes to consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
NOTE S TO CONSOLIDATED FINANC IAL STAT E M E NTS

1. ORGANIZATION

Medical Properties Trust, Inc., a Maryland corporation, was
formed on August 27, 2003, under the Maryland General
Corporation Law for the purpose of engaging in the business
of investing in, owning, and leasing healthcare real estate. Our
operating partnership subsidiary, MPT Operating Partnership,
L.P., (the “Operating Partnership”) through which we conduct
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 all of the limited partnership interests
in the Operating Partnership and have elected to report our
required disclosures and that of the Operating Partnership on a
combined basis, except where material differences exist.

We have operated as a real estate investment trust (“REIT”) since
April 6, 2004, and accordingly, elected REIT status upon the filing
in September 2005 of the calendar year 2004 federal income tax
return. Accordingly, we will generally not be subject to 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 substantial additional taxes in the U.S. from foreign based
income as the majority of such income flows through our REIT.

Our primary business strategy is to acquire and develop 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,
long-term acute care hospitals, freestanding ER/urgent care
facilities, and behavioral health facilities. We also make
mortgage and other loans to operators of similar facilities. In
addition, we may obtain profits or equity interests in our tenants,
from time-to-time, in order to enhance our overall return.

Our business model facilitates acquisitions and recapitalizations,
and allows operators of healthcare facilities to unlock the value
of their real estate to fund facility improvements, technology
upgrades, and other investments in operations. At December 31,
2020, we have investments in 392 facilities in 33 states in the U.S.,
in six countries in Europe, one country in South America, and across
Australia. We manage our business as a single business segment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of our consolidated 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 assets and liabilities at
the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. During
2020, the global outbreak of a novel coronavirus, or COVID-19,
spread all over the world including countries where we own
and lease facilities. The World Health Organization designated
COVID-19 as a pandemic, and numerous countries, including the
U.S., declared national emergencies with respect to COVID-19.
As the global impact of the outbreak evolved, many countries
reacted by instituting quarantines and restrictions on travel,
closing financial markets and/or restricting trade- including
requiring medically necessary elective surgeries at hospitals
to be deferred. Although hospitals are back accepting patients
and performing medically necessary elective surgeries, many
of these trade restrictions are still in place. We believe the
estimates and assumptions underlying our consolidated
financial statements are reasonable and supportable based on
the information available as of December 31, 2020 (particularly
as it relates to our assessments of the recoverability of our real
estate and the adequacy of our credit loss reserves on loans
and financing receivables). However, the ultimate impact to our
tenants’ results of operations and liquidity and their ability to
pay our rent and interest due to the impact of COVID-19 cannot
be predicted with 100% confidence, particularly given the full
scope, severity, and duration of the pandemic and the actions
needed (including vaccine rollouts worldwide) to contain the
pandemic or mitigate its impact is uncertain. This makes any
estimates and assumptions as of December 31, 2020 inherently
less certain than they would be absent the potential impact of
COVID-19. 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 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, 2020, we had loans and/or equity investments
in certain variable interest entities approximating $230 million,
which represents our maximum exposure to loss as a result of
our involvement in such entities. We have determined that we
were not the primary beneficiary of any variable interest entity
in which we hold a variable interest because we do not control
the activities (such as the day-to-day operations) that most
significantly impact the economic performance of these entities.

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. Any
cash distributions on these types of investments are recorded
to income upon receipt. For similar investments but for which
there are readily determinable fair values, such investments
are measured at fair value, 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 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 elected the package of practical expedients permitted
under the transition guidance within the new standard, which
among other things permitted the following: no reassessment
of whether existing contracts were or contained a lease and
no reassessment of lease classification for existing leases. In
addition, we made certain elections permitted which (1) allowed
entities to apply the transition provisions of the new standard at
its adoption date instead of at the earliest comparative period
presented and (2) permitted lessors to account for lease and
non-lease components as a single lease component in a contract
if certain criteria were met. For lessors, this new standard of
accounting for leases was substantially equivalent to previous
guidance, but there were some differences which we highlight
below:

OPERATING LEASE REVENUE

We receive income from operating leases based on the fixed
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 rents 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. 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 receivables.

Rental payments received prior to their recognition as income
are classified as deferred revenue.

FINANCING LEASE REVENUE

OTHER REVENUE

Under the 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.

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 the adoption of 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.

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: We account for
acquisitions of real estate under asset acquisition accounting
rules. Under this accounting standard, we allocate the purchase
price (including any third-party transaction costs directly
related to the acquisition) 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, 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, but
can be longer 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.

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 our lease 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.

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.
If a lease is terminated early, the unamortized portion of the
capitalized above/below market lease value is recognized in
rental income at that time.

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, 2020 are as
follows:

Buildings and improvements

Lease intangibles

Leasehold improvements

Furniture, equipment, and other

CREDIT LOSSES:

39.0 years

26.1 years

17.0 years

9.8 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, adverse economic and political conditions, and
other events ongoing (such as the recent health crisis caused by
the COVID-19 pandemic) 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: Upon the
adoption of ASU No. 2016-13 “Measurement of Credit Losses
on Financial Instruments” (“ASU 2016-13”) on January 1,
2020, we began applying a new forward-looking “expected
loss” model to all of our financing receivables, including
financing leases and loans. With this change, we have
grouped our financial instruments into two primary pools
of similar credit risk: secured and unsecured. The secured
instruments include our investments in financing receivables
as all are secured by the underlying real estate among other
collateral. Within the two primary pools, we further grouped
our instruments into sub-pools based on several tenant/
borrower characteristics, including years of experience in
the healthcare industry and in a particular market or region
and overall capitalization. We then determined a credit loss
percentage per pool based on our history over a period
of time that closely matches the remaining terms of the
financial instruments being analyzed and adjusted as needed
for current trends or unusual circumstances. We have applied
these credit loss percentages to the book value of the related
instruments to establish a credit loss reserve on our financing
lease receivables and such credit loss reserve (including the
underlying assumptions) is reviewed and adjusted quarterly.
If a financing receivable is under performing and is deemed
uncollectible based on the lessee’s overall financial condition,
we will adjust the credit loss reserve based on the fair value of
the underlying collateral.

With the adoption of ASU 2016-13, we made the accounting
policy election to exclude interest receivables from the credit
loss reserve analysis. Such receivables are impaired and an
allowance recorded when it is deemed probable that we
will be unable to collect all amounts due. 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. 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 lease 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 loans. Mortgage loans are collateralized by
interests in real property. Working capital and other loans are
generally collateralized by interests in receivables and corporate
and individual guarantees. We record loans at cost. Like our
financing lease receivables, we are using ASU 2016-13 to
establish credit loss reserves on all outstanding loans based on
historical credit losses on similar instruments. Such credit loss
reserves, including the underlying assumptions, are reviewed
and adjusted quarterly. If a loan’s performance worsens and
foreclosure is deemed probable for our collateral-based loans
(after considering the borrower’s overall financial condition as
described above for leases), we will adjust the allowance for
expected credit losses based on the current fair value of such
collateral at the time the loan is deemed uncollectible. If the
loan is not collateralized, the loan will be written-off once it
is determined that such loan is no longer collectible. Interest
receivables on loans are excluded from ASU 2016-13 and we
assess their collectability similar to how we assess collectability
for interest receivables on financing leases described above.

Upon adoption of ASU 2016-13, we recorded a credit loss reserve
of $8.4 million with the effect recorded in equity as a cumulative
effect of a change in accounting principle.

Earnings Per Share: Basic earnings per common share is
computed by dividing net income by the weighted-average
number of shares 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,
Australia, and South America, 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 revalued into U.S. dollars at the
rates of exchange prevailing at the dates of the transactions.

The effects of revaluation gains or losses on our short-term
transactions are included in other income in the consolidated
statements of income, while the revaluation 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

RECENT ACCOUNTING DEVELOPMENTS

Reference Rate Reform

•

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 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 investment in the new
international joint venture along with any related investments
such as loans (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 investments that existed at December 31, 2020.

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 began recording a right-of-use asset and
a lease liability for all material 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.

Reclassifications: Certain amounts in the consolidated financial
statements for prior periods have been reclassified to conform to
the current period presentation.

In March 2020, the Financial Accounting Standards Board
(“FASB”) issued ASU No. 2020-04, “Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting” (“ASU 2020-04”) to simplify the
accounting for contract modifications made to replace LIBOR
or other reference rates that are expected to be discontinued
because of reference rate reform. The guidance provides
optional expedients and exceptions for applying U.S. GAAP
to contracts, hedging relationships, and other transactions
affected by reference rate reform if certain criterion are met. The
optional expedients and exceptions can be applied to contract
modifications made until December 31, 2022. On January
7, 2021, the FASB issued ASU No. 2021-01, “Reference Rate
Reform (Topic 848)” (“ASU 2021-01”), which clarifies that certain
optional expedients and exceptions in Topic 848 for contract
modifications and hedge accounting apply to derivatives that
are affected by the discounting transition. The amendments in
ASU 2021-01 are elective and apply to our debt and derivative
instruments that may be modified as a result of reference rate
reform. We are continuing to evaluate these standards, as well
as the timing of the transition of various rates in our debt and
derivative instruments affected by reference rate reform.

3. REAL ESTATE ACTIVITIES

NEW INVESTMENTS

For the years ended December 31, 2020, 2019, and 2018, we
acquired or invested in the following net assets (in thousands):

2020

2019

2018

Buildings. . . . . . . . . . . . . . . . . . . . . .

2,547,313

1,951,066

686,739

Inta ngible lease assets – subject to
amortization (weighted-average useful
life of 27.5 years in 2020, 19.1 years in
2019, and 27.9 years in 2018) . . . . . . . . .

Investment in financing leases . . . . . . . .

Equity investments . . . . . . . . . . . . . . .

Mortgage loans . . . . . . . . . . . . . . . . . .

Other loans and assets . . . . . . . . . . . . .

642,699

114,797

233,593

176,840

309,523

227,468

90,651

1,386,797

—

415,836

245,267

51,267

—

135,258

336,458

Liabilit ies assumed . . . . . . . . . . . . . . .

(140,866)

(2,637)

—

Total assets acquired . . . . . . . . . . .

4,249,180

4,565,594

1,430,995

Loans repaid(1) . . . . . . . . . . . .

(834,743)

—

(764,447)

(1) The 2020 column includes approximately $750 million of loans advanced to Steward in
2017 and exchanged for the fee simple real estate of two hospitals as described below, as
well as approximately $100 million of loans advanced to Ernest Health, Inc. (“Ernest”) in 2012
and exchanged for the fee simple real estate of four hospitals as described below. 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.

2020 ACTIVITY

Circle Transaction

On January 8, 2020, we acquired a portfolio of 30 acute care
hospitals located throughout the United Kingdom for a net
purchase price of approximately £1.5 billion from affiliates of
BMI Healthcare, Inc. (“BMI”), as part of a share purchase in which
we also inherited certain deferred income tax liabilities and
£27.6 million of unearned rent revenue. In a related transaction,
affiliates of Circle Health Ltd. (“Circle”) entered into definitive
agreements to acquire BMI and assume operations of its 52
facilities in the United Kingdom. As part of our acquisition, we
inherited 30 existing leases with the operator that had initial
fixed terms ending in 2050, with no renewal options but with
annual inflation-based escalators. Once final regulatory approval
was received in the 2020 second quarter, these 30 leases with
Circle were amended (effective June 16, 2020) to include two
five-year renewal options and improve the annual inflation-
based escalators. These 30 leases are cross-defaulted and
guaranteed by Circle.

Other Transactions

On December 31, 2020, we acquired an inpatient rehabilitation
hospital in South Carolina for approximately $17 million. As part
of the transaction, we acquired the fee simple real estate of three
inpatient rehabilitation hospitals and one long-term acute care
hospital in exchange for the reduction of the mortgage loans
made to Ernest for such properties in 2012. The approximate
$115 million investment in all five of these facilities is leased to
Ernest pursuant to an existing long-term master lease that has
an initial term ending in December 2037 with multiple extension
options and annual escalation provisions.

On December 29, 2020, we increased our equity ownership and
related investment in Infracore SA (“Infracore”) by investing an
additional CHF 206.5 million. We are accounting for our total
investment in this joint venture (this investment along with
our initial investment in 2019 as noted below) under the equity
method.

On November 17, 2020, we invested in the real estate of three
general acute care hospitals in Colombia for approximately
$135 million. These properties will be operated by the new
international joint venture discussed below.

On August 13, 2020, we acquired a general acute care hospital in
Lynwood, California for a total investment of approximately $300
million. This property is leased to Prime Healthcare Services, Inc.
(“Prime”), pursuant to an existing long-term master lease, which
we extended its initial fixed term to August 2035 in connection
with this transaction, with annual escalations and multiple
extension options.

On July 8, 2020, we acquired the fee simple real estate of
two general acute care hospitals located in the Salt Lake City,
Utah area, Davis Hospital & Medical Center and Jordan Valley
Medical Center, in exchange for the reduction of the mortgage
loans made to Steward for such properties and additional cash
consideration of $200 million based on their relative fair value.

The approximate $950 million investment in these two facilities
is now subject to the Steward master lease that has an initial
fixed term ending in October 2031 with multiple extension
options and annual escalation provisions.

On June 24, 2020, we originated a CHF 45 million secured loan to
Infracore, which was paid-in full on December 2, 2020.

On May 13, 2020, we formed a joint venture for the purpose of
investing in the operations of international hospitals. As part of
the formation, we originated a $205 million acquisition loan. We
have a 49% interest in this joint venture and are accounting for
our investment using the fair value option election. The joint
venture simultaneously purchased from Steward the rights and
existing assets related to all present and future international
opportunities previously owned by Steward for strategic,
regulatory, and risk management purposes.

Other acquisitions in 2020 included three inpatient rehabilitation
hospitals, two general acute care hospitals, and one private
acute care hospital totaling approximately $300 million. One
inpatient rehabilitation facility, located in Dahlen, Germany,
was acquired on August 5, 2020 for €12.5 million and is leased
to MEDIAN Kliniken S.à.r.l. (“MEDIAN”) pursuant to the existing
master lease. One of the general acute care facilities, located in
Darlington, United Kingdom, was acquired on August 7, 2020
for £29.4 million and is leased to Circle pursuant to a long-term
lease. The other general acute care hospital, located in London,
United Kingdom, was acquired on November 25, 2020 for £50
million via the purchase of a 999-year ground lease and is leased
to The Royal Marsden NHS Foundation Trust pursuant to a
long-term lease. The inpatient rehabilitation hospitals, one in
Texas and one in Indiana, were acquired on December 17, 2020
for approximately $58 million and are leased to Curahealth
Hospitals pursuant to a long-term lease. The private acute care
hospital, located in Reading, United Kingdom, was acquired
on December 18, 2020 for £85.0 million and is leased to Circle
pursuant to the existing long-term Circle master lease.

2019 ACTIVITY

LifePoint Acquisition

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 had 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
included 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 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 beginning August 23, 2019. Although such performance
thresholds have not been met at this time, any future purchase
price 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 remaining
lease terms ending in 2037 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 A$1.2 billion plus stamp duties
and registration fees of A$66.6 million. The properties are leased
to Healthscope, pursuant to master lease agreements that had an
average initial term of 20 years, upon our acquisition, 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 (which we account for under the
equity method) was effected through our purchase of a stake
in a Swiss healthcare real estate company, Infracore, 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 that had an average 23-year
remaining term upon our acquisition and are subject to annual
escalation provisions. 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.

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 that had an initial lease term of
25 years upon our investment. 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 upon our acquisition. 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 master lease agreement that had an initial lease term
of 20 years upon acquisition. The lease provides for annual
escalations and includes three five-year extension options.

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 had an average
remaining lease term of 14 years upon our acquisition. 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.

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 Circle. The third acute
care facility was acquired on September 30, 2019 and located
in Watsonville, California. The inpatient rehabilitation hospital,
acquired on February 8, 2019, is located in Germany and leased
to affiliates of MEDIAN.

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). Upon acquisition, the properties were leased
to MEDIAN, pursuant to a 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.

DEVELOPMENT ACTIVITIES

2020 Activity

On November 23, 2020, we agreed to finance the development
of and lease an inpatient rehabilitation facility in Stockton,
California for $47.7 million. This facility will be leased to Ernest
and is expected to commence rent in the first quarter of 2022.

On May 15, 2020, we agreed to finance the development of and
lease an inpatient rehabilitation facility in Bakersfield, California
for $47.9 million. This facility will be leased to Ernest and is
expected to commence rent in the fourth quarter of 2021.

During the 2020 second quarter, we completed construction on
one general acute care facility and one inpatient rehabilitation
facility, both located in Birmingham, England. We began
recognizing revenue on these two properties on June 29, 2020.
These facilities are leased to Circle pursuant to a long-term lease.

During the 2020 first quarter, we completed construction and
began recording rental income on a general acute care facility
located in Idaho Falls, Idaho. This facility commenced rent on
January 21, 2020 and is leased to Surgery Partners, Inc. pursuant
to an existing long-term lease.

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 commenced rent on
December 18, 2020 and is leased to NeuroPsychiatric Hospitals
pursuant to a long-term lease.

2018 Activity

During the year ended December 31, 2018, we completed the
construction of 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 master
lease that was amended in 2020 to extend its initial fixed term to
2037. This lease has annual escalation provisions and multiple
extension options.

See table below for a status summary of our current
development projects (in thousands):

DISPOSALS

2020 Activity

During 2020, we completed the sale of nine facilities and
six ancillary properties for approximately $94 million. The
transactions resulted in a net loss of $2.8 million.

2019 Activity

During 2019, we completed the sale of five facilities resulting 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 “New Investments” 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.

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 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.

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. 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):

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 $229 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 as noted below, 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, 2020 (amounts in thousands):

INTANGIBLE ASSETS

At December 31, 2020 and 2019, our intangible lease assets were
$1.3 billion ($1.2 billion, net of accumulated amortization) and
$622.1 million ($556.7 million, net of accumulated amortization),
respectively.

We recorded amortization expense related to intangible lease
assets of $42.4 million, $21.5 million, and $17.6 million in
2020, 2019, and 2018, respectively, and expect to recognize
amortization expense from existing lease intangible assets as
follows (amounts in thousands):

For the Year Ended December 31:

2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 44,286

2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44,272

44,206

44,173

44,025

At December 31, 2020, leases on 13 Ernest facilities and five
Prime facilities are accounted for as DFLs and leases on 13 of our
Prospect facilities and five of our Ernest 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,
2020

As of
December 31,
2019

Minimum lease payments receivable . . . . . . . . . . . .

1,228,966

1,884,921

Estimated residual values . . . . . . . . . . . . . . . . . . .

203,818

394,195

Less: Unearned income and allowance for credit loss . .

(969,061)

(1,618,252)

Net investment in direct financing leases . . . . . . .

Other financing leases (net of allowance for credit loss)

Total investment in financing leases . . . . . . . . . .

463,723

660,864

1,547,199

1,399,438

2,010,922

2,060,302

As of December 31, 2020, capitalized lease intangibles have a
weighted-average remaining life of 21.3 years.

Rent Deferrals

LEASING OPERATIONS (LESSOR)

We acquire and develop healthcare facilities and lease the
facilities to healthcare operating companies under long-term net
leases (typical initial fixed terms of 15 years) and most include
renewal options at the election of our tenants, generally in
five year increments. Approximately 99% 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

Due to the COVID-19 pandemic and its impact on our tenants’
business during 2020, we agreed to defer collection on less
than 2% of our annual rent. The amount of this deferral, net
of subsequent collections, is approximately $11.4 million as
of December 31, 2020. Pursuant to our agreements with the
tenants, we expect such deferred rent to be paid over specified
periods in the future, with interest.

Adeptus Health

LOANS

As discussed in previous filings, our original real estate portfolio
of approximately 60 properties leased to Adeptus Health, Inc.
(“Adeptus”) has gone through significant changes starting with
Adeptus filing for Chapter 11 bankruptcy in 2017. With this filing
and other subsequent events (including COVID-19 implications
in 2020), we have transitioned all of the facilities away from
Adeptus. These transition measures have resulted in impairment
charges including approximately $20 million (of which one-
half related to straight-line rent write-offs), $2 million, and $24
million (of which $6 million was straight-line rent write-offs) in
2020, 2019, and 2018, respectively. However, these transition
measures have also provided for new tenant relationships
being formed with strong credit worthy operators like Ochsner
Health System, Dignity Health, UC Health, and HCA Healthcare
(via a joint venture discussed below), that are now leasing
approximately 40 of these transitional facilities under long-term
leases. At December 31, 2020, 18 of these transitional properties,
representing less than 1% of our total assets, remain vacant, and
each of these properties are in various stages of being re-leased
or sold. At December 31, 2020, we believe our investment in
these real estate assets are fully recoverable, but no assurances
can be given that we will not have any further impairments in
future periods.

Alecto Facilities

As noted in previous filings, we originally leased four acute care
facilities and had a mortgage loan on a fifth property (Olympia
Medical Center) to Alecto Healthcare Services LLC (“Alecto”).
During 2018 and 2019, we incurred approximately $30 million
and $20 million in real estate impairment charges, respectively.
During the second quarter of 2020, we re-leased one acute
care facility to West Virginia University and sold another facility.
We also donated the Wheeling facility to a local municipality,
resulting in a $9.1 million real estate impairment charge in the
first quarter of 2020. At December 31, 2020, we continue to lease
one acute care facility to Alecto and have a mortgage loan on the
second property, representing less than 0.5% of our total assets.
Subsequent to year-end, Alecto completed the sale of Olympia
Medical Center to the UCLA Health System. Our proceeds of
approximately $43 million from this sale fully recovered our
mortgage loan balance in addition to certain past due amounts.

Other Leasing Activity

On July 24, 2020, we re-leased our five San Antonio, Texas
freestanding emergency facilities (with a total investment of
approximately $30 million) to Methodist Healthcare System
of San Antonio, a joint venture between HCA Healthcare and
Methodist Healthcare Ministries of South Texas, pursuant to a
long-term master lease. As a result, we recorded an approximate
$1.5 million write-off of straight-line rent in the 2020 third quarter.

The following is a summary of our loans (net of allowance for
credit loss in 2020) ($ amounts in thousands):

Our mortgage loans at December 31, 2020 cover six of our
properties with four operators. The decrease from the prior year
primarily relates to the conversion of Steward mortgage loans for
the underlying fee simple real estate of two general acute care
hospitals as more fully described under “New Investments” in
this same Note 3, along with the repayment of approximately
$328 million mortgage loans from Prime.

The increase in acquisition loans primarily relates to the $205
million loan to the new international joint venture described
under “New Investments” in this same Note 3.

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.

CONCENTRATION OF CREDIT RISKS

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:

Facility concentration – We had no investment in any single
property greater than 4% of our total assets at December 31,
2020 or December 31, 2019.

2) Operator concentration – For the year ended December
31, 2020, revenue from Steward, Circle, and Prospect
represented 30%, 13%, and 12%, respectively, of our total
revenues. In comparison, Steward represented 42% of our
total revenues for the year ended December 31, 2019, while
Circle and Prospect represented less than 10%.

3) Geographic concentration – At December 31, 2020,

investments in the U.S., Europe, Australia, and South
America represented approximately 65%, 28%, 6%, and
1%, respectively, of our total assets. In comparison,
investments in the U.S., Europe, and Australia represented
approximately 74%, 20%, and 6%, respectively, of our total
assets at December 31, 2019.

Facility type concentration – For the year ended December
31, 2020, approximately 87% of our revenues are from our
general acute care facilities, while rehabilitation and long-
term acute care facilities made up 8% and 3%, respectively.
Freestanding ER/urgent care facilities and behavioral
health facilities combined to make up the additional 2%.
In comparison, general acute care, rehabilitation, and
long-term acute care facilities made up 82%, 10%, and
3%, respectively, of our total revenues for the year ended
December 31, 2019, while freestanding ER/urgent care
facilities and behavioral health facilities combined to make
up the additional 5%.

RELATED PARTY TRANSACTIONS

Lease and interest revenue earned from tenants and real estate
joint ventures in which we had an equity interest (accounted
for under either the equity or fair value option methods) during
the year were $29.8 million, $85.3 million, and $102.2 million for
2020, 2019, and 2018, respectively.

See subsections “New Investments” and “Disposals” in this
Note 3 as it relates to our investments in the new international,
Primotop, and Infracore ventures and the Ernest recapitalization
for other related party transactions during 2020, 2019, and 2018.

4. DEBT

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

As of
December 31,
2020

As of
December 31,
2019

Revolving credit facility(A) . . . . . . . . . . . . . . . .

165,407

—

Term loan . . . . . . . . . . . . . . . . . . . . . . . . . .

British pound sterling term loan(B). . . . . . . . .

Australian term loan facility(B) . . . . . . . . . . . . .

4.000% Senior Unsecured Notes due 2022(B) . . . .

2.550% Senior Unsecured Notes due 2023(B) . . . .

5.500% Senior Unsecured Notes due 2024 . . . . . .

6.375% Senior Unsecured Notes due 2024 . . . . . .

3.325% Senior Unsecured Notes due 2025(B) . . . .

5.250% Senior Unsecured Notes due 2026 . . . . . .

200,000

956,900

923,280

610,800

546,800

—

610,800

500,000

200,000

—

842,520

560,650

530,280

300,000

500,000

560,650

500,000

5.000% Senior Unsecured Notes due 2027 . . . . . .

1,400,000

3.692% Senior Unsecured Notes due 2028(B) . . . .

4.625% Senior Unsecured Notes due 2029 . . . . . .

820,200

900,000

3.500% Senior Unsecured Notes due 2031 . . . . . .

1,300,000

795,420

900,000

—

Debt issue costs and discount, net . . . . . . . . . . .

8,934,187

7,089,520

(68,729)

(65,841)

As of December 31, 2020, 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):

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thereafter

Total

CREDIT FACILITY

Total

165,407

810,800

546,800

923,280

1,567,700

4,920,200

8,934,187

Our current unsecured credit facility (“Credit Facility”) includes
a $1.3 billion unsecured revolving loan facility and a $200 million
unsecured term loan facility. At December 31, 2020, the maturity
date of our unsecured revolving loan facility was in February
2021, while our term loan’s maturity date was February 1, 2022.
The term loan and/or revolving loan commitments could be
increased in an aggregate amount not to exceed $500 million.

At our election, loans under the Credit Facility could be made
as either ABR Loans or Eurodollar Loans. The applicable margin
for term loans that are ABR Loans was 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
was 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 was 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
was adjustable on a sliding scale from 0.875% to 1.65% based on
our current credit rating. The commitment fee was adjustable on
a sliding scale from 0.125% to 0.30% based on our current credit
rating and was payable on the revolving loan facility.

At December 31, 2020, we had $165.4 million outstanding on
the revolving credit facility, whereas, we had no outstanding
borrowings on our revolving credit facility at December 31,
2019. At December 31, 2020 and 2019, our availability under
our revolving credit facility was $1.1 billion and $1.3 billion,
respectively. The weighted-average interest rate on the revolving
facility was 1.4% and 2.0% during 2020 and 2019, respectively.

At December 31, 2020 and 2019, the interest rate in effect on our
term loan was 1.65% and 3.30%, respectively.

Our Credit Facility was amended in January 2021 – see Note 13
for details of this amendment.

8,865,458

7,023,679

NON-U.S. TERM LOANS

(A) Includes £121 million of GBP-denominated borrowings that reflect the exchange rate at
December 31, 2020.

(B) Non-U.S. dollar denominated debt that reflects the exchange rate at period end.

British Pound Sterling Term Loan

On January 6, 2020, we entered into a £700 million unsecured
sterling-denominated term loan with Bank of America, N.A., as

administrative agent, and several lenders from time-to-time are
parties thereto. The term loan matures on January 15, 2025. The
applicable margin under the term loan is adjustable based on
a pricing grid from 0.85% to 1.65% dependent on our current
credit rating. On March 4, 2020, we entered into an interest rate
swap transaction (effective March 6, 2020) to fix the interest rate
to approximately 0.70% for the duration of the loan. The current
applicable margin for the pricing grid (which can vary based on
our credit rating) is 1.25% for an all-in fixed rate of 1.95%.

Australian Term Loan

On May 23, 2019, we entered into an A$1.2 billion term loan
with Bank of America, N.A., as administrative agent, and several
lenders from time-to-time are parties thereto. The term loan
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 as long as the reference rate
stays above 0.00%. The current applicable margin for the pricing
grid (which can vary based on our credit rating) is 1.25% for an
all-in fixed rate of 2.45%.

At December 31, 2020 and 2019, we had a derivative liability
of approximately $51.3 million and $5.6 million, respectively,
included in “Accounts payable and accrued expenses” in our
consolidated balance sheets associated with these interest rate
swaps.

SENIOR UNSECURED NOTES

The following are the basic terms of our senior unsecured notes.
Typically, we may redeem some or all of the notes at any time,
but may require a redemption 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.

4.000% SENIOR UNSECURED NOTES DUE 2022

On August 19, 2015, we completed a €500 million senior
unsecured notes offering. 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.

2.550% SENIOR UNSECURED NOTES DUE 2023

On December 5, 2019, we completed a £400 million senior
unsecured notes offering. 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.

in cash at a rate of 5.500% per year. The notes were to mature on
May 1, 2024; however, we redeemed the notes on December 19,
2020.

6.375% SENIOR UNSECURED NOTES DUE 2024

On February 22, 2016, we completed a $500 million senior
unsecured notes offering. Interest on the notes was payable on
March 1 and September 1 of each year. Interest on the notes
was paid in cash at a rate of 6.375% per year. The notes were to
mature on March 1, 2024; however, we redeemed the notes on
December 19, 2020.

3.325% SENIOR UNSECURED NOTES DUE 2025

On March 24, 2017, we completed a €500 million senior
unsecured notes offering. 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.

5.250% SENIOR UNSECURED NOTES DUE 2026

On July 22, 2016, we completed a $500 million senior unsecured
notes offering. 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 mature on August 1, 2026.

5.000% SENIOR UNSECURED NOTES DUE 2027

On September 7, 2017, we completed a $1.4 billion senior
unsecured notes offering. 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.

3.692% SENIOR UNSECURED NOTES DUE 2028

On December 5, 2019, we completed a £600 million senior
unsecured notes offering. 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.

4.625% SENIOR UNSECURED NOTES DUE 2029

On July 26, 2019, we completed a $900 million senior unsecured
notes offering. 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.

3.500% SENIOR UNSECURED NOTES DUE 2031

On December 4, 2020, we completed a $1.3 billion senior
unsecured notes offering. Interest on the notes is payable
semi-annually on March 15 and September 15 of each year. The
notes pay interest in cash at a rate of 3.500% per year. The notes
mature on March 15, 2031.

5.500% SENIOR UNSECURED NOTES DUE 2024

OTHER ACTIVITY

On April 17, 2014, we completed a $300 million senior unsecured
notes offering. Interest on the notes was payable semi-annually
on May 1 and November 1 of each year. The notes paid interest

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

2020

With proceeds from our $1.3 billion, 3.500% Senior Unsecured
Notes due 2031 offering completed on December 4, 2020, we
redeemed all of our outstanding $500.0 million aggregate
principal amount of 6.375% Senior Unsecured Notes due 2024
and $300.0 million aggregate principal amount of 5.500%
Senior Unsecured Notes due 2024, including accrued and
unpaid interest. As a result of these redemptions, we incurred
a charge of approximately $28 million (including redemption
premiums and accelerated amortization of deferred debt
issuance costs).

2019

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 approximately
$4 million of underwriting and other fees. However, this
commitment was cancelled with the completion of the debt
and equity offerings in July 2019 (as more fully described
above and in Note 9), 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 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.

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 2020, 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, 2020, 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,

2020

2019

2018

Current income tax benefit (expense):

Domestic . . . . . . . . . . . . . . . . . . .

125

Foreign . . . . . . . . . . . . . . . . . . . . .

Deferred income tax benefit (expense):

Domestic . . . . . . . . . . . . . . . . . . .

Foreign . . . . . . . . . . . . . . . . . . . . .

(10,203)

(10,140)

(10,680)

(10,236)

(20,916)

(1,669)

(1,608)

5,490

(1,261)

4,229

(3,294)

(3,169)

3,713

(1,471)

2,242

Income tax benefit (expense)

(31,056)

2,621

(927)

A reconciliation of income tax benefit (expense) from the
statutory income tax rate to the effective tax rate based on
income before income taxes for the years ended December 31,
2020, 2019, and 2018 is as follows (in thousands):

For the Years Ended December 31,

2020

2019

2018

At December 31, 2020, we had net NOL and other tax attribute
carryforwards as follows (in thousands):

Gross NOL carryforwards . . . . . . . . . . . . . . . . . . .

Tax-effected NOL carryforwards . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . . . .

U.S.

Foreign

159,895

16,298

(6,193)

528,567

133,703

(30,784)

Income before income tax . . . . . . . . . . . . . . . .

463,328

$ 373,780

$ 1,019,404

Net deferred tax asset – NOL carryforwards . . . . . . .

10,105

102,919

Income tax at the U.S. statutory federal rate
(21% in 2020, 2019 and 2018) . . . . . . . . . . . . . .

Decrease (increase) in income tax resulting from:

(97,299)

(78,494)

(214,075)

Foreign rate differential . . . . . . . . . . . . . . .

State income taxes, net of federal benefit . . . .

2,160

970

438

1,621

2,643

(379)

U.S. earnings not subject to federal income tax

82,921

85,495

208,472

Equity investments . . . . . . . . . . . . . . . . . .

380

1,091

Change in valuation allowance . . . . . . . . . . .

(8,514)

(7,911)

2,668

Statutory tax rate change . . . . . . . . . . . . . .

(9,471)

Other items, net . . . . . . . . . . . . . . . . . . . .

(2,203)

–

381

Total income tax benefit (expense)

(31,056)

2,621

–

(302)

(927)

The foreign provision for income taxes is based on foreign profit
before income taxes of $62.1 million, $10.7 million, and $18.6
million in 2020, 2019, and 2018, respectively.

The domestic provision for income taxes is based on income
before income taxes of $6.4 million in 2020 as compared with a
loss before income taxes of $(44.1) million in 2019 from our TRS
and income before income taxes of $8.0 million in 2018.

Expiration periods . . . . . . . . . . . . . . . . . . . . . . .

2029-indefinite

indefinite

VALUATION ALLOWANCE

A valuation allowance has been recorded on certain 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.

During 2020, a valuation allowance of $25.6 million has been
recorded against a portion of our international 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 NOLs, non-depreciable basis of real property, and other tax
attributes that we believe will not be realized.

At December 31, 2020 and 2019, components of our deferred tax
assets and liabilities were as follows (in thousands):

We have no material uncertain tax position liabilities and related
interest or penalties.

2020

2019

REIT STATUS

Deferred tax assets:

Operating loss and interest deduction carryforwards

150,001

28,684

Interest rate swap . . . . . . . . . . . . . . . . . . . . .

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . .

Valuation allowance . . . . . . . . . . . . . . . . . . . .

Total net deferred tax assets . . . . . . . . . . . . . . .

Deferred tax liabilities:

Property and equipment . . . . . . . . . . . . . . . . .

Net unbilled revenue . . . . . . . . . . . . . . . . . . . .

Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax liabilities . . . . . . . . . . . . . . . .

9,150

6,973

166,124

(36,977)

843

868

30,395

(11,355)

129,147

19,040

(211,018)

(14,776)

(4,010)

(229,804)

(7,324)

(1,449)

(737)

(9,510)

9,530

Net deferred tax asset (liability). . . . . . . . . . . . . . . .

(100,657)

We have met the annual REIT distribution requirements by
payment of at least 90% of our taxable income in 2020, 2019,
and 2018. 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,

2020

2019

2018

Common share distribution . . . . . . . $

1.070000

1.010000

0.990000

Ordinary income . . . . . . . . . . . . . .

0.603050

0.701910

0.438792

Capital gains(1) . . . . . . . . . . . . . . .

Unrecaptured Sec. 1250 gain . . . . . .

—

0.275040

0.551208

0.041160

0.132280

Section 199A Dividends . . . . . . . . . .

0.603050

0.701910

0.438792

Return of capital . . . . . . . . . . . . . .

0.466950

0.033050

—

(1) Capital gains include unrecaptured Sec. 1250 gains.

6. EARNINGS PER SHARE

Service-Based Awards

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

For the Years Ended December 31,

2020

2019

2018

Numerator:

Net income . . . . . . . . . . . . . . . . . . . . . . $

432,272

376,401

1,018,477

Non-controlling interests’ share in earnings . .

(822)

Participating securities’ share in earnings . . .

(2,105)

(1,717)

(2,308)

(1,792)

(3,685)

Net income, less participating securities’
share in earnings . . . . . . . . . . . . . . . . . .

429,345

372,376

1,013,000

Denominator:

Basic weighted-average common shares . . .

529,239

427,075

365,364

Dilutive potential common shares . . . . . . . .

1,222

1,224

907

Diluted weighted-average common shares . .

530,461

428,299

366,271

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 12.9
million shares of new common stock for awards under the
Equity Incentive Plan, out of which 8.4 million shares remain
available for future stock awards as of December 31, 2020. The
Equity Incentive Plan contains a limit of 5 million 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 and performance awards based on
company-specific performance hurdles. See below for further
details on each of these stock-based awards:

In 2020, 2019, and 2018, 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.

Performance-Based Awards

In 2020, 2019, and 2018, 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:

In 2020, 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. 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. The
performance thresholds for 2020 awards were based on funds
from operations growth, EBITDA, and acquisitions; whereas, the
2019 and 2018 performance thresholds were based on return on
equity, EBITDA, and acquisitions.

Certain performance awards granted were subject to a modifier
which increases or decreases the actual shares earned in each
performance period. The modifier for the 2020 awards was
based on two components: 1) how our total shareholder return
(“TSR”) compared to the SNL U.S. REIT Healthcare Index (“SNL
Index”) and 2) how our TSR compared to a threshold set by
the Compensation Committee. For 2019 and 2018 awards, the
modifier was based on how our TSR compared to the SNL Index.

The following summarizes stock-based award activity in 2020
and 2019 (which includes awards granted in 2020, 2019, 2018,
and any applicable prior years), respectively:

For the Year Ended December 31, 2020:

Vesting Based
on Service

Vesting Based on
Market/Performance
Conditions

Weighted-
Average
Value at
Award Date

Nonvested awards at
beginning of the year . . . .

1,122,440

Awarded . . . . . . . . . . . .

635,855

Vested . . . . . . . . . . . . .

(699,215)

Forfeited . . . . . . . . . . . .

(2,026)

17.11

19.65

16.80

18.40

5,481,155

1,800,898

(2,193,906)

(1,164)

11.66

19.42

11.35

18.22

Nonvested awards at
end of year . . . . . . . . . .

1,057,054

18.79

5,086,983

14.41

For the Year Ended December 31, 2019:

Vesting Based
on Service

Vesting Based on
Market/Performance
Conditions

Weighted-
Average
Value at
Award Date

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

The value of stock-based awards is charged to compensation
expense over the service periods. For the years ended
December 31, 2020, 2019, and 2018, we recorded $47.2 million,
$32.2 million, and $16.5 million, respectively, of non-cash
compensation expense. The remaining unrecognized cost from
stock-based awards at December 31, 2020, is $53.6 million,
which will be recognized over a weighted-average period of 1.3
years. Stock-based awards that vested in 2020, 2019, and 2018,
had a value of $58.9 million, $25.9 million, and $8.4 million,
respectively.

8. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

On December 30, 2020, we entered into definitive agreements
to acquire a portfolio of between 35 and 40 behavioral health
facilities located throughout the United Kingdom for an
aggregate purchase price of approximately £800 million from
the Priory Group. The transaction is structured to occur in
two primary phases. On December 30, 2020, an affiliate of
Waterland Private Equity Fund VII C.V. (“Waterland VII”) entered
into definitive agreements to acquire all of the outstanding
equity interests in the entity that owns the Priory Group from
its current owner, Acadia Healthcare Company, Inc. In separate
agreements entered into with Waterland VII on the same date,
we agreed to provide a short-term interim acquisition loan to
Waterland VII at the closing of Waterland VII’s acquisition of
Priory Group.

Upon closing of the first phase of the transaction on January 19,
2021, we funded an £800 million interim acquisition loan
secured by mortgages on an identified portfolio of Priory Group
real estate assets. In phase two, in a series of transactions we
expect will be completed during the first half of 2021, we will
acquire a portfolio of select real estate assets from Priory Group
(now owned by Waterland VII) in individual sale-and-leaseback
transactions, subject to customary real estate and other closing
conditions. As all conditions to closing for a particular asset are
satisfied, the applicable purchase price for the asset will be paid
by us by proportionally converting and reducing the principal

balance of the interim acquisition loan we made to Waterland
VII in phase one. The aggregate purchase price for the real estate
assets we acquire from the Priory Group is thus expected to
be approximately £800 million, being the total amount of the
interim acquisition loan, plus customary stamp duty, tax and
other transaction costs.

The properties we acquire will be subject to a master lease
type structure with an initial term of 25 years and two 10-year
extension options, with annual inflation-based escalators.
Pending its conversion and offset, the initial interim acquisition
loan will bear interest at a rate similar to the initial lease rate we
will receive under the lease transactions.

In addition to the £800 million initial interim acquisition loan
described above, we also agreed to provide Waterland VII with
a 364-day £250 million acquisition loan, which we funded on
January 19, 2021, in connection with the closing of Waterland
VII’s acquisition of the Priory Group. The loan is secured by
the same security assets securing the £800 million interim
acquisition loan.

In connection with these transactions, we also acquired a
9.9% passive equity interest in the Waterland VII affiliate that
indirectly owns the Priory Group for a nominal amount.

To help fund this acquisition, we entered into a $900 million
interim credit facility on January 15, 2021, of which we utilized
£500 million along with £350 million from our revolving facility
and the rest from cash on-hand.

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

2020 ACTIVITY

In 2020, we sold 21.0 million shares of common stock under our
at-the-market equity offering program, resulting in net proceeds
of approximately $411 million.

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%.

2018 ACTIVITY

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.

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):

December 31, 2020

December 31, 2019

Book
Value

Fair
Value

Book
Value

Fair
Value

46,208

45,381

31,357

30,472

Asset (Liability)

Interest and
rent receivables . . . . .

Loans(1) . . . . . . . . . .

751,341

756,608

1,704,854

1,742,153

Debt, net . . . . . . . . . .

(8,865,458)

(9,226,564)

(7,023,679)

(7,331,816)

(1) Excludes the $205 million acquisition loan to the new international joint venture and investment
in the real estate of three hospitals in Colombia discussed in Note 3 as they are recorded at fair
value and discussed below.

ITEMS MEASURED AT FAIR VALUE ON A RECURRING BASIS

Our equity investment and related loan to the new international
joint venture and our loan investment in the real estate of three
hospitals operated by subsidiaries of the international joint
venture in Colombia are measured at fair value on a recurring
basis as we elected to account for these investments using the
fair value option at the point of initial investment during 2020.
Our Ernest mortgage loans were measured at fair value on a
recurring basis in prior periods as we elected to account for these
investments using the fair value option method in 2012 when we
acquired an equity interest in Ernest. Such equity interest was
sold in October 2018, and the mortgage loans were converted
to fee simple real estate on December 31, 2020 as discussed in
Note 3. We elected to account for each of these investments at fair
value due to the size of the investments and because we believe
this method was more reflected of current values.

At December 31, 2020 and 2019, the amounts recorded under the
fair value option method were as follows (in thousands):

As of
December 31, 2020

As of
December 31, 2019

Asset (Liability)

Fair Value

Original
Cost

Fair Value

Original
Cost

Asset Type
Classification

Mortgage loans

$ 136,332

$ 115,000

Mortgage loans

Equity investment
and other loans

218,775

–

Equity investments/
Other loans

–

Our loans to the new international joint venture and its
subsidiaries 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. Our equity
investment in the international joint venture is recorded at fair
value based on Level 3 inputs, by using a discounted cash flow
model, which requires significant estimates of our investee
such as projected revenue and expenses and appropriate
consideration of the underlying risk profile of the forecasted
assumptions associated with the investee. We classify the equity
investment as Level 3, as we use certain unobservable inputs
to the valuation methodology that are significant to the fair

For 2018, our total lease expense was $9.4 million, which was
offset by sublease rental income of $4.3 million.

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, 2020
are as follows (amounts in thousands):

Operating
Leases

Finance
Leases

Amounts To
Be Received
From
Subleases

Net
Payments

$ 7,186

$ 126

$ (2,952)

$ 4,360

7,384

7,451

6,557

5,660

128

129

130

131

(3,238)

(3,240)

(3,259)

(3,303)

4,274

4,340

3,428

2,488

2021 . . . . . . . . . . . . . . .

2022 . . . . . . . . . . . . . . .

2023 . . . . . . . . . . . . . . .

2024 . . . . . . . . . . . . . . .

2025 . . . . . . . . . . . . . . .

Thereafter . . . . . . . . . . . .

257,730

4,783

(78,494)

184,019 (1)

Total undiscounted
minimum lease payments . .

$ 291,968

$ 5,427

$ (94,486)

$ 202,909

Less: interest . . . . . . . . . .

(201,962)

(3,492)

Present value of lease
liabilities . . . . . . . . . . . . .

$ 90,006

$ 1,935

(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.

value measurement, and the valuation requires management
judgment due to absence of quoted market prices. For this cash
flow model, our observable inputs include use of a capitalization
rate and discount rate (which is based on a weighted-average
cost of capital) and our unobservable input includes an
adjustment for a marketability discount (“DLOM”).

In regard to the underlying projections used in the discounted
cash flow model, such projections are provided by the investee.
However, we will modify such projections as needed based on
our review and analysis of historical results, meetings with key
members of management, and our understanding of trends
and developments within the healthcare industry. Given our
equity investment is in an entity that was a start-up company in
2020, we have not recognized any unrealized gain/loss on such
investment in 2020.

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 that vary in
years, and some of the leases have initial fixed terms (or renewal
options available) that 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):

Income Statement
Classification

For the Years Ended December 31,

2020

2019

Operating lease cost (1)

(2)

9,910

9,262

Finance lease cost:

Amortization of
right-of-use assets

Real estate
depreciation
and amortization

Interest on lease liabilities

Interest

128

117

Sublease income

Total lease cost

Other

(2,614)

(3,478)

7,475

5,952

(1) Includes short-term leases.
(2) $6.0 million and $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 2020
and 2019, respectively.

Supplemental balance sheet information is as follows (in
thousands, except lease terms and discount rate):

Balance Sheet
Classification

December 31,
2020

December 31,
2019

Right of use assets:

Operating leases – real estate . .

Finance leases – real estate . . .

Land

73,373

59,492

1,836

1,888

Total real estate right of use
assets . . . . . . . . . . . . . .

75,209

61,380

Operating leases – corporate . .

Other assets

8,234

9,866

Total right of use assets . . . . . . . .

83,443

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 $1.1 billion and $927 million at December 31, 2020 and
2019, respectively. The increase year-over-year is related to our
additional investment in Infracore as discussed further in Note 3.

13. SUBSEQUENT EVENTS

Equity Offering

On January 11, 2021, we completed an underwritten public
offering of 36.8 million shares (including the exercise of the
underwriters’ 30-day option to purchase an additional 4.8
million shares) of our common stock, resulting in net proceeds
of approximately $711.0 million, after deducting underwriting
discounts and commissions and offering expenses.

Credit Facility Amendment

On January 15, 2021, we amended our Credit Facility. The
amendment extended the maturity of our revolving facility to
February 2024 and can be extended for an additional 12 months
at our option. The maturity date of our $200 million unsecured
term loan facility was extended to February 1, 2026.

In addition to extending the maturity date, the amendment
improved interest rate pricing for both facilities. Under the
amended Credit Facility and at our election, loans may be made
as either ABR Loans or Eurocurrency Loans. The applicable
margin for term loans that are ABR Loans is adjustable on
a sliding scale from 0.00% to 0.85% based on our current
credit rating. The applicable margin for term loans that are
Eurocurrency Loans is adjustable on a sliding scale from 0.85%
to 1.85% 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 0.55% based on our current
credit rating. The applicable margin for revolving loans that are
Eurocurrency Loans is adjustable on a sliding scale from 0.825%
to 1.55% based on our current credit rating. The amended Credit
Facility retained the facility fee that 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.

Lease liabilities:

Operating leases . . . . . . . . . .

Financing leases . . . . . . . . . .

Obligations to
tenants and
other lease
liabilities

90,006

76,353

1,935

1,932

Total lease liabilities . . . . . . . . . .

91,941

78,285

Weighted-average remaining
lease term:

Operating leases . . . . . . . . . .

Finance leases . . . . . . . . . . .

Weighted-average discount rate:

Operating leases . . . . . . . . . .

Finance leases . . . . . . . . . . .

41.1

35.9

6.4%

6.6%

31.9

36.9

6.3%

6.6%

The following is supplemental cash flow information (in thousands):

For the Years Ended
December 31,

2020

2019

Cash paid for amounts included in the
measurement of lease liabilities:

Operating cash flows from operating leases . . . . . . . . . .

$ 6,080

$ 5,937

Operating cash flows from finance leases . . . . . . . . . . .

Financing cash flows from finance leases . . . . . . . . . . .

Non-cash activities – Right-of-use assets obtained in exchange
for lease obligations:

Operating leases. . . . . . . . . . . . . . . . . . . . . . . . . . .

Finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . .

125

—

13,832

—

114

1,818

—

12. OTHER ASSETS

The following is a summary of our other assets on our
consolidated balance sheets (in thousands):

At December 31,

2020

2019

Debt issue costs, net(1) . . . . . . . . . . . . . . . . . . . . . .

192

2,492

Other corporate assets . . . . . . . . . . . . . . . . . . . . . .

167,929

206,765

Prepaids and other assets . . . . . . . . . . . . . . . . . . . .

87,948

90,342

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . .

256,069

299,599

(1) Relates to our revolving credit facility

registered public accounting firm, as stated in their report which
appears in this Annual Report.

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, 2015
through December 31, 2020, among us, the Russell 2000 Index,
NAREIT All Equity REIT Index, and SNL U.S. 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.

(cid:31)(cid:30)(cid:31)(cid:29)(cid:28)(cid:27)(cid:26)(cid:25)(cid:31)(cid:24)(cid:26)(cid:23)(cid:27)(cid:22)(cid:25)(cid:26)(cid:21)(cid:30)(cid:26)(cid:20)(cid:29)(cid:23)(cid:19)(cid:25)

(cid:24)(cid:25)(cid:143)(cid:1)(cid:20)(cid:19)(cid:22) (cid:127)€‚(cid:24)(cid:127)(cid:3)(cid:143)(cid:24)(cid:157)(cid:22)(cid:5)(cid:127)(cid:18)(cid:157)(cid:3)ƒ(cid:22)(cid:27)(cid:26)(cid:1)„

(cid:7)(cid:18)(cid:157)(cid:157)(cid:24)(cid:19)(cid:19)(cid:22)(cid:28)(cid:30)(cid:30)(cid:30)(cid:22)(cid:27)(cid:26)(cid:25)(cid:24)(cid:23)

(cid:10)(cid:129)(cid:7)(cid:6)(cid:27)(cid:5)(cid:22)(cid:129)(cid:19)(cid:19)(cid:22)(cid:6)(cid:141)(cid:18)(cid:143)(cid:3)(cid:144)(cid:22)(cid:7)(cid:6)(cid:27)(cid:5)(cid:22)(cid:27)(cid:26)(cid:25)(cid:24)(cid:23)

(cid:11)(cid:10)(cid:9)(cid:22)(cid:8)(cid:11)(cid:22)(cid:7)(cid:6)(cid:27)(cid:5)(cid:22)(cid:4)(cid:24)(cid:20)(cid:19)(cid:3)(cid:2)(cid:1)(cid:20)(cid:127)(cid:24)(cid:22)(cid:27)(cid:26)(cid:25)(cid:24)(cid:23)

(cid:24)
(cid:18)
(cid:19)
(cid:20)
(cid:21)
(cid:23)
(cid:24)
(cid:25)
(cid:26)

(cid:22)

(cid:27)

(cid:16)(cid:30)(cid:30)

(cid:28)(cid:31)(cid:30)

(cid:28)(cid:30)(cid:30)

(cid:29)(cid:31)(cid:30)

(cid:29)(cid:30)(cid:30)

(cid:31)(cid:30)

(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:29)(cid:31)

(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:29)(cid:12)

(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:29)(cid:13)

(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:29)(cid:14)

(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:29)(cid:15)

(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:28)(cid:30)

Period Ending

Index

12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20

Medical Properties Trust, Inc.

100.00

114.44

137.94

172.38

238.81

260.15

Russell 2000

100.00

121.31

139.08

123.76

155.35

186.36

NAREIT All Equity REIT Index

100.00

108.63

118.05

113.28

145.75

138.28

SNL U.S. REIT Healthcare

100.00

107.42

107.26

114.12

138.67

129.69

CONTROLS AND PROCEDURES

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, 2020 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, as of
December 31, 2020, the internal control over financial reporting
for Medical Properties Trust, Inc. was effective.

The effectiveness of the internal control over financial reporting
for Medical Properties Trust, Inc. as of December 31, 2020 has
been audited by PricewaterhouseCoopers LLP, an independent

CORPORATE & SHAREHOLDER INFORMATION

OFFICERS

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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
Vice President, Treasurer and Managing Director of
Capital Markets

R. Lucas Savage
Vice President, Head of Global 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

LEGAL COUNSEL

Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Birmingham, AL

Goodwin Procter, LLP – New York, NY

PricewaterhouseCoopers LLP – Birmingham, AL

ANNUAL MEETING

The Annual Meeting of Shareholders of Medical Properties Trust,
Inc., is scheduled for May 26, 2021, at 10:30 a.m. CDT at the
Corporate Office located at 1000 Urban Center Drive, Suite 501,
Birmingham, AL 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 2020 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

The MPT Annual Report on Form 10-K for the year ended
December 31, 2020, has been filed with the Securities and
Exchange Commission and may be obtained without charge
by any shareholder (including beneficial owners) upon written
request to Investor Relations, Medical Properties Trust, Inc.,
1000 Urban Center Drive, Suite 501, Birmingham, AL 35242.

Medical Properties Trust, Inc.
1000 Urban Center Drive, Suite 501
Birmingham, AL 35242
(205) 969-3755
medicalpropertiestrust.com

NYSE: MPW