Medical Properties Trust Inc.
05/08/2026 | Press release | Distributed by Public on 05/08/2026 14:21
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the consolidated financial condition and consolidated results of operations are presented on a combined basis for Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. as there are no material differences between these two entities. Such discussion and analysis should be read together with the condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto contained in our 2025 Annual Report.
Forward-Looking Statements.
This Quarterly Report on Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can generally be identified by the use of forward-looking words such as "may", "will", "would", "could", "expect", "intend", "plan", "estimate", "target", "anticipate", "believe", "objectives", "outlook", "guidance", or other similar words, and include statements regarding our strategies, objectives, asset sales and other liquidity and debt repayment transactions (including the use of proceeds thereof), expected returns on investments and financial performance, expected trends and performance across our various markets, and expected outcomes from Prospect's bankruptcy process. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our 2025 Annual Report and as updated in our Quarterly Reports on Form 10-Q for future periods, and on Form 8-K filed with the SEC. Such factors include, among others, the following:
•
macroeconomic conditions, including due to geopolitical instability (such as ongoing armed conflicts in the Middle East and Ukraine) and the implementation of new and increased tariffs and other global trade disruptions, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries, persistent inflation and movements in currency exchange rates, and may negatively impact our financial condition and the financial condition of our tenants;
•
the risk that property sales, loan repayments, and other capital recycling transactions do not occur as anticipated or at all;
•
the risk that the timing, outcome, and terms of Prospect's causes of action, that is collateral for DIP and other fundings that remain outstanding, will not be consistent with those anticipated by the Company;
•
the risk that we are unable to successfully re-tenant or sell any currently vacant properties, on the terms we expect or at all;
•
the risk that governments may take action adverse to our ownership and other rights in our properties;
•
the risk that we are not able to attain our leverage, liquidity, and cost of capital objectives within a reasonable time period or at all;
•
our ability to obtain debt financing on attractive terms or at all, as a result of changes in interest rates and other factors, which may adversely impact our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, or pursue acquisition and development opportunities;
•
our ability to remain in compliance with financial covenants under our debt facilities;
•
our ability to effectuate the extension of the revolving portion of our credit facility (the "Credit Facility") to June 30, 2027;
•
any downgrades in our credit ratings;
•
the ability of our tenants, operators, and borrowers (including those of our joint ventures) to satisfy their obligations under their respective contractual arrangements with us, including the rent ramp up provisions in the leases of former Steward and Prospect-operated facilities;
•
the ability of our tenants and operators to operate profitably and generate positive cash flow, remain solvent, comply with applicable laws, rules and regulations in the operation of our properties, to deliver high-quality services, to attract and retain qualified personnel, and to attract patients;
•
the cooperation of our joint venture partners, including adverse developments affecting the financial health of such joint venture partners or the joint venture itself;
•
the economic, political, and social impact of, and uncertainty relating to, epidemics, pandemics or other public health crises (like COVID-19), which may adversely affect our and our tenants' business, financial condition, results of operations, and liquidity;
•
our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate, and integrate acquisitions and investments;
•
the nature and extent of our current and future competition;
•
factors affecting the real estate industry generally or the healthcare real estate industry in particular;
•
our ability to maintain our status as a real estate investment trust ("REIT") for income tax purposes in the U.S. and U.K.;
•
tax audit results and changes in federal, state, or local tax laws in the U.S., Europe, South America, or other jurisdictions in which we may own healthcare facilities or transact business;
•
the risk that the operations of our tenants will be negatively impacted by changes to Medicaid funding introduced by the One Big Beautiful Bill Act;
•
federal and state healthcare and other regulatory requirements, as well as those in the foreign jurisdictions where we own properties;
•
the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis;
•
loss of property owned through ground leases upon breach or termination of the ground leases;
•
potential environmental contingencies and other liabilities;
•
our ability to attract and retain qualified personnel;
•
the risks and uncertainties of litigation or other regulatory proceedings and investigations; and
•
the accuracy of our methodologies and estimates regarding corporate responsibility metrics and targets, tenant willingness and ability to collaborate towards reporting such metrics and meeting such goals and targets, and the impact of governmental regulation on our and our tenants' corporate responsibility efforts.
Key Factors that May Affect Our Operations
Our revenue is derived from rents we earn pursuant to the lease agreements with our tenants, from interest income from loans to our tenants and other facility owners, and from profits or equity interests in certain of our tenants' operations. Our tenants operate in the healthcare industry, generally providing medical, surgical, rehabilitative, and behavioral health care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants' operations are subject to economic, regulatory, market, and other conditions that may affect their profitability, which could impact our results. Accordingly, we monitor certain key performance indicators that we believe provide us with early indications of conditions that could affect the level of risk in our portfolio.
Key factors that we may consider in underwriting prospective deals and in our ongoing monitoring of our tenants' (and guarantors') performance, as well as the condition of our properties, include, but are not limited to, the following:
•
the scope and breadth of clinical services and programs, including utilization trends (both inpatient and outpatient) by service type;
•
the size and composition of medical staff and physician leadership at our facilities, including specialty, tenure, and number of procedures performed and/or referrals;
•
an evaluation of our operators' management team, as applicable, including background and tenure within the healthcare industry;
•
staffing trends, including ratios, turnover metrics, recruitment and retention strategies at corporate and individual facility levels;
•
facility operating performance measured by current, historical, and prospective operating margins (measured by a tenant's earnings before interest, taxes, depreciation, amortization, management fees, and facility rent) of each tenant and at each facility;
•
the ratio of our tenants' operating earnings to facility rent and to other fixed costs, including debt costs;
•
changes in revenue sources of our tenants, including the relative mix of public payors (including Medicare, Medicaid/MediCal, and managed care in the U.S., as well as equivalent payors in Europe, and South America) and private payors (including commercial insurance and private pay patients);
•
historical support (financial or otherwise) from governments and/or other public payor systems during major economic downturns/depressions;
•
trends in tenants' cash collections, including comparison to recorded net patient service revenues, knowing and assessing current revenue cycle management systems and potential future planned upgrades or replacements;
•
tenants' free cash flow;
•
the potential impact of healthcare pandemics/epidemics, legislation, and other regulations (including changes in reimbursement) on our tenants', borrowers', and guarantors' profitability and liquidity;
•
the potential impact of any legal, regulatory, or compliance proceedings with our tenants (including at the facility level);
•
the potential impact of supply chain and inflation-related challenges as they relate to new developments or capital addition projects;
•
an ongoing assessment of the operating environment of our tenants, including demographics, competition, market position, status of compliance, accreditation, quality performance, and health outcomes as measured by The Centers for Medicare and Medicaid Services ("CMS"), The Joint Commission, and other governmental bodies in which our tenants operate;
•
the level of investment in the hospital infrastructure and health IT systems; and
•
physical real estate due diligence, typically including property condition and Phase 1 environmental assessments, along with routine property inspections thereafter.
Certain business factors, in addition to those described above that may directly affect our tenants and borrowers, will likely materially influence our future results of operations. These factors include:
•
trends in interest rates and other costs due to general inflation and availability and increased costs from labor shortages could adversely impact the operations of our tenants and their ability to meet their lease/loan obligations;
•
changes in healthcare regulations that may limit the opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate;
•
reductions (or non-timely increases) in reimbursements from Medicare, state healthcare programs, and commercial insurance providers that may reduce our tenants' or borrowers' profitability and our revenues;
•
regulatory restrictions on REIT healthcare investments;
•
competition from other financing sources; and
•
the ability of our tenants and borrowers to access funds in the credit markets.
CRITICAL ACCOUNTING POLICIES
Refer to our 2025 Annual Report for a discussion of our critical accounting policies, which include investments in real estate, purchase price allocation, loans, credit losses, losses from rent and interest receivables, investments accounted for under the fair value option election, and our accounting policy on consolidation. During the three months ended March 31, 2026, there were no material changes to these policies.
Overview
We are a self-advised REIT focused on investing in and owning net-leased healthcare facilities across the U.S. and selectively in foreign jurisdictions. Medical Properties Trust, Inc. was incorporated under Maryland law on August 27, 2003, and MPT Operating Partnership, L.P. was formed under Delaware law on September 10, 2003. We conduct substantially all of our business through MPT Operating Partnership, L.P. We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases, which require the tenant to bear most of the costs associated with the property. The majority of our leased assets are owned 100%; however, we do own some leased assets through joint ventures with other partners that share our view that healthcare facilities are part of the infrastructure of any community, which we refer to as investments in unconsolidated real estate joint ventures. We also make mortgage loans to healthcare operators collateralized by their real estate assets. In addition, we may make loans to certain of our operators through our TRS, the proceeds of which are typically used for working capital and other purposes. From time-to-time, we may make noncontrolling investments in our tenants, which we refer to as investments in
unconsolidated operating entities. These investments are typically made in conjunction with larger real estate transactions with the tenant that give us a right to share in such tenant's profits and losses, and provide for certain minority rights and protections. Our business model facilitates acquisitions and recapitalizations, and allows operators of healthcare facilities to serve their communities by unlocking the value of their real estate assets to fund facility improvements, technology upgrades, and other investments in operations.
At March 31, 2026, our portfolio consisted of 378 properties leased or loaned to 51 operators, and all of our investments are located in the U.S., Europe, and South America. Our total assets are made up of the following (dollars in thousands):
|
As of |
% of |
As of |
% of |
|||||||||||||
|
Real estate assets - at cost |
$ |
12,615,811 |
85.5 |
% |
$ |
12,751,022 |
85.0 |
% |
||||||||
|
Accumulated real estate depreciation and amortization |
(1,713,282 |
) |
(11.6 |
)% |
(1,663,056 |
) |
(11.1 |
)% |
||||||||
|
Net investment in real estate assets |
10,902,529 |
73.9 |
% |
11,087,966 |
73.9 |
% |
||||||||||
|
Cash and cash equivalents |
425,001 |
2.9 |
% |
540,859 |
3.6 |
% |
||||||||||
|
Investments in unconsolidated real estate joint ventures |
1,390,385 |
9.4 |
% |
1,399,777 |
9.3 |
% |
||||||||||
|
Investments in unconsolidated operating entities |
320,928 |
2.2 |
% |
322,179 |
2.2 |
% |
||||||||||
|
Other |
1,723,834 |
11.6 |
% |
1,650,994 |
11.0 |
% |
||||||||||
|
Total assets |
$ |
14,762,677 |
100.0 |
% |
$ |
15,001,775 |
100.0 |
% |
||||||||
Results of Operations
Three Months Ended March 31, 2026 Compared to March 31, 2025
Net income for the three months ended March 31, 2026, was $32.8 million, or $0.05 per share compared to a net loss of ($118.3) million, or ($0.20) per share, for the three months ended March 31, 2025. This increase in net income is primarily driven by (i) a $28.3 million increase in revenue as discussed in detail below, (ii) an approximately $43 million one-time tax benefit in the first quarter of 2026 from moving seven additional U.K. entities into our U.K. REIT as described in Note 5 to the condensed consolidated financial statements, and (iii) $76 million of impairment charges primarily related to Prospect and certain of our Colombia assets along with $30 million of unfavorable fair value adjustments primarily related to our investments in PHP Holdings and Aevis in the 2025 first quarter, as compared to $19 million of impairment charges and $2 million of unfavorable non-cash fair value adjustments in the 2026 first quarter. The increase in net income was partially offset by higher interest expense and depreciation expense quarter over quarter. Normalized FFO, after adjusting for certain items (as more fully described in the section titled "Reconciliation of Non-GAAP Financial Measures" in Item 2 of this Quarterly Report on Form 10-Q), was $82.2 million for the 2026 first quarter, or $0.14 per diluted share, and in line with the $81.1 million, or $0.14 per diluted share, for the 2025 first quarter.
Revenues
A comparison of revenues for the three months ended March 31, 2026 and 2025 is as follows (dollar amounts in thousands):
|
2026 |
% of |
2025 |
% of |
Year over |
||||||||||||||||
|
Rent billed |
$ |
197,520 |
78.3 |
% |
$ |
165,190 |
73.8 |
% |
19.6 |
% |
||||||||||
|
Straight-line rent |
34,196 |
13.6 |
% |
40,127 |
17.9 |
% |
(14.8 |
)% |
||||||||||||
|
Income from financing leases |
10,064 |
4.0 |
% |
9,905 |
4.4 |
% |
1.6 |
% |
||||||||||||
|
Interest and other income |
10,285 |
4.1 |
% |
8,577 |
3.9 |
% |
19.9 |
% |
||||||||||||
|
Total revenues |
$ |
252,065 |
100.0 |
% |
$ |
223,799 |
100.0 |
% |
12.6 |
% |
||||||||||
Our total revenues for the 2026 first quarter increased $28.3 million, or 12.6%, over the same period in the prior year. This increase is made up of the following:
•
Operating lease revenue (includes rent billed and straight-line rent) - up $26.4 million from the same period in the prior year, primarily due to $15.5 million more of lease revenue earned from the retenanting of the former Steward-operated facilities, approximately $2.5 million of additional cash received from acquisitions in 2025 and 2026, an increase of $1.7 million due to increases in CPI above the contractual minimum escalations in our leases, $7.5 million of favorable foreign currency fluctuations, and $1.1 million from the completion of capital additions and development projects in 2025 and 2026. These increases were offset by approximately $1.9 million lower revenues from property sales in 2025 and 2026.
•
Income from financing leases - up $0.2 million primarily due to the increase in CPI above the lease contractual minimum escalations.
•
Interest and other income - up approximately $1.7 million from the prior year due to the following:
o
Interest from loans - up $1.7 million, primarily due to approximately $0.8 million of additional revenue from the funding of new loans and $0.9 million from increases in interest rates between periods.
o
Other income - consistent with the prior year and represents direct reimbursements from tenants for ground leases, property taxes, and insurance.
We currently have several tenants on the cash basis from a revenue recognition perspective, which can result in variability of our lease revenue quarter-to-quarter.
Interest Expense
Interest expense for the quarters ended March 31, 2026 and 2025 totaled $133.3 million and $115.8 million, respectively. This increase is primarily related to a full quarter of interest in the 2026 first quarter related to our February 2025 debt refinancing activities (see Note 4 to the condensed consolidated financial statements for further details) and higher interest expense from the increase in average borrowings on our Credit Facility in the first quarter of 2026, compared to the same period of 2025. Overall, our weighted-average interest rate was 5.2% for the quarter ended March 31, 2026, compared to 4.9% for the same period in 2025.
Real Estate Depreciation and Amortization
Real estate depreciation and amortization during the first quarter of 2026 increased to $69.7 million from $64.6 million in 2025. This increase is primarily due to the six California properties, leased to NOR, that were reclassified as operating leases in December 2025, along with acquisition and capital addition activity during 2025 (as disclosed in previous filings) and the 2026 first quarter as more fully described in Note 3 to the condensed consolidated financial statements.
Property-related
Property-related expenses totaled $9.9 million and $7.0 million for the quarters ended March 31, 2026 and 2025, respectively. Of the property expenses in the first quarter of 2026 and 2025, approximately $1.9 million and $1.9 million, respectively, represents costs that were reimbursed by our tenants and included in the "Interest and other income" line of the condensed consolidated statements of net income. The remaining non-reimbursed property expenses are higher primarily due to ongoing expenses (such as property taxes, insurance, maintenance, etc.) incurred at our vacant facilities.
General and Administrative
General and administrative expenses were $32.2 million for the 2026 first quarter, compared to $41.9 million for the 2025 first quarter. The decrease quarter-over-quarter is due to lower share-based compensation expense. Share-based compensation expense was $0.6 million for the first quarter of 2026, compared to $17.7 million in the 2025 first quarter, primarily due to the change in fair value of the performance awards that contain a cash-settlement feature and are marked to fair value quarterly, partially offset by additional expense from stock awards granted in 2025 and the 2026 first quarter.
With certain performance awards granted in 2025 and 2024 having cash-settlement features, we expect there will be volatility in our stock compensation expense quarter-to-quarter. As of March 31, 2026, none of the 2025 or 2024 performance shares have been earned/vested and will not begin to earn/vest until, for 20 consecutive days, our total shareholder return reaches 20% (based on the April 15, 2025 grant date) for the 2025 performance award and our stock price reaches $7.00 per share for the 2024 performance award.
Excluding share-based compensation, general and administrative expenses for the 2026 first quarter were higher than the prior year due to non-cash depreciation and other costs associated with our completed headquarters facility in Birmingham, Alabama and higher travel expenses.
(Loss) Gain on Sale of Real Estate
During the three months ended March 31, 2026, the loss on sale of real estate of ($0.8) million primarily relates to the sale of two facilities as described in Note 3 to the condensed consolidated financial statements. During the three months ended March 31, 2025, we disposed of two facilities and an ancillary facility resulting in a net gain of $8.1 million.
Real Estate and Other Impairment Charges, Net
In the 2026 first quarter, we recognized $19.0 million of real estate and other impairment charges, primarily associated with our working capital loans to Insight and Tenor and, to a lesser extent, the expected transition of three vacant properties back to the ground lessor and negative fair value adjustments on our investments in three hospitals in Colombia, along with non-real estate impairment charges for property taxes and other obligations not paid by our cash-basis tenants. In the same period of 2025, we recognized $76.1 million of real estate and other impairment charges, primarily associated with our investments in Prospect and three hospitals in Colombia. See Note 3 and Note 8 to the condensed consolidated financial statements for further details of these charges.
Earnings from Equity Interests
Earnings from equity interests was $15.7 million for the quarter ended March 31, 2026, compared to earnings of $14.0 million for the same period in 2025. Our share of income in the Utah partnership included a $7.2 million positive fair value adjustment in the first quarter of 2026, primarily related to a fair value increase in its real estate (as further described inNote 3 to the condensed consolidated financial statements), compared to $6 million primarily related to its interest rate swap in the same period last year.
Debt Refinancing and Unutilized Financing Costs
We incurred $3.8 million of debt refinancing costs in the 2025 first quarter as a result of the early redemption of our 3.325% Senior Unsecured Notes due 2025, 2.500% Senior Unsecured Notes due 2026, and 5.250% Senior Unsecured Notes due 2026. We did not incur any debt refinancing and unutilized financing costs in the first quarter of 2026.
Other (Including Fair Value Adjustments on Securities)
Other expense for the first quarter of 2026 was $2.5 million, compared to expense of $45.2 million in the prior year period. For 2025, we recognized approximately $30 million in unfavorable non-cash fair value adjustments from our investments marked to fair value, primarily due to an approximate $18 million unfavorable adjustment to our investment in PHP Holdings and approximately $12 million related to our investment in Aevis.
With certain investments accounted for at fair value, we may have positive or negative fair value adjustments from quarter-to-quarter.
Income Tax Expense
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 $32.8 million income tax benefit for the three months ended March 31, 2026 is largely due to moving seven additional U.K. property holding legal entities into our U.K. REIT that was formed on July 1, 2023. As part of this move, we adjusted the deferred tax liabilities associated with these entities, which resulted in an approximate $43 million one-time tax benefit in the first quarter of 2026. Going forward, these U.K. entities (like the others in the U.K. REIT) will be subject only to a withholding tax on earnings upon distribution out of the U.K. REIT. Excluding this one-time benefit, income tax expense for the 2026 first quarter was in line with the $9.4 million income tax expense for the three months ended March 31, 2025, which was primarily based on the income generated by our investments in the U.K. and Germany.
We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $529 million should be reflected against certain of our international and domestic net deferred tax assets at March 31, 2026. 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.
Reconciliation of Non-GAAP Financial Measures
Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. We compute FFO in accordance with the definition provided by the National Association of Real Estate Investment Trusts, or Nareit, which represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairment charges on real estate assets, plus real estate depreciation and amortization, including amortization related to in-place lease intangibles, and after adjustments for unconsolidated partnerships and joint ventures.
In addition to presenting FFO in accordance with the Nareit definition, we disclose normalized FFO, which adjusts FFO for items that relate to unanticipated or non-core events or activities or accounting changes that, if not noted, would make comparison to prior period results and market expectations less meaningful to investors and analysts.
We believe that the use of FFO, combined with the required GAAP presentations, improves the understanding of our operating results among investors and the use of normalized FFO makes comparisons of our operating results with prior periods and other companies more meaningful. While FFO and normalized FFO are relevant and widely used supplemental measures of operating and financial performance of REITs, they should not be viewed as a substitute measure of our operating performance since the measures do not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs (if any are not paid by our tenants) to maintain the operating performance of our properties, which can be significant economic costs that could materially impact our results of operations. FFO and normalized FFO should not be considered an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.
The following table presents a reconciliation of net income (loss) attributable to MPT common stockholders to FFO and Normalized FFO for the three months ended March 31, 2026 and 2025 (in thousands except per share data):
|
For the Three Months Ended |
||||||||
|
March 31, 2026 |
March 31, 2025 |
|||||||
|
FFO information: |
||||||||
|
Net income (loss) attributable to MPT common stockholders |
$ |
32,827 |
$ |
(118,275 |
) |
|||
|
Participating securities' share in earnings |
(461 |
) |
(117 |
) |
||||
|
Net income (loss), less participating securities' share in earnings |
$ |
32,366 |
$ |
(118,392 |
) |
|||
|
Depreciation and amortization |
85,882 |
76,891 |
||||||
|
Loss (gain) on sale of real estate |
2,016 |
(8,059 |
) |
|||||
|
Real estate impairment charges |
9,037 |
65,683 |
||||||
|
Funds from operations |
$ |
129,301 |
$ |
16,123 |
||||
|
Other impairment charges, net |
10,469 |
13,898 |
||||||
|
Litigation, bankruptcy and other costs |
1,632 |
10,047 |
||||||
|
Share-based compensation (fair value adjustments) (1) |
(8,462 |
) |
9,527 |
|||||
|
Non-cash fair value adjustments |
(5,568 |
) |
26,609 |
|||||
|
Tax rate changes and other |
(45,155 |
) |
1,102 |
|||||
|
Debt refinancing and unutilized financing costs |
- |
3,796 |
||||||
|
Normalized funds from operations |
$ |
82,217 |
$ |
81,102 |
||||
|
Per diluted share data: |
||||||||
|
Net income (loss), less participating securities' share in earnings |
$ |
0.05 |
$ |
(0.20 |
) |
|||
|
Depreciation and amortization |
0.15 |
0.13 |
||||||
|
Loss (gain) on sale of real estate |
- |
(0.01 |
) |
|||||
|
Real estate impairment charges |
0.02 |
0.11 |
||||||
|
Funds from operations |
$ |
0.22 |
$ |
0.03 |
||||
|
Other impairment charges, net |
0.02 |
0.02 |
||||||
|
Litigation, bankruptcy and other costs |
- |
0.02 |
||||||
|
Share-based compensation (fair value adjustments) (1) |
(0.01 |
) |
0.02 |
|||||
|
Non-cash fair value adjustments |
(0.01 |
) |
0.04 |
|||||
|
Tax rate changes and other |
(0.08 |
) |
- |
|||||
|
Debt refinancing and unutilized financing costs |
- |
0.01 |
||||||
|
Normalized funds from operations |
$ |
0.14 |
$ |
0.14 |
||||
(1)
Total share-based compensation expense for GAAP purposes is $0.6 million and $17.7 million for the three months ended March 31, 2026 and 2025, respectively (including certain awards that are to be settled in cash). Cash-settled awards are typically recorded in accordance with GAAP at fair value and measured at each balance sheet date until settlement. The resulting fluctuations, which are primarily driven by changes in our stock price rather than operational performance, can introduce significant volatility in our earnings. To enhance comparability and provide a more stable view of performance over time, NFFO reflects an ($8.5) million and $9.5 million adjustment in the three months ended March 31, 2026 and 2025, respectively, to arrive at total share-based compensation expense using grant date fair value for all awards (including cash-settled awards) of $9.0 million and $8.1 million for the three months ended March 31, 2026 and 2025, respectively.
LIQUIDITY AND CAPITAL RESOURCES
2026 Cash Flow Activity
During the first three months of 2026, we used approximately $14 million of cash flows for operating activities, which were lower than the first three months of 2025 primarily due to a $56 million increase in interest paid in the first three months of 2026 compared to the same period in 2025 due to the February 2025 refinancing activities, partially offset by an approximate $33 million increase in cash rent received and less cash paid for litigation, bankruptcy, and other costs. Our interest payments are typically higher in the first quarter than other quarters during the year. Given this and the continued ramping up of rents at HSA and NOR, we expect operating cash flows to improve as we move forward in 2026.
We used cash on-hand, proceeds from the revolving portion of our Credit Facility, and proceeds from repayment of loans receivable and asset sales to fund our dividends and other investing activities. During the first three months of 2026, we completed the sale of two facilities for total proceeds of approximately $31 million, of which $12 million was received in advance of the sale in the first quarter of 2025, and we closed on the acquisition of one property in Germany for approximately €23 million.
In the first quarter of 2026 (and as noted in Note 3 to the condensed consolidated financial statements), Prospect's bankruptcy plan was deemed effective. We received approximately $45 million from Connecticut and Pennsylvania asset sales and collection of Connecticut accounts receivable during the quarter, while funding $45 million of the $70 million bankruptcy court approved funding commitment (as disclosed in our 2025 Annual Report) and expect to fund the remaining $25 million commitment in the 2026 second quarter. Although no assurances can be given as to the amount to be received or timing of such collections, we expect to collect our remaining loan of $61 million at March 31, 2026 plus the additional $25 million funding to be made in the 2026 second quarter from a combination of a) collection of remaining Connecticut accounts receivable, of which we received approximately $9 million in April 2026 and b) proceeds from certain of Prospect's causes of action.
Debt Covenant Compliance
See Note 4 to the condensed consolidated financial statements for detail of our covenant requirements.
As of May 6, 2026, we are in compliance with all such financial and operating covenants.
2025 Cash Flow Activity
During the first three months of 2025, we generated approximately $0.4 million of cash flows from operating activities. We used these operating cash flows, proceeds from our revolving credit facility, and proceeds from asset sales to fund our dividends and other investing activities. During the 2025 first quarter, we repaid the remaining outstanding balance of the British pound sterling term loan due 2025 of £493 million, with a combination of cash on hand and available capacity under our revolving credit facility. We also completed a private offering of $1.5 billion in aggregate principal amount of senior secured notes due 2032 and €1.0 billion aggregate principal amount of senior secured notes due 2032. The net proceeds from the offering were approximately $2.5 billion after deducting discounts, commissions, and other offering related expenses. We used the net proceeds from the offering to fund the redemption of our 3.325% Senior Unsecured Notes due 2025, 2.500% Senior Unsecured Notes due 2026, and 5.250% Senior Unsecured Notes due 2026, with the remainder of net proceeds used to paydown our revolving credit facility by approximately $800 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. Our monthly rent and interest receipts and distributions from our joint venture arrangements are typically enough to cover our short-term liquidity requirements.
Over the next twelve months, we expect our monthly rent and interest receipts to increase with our contractually required annual escalations, from the ramp up of cash rents from the tenants that replaced Steward, and expected cash rents from the replacement
tenant of the Prospect California facilities. We would expect these rent and interest increases to outpace the higher interest cost that may be associated with refinancing maturities coming due within the next twelve months.
At May 6, 2026, we only have the €500 million, 0.993% Senior Unsecured Notes due 2026, coming due in the next twelve months, as we have provided notice of our intent to extend the revolving portion of our Credit Facility to 2027. In addition, we have liquidity of $1.0 billion (including cash on hand and availability under the $1.28 billion revolving portion of our Credit Facility). We believe this liquidity, along with the expected cash receipts of rent and interest pursuant to our contractual agreements with our tenants/borrowers, is sufficient to fund our short-term liquidity requirements.
Long-term Liquidity Requirements:
Our long-term liquidity requirements generally consist of the same requirements described above under "Short-term Liquidity Requirements" along with investments in real estate and the funding of debt maturities coming due after the next twelve months. At this time, we do not expect any material new investments of real estate in the foreseeable future.
As described previously, our monthly rent and interest receipts and distributions from our joint venture arrangements along with our current liquidity of approximately $1.0 billion at May 6, 2026, are typically enough to cover our short-term liquidity requirements. However, to further improve cash flows and to fund future debt maturities, we will need to look to other sources, which may include one or a combination of the following:
•
further property sales or the monetization of a portion of our real estate joint ventures;
•
monetizing our investment in operators;
•
reducing our dividend (or switching to a stock dividend), while still complying with REIT requirements and credit facility covenants;
•
identifying and implementing cost reduction opportunities;
•
entering into additional secured loans on real estate;
•
extending the maturity or refinancing of our existing Credit Facility and other term loans;
•
entering into new bank term loans or issuing new USD, EUR, or GBP denominated debt securities; and
•
sale of equity securities.
However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful.
Principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) as of May 6, 2026 are as follows (in thousands):
|
2026 |
$ |
1,111,653 |
(1) |
||
|
2027 |
1,600,000 |
||||
|
2028 |
815,580 |
||||
|
2029 |
900,000 |
||||
|
2030 |
475,755 |
||||
|
Thereafter |
4,833,034 |
||||
|
Total |
$ |
9,736,022 |
(1)
Approximately $524 million represents the outstanding balance of our revolving credit facility for which we have provided notice of our intent to extend to 2027 - see Note 4 to the condensed consolidated financial statements for further details.
Contractual Commitments
We presented our contractual commitments in our 2025 Annual Report. There have been no significant changes through May 6, 2026, other than the net repayment of approximately $145 million on our revolving credit facility.
Distribution Policy
The table below is a summary of our distributions declared (and paid in cash) during the two year period ended March 31, 2026:
|
Declaration Date |
Record Date |
Date of Distribution |
Distribution |
|||||
|
February 12, 2026 |
March 12, 2026 |
April 9, 2026 |
$ |
0.09 |
||||
|
November 17, 2025 |
December 11, 2025 |
January 8, 2026 |
$ |
0.09 |
||||
|
August 14, 2025 |
September 11, 2025 |
October 9, 2025 |
$ |
0.08 |
||||
|
May 29, 2025 |
June 18, 2025 |
July 17, 2025 |
$ |
0.08 |
||||
|
February 13, 2025 |
March 10, 2025 |
April 10, 2025 |
$ |
0.08 |
||||
|
November 21, 2024 |
December 12, 2024 |
January 9, 2025 |
$ |
0.08 |
||||
|
August 22, 2024 |
September 9, 2024 |
October 10, 2024 |
$ |
0.08 |
||||
|
May 30, 2024 |
June 10, 2024 |
July 9, 2024 |
$ |
0.15 |
||||
It is our policy to make sufficient distributions to stockholders in order for us to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and to efficiently manage corporate income and excise taxes on undistributed income. Although we have only made cash distributions historically, we may consider making stock dividends in the future for liquidity purposes, while still complying with REIT requirements. In addition, our Credit Facility limits the amount of cash dividends we can make- see Note 4 to the condensed consolidated financial statements for further information.
Medical Properties Trust Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 20:22 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]