Medical Properties Trust Inc.
11/07/2025 | Press release | Distributed by Public on 11/07/2025 15:09
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis ofFinancial 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 Form 10-Q and the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2024.
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 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 or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K and as updated in our quarterly reports on Form 10-Q for future periods, and current reports on Form 8-K as we file them with the SEC under the Exchange Act. Such factors include, among others, the following:
•
macroeconomic conditions, including due to geopolitical instability, including the current U.S. government shutdown, and 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, rising inflation and movements in currency exchange rates, and may negatively impact 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 outcome and terms of the bankruptcy restructurings of affiliates of Prospect will not be consistent with those we anticipate and the risk that we are unable to recover the value of our real estate and other investments in the Prospect portfolio as a result of the bankruptcy restructuring, within a reasonable timeframe or at all;
•
the risk that we are unable to successfully re-tenant or sell the remaining former Steward hospitals, on the terms we expect or at all;
•
the risk that governments may exercise powers 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 (including debt in our joint venture arrangements), 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 our financial covenants under our debt facilities;
•
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-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, the potential impact from 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;
•
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;
•
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 REIT for income tax purposes in the U.S. and U.K.;
•
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;
•
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 equity or 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 2024 Annual Report on Form 10-K 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 nine months ended September 30, 2025, 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 September 30, 2025, our portfolio consisted of 388 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 |
$ |
12,820,619 |
85.9 |
% |
$ |
12,471,543 |
87.2 |
% |
||||||||
|
Accumulated real estate depreciation and amortization |
(1,633,531 |
) |
(10.9 |
)% |
(1,422,948 |
) |
(10.0 |
)% |
||||||||
|
Net investment in real estate assets |
11,187,088 |
75.0 |
% |
11,048,595 |
77.2 |
% |
||||||||||
|
Cash and cash equivalents |
396,577 |
2.7 |
% |
332,335 |
2.3 |
% |
||||||||||
|
Investments in unconsolidated real estate joint ventures |
1,379,600 |
9.2 |
% |
1,156,397 |
8.1 |
% |
||||||||||
|
Investments in unconsolidated operating entities |
319,192 |
2.1 |
% |
439,578 |
3.1 |
% |
||||||||||
|
Other |
1,641,738 |
11.0 |
% |
1,317,689 |
9.3 |
% |
||||||||||
|
Total assets |
$ |
14,924,195 |
100.0 |
% |
$ |
14,294,594 |
100.0 |
% |
||||||||
Results of Operations
Three Months Ended September 30, 2025 Compared to September 30, 2024
Net loss for the three months ended September 30, 2025, was ($77.7) million, or ($0.13) per share compared to a net loss of ($801.2) million, or ($1.34) per share, for the three months ended September 30, 2024. This decrease in net loss is primarily driven by (i) approximately $608 million of impairment charges primarily related to the global settlement reached with Steward and its lenders as described in Note 3to the condensed consolidated financial statements, (ii) approximately $134 million unfavorable fair value adjustment to our investment in PHP Holdings, and (iii) approximately $137 million of accelerated amortization of in-place lease intangibles, all in the third quarter of 2024. These decreases were partially offset by approximately $100 million of additional gains on sales of real estate in the third quarter of 2024 compared to the 2025 third 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 $77.2 million for the 2025 third quarter, or $0.13 per diluted share, as compared to $93.9 million, or $0.16 per diluted share, for the 2024 third quarter. This 17.7% decrease in Normalized FFO is primarily due to higher interest expense from our recent refinancing activities.
Revenues
A comparison of revenues for the three months ended September 30, 2025 and 2024 is as follows (dollar amounts in thousands):
|
2025 |
% of |
2024 |
% of |
Year over |
||||||||||||||||
|
Rent billed |
$ |
181,001 |
76.2 |
% |
$ |
169,721 |
75.2 |
% |
6.6 |
% |
||||||||||
|
Straight-line rent |
36,405 |
15.3 |
% |
36,602 |
16.2 |
% |
(0.5 |
)% |
||||||||||||
|
Income from financing leases |
9,944 |
4.2 |
% |
9,798 |
4.3 |
% |
1.5 |
% |
||||||||||||
|
Interest and other income |
10,172 |
4.3 |
% |
9,706 |
4.3 |
% |
4.8 |
% |
||||||||||||
|
Total revenues |
$ |
237,522 |
100.0 |
% |
$ |
225,827 |
100.0 |
% |
5.2 |
% |
||||||||||
Our total revenues for the 2025 third quarter increased $11.7 million, or 5%, 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 $11.1 million from the prior year, primarily due to $11 million more of lease revenue earned from the retenanting of the former Steward-operated facilities, approximately $6 million of additional cash received from other cash-basis tenants, an increase of $2.5 million due to increases in CPI above the contractual minimum escalations in our leases, $5 million of favorable foreign currency fluctuations, and $0.6 million from the completion of capital additions and development projects in 2024 and 2025. These increases were offset by approximately $10 million from rent collected from Steward in the 2024 third quarter (none in the 2025 third quarter) and approximately $3.6 million lower revenues from property sales in 2024 and 2025.
•
Income from financing leases - up $0.1 million primarily due to the increase in CPI above the lease contractual minimum escalations.
•
Interest and other income - up approximately $0.5 million from the prior year due to the following:
o
Interest from loans - up $0.8 million, primarily due to approximately $1.2 million of additional revenue from the funding of new loans.
o
Other income - down $0.3 million from the prior year as we had less direct reimbursements from our cash-basis 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. For example, one of our tenants, Healthcare Systems of America, paid their September rent of approximately $4 million on October 1, 2025, which will be recorded in the 2025 fourth quarter.
Interest Expense
Interest expense for the quarters ended September 30, 2025 and 2024 totaled $132.4 million and $106.2 million, respectively. This increase is primarily related to higher interest from our February 2025 debt refinancing activities (see Note 4to the condensed consolidated financial statements for further details), partially offset by lower interest expense from the decrease in average borrowings on our Credit Facility in the third quarter of 2025, compared to the same period of 2024 and the payoff of our £493 million British pound sterling term loan in the first quarter of 2025. Overall, our weighted-average interest rate was 5.4% for the quarter ended September 30, 2025, compared to 4.3% for the same period in 2024.
Real Estate Depreciation and Amortization
Real estate depreciation and amortization during the third quarter of 2025 decreased to $67.0 million from $204.9 million in 2024. This decrease is primarily related to the $137 million of additional amortization expense recorded in the third quarter of 2024 to fully amortize the intangibles associated with two terminated master leases, including the Steward master lease that was terminated effective September 11, 2024 as part of the global settlement discussed in Note 3to the condensed consolidated financial statements.
Property-related
Property-related expenses totaled $9.0 million and $5.0 million for the quarters ended September 30, 2025 and 2024, respectively. Of the property expenses in the third quarter of 2025 and 2024, approximately $2.3 million and $2.6 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. Net of reimbursement, our property-related expenses are higher than prior year as we have additional vacant properties following the Steward bankruptcy. We are in various stages of re-tenanting or selling our vacant properties, which make up less than 1% of our total assets.
General and Administrative
General and administrative expenses were $37.7 million for the 2025 third quarter, compared to $36.6 million for the 2024 third quarter. The increase quarter-over-quarter is due to higher travel and professional fees, partially offset by lower share-based compensation expenses. Share-based compensation expense was $12.3 million for the third quarter of 2025, compared to $14.4 million in the 2024 third quarter, primarily due to the decrease in fair value of the 2024 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.
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 September 30, 2025, 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.
Gain (Loss) on Sale of Real Estate
During the three months ended September 30, 2025, the loss on sale of real estate was ($9.1) million primarily related to the sale of two facilities. During the three months ended September 30, 2024, the gain on sale of real estate of $91.8 million primarily relates to the sale of eight Dignity Health facilities and 11 UCHealth facilities as more fully described in Note 3to the condensed consolidated financial statements.
Real Estate and Other Impairment Charges, Net
In the 2025 third quarter, we recognized $81.8 million of real estate and other impairment charges, primarily associated with our Prospect investments and non-real estate impairment charges for property taxes and other obligations not paid by our cash-basis tenants. In the same period of 2024, we recognized $607.9 million of real estate and other impairment charges. Of these charges, approximately $425 million consisted of the impairment of working capital loans and other secured loans advanced to Steward, and $180 million was related to real estate, including the Space Coast facilities and certain excess properties previously leased to Steward (as more fully described in Note 3to the condensed consolidated financial statements).
Earnings (Loss) from Equity Interests
Earnings from equity interests was $34.4 million for the quarter ended September 30, 2025, compared to earnings of $21.6 million for the same period in 2024. This increase is primarily due to our share of income in the MEDIAN joint venture from a deferred income tax benefit recognized in the third quarter of 2025 related to the lowering of German tax rates. Our share of income in the Utah partnership included a $12.8 million positive fair value adjustment in the third quarter of 2025, primarily related to a favorable fair value adjustment on its investments in real estate (as further described inNote 3to the condensed consolidated financial statements), compared to $13.5 million in the same period last year.
Other (Including Fair Value Adjustments on Securities)
Other expense for the third quarter of 2025 was $1.5 million, compared to expense of $169.8 million in the prior year. For the 2024 third quarter, we recognized approximately $140 million in unfavorable adjustments to our investment in PHP Holdings and Aevis. The remaining expense in the 2024 third quarter included approximately $29 million of legal and other professional expenses associated with, among other things, responding to certain defamatory statements published by certain parties.
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 $10.9 million income tax expense for the three months ended September 30, 2025, is primarily based on the income generated by our investments in the U.K. and Germany and is higher than the $9.0 million income tax expense in the third quarter of 2024 due to various matters including the impact from the lowering of German tax rates (in future years) on certain deferred tax asset positions on our non-joint venture German entities.
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 $486 million should be reflected against certain of our international and domestic net deferred tax assets at September 30, 2025. 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.
Nine Months Ended September 30, 2025 Compared to September 30, 2024
Net loss for the nine months ended September 30, 2025, was ($294.4) million, or ($0.49) per share compared to a net loss of ($2.0) billion, or ($3.33) per share, for the nine months ended September 30, 2024. This decrease in net loss was primarily driven by the $1.4 billion of impairment charges and negative fair value adjustments in 2024 primarily related to Steward and the international joint venture (all included in "Real estate and other impairment charges, net" line of the condensed consolidated statements of net income), whereas, we incurred only $81.8 million in the first nine months of 2025, primarily related to Prospect. In addition, we had an approximate $498 million unfavorable fair value adjustment to our investment in PHP Holdings in the first nine months of 2024 (compared to $147 million in the same period of 2025) as reflected in "Other (including fair value adjustments on securities)" line of the condensed consolidated statements of net income, and the $410 million of impairment charges related to our Massachusetts-based partnership in the second quarter of 2024 reflected in "Earnings (loss) from equity interests" line of the condensed consolidated statements of net income. 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 $239.7 million for the first nine months of 2025, or $0.40 per diluted share, as compared to $375.0 million, or $0.62 per diluted share, for the same period of 2024. This 36% decrease in Normalized FFO is primarily due to lower revenues as a result of various disposals in 2024 and 2025, along with less cash revenue received from Steward and Prospect, and higher interest expense from our recent refinancing activities.
Revenues
A comparison of revenues for the nine months ended September 30, 2025 and 2024 is as follows (dollar amounts in thousands):
|
2025 |
% of |
2024 |
% of |
Year over |
||||||||||||||||
|
Rent billed |
$ |
524,051 |
74.7 |
% |
$ |
552,784 |
72.4 |
% |
(5.2 |
)% |
||||||||||
|
Straight-line rent |
116,197 |
16.6 |
% |
119,719 |
15.7 |
% |
(2.9 |
)% |
||||||||||||
|
Income from financing leases |
29,772 |
4.2 |
% |
53,832 |
7.0 |
% |
(44.7 |
)% |
||||||||||||
|
Interest and other income |
31,660 |
4.5 |
% |
37,368 |
4.9 |
% |
(15.3 |
)% |
||||||||||||
|
Total revenues |
$ |
701,680 |
100.0 |
% |
$ |
763,703 |
100.0 |
% |
(8.1 |
)% |
||||||||||
Our total revenues for the first nine months of 2025 decreased $62 million, or 8%, over the same period in the prior year. This decrease is made up of the following:
•
Operating lease revenue (includes rent billed and straight-line rent) - down $32.3 million from the same period in the prior year, primarily due to property sales in 2024 and 2025, resulting in a loss of operating lease revenue in the first nine months of 2025 compared to the same period of 2024 of approximately $61 million and $40 million from rent collected from Steward in the first nine months of 2024 (none in the same period of 2025). This decrease was partially offset by $36 million of operating lease revenue earned from the retenanting of the former Steward-operated facilities, an increase of $11 million due to increases in CPI above the contractual minimum escalations in our leases, $9.8 million of favorable foreign currency fluctuations, approximately $8 million more cash received from other cash-basis tenants, and a $1 million increase due to the completion of capital addition and development projects, including the commencement of rent on two development properties in 2024 and three in 2025.
•
Income from financing leases - down $24.1 million from the same period in the prior year primarily due to not receiving any cash for rent revenue from Prospect (cash-basis tenant) in the first nine months of 2025, whereas we received and recorded $25 million of rent from Prospect in the first nine months of 2024. This decrease was partially offset by $1 million from the increase in CPI above the lease contractual minimum escalations.
•
Interest and other income - down approximately $5.7 million from the same period in the prior year due to the following:
o
Interest from loans - down $5.2 million from the same period in the prior year, primarily due to an approximate $3.5 million decrease from the sale of our interest in the Priory syndicated term loan in the first quarter of 2024 and other loan payoffs and approximately $5 million less interest received from cash-basis tenants in the first nine months of 2025 compared to the same period of 2024, partially offset by approximately $3.2 million of additional revenue from the funding of new loans.
o
Other income - down $0.5 million from the prior year as we had less direct reimbursements from our cash-basis tenants for ground leases, property taxes, and insurance.
Interest Expense
Interest expense for the nine months ended September 30, 2025 and 2024 totaled $377.9 million and $316.4 million, respectively. This increase is primarily related to higher interest from our February 2025 debt refinancing activities (see Note 4to the condensed consolidated financial statements for further details), partially offset by lower interest expense from the decrease in average borrowings on our Credit Facility in the first nine months of 2025, compared to the same period of 2024, along with the payoff of our £493 million British pound sterling term loan in the first quarter of 2025. Overall, our weighted-average interest rate was 5.2% for the nine months ended September 30, 2025, compared to 4.3% for the same period in 2024.
Real Estate Depreciation and Amortization
Real estate depreciation and amortization for the first nine months of 2025 decreased to $198.3 million from $382.7 million for the same period of the prior year. This decrease is primarily due to $170 million of additional amortization expense recorded in 2024 primarily to fully amortize the intangibles associated with two master leases, including the Steward master lease that was terminated effective September 11, 2024. The remaining decrease is due to the sale of various properties in 2024 and 2025.
Property-related
Property-related expenses totaled $26.9 million and $17.5 million for the nine months ended September 30, 2025 and 2024, respectively. Of the property expenses in the first nine months of 2025 and 2024, approximately $9.3 million and $9.8 million, respectively, represents costs that were reimbursed by our tenants and included in the "Interest and other income" line on our condensed consolidated statements of net income. Net of reimbursement, our property-related expenses are higher than prior year due to having additional vacant properties post Steward bankruptcy. We are in various stages of re-tenanting or selling our vacant properties, which make up less than 1% of our total assets.
General and Administrative
General and administrative expenses were $105.8 million for the first nine months of 2025, compared to $105.3 million for the same period of 2024. Share-based compensation expense was $30.9 million for the first nine months of 2025, compared to $30.6 million for the same period of 2024.
Gain on Sale of Real Estate
During the nine months ended September 30, 2025, the net gain on sale of real estate of $4.2 million primarily relates to the sale of five facilities as more fully described in Note 3to the condensed consolidated financial statements. During the nine months ended September 30, 2024, the gain on sale of real estate of $475.2 million primarily related to the sale of five Prime facilities, a 75% interest in five Utah facilities as part of the Utah Transaction, and the sale of eight Dignity Health and 11 UCHealth facilities, each as more fully described in Note 3to the condensed consolidated financial statements.
Real Estate and Other Impairment Charges, Net
In the first nine months of 2025, we recognized $159.3 million of real estate and other impairment charges, primarily associated with our investments in Prospect and three hospitals in Colombia, as well as ongoing property taxes and other obligations not paid by our cash-basis tenants. In the same period of 2024, we recognized $1.4 billion of real estate and other impairment charges and fair value adjustments, primarily associated with our investments in Steward and the international joint venture as further described in Note 3to the condensed consolidated financial statements.
Earnings (Loss) from Equity Interests
Earnings from equity interests was $73.7 million for the nine months ended September 30, 2025, compared to a loss of ($369.6) million for the same period in 2024. This increase is primarily due to the $410 million charge in the second quarter of 2024 associated with the real estate impairment in our Massachusetts-based partnership with Macquarie. In addition, our share of income increased year-over-year in the Utah partnership that was formed in the 2024 second quarter by approximately $27.0 million, as prior year only included three months of activity versus a full nine months in 2025 plus the nine months ended September 30, 2025 included approximately $34 million of positive fair value adjustments (primarily real estate related) compared to $13.5 million in 2024. Finally, our share of income in the MEDIAN joint venture increased by approximately $8.8 million primarily driven by the deferred tax benefit disclosed previously in Note 3to the condensed consolidated financial statements.
Debt Refinancing and Unutilized Financing Costs
Debt refinancing and unutilized financing costs were $3.6 million for the first nine months of 2025. These costs were incurred primarily 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. For the same period of 2024, these costs were $3.7 million and were incurred as a result of the reduction in revolving commitments under our Credit Facility and partial paydown of our British pound sterling term loan due 2025.
Other (Including Fair Value Adjustments on Securities)
Other expense for the first nine months of 2025 was $171.1 million, compared to expense of $566.8 million in the same period of the prior year. For 2025, we recognized approximately $156 million in unfavorable non-cash fair value adjustments from our investments marked to fair value, primarily due to an approximate $147 million unfavorable adjustment to our investment in PHP Holdings and approximately $8.3 million related to our investment in Aevis. For the first nine months of 2024, we recognized an approximate $498 million unfavorable adjustment to our investment in PHP Holdings. The remaining expense in the first nine months of 2024 included a $7.8 million economic loss from the sale of our interest in the Priory syndicated term loan and approximately $46.5 million of legal and other professional expenses associated with, among other things, responding to certain defamatory statements published by certain parties.
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 $30.1 million income tax expense for the nine months ended September 30, 2025, is primarily based on the income generated by our investments in the U.K. and Germany and less than the $34.5 million income tax expense in the first nine months of 2024 due to a $5 million additional tax expense in the second quarter of 2024 as a result of the gain on the interest rate swap associated with the internal restructuring of the British pound sterling term loan due 2025.
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 $486 million should be reflected against certain of our international and domestic net deferred tax assets at September 30, 2025. 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 loss attributable to MPT common stockholders to FFO and Normalized FFO for the three and nine months ended September 30, 2025 and 2024 (in thousands except per share data):
|
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
|
September 30, 2025 |
September 30, 2024 |
September 30, 2025 |
September 30, 2024 |
|||||||||||||
|
FFO information: |
||||||||||||||||
|
Net loss attributable to MPT common stockholders |
$ |
(77,730 |
) |
$ |
(801,163 |
) |
$ |
(294,362 |
) |
$ |
(1,997,423 |
) |
||||
|
Participating securities' share in earnings |
(256 |
) |
(153 |
) |
(597 |
) |
(807 |
) |
||||||||
|
Net loss, less participating securities' share in earnings |
$ |
(77,986 |
) |
$ |
(801,316 |
) |
$ |
(294,959 |
) |
$ |
(1,998,230 |
) |
||||
|
Depreciation and amortization |
82,242 |
218,646 |
240,465 |
430,128 |
||||||||||||
|
Loss (gain) on sale of real estate |
9,115 |
(91,795 |
) |
(4,156 |
) |
(475,196 |
) |
|||||||||
|
Real estate impairment charges |
78,677 |
179,952 |
126,645 |
679,276 |
||||||||||||
|
Funds from operations |
$ |
92,048 |
$ |
(494,513 |
) |
$ |
67,995 |
$ |
(1,364,022 |
) |
||||||
|
Other impairment charges, net |
6,976 |
427,811 |
40,487 |
1,172,789 |
||||||||||||
|
Litigation, bankruptcy and other (recoveries) costs |
(1,125 |
) |
28,899 |
11,078 |
46,507 |
|||||||||||
|
Share-based compensation (fair value adjustments) (1) |
3,457 |
- |
3,444 |
- |
||||||||||||
|
Non-cash fair value adjustments |
(12,066 |
) |
130,949 |
123,370 |
511,472 |
|||||||||||
|
Tax rate changes and other |
(12,091 |
) |
8 |
(10,970 |
) |
4,596 |
||||||||||
|
Debt refinancing and unutilized financing costs |
14 |
713 |
4,273 |
3,677 |
||||||||||||
|
Normalized funds from operations |
$ |
77,213 |
$ |
93,867 |
$ |
239,677 |
$ |
375,019 |
||||||||
|
Per diluted share data: |
||||||||||||||||
|
Net loss, less participating securities' share in earnings |
$ |
(0.13 |
) |
$ |
(1.34 |
) |
$ |
(0.49 |
) |
$ |
(3.33 |
) |
||||
|
Depreciation and amortization |
0.14 |
0.37 |
0.40 |
0.72 |
||||||||||||
|
Loss (gain) on sale of real estate |
0.01 |
(0.15 |
) |
(0.01 |
) |
(0.79 |
) |
|||||||||
|
Real estate impairment charges |
0.13 |
0.30 |
0.21 |
1.13 |
||||||||||||
|
Funds from operations |
$ |
0.15 |
$ |
(0.82 |
) |
$ |
0.11 |
$ |
(2.27 |
) |
||||||
|
Other impairment charges, net |
0.01 |
0.71 |
0.06 |
1.94 |
||||||||||||
|
Litigation, bankruptcy and other (recoveries) costs |
- |
0.05 |
0.02 |
0.08 |
||||||||||||
|
Share-based compensation (fair value adjustments) (1) |
0.01 |
- |
0.01 |
- |
||||||||||||
|
Non-cash fair value adjustments |
(0.02 |
) |
0.22 |
0.21 |
0.85 |
|||||||||||
|
Tax rate changes and other |
(0.02 |
) |
- |
(0.02 |
) |
0.01 |
||||||||||
|
Debt refinancing and unutilized financing costs |
- |
- |
0.01 |
0.01 |
||||||||||||
|
Normalized funds from operations |
$ |
0.13 |
$ |
0.16 |
$ |
0.40 |
$ |
0.62 |
||||||||
(1)
Total share-based compensation expense is $12.3 million and $30.9 million for the three and nine months ended September 30, 2025, respectively, (including certain awards that are to be settled in cash). Cash-settled awards are 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, normalized FFO reflects a $3.5 million and $3.4 million favorable adjustment in the three and nine months ended September 30, 2025, respectively, to arrive at total share-based compensation expense using grant date fair value for all awards (including cash-settled awards) of $8.9 million and $27.4 million for the three and nine months ended September 30, 2025.
LIQUIDITY AND CAPITAL RESOURCES
2025 Cash Flow Activity
During the first nine months of 2025, we generated approximately $70 million of cash flows from operating activities, which were lower than the first nine months of 2024 primarily due to approximately $55 million of less cash rent received due to property
sales in 2024 and 2025, approximately $43 million less cash rent and interest received from tenants accounted for on a cash basis, and an approximate $43 million increase in interest paid for the first nine months of 2025 compared to the same period of 2024, partially offset by increases in cash received due to inflation based escalators in our leases and less cash paid for litigation, bankruptcy, and other costs. We used these operating cash flows, proceeds from our Credit Facility, and proceeds from asset sales to fund our dividends and other investing activities. During the first nine months of 2025, 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 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 Credit Facility by approximately $800 million.
In the third quarter of 2025 (and as noted in Note 3to the condensed consolidated financial statements), the bankruptcy court handling the Prospect bankruptcy approved, among other things, an interim order for additional loan advances to be made by us to the debtor including: a) up to $55 million, which we funded in full in the 2025 third quarter to cover forecasted cash shortfalls by the debtor as it completes the sales of hospital operations and sales/leases of related real estate; b) approximately $25 million for the full repayment of the current senior debtor-in-possession lender, which we funded in the 2025 third quarter; and c) up to $30 million in the form of a backstop facility to cover administrative and priority claims, which remains conditioned on other events occurring including further bankruptcy court approvals. Any funds advanced under the backstop facility will be secured by recoveries, if any, from causes of actions owned by the debtor. Excluding the possible additional $30 million of fundings, we have approximately $100 million of loans outstanding for which we currently expect to recover in excess of from sales of Connecticut properties and Yale proceeds (of which we received $45 million on November 4, 2025), as further described in Note 3to the condensed consolidated financial statements.
Subsequent to September 30, 2025, we received approximately $23 million in distributions from the Swiss Medical Network joint venture. In addition, we committed to the acquisition of one property in Germany for approximately €23 million to be leased to MEDIAN with closing and funding expected in the 2025 fourth quarter.
Debt Amendments, Restrictions, and Covenant Compliance
On February 13, 2025 and concurrent with the closing of the Senior Secured Notes due 2032 as discussed in Note 4to the condensed consolidated financial statements, we amended the Credit Facility to among other things: (i) provide for the facility to be secured and guaranteed ratably with the senior notes issued concurrently, (ii) provide notice that we plan to exercise both of our maturity extension options such that the maturity of the revolving portion would move from June 30, 2026 to June 30, 2027, the same maturity date as our term loan facility (subject to the satisfaction of certain conditions), (iii) reset the interest rate to SOFR plus 225 basis points (which had previously been moved to SOFR plus 300 basis points in August 2024), (iv) permanently remove financial covenants regarding minimum consolidated tangible net worth, maximum unsecured indebtedness to unencumbered asset value and minimum unsecured net operating income to unsecured interest expense, (v) amend certain definitions used in the financial covenant regarding maximum total indebtedness to total asset value to conform to corresponding definitions in our existing unsecured indentures and the secured notes issued concurrently and set the covenant level at 60%, (vi) set the maximum secured leverage ratio at 40%, and (vii) add mandatory prepayments of senior debt or additional collateral in connection with any failure to (x) maintain a 65% maximum ratio of secured first lien debt to the undepreciated real estate value of the secured pool properties or (y) maintain a minimum senior secured debt service coverage ratio of 1.15:1.00 (increasing to 1.30:1.00 in 12 months).
As of November 4, 2025, we are in compliance with all such financial and operating covenants.
2024 Cash Flow Activity
During the first nine months of 2024, we generated approximately $169 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. In addition to operating cash flows, we received approximately $1.8 billion during the first nine months of 2024 from the Utah Transaction and the sale of 25 properties (as further discussed in Note 3to the condensed consolidated financial statements), along with approximately $130 million from the sale of our interest in the syndicated Priory term loan and remaining minority interest in Lifepoint Behavioral. In May 2024, we closed on a new secured term loan, generating proceeds of approximately $800 million. We used our operating cash flows, asset sale proceeds, and term loan proceeds to fund our dividends of $273 million, pay down over $1 billion of our Credit Facility and British pound sterling term loan due 2025, and to pay off our British pound sterling secured term loan due 2024.
See below for further details of these transactions along with additional liquidity activity in the first nine months of 2024:
•
we completed the sales of 11 properties to UC Health for approximately $86 million of proceeds and eight properties to Dignity Health for approximately $160 million of proceeds;
•
we completed the sale of five properties to Prime for cash proceeds of $250 million along with a $100 million interest-bearing mortgage loan that was repaid on August 29, 2024;
•
we completed the Utah Transaction (as discussed in Note 3to the condensed consolidated financial statements) that generated cash proceeds of approximately $1.1 billion. With the proceeds from these asset sales, we paid off and terminated our $306 million Australian term loan facility that was due in May 2024 and paid down the revolving portion of our Credit Facility; and
•
on May 24, 2024, we closed on a secured loan facility with a consortium of institutional investors that provided for a term loan in aggregate principal amount of approximately £631 million (approximately $800 million) secured by a portfolio of 27 properties located in the U.K. currently leased to affiliates of Circle. We used the majority of the net proceeds of the facility to pay down portions of our Credit Facility and British pound sterling term loan due 2025, and to pay off our British pound sterling secured term loan due 2024 (approximately £105 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 last year replaced Steward, and expected rent revenue from the replacement tenant of the Prospect California facilities. We would expect these rent and interest increases to outpace the higher interest cost from the recent refinancings.
At November 4, 2025, 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 $1.1 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 $1.1 billion at November 4, 2025, are typically enough to cover our short-term liquidity requirements. However, to further improve cash flows and to fund future debt maturities, we may 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. In addition, the Prospect bankruptcy related proceedings discussed previously could result in additional cash outflows as discussed above and/or negatively impact the timing, value, and/or our ability to sell or re-lease certain Prospect assets, which could negatively impact our liquidity.
Principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) as of November 4, 2025 are as follows (in thousands):
|
2025 |
$ |
- |
|||
|
2026 |
1,008,104 |
(1) |
|||
|
2027 |
1,600,000 |
||||
|
2028 |
781,260 |
||||
|
2029 |
900,000 |
||||
|
Thereafter |
5,226,054 |
||||
|
Total |
$ |
9,515,418 |
(1)
Approximately $435 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 4to the condensed consolidated financial statements for further details.
Contractual Commitments
We presented our contractual commitments in our 2024 Annual Report on Form 10-K, which factored in our debt refinancing activities in February 2025, and we provided an update to our commitment schedule in our Form 10-Q for the quarter ended June 30, 2025. There have been no further significant changes through November 4, 2025.
Distribution Policy
The table below is a summary of our distributions declared (and paid in cash) during the two year period ended September 30, 2025:
|
Declaration Date |
Record Date |
Date of Distribution |
Distribution |
|||||
|
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 |
||||
|
April 12, 2024 |
April 22, 2024 |
May 1, 2024 |
$ |
0.15 |
||||
|
November 9, 2023 |
December 7, 2023 |
January 11, 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 4to the condensed consolidated financial statements for further information.
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