2021 ANNUAL REPORT
AT THE
LEADING
EDGE
Letter to Investors 02
True to Form 08
Building on a Stellar,
Long-Term Track Record 10
MPT Portfolio 12
Innovation in Action:
Bringing World-Class Care
to Underserved Communities 16
Full-Circle: Value Realized From
Unique Investing Strategy 20
Key Footholds in Behavioral
Health, Meeting Growing Needs 24
Putting Down Roots 30
Leading the Way in
Social Responsibility 32
Financial Review 34
TABLE OF
CONTENTS
LETTER TO
INVESTORS
2021 was all about continuing the extraordinary
growth in earnings, dividends, accretive
acquisitions and the quality of our portfolio that
we have consistently delivered for many years.
We accomplished this by executing on our long-
established strategy of focusing on high-acuity
hospital real estate that is critical to the sustained
healthcare of local communities. The success of 2021
has further positioned us to continue as the global
leader in the rapidly expanding market for hospital
real estate.
2021 showed the importance of MPT’s
pioneering approach
We built on our exceptionally strong performance
by completing a number of important transactions
in 2021. These deals further diversified our portfolio,
unlocked embedded real estate value to fund new
investments and pushed earnings substantially
higher.
Our tenants provide world-class hospital care around
the globe by accessing real estate capital provided by
MPT. We allocate this capital in a sustainable manner
that not only delivers outstanding financial returns to
our investors, but also improves the quality of life in
the communities where we invest.
Accomplishments and components of
continued growth
MPT provided a robust total shareholder return
(TSR) in 2021 exceeding 14%. It is important also
to note that MPT’s TSR since the beginning of the
COVID pandemic in 2020 has been nearly 25%,
outperforming healthcare REITs fivefold. Taking a
longer-term view, TSR since MPT’s 2005 initial
public offering (IPO) has been an outstanding, sector-
leading 661%.
2
The company continued its virtually unmatched
growth pace in 2021, investing $3.9 billion in assets.
We began the year by completing a $1.1 billion
investment in 35 behavioral health facilities operated
by Priory Group in the United Kingdom. These
facilities represent Priory’s most valuable real estate
and are where the most acute forms of behavioral
care are delivered across the U.K.
Beginning in 2021’s second quarter, our acquisition
efforts continued with a number of key transactions
in the U.S. In July, these efforts led to a $215 million
investment in a portfolio of essential neighborhood
hospitals in Los Angeles operated by Pipeline Health
System. These facilities are located in underserved
neighborhoods with few other options for care, and
Pipeline’s model is calibrated to operate profitably in
this type of setting.
In August, MPT closed on a $900 million portfolio
acquisition of five general acute care hospitals in
South Florida from Tenet Healthcare Corp., now
operated by Steward Health Care and subject
to a highly attractive in-place master lease with
other high-quality Steward hospitals. These South
Florida facilities have been essential to their densely
populated and culturally diverse communities
for many decades and are expected to benefit
tremendously from Steward’s integrated model and
planned care enhancements. MPT is confident that
Steward will position these facilities to better serve
their communities for generations to come.
October marked the completion of MPT’s first
investment of significant scale in U.S. inpatient
behavioral health, as it acquired 18 hospitals and a
stake in the operations of Springstone, Inc., for $950
million. MPT had evaluated this portfolio of purpose-
built, behavioral hospitals in several strategic markets
across the U.S. for a number of years, and gained
tremendous respect for Springstone’s management
and operating model. Closely following the U.K.
acquisition of the Priory portfolio, MPT seized the
opportunity to enter the U.S. behavioral market with
significant initial scale, a desirable level of acuity,
highly specialized real estate and the possibility of
future development opportunities. We believe that
inpatient behavioral health hospitals are mission-
critical infrastructure just like general acute
care hospitals.
Throughout the year, we continued to add to our
European hospital portfolio by making important
acquisitions and commitments in Spain, Portugal and
the U.K., as well as by conducting due diligence ahead
of our first investment in Finland completed in the
first quarter of 2022.
MPT’s operators experienced a strong recovery
after the 2020 global pandemic shut down elective
surgeries for several months. Operators engineered
a robust recovery in admissions, with the added
benefits of an improved acuity mix and cost controls.
Hospitals are essential to a community’s
infrastructure, similar to utilities and transportation
assets that no community can do without. MPT
has built a well-diversified portfolio of high-quality
hospitals run by world-class operators who raise the
bar for patient care.
Innovative capital harvesting strategy
In September, MPT announced a major transaction
to harvest embedded value from its existing
Massachusetts portfolio to fund its accretive growth.
The move provided nearly $1.3 billion in funds to MPT
when it was completed in March 2022, generated
a real estate gain approximating $600 million,
and initiated a 50-50 partnership with Macquarie
Infrastructure Partners V to own eight Steward-
operated hospitals near Boston. This transaction
revalued the Massachusetts portfolio (originally
acquired in 2016) to generate a 47% gain on sale of
real estate. In addition to illustrating MPT’s ability to
identify and acquire hospital real estate at attractive
prices and validating Steward’s prowess as an
operator, it provided the company a superior cost of
equity capital to permanently fund the acquisition
of roughly $2 billion in U.S. hospital investments at
highly accretive cash yields.
Edward K. Aldag, Jr.
Chairman, President and CEO
Sustainability in focus
MPT has long recognized the impact its own facilities
have on the environment and has ensured that
the real estate it controls operates as efficiently
as possible. As it heads into 2022, the company is
unveiling plans for a new headquarters building that
will apply state-of-the-art, energy-saving technology.
In addition, new space that MPT has leased in New
York City is in a LEED Gold-certified building and
includes office-formatting measures that enhance
safety, promise business continuity and encourage
employees to want to be in the office. MPT also
continues to develop new properties to include
advanced environmental features.
To help improve the neighborhoods where it owns
hospitals, MPT donated significant funds and
provided employee volunteer time to City Plants, a
nonprofit organization created by the Los Angeles
mayor’s office. City Plants works to increase healthy
environments across the city in terms of access to the
proven health benefits of an abundance of trees.
Rewarding investors
During 2021, the capital sources who have funded
our exceptional growth continued to be rewarded by
our significant, long-term outperformance versus all
relevant benchmarks. We distributed more than $600
million to shareholders in well-covered dividends and
generated full-year growth in per-share normalized
funds from operation (NFFO) exceeding 11% on top of
2020’s growth of more than 20%.
As we enter 2022, I have never felt better about MPT’s
portfolio and its prospects for continued growth
and added diversification, our access to numerous
sources of capital, and, most importantly, our culture
of innovation that places us on the leading edge of a
growing and evolving hospital industry.
Edward K. Aldag, Jr.
Chairman, President and CEO
This large partnership transaction was complemented
with smaller capital recycling transactions, such as
the sale of equity stakes in MEDIAN Kliniken and ATOS
Clinics International; the sale of MultiCare Capital
Medical Center in Olympia, Washington; and various
loan repayments and other small property sales,
which in the aggregate provided significant amounts
of low-cost capital for accretive reinvestment.
Importantly, HCA Healthcare’s September agreement
to acquire the operations of Steward’s Utah hospitals
provided further evidence of unrealized gains in MPT’s
real estate portfolio.
Funding MPT’s growth in a fashion that maximizes
capital efficiency and liquidity, all while delivering
solid returns to shareholders, requires careful
evaluation of various capital options and outside-
the-box thinking. These funding sources, in addition
to the more than $1 billion in common equity MPT
raised during 2021, solidify a cost of capital that
ensures the company’s investments will be highly
accretive to earnings.
Diversification across several measures
MPT’s $22.3 billion portfolio is the most diversified
it has been in the company’s history, with three
property types representing at least $2 billion in
gross assets, no distinct market accounting for more
than roughly 11% of our portfolio, and no individual
property representing more than 2.5% of total pro
forma gross assets. Furthermore, the company’s
approximate 46,000 beds are diversified across 53
operators, 32 U.S. states and nine countries on
four continents.
A unique culture receives recognition
On Modern Healthcare’s list of Best Places to Work
2021, MPT was honored to be ranked among the best
places to work for healthcare companies. This leading
news publication also gave MPT a high overall ranking
in this premier award program, which involves
an extensive, third-party-administered employee
survey. MPT earned an extraordinarily high 98%
overall engagement score and similarly high levels of
employee satisfaction and confidence in executive
management. All of MPT’s accomplishments in 2021
were a direct result of the culture that has been
cultivated at the company for the entirety of its nearly
two-decade existence.
4
7
MPT stands at the leading edge. From
inception, the company’s focus on
investing exclusively in hospitals
signaled new opportunities for
investors and hospital operators
alike. Through constant innovation,
MPT shows the industry the way
forward. It is proving hospitals
truly are part of community
infrastructure. It is advancing
into behavioral health. And it is
expanding with the creative use of
capital. MPT’s performance today
is a glimpse into tomorrow.
CHAPTER ONE
SETTING
THE
STANDARD
SETTING
THE
TRUE TO FORM
Executive leadership at MPT guided the
company to another year of accretive
growth, increased diversification and
new connections that set the stage for
continued success.
Edward K. Aldag, Jr., founded MPT in 2003 with
decades of healthcare experience under his belt
and a deliberately narrow focus on hospitals. It was
an innovative approach that has continued to the
present and resulted in a portfolio of more than 400
properties around the globe. Joined by co-founders R.
Steven Hamner and Emmett E. McLean, Aldag has led
the company to an unrivaled position at the forefront
of its industry, and 2021 further secured that position.
Aldag and his co-founders continue to leverage strong
relationships with best-in-class hospital operators
and to form new ones in the acute care industry and
in behavioral health. MPT helps finance excellent
healthcare in communities worldwide—care that is
essential to the welfare of entire communities, care
that is protected and valued, care that is performed
in facilities that, therefore, have intrinsic value.
Experienced in working with hospital operators of
all types in executing complex transactions, the
company has facilitated improvements to the quality
of care provided and the efficiency of operations.
The leadership has never strayed from the company’s
original investment strategy, focusing on the growing
community needs that hospitals meet as populations
grow and healthcare technologies advance. And
Aldag’s quest for the company to overachieve and
outperform continues.
8
EDWARD K. ALDAG, JR.
Chairman, President and
Chief Executive Officer
From day one, Aldag believed that a company that owned hospitals owned something of genuine value that
would only increase over time. Drawing on a deep knowledge of the healthcare industry, he has led MPT to
almost 20 years of acquiring carefully selected facilities worldwide. Year after year, the company achieves its
ambitious goals, but Aldag continues to look ahead with the same vision and foresight he had when founding
the company. His original cutting-edge idea of a hospital-centric investment strategy that launched MPT
continues to inspire. Aldag has steadfastly guided MPT as it has pushed into new territories and new high-acuity
healthcare sectors during recessions and a global pandemic.
R. STEVEN HAMNER
Executive Vice President and
Chief Financial Officer
Hamner has demonstrated time and again his keen eye for strategic acquisitions that further MPT’s financial
position. He oversees a team that knows how to execute complicated financial transactions in the U.S. and in the
international market—all to benefit patients with improved facilities and shareholders with outsized shareholder
returns. Along with Aldag and McLean, Hamner helps cast the vision for an evolving acquisition strategy
grounded on the bedrock belief that hospitals represent significant value to society and are therefore deserving
of capital for ongoing expansion, maintenance and improvements. So that MPT can continue this mission in
a fashion particularly beneficial to shareholders, he has led the company toward a strategy of harvesting real
estate equity and attracting new real estate and infrastructure investors.
EMMETT E. MCLEAN
Executive Vice President,
Chief Operating Officer and Secretary
With his background in investment banking and corporate healthcare finance, McLean joins Aldag and Hamner
in curating the company’s pioneering and constantly evolving strategy. At facility site visits and at formal and
informal strategy sessions, he brings insight and understanding about hospital and business operations, helping
guide MPT toward the pursuit of properties that make sense for the company to acquire. Furthermore, he brings
tremendous skill in identifying business relationships that work well with MPT teams. He represents MPT on the
boards of several nonprofit organizations in MPT’s headquarters city of Birmingham, Alabama. He is always on
the lookout for ways the company can contribute to worthy causes and missions that align with MPT’s own goals
of improving healthcare and community wellness in the U.S. and around the world.
From left to right: Charles R. Lambert – vice president, treasurer and managing director of Capital Markets; Emmett E. McLean
– executive vice president, chief operating officer and secretary; 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;
Rosa H. Hooper – vice president, managing director of Asset Management and Underwriting; J. Kevin Hanna – vice president,
controller and chief accounting officer
9
BUILDING ON A
STELLA R, LONG-TERM
TRACK RECORD
Resourceful and expert execution of
MPT’s hospital-focused investment
strategy resulted in impressive
shareholder returns, a strategic portfolio
expansion and new global investing
relationships.
MPT spent 2021 executing important growth and
funding transactions consistent with the strategy that
has rewarded investors with a 661% total shareholder
return since the company’s IPO, according to
Edward K. Aldag, Jr., chairman, president and CEO.
Following its sector leading financial performance in
the face of the pandemic-related challenges of 2020,
MPT moved quickly in 2021 to expand its general
acute care hospital portfolio and establish strategic
footholds in the emerging inpatient behavioral
health segment. 2021 was truly a signature year
for MPT in terms of several measures of earnings
growth, portfolio diversification, cost of funding
and realization of real estate gains embedded in
its portfolio. Importantly, MPT capitalized on new
demand for hospital real estate from sophisticated,
global infrastructure and real estate investors to
source inexpensive equity capital to fund its growth.
While the steady, fundamental performance that MPT
displayed from the onset of the pandemic continued
throughout 2021, the creative transactions executed
during the year are what will perpetuate the pattern
of excellent dividend coverage and outperforming
per-share earnings growth, a pattern that has created
billions of dollars of value for MPT shareholders.
10
OUTPERFORMING: TOTAL SHAREHOLDER RETURN (TSR)
Medical Properties
Trust Trailing TSR
Dow Jones U.S.
Real Estate Health
Care Index
MSCI U.S. REIT Index
24.6%
TWO-YEAR
4.8%
32.2%
72.6%
THREE-YEAR
27.3%
66.4%
EARNINGS & DIVIDEND GROWTH
2011
2020
2021
2021
GROWTH
NFFO Per Share
Dividend Per Share
$0.71
$0.80
$1.57
$1.08
$1.75
11.5%
$1.12
3.7%
10-YR
CAGR
9.4%
3.4%
DIVERSIFICATION
THE LARGEST MPT INVESTMENT PROPERTY
MAKES UP NO MORE THAN
2.5%
of total pro forma
gross assets
53 number of operators
29.2% Total pro forma
gross assets
10-year CAGR
2021
transaction
volume
$3.9B
$12B transaction
volume
since 2019
11
U.S. STATES
32
PROPERTIES
438
CONTINENTS
4
COUNTRIES
9
MPT PORTFOLIO
DIV ERS E, GROWING & STRONG
Affirming its belief in acute care hospitals as the strongest of investments and broadening its position in the
behavioral health sector, MPT substantially increased its presence in the U.S. and in the United Kingdom in 2021.
The company also enhanced its existing holdings in Australia, South America and across Europe as it committed
investment dollars to new relationships and built on existing ones. It continues to bring reliable healthcare to
communities worldwide—securing its place as a leader in capital solutions for the healthcare industry.
Pro forma portfolio statistics are as of December 31, 2021, and assume fully funded commitments.
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OPERATORS
53
BEDS
46,197
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Believing hospitals have intrinsic
value as protectors of individual and
community well-being, MPT does
not hesitate to pursue attractive
opportunities. In 2021, MPT made
strategic, acute care acquisitions;
formed key alliances with mental
health providers; and earned the
confidence of leading international
infrastructure investors. At the
forefront of global healthcare, MPT
sees what’s coming and
knows when to act.
CHAPTER TWO
PIONEER
SPIRIT
INNOVATION IN ACTION:
BRINGING WORLD-CLASS
CARE TO UNDERSERVED
COMMUNITIES
In 2021, MPT continued its singular
investment strategy: identifying and
investing in hospital facilities that anchor
communities. Relationships with proven
operators enable MPT to generate robust
financial returns to its investors while
simultaneously facilitating a higher
standard of community healthcare.
Investing in acute care hospitals is MPT’s very
foundation. Last year, the company deepened its
presence in Florida and Southern California, reaching
into U.S. neighborhoods that greatly benefit from
the type of capital resources MPT provides to highly
experienced hospital operators.
In July, the company completed a $215 million
acquisition of four general acute care hospitals
located in East Los Angeles and operated by Pipeline
Health System—helping to raise the bar for care in
these communities. In August, MPT looked to the
southeastern corner of Florida to execute a $900
million acquisition of five general acute care hospitals
to be run by Steward Health Care.
In both instances, MPT teamed with operating
partners rated highly for patient care to maintain
efficient, profitable operations.
“MPT works with operators that we’re aligned with
strategically and supports communities where we
own medical facilities,” says Harrison Hyde, manager
of U.S. Acquisitions at MPT. “When it comes to
assessing real estate values, you have to analyze not
16
only the real estate but also the hospital operations.
MPT understands hospitals and has the ability to fully
underwrite them.”
That thought process is rooted in MPT’s original
hospital-centric investment thesis. “We have made
acute care our consistent focus, and that alone
demonstrates our uniqueness and our creative
approach in adding value to the hospital industry,”
says Hyde, who helped facilitate the Pipeline
acquisition. Adds Anderson Aldag, a manager
of MPT acquisitions who worked on the Florida
portfolio transaction, “Hospitals aren’t easy to
operate, and they’re not easy to underwrite. MPT has
the healthcare expertise and experience to assess
opportunities and to act.”
A stronger presence in Los Angeles
The Pipeline group of four hospitals joins 11 other
MPT medical facilities in the greater Los Angeles area
that are run by experienced operators. MPT now owns
15 acute care and behavioral health hospitals in this
key metro area, increasing its stake and interest in the
health and well-being of the second largest city in the
U.S. (See “Putting Down Roots,” page 30, for more on
how MPT is helping neighborhoods in L.A.)
“In the past, these four facilities recently acquired by
MPT had been underinvested and underappreciated,”
MPT’s Hyde says. “But now, rather than continue
to run them as bare-bones community hospitals,
Pipeline has done the exact opposite by investing
in them to better meet residents’ needs.” In fact, it
was Pipeline’s innovative business model, which
centers on delivering high-quality care to generally
underserved communities, that attracted MPT.
Palmetto General Hospital
Hialeah, Florida
United States
Andrei Soran, CEO of Pipeline Health, says hospitals
are pillars of the community. “When someone is
moving into a community, they look at qualities such
as safety, employment opportunities, schools and
hospitals,” says Soran. “We play an essential role.”
The MPT facilities run by Pipeline include Memorial
Hospital of Gardena, with 172 beds; East Los Angeles
Doctors Hospital, with 127 beds; Community Hospital
of Huntington Park, with 81 beds and one on-campus
medical office building (MOB); and Coast Plaza
Hospital, with 117 beds and one MOB. These vital
facilities are long-established emergency room-driven
hospitals, treating an average of 123,600 ER patients
annually. Hyde cites data that shows an average
Pipeline ER wait time of only 90 minutes compared to
other area ERs where patients may wait an average of
six hours. “We offer better care and faster response,”
says Nick Orzano, co-president and co-founder
of Pipeline.
He says that ERs at these hospitals are the
primary healthcare destinations for many in these
communities and describes how Pipeline has
developed efficiencies that allow for quicker service
times. “Our ERs are a gateway to care,” Orzano says.
“Some competitors would not welcome the volume
that we serve via the ER, but we know how to treat
that volume and serve patients well.”
“Other real estate investors may try to
invest in hospitals along with other
property types, but they lack the special
competency and dedication that investing
in hospitals requires. By focusing just on
hospitals, MPT is an expert. And when your
primary resource for capital understands
your business, it makes it a lot easier to
work together.”
– Claude Plaskett, manager of acquisitions at MPT
Teaming to serve the underserved
These four Pipeline-run facilities have long histories
in their ethnically diverse neighborhoods. Those in
these underinsured populations face logistical and
socioeconomic challenges that make it difficult for
them to seek care at the city’s elite hospitals, and
families often rely on Pipeline-operated facilities to
meet their healthcare needs.
17
For all those reasons, Orzano saw just how vital these
hospitals were to maintaining community wellness
as he helped Pipeline assume operations. MPT
recognizes the value of the hospitals as well. “MPT is
a great cultural fit with Pipeline. We’ve known of the
MPT team for a long time, top to bottom,” Orzano
says. “There’s a family dynamic in the company that
was critically important. It’s one of the main things
that differentiates it, and we share the same values.”
Soran adds that, in general, hospitals are unique
assets and require a high degree of expertise to own
and operate. “MPT is a specialist,” he adds. “Frankly,
they’re without question the most knowledgeable
player in the real estate sector for hospitals.”
With the help of MPT’s capital, Pipeline expanded the
ER at Memorial, and it has more ER and operating
room upgrades planned. Other facility improvements
will include new CT scanners and MRI machines,
structural and facade changes, and new nursing
stations. “Our type of funding allows groups like
Pipeline to keep operating with robust growth plans
in place,” explains Luke Savage, head of Global
Acquisitions at MPT. “It’s especially important in
communities where residents’ second hospital or ER
option may be miles away.”
During the pandemic and in its wake, these hospitals
have proven to be more vital than ever. Language
barriers during the lockdown prevented some from
accessing education about COVID-19 protocols and
treatments while population density spurred the
spread of infection. As COVID-19 disproportionately
impacted people with fewer resources, many in these
L.A. neighborhoods faced job loss and continue to
struggle financially. In such circumstances, locals
appreciate knowing quality healthcare is nearby.
In addition to providing quality healthcare, the
Pipeline hospitals in MPT’s portfolio serve as job-
generators in their respective communities. Memorial
Hospital of Gardena alone employs 765 people and
makes approximately 50 emergency medical service
runs daily. And the city of Gardena, southwest of
Los Angeles, takes pride in Memorial’s service lines
and employee profile. It has an accredited geriatric
emergency department and serves as a Primary
Stroke Center designated by the American Stroke
Association and by The Joint Commission, an
organization that drives care quality and patient
18
safety toward zero harm. It is the only full-service
hospital within a 3.5-mile radius.
“Acute care hospitals are the hub. You see
the rise of telehealth and strip-center
medical clinics, but none of those are
possible without the crucial infrastructure
of general acute care hospitals that serve
the patients with greatest need and
coordinate the delivery of care throughout
the rest of the care network.”
– Anderson Aldag, manager of acquisitions at MPT
Pride in South Florida community hospitals
The $900 million acquisition of five Steward-run
facilities in South Florida further attests to MPT’s
belief in the value of serving communities well.
“These Steward-operated hospitals in Florida are
in highly visible locations in these neighborhoods,
and they are at the core of their communities,”
says Savage.
All signs point to high demand for these facilities now
and in the future. The large and aging population
indicates there will be continual high demand for
treatment in South Florida’s future, making these five
MPT-owned hospitals all the more crucial. This group
of hospitals is in prime position to continue catering
to the local population and to benefit from any
updates or renovations that MPT’s continued financial
support affords. Each hospital has stood proudly for
decades, but all are already benefiting from Steward’s
proven operating model.
Leading by example
Like Steward’s physician-led model, MPT’s workforce
includes many leaders and employees who have
worked in healthcare operations or hospital finance
in the past. Their expertise and experience keep MPT
ahead of competitors.
“A lot of other real estate investors have tried to
emulate what MPT was doing when the company
first started, but they’ve realized it’s not as easy
as MPT makes it look,” says Anderson Aldag. “The
company started with an innovative investment
thesis. The sale-leaseback structure that we most
often use offers mutual, long-term benefits to both
MPT and its tenants. And while it was often used in
other industries, it was not being utilized in high-
acuity healthcare. The MPT founders were pioneers in
bringing the concept to hospitals.”
Memorial Hospital
of Gardena
Gardena, California
United States
19
FULL-CIRCLE:
VALUE RE A LIZED
FROM UNIQUE
INVESTING STR ATEGY
regional portfolios of hospitals around the globe have
qualities highly attractive to this type of investor.
Attracting MPT’s 2016 capital investment
By 2015, MPT’s executives had observed the transition
beginning in 2010 of the Caritas Christi Healthcare
System into the successful Steward system funded
by private capital and managed by a new and highly
competent management team. Steward had built an
integrated delivery system aligned across the care
continuum with a large network of employees and
affiliated physicians. The hospitals’ status as critical
infrastructure for the communities they serve became
obvious. In late 2016, MPT and Steward completed
a $1.2 billion transaction that included the sale and
leaseback of Steward’s Massachusetts hospitals.
MPT capital has had a direct impact on improving the
facilities since 2016. At St. Elizabeth’s Medical Center,
more than $30 million in upgrades have included a
16-bed medical/surgical unit, a new 10-bed intensive
care unit, two operating rooms (ORs) and renovations
to the Central Sterile department. At Morton Hospital,
$10 million has gone toward a new 32-bed, level-4
intensive substance abuse treatment unit. At Saint
Anne’s Hospital, $5 million has given patients two
new ORs and upgraded emergency department
behavioral units.
The success of the Steward network in the
Massachusetts market is mirrored by similar stories
in other U.S. regional hospital portfolios owned by
MPT and run by Steward. The scenario represents a
common theme seen elsewhere in MPT’s portfolio
In 2016, MPT acquired a portfolio
of Steward-operated hospitals in
Massachusetts that has provided
substantial returns—most recently, that
investment decision was validated by
the attraction of these eight hospitals to
global infrastructure capital, creating a
major win for MPT shareholders.
When MPT acquired the Massachusetts-based
Steward Health Care System hospital portfolio in 2016,
the company was doing what it has since inception:
forming and maintaining mutually beneficial real
estate-based relationships with hospital operators.
It was also laying the groundwork for a landmark
relationship with a new type of sophisticated
international investing partner announced in 2021,
when Macquarie Asset Management, a global leader
in infrastructure investments, committed to acquire
an interest in these key hospitals.
In a milestone transaction first announced in
September, MPT agreed to sell a 50% interest in the
eight-facility portfolio to Macquarie Infrastructure
Partners V, a fund managed by Macquarie Asset
Management. The transaction evidenced for the
first time that a deep private market for U.S. private,
for-profit hospitals was emerging―an important
indication of true real estate value for MPT’s investors.
The Macquarie partnership proves that MPT’s long-
held view of hospitals as community infrastructure
was spot on. And It also proves that MPT’s other
20
Carney Hospital
Dorchester, Massachusetts
United States
– Karl Kuchel, CEO of
Macquarie Infrastructure
Partners
at systems run by other successful operators: Where
capital has been deployed, care has improved,
lives have been saved, jobs have been created and
communities have benefited.
MPT attracts global infrastructure
capital partner
By 2021, with strong and stable rent coverage,
especially during the worst of the pandemic,
conditions were ripe for infrastructure investors such
as Macquarie to take notice. “The pandemic actually
validated what we at MPT have believed since we
put the company together 18 years ago, which is that
hospitals with certain appropriate characteristics are
part of a community’s infrastructure,” says R. Steven
Hamner, executive vice president and chief financial
officer at MPT. “They are critical to the community,
just like any other public service. The pandemic has
demonstrated that.”
The transaction represented an attractive investment
yield for Macquarie. The infrastructure investment
company’s fund managers saw the yield compared
to other more established forms of infrastructure
investment options, inflation-protected rent
escalators, and the opportunity to amplify
Macquarie’s return with conservative use of
secured debt.
The sale, which closed in March 2022, provided nearly
$1.3 billion of proceeds to MPT. This permanently
funded the acquisitions of general acute and
behavioral health hospitals in the U.S., locking in
exceptional earnings growth and reducing leverage.
“Hospitals are essential, long-lived assets
that are critical to any functioning
community, with high barriers to entry
driven by their specialized nature
and complexity of services. These
characteristics produce a sustainable
and resilient operating environment and
investment profile, which we will continue
to pursue as infrastructure investors.”
– Karl Kuchel, CEO of
Macquarie Infrastructure Partners
– Karl Kuchel, CEO of
Macquarie Infrastructure Partners
21
MPT will continue to weigh opportunities to partner
with like-minded operators and investors to deliver
reliable healthcare for communities and strong
performance for shareholders.
“Through working closely with and investing alongside
MPT, we have come to recognize that our view of
the merits of infrastructure assets aligns closely with
MPT’s hospital investment thesis, despite what may
appear to be different industries on the surface,” says
Karl Kuchel, CEO of Macquarie Infrastructure Partners.
“Hospitals are essential, long-lived assets that are
critical to any functioning community, with high
barriers to entry driven by their specialized nature
and complexity of services. These characteristics
produce a sustainable and resilient operating
environment and investment profile, which we will
continue to pursue as infrastructure investors.”
Palmetto General Hospital
Hialeah, Florida
United States
22
1
2
THREE INNOVATIVE STRATEGIES
SPELL UPSIDE FOR MPT
SHAREHOLDERS
MPT’s steady accumulation of U.S.
hospitals over time
Over the past two decades, MPT has had the
foresight to acquire U.S. hospitals at attractive
pricing, convinced that the asset class would
eventually be recognized broadly as essential
community infrastructure—making it even more
attractive to investors. Indeed, that recognition
has occurred.
MPT’s strong preference for hospital
portfolios clustered in regional markets
Proximity allows operators to take advantage of
scale and to efficiently organize operations around
central, hub hospitals and more specialized “spoke”
hospitals. Thus, these types of MPT portfolios
appeal to investors in hospital operations looking
to increase a presence in a particular market.
For example, HCA Healthcare—attracted to the
fast-growing Utah market1 where the population
has grown 18.4% over the past decade2—recently
announced plans to acquire the operations
of an entire portfolio of five MPT-owned Utah
hospitals from Steward Health Care. Steward will
use proceeds to invest in other geographic areas
and in its physician-led model1; HCA will lease
the associated Utah real estate from owner MPT,
bringing an important new tenant into the MPT
portfolio and opening new strategic opportunities
with the operator. At the same time, it is highly
important for sophisticated global investors
interested in real estate and infrastructure to gain a
deep understanding of the local markets where they
are investing. MPT’s targeted geographic holdings
facilitate a more focused and efficient underwriting
process likely to broaden investor interest in
potential opportunities.
Creation of a new kind of partnership
investment structure
3
In September of 2021, MPT committed to sell a 50%
stake in its Steward Health Care System-operated
hospitals in Massachusetts. That transaction with
a Macquarie Asset Management infrastructure
fund shows how private capital can invest in MPT
facilities in a way that benefits tenants with an
infusion of cash and lets MPT manage the tenant
relationship. Such partnerships with private capital
investors also allow MPT to access property-specific,
secured debt at attractive terms while keeping its
consolidated portfolio of hospitals unencumbered
by debt. The Macquarie partnership also shows
how MPT can achieve a cost of equity capital that
minimizes dilution for existing shareholders and
supports stronger growth of normalized funds from
operations and adjusted funds from operations.
It illustrates how MPT can source funding for new
growth initiatives without the need to “time” the
sometimes volatile stock market.
1“HCA To Acquire Five Steward Health Hospitals,” Rebecca Pifer,
Healthcare Dive, Sept. 21, 2021
https://www.healthcaredive.com/news/hca-to-acquire-5-utah-hospitals-
from-steward-health-care/606896/
2Table 2, 2020 U.S. Census
https://www.census.gov/library/stories/2021/04/2020-census-data-
release.html
23
KEY FOOTHOLDS IN
BEHAVIORAL HEALTH,
MEETING GROWING NEEDS
For years ahead of its 2021 investments
in behavioral care, MPT had laid the
groundwork for these acquisitions that
have propelled the company to the
forefront of this much needed segment
of healthcare delivery in our society.
Medical Properties Trust’s success comes from its
expertise and instincts in the healthcare market—
understanding patient needs, industry players and
the best time to act. In 2021, years of preparation,
investigation and relationship-building came to
fruition as MPT secured signature footholds in the
behavioral health space at home and abroad. The
company’s early recognition of the critical need for
best-in-class, inpatient care for those with mental
health conditions highlights its leadership in
healthcare and positions MPT as an early mover in
this important market segment.
Early in 2021 came the $1.1 billion acquisition of 35
behavioral health facilities in the United Kingdom
from market leader Priory Group. Then in October,
MPT completed a $950 million investment in 18
inpatient behavioral hospitals and a joint venture
interest in the operations of Springstone, based in
Louisville, Kentucky.
“Since our inception, we have been investigating
behavioral health,” says Luke Savage, vice president
and head of Global Acquisitions at MPT. “From service
members struggling with post-traumatic stress
disorder after military conflicts to families thrown
into a global pandemic and lockdown, there’s an
increasing recognition that mental health struggles
impact much of the population. The need for quality,
inpatient facilities is very real, and after a long search
24
for the right opportunities, the Priory and Springstone
investments were completed in the same year.”
Savage says the alliance with such respected
operators will open more doors in this important
emerging sector. “There is a need, and it’s not going
away, and helping meet that need absolutely benefits
the overall MPT portfolio,” he says. The company
has always focused on acute care, and now it’s
broadening its holdings to include high-caliber,
inpatient facilities for those with the most acute
mental health needs.
Priory: U.K. facilities with private,
world-class care
MPT acquired the 35-facility Priory portfolio in
conjunction with Waterland Private Equity
Investments’ acquisition of their operations, ensuring
that best-in-class mental health services can continue
in towns and cities across the U.K. “The Priory
acquisition was such a winning transaction for our
company,” says Steve Nitschke, managing director
and head of European Acquisitions at MPT. “It was
great for MPT, for Priory and, most importantly, for
its patients.”
Stephanie Hamner, manager of International
Acquisitions and based in MPT’s London office, says
each of these state-of-the-art facilities plays a critical
role locally. “If those facilities went away, mental
health care would suffer,” she says, emphasizing
Priory’s position as the preeminent behavioral
health provider across the U.K. “We’ve seen all over
the world an increase in demand for mental health
services, and that’s a trend that will continue in the
U.K. and elsewhere.”
Priory’s market position among the U.K.’s private
mental health operators reinforced the promising
findings in MPT’s underwriting of this large portfolio.
Priory Hospital Cheadle Royal
Cheadle, United Kingdom
Priory boasts 26% of the U.K. behavioral market share
versus 17% for the second-place operator, according
to the LaingBuisson U.K. Healthcare Market Review,
32nd Edition. The company has hundreds of facilities
that treat patients across the entire spectrum of
acuity on the behavioral healthcare continuum.
MPT’s Priory portfolio comprises the operator’s most
acute inpatient behavioral hospitals in England,
Scotland and Wales. The buildings, welcoming to
patients and located in key demand centers, are
virtually irreplaceable.
Priory’s strong relationship with the National
Health Service
In selecting the Priory portfolio, MPT recognized
the strength of the U.K.’s reimbursement system as
one of its most attractive attributes. Priory operates
under the National Health Service (NHS), which
is the second largest single-payor system in the
world, meeting the majority of healthcare needs of
U.K. citizens. Even more compelling, the NHS funds
nearly all mental health care for U.K. patients, either
directly or through local commissioning authorities.
In fact, 90% of Priory revenues come from the NHS
and related commissioning authorities, with the
remainder coming from private insurance and self-
pay programs. This type of reimbursement setup
for services ensures a strong financial position for
Priory and reliable rent coverage on facility lease
agreements with MPT.
Maximizing relationships for better care
Since MPT acquired the Priory portfolio in January
2021, Priory and MPT’s longtime post-acute operator
MEDIAN, also owned by Waterland, have merged to
create Europe’s leading comprehensive medical and
behavioral rehabilitation services provider. MEDIAN
has served as a steadfast and dependable tenant
of MPT in Germany for nearly a decade, providing
unrivaled value, award-winning service, and stable
performance. Its healthcare acumen is expected to
add significant efficiency to Priory’s U.K. operations.
With strong NHS reimbursement and Priory and
MEDIAN’s expertise in running these facilities,
MPT counts this 2021 acquisition among its most
attractive. “It was our biggest transaction last year,
and Springstone was the second largest,” Luke
Savage says. “Once we knew what to look for in the
behavioral sector and operators understood how we
work and how we as a real estate owner could help
these systems grow, the relationships just
made sense.”
Springstone: Investing in U.S.
behavioral healthcare
After securing such a strong presence in the
U.K.’s behavioral health market, MPT finalized its
investment in the Springstone portfolio of high-
quality, inpatient hospitals in the U.S., acquiring
1,331 beds in 18 facilities across nine states. “Our
25
Springstone offers a full continuum of care,
including inpatient, partial hospitalization and
intensive outpatient programs. It has developed
a successful step-down care model, with patients
usually transferred directly to inpatient hospitals or
transferred from general acute hospital ERs. They
typically spend as many as seven days in the inpatient
facility, three weeks in the partial hospitalization
program, and five weeks in the intensive outpatient
program.
MPT: Leading-edge investment prowess in
behavioral health
The company’s acquisitions team spent years
developing relationships that enabled it to act quickly
when the Priory and Springstone opportunities arose.
Once again, MPT’s years of rigorous underwriting
surfaced in the form of an unrivaled readiness to
execute when an important new opportunity to invest
in essential hospital real estate emerged. Perhaps
more important, the valuable properties that MPT
now owns are the basis for abundant capital that will
allow for these operators to invest in their operations
and meet more mental health needs. “These two
2021 investments signaled our arrival as a key investor
in this space,” Savage says. “They opened the door
for us into this service line in an important way, and
we’re receiving calls from others interested in working
with us in behavioral health.”
To right: Copper Springs
Avondale, Arizona
United States
mission is to provide purpose-built facilities that are
truly centered on healing,” says Phil Spencer, CEO of
Springstone. “They are places that remove the stigma
of mental health challenges—beautiful buildings that
also offer maximum safety and convenience. We’re
offering spaces with sunlight and outdoor space
when possible so patients don’t feel confined.”
MPT’s Savage was impressed at on-site visits during
the underwriting phase. “These facilities do not
feel isolating. Instead, the buildings are like little
communities designed to serve different types of
patients, from adolescents and adults to patients
dealing with substance abuse,” he says. “In behavioral
health, many patients want a partner or roommate to
talk through similar problems. Springstone facilities
are arranged to foster community when possible.”
Spencer says he recognizes MPT’s expertise in the
healthcare industry as a true asset in providing this
type of healing environment and sees the potential
for growth as the companies work together. “We want
to make all of our facilities patient-centric, where they
have the aesthetics and experience that allows them
to begin healing,” he says.
Proud of high ratings on patient surveys about their
time at Springstone facilities, Springstone’s Spencer
says that the experience begins with the buildings
themselves. “That’s where MPT can advise and assist
as Springstone looks to expand,” he says. “We have
a growth plan in place and will be looking to MPT’s
expertise in property and capital resources as we
grow our footprint.” With capital freed from the 2021
MPT transaction, Springstone plans to add on to
some of its existing hospitals and hire more therapists,
nurses and staff. Beyond that, there’s potential for
more growth.
Establishing an alliance for growth
Long before the global pandemic shined a light
on America’s mental health crisis, MPT observed
bipartisan political support for increased funding for
mental health services and for expansion of access
to behavioral healthcare. “One in five in the U.S. have
mental health problems, and COVID-19 has only
exacerbated the issues,” Spencer says. “The pandemic
has made them more visible. The problems have
always been there, but they’ve bubbled up.”
26
MPT shares with its communities in
strategic ways, contributing to worthy
causes large and small with as much
consideration as it gives business
transactions. Beyond charitable gifts
and cultivation of an award-winning
workplace, the company aims to
improve the communities where it
operates and holds property. It works
with similarly motivated hospital
operators and aligns with innovative
nonprofit groups and organizations
that, like MPT, want to make
a real difference.
CHAPTER THREE
SOCIAL
SERVICE
PUTTING DOWN ROOTS
MPT contributes to an ambitious tree-
planting initiative that aims to bring
green space to all, improve public health
and curb climate change.
Amid tangled freeways in sprawling Los Angeles,
local nonprofit City Plants adds 20,000 trees a year to
the landscape. It targets neighborhoods that need
life-giving green spaces as much as they need the
quality healthcare that MPT-owned facilities provide.
Because trees benefit community health, MPT eagerly
sponsored the group’s 2021-2022 season. “MPT has
had a presence in Los Angeles for more than 15 years,
and we are pleased to make a contribution to City
Plants that will positively impact the communities our
hospitals serve,” says Ryan Murphy, an MPT graphic
designer who recently spent a day in L.A. to see the
group’s work firsthand.
Funding green spaces where MPT operates
Murphy and a group from MPT toured City Plants’
new 11-acre Commonwealth Nursery and helped
transplant saplings into bigger pots. The trees will go
at no cost to locals or to sidewalk planting projects.
30
MPT’s yearlong sponsorship will provide resources for
initiatives such as an effort to grow climate-adapted
trees from local seed. These native and climate-ready
species will help create a more equitable tree canopy
in Los Angeles, where affluent neighborhoods can
boast 37% tree canopy coverage compared to 10% in
lower-income neighborhoods.
As MPT applauds capital improvements to its
Los Angeles facilities, it’s championing area
environmental work with its charitable dollars. “The
Medical Properties Trust investment in the city of Los
Angeles ensures that trees are planted in the areas
where they’re needed most,” says Rachel O’Leary,
executive director of City Plants. “We align and
identify with MPT’s values of preventing disease and
supporting communities.”
“In the urban forestry world, we see a bond
with health practitioners because we
recognize the public health benefits
of trees and see them as preventive health
measures. MPT is ahead of the curve in
the way that they’re thinking about that. ”
– Rachel O’Leary, executive
director of City Plants
Improving health and wellness
Research has shown a connection between green
space and physical and mental health. Studies
have shown that the presence of trees and grass
may lower depression and anxiety and that it may
reduce the mental fatigue that can lead to aggression
and violence. Evidence even suggests that hospital
patients heal faster with access to a window view
of trees.
Trees capture carbon and reduce greenhouse gases,
slowing climate change and lowering the amount of
heat reflecting from streetscapes. They also shelter
pathways and provide shelter as people go to school
and work, creating lifesaving shade for those with
chronic medical conditions.
Trees delivered by City Plants will provide
needed shade to this block near Pipeline
Health System’s East Los Angeles Doctors
Hospital and Community Hospital of
Huntington Park.
MPT supports environmental sustainability:
medicalpropertiestrust.com/environmental-
responsibility. Learn more about City Plants:
CityPlants.org.
Finally, the trees that MPT is helping to plant through
City Plants projects add beauty, joy and a sense
of community.
Collaborating for change
City Plants now counts MPT as a valuable sponsor
that understands its mission. “When we saw all
that City Plants has done for neighborhoods across
Los Angeles, we wanted to support its efforts,” says
Edward K. Aldag, Jr., chairman, president and CEO of
MPT. “We care about the patients and families served
at our facilities, and it is important to us that they
return to healthy neighborhoods.”
31
LEADING THE WAY IN
SOCIAL RESPONSIBILITY
MPT understands the critical role
hospitals play in communities. One New
Jersey facility shows how the company
values operators who prioritize the
elimination of health disparities.
Medical Properties Trust aligns itself with hospitals
that do the right things—from the quality of care they
provide to the business strategies of their operators.
Fundamental in MPT’s underwriting process is an
analysis of a facility’s need within its community. This
is what MPT means when it uses the word “essential.”
When MPT acquired Saint Michael’s Medical Center
in Newark, New Jersey, in 2016, the company
found a facility of particular importance to the
local population and whose continuous operations
were absolutely vital. Prime Healthcare acquired
operations of the hospital that same year, and since
then, under ownership of MPT and management by
Prime Healthcare, Saint Michael’s has substantially
improved its position in the community.
“It’s a mission-driven organization, and our mission
is to provide great healthcare and to be seen as a
partner with the community,” says Dr. Alan Sickles,
CEO of Saint Michael’s.
It’s succeeding. The hospital earned a national
second-place ranking on the 2021 Lown Hospitals
Index for Social Responsibility.1 “We were very, very
proud of that ranking,” Sickles says. “We see ourselves
as a center of equitable care.”
When the Lown ranking was announced, Sickles said
that quality healthcare should not be determined by
where a person lives, adding, “As an urban hospital,
[Saint Michael’s is] committed to eliminating health
disparities by delivering safe, compassionate, value-
based care from skilled, experienced physicians,
nurses and techs with access to state-of-the-art
diagnostic equipment.”2
32
In addition to the facility’s ranking, Prime Healthcare
itself ranked in the top five socially responsible
hospital system operators on the 2021 Lown Index.3
A long track record of service
From its establishment by the Franciscan Sisters of
the Poor in 1867, Saint Michael’s has demonstrated
a commitment to the community. “Saint Michael’s
has been here for more than 150 years,” Sickles says.
“Many people who were born at this hospital work
here now, and employees and patients live in the
surrounding neighborhoods. There’s a real sense of
empathy and caring.”
Today, the 358-bed hospital serves as a tertiary-care,
teaching and research center in Newark’s business
and educational district. It has long served as a
leader in the state’s medical community, providing
top-quality services and pioneering cardiovascular
services, such as performing New Jersey’s first open-
heart surgery. Saint Michael’s also was the first to offer
a cardiac catheterization program, and today its Heart
and Vascular Institute continues to provide innovative
methods. Its Cancer Center provides state-of-the-
art treatment as well, and the hospital contributes
leading-edge research and instruction as a teaching
affiliate for New York Medical College. It also provides
needed behavioral health services. “Some people
think of a community hospital as a fancy first-aid
station, but that’s not the case here,” Sickles says.
“We offer very advanced treatment and high-level care.
We’re not glitzy, but what we do, we do really,
really well.”
With MPT’s capital support, Prime has invested
heavily in improving the facility and what it offers
patients. In addition to adding state-of-the-art
tools for treating cancer and cardiac diseases, Saint
Michael’s has received a much needed face-lift,
with Prime orchestrating the multiple important
renovations with MPT as a primary source of funding.
These upgrades improve the structural integrity of the
1https://lownhospitalsindex.org/2021-winning-hospitals-social-responsibility/
2https://www.primehealthcare.com/News/2021/September/Prime-Healthcare-
Receives-Highest-Ranking-for-So.aspx
3https://www.primehealthcare.com/News/2021/September/Prime-Healthcare-
Receives-Highest-Ranking-for-So.aspx
facility and add to the convenience of the hospital for
patients and their families as they come and go.
Saint Michael’s serves a community impacted by
a high prevalence of preexisting conditions and
chronic diseases among residents. It is a necessary
healthcare facility that MPT is proud to own. “During
the underwriting process, we saw firsthand the
hospital and the community it serves, and we heard
Prime’s plan for the facility and its impact,” says
Rosa Hooper, vice president and managing director
of Asset Management and Underwriting at MPT.
“Knowing Prime’s history and capability, we had every
confidence about the transaction.” The actions of MPT
and Prime ensure that Saint Michael’s will continue
its tradition of compassionate service and social
responsibility for years to come.
Saint Michael’s
Medical Center
Newark, New Jersey
United States
33
In 2021, MPT strengthened its portfolio
and position as industry leader—and the
numbers show it. The company established
itself in this role by expanding holdings
and by harvesting capital to finance new
business. As the numbers demonstrate,
MPT stands at the forefront, always ready
to capitalize on its healthcare expertise.
Selected Financial Data 36
Non-GAAP Financial Measures 38
Forward-Looking Statements 42
Report of Independent Registered
Public Accounting Firm 44
Consolidated Balance Sheets 46
Consolidated Statements
of Net Income 47
Consolidated Statements of
Comprehensive Income 48
Consolidated Statements of Equity 49
Consolidated Statements
of Cash Flows 50
Notes to Consolidated
Financial Statements 52
Corporate and
Shareholder Information 80
CHAPTER FOUR
REPORTS
AND DATA
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,
2021
2020
OPERATING DATA
Total revenues
Expenses:
Interest
Real estate depreciation and amortization
Property-related
General and administrative
Total expenses
Other income (expense):
Gain (loss) 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
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
$
1,544,669
$
1,249,238
367,393
321,249
39,098
145,638
873,378
52,471
—
28,488
(27,650)
6,288
(73,948)
656,940
(919)
656,021
1.11
590,139
1.12
975,988
1,035,920
1.75
4,246,829
$
$
$
$
$
$
$
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
$
$
$
$
$
$
$
(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.
36
BALANCE SHEET DATA
Real estate assets – at cost
Real estate accumulated depreciation/amortization
Cash and cash equivalents
Equity investments
Other loans
Other
Total assets
Debt, net
Other liabilities
Total Medical Properties Trust, Inc. stockholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
December 31, 2021
December 31, 2020
$
17,425,765
$
14,337,929
$
$
(993,100)
459,227
1,181,025
1,328,653
1,118,231
20,519,801
11,282,770
791,360
8,440,188
5,483
8,445,671
$
$
(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
$
20,519,801
$
16,829,014
37
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 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.
38
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, 2021 and 2020 (amounts in thousands except per share data):
For the Years Ended December 31,
FFO INFORMATION
2021
2020
Net income attributable to MPT common stockholders
$
656,021
$
431,450
Participating securities’ share in earnings
(2,161)
(2,105)
Net income, less participating securities’ share in earnings
$
653,860
$
429,345
Depreciation and amortization
(Gain) loss on sale of real estate
Real estate impairment charges
Funds from operations
Write-off (recovery) of straight-line rent and other
Non-cash fair value adjustments
Tax rate and other changes
Debt refinancing and unutilized financing costs
Normalized funds from operations
PER DILUTED SHARE DATA
374,599
(52,471)
—
$
975,988
$
(2,271)
(8,193)
42,746
27,650
$
1,035,920
$
Net income, less participating securities’ share in earnings
$
1.11
$
Depreciation and amortization
(Gain) loss on sale of real estate
Real estate impairment charges
Funds from operations
Write-off (recovery) of straight-line rent and other
Non-cash fair value adjustments
Tax rate and other changes
Debt refinancing and unutilized financing costs
Normalized funds from operations
0.63
(0.09)
—
$
1.65
$
—
(0.01)
0.07
0.04
$
1.75
$
The change in net income per share was 37% from 2020 to 2021, whereas Normalized FFO per share increased by 11% for the same period.
306,493
2,833
19,006
757,677
26,415
9,642
9,295
28,180
831,209
0.81
0.57
0.01
0.04
1.43
0.05
0.02
0.02
0.05
1.57
39
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 at period-end and cash generated
from or to be generated from financing activities subsequent to period-end are 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:
2021
2020
$
20,519,801
$
16,829,014
Real estate commitments on new investments(1)
—
1,901,087
Unfunded amounts on development deals and
commenced capital improvement projects(2)
Accumulated depreciation and amortization
Incremental gross assets of our joint ventures and other(3)
Less:
480,132
166,258
993,100
1,713,603
833,529
1,287,077
Cash used for funding the transactions above(4)
(1,377,299)
(587,384)
Total pro forma gross assets
$
22,329,337
$
20,429,581
(1) The 2020 column reflects investments made in 2021 including the Priory transaction that was funded on January 19, 2021.
(2) Includes $163.6 million and $65.5 million of unfunded amounts on ongoing development projects and $316.5 million and $100.8 million of unfunded amounts on
capital improvement projects as of December 31, 2021 and 2020, respectively.
(3) Adjustment to reflect our share of our joint ventures’ gross assets.
(4) Includes cash available on-hand plus cash generated or to be generated from activities subsequent to period-end such as loan repayments, issuances of debt or
equity, or dispositions (including the Macquarie Transaction discussed in Note 3 of this Annual Report), if any.
40
ADJUSTED REVENUES
Adjusted revenues are total revenues adjusted for our pro rata portion of similar revenues in our unconsolidated real estate joint venture
arrangements. We believe adjusted revenues are useful to investors as it provides a more complete view of revenues across all of our
investments and allows for better understanding of our revenue concentration. The following table presents a reconciliation of total revenues
to total adjusted revenues (in thousands):
For the Years Ended December 31,
Total revenues
Revenue from real estate properties owned
through joint venture arrangements
Total adjusted revenues
2021
2020
1,544,669
$
1,249,238
131,013
105,758
1,675,682
$
1,354,996
$
$
41
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 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.
42
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, 2021;
• 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;
• the impact of the coronavirus (“COVID-19”) pandemic
on our business, our joint ventures, and the business
of our tenants/borrowers and the economy in general,
as well as the impact of other factors that may affect
our business, our joint ventures or that of our tenants/
borrowers that are beyond our control, including
natural disasters, health crises, or other 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 (including the transactions described in
Note 8 of this Annual Report) that have not closed as of
the date hereof may not be satisfied;
• the possibility that the anticipated benefits from any
or all of the transactions we have entered into or will
enter into may take longer to realize than expected or
will not be realized at all;
• the competitive environment in which we operate;
• the execution of our business plan;
• financing risks;
• acquisition and development risks;
• potential environmental contingencies and
other liabilities;
• adverse developments affecting the financial health of
one or more of our tenants, including insolvency;
• other factors affecting the real estate industry generally
or the healthcare real estate industry in particular;
• our ability to maintain our status as a REIT for U.S.
federal and state income tax purposes;
• our ability to attract and retain qualified personnel;
• changes in foreign currency exchange rates;
• changes in federal, state, or local tax laws in the U.S.,
Europe, Australia, South America, or other jurisdictions
in which we may own healthcare facilities or transact
business; and
• healthcare and other regulatory requirements of the
U.S., Europe, Australia, South America, and other
foreign countries.
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.
43
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, 2021
and 2020, 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, 2021 (collectively referred to as
the “consolidated financial statements”). We also have
audited the Company’s internal control over financial
reporting as of December 31, 2021, 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,
2021 and 2020, and the results of its operations and
its cash flows for each of the three years in the period
ended December 31, 2021 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, 2021, 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 2021 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
44
statements are free of material misstatement, whether
due to error or fraud, and whether effective internal
control over financial reporting was maintained in all
material respects.
Our audits of the consolidated financial statements
included performing procedures to assess the risks of
material misstatement of the consolidated financial
statements, whether due to error or fraud, and
performing procedures that respond to those risks.
Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in
the consolidated financial statements. Our audits also
included evaluating the accounting principles used and
significant estimates made by management, as well as
evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over
financial reporting included obtaining an understanding
of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our
audits also included performing such other procedures
as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for
our opinions.
Definition and Limitations of Internal Control over
Financial Reporting
A company’s internal control over financial reporting
is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and
the preparation of financial statements for external
purposes in accordance with generally accepted
accounting principles. A company’s internal control
over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit
preparation of financial statements in accordance
with generally accepted accounting principles, and
that receipts and expenditures of the company are
being made only in accordance with authorizations
of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
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, 2022
We have served as the Company’s auditor since 2008.
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
As described in Notes 2 and 3 to the consolidated
financial statements, management allocates the
purchase price of acquired properties to tangible and
identified lease intangible assets based on their fair
values. In 2021, the Company acquired a total of $3.3
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
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,
45
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BAL ANCE 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
Real estate held for sale
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 —
596,814 shares at December 31, 2021 and 541,419 shares at December 31, 2020
Additional paid-in capital
Distributions in excess of net income
Accumulated other comprehensive loss
Treasury shares, at cost
Total Medical Properties Trust, Inc. stockholders’ equity
Non-controlling interests
Total Equity
Total Liabilities and Equity
46
2021
2020
$
1,961,478
$
1,463,200
10,581,992
101,439
1,417,813
2,053,327
1,096,505
213,211
9,286,507
30,139
1,299,081
2,010,922
—
248,080
17,425,765
14,337,929
(853,879)
(139,221)
(728,176)
(105,353)
16,432,665
13,504,400
459,227
56,229
728,522
1,181,025
1,328,653
333,480
549,884
46,208
490,462
1,123,623
858,368
256,069
$
20,519,801
$
16,829,014
$
11,282,770
$
8,865,458
607,792
25,563
158,005
438,750
36,177
144,772
12,074,130
9,485,157
—
597
—
541
8,564,786
7,461,503
(87,691)
(36,727)
(777)
8,440,188
5,483
8,445,671
(71,411)
(51,324)
(777)
7,338,532
5,325
7,343,857
See accompanying notes to consolidated financial statements.
$
20,519,801
$
16,829,014
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET INCOM E
For the Years Ended December 31,
2021
2020
2019
(Amounts in thousands, except for per share data)
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)
Gain (loss) 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 and diluted
Net income attributable to MPT common stockholders
Weighted average shares outstanding – basic
Weighted average shares outstanding – diluted
$
931,942
$
741,311
$
474,151
241,433
202,599
168,695
158,881
206,550
142,496
1,544,669
1,249,238
367,393
321,249
39,098
145,638
873,378
52,471
—
28,488
(27,650)
6,288
59,597
730,888
(73,948)
656,940
(919)
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)
$
$
656,021
$
431,450
$
374,684
1.11
$
0.81
$
0.87
588,817
590,139
529,239
530,461
427,075
428,299
See accompanying notes to consolidated financial statements.
47
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CO MPREHEN S IV E I NCO ME
For the Years Ended December 31,
2021
2020
2019
(In thousands)
Net income
Other comprehensive income:
$
656,940
$
432,272
$
376,401
Unrealized gain (loss) on interest rate swaps, net of tax
Foreign currency translation (loss) gain
Total comprehensive income
Comprehensive income attributable to non-controlling interests
52,288
(37,691)
671,537
(919)
(33,091)
44,672
443,853
(822)
Comprehensive income attributable to MPT common stockholders
$
670,618
$
443,031
$
(9,033)
4,330
371,698
(1,717)
369,981
See accompanying notes to consolidated financial statements.
48
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQ UITY
FOR THE YEARS ENDED DE CE MBE R 31, 2021 , 2 0 2 0 AN D 2 0 1 9
(Amounts in thousands, except per share data)
Preferred
Common
Shares
Par
Value
Shares
Par
Value
Additional
Paid-in
Capital
Retained
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Loss
Treasury
Shares
Non-
Controlling
Interests
Total
Equity
Balance at December 31, 2018
Net income
Unrealized loss on interest rate
swaps, 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)
—
—
—
—
—
—
—
—
$ —
370,637
$ 371
$ 4,442,948
$ 162,768
$
(58,202)
$
(777)
$
13,830
$ 4,560,938
—
—
—
—
—
—
—
—
1,536
—
—
—
—
2
—
—
—
—
32,186
—
—
145,349
145
2,533,065
374,684
—
—
—
—
—
—
—
—
—
(454,440)
—
(9,033)
4,330
—
—
—
—
—
—
—
—
1,717
376,401
—
—
—
(9,033)
4,330
32,188
—
(15,440)
(15,440)
—
—
—
2,533,210
—
(454,440)
Balance at December 31, 2019
—
$ —
517,522
$ 518
$ 7,008,199
$
83,012
$
(62,905)
$
(777)
$
107
$ 7,028,154
Net income
Cumulative effect of change in
accounting principles
Unrealized loss on interest rate
swaps, 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)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,893
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
47,152
—
(4,928)
—
—
21,004
21
411,080
431,450
(8,399)
—
—
—
—
—
—
—
—
—
—
—
(577,474)
—
—
(33,091)
44,672
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
822
—
—
—
—
432,272
(8,399)
(33,091)
44,672
47,154
5,097
5,097
—
(4,928)
(701)
(701)
—
411,101
—
(577,474)
Balance at December 31, 2020
—
$ —
541,419
$ 541
$ 7,461,503
$ (71,411)
$
(51,324)
$
(777)
$
5,325
$ 7,343,857
Net income
Unrealized gain on interest rate
swaps, net of tax
Foreign currency translation loss
Stock vesting and amortization of
stock-based compensation
Distributions to non-controlling
interests
Proceeds from offering (net of
offering costs)
Dividends declared ($1.12 per
common share)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,332
—
—
—
—
3
—
—
—
—
52,107
—
—
53,063
53
1,051,176
656,021
—
—
—
—
—
—
—
—
—
(672,301)
—
52,288
(37,691)
—
—
—
—
—
—
—
—
—
—
—
919
—
—
—
656,940
52,288
(37,691)
52,110
(761)
(761)
—
1,051,229
—
(672,301)
Balance at December 31, 2021
—
$ —
596,814
$ 597
$ 8,564,786
$
(87,691)
$
(36,727)
$
(777)
$
5,483
$ 8,445,671
See accompanying notes to consolidated financial statements.
49
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2021
2020
2019
(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
$
656,940
$
432,272
$
376,401
333,781
16,856
275,953
13,099
156,575
8,881
Straight-line rent revenue and other
(288,717)
(226,906)
(138,806)
Share-based compensation
(Gain) loss from sale of real estate
Impairment charges
Straight-line rent and other (recovery) write-off
Debt refinancing and unutilized financing costs
Tax rate and other changes
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
52,110
(52,471)
—
(2,271)
27,650
42,746
—
11,913
(23,867)
(4,375)
54,058
(12,697)
811,656
47,154
2,833
19,006
26,415
28,180
9,295
(35,020)
8,134
(2,438)
18,264
(18,424)
19,819
32,188
(41,560)
21,031
22,447
6,106
—
—
(2,271)
12,906
(4,992)
39,630
5,581
617,636
494,117
Cash paid for acquisitions and other related investments
(5,350,239)
(4,249,180)
(4,565,594)
Net proceeds from sale of real estate
Principal received on loans receivable
Investment in loans receivable
Construction in progress and other
Proceeds from sale and return of equity investment
Capital additions and other investments, net
246,468
94,177
111,766
1,595,708
1,306,187
(58,932)
(67,725)
65,546
(289,239)
(62,651)
(68,350)
69,224
(36,180)
920
(54,088)
(83,798)
—
(293,163)
Net cash used for investing activities
(3,858,413)
(2,946,773)
(4,883,957)
See accompanying notes to consolidated financial statements.
50
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CO NT IN U ED )
For the Years Ended December 31,
FINANCING ACTIVITIES
2021
2020
2019
Proceeds from term debt, net of discount
3,407,535
2,215,950
3,048,424
Payments of term debt
Revolving credit facilities, net
Dividends paid
(1,390,994)
559,985
(800,000)
162,633
—
(65,736)
(643,473)
(567,969)
(411,697)
Lease deposits and other obligations to tenants
17,815
21,706
(12,260)
Proceeds from sale of common shares, net of offering costs
1,051,229
411,101
2,533,210
Payment of debt refinancing, deferred financing costs and other
(54,489)
(42,347)
(50,057)
financing activities
Net cash provided by financing activities
2,947,608
1,401,074
5,041,884
(Decrease) increase in cash, cash equivalents, and restricted cash for
the year
(99,149)
(928,063)
652,044
Effect of exchange rate changes
4,662
16,441
Cash, cash equivalents, and restricted cash at beginning of year
556,369
1,467,991
(6,478)
822,425
Cash, cash equivalents, and restricted cash at end of year
$
461,882
$
556,369
$
1,467,991
Interest paid, including capitalized interest of $3,289 in 2021, $3,030 in 2020,
and $3,936 in 2019
$
326,406
$
309,920
$
211,163
Supplemental schedule of non-cash financing activities:
Dividends declared, unpaid
$
176,494
$
147,666
$
138,161
Cash, cash equivalents, and restricted cash are comprised of the following:
Beginning of period:
Cash and cash equivalents
$
549,884
$
1,462,286
$
820,868
Restricted cash, included in Other assets
6,485
5,705
1,557
End of period:
Cash and cash equivalents
$
556,369
$
1,467,991
$
822,425
$
459,227
$
549,884
$
1,462,286
Restricted cash, included in Other assets
2,655
6,485
5,705
$
461,882
$
556,369
$
1,467,991
See accompanying notes to consolidated financial statements.
51
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOL IDATED FINA NCIAL STAT E M EN TS
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.
We believe the estimates and assumptions underlying
our consolidated financial statements are reasonable
and supportable based on the information available as
of December 31, 2021 (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). Although the effects of COVID-19
and related variants seem to be lessening, government
restrictions appear to be easing, and most hospitals
around the world have generally returned to their normal
operations, 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 still
cannot be predicted with 100% confidence. This makes
any estimates and assumptions as of December 31, 2021,
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.
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.
At present, we own all of the partnership interests in
the Operating Partnership and have elected to report
our required disclosures and that of the Operating
Partnership on a combined basis, except where material
differences exist.
We operate as a real estate investment trust (“REIT”).
Accordingly, we will generally not be subject to United
States (“U.S.”) federal income tax, provided that we
continue to qualify as a REIT and our distributions to our
stockholders equal or exceed our taxable income. Certain
non-real estate activities we undertake are conducted by
entities which we elected to be treated as taxable REIT
subsidiaries (“TRS”). Our TRS entities are subject to both
U.S. federal and state income taxes. For our properties
located outside the U.S., we are subject to the local taxes
of the jurisdictions where our properties reside and/or
legal entities are domiciled; however, we do not expect
to incur additional taxes, of a significant nature, in the
U.S. from foreign-based income as the majority of such
income flows through our REIT.
Our primary business strategy is to acquire and develop
real estate and improvements, primarily for long-term
lease to providers of healthcare services, such as
operators of general acute care hospitals, behavioral
health facilities, inpatient physical rehabilitation
hospitals, long-term acute care hospitals, and
freestanding ER/urgent care 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, 2021, we
have investments in 438 facilities in 32 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.
52
At December 31, 2021, we had loans and/or equity
investments in certain variable interest entities
approximating $570 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”). 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 investment in Steward Health Care
System LLC (“Steward”)] are accounted for at cost,
less any impairment, plus or minus changes resulting
from observable price changes in orderly transactions
involving the investee. Cash distributions on these types
of investments are recorded to either income upon
receipt (if a return on investment) or as a reduction
of our investment (if the distributions received are in
excess of our share of the investee’s earnings). 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. For leases, we follow 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). For lessors, we apply this standard as follows:
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 our 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.
53
FINANCING LEASE REVENUE
Under ASU 2016-02, if an acquisition and subsequent
lease of a property back to the seller does not meet the
definition of a sale, we must account for the transaction
as a financing lease with income recognized using the
imputed interest method.
Another type of financing lease is a direct financing lease
(“DFL”). For leases accounted for as DFLs, the future
minimum lease payments are recorded as a receivable
at lease inception, while, 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 term 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.
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.
INTEREST REVENUE
We receive interest income from our tenants/borrowers
on mortgage loans, working capital loans, and other
54
long-term loans. Interest income from these loans
is recognized as earned based upon the principal
outstanding and terms of the loans.
OTHER REVENUE
Commitment fees received from lessees for development
and leasing services are initially recorded as deferred
revenue and recognized as income over the initial term
of a lease to produce a constant effective yield on the
lease (interest method). Commitment and origination
fees from lending services are also recorded as deferred
revenue initially and recognized as income over the life of
the loan using the interest method.
Acquired Real Estate Purchase Price Allocation: 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 relative 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, 2021 are as follows:
Buildings and improvements
Lease intangibles
Leasehold improvements
Furniture, equipment, and other
CREDIT LOSSES:
35.8 years
24.9 years
17.0 years
7.6 years
Losses from Rent Receivables: For all leases, we
continuously monitor the performance of our existing
tenants, which may include, 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
55
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 typically 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 of 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.
The following table summarizes our credit loss reserves
(in thousands):
December 31,
2021
2020
Balance at beginning of the year
$
8,726
$
Cumulative effect of change in
accounting principle
Provision for credit loss
Expected credit losses related to
financial instruments sold or repaid
—
41,710
(1,909)
—
8,399
3,255
(2,928)
Balance at the end of year
$
48,527
$
8,726
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
56
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
TRS entities, including MPT Development Services,
Inc. (“MDS”) and many other entities, which are single
member LLCs that are disregarded for tax purposes and
are reflected in the tax returns of MDS. None of our TRS
entities are entitled to a dividends paid deduction and
are subject to U.S. federal, state, and local income taxes.
Our TRS entities are 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 these entities.
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, of a significant
nature, in the U.S. as the majority such income from our
international properties flows through our REIT income
tax returns. For our TRS entities 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
57
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.
58
To qualify for hedge accounting, we formally document
all relationships between hedging instruments and
hedged items, as well as our risk management objective
and strategy for undertaking the hedge prior to entering
into a derivative transaction. This process includes
specific identification of the hedging instrument and
the hedge transaction, the nature of the risk being
hedged and how the hedging instrument’s effectiveness
in hedging the exposure to the hedged transaction’s
variability in cash flows attributable to the hedged risk
will be assessed. Both at the inception of the hedge and
on an ongoing basis, we assess whether the derivatives
that are used in hedging transactions are highly effective
in offsetting changes in cash flows or fair values of
hedged items. In addition, for cash flow hedges, we
assess whether the underlying forecasted transaction will
occur. We discontinue hedge accounting if a derivative is
not determined to be highly effective as a hedge or that
it is probable that the underlying forecasted transaction
will not occur.
Fair Value Measurement: We measure and disclose the
estimated fair value of financial assets and liabilities
utilizing a hierarchy of valuation techniques based
on whether the inputs to a fair value measurement
are considered to be observable or unobservable in a
marketplace. Observable inputs reflect market data
obtained from independent sources, while unobservable
inputs reflect our market assumptions. This hierarchy
requires the use of observable market data when
available. These inputs have created the following fair
value hierarchy:
•
•
•
Level 1 — quoted prices for identical instruments in
active markets;
Level 2 — quoted prices for similar instruments in
active markets; quoted prices for identical or similar
instruments in markets that are not active; and
model-derived valuations in which significant inputs
and significant value drivers are observable in active
markets; and
Level 3 — fair value measurements derived from
valuation techniques in which one or more
significant inputs or significant value drivers
are unobservable.
We measure fair value using a set of standardized
procedures that are outlined herein for all assets and
liabilities which are required 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 international joint venture and equity interest in
Springstone, LLC (“Springstone”), 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, 2021.
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. We record 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.
Reclassifications: Certain amounts in the consolidated
financial statements for prior periods have been
reclassified to conform to the current period presentation.
RECENT ACCOUNTING DEVELOPMENTS
Reference Rate Reform
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 the London Interbank Offered Rate
(“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 generally accepted accounting principles
(“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 transition. We have evaluated
our contracts that are referenced to LIBOR or other
reference rates expected to be discontinued. Our British
pound sterling term loan and corresponding interest rate
swap were modified with the Sterling Overnight Index
Average (SONIA) Rate as a replacement reference rate
during the fourth quarter of 2021, and we accounted for
such modifications using the expedients and exceptions
provided for in ASU 2020-04 and ASU 2021-01. We are
continuing to evaluate the need to modify our U.S. dollar
LIBOR contracts, such as our unsecured credit facility,
but the requirement to replace the U.S. dollar LIBOR
has been extended to June 30, 2023. Moreover, we do
not expect any impact to our Australian dollar term loan
and corresponding interest rate swap, as these contracts
are not referenced to rates that are expected to be
discontinued.
59
3. REAL ESTATE AND OTHER ACTIVITIES
NEW INVESTMENTS
For the years ended December 31, 2021, 2020, and 2019,
we acquired or invested in the following net assets
(in thousands):
Land and land
improvements
Buildings
Inta ngible lease assets –
subject to amortization
(weighted-average
useful life of 34.5 years
in 2021, 27.5 years in
2020, and 19.1 years
in 2019)
Investment in financing
leases
Equity investments
Mortgage loans
Other loans and assets
2021
2020
2019
$
642,312
$
365,281
$
400,539
2,381,654
2,547,313
1,951,066
262,385
642,699
227,468
—
114,797
1,386,797
123,427
1,113,300
909,669
233,593
176,840
309,523
415,836
51,267
135,258
Liabilit ies assumed
(82,508)
(140,866)
(2,637)
$
5,350,239
$
4,249,180
$
4,565,594
Loans repaid(1)
(1,103,410)
(834,743)
—
Total net assets
acquired
$
4,246,829
$
3,414,437
$
4,565,594
(1) The 2021 column includes an £800 million mortgage loan advanced to the
Priory Group (“Priory”) in the first quarter of 2021 and converted to fee simple
ownership in a portfolio of 35 properties in the second quarter of 2021 as described
below. The 2020 column includes approximately $740 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.
2021 ACTIVITY
Priory Group Transaction
On January 19, 2021, we completed the first of two
phases in the Priory transaction in which we funded
an £800 million interim mortgage loan on an identified
portfolio of Priory real estate assets in the United
Kingdom. On June 25, 2021, we completed the second
phase of the transaction in which we converted this
mortgage loan to fee simple ownership in a portfolio
of 35 select real estate assets from Priory [which is
currently owned by Waterland Private Equity Fund VII
C.V. (“Waterland VII”)] in individual sale-and-leaseback
transactions. The applicable purchase price for the
60
assets was paid by us by proportionally converting and
reducing the principal balance of the interim mortgage
loan we made to Waterland VII in phase one. Therefore,
the net aggregate purchase price for the real estate
assets we acquired from Priory was approximately £800
million, plus customary stamp duty, tax, and other
transaction costs. As part of the real estate acquisition
(for which some of the assets were acquired by the share
purchase of real estate holding entities), we incurred
deferred income tax liabilities and other liabilities of
approximately £47.1 million.
In addition to the real estate investment, on January 19,
2021, we made a £250 million acquisition loan to
Waterland VII, in connection with the closing of
Waterland VII’s acquisition of Priory, which was repaid in
full plus interest on October 22, 2021.
Finally, we acquired a 9.9% passive equity interest in the
Waterland VII affiliate that indirectly owns Priory.
Other Transactions
On December 2, 2021, we acquired the remaining 50%
interest in a general acute hospital operated by IMED
Hospitales in Valencia, Spain, which was formerly
owned by our joint venture partner. We followed the
asset acquisition cost accumulation model to account
for this acquisition and included the carrying amount
of our previously held equity interest, along with the
approximately €46 million consideration paid and direct
transaction costs incurred, in determining the total cost
allocated to the net assets acquired.
On October 21, 2021, we acquired an acute care facility in
Portugal for €17.8 million. This facility is leased to Atrys
Health pursuant to a long-term master lease with annual
escalations.
On October 19, 2021, we invested in 18 inpatient
behavioral health facilities throughout the U.S. and
an interest in the operations of Springstone for total
consideration of $950 million (including an acquisition
loan of approximately $185 million), plus closing and
other transaction costs. We also incurred deferred
income tax liabilities of approximately $8.0 million. These
facilities are leased to Springstone pursuant to a long-
term master lease with annual escalations and multiple
extension options.
On August 1, 2021, we completed the acquisition of five
general acute care hospitals located in South Florida
for approximately $900 million, plus closing and other
transaction costs. These hospitals are leased to Steward
pursuant to the master lease, with annual inflation-
based escalators, that had its initial fixed term recently
extended by 10 years to 2041.
On July 6, 2021, we acquired four acute care hospitals
and two on-campus medical office buildings in Los
Angeles, California for $215 million. These hospitals are
leased to Pipeline Health Systems pursuant to a long-
term lease with annual inflation-based escalators.
On July 6, 2021, we also acquired an acute care hospital
in Stirling, Scotland for £15.6 million. This hospital is
leased to Circle Health Ltd. (“Circle”) pursuant to a long-
term lease with annual inflation-based escalators.
On April 16, 2021, we made a CHF 145 million investment
in Swiss Medical Network, our tenant via our Infracore SA
(“Infracore”) equity investment.
On January 8, 2021, we made a $335 million loan to
affiliates of Steward, all of the proceeds of which were
used to redeem a similarly sized convertible loan from
Steward’s former private equity sponsor.
2020 ACTIVITY
Circle Transaction
On January 8, 2020, we acquired a portfolio of 30 acute
care hospitals located throughout the United Kingdom
for approximately £1.5 billion from affiliates of BMI
Healthcare, Inc. (“BMI”). In a related transaction, affiliates
of Circle acquired BMI and assumed its operations 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. Effective June 16, 2020,
these 30 leases were amended 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 with multiple extension options and
annual escalation provisions.
On December 29, 2020, we increased our equity
ownership and related investment in 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 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
a long-term master lease 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 and 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 subject to the Steward master lease.
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.
Through this joint venture, we invested, on November
17, 2020, in the real estate of three general acute care
hospitals in Colombia for approximately $135 million.
These properties are operated by the international
joint venture.
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 (now
Post Acute Medical, LLC) pursuant to a long-term lease.
61
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. The master leases and mortgage loan
have substantially similar terms, with an initial 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 that include annual fixed and periodic
market-based escalations.
62
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.
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 mark 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 that had 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, include two five-year extension options, and
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.
DEVELOPMENT ACTIVITIES
2021 Activity
In the fourth quarter of 2021, we agreed to finance
the development of and lease an acute care facility in
Texarkana, Texas for $169.4 million. This facility will be
leased to Steward and is expected to commence rent in
the second quarter of 2024.
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 second 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 first quarter of 2022.
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 being 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.
See table below for a status summary of our current
development projects (in thousands):
Property
Commitment
Costs Incurred
as of Dec. 31,
2021
Estimated Rent
Commencement
Date
Ernest
(Bakersfield,
California)
Ernest (Stockton,
California)
Steward
(Texarkana,
Texas)
$
47,929
$
42,132
1Q 2022
47,700
31,197
2Q 2022
169,408
28,110
2Q 2024
Total assets
acquired
$
265,037
$
101,439
DISPOSALS
2021 Activity
Joint Venture Transaction
On August 28, 2021, we entered into a definitive
agreement with Macquarie Asset Management (“MAM”)
to form a partnership (the “Macquarie Transaction”),
pursuant to which a fund managed by MAM will acquire,
for cash consideration, a 50% interest in a portfolio of
eight Massachusetts-based general acute care hospitals
that we currently own and lease to Steward. The
transaction values the portfolio at approximately $1.7
billion. We expect to recognize a gain, net of transaction
costs, of approximately $0.5 billion from this transaction,
which we expect to close in the 2022 first quarter.
The partnership plans to raise nonrecourse secured debt
of up to 55% of asset value, and we expect to receive total
proceeds, including proceeds from the expected secured
debt, of approximately $1.3 billion. There is no certainty
as to the amount or terms of expected secured debt
financing, and the ultimate amount and terms may affect
the completion of the transaction, the transaction value,
proceeds, and gain on real estate.
63
As of December 31, 2021, capitalized lease intangibles
have a weighted-average remaining life of 22.9 years.
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 at
least 15 years) and most include renewal options at the
election of our tenants, generally in five year increments.
Over 99% of our leases provide annual rent escalations
based on increases in the CPI (or similar index outside
the U.S.) and/or fixed minimum annual rent escalations.
Many of our domestic leases contain purchase options
with pricing set at various terms but in no case less
than our total investment. For five properties with a
carrying value of $231 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, 2021 (amounts
in thousands):
Total Under
Operating
Leases
Total Under
Financing
Leases
Total
$
1,078,148
$
168,190
$
1,246,338
1,099,027
171,553
1,270,580
1,117,353
174,984
1,292,337
1,135,695
178,484
1,314,179
1,154,286
182,054
1,336,340
2022
2023
2024
2025
2026
Thereafter
29,555,221
4,513,925
34,069,146
$
35,139,730
$
5,389,190
$
40,528,920
At December 31, 2021, the eight facilities subject to the
joint venture were designated as held for sale and made
up of the following net assets (in thousands):
Real estate held for sale
Straight-line rent receivables
Other assets, net
Total
As of December 31, 2021
$
$
1,096,505
120,268
4,234
1,221,007
Other Disposal Transactions
During the 2021 fourth quarter, we sold our interest in
the operations of three operators (two of which were in
Germany) for proceeds of approximately $54.5 million,
resulting in a net gain of approximately $40 million.
During 2021, we also completed the sale of 16 facilities
and an ancillary property for approximately $246 million,
resulting in a net gain on real estate of approximately
$52.5 million.
2020 Activity
During 2020, we completed the sale of nine facilities and
six ancillary properties for approximately $94 million,
resulting 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.
INTANGIBLE ASSETS
At December 31, 2021 and 2020, our intangible lease
assets were $1.4 billion ($1.3 billion, net of accumulated
amortization) and $1.3 billion ($1.2 billion, net of
accumulated amortization), respectively.
We recorded amortization expense related to intangible
lease assets of $56.0 million, $42.4 million, and
$21.5 million in 2021, 2020, and 2019, respectively, and
expect to recognize amortization expense from existing
lease intangible assets as follows (amounts
in thousands):
For the Year Ended December 31:
$ 57,433
57,368
57,334
57,186
56,917
2022
2023
2024
2025
2026
64
At December 31, 2021, 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):
transitional properties, representing less than 0.5%
of our total assets, remain vacant, and each of these
properties are in various stages of being re-leased or
sold. At December 31, 2021, 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.
As of
December 31,
2021
As of
December 31,
2020
Alecto Facilities
Minimum lease payments receivable
$
1,183,855
$
1,228,966
Estimated residual values
203,818
203,818
Less: Unearned income and allowance for
credit loss
Net investment in direct financing
leases
(918,584)
(969,061)
469,089
463,723
Other financing leases (net of allowance for
credit loss)
1,584,238
1,547,199
Total investment in financing leases
$
2,053,327
$
2,010,922
COVID-19 Rent Deferrals
Due to the COVID-19 pandemic and its impact on our
tenants’ business during 2020, we agreed to defer
collection of less than 2% of our annual rent. In 2021,
we collected approximately $2.8 million of previously
deferred rent. Pursuant to our agreements with certain
tenants, we expect the remaining outstanding deferred
rent to be paid over specified periods in the future,
with interest.
Adeptus Health
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 transitioned all of our facilities away from
Adeptus, which resulted in impairment charges including
approximately $20 million (of which one-half related to
straight-line rent write-offs) and $2 million in 2020 and
2019, respectively. However, these transition measures
have also provided for new tenant relationships being
formed with strong credit worthy operators such as
Ochsner Health System, Dignity Health, UC Health
(University of Colorado), and HCA Healthcare, Inc.
(“HCA”), that are now leasing over 40 of these transitional
facilities under long-term leases. In addition, we have
been able to dispose of 12 properties generating cash
proceeds for re-investment purposes, including the
sale of our Carrollton, Texas property in February 2022
for approximately $43 million, which exceeded our net
book value. At December 31, 2021, only three of these
As noted in previous filings, we originally leased four
acute care facilities to and had a mortgage loan on a
fifth property (Olympia Medical Center) with Alecto
Healthcare Services LLC (“Alecto”), along with working
capital loans. During 2019, we incurred approximately
$20 million in real estate impairment charges. During the
first quarter of 2020, we donated the Wheeling facility to
a local municipality, resulting in a $9.1 million real estate
impairment charge. In addition, we re-leased one acute
care facility and sold another facility in 2020. In the first
quarter of 2021, Alecto completed the sale of Olympia
Medical Center to the UCLA Health System. Our proceeds
of approximately $51 million from this sale were used
to pay off the mortgage and working capital loans in
full, with the remaining proceeds used to recover certain
previously reserved past due receivables. At December 31,
2021, we continue to lease one acute care facility to
Alecto, representing less than 0.1% of our total assets.
Halsen Healthcare
On September 30, 2019, we acquired the real estate
of Watsonville Community Hospital in Watsonville,
California for $40 million, which was then leased to
Halsen Healthcare. In addition, we made a working
capital loan to Halsen Healthcare. The hospital operator
faced significant financial challenges over a two-year
period that were worsened by revenue losses during the
COVID-19 pandemic. During this time, we increased the
working capital loan balance in an effort to support the
operator of this facility. On December 5, 2021, Halsen
Healthcare filed Chapter 11 bankruptcy in order to
reorganize, while keeping the hospital open. As such, we
recorded a credit loss reserve (approximately $40 million)
in the fourth quarter of 2021 and wrote off approximately
$2.5 million of billed and straight-line rent receivables. At
December 31, 2021, we believe our total investment in
the Watsonville property, representing less than 0.5% of
total assets, is fully recoverable, but no assurances can
be given that we will not have any further write-offs or
impairments in future periods.
65
Other Leasing Activity
2021 Activity
On December 23, 2021, LifePoint announced the
completion of the transaction with Kindred Healthcare
(“Kindred”), in which LifePoint acquired Kindred, and
announced the related launch of ScionHealth, a new
healthcare company made up of a combination of former
Kindred and LifePoint hospitals. With this transaction,
we have eight properties leased to ScionHealth and nine
properties leased to LifePoint.
2020 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 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.
LOANS
The following is a summary of our loans (net of allowance
for credit loss) (dollar amounts in thousands):
As of December 31, 2021
As of December 31, 2020
Weighted-
Average
Interest
Rate
Balance
Weighted-
Average
Interest
Rate
Balance
$
213,211
8.7% $
248,080
8.5%
Mortgage
loans
Acquisition
loans
Other loans
804,824
6.2%
520,095
5.8%
$
1,541,864
$
1,106,448
Our mortgage loans at December 31, 2021 cover five of
our properties with three operators.
4)
The increase in acquisition loans primarily relates to the
$185 million loan to Springstone in the fourth quarter
of 2021.
Other loans consist of loans to our tenants for working
capital and other purposes and include our shareholder
loan made in 2018 to the joint venture with Primotop
in the amount of €297 million. The increase in other
loans is primarily related to the $335 million loan to
affiliates of Steward (as more fully described above),
partially offset by the repayment of $75 million in other
loans from Prime.
66
Other Investment Activities
On October 13, 2021, we funded an additional €27 million
to Priory in order to maintain our 9.9% equity interest.
Pursuant to our existing 9.9% equity interest in Steward,
we received an $11 million cash distribution during the
first quarter of 2021, which was accounted for as a return
of capital.
Pursuant to our 4.9% stake in Aevis, we recorded an $8.2
million favorable non-cash fair value adjustment to mark
our investment in Aevis stock to market during 2021;
whereas, this was a $5.8 million unfavorable non-cash fair
value adjustment for 2020.
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:
1)
Facility concentration – At December 31, 2021, our
largest single property represented approximately
2.7% of our total assets, slightly down from the 3.2%
at December 31, 2020.
2) Operator concentration – For the year ended
December 31, 2021, revenue from Steward, Circle,
and Prospect individually represented more than
10% of our total revenues. In comparison, Steward,
Circle, Prospect, and Prime individually represented
more than 10% of our total revenues for the year
ended December 31, 2020.
investments in the U.S., Europe, Australia, and South
America represented approximately 64%, 30%, 5%,
and 1%, respectively, of our total assets compared
to 65%, 28%, 6%, and 1%, respectively, of our total
assets at December 31, 2020.
Facility type concentration – For the year ended
December 31, 2021, approximately 81% of our
revenues were generated from our general acute
care facilities, while revenues from our behavioral
and rehabilitation facilities made up 8% and 7%,
respectively. Freestanding ER/urgent care facilities
and long-term acute care facilities combined to
make up the remaining 4%. In comparison, general
acute care, rehabilitation, and long-term acute care
facilities made up 87%, 8%, and 3%, respectively, of
our total revenues for the year ended December 31,
2020, while freestanding ER/urgent care facilities
and behavioral health facilities combined to make
up the remaining 2%.
523,829
7.7%
338,273
7.6%
3) Geographic concentration – At December 31, 2021,
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 $63.9 million,
$29.8 million, and $85.3 million for 2021, 2020, and 2019,
respectively.
See subsections “New Investments” and “Disposals” in
this Note 3 as it relates to our investments in Springstone
and the new international, Primotop, and Infracore
ventures for other related party transactions during 2021,
2020, and 2019.
As of December 31, 2021, principal payments due on
our debt (which exclude the effects of any discounts,
premiums, or debt issue costs recorded) are as follows
(dollar amounts in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
$
869,606
541,280
1,601,560
1,515,740
1,945,100
4,885,540
$ 11,358,826
4. DEBT
CREDIT FACILITY
The following is a summary of debt (dollar amounts in
thousands):
As of
December 31,
2021
As of
December 31,
2020
Revolving credit facility(A)
$
730,000
$
165,407
Interim credit facilities
Term loan
869,606
—
200,000
200,000
British pound sterling term loan(B)
947,240
956,900
Australian term loan facility(B)
871,560
923,280
4.000% Senior Unsecured Notes due 2022(B)
—
610,800
2.550% Senior Unsecured Notes due 2023(B)
541,280
546,800
3.325% Senior Unsecured Notes due 2025(B)
568,500
610,800
0.993% Senior Unsecured Notes due 2026(B)
2.500% Senior Unsecured Notes due 2026(B)
568,500
676,600
—
—
5.250% Senior Unsecured Notes due 2026
500,000
500,000
5.000% Senior Unsecured Notes due 2027
1,400,000
1,400,000
3.692% Senior Unsecured Notes due 2028(B)
811,920
820,200
4.625% Senior Unsecured Notes due 2029
900,000
900,000
3.375% Senior Unsecured Notes due 2030(B)
473,620
—
3.500% Senior Unsecured Notes due 2031
1,300,000
1,300,000
Debt issue costs and discount, net
(76,056)
(68,729)
$
11,358,826
$
8,934,187
$
11,282,770
$
8,865,458
(A) The 2020 column 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.
Our current unsecured credit facility (“Credit Facility”)
includes a $1.3 billion unsecured revolving loan facility
and a $200 million unsecured term loan facility. On
January 15, 2021, we amended our Credit Facility. The
amendment extended the maturity of our unsecured
revolving loan facility to February 1, 2024 and can be
extended for an additional 12 months at our option. The
maturity date of our 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.
At December 31, 2021, we had $730.0 million outstanding
on the revolving credit facility, whereas, we had $165.4
million outstanding on our revolving credit facility at
December 31, 2020. At December 31, 2021 and 2020, our
availability under our revolving credit facility was $0.6
billion and $1.1 billion, respectively.
67
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, 2021, we had a derivative asset of
approximately $12.4 million related to the sterling-
denominated term loan interest rate swap and a
derivative liability of approximately $4.2 million
related to the Australian dollar term loan interest
rate swap, included in “Other assets” and “Accounts
payable and accrued expenses,” respectively, on our
consolidated balance sheets. At December 31, 2020, we
had a derivative liability of approximately $51.3 million
associated with these interest rate swaps, included
in “Accounts payable and accrued expenses” on our
consolidated balance sheets.
The weighted-average interest rate on the revolving
facility was 1.3% and 1.4% during 2021 and 2020,
respectively.
At December 31, 2021 and 2020, the interest rate in effect
on our term loan was 1.56% and 1.65%, respectively.
INTERIM CREDIT FACILITIES
January 2021 Interim Credit Facility
On January 15, 2021, we entered into a $900 million
interim credit facility (“January 2021 Interim Credit
Facility”), of which we borrowed £500 million to partially
fund the Priory Group Transaction. We paid off and
terminated this facility on March 26, 2021 with the
issuance of the 2.500% Senior Unsecured Notes due 2026
and the 3.375% Senior Unsecured Notes due 2030.
July 2021 Interim Credit Facility
On July 27, 2021, we entered into a $1 billion interim
credit facility with Barclays Bank PLC as administrative
agent (“July 2021 Interim Credit Facility”), and several
lenders from time-to-time are parties thereto. This
facility matures on July 28, 2022 and bears interest at a
variable rate. We used this facility to partially fund the
acquisition of five South Florida facilities in August 2021
and the Springstone investments in October 2021. At
December 31, 2021, the outstanding balance under this
facility was $869.6 million at a rate of 1.610%.
NON-U.S. TERM LOANS
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
68
SENIOR UNSECURED NOTES
The following are the basic terms of our senior unsecured notes at December 31, 2021 (par value amounts in thousands):
Offering Completion Date
Maturity Date
Par Value
% of Par Value
2.550% Senior Unsecured Notes due 2023
December 5, 2019
December 5, 2023
3.325% Senior Unsecured Notes due 2025
March 24, 2017
March 24, 2025
0.993% Senior Unsecured Notes due 2026
October 6, 2021
October 15, 2026
2.500% Senior Unsecured Notes due 2026
March 24, 2021
March 24, 2026
5.250% Senior Unsecured Notes due 2026
July 22, 2016
August 1, 2026
£ 400,000
€ 500,000
€ 500,000
£ 500,000
$ 500,000
Interest Payment
Frequency
Annually
Annually
Annually
Annually
100.000%
100.000%
100.000%
99.937%
100.000%
Semi-annually
5.000% Senior Unsecured Notes due 2027
September 7, 2017
October 15, 2027
$ 1,400,000
100.000%
Semi-annually
3.692% Senior Unsecured Notes due 2028
December 5, 2019
June 5, 2028
4.625% Senior Unsecured Notes due 2029
July 26, 2019
August 1, 2029
3.375% Senior Unsecured Notes due 2030
March 24, 2021
April 24, 2030
3.500% Senior Unsecured Notes due 2031
December 4, 2020
March 15, 2031
£ 600,000
$ 900,000
£ 350,000
$ 1,300,000
99.998%
Annually
99.500%
Semi-annually
99.448%
Annually
100.000%
Semi-annually
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.
DEBT REFINANCING AND UNUTILIZED
FINANCING COSTS
2021
With the amendment of our Credit Facility, the
termination of our January 2021 Interim Credit Facility,
and duration fees incurred on our July 2021 Interim
Credit Facility, we incurred approximately $7.3 million of
debt refinancing costs in 2021.
With proceeds from our 0.993% Senior Unsecured Notes
due 2026 offering, on October 22, 2021, we redeemed
all of our outstanding €500 million aggregate principal
amount of 4.000% senior unsecured notes that were
due in 2022, including accrued and unpaid interest.
As a result of this redemption, we incurred a charge
of approximately $20 million (including redemption
premiums and accelerated amortization of deferred debt
issuance costs).
2020
With proceeds from our 3.500% Senior Unsecured
Notes due 2031 offering in 2020, we redeemed all of our
outstanding $500.0 million aggregate principal amount
of 6.375% senior unsecured notes that were due in 2024
and $300.0 million aggregate principal amount of 5.500%
senior unsecured notes that were due in 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 canceled with the
completion of the debt and equity offerings in July 2019
(as more fully described in the table 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.
69
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 entities 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 entities and our foreign operations, income
tax (expense) benefit were as follows (in thousands):
Current income tax (expense) benefit:
Domestic
Foreign
Deferred income tax (expense) benefit:
Domestic
Foreign
For the Years Ended December 31,
2021
2020
2019
$
(1,559)
$
63
$
61
(18,964)
(10,203)
(1,669)
(20,523)
(10,140)
(1,608)
6,915
(10,680)
5,490
(60,340)
(10,236)
(1,261)
(53,425)
(20,916)
4,229
Income tax (expense) benefit
$
(73,948)
$
(31,056)
$
2,621
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. At December 31, 2021, 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, 2021,
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
70
A reconciliation of income tax (expense) benefit from the
statutory income tax rate to the effective tax rate based
on income before income taxes for the years ended
December 31, 2021, 2020, and 2019 is as follows
(in thousands):
At December 31, 2021 and 2020, components of our
deferred tax assets and liabilities were as follows
(in thousands):
2021
2020
For the Years Ended December 31,
2021
2020
2019
Deferred tax assets:
Operating loss and interest deduction
carry forwards
$
197,876
$
150,001
Income before income tax
$
730,888
$ 463,328
$
373,780
Income tax at the U.S. statutory federal
rate (21% in 2021, 2020, and 2019)
Decrease (increase) in income tax
resulting from:
(153,486)
(97,299)
(78,494)
Foreign rate differential
2,742
2,160
438
Interest rate swap
Other
Total deferred tax assets
Valuation allowance
Total net deferred tax assets
—
970
1,621
Deferred tax liabilities:
State income taxes, net of
federal benefit
U.S. earnings not subject to federal
income tax
132,266
82,921
85,495
Property and equipment
Net unbilled revenue
Partnership investments
Equity investments
—
380
1,091
Change in valuation allowance
(10,040)
(8,514)
(7,911)
Other
—
1,815
199,691
(61,747)
9,150
6,973
166,124
(36,977)
137,944
$
129,147
(320,546)
$
(211,018)
(43,366)
(15,963)
(3,836)
(14,776)
—
(4,010)
$
$
Statutory tax rate change
(43,924)
(9,471)
Interest disallowance
(646)
—
—
—
Other items, net
(860)
(2,203)
381
Total income tax (expense) benefit
$
(73,948)
$
(31,056)
$
2,621
The foreign provision for income taxes is based on foreign
profit before income taxes of $164.0 million, $62.1 million,
and $10.7 million in 2021, 2020, and 2019, respectively.
The domestic provision for income taxes is based on
income (loss) before income taxes of $(29.7) million in
2021, $6.4 million in 2020, and $(44.1) million in 2019
from our TRS entities.
Total deferred tax liabilities
(383,711)
(229,804)
Net deferred tax asset (liability)
$
(245,767)
$
(100,657)
During the 2021 second quarter, the United Kingdom
enacted an increase in its corporate income tax rates
from 19% to 25% effective April 1, 2023, which resulted in
a one-time adjustment to our net deferred tax liabilities
of approximately $43 million. Similarly, in the 2020 third
quarter, we incurred an approximate $9 million charge for
the change in the corporate income tax rate from 17% to
19% in the United Kingdom.
At December 31, 2021, we had net NOL and other tax
attribute carryforwards as follows (in thousands):
Gross NOL carryforwards
Tax-effected NOL carryforwards
U.S.
Foreign
$
$
239,520
28,837
$
$
699,514
169,039
Valuation allowance
(6,291)
(45,578)
Net deferred tax asset – NOL carryforwards
$
22,546
$
123,461
Expiration periods
2030-indefinite
indefinite
71
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 2021, a valuation allowance of $24.8 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. Valuation allowance activity
recorded generally follows the activity of the associated
deferred tax asset that is not expected to be recognized.
From time-to-time, we may acquire deferred tax assets
as part of real estate transactions and will assess the
need for a valuation allowance as part of the opening
balance sheet. Additionally, valuation allowances will be
remeasured for foreign currency translation fluctuations
through other comprehensive income.
We have no material uncertain tax position liabilities and
related interest or penalties.
REIT STATUS
We have met the annual REIT distribution requirements
by payment of at least 90% of our taxable income in 2021,
2020, and 2019. 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,
2021
2020
2019
Common share distribution $
1.110000
$
1.070000
$
1.010000
Ordinary income
0.764580
0.603050
0.701910
Capital gains(1)
0.165420
—
0.275040
Unrecaptured Sec. 1250
gain
0.058270
—
0.041160
Section 199A Dividends
0.764580
0.603050
0.701910
Return of capital
0.180000
0.466950
0.033050
(1) Capital gains include unrecaptured Sec. 1250 gains.
6. EARNINGS PER SHARE
Our earnings per share were calculated based on the
following (amounts in thousands):
Numerator:
Net income
Non-controlling interests’ share
in earnings
Participating securities’ share
in earnings
Net income, less participating
securities’ share in earnings
Denominator:
Basic weighted-average
common shares
For the Years Ended December 31,
2021
2020
2019
$
656,940 $
432,272
$
376,401
(919)
(822)
(1,717)
(2,161)
(2,105)
(2,308)
$
653,860
$
429,345
$
372,376
588,817
529,239
427,075
Dilutive potential common shares
1,322
1,222
1,224
Diluted weighted-average
common shares
590,139
530,461
428,299
72
7. STOCK AWARDS
STOCK AWARDS
Our Equity Incentive Plan, adopted during the second
quarter of 2019 and replacing 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 5.7 million shares remain available for future
stock awards as of December 31, 2021. 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:
Service-Based Awards
In 2021, 2020, and 2019, 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 2021, 2020, and 2019, 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 2021, 2020, and 2019, 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 2021
and 2020 awards were based on funds from operations
growth, EBITDA, and acquisitions; whereas, the 2019
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
2021 and 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 awards, the modifier
was based on how our TSR compared to the SNL Index.
The following summarizes stock-based award activity in
2021 and 2020 (which includes awards granted in 2021,
2020, 2019, and any applicable prior years), respectively:
For the Year Ended December 31, 2021:
Vesting Based
on Service
Vesting Based on
Market/Performance
Conditions
Weighted-
Average
Value at
Award Date
Shares
Weighted-
Average
Value at
Award Date
Shares
1,057,054
$
18.79
5,086,983
651,113
(781,076)
(4,137)
$
$
$
20.83
18.77
18.69
1,957,802
(1,551,482)
(15,767)
$
$
$
$
14.41
17.94
13.73
16.72
922,954
$
20.26
5,477,536
$
15.86
Nonvested
awards at
beginning of
the year
Awarded
Vested
Forfeited
Nonvested
awards at
end of year
73
For the Year Ended December 31, 2020:
Vesting Based
on Service
Vesting Based on
Market/Performance
Conditions
Weighted-
Average
Value at
Award Date
Shares
Weighted-
Average
Value at
Award Date
Shares
1,122,440
$
17.11
5,481,155
635,855
(699,215)
(2,026)
$
$
$
19.65
16.80
18.40
1,800,898
(2,193,906)
(1,164)
$
$
$
$
11.66
19.42
11.35
18.22
1,057,054
$
18.79
5,086,983
$
14.41
Nonvested
awards at
beginning of
the year
Awarded
Vested
Forfeited
Nonvested
awards at
end of year
The value of stock-based awards is charged to
compensation expense over the service periods. For the
years ended December 31, 2021, 2020, and 2019, we
recorded $52.1 million, $47.2 million, and $32.2 million,
respectively, of non-cash compensation expense. The
remaining unrecognized cost from stock-based awards
at December 31, 2021, is $49.9 million, which will be
recognized over a weighted-average period of 1.1 years.
Stock-based awards that vested in 2021, 2020, and
2019, had a value of $49.9 million, $58.9 million, and
$25.9 million, respectively.
8. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
On September 15, 2021, we entered into definitive
agreements to lease five general acute care hospitals,
representing 5.5% of our total assets at December 31,
2021, located in Utah to HCA following an agreement by
HCA to purchase the operations of these five facilities
from Steward. Upon completion of the transaction
between HCA and Steward, we will enter into a new
master lease with HCA for these five facilities (the “HCA
Transaction”). The consummation of the HCA Transaction,
which is subject to regulatory approval, is expected in the
first half of 2022.
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,
74
if any, with respect to those proceedings is not presently
expected to materially affect our financial position,
results of operations, or cash flows.
9. COMMON STOCK
2021 ACTIVITY
On January 11, 2021, we completed an underwritten
public offering of 36.8 million shares of our common stock,
resulting in net proceeds of approximately $711 million,
after deducting underwriting discounts and commissions
and offering expenses.
In addition, we sold 16.3 million shares of common stock
under our at-the-market equity offering program during
2021, resulting in net proceeds of approximately
$340 million.
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 8, 2019, we completed an underwritten
public offering of 57.5 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 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.
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, 2021
December 31, 2020
Book
Value
Fair
Value
Book
Value
Fair
Value
$
56,229
$
56,564
$
46,208
$
45,381
991,609
991,954
751,341
756,608
(11,282,770)
(11,526,388)
(8,865,458)
(9,226,564)
Asset (Liability)
Interest and rent
receivables
Loans(1)
Debt, net
(1) Excludes the acquisition loan and mortgage loan made in October 2021 to
Springstone and the acquisition loan made in May 2020 to our international joint
venture, along with the related subsequent investment in the real estate of three
hospitals in Colombia (see Note 3 for further details), as these assets are accounted for
under the fair value option method.
ITEMS MEASURED AT FAIR VALUE ON A
RECURRING BASIS
Our equity investment and related loan to the
international joint venture, our loan investment in the
real estate of three hospitals operated by subsidiaries
of the international joint venture in Colombia, and our
equity investment and related loans in Springstone are
measured at fair value on a recurring basis as we elected
to account for these investments using the fair value
option at the point of initial investment. We elected to
account for these investments at fair value due to the size
of the investments and because we believe this method
was more reflective of current values.
At December 31, 2021 and 2020, the amounts recorded
under the fair value option method were as follows
(in thousands):
As of
December 31, 2021
As of
December 31, 2020
Fair
Value
Original
Cost
Fair Value
Original
Cost
Asset Type
Classification
$ 143,068
$ 143,068
$ 136,332
$ 136,332
409,638
409,638
218,775
218,775
Mortgage
loans
Equity
investments/
Other loans
Asset
(Liability)
Mortgage
loans
Equity
investment
and other
loans
Our loans to Springstone and the 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 at which similar loans would
be made to borrowers with similar credit ratings and
the same remaining maturities. Our equity investment
in Springstone and 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 our valuations of equity
investments as Level 3, as we use certain unobservable
inputs to the valuation methodology that are significant
to the fair value measurement, and the valuations require
management judgment due to absence of quoted market
prices. For the cash flow models, our observable inputs
include use of a capitalization rate and discount rate
(which is based on a weighted-average cost of capital)
and our unobservable input includes an adjustment
for a marketability discount (“DLOM”). In regard to the
underlying projections used in the discounted cash flow
model, such projections are provided by the investees.
However, we will modify such projections as needed
based on our review and analysis of historical results,
meetings with key members of management, and our
understanding of trends and developments within the
healthcare industry.
Given our international joint venture equity investment is
in an entity that was a startup company in 2020 and given
our equity investment in Springstone was made late in
2021, we believe the fair value of these equity investments
are in line with our cost basis. Thus, we have not
recognized any unrealized gain/loss on such investments
in 2020 or 2021.
75
122
The DLOM on our Springstone and international joint
venture equity investments was 40% at December 31,
2021. In arriving at the DLOM, we started with a DLOM
range based on the results of studies supporting valuation
discounts for other transactions or structures without a
public market. To select the appropriate DLOM within
the range, we then considered many qualitative factors,
including the percent of control, the nature of the
underlying investee’s business along with our rights as
an investor pursuant to the operating agreement, the
size of investment, expected holding period, number
of shareholders, access to capital marketplace, etc. To
illustrate the effect of movements in the DLOM, we
performed a sensitivity analysis below by using basis
point variations (dollars in thousands):
Basis Point Change in Marketability Discount
+ 100 basis points
- 100 basis points
Estimated Increase
(Decrease) in Fair Value
$
(41)
41
ITEMS MEASURED AT FAIR VALUE ON A
NONRECURRING BASIS
In addition to items that are measured at fair value
on a recurring basis, we have assets and liabilities
that are measured, from time-to-time, at fair value
on a nonrecurring basis, such as for long-lived asset
impairment purposes (see Note 3). In these cases, fair
value is based on estimated cash flows discounted at a
risk-adjusted rate of interest by using Level 2 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 offices 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.
76
The following is a summary of our lease expense
(in thousands):
Income Statement
Classification
For the Years Ended December 31,
2021
2020
(2)
$
10,694
$
9,910
Real estate
depreciation
and amortization
51
51
Interest
128
128
Operating lease
cost(1)
Finance lease cost:
Amortization of
right-of-use
assets
Interest on lease
liabilities
Sublease income
Other
(4,466)
(2,614)
Total lease cost
$
6,407
$
7,475
(1) Includes short-term leases.
(2) $6.3 million and $6.0 million included in “Property-related”, with the remainder
reflected in the “General and administrative” line of our consolidated statements
of net income for 2021 and 2020, respectively.
Fixed minimum payments due over the remaining lease
term under non-cancelable leases of more than one year
and amounts to be received in the future from non-
cancelable subleases over their remaining lease term at
December 31, 2021 are as follows (amounts
in thousands):
Operating
Leases
Finance
Leases
Amounts To
Be Received
From
Subleases
Net
Payments
$ 7,376
$ 128
$ (4,143)
$ 3,361
7,448
6,559
5,666
5,255
129
130
131
133
(3,963)
(3,987)
(4,044)
(4,015)
3,614
2,702
1,753
1,373
2022
2023
2024
2025
2026
Thereafter
239,727
4,650
(71,286)
173,091
(1)
Total undiscounted
minimum lease
payments
$ 272,031
$ 5,301
$ (91,438)
$ 185,894
Less: interest
(186,814)
(3,364)
Present value of
lease liabilities
$ 85,217
$ 1,937
(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.
122
Supplemental balance sheet information is as follows (in
thousands, except lease terms and discount rate):
12. OTHER ASSETS
The following is a summary of our other assets on our
consolidated balance sheets (in thousands):
Balance Sheet
Classification
December 31,
2021
December 31,
2020
Land
$
68,616
$
73,373
Land
1,785
1,836
Debt issue costs, net(1)
Other corporate assets
$
70,401
$
75,209
Total other assets
$
333,480
$
256,069
Prepaids and other assets
134,243
87,948
Other assets
7,458
8,234
(1) Relates to our revolving credit facility
At December 31,
2021
2020
$
5,488
$
192
193,749
167,929
Right-of-use assets:
Operating leases –
real estate
Finance leases –
real estate
Total real estate
right-of-use
assets
Operating leases –
corporate
Total right-of-use assets
$
77,859
$
83,443
Lease liabilities:
Operating leases
Financing leases
$
85,217
$
90,006
1,937
1,935
Obligations to
tenants and
other lease
liabilities
Obligations to
tenants and
other lease
liabilities
Total lease liabilities
$
87,154
$
91,941
Weighted-average
remaining lease term:
Operating leases
Finance leases
Weighted-average
discount rate:
Operating leases
Finance leases
40.6
34.9
6.4%
6.6%
41.1
35.9
6.4%
6.6%
The following is supplemental cash flow information
(in thousands):
For the Years Ended
December 31,
2021
2020
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from operating leases
$ 7,330
$ 6,080
Operating cash flows from finance leases
126
125
Non-cash activities – Right-of-use assets obtained
in exchange for lease obligations:
Operating leases
1,120
13,832
Other corporate assets include land and land
improvements associated with our corporate offices,
furniture and fixtures, equipment, corporate vehicles,
aircraft, enterprise and other software, deposits, and
right-of-use assets associated with corporate leases.
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 $1.2 billion and $1.1 billion at
December 31, 2021 and 2020, respectively. The increase
year-over-year is primarily related to new investments
in Swiss Medical Network, Priory, and Aspris Children’s
Services during 2021, partially offset by the sale of three
equity investments during 2021, as discussed further in
Note 3.
77
December 31, 2021 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, 2021, 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, 2021 has been audited by
PricewaterhouseCoopers LLP, an independent 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.
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
78
Performance Graph
The following graph provides comparison of cumulative
total stockholder return for the period from December 31,
2016 through December 31, 2021, among us, the S&P
500 Index, MSCI U.S. REIT Index, and Dow Jones U.S.
Real Estate Health Care 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:144)(cid:24)(cid:25)€‚(cid:20)(cid:19)(cid:22) (cid:143)(cid:10)ƒ(cid:24)(cid:143)(cid:1)€(cid:24)(cid:7)(cid:22)(cid:157)(cid:143)(cid:18)(cid:7)(cid:1)„(cid:22)(cid:27)(cid:26)‚(cid:5)
(cid:4) (cid:22)(cid:31)(cid:30)(cid:30)(cid:22)(cid:27)(cid:26)(cid:25)(cid:24)(cid:23)
(cid:144)(cid:4)(cid:141)(cid:27)(cid:22)(cid:6)(cid:5)(cid:4)(cid:5)(cid:22)(cid:3)(cid:2)(cid:27)(cid:157)(cid:22)(cid:27)(cid:26)(cid:25)(cid:24)(cid:23)
(cid:11)(cid:10)(cid:9)(cid:22)(cid:8)(cid:10)(cid:26)(cid:24)(cid:7)(cid:22)(cid:6)(cid:5)(cid:4)(cid:5)(cid:22)(cid:3)(cid:24)(cid:20)(cid:19)(cid:22)(cid:2)(cid:7)(cid:1)(cid:20)(cid:1)(cid:24)(cid:22)
(cid:127)(cid:24)(cid:20)(cid:19)(cid:1)(cid:129)(cid:22)(cid:141)(cid:20)(cid:143)(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: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)
(cid:29)(cid:28)(cid:17)(cid:16)(cid:29)(cid:17)(cid:28)(cid:29)
Period Ending
Index
12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21
Medical Properties
Trust, Inc.
100.00
120.55
150.72
208.79
227.68
260.16
S&P 500 Index
100.00
121.83
116.49
153.17
181.35
233.41
MSCI U.S. REIT
Index
Dow Jones U.S.
Real Estate Health
Care Index
100.00
105.07
100.27
126.18
116.62
166.84
100.00
100.63
108.19
131.43
118.55
137.80
79
CORPORATE & SHAREHOLDER INFORMATION
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PricewaterhouseCoopers LLP – Birmingham, AL
ANNUAL MEETING
The Annual Meeting of Shareholders of Medical
Properties Trust, Inc., is scheduled for May 26, 2022, at
10:30 a.m. CDT at the UAB Collat School of Business, 710
13th St. S., Birmingham, AL 35233
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
2021 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.astfinancial.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
Main: 205.969.3755 | Fax: 205.969.3756
www.medicalpropertiestrust.com
The MPT Annual Report on Form 10-K for the year ended
December 31, 2021, 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.
OFFICERS
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
Emily W. Murphy
Former Administrator, U.S. General Services
Administration
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
80
Medical Properties Trust, Inc.
1000 Urban Center Drive, Suite 501
Birmingham, AL 35242
205.969.3755
medicalpropertiestrust.com
NYSE: MPW