# MEDICAL PROPERTIES TRUST INC (MPT) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from MEDICAL PROPERTIES TRUST INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1287865/000095017023005575/mpw-20221231.htm
Accession: 0000950170-23-005575
Filing date: 2023-03-01
Report date: 2022-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/MPT/
All MD&A years: /company/MPT/mda/
Previous year: /company/MPT/mda/fy2021/ (FY 2021)
Next year: /company/MPT/mda/fy2023/ (FY 2023)

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, references to “our,” “we,” and “us” in this management’s discussion and analysis of financial condition and results of operations refer to Medical Properties Trust, Inc. and its consolidated subsidiaries, including MPT Operating Partnership, L.P.

Overview

We are a self-advised healthcare REIT that was incorporated in Maryland on August 27, 2003, primarily for the purpose of investing in and owning healthcare facilities to be leased to healthcare operators under long-term net leases. We may also make mortgage loans to healthcare operators that are collateralized by the underlying real estate. We conduct our business operations in one segment. We currently have healthcare investments in the U.S., Europe, Australia, and South America. Our existing tenants are, and our prospective tenants will generally be, healthcare operating companies and other healthcare providers that use substantial real estate assets in their operations. We offer financing to these operators through 100% lease and mortgage financing and generally seek lease and loan terms on a long-term basis (typically at least 15 years) with a series of shorter renewal terms, generally in five year increments, at the option of our tenants and borrowers. We also have included and intend to include in our lease and loan agreements annual contractual minimum rate increases. Our existing portfolio’s minimum escalators are typically at least 2.0%. In addition, most of our leases and loans include rate increases based on the general rate of inflation (based on CPI or similar indices) if greater than the minimum contractual increases. Beyond rent or mortgage interest, our leases and loans typically require our tenants to pay all operating costs and expenses associated with the facility. Finally, from time-to-time, we may make noncontrolling investments in our tenants, typically 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.

We may make other loans to certain of our operators through our TRSs, which the operators use for working capital. Although it represents only 1% of our total assets at December 31, 2022, we consider our lending business an important element of our overall business strategy for two primary reasons: (1) it provides opportunities to make income-earning investments that yield attractive risk-adjusted returns in an industry in which our management has expertise, and (2) by making debt capital available to certain qualified operators, we believe we create a competitive advantage for our company over other buyers of, and financing sources for, healthcare facilities.

At December 31, 2022, our portfolio (including real estate assets in joint ventures) consisted of 444 properties leased or loaned to 55 operators, of which seven were under development and five were in the form of mortgage loans.

The information set forth in this Item 7 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. This section generally discusses the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. For a discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.

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Selected Financial Data

The following sets forth selected consolidated financial and operating data. You should read the following selected financial data in conjunction with the consolidated financial statements and notes thereto of each of Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. and their respective subsidiaries included in Item 8 to this Annual Report on Form 10-K.

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2022","","","2021"],["","","(In thousands except per share data)"],["OPERATING DATA"],["Total revenues","","$","1,542,851","","","$","1,544,669"],["Expenses:"],["Interest","","","359,036","","","","367,393"],["Real estate depreciation and amortization","","","332,977","","","","321,249"],["Property-related","","","45,697","","","","39,098"],["General and administrative","","","160,494","","","","145,638"],["Total expenses","","","898,204","","","","873,378"],["Other income (expense):"],["Gain on sale of real estate","","","536,755","","","","52,471"],["Real estate and other impairment charges, net","","","(268,375",")","","","(39,411",")"],["Earnings from equity interests","","","40,800","","","","28,488"],["Debt refinancing and unutilized financing costs","","","(9,452",")","","","(27,650",")"],["Other (including fair value adjustments on securities)","","","15,344","","","","45,699"],["Income tax (expense)","","","(55,900",")","","","(73,948",")"],["Net income","","","903,819","","","","656,940"],["Net income attributable to non-controlling interests","","","(1,222",")","","","(919",")"],["Net income attributable to MPT common stockholders","","$","902,597","","","$","656,021"],["Net income attributable to MPT common stockholders per diluted share","","$","1.50","","","$","1.11"],["Weighted-average shares outstanding \u2014 diluted","","","598,837","","","","590,139"],["OTHER DATA"],["Dividends declared per common share","","$","1.16","","","$","1.12"],["FFO(1)","","$","934,312","","","$","975,988"],["Normalized FFO(1)","","$","1,087,603","","","$","1,035,920"],["Normalized FFO per share(1)","","$","1.82","","","$","1.75"],["Cash paid for acquisitions and other related investments","","$","1,332,962","","","$","4,246,829"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2022","","","2021"],["","","(In thousands)"],["BALANCE SHEET DATA"],["Real estate assets \u2014 at cost","","$","15,917,839","","","$","17,425,765"],["Real estate accumulated depreciation/amortization","","","(1,193,312",")","","","(993,100",")"],["Cash and cash equivalents","","","235,668","","","","459,227"],["Investments in unconsolidated real estate joint ventures","","","1,497,903","","","","1,152,927"],["Investments in unconsolidated operating entities","","","1,444,872","","","","1,289,434"],["Other loans","","","227,839","","","","67,317"],["Other","","","1,527,191","","","","1,118,231"],["Total assets","","$","19,658,000","","","$","20,519,801"],["Debt, net","","$","10,268,412","","","$","11,282,770"],["Other liabilities","","","795,181","","","","791,360"],["Total Medical Properties Trust, Inc. stockholders\u2019 equity","","","8,592,838","","","","8,440,188"],["Non-controlling interests","","","1,569","","","","5,483"],["Total equity","","","8,594,407","","","","8,445,671"],["Total liabilities and equity","","$","19,658,000","","","$","20,519,801"]]
[[/GREPCENT_TABLE]]

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

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2022 Highlights

In 2022, the value of our well-underwritten hospital investments was confirmed through strategic property sales that generated gains over $535 million and cash proceeds of approximately $2.2 billion. These sales were highlighted by the previously described partnership with MAM in which we sold the real estate of eight Massachusetts-based general acute care hospitals with a fair value of approximately $1.7 billion, using proceeds to pay off an interim credit facility. Despite the economic uncertainty, high interest rates, and inflationary pressures that were prevalent throughout most of 2022, we invested approximately $1 billion in hospital real estate, including expanding our footprint in Europe with our investment in four facilities in Finland. We also increased our availability and extended and improved pricing on our revolving credit and term loan facility in 2022. In addition, we initiated a stock repurchase program, through which we repurchased 1.6 million shares of common stock for $17.9 million through December 31, 2022. Lastly, we increased our dividend to $0.29 per share per quarter in 2022, which is the 8th consecutive year for such an increase.

A summary of additional 2022 activity is as follows:

•
Acquired an additional six behavioral health facilities in the UK for approximately £233 million that are leased to Priory;

•
Funded £96.5 million towards a £100 million participation in a syndicated term loan originated on behalf of Priory;

•
Completed the Bakersfield development for $47 million and commenced development of five additional facilities, including three in Spain;

•
Re-tenanted our Watsonville facility, after the previous tenant filed for bankruptcy, and recovered $32 million on a working capital loan that was previously reserved;

•
Acquired six general acute care facilities, three located throughout Spain, two in the U.S., and one in Colombia, for approximately $135 million that are leased to three different operators;

•
Selected as one of Modern Healthcare's Best Places to Work in healthcare in 2022, for the second consecutive year;

•
Achieved internal growth by approximately $30 million from increases in CPI above the contractual minimum escalations in our leases and loans; and

•
Recorded a $283 million impairment charge related to our tenant, Prospect, including $171 million impairment on the Pennsylvania real estate and a $112 million reserve on non-cash rent. We expect to record rent on our Prospect leases on a cash only basis for the foreseeable future.

Subsequent to December 31, 2022, the following activity took place:

•
Announced the agreement to lease five facilities in Utah to Catholic Health Initiatives Colorado, a wholly-owned subsidiary of CommonSpirit Health, that are currently leased to Steward, subject to receipt of certain regulatory approvals and other customary closing conditions and

•
Received approximately $205 million from Lifepoint to pay off an outstanding loan, plus accrued interest, as part of their acquisition of a majority ownership interest in Springstone. We had funded this loan in October 2021 as part of our non-controlling investment in Springstone's operations that was needed for us to complete the larger acquisition of Springstone's 18 behavioral health hospitals. We will continue leasing these 18 facilities to Lifepoint.

2021 Highlights

During 2021, our business and that of our tenants continued to be impacted by the COVID-19 pandemic. Like most of the world, our employees worked remotely through much of the year. While our offices re-opened in October 2021, we had less than 100% of our employees in the office due to spikes in COVID-19 and related variants throughout the fourth quarter. Despite the continued effects of the pandemic, MPT had a record year. In 2021, we invested approximately $3.9 billion in hospital real estate, and our revenues surpassed $1.5 billion for the first time in our history. Additionally, we maintained a strong liquidity position throughout the year and kept our leverage substantially in line with 2020 by raising more than $1.0 billion in proceeds through sales of our common stock and receiving approximately $0.5 billion from payoffs on our loan portfolio and proceeds from strategic divestitures. In addition, we lowered our weighted-average interest rate during 2021 by extending and improving pricing on our revolving credit and term loan facilities, completing an £850 million senior unsecured notes offering at a weighted-average rate of 2.9%, and completing a €500 million 0.993% senior unsecured notes offering, of which all of the proceeds were used to redeem our outstanding €500 million senior unsecured notes that had a higher interest rate of 4.000%. Finally, we increased our dividend to $0.28 per share per quarter in 2021.

The COVID-19 pandemic had a severe impact on the world from a business and personal health perspective. However, as we have noted before, we believe this pandemic further validated our business model, which focuses on hospitals as the centerpiece of

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healthcare delivery across the world. In addition, the pandemic proved the ability of our employees and our hospital operators to overcome significant challenges for the good of our stakeholders and mankind.

A summary of additional 2021 activity is as follows:

•
Increased the number of our properties to 438, added eight new operators, and significantly expanded our footprint in the behavioral health space by the following:

•
Acquired 35 behavioral health facilities operated by Priory for an aggregate purchase price of approximately £800 million;

•
Invested in 18 inpatient behavioral health facilities throughout the U.S., leased to Springstone and an interest in the operations of Springstone for approximately $950 million;

•
Acquired five general acute care facilities in South Florida for approximately $900 million that are leased to Steward; and

•
Acquired four acute care facilities and two on-campus medical office buildings in California for $215 million, leased to Pipeline.

•
Grew net income and Normalized FFO (both on a per diluted share basis) by 37% and 11%, respectively; and

•
Selected as one of Modern Healthcare’s Best Places to Work in healthcare in 2021.

Critical Accounting Estimates

In order to prepare financial statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S., we must make estimates about certain types of transactions and account balances. We believe that our estimates of the amount and timing of credit losses, fair value adjustments (either as part of a purchase price allocation, recurring accounting for those investments that we have selected under the fair value option method, or impairment analyses), and periodic depreciation of our real estate assets, along with our assessment as to whether investments we make in certain businesses/entities should be consolidated with our results, have significant effects on our financial statements. Each of these items involves estimates that require us to make subjective judgments. We rely on our experience, collect historical and current market data, and develop relevant assumptions to arrive at what we believe to be reasonable estimates. Under different conditions or assumptions, materially different amounts could be reported related to the critical accounting policies described below. In addition, application of these critical accounting policies involves the exercise of judgment on the use of assumptions as to future uncertainties (such as uncertainties caused by the COVID-19 pandemic) and, as a result, actual results could materially differ from these estimates. See Note 2 to Item 8 of this Annual Report on Form 10-K for more information regarding our accounting policies and recent accounting developments. Our accounting estimates include the following:

Credit Losses:

Losses from Rent Receivables: For all leases, we continuously monitor the performance of our existing tenants including, but not limited to: admission levels and surgery/procedure volumes by type; current operating margins; ratio of our tenant's operating margins both to facility rent and to facility rent plus other fixed costs; trends in revenue, cash collections, patient mix; and the effect of evolving healthcare regulations, adverse economic and political conditions, such as rising inflation and interest rates, and other events ongoing on a tenant's profitability and liquidity.

Losses from Operating Lease Receivables: We utilize the information above along with the tenant's payment and default history in evaluating (on a property-by-property basis) whether or not a provision for losses on outstanding billed rent and/or straight-line rent receivables is needed. A provision for losses on rent receivables (including straight-line rent receivables) is ultimately recorded when it becomes probable that the receivable will not be collected in full. The provision is an amount which reduces the receivable to its estimated net realizable value based on a determination of the eventual amounts to be collected either from the debtor or from existing collateral, if any.

Losses on Financing Lease Receivables: We apply a forward-looking “expected credit loss” model to all of our financing receivables, including financing leases and loans. To do this, we have grouped our financial instruments into two primary pools of similar credit risk: secured and unsecured. The secured instruments include our investments in financing receivables as all are secured by the underlying real estate, among other collateral. Within the two primary pools, we further grouped our instruments into sub-pools based on several tenant/borrower characteristics, including years of experience in the healthcare industry and in a particular market or region and overall capitalization. We then determined a credit loss percentage per pool based on our history over a period of time that closely matches the remaining terms of the financial instruments being analyzed and adjusted as needed for current trends or unusual circumstances. We have applied these credit loss percentages to the book value of the related instruments to establish a credit loss reserve on our financing lease receivables and such credit loss

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reserve (including the underlying assumptions) is reviewed and adjusted quarterly. If a financing receivable is underperforming and is deemed uncollectible based on the lessee’s overall financial condition, we will adjust the credit loss reserve based on the fair value of the underlying collateral.

We exclude interest receivables from the credit loss reserve model. Instead, such receivables are impaired and an allowance recorded when it is deemed probable that we will be unable to collect all amounts due. Like operating lease receivables, the need for an allowance is based upon our assessment of the lessee’s overall financial condition, economic resources and payment record, the prospects for support from any financially responsible guarantors, and, if appropriate, the realizable value of any collateral. Financing leases are placed on non-accrual status when we determine that the collectability of contractual amounts is not reasonably assured. If on non-accrual status, we generally account for the financing lease on a cash basis, in which income is recognized only upon receipt of cash.

Loans: Loans consist of mortgage loans, working capital loans, and other loans. Mortgage loans are collateralized by interests in real property. Working capital and other loans are generally collateralized by interests in receivables and corporate and individual guarantees. We record loans at cost. Like our financing lease receivables, we establish credit loss reserves on all outstanding loans based on historical credit losses of similar instruments. Such credit loss reserves, including the underlying assumptions, are reviewed and adjusted quarterly. If a loan’s performance worsens and foreclosure is deemed probable for our collateral-based loans (after considering the borrower’s overall financial condition as described above for leases), we will adjust the allowance for expected credit losses based on the current fair value of such collateral at the time the loan is deemed uncollectible. If the loan is not collateralized, the loan will be reserved for/written-off once it is determined that such loan is no longer collectible. Interest receivables on loans are excluded from the forward-looking credit loss reserve model; however, we assess their collectability similar to how we assess collectability for interest receivables on financing leases described above.

Investments in Real Estate: We maintain our investments in real estate at cost, and we capitalize improvements and replacements when they extend the useful life or improve the efficiency of the asset. While our tenants are generally responsible for all operating costs at a facility, in the event we incur costs of repairs and maintenance, we expense those costs as incurred. We compute depreciation using the straight-line method over the weighted-average useful life of approximately 39.0 years for buildings and improvements.

When circumstances indicate a possible impairment of the value of our real estate investments, we review the recoverability of the facility’s carrying value. The review of the recoverability is generally based on our estimate of the future undiscounted cash flows from the facility’s use and eventual disposition. Our forecast of these cash flows considers factors such as expected future operating income, market and other applicable trends, and residual value, as well as the effects of leasing demand, competition, and other factors. If impairment exists due to the inability to recover the carrying value of a facility on an undiscounted basis, an impairment loss is recorded to the extent that the carrying value exceeds the estimated fair value of the facility. In making estimates of fair value for purposes of impairment assessments, we will look to a number of sources including independent appraisals, available broker data, or our internal data from recent transactions involving similar properties in similar markets. Given the highly specialized aspects of our properties, no assurance can be given that future impairment charges will not be taken.

Acquired Real Estate Purchase Price Allocation: For properties acquired for operating leasing purposes, we currently account for such acquisitions based on asset acquisition accounting rules. Under this accounting method, we allocate the purchase price of acquired properties to net tangible and identified intangible assets acquired based on their relative fair values. In making estimates of fair value for purposes of allocating purchase prices of acquired real estate, we may utilize a number of sources, including available real estate broker data, independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, internal data from previous acquisitions or developments, and other market data, including market comparables for significant assumptions such as market rental, capitalization, and discount rates. We also consider information obtained about each property as a result of our pre-acquisition due diligence, marketing, and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

We record above-market and below-market in-place lease values, if any, for the facilities we own which are based on the present value of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize any resulting capitalized above-market lease values as a reduction of rental income over the lease term. We amortize any resulting capitalized below-market lease values as an increase to rental income over the lease term. Because our strategy to a large degree involves the origination and acquisition of long-term lease arrangements at market rates with independent parties, we do not expect the above-market or below-market in-place lease values to be significant for many of our transactions.

We measure the aggregate value of other lease intangible assets to be acquired based on the difference between (i) the property valued with new or in-place leases adjusted to market rental rates and (ii) the property valued as if vacant when acquired.

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Management’s estimates of value are made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors considered by management in our analysis include an estimate of carrying costs during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. We also consider information obtained about each targeted facility as a result of our pre-acquisition due diligence, marketing, and leasing activities in estimating the fair value of the intangible assets acquired. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses, and estimates of lost rentals at market rates during the expected lease-up periods, which we expect to be about six months (based on experience) but can be longer depending on specific local market conditions. Management also estimates costs to execute similar leases including leasing commissions, legal costs, and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination.

Other intangible assets acquired may include customer relationship intangible values, which are based on management’s evaluation of the specific characteristics of each prospective tenant’s lease and our overall relationship with that tenant. Characteristics to be considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, including those existing under the terms of the lease agreement, among other factors. At December 31, 2022, we have not assigned any value to customer relationship intangibles.

We amortize the value of lease intangibles to expense over the term of the respective leases, which have a weighted-average useful life of 26.8 years at December 31, 2022. If a lease is terminated early, the unamortized portion of the lease intangible is charged to expense.

Fair Value Option Election: We elected to account for certain investments using the fair value option method, which means we mark these investments to fair market value on a recurring basis. At December 31, 2022, the amount of investments recorded using the fair value option were approximately $575 million made up of loans and equity investments. Our loans are recorded at fair value based on Level 2 inputs by discounting the estimated cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities.

For our equity investments in Springstone and the international joint venture, fair value is determined based on Level 3 inputs, by using a discounted cash flow model, which required significant estimates of our investee such as projected revenue and expenses and appropriate consideration of the underlying risk profile of the forecasted assumptions associated with the investee. We classified these equity investments as Level 3, as we used certain unobservable inputs to the valuation methodology that were significant to the fair value measurement, and the valuation required management judgment due to the absence of quoted market prices. For the cash flow model, our observable inputs included use of a capitalization rate, discount rate (which was based on a weighted average cost of capital), and market interest rates, and our unobservable input included an adjustment for a marketability discount (“DLOM”) on our Springstone equity investment of 40%. In regards to the underlying projection of revenues and expenses used in the discounted cash flow model, such projections were provided by the investees. However, we modified such projections (including underlying assumptions used) as needed based on our review and analysis of their historical results, meetings with key members of management, and our understanding of trends and developments within the healthcare industry. In arriving at the DLOM, we started with a DLOM range based on the results of studies supporting valuation discounts for other transactions or structures without a public market. To select the appropriate DLOM within the range, we then considered many qualitative factors including the percent of control, the nature of the underlying investee’s business along with our rights as an investor pursuant to the operating agreement, the size of investment, expected holding period, number of shareholders, access to the capital marketplace, etc. See Note 10 to Item 8 of this Annual Report on Form 10-K for additional details.

Principles of Consolidation: Property holding entities and other subsidiaries of which we own 100% of the equity or have a controlling financial interest evidenced by ownership of a majority voting interest are consolidated. All inter-company balances and transactions are eliminated. For entities in which we own less than 100% of the equity interest, we consolidate the property if we have the direct or indirect ability to control the entity’s activities based upon the terms of the respective entity's ownership agreements. For these entities, we record a non-controlling interest representing equity held by non-controlling interests.

We continually evaluate all of our transactions and investments to determine if they represent variable interests in a variable interest entity. If we determine that we have a variable interest in a variable interest entity, we then evaluate if we are the primary beneficiary of the variable interest entity. The evaluation is a qualitative assessment as to whether we have the ability to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance. We consolidate each variable interest entity in which we, by virtue of or transactions with our investments in the entity, are considered to be the primary beneficiary. At December 31, 2022 and 2021, we determined that we were not the primary beneficiary of any variable interest entity in which we hold a variable interest because we do not control the activities (such as the day-to-day operations) that most significantly impact the economic performance of these entities.

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Liquidity and Capital Resources

Our typical sources of cash include our monthly rent and interest receipts, distributions from our real estate joint venture agreements, borrowings under our revolving credit facility, public issuances of debt and equity securities, and proceeds from bank debt, asset dispositions (either one-off or group asset sales through joint venture transactions), and principal payments on loans. Our primary uses of cash include dividend distributions, debt service (including principal and interest), new investments (including acquisitions, developments, or capital improvement projects), loan advances, property expenses, and general and administrative expenses.

Absent our requirements to make distributions to maintain our REIT qualification (as described earlier and further described in Note 5 within Item 8 of this Annual Report on Form 10-K) and our current contractual commitments discussed later in this section, we do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

See below for highlights of our sources and uses of cash for the past two years:

2022 Cash Flow Activity

We generated cash 2of $740 million from operating activities during 2022, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $699 million.

In regards to investing and financing activities in 2022, we did the following:

a)
Invested approximately $1.3 billion in hospital real estate, representing 16 facilities across five countries;

b)
Funded $524.2 million of development, capital addition, and other projects;

c)
Completed the Macquarie Transaction in which we contributed eight Massachusetts-based general acute care hospitals to form a partnership, resulting in a gain on real estate of approximately $600 million and proceeds of approximately $1.3 billion, which were partially used to pay off our $1 billion interim credit facility;

d)
Exercised the $500 million accordion feature to our revolving credit facility and extended the term on both the revolver and term loan portions of our Credit Facility;

e)
Authorized a stock repurchase program for up to $500 million of common stock, of which we repurchased 1.6 million shares of common stock for approximately $17.9 million through December 31, 2022; and

f)
Separate from the Macquarie Transaction, we sold 15 facilities and five ancillary properties generating net proceeds of approximately $522 million.

Subsequent to December 31, 2022, we received approximately $205 million from Lifepoint to pay off an outstanding loan, plus accrued interest, as part of their acquisition of a majority ownership interest in Springstone. See Note 13 to Item 8 of this Annual Report on Form 10-K for further details on this transaction.

2021 Cash Flow Activity

We generated cash of $812 million from operating activities during 2021, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of $643 million and certain investing activities.

In regards to investing and financing activities in 2021, we did the following:

a)
Invested approximately $4.0 billion in hospital real estate, representing over 65 facilities across five countries, headlined by the £800 million Priory acquisition of 35 properties in January 2021;

b)
Funded $415.9 million of development, capital addition, and other projects;

c)
Issued 16.3 million shares of common stock under our at-the-market equity offering program, resulting in net proceeds of approximately $340 million;

d)
Completed an underwritten public offering of 36.8 million shares, resulting in net proceeds of $711 million;

e)
Amended and extended our unsecured revolving and term loan facility;

f)
Entered into a $900 million interim credit facility on January 15, 2021, of which we borrowed £500 million. This facility was paid off and terminated on March 26, 2021, after the completion of an £850 million unsecured notes offering on March 24, 2021 that was issued in two tranches;

g)
Received $11 million from Steward as a return of capital distribution;

h)
Entered into a $1 billion interim credit facility in July 2021 (“July 2021 Interim Credit Facility”) to fund new investments;

i)
Completed a €500 million, 0.993% senior unsecured notes offering on October 6, 2021, using proceeds to pay off €500 million of senior unsecured notes with an interest rate of 4.000% on October 22, 2021;

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j)
Received approximately $0.5 billion in loan principal repayments; and

k)
Sold 16 facilities and an ancillary property generating net proceeds of $246 million.

Debt Restrictions and REIT Requirements

Our debt facilities impose certain restrictions on us, including, but not limited to, restrictions on our ability to: incur debt; create or incur liens; provide guarantees in respect of obligations of any other entity; make redemptions and repurchases of our capital stock; prepay, redeem, or repurchase debt; engage in mergers or consolidations; enter into affiliated transactions; dispose of real estate or other assets; and change our business. In addition, the credit agreement governing our Credit Facility limits the amount of dividends we can pay to 95% of NAFFO, as defined in the agreements, on a rolling four quarter basis. The indentures governing our senior unsecured notes also limit the amount of dividends we can pay based on the sum of 95% of funds from operations, proceeds of equity issuances, and certain other net cash proceeds. Finally, our senior unsecured notes require us to maintain total unencumbered assets (as defined in the related indenture) of not less than 150% of our unsecured indebtedness.

In addition to these restrictions, the Credit Facility contains customary financial and operating covenants, including covenants relating to our total leverage ratio, fixed charge coverage ratio, secured leverage ratio, unsecured leverage ratio, consolidated adjusted net worth, and unsecured interest coverage ratio. This facility also contains customary events of default, including among others, nonpayment of principal or interest, material inaccuracy of representations, and failure to comply with our covenants. If an event of default occurs and is continuing under the facility, the entire outstanding balance may become immediately due and payable. At December 31, 2022, we were in compliance with all such financial and operating covenants.

In order for us to continue to qualify as a REIT we are required to distribute annual dividends equal to a minimum of 90% of our REIT taxable income, computed without regard to the dividends paid deduction and our net capital gains. See section titled “Distribution Policy” within this Item 7 of this Annual Report on Form 10-K for further information on our dividend policy along with the historical dividends paid on a per share basis.

Short-term Liquidity Requirements:

As of February 17, 2023, our liquidity approximates $1.2 billion. We believe this liquidity, along with our current monthly cash receipts from rent and loan interest and regular distributions from our joint venture arrangements, is sufficient to fund our operations, dividends in order to comply with REIT requirements, our current firm commitments (capital expenditures and expected funding requirements on development projects) and debt service obligations for the next twelve months (including contractual interest payments and our December 2023 debt maturity of approximately $450 million). If the sale of three Prospect facilities (as more fully described in Note 8 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K) are consummated in 2023, we would have additional liquidity.

Long-term Liquidity Requirements:

As of February 17, 2023, our liquidity approximates $1.2 billion. We believe that this liquidity, along with monthly cash receipts from rent and loan interest (of which 99% of such leases and mortgage loans include escalation provisions that compound annually) and regular distributions from our joint venture arrangements, is sufficient to fund our operations, interest obligations, debt principal payments coming due in 2023, our current firm commitments, and dividends in order to comply with REIT requirements.

However, in order to make additional investments, to fund other debt maturities coming due in 2024 and beyond (as outlined below in our commitment schedule), or to strategically refinance any existing debt in order to reduce interest rates, or to further improve our leverage ratios, we may need to access one or a combination of the following sources of capital:

•
strategic property sales or joint ventures (including sale of three Prospect facilities as described in Note 8 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K);

•
sale of equity securities;

•
new bank term loans;

•
new USD, EUR, or GBP denominated debt securities, including senior unsecured notes; and/or

•
new secured loans on real estate.

However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful.

47

Contractual Commitments

The following table summarizes known material contractual commitments including debt service commitments (principal and interest payments) as of February 17, 2023 (amounts in thousands):

[[GREPCENT_TABLE]]
[["","","2023","","","2024","","","2025","","","2026","","","2027","","","Thereafter","","","Total"],["Senior unsecured notes(1)","","$","722,215","","","$","262,395","","","$","797,145","","","$","1,881,214","","","$","1,598,008","","","$","3,655,335","","","$","8,916,312"],["Revolving credit facility(2)","","","45,187","","","","51,806","","","","51,806","","","","964,676","","","","\u2014","","","","\u2014","","","","1,113,475"],["Term loan","","","10,414","","","","12,023","","","","11,990","","","","11,990","","","","205,946","","","","\u2014","","","","252,363"],["Australian term loan facility(1)","","","17,563","","","","833,458","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","851,021"],["British pound sterling term loans(1)","","","20,015","","","","148,918","","","","843,265","","","","\u2014","","","","\u2014","","","","\u2014","","","","1,012,198"],["Operating lease commitments(1)(3)","","","8,058","","","","9,074","","","","8,400","","","","7,933","","","","7,888","","","","239,375","","","","280,728"],["Purchase obligations(1)(4)","","","358,439","","","","169,760","","","","106,710","","","","59,980","","","","41,274","","","","44,193","","","","780,356"],["Totals","","$","1,181,891","","","$","1,487,434","","","$","1,819,316","","","$","2,925,793","","","$","1,853,116","","","$","3,938,903","","","$","13,206,453"]]
[[/GREPCENT_TABLE]]

(1)
We used the exchange rates at February 17, 2023 in preparing this table.

(2)
As of February 17, 2023, we have a $1.8 billion revolving credit facility. This table assumes the balance outstanding under the revolver (which was $939 million as of February 17, 2023) and interest rate in effect at February 17, 2023 remain in effect through maturity.

(3)
Much of our contractual obligations to make operating lease payments are related to ground leases for which we are reimbursed by our tenants along with corporate office and equipment leases.

(4)
Includes approximately $239.2 million of future expenditures related to development projects and $436.6 million of future expenditures on committed capital improvement projects.

Results of Operations

Our operating results may vary significantly from year-to-year due to a variety of reasons including acquisitions made during the year, incremental revenues and expenses from acquisitions made in the prior year, revenues and expenses from completed development properties, property disposals, annual escalation provisions, foreign currency exchange rate changes, new or amended debt agreements, issuances of shares through an equity offering, impact from accounting changes, etc. Thus, our operating results for the current year are not necessarily indicative of the results that may be expected in future years.

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

Net income for the year ended December 31, 2022, was $902.6 million ($1.50 per diluted share) compared to net income of $656.0 million ($1.11 per diluted share) for the year ended December 31, 2021. This 38% increase in net income is primarily due to $0.5 billion of gains on sales of real estate in 2022 (including the Macquarie Transaction as described in Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K), incremental revenue from new investments and annual escalations, and lower tax expense due to the unfavorable adjustment in 2021 to recognize an increase in the United Kingdom corporate income tax rate, partially offset by $283 million of impairment charges related to our tenant, Prospect (see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details), $41.9 million of straight-line rent write-offs related to our sale of non-Macquarie Transaction disposals, and higher depreciation expense and general and administrative costs. Normalized FFO, after adjusting for certain items (as more fully described in the section titled “Non-GAAP Financial Measures” in this Item 7 of this Annual Report on Form 10-K), was $1.1 billion for 2022, or $1.82 per diluted share, as compared to $1.0 billion, or $1.75 per diluted share, for 2021. This 5% increase in Normalized FFO is primarily due to incremental revenue from new investments made in 2021 and 2022 and annual escalations.

A comparison of revenues for the years ended December 31, 2022 and 2021 is as follows (dollar amounts in thousands):

[[GREPCENT_TABLE]]
[["","","2022","","","","","","2021","","","","","","Change"],["Rent billed","","$","968,874","","","","62.8","%","","$","931,942","","","","60.4","%","","$","36,932"],["Straight-line rent","","","204,159","","","","13.2","%","","","241,433","","","","15.6","%","","","(37,274",")"],["Income from financing leases","","","203,580","","","","13.2","%","","","202,599","","","","13.1","%","","","981"],["Interest and other income","","","166,238","","","","10.8","%","","","168,695","","","","10.9","%","","","(2,457",")"],["Total revenues","","$","1,542,851","","","","100.0","%","","$","1,544,669","","","","100.0","%","","$","(1,818",")"]]
[[/GREPCENT_TABLE]]

48

Our total revenues for 2022 are down $1.8 million or 0.1% over the prior year. This change is made up of the following:

•
Operating lease revenue (includes rent billed and straight-line rent) — was basically flat year over year. However, from a detailed perspective, 2022 saw a decrease in approximately $165.8 million from disposals in 2021 and 2022 (including a $96.9 million decrease from the properties disposed of in the Macquarie Transaction as described in Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K, along with lower revenues due to Prime Healthcare Services, Inc.'s ("Prime") repurchase transaction in the 2022 third quarter and $41.9 million of straight-line rent and other write-offs associated with non-Macquarie Transaction disposals in 2022) and $36.2 million from unfavorable foreign currency fluctuations. This decrease was partially offset by $172.5 million of incremental revenue from acquisitions made in late 2021 (including approximately $55.8 million from Springstone) and 2022 (primarily our Finland acquisition in the 2022 first quarter). In addition, rent revenues are up approximately $23 million year-over-year from increases in CPI above the contractual minimum escalations in our leases, $1.5 million from capital additions in 2022, and $4.8 million from the commencement of rent on a development property in the first quarter of 2022.

•
Income from financing leases — up $1.0 million as 2022 annual rent escalations exceeded lease contractual minimums due to the increase in CPI by approximately $5.3 million, partially offset by $4.3 million of lower revenues from the disposal of two financing leases related to the Prime repurchase transaction in the 2022 third quarter.

•
Interest and other income — down $2.5 million from the prior year due to the following:

o
Interest from loans — down $10.8 million over the prior year due to $41.5 million from loan payoffs, including $37.4 million of less interest revenue earned on the Priory loans from the conversion of the £800 million mortgage loan to fee simple assets in the second quarter of 2021 and the repayment of the £250 million acquisition loan in the 2021 fourth quarter as described in Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K, along with approximately $7.7 million of unfavorable foreign currency fluctuations. This decrease is partially offset by $37.2 million of incremental revenue earned on new investments, including Springstone in the 2021 fourth quarter and the Priory syndicated loan in the 2022 first quarter and higher income from annual escalations due to increases in CPI of approximately $1.2 million.

o
Other income — up $8.3 million from the prior year as we received more direct reimbursements from our tenants for ground lease, property taxes, and insurance.

Interest expense for 2022 and 2021 totaled $359.0 million and $367.4 million, respectively. This decrease is related to lowering our outstanding debt using proceeds from the Macquarie Transaction and other property sales, the reduction of the interest rate on our €500 million senior unsecured notes tranche in October 2021 from 4.000% to 0.993%, and foreign currency fluctuations. Overall, our weighted-average interest rate was 3.3%, same as 2021.

Real estate depreciation and amortization during 2022 increased to $333.0 million from $321.2 million in 2021 due to new investments made in 2021 and 2022, partially offset by foreign currency fluctuations and property sales in 2022.

Property-related expenses for 2022 increased to $45.7 million, compared to $39.1 million in 2021. Of the property expenses in 2022 and 2021, approximately $36 million and $28 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our consolidated statements of net income. Excluding the reimbursable amounts, property expenses are $1.4 million less in 2022 compared to 2021 due to the re-leasing and sales of vacant properties in 2022.

As a percentage of revenue and after adjusting for non-cash rent write-offs noted above, general and administrative expenses represented 10.1% for 2022, slightly higher than 9.4% in the prior year. On a dollar basis, general and administrative expenses totaled $160.5 million for 2022, which is a $14.9 million increase from 2021. This increase reflects continued ESG efforts in additional charitable giving, further board diversification, and additional benefits to our employees, along with higher professional expenses. Compensation expense was slightly lower overall compared to 2021, as the cost of additional non-executive headcount and benefits were more than offset by a reduction in stock and cash bonus compensation expense.

During the year ended December 31, 2022, we realized $536.8 million from the sales of real estate, including the completion of the Macquarie Transaction in which we sold the real estate of eight Massachusetts-based general acute care hospitals, resulting in a gain on real estate of approximately $600 million, partially offset by approximately $125 million of write-offs of non-cash straight-line rent receivables. We also disposed of 11 facilities previously leased to Prime, resulting in a gain on real estate of approximately $67 million. In addition, we disposed of four other properties and five ancillary properties, resulting in a net gain of $33 million. In comparison, we sold 16 properties and one ancillary property in 2021 for a net gain of $52.5 million.

49

In December 2022, we recorded a $283 million impairment charge related to our tenant, Prospect - see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details. As part of this charge, we reduced the carrying value of the Pennsylvania real estate by $171 million and reserved all non-cash rent, representing $112 million. We expect to record rent on our Prospect leases on a cash only basis for the foreseeable future.

In 2021, we recorded an approximate $40 million impairment charge related to loans made to the previous operator for services to continue at our Watsonville Community Hospital - see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further details. In 2022 and after finding a replacement operator through a bankruptcy process with the former operator, we were repaid a significant amount of this loan, resulting in a net credit loss recovery of approximately $15 million.

Earnings from equity interests was $40.8 million for 2022, up $12.3 million from 2021. This increase is primarily due to $13.0 million of income generated on our Massachusetts-based partnership with MAM entered into during March 2022 (part of the Macquarie Transaction) and approximately $4 million of dividend income we received in 2022 from our Switzerland investments (see Note 3 to the consolidated financial statements in Item 8 to this Annual Report on Form 10-K for more detail), partially offset by the loss of equity interest income from the remaining 50% interest of the IMED Hospitales joint venture that we acquired during December 2021 and the impact from foreign currency fluctuations.

Debt refinancing and unutilized financing costs were $9.5 million in 2022 due to the termination of our $1 billion interim credit facility in March 2022 and the amendment of our Credit Facility in the second quarter of 2022 (see Note 4 to Item 8 of this Annual Report on Form 10-K for further details). In 2021, these costs were $27.7 million as a result of the early termination of our $900 million interim credit facility and 4.000% Senior Unsecured Notes due 2022 in the fourth quarter of 2021.

Other income for 2022 was $15.3 million compared to $45.7 million in 2021. Other income in 2022 includes unrealized gains on our investments in marketable securities plus dividend income on such investments in 2022. In regards to 2021, in addition to unrealized gains from our investment in marketable securities, we realized approximately $40 million in net pre-tax gains on the sale of investments in operators (two of which were in Europe).

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 $55.9 million income tax expense for 2022 is primarily based on the income generated by our investments in the United Kingdom, Colombia, and Australia along with an additional $5 million U.S. tax expense related to our Watsonville loan recovery in 2022. In comparison, we incurred a $73.9 million income tax expense in 2021 from income generated by our investments in the United Kingdom, Colombia, and Australia, including an adjustment to our net deferred tax liabilities of approximately $43 million to reflect an increase in the United Kingdom corporate tax rate from 19% to 25%, partially offset by an approximate $10 million U.S. tax benefit from the Watsonville loan impairment in 2021. For more detailed information, see Note 5 to Item 8 of this Annual Report on Form 10-K.

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 $71 million should be reflected against certain of our international and domestic net deferred tax assets at December 31, 2022. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes in future periods as income is earned. For more detailed information, see Note 5 to Item 8 of this Annual Report on Form 10-K.

Non-GAAP Financial Measures

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

Funds From Operations and Normalized Funds From Operations

Investors and analysts following the real estate industry utilize funds from operations ("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,

50

or Nareit, which represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairment charges on real estate assets, plus real estate depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.

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 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 attributable to MPT common stockholders to FFO and Normalized FFO for the years ended December 31, 2022 and 2021 (amounts in thousands except per share data):

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2022","","","2021"],["FFO Information"],["Net income attributable to MPT common stockholders","","$","902,597","","","$","656,021"],["Participating securities\u2019 share in earnings","","","(1,602",")","","","(2,161",")"],["Net income, less participating securities\u2019 share in earnings","","$","900,995","","","$","653,860"],["Depreciation and amortization","","","399,622","","","","374,599"],["Gain on sale of real estate","","","(536,887",")","","","(52,471",")"],["Real estate impairment charges","","","170,582","","","","\u2014"],["Funds from operations","","$","934,312","","","$","975,988"],["Write-off of unbilled rent and other","","","37,682","","","","7,213"],["Gain on sale of equity investments","","","\u2014","","","","(40,945",")"],["Other impairment charges, net","","","97,793","","","","39,411"],["Non-cash fair value adjustments","","","(2,333",")","","","(8,193",")"],["Tax rate changes and other","","","10,697","","","","34,796"],["Debt refinancing and unutilized financing costs","","","9,452","","","","27,650"],["Normalized funds from operations","","$","1,087,603","","","$","1,035,920"],["Per diluted share data"],["Net income, less participating securities\u2019 share in earnings","","$","1.50","","","$","1.11"],["Depreciation and amortization","","","0.67","","","","0.63"],["Gain on sale of real estate","","","(0.90",")","","","(0.09",")"],["Real estate impairment charges","","","0.29","","","","\u2014"],["Funds from operations","","$","1.56","","","$","1.65"],["Write-off of unbilled rent and other","","","0.07","","","","0.01"],["Gain on sale of equity investments","","","\u2014","","","","(0.07",")"],["Other impairment charges, net","","","0.16","","","","0.07"],["Non-cash fair value adjustments","","","\u2014","","","","(0.01",")"],["Tax rate changes and other","","","0.02","","","","0.06"],["Debt refinancing and unutilized financing costs","","","0.01","","","","0.04"],["Normalized funds from operations","","$","1.82","","","$","1.75"]]
[[/GREPCENT_TABLE]]

51

Total Adjusted Gross Assets

Total adjusted gross assets is total assets before accumulated depreciation/amortization (adjusted for our investments in unconsolidated real estate joint ventures), assumes material transaction commitments are completed, and assumes cash on hand at period-end and cash generated from or to be generated from transaction commitments or financing activities subsequent to period-end are either used in these transactions or used to reduce debt. We believe total adjusted gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our commitments close. The following table presents a reconciliation of total assets to total adjusted gross assets (in thousands):

[[GREPCENT_TABLE]]
[["","","As of December 31, 2022","","","As of December 31, 2021"],["Total assets","","$","19,658,000","","","$","20,519,801"],["Add: Accumulated depreciation and amortization","","","1,193,312","","","","993,100"],["Add: Incremental gross assets of our Investments in Unconsolidated Real Estate Joint Ventures(1)","","","1,698,917","","","","1,713,603"],["Net: Reclassification between operators(2)","","","\u2014","","","","\u2014"],["Less: Gross book value of the transactions, net(3)","","","(1,074,024",")","","","(437,940",")"],["Decrease in cash from the transactions(4)","","","(235,668",")","","","(459,227",")"],["Total adjusted gross assets","","$","21,240,537","","","$","22,329,337"]]
[[/GREPCENT_TABLE]]

(1)
Reflects an addition to total assets to present our total share of each joint venture's gross assets. See below for details of the calculation. While we do not control any of our unconsolidated real estate joint venture arrangements and do not have direct legal claim to the underlying assets of the unconsolidated real estate joint ventures, we believe this adjustment allows investors to view certain concentration information on a basis comparable to the remainder of our real estate portfolio. This presentation is also consistent with how our management team reviews our portfolio (dollar amounts in thousands):

[[GREPCENT_TABLE]]
[["","","As of","","","As of"],["","","December 31, 2022","","","December 31, 2021"],["Real estate joint venture total gross real estate and other assets","","$","5,921,188","","","$","5,898,342"],["Weighted-average equity ownership percentage","","","55","%","","","55","%"],["","","","3,261,727","","","","3,242,505"],["Investments in Unconsolidated Real Estate Joint Ventures(A)","","","(1,562,810",")","","","(1,528,902",")"],["Incremental gross assets of our Investments in Unconsolidated Real Estate Joint Ventures","","$","1,698,917","","","$","1,713,603"]]
[[/GREPCENT_TABLE]]

(A) Includes amount shown on the "Investments in unconsolidated real estate joint ventures" line on our consolidated balance sheets, along with a CHF 60 million mortgage loan included in the "Mortgage loans" line on our consolidated balance sheet for 2022 and $0.4 billion for the Macquarie Transaction for 2021.

(2)
The 2022 column reflects a reclass of $0.8 billion of gross assets between Springstone and Lifepoint along with a $0.9 billion reclass of gross assets between Steward and CommonSpirit Health as part of the transactions described in Note 13 to Item 8 of this Annual Report on Form 10-K.

(3)
Represents the gross book value of assets sold or written off due to the committed transactions, partially offset by the addition of new gross assets from the committed transactions. See detail below (in thousands):

[[GREPCENT_TABLE]]
[["","","As of","","","As of"],["","","December 31, 2022","","","December 31, 2021"],["Gross book value of assets in transactions as described in Notes 8 and 13","","$","(655,354",")","","$","\u2014"],["Book value of Massachusetts assets held-for-sale","","","\u2014","","","","(1,096,505",")"],["Expected book value of our 50% interest in the Massachusetts joint venture","","","\u2014","","","","375,975"],["Unfunded amounts on development deals and commenced capital improvement projects","","","\u2014","","","","480,132"],["Non-cash write-offs related to transactions","","","(418,670",")","","","(197,542",")"],["Gross book value of the transactions, net","","$","(1,074,024",")","","$","(437,940",")"]]
[[/GREPCENT_TABLE]]

52

(4)
Represents cash expected from the proceeds generated by the transactions along with cash on hand to fund the transactions or reduce debt as detailed below (in thousands):

[[GREPCENT_TABLE]]
[["","","As of","","","As of"],["","","December 31, 2022","","","December 31, 2021"],["Expected cash proceeds generated by the transactions as described in Notes 3, 8 and 13","","$","659,000","","","$","1,280,000"],["Paydown of July 2021 Interim Credit Facility","","","\u2014","","","","(869,606",")"],["Reduction of revolver balance","","","(894,668",")","","","(389,489",")"],["Unfunded amounts on development deals and commenced capital improvement projects","","","\u2014","","","","(480,132",")"],["Net decrease in cash from the transactions","","$","(235,668",")","","$","(459,227",")"]]
[[/GREPCENT_TABLE]]

Total Adjusted Revenues

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

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2022","","","2021"],["Total revenues","","$","1,542,851","","","$","1,544,669"],["Revenues from investments in unconsolidated real estate joint ventures","","","174,940","","","","131,013"],["Total adjusted revenues","","$","1,717,791","","","$","1,675,682"]]
[[/GREPCENT_TABLE]]

Distribution Policy

We have elected to be taxed as a REIT commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gain, to our stockholders. It is our current intention to comply with these requirements and maintain such status going forward.

The table below is a summary of our distributions declared for the three year period ended December 31, 2022:

[[GREPCENT_TABLE]]
[["Declaration Date","","Record Date","","Date of Distribution","","Distribution per Share"],["November 10, 2022","","December 8, 2022","","January 12, 2023","","$","0.29"],["August 18, 2022","","September 15, 2022","","October 13, 2022","","$","0.29"],["May 26, 2022","","June 16, 2022","","July 14, 2022","","$","0.29"],["February 17, 2022","","March 17, 2022","","April 14, 2022","","$","0.29"],["November 11, 2021","","December 9, 2021","","January 13, 2022","","$","0.28"],["August 19, 2021","","September 16, 2021","","October 14, 2021","","$","0.28"],["May 26, 2021","","June 17, 2021","","July 8, 2021","","$","0.28"],["February 18, 2021","","March 18, 2021","","April 8, 2021","","$","0.28"],["November 12, 2020","","December 10, 2020","","January 7, 2021","","$","0.27"],["August 13, 2020","","September 10, 2020","","October 8, 2020","","$","0.27"],["May 21, 2020","","June 18, 2020","","July 16, 2020","","$","0.27"],["February 14, 2020","","March 12, 2020","","April 9, 2020","","$","0.27"]]
[[/GREPCENT_TABLE]]

On February 16, 2023, we announced that our Board of Directors declared a regular quarterly cash dividend of $0.29 per share of common stock to be paid on April 13, 2023, to stockholders of record on March 16, 2023.

We intend to pay to our stockholders, within the time periods prescribed by the Code, all or substantially all of our annual taxable income, including taxable gains from the sale of real estate and recognized gains on the sale of securities. It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid corporate income and excise taxes on undistributed income, although there is no assurance as to further dividends because they depend

53

on future earnings, capital requirements, and our financial condition. In addition, our Credit Facility limits the amount of dividends we can pay — see Note 4 to our consolidated financial statements in Item 8 to this Annual Report on Form 10-K for further information.