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What changed in MEDICAL PROPERTIES TRUST INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MEDICAL PROPERTIES TRUST INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+457 added−245 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in MEDICAL PROPERTIES TRUST INC's 2023 10-K

457 paragraphs added · 245 removed · 180 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

100 edited+219 added−15 removed165 unchanged
Biggest changeFor example, it could require us to use a substantial portion (or all) of our cash flow from operations to service our indebtedness, which would reduce the available cash flow to fund working capital, development projects, and other general corporate purposes and reduce cash for distributions; force us to dispose of one or more of our properties, possibly on disadvantageous terms, to make payments on our debt; increase our vulnerability to general adverse economic and industry conditions; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; restrict us from making strategic acquisitions or exploiting other business opportunities; and place us at a competitive disadvantage compared to our competitors that have less debt.
Biggest changeOur indebtedness could have significant effects on our business, including by: • requiring us to use a substantial portion (or all) of our cash flow from operations to service our indebtedness, which would reduce available cash flow to fund working capital, development projects, and other general corporate purposes, as well as distributions; • forcing us to dispose of one or more of our properties, possibly on disadvantageous terms, to make payments on our debt; • reducing our ability to extend existing bank debt or refinance debt on favorable terms; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restricting us from making strategic acquisitions or exploiting other business opportunities; and • placing us at a competitive disadvantage compared to our competitors that have less debt. 27 Our future borrowings under our loan facilities may bear interest at variable rates in addition to the $1.8 billion in variable interest rate debt that we had outstanding as of February 16, 2024 (excluding the variable rate debt that we have fixed through interest rate swaps).
There can be no assurance that we would be able to find another tenant in a timely fashion, or at all, or that, if another tenant were found, we would be able to enter into a new lease on favorable terms.
There can be no assurance that we would be able to find another tenant in a timely fashion, or at all, or that, if another tenant were found, we would be able to enter into a new lease on favorable terms.
Although not a comprehensive list, some possible factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: • actual or anticipated variations in our quarterly operating results or distributions; • changes in our earnings estimates, or publications of research, news, or other reports about us or the real estate industry; • changes in market valuations of similar companies; • changes in the market value of our facilities; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • an oversupply of, or a reduction in demand for, general acute care hospitals, behavioral health facilities, IRFs, LTACHs, or freestanding ER/urgent care facilities; 26 • speculation in the press or investment community; • short-selling activity; • the financial performance and health of our tenants; and • general market and economic conditions, including inflation and rising interest rates.
Although not a comprehensive list, some possible factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: • actual or anticipated variations in our quarterly operating results or distributions; • changes in our earnings estimates, or publications of research, news, or other reports about us or the real estate industry; • changes in market valuations of similar companies; • changes in the market value of our facilities; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • an oversupply of, or a reduction in demand for, general acute care hospitals, behavioral health facilities, IRFs, LTACHs, or freestanding ER/urgent care facilities; • speculation in the press or investment community; • short-selling activity; • the financial performance and health of our tenants; and • general market and economic conditions, including inflation and rising interest rates.
We may be subject to risks in connection with our acquisition of healthcare real estate, including: • we may have no previous business experience with the tenants at the facilities acquired, and we may face difficulties in working with them; • underperformance of the acquired facilities due to various factors, including unfavorable terms and conditions of any acquired lease agreements, disruptions caused by the management of our tenants, or changes in economic conditions; • diversion of our management’s attention away from other business concerns; • exposure to any undisclosed or unknown potential liabilities (including environmental liabilities) relating to the acquired facilities (or entities acquired in a share deal); and • potential underinsured losses on the acquired facilities.
We may be subject to risks in connection with our acquisition of healthcare real estate, including: • we may have no previous business experience with the tenants at the facilities acquired, and we may face difficulties in working with them; 30 • underperformance of the acquired facilities due to various factors, including unfavorable terms and conditions of any acquired lease agreements, disruptions caused by the management of our tenants, or changes in economic conditions; • diversion of our management’s attention away from other business concerns; • exposure to any undisclosed or unknown potential liabilities (including environmental liabilities) relating to the acquired facilities (or entities acquired in a share deal); and • potential underinsured losses on the acquired facilities.
However, depending on the terms of any specific transaction, taxing authorities might take the position that the transaction is not a “true lease”. In the event any sale-leaseback transaction is challenged 34 and successfully re-characterized, we might not be able to deduct depreciation expense on the real estate, resulting in potential higher income taxes.
However, depending on the terms of any specific transaction, taxing authorities might take the position that the transaction is not a “true lease”. In the event any sale-leaseback transaction is challenged and successfully re-characterized, we might not be able to deduct depreciation expense on the real estate, resulting in potential higher income taxes.
Failure to comply with these laws could subject us to civil and criminal penalties that could materially and adversely affect our results of operations, the value of our international investments, and our ability to service our debt and make distributions to our stockholders. We and our tenants have exposure to contingent rent escalators, which could impact profitability.
Failure to comply with these laws could subject us to civil and criminal penalties that could materially and 25 adversely affect our results of operations, the value of our international investments, and our ability to service our debt and make distributions to our stockholders. We and our tenants have exposure to contingent rent escalators, which could impact profitability.
If any of these events occur, we may need to 24 provide additional funding to the joint ventures to meet its obligations, incur additional expenses to resolve disputes, or be forced to buy out the partner’s interest or to sell our interests at a time that is not advantageous to us.
If any of these events occur, we may need to provide additional funding to the joint ventures to meet its obligations, incur additional expenses to resolve disputes, or be forced to buy out the partner’s interest or to sell our interests at a time that is not advantageous to us.
We compete with other healthcare REITs, healthcare providers, healthcare lenders, real estate partnerships, banks, insurance companies, private equity firms, and other investors that pursue a variety of investments, which may include investments in our tenants. We have historically developed strong, long-term relationships with many of our tenants.
We compete with other healthcare REITs, healthcare providers, healthcare lenders, real estate partnerships, banks, insurance companies, private equity firms, and other investors that pursue a variety of investments, which may include investments in our 26 tenants. We have historically developed strong, long-term relationships with many of our tenants.
From time-to-time, our tenants are subject to various federal and state inquiries, investigations, and other proceedings and would expect such governmental compliance and enforcement activities to be ongoing at any given time with respect to one or more of our 30 tenants, either on a confidential or public basis.
From time-to-time, our tenants are subject to various federal and state inquiries, investigations, and other proceedings and would expect such governmental compliance and enforcement activities to be ongoing at any given time with respect to one or more of our tenants, either on a confidential or public basis.
Our leases and mortgage loans generally require our tenants/borrowers to carry property, general liability, professional liability, loss of earnings, all risk, and extended coverage insurance in amounts sufficient to permit the replacement of the facility in the event 28 of a total loss, subject to applicable deductibles.
Our leases and mortgage loans generally require our tenants/borrowers to carry property, general liability, professional liability, loss of earnings, all risk, and extended coverage insurance in amounts sufficient to permit the replacement of the facility in the event of a total loss, subject to applicable deductibles.
Adverse decisions, fines, or recoupments might negatively impact our tenants’ financial condition, and in turn their ability to make lease and/or loan payments to us. 31 Certain of our lease arrangements may be subject to laws related to fraud and abuse or physician self-referrals.
Adverse decisions, fines, or recoupments might negatively impact our tenants’ financial condition, and in turn their ability to make lease and/or loan payments to us. Certain of our lease arrangements may be subject to laws related to fraud and abuse or physician self-referrals.
Our charter and bylaws also provide restrictions on replacing or removing directors. Directors may be removed by the affirmative vote of the holders of two-thirds 32 of our common stock. Additionally, stockholders are required to give us advance notice of director nominations.
Our charter and bylaws also provide restrictions on replacing or removing directors. Directors may be removed by the affirmative vote of the holders of two-thirds of our common stock. Additionally, stockholders are required to give us advance notice of director nominations.
The market price and trading volume of our common stock may be volatile and may decline regardless of our operating performance, and you may lose all or part of your investment. As can be seen in 2022, the market price of our common stock may be highly volatile and be subject to wide fluctuations.
The market price and trading volume of our common stock may be volatile and may decline regardless of our operating performance, and you may lose all or part of your investment. As can be seen in 2023 and 2022, the market price of our common stock may be highly volatile and subject to wide fluctuations.
Even well-protected information systems remain potentially vulnerable because the techniques used in security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
Even well-protected information systems remain potentially vulnerable because the techniques used in security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may 35 not be detected.
In addition, our tenants experience operational challenges from time-to-time, and this can be even more of a risk for those tenants that grow (or have grown) via acquisitions in a short time frame, like Steward, Circle, and others.
Our tenants experience operational challenges from time-to-time, and this can be even more of a risk for those tenants that grow (or have grown) via acquisitions in a short time frame, like Steward, Circle, and others.
If property taxes increase, our tenants may be unable to make the required tax payments, ultimately requiring us to pay the taxes. If we incur these tax liabilities, our ability to service our debt and make expected distributions to our stockholders could be adversely affected.
If property taxes increase, our tenants may be unable to make the required tax payments, ultimately requiring us to pay the taxes. If we incur these tax liabilities, our ability to service our debt and make expected distributions to our 31 stockholders could be adversely affected.
If the market price of our common stock declines significantly, you may be unable to sell your shares at or above your purchase price. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.
If the market price of our common stock declines significantly, you may be unable to sell your shares at or above your purchase price. 28 We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.
In instances where we have an equity investment in our tenants’ operations, in addition to the effect on these tenants’ ability to meet their financial obligations to us, our ownership and investment interests may also be negatively impacted.
In instances where we have an equity investment in our tenants’ operations, 32 in addition to the effect on these tenants’ ability to meet their financial obligations to us, our ownership and investment interests may also be negatively impacted.
The terms of our unsecured credit facility ("Credit Facility") and the indentures governing our outstanding unsecured senior notes and other debt instruments that we may enter into in the future are subject to customary financial and operational covenants.
The terms of our unsecured credit facility ("Credit Facility") and the indentures governing our outstanding unsecured senior notes and other debt instruments that we may enter into in the future are subject to customary financial, operational, and reporting covenants.
Under applicable rules, transactions such as leases between our TRS and its parent REIT that are not conducted on a market terms basis may be subject to a 100% excise tax.
Under applicable rules, transactions such as leases between our TRS and its parent REIT that are not conducted on a 37 market terms basis may be subject to a 100% excise tax.
In addition, the revenues and expenses incurred internationally are denominated in either euros, British pounds, Swiss francs, Australian dollars, or Colombian pesos, which could expose us to losses resulting from fluctuations in exchange rates to the extent we have not hedged our position, which in turn could adversely affect our revenues, operating margins, and dividends, and may also affect the book value of our assets and the amount of stockholders’ equity.
In addition, the revenues and expenses incurred internationally are denominated in either euros, British pounds, Swiss francs, or Colombian pesos, which could expose us to losses resulting from fluctuations in exchange rates to the extent we have not hedged our position, which in turn could adversely affect our revenues, operating margins, and dividends, and may also affect the book value of our assets and the amount of stockholders’ equity.
For 93 of these properties, the purchase option generally allows the lessee to purchase the real estate at the end of the lease term, assuming not currently in default, at a price equivalent to the greater of (i) fair market value or (ii) our original purchase price (increased, in some cases, by a certain annual rate of return from the lease commencement date).
For 95 of these properties, the purchase option generally allows the lessee to purchase the real estate at the end of the lease term, assuming not currently in default, at a price equivalent to the greater of (i) fair market value or (ii) our original purchase price (increased, in some cases, by a certain annual rate of return from the lease commencement date).
Special meetings of stockholders can only be called by our president, our board of directors, or the holders of at least 25% of stock entitled to vote at the meetings.
Special meetings of stockholders can only be called by our president, our Board, or the holders of at least 25% of stock entitled to vote at the meetings.
Adverse U.S. and global market, economic and political conditions, including dislocations and volatility in the credit markets, rising inflation and interest rates, and general global economic uncertainty, could have a material adverse effect on our business, results of operations, and financial condition as a result of the following potential consequences, among others: • reduced values of our properties may limit our ability to dispose of assets at attractive prices, or at all, or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans; and • our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and redevelopment opportunities and refinance existing debt, reduce our returns from our acquisition and redevelopment activities and increase our future interest expense.
Adverse U.S. and global market, economic and political conditions, including dislocations and volatility in the credit markets, rising inflation and interest rates, and general global economic uncertainty, could have a material adverse effect on our business, results of operations, and financial condition as a result of the following potential consequences, among others: • reduced values of our properties may limit our ability to dispose of assets at attractive prices, or at all, or to obtain debt financing secured by our properties and may reduce the availability of unsecured loans; and • our ability to obtain financing on terms and conditions that we find acceptable, or at all, may be limited, which could reduce our ability to pursue acquisition and redevelopment opportunities, refinance existing debt, reduce our returns from our acquisition and redevelopment activities, reduce our ability to sell properties or re-tenant properties at favorable terms, and increase our future interest expense.
Our tenants operate in the healthcare industry, which is highly regulated by U.S. federal, state, and local laws along with laws in Europe, Australia, and South America and changes in regulations may temporarily impact our tenants’ operations until they are able to make the appropriate adjustments to their business.
In addition, our tenants operate in the healthcare industry, which is highly regulated by U.S. federal, state, and local laws along with laws in Europe and South America and changes in regulations may temporarily impact our tenants’ operations until they are able to make the appropriate adjustments to their business.
If we were to lose any of these, it may be more difficult for us to locate attractive acquisition targets, complete our acquisitions, and manage the facilities that we have acquired or developed. Additionally, as we expand, we will continue to need to attract and retain additional qualified officers and employees.
If we were to lose any of these, it may be more difficult for us to locate attractive acquisition targets, complete our acquisitions, and manage the facilities that we have acquired or developed. Additionally, we will continue to need to attract and retain additional qualified officers and employees.
Our failure to manage such growth effectively may adversely impact our financial condition and cash flows, which could negatively affect our ability to service our debt and make distributions to our stockholders. Our rapid growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and/or incur additional debt.
Our failure to manage our growth effectively may adversely impact our financial condition and cash flows, which could negatively affect our ability to service our debt and make distributions to our stockholders. Our growth could also increase our capital requirements, which may require us to issue potentially dilutive equity securities and/or incur additional debt.
Therefore, we will likely need to refinance at least a portion of that debt as it matures. There is a risk that we may not be able to refinance debt maturing in 2023 and future years or that the terms of any refinancing will not be as favorable as the terms of the then-existing debt.
Therefore, we will likely need to refinance at least a portion of that debt as it matures. There is a risk that we may not be able to refinance debt maturing in 2024 and future years or that the terms of any refinancing will not be as favorable as the terms of the then-existing debt.
In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. A variety of factors may cause significant price variations, including the amount and status of short interest in our securities and any coordinated trading activities or large derivative positions in our common stock.
In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. A variety of factors may cause significant price variations, including, we believe, the amount and status of short interest in our securities and any coordinated trading activities or large derivative positions in our common stock.
In addition, if strong economic conditions or higher than normal inflation results in significant increases in CPI (like has been the case in 2022), but the escalations under our leases are capped, our growth and profitability may be limited.
In addition, if strong economic conditions or higher than normal inflation results in significant increases in CPI (like has been the case in 2023), but the escalations under our leases are capped, our growth and profitability may be limited.
Financial and other covenants that limit our operational flexibility, as well as defaults resulting from a breach of any of these covenants in our debt instruments, could have a material adverse effect on our financial condition and results of operations.
Financial and other covenants, among others, that limit our operational flexibility, as well as defaults resulting from a breach of any of these covenants in our debt instruments, could have a material adverse effect on our financial condition and results of operations.
All of our healthcare facilities are subject to property taxes that may increase in the future and adversely affect our business. Our facilities are subject to real and personal property taxes that may increase as property tax rates change and as the facilities are assessed or reassessed by taxing authorities.
Certain of our healthcare facilities are subject to property taxes that may increase in the future and adversely affect our business. Our facilities are subject to real and personal property taxes that may increase as property tax rates change and as the facilities are assessed or reassessed by taxing authorities.
Public health crises, pandemics and epidemics, such as those caused by new strains of viruses such as H5N1 (avian flu), severe acute respiratory syndrome (SARS) and, most recently, COVID-19, could adversely impact our and our tenants’ business by disrupting supply chains and transactional activities, and negatively impacting local, national, or global economies.
Public health crises, pandemics and epidemics, such as those caused by new strains of viruses such as H5N1 (avian flu), severe acute respiratory syndrome (SARS) and, most recently, COVID-19, could adversely impact our and our tenants’ business by disrupting supply chains and transactional activities, creating labor shortages, and negatively impacting local, national, or global economies.
For 13 of these properties, the purchase option generally allows the lessee to purchase the real estate at the end of the lease term, assuming not currently in default, at our purchase price (increased, in some cases, by a certain annual rate of return from lease commencement date). For the remaining eight leases, the purchase options approximate fair value.
For nine of these properties, the purchase option generally allows the lessee to purchase the real estate at the end of the lease term, assuming not currently in default, at our purchase price (increased, in some cases, by a certain annual rate of return from lease commencement date). For the remaining eight properties, the purchase options approximate fair value.
We have purchased certain properties and leased them back to the sellers of such properties. We intend for any such sale-leaseback transactions to be structured in a manner that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner of the property for income tax purposes.
We have purchased certain properties and leased them back to the sellers of such properties. We intend for any such sale-leaseback transactions to be structured in a manner that the lease will be characterized as a “true lease,” thereby allowing us to be treated as the owner of the property for U.S. federal income tax purposes.
Our revenues are dependent upon our relationships with and success of our tenants, particularly our largest tenants, like Steward, Circle, Prospect, Priory, and Springstone. Our tenants’ financial performance and resulting ability to satisfy their lease and loan obligations to us are material to our financial results and our ability to service our debt and make distributions to our stockholders.
Our revenues are dependent upon our relationships with and success of our tenants, particularly our largest tenants, like Steward, Circle, Priory, Prospect, and Lifepoint Behavioral. Our tenants’ financial performance and resulting ability to satisfy their lease and loan obligations to us are material to our financial results and our ability to service our debt and make distributions to our stockholders.
Any adverse result to our tenants (particularly Steward, Circle, Prospect, Priory, and Springstone) in regulatory proceedings or financial or operational setbacks may have a material adverse effect on the relevant tenant’s operations and on its ability to make required lease and loan payments to us.
Any adverse result to our tenants (particularly Steward, Circle, Priory, Prospect, and Lifepoint Behavioral) in regulatory proceedings or financial or operational setbacks may have a material adverse effect on the relevant tenant’s operations and on its ability to make required lease and loan payments to us.
See Item 7 of Part II of this Annual Report on Form 10-K for further information on our current debt maturities. 25 Covenants in our debt instruments limit our operational flexibility, and a breach of these covenants could materially affect our financial condition and results of operations.
See Item 7 of this Annual Report on Form 10-K for further information on our current debt maturities. Covenants in our debt instruments limit our operational flexibility, and a breach of these covenants could materially affect our financial condition and results of operations.
We have investments in five unconsolidated real estate joint ventures with independent parties that total approximately $1.5 billion at December 31, 2022.
We have investments in five unconsolidated real estate joint ventures with independent parties that total approximately $1.5 billion at December 31, 2023.
This variable rate debt subjects us to interest rate volatility. To manage this interest rate volatility, we have entered into interest rate swaps to fix the interest rate on all but $1.1 billion of this debt and have an interest rate cap in place on another $900 million.
This variable rate debt subjects us to interest rate volatility. To manage this interest rate volatility, we have entered into interest rate swaps to fix the interest rate on all but $1.8 billion of this debt and have an interest rate cap in place on another $890 million.
Our continued ability to incur debt and operate our business is subject to compliance with the covenants in our debt instruments, which limit operational flexibility. Breaches of these covenants could result in defaults under applicable debt instruments and other debt instruments due to cross-default provisions, even if payment obligations are satisfied.
Our continued ability to incur debt and operate our business is subject to compliance with the covenants in our debt instruments. Breaches of these covenants could result in defaults under applicable debt instruments and other debt instruments due to cross-default provisions, even if payment obligations are satisfied.
The U.S. government, as well as the governments of many of the locations in which we operate (such as Australia, Germany, the United Kingdom, Colombia, Portugal, Spain, Finland, and Luxembourg, which is where most of our Europe entities are domiciled) are actively discussing changes to corporate taxation.
The U.S. government, as well as the governments of many of the locations in which we operate (such as Germany, the U.K., Colombia, Portugal, Spain, Finland, and Luxembourg, which is where most of our Europe entities are domiciled) are actively discussing changes to corporate taxation.
As with the U.S. healthcare industry, our tenants in Australia, the United Kingdom, South America, and other parts of Europe are also subject in some instances to comparable types of laws, regulations, and rules that affect their ownership and operation of healthcare facilities.
As with the U.S. healthcare industry, our tenants in the U.K., South America, and other parts of Europe are also subject in some instances to comparable types of laws, regulations, and rules that affect their ownership and operation of healthcare facilities.
We have less experience with healthcare facilities located outside the U.S. At December 31, 2022, we had approximately 39% of our total assets located in nine different countries outside the U.S. We have less experience investing in healthcare properties or other real estate-related assets located outside the U.S.
We have less experience with healthcare facilities located outside the U.S. At December 31, 2023, we had approximately 39% of our total assets located in eight different countries outside the U.S. We have less experience investing in healthcare properties or other real estate-related assets located outside the U.S.
We have acquired interests in 29 facilities, at least in part, by acquiring leasehold interests in the land on which the facility is located rather than an ownership interest in the property.
We have acquired interests in 28 facilities, at least in part, by acquiring leasehold interests in the land on which the facility is located rather than an ownership interest in the land.
As a result, interest rate fluctuations and capital market conditions can affect the market price of our common stock. In addition, rising interest rates would result in increased interest expense on our variable-rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and make distributions.
As a result, interest rate fluctuations and capital market conditions can affect the market price of our common stock. In addition, rising interest rates would result in increased interest expense on our variable-rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and make distributions. Limited access to capital may restrict our growth.
As was the case from 2008 through 2010, as well as most of 2022, these factors, combined with volatile oil prices and fluctuating business and consumer confidence, can precipitate a steep economic decline.
As was the case from 2008 through 2010, as well as most of 2022 and 2023, these factors, combined with volatile oil prices and fluctuating business and consumer confidence, can precipitate an economic decline.
Many of our tenants have an option to purchase the facilities we lease to them, which could disrupt our operations. Many of our tenants have the option to purchase the facilities we lease to them. There is no assurance that the formulas we have developed for setting the purchase price will yield a fair market value purchase price.
Many of our tenants have the option to purchase the facilities we lease to them. There is no assurance that the formulas we have developed for setting the purchase price will yield a fair market value purchase price.
The nature and timing of any changes to each jurisdiction’s tax laws and the impact on our future tax exposure both in the U.S. and abroad cannot be predicted with any accuracy but could materially and adversely impact our results of operations and cash flows. ITEM 1B. U nresolved Staff Comments None. 35
The nature and timing of any changes to each jurisdiction’s tax laws and the impact on our future tax exposure both in the U.S. and abroad cannot be predicted with any accuracy but could materially and adversely impact our results of operations and cash flows.
We have experienced rapid growth over the years, from adding new tenants to expanding our global footprint, and our failure to effectively manage our growth may adversely impact our financial condition and cash flows, which could negatively affect our ability to service our debt and make distributions.
See Item 2 for our lease and loan maturity schedule. We have experienced rapid growth over the years, from adding new tenants to expanding our global footprint, and our failure to effectively manage our growth may adversely impact our financial condition and cash flows, which could negatively affect our ability to service our debt and make distributions.
Failure to hedge effectively against interest rate changes may adversely affect our results of operations and our ability to make distributions to our stockholders. As of February 17, 2023, we had approximately $2.8 billion in variable interest rate debt along with €655 million and approximately $900 million in our joint venture arrangements with Primotop Holdings S.à.r.l. (“Primotop”) and MAM, respectively.
Failure to hedge effectively against interest rate changes may adversely affect our results of operations and our ability to make distributions to our stockholders. As of February 16, 2024, we had approximately $3.0 billion in variable interest rate debt along with €655 million and approximately $890 million in our joint venture arrangements with Primotop Holdings S.à.r.l. (“Primotop”) and MAM, respectively.
We have 114 leased properties that are subject to purchase options as of December 31, 2022.
We have 112 leased properties that are subject to purchase options as of December 31, 2023.
There is no assurance that we will be able to adapt our management, administrative, accounting, and operational systems, or hire and retain sufficient operational staff, to manage the facilities we have acquired over the years across ten countries and those that we may acquire or develop in the future.
There is no assurance that we will be able to adapt our management, administrative, accounting, and operational systems, or hire and retain sufficient operational staff, to manage any facilities that we may acquire or develop in the future.
In some cases, we could be required to apply a new or revised standard retroactively, resulting in potentially material restatements of prior period financial statements. Similarly, these changes could have a material impact on our tenants’/borrowers’ reported financial condition or results of operations or could affect our tenants’ preferences regarding leasing real estate.
These changes could have a material impact on our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in potentially material restatements of prior period financial statements.
If we lose or revoke our REIT status (currently or with respect to any tax years for which the statute of limitations has not yet expired), we will face serious tax consequences that will substantially reduce the funds available for distribution because we would not be allowed a deduction for distributions to stockholders in computing our taxable income; therefore, we would be subject to federal income tax at regular corporate rates, and we might need to borrow money or sell assets in order to pay any such tax.
It is possible that future economic, market, legal, tax, or other considerations may cause our Board to revoke the REIT election, which it may do without stockholder approval. 36 If we lose or revoke our REIT status (currently or with respect to any tax years for which the statute of limitations has not yet expired), we will face serious tax consequences that will substantially reduce the funds available for distribution because we would not be allowed a deduction for distributions to stockholders in computing our taxable income; therefore, we would be subject to U.S. federal income tax at regular corporate rates, and we might need to borrow money or sell assets in order to pay any such tax.
Uncertainties posed by various initiatives of accounting standard-setting by the Financial Accounting Standards Board (“FASB”) and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements. 33 These changes could have a material impact on our reported financial condition and results of operations.
Uncertainties posed by various initiatives of accounting standard-setting by the Financial Accounting Standards Board (“FASB”) and the SEC, which create and interpret applicable accounting standards for U.S. companies, may change the financial accounting and reporting standards or their interpretation and application of these standards that govern the preparation of our financial statements.
Another economic or financial crisis, significant concerns over energy costs and inflation, rising interest rates, geopolitical issues, the availability and cost of credit, or a declining real estate market in the U.S. or abroad can contribute to increased volatility, diminished expectations for the economy and the markets, shortage of available healthcare workers and related increased labor costs, and high levels of unemployment by historical standards.
Another economic or financial crisis, significant concerns over energy costs and inflation, rising interest rates, geopolitical issues (including as a result of the armed conflict between Russia and Ukraine, and recent escalation in the conflict between the State of Israel and Hamas, and potentially other countries in the Middle East and North Africa), the availability and cost of credit, or a declining real estate market in the U.S. or abroad can contribute to increased volatility, diminished expectations for the economy and the markets, shortage of available healthcare workers and related increased labor costs, and high levels of unemployment by historical standards.
Defaults by our tenants under our leases may adversely affect our results of operations, financial condition, and our ability to service our debt and make distributions to our stockholders. Defaults by our significant tenants under master leases (like Steward, Circle, and Prospect) will have an even greater effect.
Defaults by our tenants under our leases may adversely affect our results of operations, financial condition, and our ability to service our debt and make distributions to our 24 stockholders. Defaults by our significant tenants under master leases (like Steward, Circle, Priory, Prospect, and Lifepoint Behavioral) would have an even more pronounced negative impact.
Sources of revenue for our tenants may include the Medicare and Medicaid programs, private insurance carriers, and health maintenance organizations, among others. In addition to ongoing efforts to reduce healthcare costs, the failure of any of our tenants to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid, and other government-sponsored payment programs.
In addition to ongoing efforts to reduce healthcare costs, the failure of any of our tenants to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid, and other government-sponsored payment programs.
Any loss of revenues or additional capital expenditures occurring as a result could have a material adverse effect on our financial condition and results of operations and could hinder our ability to meet debt service obligations or make distributions to our stockholders. 27 Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our facilities and harm our financial condition.
Any loss of revenues or additional capital expenditures occurring as a result could have a material adverse effect on our financial condition and results of operations and could hinder our ability to meet debt service obligations or make distributions to our stockholders.
As a result of all these factors, a loss or revocation of our REIT status could have a material adverse effect on our financial condition and results of operations and would adversely affect the value of our common stock. Failure to make required distributions as a REIT would subject us to tax.
REIT, the related U.K. operations would be subject to higher tax rates like non-REITs. As a result of all these factors, a loss or revocation of our REIT status could have a material adverse effect on our financial condition and results of operations and would adversely affect the value of our common stock.
Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. Development and construction risks could adversely affect our ability to service debt and make distributions. We have developed and constructed facilities in the past and are currently developing several facilities.
Development and construction risks could adversely affect our ability to service debt and make distributions. We have developed and constructed facilities in the past and are currently developing several facilities.
However, any significant negative impact to our tenants could have a material adverse effect on our financial condition and results of operations and could negatively affect our ability to service our debt and make distributions to our stockholders.
We cannot predict with absolute precision how these changes will affect the long-term financial condition of our tenants. However, any significant negative impact to our tenants could have a material adverse effect on our financial condition and results of operations and could negatively affect our ability to service our debt and make distributions to our stockholders.
Any of the foregoing could have a materially adverse effect on our business, financial condition, and results of operations. Unfavorable resolution of pending and future litigation or other regulatory proceedings could have a material adverse effect on our financial condition. From time-to-time, we may be involved in litigation and regulatory proceedings.
Any of the foregoing could have a materially adverse effect on our business, financial condition, and results of operations. Unfavorable resolution of pending and future litigation, regulatory proceedings, or governmental inquiries could have a material adverse effect on our and our tenants' business, results of operations, financial condition, and reputation.
There is continued focus on transitioning Medicare from its traditional fee-for-service model to models that employ one or more capitated, value-based, or bundled payment approaches, and private payors have implemented similar types of alternative payment models. Such efforts from private and government payors, in addition to general industry trends, continue to place pressures on our tenants to control healthcare costs.
In the U.S., there is continued focus on transitioning Medicare from its traditional fee-for-service model to models that employ one or more capitated, value-based, or bundled payment approaches, and private payors have implemented similar types of alternative payment models.
Finally, healthcare facility reimbursement practices and quality of care issues may result in loss of license or certification, such as engaging in the practice of “upcoding,” whereby services are billed for higher procedure codes, or an event involving poor quality of care, which leads to the serious injury or death of a patient.
Facilities may lose accreditation for failure to meet such requirements, which in turn may result in the loss of license or certification including under the Medicare and Medicaid programs, as well as inability to participate in certain managed care plans, which require the healthcare provider to be accredited. 33 Finally, healthcare facility reimbursement practices and quality of care issues may result in loss of license or certification, such as engaging in the practice of “upcoding,” whereby services are billed for higher procedure codes, or an event involving poor quality of care, which leads to the serious injury or death of a patient.
We compete for development opportunities and opportunities to purchase healthcare facilities with, among others: private investors, including large private equity funds; healthcare providers, including physicians; other REITs; real estate developers; government-sponsored and/or not-for-profit agencies; financial institutions; and other lenders.
We compete for acquisition and development opportunities with, among others, private investors, including large private equity funds; healthcare providers, including physicians; other REITs; real estate developers; government-sponsored and/or not-for-profit agencies; financial institutions; and other lenders. Some of these competitors may have substantially greater financial resources than we have and may have better relationships with lenders and sellers.
RISKS RELATING TO THE HEALTHCARE INDUSTRY The continued pressure on fee-for-service reimbursement from third-party payors and the shift towards alternative payment models, could adversely affect the profitability of our tenants and hinder their ability to make payments to us.
RISKS RELATING TO THE HEALTHCARE INDUSTRY The continued pressure on healthcare reimbursement in the U.S. and other countries in which we do business, including shifts from fee-for-service reimbursement towards alternative payment models and other healthcare policy reforms, could adversely affect the profitability of our tenants and hinder their ability to make payments to us.
As of December 31, 2022, our largest tenants – Steward, Circle, Prospect, Priory, and Springstone – represented 24.2%, 10.5%, 7.5%, 6.6%, and 5.0%, respectively, of our total assets.
As of December 31, 2023, our largest tenants – Steward, Circle, Priory, Prospect, and Lifepoint Behavioral – represented 19.2%, 11.6%, 7.6%, 6.0%, and 4.4%, respectively, of our total assets.
Please refer to the section entitled “A Warning About Forward Looking Statements” at the beginning of this Annual Report. RISKS RELATED TO OUR BUSINESS AND GROWTH STRATEGY Adverse U.S. and global market, economic and political conditions, health crises and other events beyond our control could have a material adverse effect on our business, results of operations, and financial condition.
RISKS RELATED TO OUR BUSINESS, TENANTS, AND STRATEGY Adverse U.S. and global market, economic and political conditions, health crises and other events beyond our control could have a material adverse effect on our business, results of operations, and financial condition.
We cannot assure you that our tenants would be able to fulfill their indemnification obligations and, therefore, any material violation of environmental laws could have a material adverse effect on us.
We cannot assure you that our tenants would be able to fulfill their indemnification obligations and, therefore, any material violation of environmental laws could have a material adverse effect on us. In addition, environmental laws are constantly evolving, and changes in laws or regulations, or changes in interpretations of the foregoing, could create liabilities where none exist today.
In addition, we own a direct interest in two subsidiary REITs that have elected to be taxed as a REIT commencing with the 2019 and 2022 tax years, respectively. The REIT qualification requirements are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited.
We believe that we qualify as a REIT for U.S. federal income tax purposes as of December 31, 2023. In addition, we own a direct interest in two subsidiary REITs that have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with the 2019 and 2022 tax years, respectively.
Real estate investments are relatively illiquid. Additionally, the real estate market is affected by many factors beyond our control, including adverse changes in global, national, and local economic and market conditions and the availability, costs, and terms of financing.
Additionally, the real estate market is affected by many factors beyond our control, including adverse changes in global, national, and local economic and market conditions and the availability, costs, and terms of financing. Our ability to quickly sell or exchange any of our facilities in response to changes in economic and other conditions will be limited.
Even if these governmental programs eventually increase reimbursement rates in line with CPI, there could be interim shortfall for our tenants, which may adversely impact our ability to collect rent/interest on a timely basis. The bankruptcy or insolvency of our tenants or investees could harm our operating results and financial condition.
Even if these governmental programs eventually increase reimbursement rates in line with CPI, there could be interim shortfalls for our tenants, which may adversely impact our ability to collect rent/interest on a timely basis. Our business is highly competitive, and we may be unable to compete successfully.
In addition, environmental laws are constantly evolving, and changes in laws or regulations, or changes in interpretations of the foregoing, could create liabilities where none exist today. 29 Our interests in facilities through ground leases expose us to the loss of the facility upon breach or termination of the ground lease, may limit our use of the facility, and may result in additional expense to us if our tenants vacate our facility.
Our interests in facilities through ground leases expose us to the loss of the facility upon breach or termination of the ground lease, may limit our use of the facility, and may result in additional expense to us if our tenants vacate our facility.
RISKS RELATED TO FINANCING OUR BUSINESS Limited access to capital may restrict our growth. Our business plan contemplates growth through acquisitions and development of facilities. As a REIT, we are required to make cash distributions, which reduce our ability to fund acquisitions and developments with retained earnings.
Our business plan contemplates growth through acquisitions and development of facilities. As a REIT, we are required to make distributions, which (if paid in cash) reduce our ability to fund acquisitions and developments with retained earnings. Thus, access to 29 the capital markets, bank borrowings, and other financing vehicles are important to fund new opportunistic investments.
Also, if the property needs to be renovated to accommodate multiple tenants, or regulatory requirements, we may incur substantial expenditures before we are able to re-lease the space. These expenditures or renovations may have a material adverse effect on our business, results of operations, and financial condition.
Also, if the property needs to be renovated to accommodate multiple tenants, or regulatory requirements, we may incur substantial expenditures before we are able to re-lease the space.
We have experienced growth through investments in healthcare properties and expansion into ten countries and four continents. We continually evaluate property acquisition and development opportunities as they arise, and we typically have a number of potential acquisition and development transactions under active consideration.
In past years, we have experienced growth through investments in healthcare properties and expansion into nine countries and three continents. We continually evaluate property acquisition and development opportunities as they arise.
If we are unable to acquire or develop facilities or if we pay too much for facilities, our revenue, earnings growth, and financial return could be materially adversely affected. Certain of our facilities, or facilities we may acquire or develop in the future, will face competition from other nearby facilities that provide services comparable to those offered at our facilities.
Competition for healthcare facilities may adversely affect our ability to acquire or develop healthcare facilities and the prices we pay for those facilities. If we are unable to acquire or develop facilities or if we pay too much for facilities, our revenue, earnings growth, and financial return could be materially adversely affected.
Compliance with current and future changes to REIT requirements may limit our flexibility in executing our business plan. If certain sale-leaseback transactions are not characterized by the Internal Revenue Service (“IRS”) or similar tax authorities internationally as “true leases,” we may be subject to adverse tax consequences.
In order to meet these tests, we may be required to forego attractive business or investment opportunities. If certain sale-leaseback transactions are not characterized by the Internal Revenue Service (“IRS”) or similar tax authorities internationally as “true leases,” we may be subject to adverse tax consequences.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table shows lease and loan expirations, assuming that none of the tenants/borrowers exercise any of their renewal options (dollars in thousands): Total Lease and Loan Portfolio(1) Total Leases/ Loans(2) Annualized Base Rent/ Interest(3) % of Total Annualized Base Rent/ Interest Total Square Footage Total Licensed Beds 2023 4 $ 14,903 1.2 % 912,652 703 2024 1 2,731 0.2 % 115,039 170 2025 7 18,785 1.5 % 1,371,928 792 2026 4 2,333 0.2 % 332,221 238 2027 1 3,346 0.3 % 102,948 13 2028 4 5,832 0.5 % 142,328 74 2029 6 15,788 1.2 % 689,378 405 2030 11 6,053 0.5 % 220,258 59 2031 4 4,236 0.3 % 172,655 89 2032 41 64,384 5.1 % 1,291,879 803 Thereafter 346 1,117,664 89.0 % 47,798,993 40,684 Total 429 $ 1,256,055 100.0 % 53,150,279 44,030 (1) Schedule includes leases and mortgage loans.
Biggest changeThe following table shows lease and loan expirations, assuming that none of the tenants/borrowers exercise any of their renewal options (dollars in thousands): Total Lease and Loan Portfolio(1) Total Leases/ Loans(2) Annualized Base Rent/ Interest(3) % of Total Annualized Base Rent/ Interest Total Square Footage Total Licensed Beds 2024 — $ — — — — 2025 7 19,961 1.5 % 1,371,928 778 2026 4 2,274 0.2 % 332,221 238 2027 1 3,476 0.3 % 102,948 13 2028 8 19,968 1.5 % 2,281,409 548 2029 6 15,163 1.2 % 734,452 527 2030 11 6,454 0.5 % 220,258 59 2031 4 4,789 0.4 % 172,655 89 2032 41 68,677 5.3 % 1,291,879 804 2033 8 11,991 0.9 % 230,296 142 Thereafter 336 1,147,291 88.2 % 45,353,110 39,438 Total 426 $ 1,300,044 100.0 % 52,091,156 42,636 (1) Schedule includes leases and mortgage loans and related terms as of December 31, 2023.
ITEM 2. P roperties At December 31, 2022, our portfolio (including properties in our five real estate joint ventures) consisted of 444 properties (439 owned and five in the form of a first lien mortgage loan). Of these facilities, 432 properties are operated by 55 different operators, while seven properties were under construction and five facilities were vacant.
ITEM 2. P roperties At December 31, 2023, our portfolio (including properties in our five real estate joint ventures) consisted of 439 properties (including properties under construction or in the form of a first lien mortgage loan) operated by 54 different operators. Our vacant facilities represent less than 0.3% of total assets at December 31, 2023.
(3) The December 2022 base rent and mortgage loan interest are annualized. This does not include tenant recoveries, additional rents, and other lease/loan-related adjustments to revenue (i.e., straight-line rents and deferred revenues). 37
(2) Reflects all properties, including properties owned through our real estate joint ventures, except vacant properties and facilities that are under development. 42 (3) The December 2023 base rent and mortgage loan interest per the lease/loan agreements are annualized. This does not include tenant recoveries, additional rents, and other lease/loan-related adjustments to revenue (i.e., straight-line rents, deferred revenues, or reserves/write-offs).
(b) Includes one development project still under construction at December 31, 2022. (c) Includes one facility that was vacant at December 31, 2022. (d) Includes two development projects still under construction and four facilities that were vacant at December 31, 2022.
See Note 3 to Item 8 of this Annual Report on Form 10-K. (B) Represents total assets at December 31, 2023. (C) Includes one facility that was vacant at December 31, 2023. (D) Includes development projects still under construction and facilities that were vacant at December 31, 2023. (E) Includes development projects still under construction at December 31, 2023.
Our investment in facilities that were vacant at December 31, 2022 is less than 0.3% of total assets. 36 (e) Includes three development projects still under construction at December 31, 2022. (f) For Germany, the U.S., Switzerland, Spain, and Italy, we own properties through five real estate joint venture arrangements.
(F) For Germany, the U.S., Switzerland, Spain, and Italy, we own properties through five real estate joint venture arrangements.
A breakout of our facilities at December 31, 2022 based on property type is as follows: Number of Properties Total Square Footage Total Licensed Beds(A) General acute care hospitals 202 37,578,686 23,059 Behavioral health facilities 67 3,205,254 4,496 IRFs 112 12,692,798 16,244 LTACHs 20 1,174,007 939 FSERs 43 407,936 — 444 55,058,681 44,738 (a) Excludes our seven facilities that are under development.
The table below shows revenues earned from our joint venture arrangements: Total Properties Total 2023 Revenues (Dollars in thousands) Germany 71 $ 64,578 U.S. 8 41,217 Switzerland 19 48,606 Spain 2 7,033 Italy 8 9,218 Total 108 $ 170,652 A breakout of our facilities at December 31, 2023 based on property type is as follows: Number of Properties Total Square Footage Total Licensed Beds(A) General acute care hospitals 192 35,112,270 20,758 Behavioral health facilities 70 3,272,782 4,479 IRFs 114 12,954,523 16,611 LTACHs 20 1,174,007 939 FSERs 43 407,936 — 439 52,921,518 42,787 (A) Excludes our facilities that are under development.
Removed
Total Properties Total 2022 Revenues Total Assets(A) (Dollars in thousands) United States: Alabama 2 $ 791 $ 6,946 Arizona 18 65,468 563,324 Arkansas 2 10,593 80,627 California 20 147,281 1,450,112 (B) Colorado 14 18,423 162,142 Connecticut 3 46,917 457,826 Florida 9 101,947 1,324,555 Idaho 6 34,236 253,858 Indiana 5 3,884 64,994 Iowa 1 4,912 50,701 Kansas 11 25,682 291,141 (C) Kentucky 1 23,904 264,535 Louisiana 6 15,182 127,562 Massachusetts 10 53,114 761,694 (F) Michigan 2 3,588 21,342 Missouri 4 16,693 129,738 Montana 1 1,830 18,494 Nevada — 7,333 — New Jersey 6 34,320 270,552 New Mexico 2 5,071 47,405 North Carolina 1 3,026 32,760 Ohio 9 45,763 354,922 Oklahoma 2 6,964 74,565 Oregon 1 11,453 89,682 Pennsylvania 9 78,513 573,420 South Carolina 8 13,830 131,977 (B) Texas 52 157,550 1,967,948 (D) Utah 7 139,204 1,224,484 Virginia 2 3,085 20,140 Washington 2 3,454 37,741 Wisconsin 1 3,348 23,007 Wyoming 3 9,106 95,905 Other assets — — 1,028,946 Total United States 220 $ 1,096,465 $ 12,003,045 International: Australia 11 $ 61,239 $ 854,582 Colombia 4 13,659 143,127 Germany 82 33,049 664,900 (F) Italy 8 — 86,245 (F) Portugal 2 3,232 50,072 Spain 9 7,274 222,316 (E)(F) Switzerland 17 1,752 748,947 (F) United Kingdom 87 317,013 4,083,244 Finland 4 9,168 219,309 Other assets — — 582,213 Total International 224 $ 446,386 $ 7,654,955 Total 444 $ 1,542,851 $ 19,658,000 (a) Represents total assets at December 31, 2022.
Added
Total Properties Total 2023 Revenues(A) Total Assets(B) (Dollars in thousands) United States: Alabama 2 $ 791 $ 6,684 Arizona 18 2,131 547,789 Arkansas 2 10,146 78,146 California 19 102,224 1,252,674 Colorado 14 18,544 159,292 Connecticut 3 28,508 354,141 Florida 9 35,688 1,348,210 Idaho 6 34,423 265,368 Indiana 5 6,930 63,116 Iowa 1 5,307 48,592 Kansas 9 20,712 204,972 (C) Kentucky 1 (5,093 ) 72,946 Louisiana 6 (33 ) 128,233 Massachusetts 10 (99,548 ) 732,550 (F) Michigan 2 2,178 20,493 Missouri 4 17,350 125,633 Montana 1 1,915 18,696 New Jersey 6 35,515 263,870 New Mexico 2 5,187 48,463 North Carolina 1 3,114 31,849 Ohio 9 20,411 349,141 Oklahoma 2 7,495 72,377 Oregon 1 12,381 86,634 Pennsylvania 9 44,418 470,562 South Carolina 8 15,714 136,264 Texas 51 30,326 1,891,482 (D) Utah 7 30,329 824,048 Virginia 2 2,863 19,418 Washington 2 4,187 37,536 Wisconsin 1 3,476 22,281 Wyoming 3 9,740 93,649 Other assets — — 1,397,170 Total United States 216 $ 407,329 $ 11,172,279 International: Australia — $ 29,707 $ — Colombia 4 17,913 178,309 Germany 85 37,955 734,630 (F) Italy 8 — 80,562 (F) Portugal 2 3,410 50,151 Spain 9 8,349 252,529 (E)(F) Switzerland 19 3,117 735,891 (F) United Kingdom 92 352,594 4,261,944 Finland 4 11,425 218,322 Other assets — — 620,227 Total International 223 $ 464,470 $ 7,132,565 Total 439 $ 871,799 $ 18,304,844 41 (A) Total 2023 revenues include approximately $459 million of reserves for billed rent, straight-line rent, and interest and other income, primarily related to Steward.
Removed
The table below shows revenues earned from our joint venture arrangements: Total Properties Total 2022 Revenues (Dollars in thousands) Germany 71 $ 60,637 U.S. 8 (1) 55,443 Switzerland 17 44,345 Spain 2 6,806 Italy 8 7,709 Total 106 $ 174,940 (1) On March 14, 2022, we completed a transaction with MAM to form a joint venture (the "Macquarie Transaction") in which we contributed eight Massachusetts-based general acute care hospitals that are leased to Steward for cash consideration and a 50% interest in the partnership.
Removed
See Note 3 to Item 8 of this Annual Report on Form 10-K for more information regarding this transaction.
Removed
(2) Reflects all properties, including properties owned through our real estate joint ventures, except vacant properties, seven facilities that are under development, and three properties leased to Prospect that we have agreed to sell as further described in Note 8 of Item 8 of this Annual Report on Form 10-K.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
ITEM 3. Legal Proceedings From time to time, we are a party to various legal proceedings, claims, or regulatory inquiries and investigations arising out of, or incident to, our ordinary course of business.
Added
ITEM 3. Legal Proceedings In 2023, we became party to various lawsuits as further described in Note 8 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K.
Removed
While we are unable to predict with certainty the outcome of any particular matter, management does not expect, when such matters are resolved, that our resulting exposure to loss contingencies, if any, will have a material adverse effect on our consolidated financial position. ITEM 4. M ine Safety Disclosures None. P ART II
Added
We have not recorded a liability related to these lawsuits because, at this time, we are unable to determine whether an unfavorable outcome is possible or to estimate reasonably possible losses. In addition to the foregoing, we are currently and have in the past been subject to various legal proceedings and regulatory actions in connection with our business.
Added
We believe that the resolution of any current pending legal or regulatory matters will not have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Added
Nonetheless, we cannot predict the outcome of these proceedings, as legal and regulatory matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of such matters could have a material adverse effect on our financial condition, cash flows, results of operations, and the trading price of our common stock. ITEM 4.
Added
M ine Safety Disclosures None. P ART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe historical information below is not indicative of future performance. Period Ending Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Medical Properties Trust, Inc. 100.00 125.03 173.20 188.88 215.82 110.06 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 MSCI U.S. REIT Index 100.00 95.43 120.09 110.99 158.79 119.87 Dow Jones U.S.
Biggest changeThe 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. Period Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Medical Properties Trust, Inc. 100.00 138.53 151.07 172.61 88.02 43.81 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 MSCI U.S.
As of February 17, 2023, there were 44 holders of record of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name. (b) Not applicable.
As of February 16, 2024, there were 46 holders of record of our common stock. This figure does not reflect the beneficial ownership of shares held in nominee name. (b) Not applicable.
(c) Stock repurchases: The table below summarizes repurchases of our common stock made during the quarter ended December 31, 2022: Period Total number of shares purchased(1) (in thousands) Average price per share Total number of shares purchased as part of publicly announced programs(2) (in thousands) Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) October 1-October 31, 2022 1,116 $ 10.88 1,075 November 1-November 30, 2022 220 11.13 220 December 1-December 31, 2022 349 10.89 349 Total 1,685 $ 10.92 1,644 $ 482,085 38 (1) The number of shares purchased consists of shares of common stock purchased as part of a publicly announced program to purchase common stock of the Company as well as shares of common stock tendered by employees to satisfy the employees' tax withholding obligations arising as a result of vesting of restricted stock awards under the 2019 Equity Incentive Plan (the "Equity Incentive Plan"), which shares were purchased based on their fair market value on the vesting date.
(c) Stock repurchases: 43 The table below summarizes repurchases of our common stock made during the quarter ended December 31, 2023: Period Total number of shares purchased(1) (in thousands) Average price per share Total number of shares purchased as part of publicly announced programs(2) (in thousands) Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) October 1-October 31, 2023 370 $ 5.38 — November 1-November 30, 2023 — — — December 1-December 31, 2023 — — — Total 370 $ 5.38 — $ — (1) The number of shares purchased consists of shares of common stock tendered by employees to satisfy the employees' tax withholding obligations arising as a result of vesting of restricted stock awards under the 2019 Equity Incentive Plan (the "Equity Incentive Plan"), which shares were purchased based on their fair market value on the vesting date.
(2) On October 9, 2022, the board of directors of the Company authorized a stock repurchase program (the "Stock Repurchase Program") for up to $500 million of common stock, par value $0.001 per share.
(2) On October 9, 2022, the Board of the Company authorized a stock repurchase program (the "Stock Repurchase Program") for up to $500 million of common stock, par value $0.001 per share. No shares were repurchased under this plan during 2023.
Real Estate Health Care Index 100.00 107.51 130.61 117.81 136.94 107.01 The graph and accompanying text shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended. ITEM 6.
Real Estate Health Care Index 100.00 121.48 109.58 127.37 99.53 113.33 The graph and accompanying text shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or under the Securities Exchange Act of 1934, as amended. ITEM 6.
High Low Dividends Year Ended December 31, 2022 First Quarter $ 24.13 $ 19.51 $ 0.29 Second Quarter 21.55 14.10 0.29 Third Quarter 17.36 11.35 0.29 Fourth Quarter 13.33 9.90 0.29 Year Ended December 31, 2021 First Quarter $ 22.75 $ 19.91 $ 0.28 Second Quarter 22.82 19.80 0.28 Third Quarter 21.99 19.39 0.28 Fourth Quarter 23.74 19.45 0.28 On February 17, 2023, the closing price for our common stock, as reported on the New York Stock Exchange, was $12.96 per share.
High Low Dividends Year Ended December 31, 2023 First Quarter $ 14.00 $ 7.10 $ 0.29 Second Quarter 9.41 7.20 0.29 Third Quarter 10.74 4.97 0.15 Fourth Quarter 5.77 4.04 0.15 Year Ended December 31, 2022 First Quarter $ 24.13 $ 19.51 $ 0.29 Second Quarter 21.55 14.10 0.29 Third Quarter 17.36 11.35 0.29 Fourth Quarter 13.33 9.90 0.29 On February 16, 2024, the closing price for our common stock, as reported on the New York Stock Exchange, was $3.56 per share.
The following graph provides comparison of cumulative total stockholder return for the period from December 31, 2017 through December 31, 2022, 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 repurchase authorization expired on October 10, 2023. 44 The following graph provides a comparison of cumulative total stockholder returns for the period from December 31, 2018 through December 31, 2023, among us, the S&P 500 Index, MSCI U.S. REIT Index, and Dow Jones U.S. Real Estate Health Care Index.
Removed
The repurchase authorization expires October 10, 2023, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash.
Added
REIT Index 100.00 125.84 116.31 166.39 125.61 142.87 Dow Jones U.S.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents a reconciliation of net income attributable to MPT common stockholders to FFO and Normalized FFO for the years ended December 31, 2022 and 2021 (amounts in thousands except per share data): For the Years Ended December 31, 2022 2021 FFO Information Net income attributable to MPT common stockholders $ 902,597 $ 656,021 Participating securities’ share in earnings (1,602 ) (2,161 ) Net income, less participating securities’ share in earnings $ 900,995 $ 653,860 Depreciation and amortization 399,622 374,599 Gain on sale of real estate (536,887 ) (52,471 ) Real estate impairment charges 170,582 — Funds from operations $ 934,312 $ 975,988 Write-off of unbilled rent and other 37,682 7,213 Gain on sale of equity investments — (40,945 ) Other impairment charges, net 97,793 39,411 Non-cash fair value adjustments (2,333 ) (8,193 ) Tax rate changes and other 10,697 34,796 Debt refinancing and unutilized financing costs 9,452 27,650 Normalized funds from operations $ 1,087,603 $ 1,035,920 Per diluted share data Net income, less participating securities’ share in earnings $ 1.50 $ 1.11 Depreciation and amortization 0.67 0.63 Gain on sale of real estate (0.90 ) (0.09 ) Real estate impairment charges 0.29 — Funds from operations $ 1.56 $ 1.65 Write-off of unbilled rent and other 0.07 0.01 Gain on sale of equity investments — (0.07 ) Other impairment charges, net 0.16 0.07 Non-cash fair value adjustments — (0.01 ) Tax rate changes and other 0.02 0.06 Debt refinancing and unutilized financing costs 0.01 0.04 Normalized funds from operations $ 1.82 $ 1.75 51 Total Adjusted Gross Assets Total adjusted gross assets is total assets before accumulated depreciation/amortization (adjusted for our investments in unconsolidated real estate joint ventures), assumes material transaction commitments are completed, and assumes cash on hand at period-end and cash generated from or to be generated from transaction commitments or financing activities subsequent to period-end are either used in these transactions or used to reduce debt.
Biggest changeFFO 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. 58 The following table presents a reconciliation of net (loss) income attributable to MPT common stockholders to FFO and Normalized FFO for the years ended December 31, 2023 and 2022 (in thousands except per share data): For the Years Ended December 31, 2023 2022 FFO Information Net (loss) income attributable to MPT common stockholders $ (556,476 ) $ 902,597 Participating securities’ share in earnings (1,644 ) (1,602 ) Net (loss) income, less participating securities’ share in earnings $ (558,120 ) $ 900,995 Depreciation and amortization 676,132 399,622 Loss (gain) on sale of real estate 1,815 (536,887 ) Real estate impairment charges 167,966 170,582 Funds from operations $ 287,793 $ 934,312 Write-off of billed and unbilled rent and other 649,911 35,370 Other impairment charges 208,941 97,793 Litigation and other 15,886 — Share-based compensation adjustments (9,691 ) 3,076 Non-cash fair value adjustments (34,157 ) (3,097 ) Tax rate changes and other (167,332 ) 10,697 Debt refinancing and unutilized financing (benefit) costs (285 ) 9,452 Normalized funds from operations $ 951,066 $ 1,087,603 Per diluted share data Net (loss) income, less participating securities’ share in earnings $ (0.93 ) $ 1.50 Depreciation and amortization 1.13 0.67 Loss (gain) on sale of real estate — (0.90 ) Real estate impairment charges 0.28 0.29 Funds from operations $ 0.48 $ 1.56 Write-off of billed and unbilled rent and other 1.09 0.06 Other impairment charges 0.35 0.16 Litigation and other 0.03 — Share-based compensation adjustments (0.02 ) 0.01 Non-cash fair value adjustments (0.06 ) (0.01 ) Tax rate changes and other (0.28 ) 0.02 Debt refinancing and unutilized financing (benefit) costs — 0.02 Normalized funds from operations $ 1.59 $ 1.82 Distribution Policy We have elected to be taxed as a REIT commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004.
During the year ended December 31, 2022, we realized $536.8 million from the sales of real estate, including the completion of the Macquarie Transaction in which we sold the real estate of eight Massachusetts-based general acute care hospitals, resulting in a gain on real estate of approximately $600 million, partially offset by approximately $125 million of write-offs of non-cash straight-line rent receivables.
During the year ended December 31, 2022, we realized $536.8 million of gains from the sales of real estate, including the completion of the Macquarie Transaction, in which we sold the real estate of eight Massachusetts-based general acute care hospitals, resulting in a gain on real estate of approximately $600 million, partially offset by approximately $125 million of write-offs of non-cash straight-line rent receivables.
It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid corporate income and excise taxes on undistributed income, although there is no assurance as to further dividends because they depend 53 on future earnings, capital requirements, and our financial condition.
It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid corporate income and excise taxes on undistributed income, although there is no assurance as to further dividends because they depend on future earnings, capital requirements, and our financial condition.
A summary of additional 2022 activity is as follows: • Acquired an additional six behavioral health facilities in the UK for approximately £233 million that are leased to Priory; • Funded £96.5 million towards a £100 million participation in a syndicated term loan originated on behalf of Priory; • Completed the Bakersfield development for $47 million and commenced development of five additional facilities, including three in Spain; • Re-tenanted our Watsonville facility, after the previous tenant filed for bankruptcy, and recovered $32 million on a working capital loan that was previously reserved; • Acquired six general acute care facilities, three located throughout Spain, two in the U.S., and one in Colombia, for approximately $135 million that are leased to three different operators; • Selected as one of Modern Healthcare's Best Places to Work in healthcare in 2022, for the second consecutive year; • Achieved internal growth by approximately $30 million from increases in CPI above the contractual minimum escalations in our leases and loans; and • Recorded a $283 million impairment charge related to our tenant, Prospect, including $171 million impairment on the Pennsylvania real estate and a $112 million reserve on non-cash rent.
A summary of additional 2022 activity is as follows: • Acquired an additional six behavioral health facilities in the UK for approximately £233 million that are leased to Priory; • Funded £96.5 million towards a £100 million participation in a syndicated term loan originated on behalf of Priory; • Completed the Bakersfield development for $47 million and commenced development of five additional facilities, including three in Spain; • Re-tenanted our Watsonville facility, after the previous tenant filed for bankruptcy, and recovered $32 million on a working capital loan that was previously reserved; • Acquired six general acute care facilities, three located throughout Spain, two in the U.S., and one in Colombia, for approximately $135 million that are leased to three different operators; • Selected as one of Modern Healthcare's Best Places to Work in healthcare in 2022; • Achieved internal growth by approximately $30 million from increases in CPI above the contractual minimum escalations in our leases and loans; and • Recorded a $283 million impairment charge related to our tenant, Prospect, including $171 million impairment on the Pennsylvania real estate and a $112 million reserve on non-cash rent.
We conduct our business operations in one segment. We currently have healthcare investments in the U.S., Europe, Australia, and South America. Our existing tenants are, and our prospective tenants will generally be, healthcare operating companies and other healthcare providers that use substantial real estate assets in their operations.
We conduct our business operations in one segment. We currently have healthcare investments in the U.S., Europe, and South America. Our existing tenants are, and our prospective tenants will generally be, healthcare operating companies and other healthcare providers that use substantial real estate assets in their operations.
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 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 49 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 43 reserve (including the underlying assumptions) is reviewed and adjusted quarterly.
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.
At December 31, 2022, we were in compliance with all such financial and operating covenants. In order for us to continue to qualify as a REIT we are required to distribute annual dividends equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains.
At December 31, 2023, we were in compliance with all such financial and operating covenants. In order for us to continue to qualify as a REIT we are required to distribute annual dividends equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains.
We also have included and intend to include in our lease and loan agreements annual contractual minimum rate increases. Our existing portfolio’s minimum escalators are typically at least 2.0%. In addition, most of our leases and loans include rate increases based on the general rate of inflation (based on CPI or similar indices) if greater than the minimum contractual increases.
We also have included and intend to include in our lease and loan agreements annual contractual minimum rate increases. Our existing portfolio’s minimum escalators are typically 2.0%. In addition, most of our leases and loans include rate increases based on the general rate of inflation (based on CPI or similar indices) if greater than the minimum contractual increases.
While our tenants are generally responsible for all operating costs at a facility, in the event we incur costs of repairs and maintenance, we expense those costs as incurred. We compute depreciation using the straight-line method over the weighted-average useful life of approximately 39.0 years for buildings and improvements.
While our tenants are generally responsible for all operating costs at a facility, in the event we incur costs of repairs and maintenance, we expense those costs as incurred. We compute depreciation using the straight-line method over the weighted-average useful life of approximately 39.1 years for buildings and improvements.
In regards to investing and financing activities in 2022, we did the following: a) Invested approximately $1.3 billion in hospital real estate, representing 16 facilities across five countries; b) Funded $524.2 million of development, capital addition, and other projects; c) Completed the Macquarie Transaction in which we contributed eight Massachusetts-based general acute care hospitals to form a partnership, resulting in a gain on real estate of approximately $600 million and proceeds of approximately $1.3 billion, which were partially used to pay off our $1 billion interim credit facility; d) Exercised the $500 million accordion feature to our revolving credit facility and extended the term on both the revolver and term loan portions of our Credit Facility; e) Authorized a stock repurchase program for up to $500 million of common stock, of which we repurchased 1.6 million shares of common stock for approximately $17.9 million through December 31, 2022; and f) Separate from the Macquarie Transaction, we sold 15 facilities and five ancillary properties generating net proceeds of approximately $522 million.
In regard to investing and financing activities in 2022, we did the following: a) Invested approximately $1.3 billion in hospital real estate, representing 16 facilities across five countries; b) Funded $524.2 million of development, capital addition, and other projects; c) Completed the Macquarie Transaction in which we contributed eight Massachusetts-based general acute care hospitals to form a partnership ("Macquarie Transaction"), generating proceeds of approximately $1.3 billion, which were partially used to pay off our $1 billion interim credit facility; d) Exercised the $500 million accordion feature to our revolving credit facility and extended the term on both the revolver and term loan portions of our Credit Facility; e) Authorized a stock repurchase program for up to $500 million of common stock, of which we repurchased 1.6 million shares of common stock for approximately $17.9 million through December 31, 2022; and f) Separate from the Macquarie Transaction, we sold 15 facilities and five ancillary properties generating net proceeds of approximately $522 million.
Funds From Operations and Normalized Funds From Operations Investors and analysts following the real estate industry utilize funds from operations ("FFO") as a supplemental performance measure.
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.
Our loans are recorded at fair value based on Level 2 inputs by discounting the estimated cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities.
Our loans are recorded at fair value based on Level 2 or Level 3 inputs by discounting the estimated cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities.
The information set forth in this Item 7 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. This section generally discusses the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The information set forth in this Item 7 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. This section generally discusses the results of our operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
In addition, we initiated a stock repurchase program, through which we repurchased 1.6 million shares of common stock for $17.9 million through December 31, 2022. Lastly, we increased our dividend to $0.29 per share per quarter in 2022, which is the 8 th consecutive year for such an increase.
In addition, we initiated a stock repurchase 48 program, through which we repurchased 1.6 million shares of common stock for $17.9 million through December 31, 2022. Lastly, we increased our dividend to $0.29 per share per quarter in 2022, which was the 8 th consecutive year for such an increase.
In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes in future periods as income is earned.
In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and potentially incur higher income tax expense in future periods as income is earned.
Although it represents only 1% of our total assets at December 31, 2022, we consider our lending business an important element of our overall business strategy for two primary reasons: (1) it provides opportunities to make income-earning investments that yield attractive risk-adjusted returns in an industry in which our management has expertise, and (2) by making debt capital available to certain qualified operators, we believe we create a competitive advantage for our company over other buyers of, and financing sources for, healthcare facilities.
Although it represents approximately 1.6% of our total assets at December 31, 2023, we consider our lending business an important element of our overall business strategy for two primary reasons: (1) it provides opportunities to make income-earning investments that could yield attractive risk-adjusted returns in an industry in which our management has expertise, and (2) by making debt capital available to certain qualified operators, we believe we create a competitive advantage for our company over other buyers of, and financing sources for, healthcare facilities.
Results of Operations Our operating results may vary significantly from year-to-year due to a variety of reasons including acquisitions made during the year, incremental revenues and expenses from acquisitions made in the prior year, revenues and expenses from completed development properties, property disposals, annual escalation provisions, foreign currency exchange rate changes, new or amended debt agreements, issuances of shares through an equity offering, impact from accounting changes, etc.
Results of Operations Our operating results may vary significantly from year-to-year due to a variety of reasons including acquisitions made during the year, incremental revenues and expenses from acquisitions made in the prior year, revenues and expenses from completed development properties, property disposals, annual escalation provisions, interest rate changes, foreign currency exchange rate changes, new or amended debt agreements, issuances of shares through an equity offering, impact from accounting changes, lease terminations/re-tenanting, etc.
For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022. 40 Selected Financial Data The following sets forth selected consolidated financial and operating data.
For a discussion of the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 1, 2023. 46 Selected Financial Data The following sets forth selected consolidated financial and operating data.
For our equity investments in Springstone and the international joint venture, fair value is determined based on Level 3 inputs, by using a discounted cash flow model, which required 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.
For our equity investments in PHP Holdings and the international joint venture, fair value is determined 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.
Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $71 million should be reflected against certain of our international and domestic net deferred tax assets at December 31, 2022.
Based upon our review of all positive and negative evidence, including our three-year cumulative 57 pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $117 million should be reflected against certain of our international and domestic net deferred tax assets at December 31, 2023.
(3) Much of our contractual obligations to make operating lease payments are related to ground leases for which we are reimbursed by our tenants along with corporate office and equipment leases. (4) Includes approximately $239.2 million of future expenditures related to development projects and $436.6 million of future expenditures on committed capital improvement projects.
(3) Much of our contractual obligations to make operating lease payments are related to ground leases for which we are reimbursed by our tenants along with corporate office and equipment leases. (4) Includes approximately $61 million of future expenditures related to development projects and $176 million of future expenditures on committed capital improvement projects.
We also disposed of 11 facilities previously leased to Prime, resulting in a gain on real estate of approximately $67 million. In addition, we disposed of four other properties and five ancillary properties, resulting in a net gain of $33 million.
In 2022, we also disposed of 11 facilities to Prime, resulting in a gain on real estate of approximately $67 million, and we disposed of four other facilities and five ancillary properties, resulting in a net gain of $33 million.
We compute FFO in accordance with the definition provided by the National Association of Real Estate Investment Trusts, 50 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.
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, including amortization related to in-place lease intangibles, and after adjustments for unconsolidated partnerships and joint ventures.
Normalized FFO, after adjusting for certain items (as more fully described in the section titled “Non-GAAP Financial Measures” in this Item 7 of this Annual Report on Form 10-K), was $1.1 billion for 2022, or $1.82 per diluted share, as compared to $1.0 billion, or $1.75 per diluted share, for 2021.
Normalized FFO, after adjusting for certain items (as more fully described in the section titled “Non-GAAP Financial Measures” in this Item 7 of this Annual Report on Form 10-K), was $951 million for 2023, or $1.59 per share, as compared to $1.1 billion, or $1.82 per diluted share, for 2022.
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 the capital marketplace, etc.
In arriving at the DLOM, we 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 the capital marketplace, etc.
Our accounting estimates include the following: Credit Losses: Losses from Rent Receivables : For all leases, we continuously monitor the performance of our existing tenants including, but not limited to: admission levels and surgery/procedure volumes by type; current operating margins; ratio of our tenant's operating margins both to facility rent and to facility rent plus other fixed costs; trends in revenue, cash collections, patient mix; and the effect of evolving healthcare regulations, adverse economic and political conditions, such as rising inflation and interest rates, and other events ongoing on a tenant's profitability and liquidity.
Our accounting estimates include the following: Credit Losses: Losses from Rent Receivables : For our leases, we review tenant provided financial data and monitor the performance of our tenants in areas generally consisting of: admission levels and surgery/procedure volumes by type; current operating margins; ratio of our tenant's operating margins both to facility rent and to facility rent plus other fixed costs; trends in revenue, cash collections, patient mix; and the effect of evolving healthcare regulations, adverse economic and political conditions, such as rising inflation and interest rates, and other events ongoing on a tenant's profitability and liquidity.
Debt refinancing and unutilized financing costs were $9.5 million in 2022 due to the termination of our $1 billion interim credit facility in March 2022 and the amendment of our Credit Facility in the second quarter of 2022 (see Note 4 to Item 8 of this Annual Report on Form 10-K for further details).
In 2022, debt refinancing and unutilized financing costs were $9.5 million, as a result of the termination of our $1 billion interim credit facility in March 2022 and the amendment of our Credit Facility (see Note 4 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details).
Of the property expenses in 2022 and 2021, approximately $36 million and $28 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our consolidated statements of net income.
Of the property expenses in 2023 and 2022, approximately $29 million and $36 million, respectively, represents costs (primarily property insurance premiums) that were reimbursed by our tenants and included in the “Interest and other income” line on our consolidated statements of net income.
The $55.9 million income tax expense for 2022 is primarily based on the income generated by our investments in the United Kingdom, Colombia, and Australia along with an additional $5 million U.S. tax expense related to our Watsonville loan recovery in 2022.
In comparison, we incurred a $55.9 million income tax expense for 2022, primarily based on the income generated by our investments in the U.K., Colombia, and Australia along with an additional $5 million U.S. tax expense related to our Watsonville loan recovery in 2022.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Net income for the year ended December 31, 2022, was $902.6 million ($1.50 per diluted share) compared to net income of $656.0 million ($1.11 per diluted share) for the year ended December 31, 2021.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Net loss for the year ended December 31, 2023, was $(556.5) million ($(0.93) per share) compared to net income of $902.6 million ($1.50 per diluted share) for the year ended December 31, 2022.
See Note 13 to Item 8 of this Annual Report on Form 10-K for further details on this transaction. 2021 Cash Flow Activity We generated cash of $812 million from operating activities during 2021, primarily consisting of rent and interest from mortgage and other loans.
See Note 13 to Item 8 of this Annual Report on Form 10-K for further details of these transactions. 2022 Cash Flow Activity We generated cash of approximately $740 million from operating activities during 2022, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $699 million.
See section titled “Distribution Policy” within this Item 7 of this Annual Report on Form 10-K for further information on our dividend policy along with the historical dividends paid on a per share basis. Short-term Liquidity Requirements: As of February 17, 2023, our liquidity approximates $1.2 billion.
See section titled 53 “Distribution Policy” within this Item 7 of this Annual Report on Form 10-K for further information on our dividend policy along with the historical dividends paid on a per share basis.
We classified these equity investments as Level 3, as we used certain unobservable inputs to the valuation methodology that were significant to the fair value measurement, and the valuation required management judgment due to the absence of quoted market prices.
We classify our valuations of these 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 the absence of quoted market prices.
At December 31, 2022, our portfolio (including real estate assets in joint ventures) consisted of 444 properties leased or loaned to 55 operators, of which seven were under development and five were in the form of mortgage loans.
At December 31, 2023, our portfolio (including real estate assets in joint ventures) consisted of 439 properties, of which 434 properties are leased or loaned to 54 operators, including facilities under development or in the form of mortgage loans.
Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S.
Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $130.7 million income tax benefit for 2023 was primarily based on the $161 million benefit received by entering the U.K.
At December 31, 2022, we have not assigned any value to customer relationship intangibles. We amortize the value of lease intangibles to expense over the term of the respective leases, which have a weighted-average useful life of 26.8 years at December 31, 2022. If a lease is terminated early, the unamortized portion of the lease intangible is charged to expense.
At December 31, 2023, we have not assigned any value to customer relationship intangibles. We amortize the value of lease intangibles to expense over the term of the respective leases, which have a weighted-average useful life of 28.0 years at December 31, 2023.
(2) As of February 17, 2023, we have a $1.8 billion revolving credit facility. This table assumes the balance outstanding under the revolver (which was $939 million as of February 17, 2023) and interest rate in effect at February 17, 2023 remain in effect through maturity.
For any variable rate debt, we have assumed that the interest rate in effect at February 16, 2024 remains in effect through maturity. (2) As of February 16, 2024, we have a $1.8 billion revolving credit facility. This table assumes the balance outstanding under the revolver (which was $1.6 billion as of February 16, 2024) remains in effect through maturity.
Critical Accounting Estimates In order to prepare financial statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S., we must make estimates about certain types of transactions and account balances.
In addition, we began recording rent on our Prospect leases on a cash only basis as of December 31, 2022. Critical Accounting Estimates In order to prepare financial statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S., we must make estimates about certain types of transactions and account balances.
See below for highlights of our sources and uses of cash for the past two years: 2022 Cash Flow Activity We generated cash 2of $740 million from operating activities during 2022, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $699 million.
See below for highlights of our sources and uses of cash for the past two years: 2023 Cash Flow Activity We generated cash of approximately $506 million from operating activities during 2023, primarily consisting of rent and interest from mortgage and other loans and distributions from our real estate joint ventures.
The table below is a summary of our distributions declared for the three year period ended December 31, 2022: Declaration Date Record Date Date of Distribution Distribution per Share November 10, 2022 December 8, 2022 January 12, 2023 $ 0.29 August 18, 2022 September 15, 2022 October 13, 2022 $ 0.29 May 26, 2022 June 16, 2022 July 14, 2022 $ 0.29 February 17, 2022 March 17, 2022 April 14, 2022 $ 0.29 November 11, 2021 December 9, 2021 January 13, 2022 $ 0.28 August 19, 2021 September 16, 2021 October 14, 2021 $ 0.28 May 26, 2021 June 17, 2021 July 8, 2021 $ 0.28 February 18, 2021 March 18, 2021 April 8, 2021 $ 0.28 November 12, 2020 December 10, 2020 January 7, 2021 $ 0.27 August 13, 2020 September 10, 2020 October 8, 2020 $ 0.27 May 21, 2020 June 18, 2020 July 16, 2020 $ 0.27 February 14, 2020 March 12, 2020 April 9, 2020 $ 0.27 On February 16, 2023, we announced that our Board of Directors declared a regular quarterly cash dividend of $0.29 per share of common stock to be paid on April 13, 2023, to stockholders of record on March 16, 2023.
It is our current intention to comply with these requirements and maintain such status going forward. 59 The table below is a summary of our distributions declared (and paid in cash) during the three year period ended December 31, 2023: Declaration Date Record Date Date of Distribution Distribution per Share November 9, 2023 December 7, 2023 January 11, 2024 $ 0.15 August 21, 2023 September 14, 2023 October 12, 2023 $ 0.15 April 27, 2023 June 15, 2023 July 13, 2023 $ 0.29 February 16, 2023 March 16, 2023 April 13, 2023 $ 0.29 November 10, 2022 December 8, 2022 January 12, 2023 $ 0.29 August 18, 2022 September 15, 2022 October 13, 2022 $ 0.29 May 26, 2022 June 16, 2022 July 14, 2022 $ 0.29 February 17, 2022 March 17, 2022 April 14, 2022 $ 0.29 November 11, 2021 December 9, 2021 January 13, 2022 $ 0.28 August 19, 2021 September 16, 2021 October 14, 2021 $ 0.28 May 26, 2021 June 17, 2021 July 8, 2021 $ 0.28 February 18, 2021 March 18, 2021 April 8, 2021 $ 0.28 In the third quarter of 2023, we reduced our quarterly dividend from $0.29 to $0.15 per share of common stock, which would result in annual cash savings of approximately $330 million.
Because our strategy to a large degree involves the origination and acquisition of long-term lease arrangements at market rates with independent parties, we do not expect the above-market or below-market in-place lease values to be significant for many of our transactions.
Because our strategy to a large degree involves the origination and acquisition of long-term lease arrangements at market rates with independent parties, we do not expect the above-market or below-market in-place lease values to be significant for many of our transactions. 50 We measure the aggregate value of other lease intangible assets to be 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 when acquired.
To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gain, to our stockholders. It is our current intention to comply with these requirements and maintain such status going forward.
To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute (in the form of cash or stock) at least 90% of our REIT taxable income, excluding net capital gains, to our stockholders.
However, we modified such projections (including underlying assumptions used) as needed based on our review and analysis of their historical results, meetings with key members of management, and our understanding of trends and developments within the healthcare industry.
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. The DLOM on our investment in PHP Holdings was approximately 8% at December 31, 2023.
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.
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.
At December 31, 2022 and 2021, we determined that we were not the primary beneficiary of any variable interest entity in which we hold a variable interest because we do not control the activities (such as the day-to-day operations) that most significantly impact the economic performance of these entities. 45 Liquidity and Capital Resources Our typical sources of cash include our monthly rent and interest receipts, distributions from our real estate joint venture agreements, borrowings under our revolving credit facility, public issuances of debt and equity securities, and proceeds from bank debt, asset dispositions (either one-off or group asset sales through joint venture transactions), and principal payments on loans.
Liquidity and Capital Resources Our typical sources of cash include our monthly rent and interest receipts, distributions from our real estate joint ventures, borrowings under our revolving credit facility, public issuances of debt and equity securities, and proceeds from bank debt, asset dispositions (either one-off or group asset sales through joint venture transactions), and principal payments on loans.
For the Years Ended December 31, 2022 2021 (In thousands except per share data) OPERATING DATA Total revenues $ 1,542,851 $ 1,544,669 Expenses: Interest 359,036 367,393 Real estate depreciation and amortization 332,977 321,249 Property-related 45,697 39,098 General and administrative 160,494 145,638 Total expenses 898,204 873,378 Other income (expense): Gain on sale of real estate 536,755 52,471 Real estate and other impairment charges, net (268,375 ) (39,411 ) Earnings from equity interests 40,800 28,488 Debt refinancing and unutilized financing costs (9,452 ) (27,650 ) Other (including fair value adjustments on securities) 15,344 45,699 Income tax (expense) (55,900 ) (73,948 ) Net income 903,819 656,940 Net income attributable to non-controlling interests (1,222 ) (919 ) Net income attributable to MPT common stockholders $ 902,597 $ 656,021 Net income attributable to MPT common stockholders per diluted share $ 1.50 $ 1.11 Weighted-average shares outstanding — diluted 598,837 590,139 OTHER DATA Dividends declared per common share $ 1.16 $ 1.12 FFO(1) $ 934,312 $ 975,988 Normalized FFO(1) $ 1,087,603 $ 1,035,920 Normalized FFO per share(1) $ 1.82 $ 1.75 Cash paid for acquisitions and other related investments $ 1,332,962 $ 4,246,829 December 31, 2022 2021 (In thousands) BALANCE SHEET DATA Real estate assets — at cost $ 15,917,839 $ 17,425,765 Real estate accumulated depreciation/amortization (1,193,312 ) (993,100 ) Cash and cash equivalents 235,668 459,227 Investments in unconsolidated real estate joint ventures 1,497,903 1,152,927 Investments in unconsolidated operating entities 1,444,872 1,289,434 Other loans 227,839 67,317 Other 1,527,191 1,118,231 Total assets $ 19,658,000 $ 20,519,801 Debt, net $ 10,268,412 $ 11,282,770 Other liabilities 795,181 791,360 Total Medical Properties Trust, Inc. stockholders’ equity 8,592,838 8,440,188 Non-controlling interests 1,569 5,483 Total equity 8,594,407 8,445,671 Total liabilities and equity $ 19,658,000 $ 20,519,801 (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. 41 2022 Highlights In 2022, the value of our well-underwritten hospital investments was confirmed through strategic property sales that generated gains over $535 million and cash proceeds of approximately $2.2 billion.
For the Years Ended December 31, 2023 2022 (In thousands except per share data) OPERATING DATA Total revenues $ 871,799 $ 1,542,851 Expenses: Interest 411,171 359,036 Real estate depreciation and amortization 603,360 332,977 Property-related 41,567 45,697 General and administrative 145,588 160,494 Total expenses 1,201,686 898,204 Other (expense) income: (Loss) gain on sale of real estate (1,815 ) 536,755 Real estate and other impairment charges, net (376,907 ) (268,375 ) Earnings from equity interests 13,967 40,800 Debt refinancing and unutilized financing benefit (costs) 285 (9,452 ) Other (including fair value adjustments on securities) 7,586 15,344 Income tax benefit (expense) 130,679 (55,900 ) Net (loss) income (556,092 ) 903,819 Net income attributable to non-controlling interests (384 ) (1,222 ) Net (loss) income attributable to MPT common stockholders $ (556,476 ) $ 902,597 Net (loss) income attributable to MPT common stockholders per diluted share $ (0.93 ) $ 1.50 Weighted-average shares outstanding — diluted 598,518 598,837 OTHER DATA Dividends declared per common share $ 0.88 $ 1.16 FFO(1) $ 287,793 $ 934,312 Normalized FFO(1) $ 951,066 $ 1,087,603 Normalized FFO per share(1) $ 1.59 $ 1.82 Cash paid for acquisitions and other related investments $ 212,287 $ 1,332,962 December 31, 2023 2022 (In thousands) BALANCE SHEET DATA Real estate assets — at cost $ 14,778,132 $ 15,917,839 Real estate accumulated depreciation/amortization (1,407,971 ) (1,193,312 ) Cash and cash equivalents 250,016 235,668 Investments in unconsolidated real estate joint ventures 1,474,455 1,497,903 Investments in unconsolidated operating entities 1,778,640 1,444,872 Other loans 292,615 227,839 Other 1,138,957 1,527,191 Total assets $ 18,304,844 $ 19,658,000 Debt, net $ 10,064,236 $ 10,268,412 Other liabilities 606,743 795,181 Total Medical Properties Trust, Inc. stockholders’ equity 7,631,600 8,592,838 Non-controlling interests 2,265 1,569 Total equity 7,633,865 8,594,407 Total liabilities and equity $ 18,304,844 $ 19,658,000 (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. 47 2023 Highlights In 2023, economic uncertainty, high interest rates, and inflationary pressures affected our business (and that of some of our tenants) and caused us to look at several initiatives to improve cash flows, reduce costs, and secure the value of our non-performing assets.
We used these operating cash flows to fund our dividends of $643 million and certain investing activities.
We used these operating cash flows (along with cash on-hand and borrowings on our revolving credit facility) to fund our dividends of $615 million.
In 2021, we recorded an approximate $40 million impairment charge related to loans made to the previous operator for services to continue at our Watsonville Community Hospital - see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details.
See Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details of the 2023 and 2022 charges. In 2022, we did recognize an impairment recovery of approximately $15 million related to our Watsonville facility. Earnings from equity interests was $14 million for 2023, down from $40.8 million in 2022.
Fair Value Option Election: We elected to account for certain investments using the fair value option method, which means we mark these investments to fair market value on a recurring basis. At December 31, 2022, the amount of investments recorded using the fair value option were approximately $575 million made up of loans and equity investments.
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. Fair Value Option Election: We elected to account for certain investments using the fair value option method, which means we mark these investments to fair market value on a recurring basis.
For the cash flow model, our observable inputs included use of a capitalization rate, discount rate (which was based on a weighted average cost of capital), and market interest rates, and our unobservable input included an adjustment for a marketability discount (“DLOM”) on our Springstone equity investment of 40%.
For the cash flow models, our unobservable inputs include use of a discount rate (which is based on a weighted-average cost of capital) and an 51 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.
This decrease is partially offset by $37.2 million of incremental revenue earned on new investments, including Springstone in the 2021 fourth quarter and the Priory syndicated loan in the 2022 first quarter and higher income from annual escalations due to increases in CPI of approximately $1.2 million. o Other income — up $8.3 million from the prior year as we received more direct reimbursements from our tenants for ground lease, property taxes, and insurance.
These decreases were partially offset by $15 million of incremental revenue on new investments, along with approximately $1 million of interest revenue on the CHF 60 million mortgage loan from Infracore (which was repaid in the second quarter of 2023), approximately $3 million of higher income from annual escalations due to increases in CPI, and $0.4 million of favorable foreign currency fluctuations. o Other income — down $7.0 million from the prior year due to less direct reimbursements from our tenants for ground leases, property taxes, and insurance.
Overall, our weighted-average interest rate was 3.3%, same as 2021. Real estate depreciation and amortization during 2022 increased to $333.0 million from $321.2 million in 2021 due to new investments made in 2021 and 2022, partially offset by foreign currency fluctuations and property sales in 2022. Property-related expenses for 2022 increased to $45.7 million, compared to $39.1 million in 2021.
Our weighted-average interest rate was 3.9% for 2023 compared to 3.3% in 2022. 56 Real estate depreciation and amortization during 2023 increased to $603.4 million from $333.0 million in 2022.
If the sale of three Prospect facilities (as more fully described in Note 8 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K) are consummated in 2023, we would have additional liquidity. Long-term Liquidity Requirements: As of February 17, 2023, our liquidity approximates $1.2 billion.
REIT regime (as more fully described in Note 5 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K).
A comparison of revenues for the years ended December 31, 2022 and 2021 is as follows (dollar amounts in thousands): 2022 2021 Change Rent billed $ 968,874 62.8 % $ 931,942 60.4 % $ 36,932 Straight-line rent 204,159 13.2 % 241,433 15.6 % (37,274 ) Income from financing leases 203,580 13.2 % 202,599 13.1 % 981 Interest and other income 166,238 10.8 % 168,695 10.9 % (2,457 ) Total revenues $ 1,542,851 100.0 % $ 1,544,669 100.0 % $ (1,818 ) 48 Our total revenues for 2022 are down $1.8 million or 0.1% over the prior year.
This 13% decrease in Normalized FFO is primarily due to lower revenue from various disposals in 2022 and 2023, including the Macquarie Transaction, the Australia Transaction, and Prime disposals, along with lower revenues from Prospect from moving to the cash basis of accounting on December 31, 2022 and higher interest expense. 55 A comparison of revenues for the years ended December 31, 2023 and 2022 is as follows (dollar amounts in thousands): 2023 2022 Change Rent billed $ 803,375 92.2 % $ 968,874 62.8 % $ (165,499 ) Straight-line rent (127,894 ) (14.7 )% 204,159 13.2 % (332,053 ) Income from financing leases 127,141 14.6 % 203,580 13.2 % (76,439 ) Interest and other income 69,177 7.9 % 166,238 10.8 % (97,061 ) Total revenues $ 871,799 100.0 % $ 1,542,851 100.0 % $ (671,052 ) Our total revenues for 2023 declined by $671.1 million or 43% over the prior year.
In comparison, we sold 16 properties and one ancillary property in 2021 for a net gain of $52.5 million. 49 In December 2022, we recorded a $283 million impairment charge related to our tenant, Prospect - see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details.
This decrease is due to a $30 million reserve of billed and straight-line rent in 2023 on Steward leased properties that make up our Massachusetts-based partnership with MAM (see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details).
We believe this liquidity, along with our current monthly cash receipts from rent and loan interest and regular distributions from our joint venture arrangements, is sufficient to fund our operations, dividends in order to comply with REIT requirements, our current firm commitments (capital expenditures and expected funding requirements on development projects) and debt service obligations for the next twelve months (including contractual interest payments and our December 2023 debt maturity of approximately $450 million).
Short-term Liquidity Requirements: Our short-term liquidity requirements typically consist of general and administrative expenses, dividends in order to comply with REIT requirements, interest payments on our debt, and planned funding commitments on development and capital improvement projects, for the next twelve months.
This 38% increase in net income is primarily due to $0.5 billion of gains on sales of real estate in 2022 (including the Macquarie Transaction as described in Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K), incremental revenue from new investments and annual escalations, and lower tax expense due to the unfavorable adjustment in 2021 to recognize an increase in the United Kingdom corporate income tax rate, partially offset by $283 million of impairment charges related to our tenant, Prospect (see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details), $41.9 million of straight-line rent write-offs related to our sale of non-Macquarie Transaction disposals, and higher depreciation expense and general and administrative costs.
This decrease in net income is primarily driven by the $600 million gain on sale of real estate from the Macquarie Transaction in 2022, the approximate $700 million impairment charge in 2023 related to Steward, and accelerating the amortization of the approximate $286 million in-place lease intangible and the write-off of approximately $95 million of straight-line rent receivables, both associated with the Steward Utah Transaction in 2023 (see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for more detail), partially offset by the approximate $161 million tax benefit recognized in 2023 related to entering the U.K.
However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful. 47 Contractual Commitments The following table summarizes known material contractual commitments including debt service commitments (principal and interest payments) as of February 17, 2023 (amounts in thousands): 2023 2024 2025 2026 2027 Thereafter Total Senior unsecured notes(1) $ 722,215 $ 262,395 $ 797,145 $ 1,881,214 $ 1,598,008 $ 3,655,335 $ 8,916,312 Revolving credit facility(2) 45,187 51,806 51,806 964,676 — — 1,113,475 Term loan 10,414 12,023 11,990 11,990 205,946 — 252,363 Australian term loan facility(1) 17,563 833,458 — — — — 851,021 British pound sterling term loans(1) 20,015 148,918 843,265 — — — 1,012,198 Operating lease commitments(1)(3) 8,058 9,074 8,400 7,933 7,888 239,375 280,728 Purchase obligations(1)(4) 358,439 169,760 106,710 59,980 41,274 44,193 780,356 Totals $ 1,181,891 $ 1,487,434 $ 1,819,316 $ 2,925,793 $ 1,853,116 $ 3,938,903 $ 13,206,453 (1) We used the exchange rates at February 17, 2023 in preparing this table.
However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful. 54 Contractual Commitments The following table summarizes known material contractual commitments including debt service commitments (principal and interest payments) as of February 16, 2024 (amounts in thousands): Commitments (1) 2024 2025 2026 2027 2028 Thereafter Total Senior unsecured notes $ 231,261 $ 804,048 $ 1,916,231 $ 1,599,927 $ 886,047 $ 2,826,217 $ 8,263,731 Revolving credit facility(2) 94,554 108,062 1,617,640 — — — 1,820,256 Term loan 13,191 14,463 14,463 207,172 — — 249,289 Australian term loan facility 308,897 — — — — — 308,897 British pound sterling term loans 155,914 882,991 — — — — 1,038,905 Operating lease commitments(3) 8,221 9,336 8,581 7,984 8,039 235,021 277,182 Purchase obligations(4) 246,866 29,516 — — — — 276,382 Totals $ 1,058,904 $ 1,848,416 $ 3,556,915 $ 1,815,083 $ 894,086 $ 3,061,238 $ 12,234,642 (1) We used the exchange rates at February 16, 2024 in preparing this table.
We measure the aggregate value of other lease intangible assets to be 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 when acquired. 44 Management’s estimates of value are made using methods similar to those used by independent appraisers ( e.g. , discounted cash flow analysis).
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.
However, in order to make additional investments, to fund other debt maturities coming due in 2024 and beyond (as outlined below in our commitment schedule), or to strategically refinance any existing debt in order to reduce interest rates, or to further improve our leverage ratios, we may need to access one or a combination of the following sources of capital: • strategic property sales or joint ventures (including sale of three Prospect facilities as described in Note 8 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K); • sale of equity securities; • new bank term loans; • new USD, EUR, or GBP denominated debt securities, including senior unsecured notes; and/or • new secured loans on real estate.
However, to address upcoming debt maturities (as outlined below in our commitment schedule), we may need to look to other sources, which may include one or a combination of the following: • reducing our dividend (or moving to a stock dividend), while still complying with REIT requirements; • strategic property sales or joint ventures including the expected $480 million proceeds of binding asset sales discussed previously under "Short-term Liquidity Requirements," and the binding commitment to sell three Connecticut facilities, subject to regulatory approval, that is expected to generate $355 million; • monetizing our investment in operators, including our investment in PHP Holdings; • entering into new secured loans on real estate; • extending the maturity of existing term loans; • identifying and implementing cost reduction opportunities; • entering into new bank term loans or issuing new USD, EUR, or GBP denominated debt securities; and • sale of equity securities.
Removed
We expect to record rent on our Prospect leases on a cash only basis for the foreseeable future.
Added
Due to operational and liquidity challenges (as discussed previously above in "Significant Tenants" and in Note 3 to Item 8 of this Annual Report on Form 10-K), we recorded an approximate $700 million charge related to our investments in Steward and moved to the cash basis of accounting at December 31, 2023.
Removed
Subsequent to December 31, 2022, the following activity took place: • Announced the agreement to lease five facilities in Utah to Catholic Health Initiatives Colorado, a wholly-owned subsidiary of CommonSpirit Health, that are currently leased to Steward, subject to receipt of certain regulatory approvals and other customary closing conditions and • Received approximately $205 million from Lifepoint to pay off an outstanding loan, plus accrued interest, as part of their acquisition of a majority ownership interest in Springstone.
Added
In 2023, we completed strategic property sales, highlighted by the sale of our 11 Australia properties for A$1.2 billion. We used the proceeds from this sale to partially paydown our A$1.2 billion Australian term loan as well as our revolving credit facility.
Removed
We had funded this loan in October 2021 as part of our non-controlling investment in Springstone's operations that was needed for us to complete the larger acquisition of Springstone's 18 behavioral health hospitals.
Added
In regard to cost reduction, we implemented a REIT tax structure in the U.K. in the second quarter of 2023 that we expect will result in quarterly tax savings.
Removed
We will continue leasing these 18 facilities to Lifepoint. 2021 Highlights During 2021, our business and that of our tenants continued to be impacted by the COVID-19 pandemic. Like most of the world, our employees worked remotely through much of the year.
Added
In addition, we reduced our dividend from $0.29 per share per quarter to $0.15 starting with our dividend declared in the 2023 third quarter, which equates to annual cash savings of approximately $330 million.
Removed
While our offices re-opened in October 2021, we had less than 100% of our employees in the office due to spikes in COVID-19 and related variants throughout the fourth quarter. Despite the continued effects of the pandemic, MPT had a record year.
Added
To help secure the value of our $1.7 billion investment in Prospect, we agreed to a restructuring, that included a new $700 million investment in PHP Holdings at December 31, 2023 (see Note 3 to Item 8 of this Annual Report on Form 10-K for more information on this transaction).
Removed
In 2021, we invested approximately $3.9 billion in hospital real estate, and our revenues surpassed $1.5 billion for the first time in our history.
Added
A summary of additional 2023 activity is as follows: • Reserved approximately $95 million of billed rent/interest receivables and straight-line rent receivables associated with two other domestic tenants and a loan to our international joint venture and began applying cash basis accounting on these investments; • Received approximately $205 million from Lifepoint to pay off our initial acquisition loan, plus accrued interest, as part of their acquisition of a majority ownership interest in Springstone (now Lifepoint Behavioral); • Sold three facilities to Prime Healthcare Services, Inc.
Removed
Additionally, we maintained a strong liquidity position throughout the year and kept our leverage substantially in line with 2020 by raising more than $1.0 billion in proceeds through sales of our common stock and receiving approximately $0.5 billion from payoffs on our loan portfolio and proceeds from strategic divestitures.
Added
("Prime") for approximately $100 million; • CHIC acquired the Utah hospital operations of five general acute care facilities previously operated by Steward, and we received $100 million from Steward as a result of this transaction (see Note 3 to Item 8 of this Annual Report on Form 10-K for further details); • Received CHF 60 million from the payoff of a loan by Infracore SA ("Infracore"); • Paid off our £400 million 2.550% Senior Unsecured Notes due 2023 (of which £50 million was purchased before the maturity date at a discounted price); • Acquired three inpatient rehabilitation facilities for a total of €70 million that are leased to MEDIAN and five behavioral health hospitals for £44 million that are leased to Priory; • Completed two developments for approximately $70 million that are leased to Ernest Health, Inc.
Removed
In addition, we lowered our weighted-average interest rate during 2021 by extending and improving pricing on our revolving credit and term loan facilities, completing an £850 million senior unsecured notes offering at a weighted-average rate of 2.9%, and completing a €500 million 0.993% senior unsecured notes offering, of which all of the proceeds were used to redeem our outstanding €500 million senior unsecured notes that had a higher interest rate of 4.000%.
Added
(“Ernest”); and • Selected as one of Modern Healthcare's Best Places to Work in healthcare in 2023, for the third consecutive year; Subsequent to December 31, 2023, the following activity took place: • Selected as one of Newsweek's Most Responsible Companies in 2024; • In the first quarter of 2024, we sold our interest in the Priory syndicated term loan for aggregate proceeds of £90 million; and • Entered into definitive agreements to sell five properties leased to Prime for net proceeds of approximately $250 million and a $100 million mortgage loan to be repaid in approximately nine months.
Removed
Finally, we increased our dividend to $0.28 per share per quarter in 2021. The COVID-19 pandemic had a severe impact on the world from a business and personal health perspective. However, as we have noted before, we believe this pandemic further validated our business model, which focuses on hospitals as the centerpiece of 42 healthcare delivery across the world.
Added
See Note 13 to Item 8 of this Annual Report on Form 10-K for further details of our subsequent events. 2022 Highlights In 2022, the value of our well-underwritten hospital investments was confirmed through strategic property sales that generated gains over $535 million and cash proceeds of approximately $2.2 billion.
Removed
In addition, the pandemic proved the ability of our employees and our hospital operators to overcome significant challenges for the good of our stakeholders and mankind.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−1 removed10 unchanged
Biggest changeBased solely on our 2022 operating results, a 10% change to the following exchange rates would have impacted our net income, FFO, and Normalized FFO by the amounts below (in thousands): Net Income Impact FFO Impact NFFO Impact British pound (£) $ 9,242 $ 17,949 $ 18,021 Euro (€) 1,937 6,055 6,444 Swiss franc (CHF) 2,920 5,137 3,648 Australian dollar (A$) 1,125 3,151 3,151 Colombian peso (COP) 1,137 1,167 1,167 54
Biggest changeBased solely on our 2023 operating results, a 10% change to the following exchange rates would have impacted our net income, FFO, and Normalized FFO by the amounts below (in thousands): Net Income Impact(1) FFO Impact(1) NFFO Impact British pound (£) $ 11,331 $ 20,762 $ 20,734 Euro (€) 1,670 6,177 6,180 Swiss franc (CHF) 3,350 5,741 3,667 Colombian peso (COP) 1,466 1,537 1,537 (1) Excludes the approximate $161 million one-time tax benefit in 2023 as a result of entering the U.K.
This assumes that the average amount outstanding under our variable rate debt for a year is $1.1 billion, the balance of such variable rate debt at December 31, 2022.
This assumes that the average amount outstanding under our variable rate debt for a year is $1.7 billion, the balance of such variable rate debt at December 31, 2023.
Foreign Currency Sensitivity With our investments in the United Kingdom, Germany, Spain, Italy, Portugal, Switzerland, Finland, Australia, and Colombia, we are subject to fluctuations in the British pound, euro, Swiss franc, Australian dollar, and Colombian peso to U.S. dollar currency exchange rates.
Foreign Currency Sensitivity With our investments in the U.K., Germany, Spain, Italy, Portugal, Switzerland, Finland, and Colombia, we are subject to fluctuations in the British pound, euro, Swiss franc, and Colombian peso to U.S. dollar currency exchange rates.
If market rates of interest on our variable rate debt decrease by 10%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by $5.4 million per year.
If market rates of interest on our variable rate debt decrease by 10%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by $11.3 million per year.
At December 31, 2022, our outstanding debt totaled $10.3 billion, which consisted of fixed-rate debt of approximately $9.2 billion (after considering interest rate swaps in-place) and variable rate debt of $1.1 billion. If market interest rates increase by 10%, the fair value of our debt at December 31, 2022 would decrease by approximately $228.4 million.
At December 31, 2023, our outstanding debt totaled $10.1 billion, which consisted of fixed-rate debt of approximately $8.4 billion (after considering interest rate swaps in-place) and variable rate debt of $1.7 billion. If market interest rates increase by 10%, the fair value of our debt at December 31, 2023 would decrease by approximately $219.9 million.
If market rates of interest on our variable rate debt increase by 10%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by $5.4 million per year.
Changes in the fair value of our fixed rate debt will not have any impact on us unless we decided to repurchase the debt in the open market. 60 If market rates of interest on our variable rate debt increase by 10%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by $11.3 million per year.
Removed
Changes in the fair value of our fixed rate debt will not have any impact on us unless we decided to repurchase the debt in the open market.
Added
REIT regime on July 1, 2023 (as discussed in further detail in Note 5 to our consolidated financial statements in Item 8 to this Annual Report on Form 10-K). 61

Other MPW 10-K year-over-year comparisons