UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-32559
MEDICAL PROPERTIES TRUST, INC.
MPT OPERATING PARTNERSHIP, L.P.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND DELAWARE |
20-0191742 20-0242069 | |
(State or other jurisdiction of incorporation or organization) |
(I. R. S. Employer Identification No.) | |
1000 URBAN CENTER DRIVE, SUITE 501 BIRMINGHAM, AL |
35242 | |
(Address of principal executive offices) | (Zip Code) |
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (205) 969-3755
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x (Medical Properties Trust, Inc. only) | Accelerated filer | ¨ | |||
Non-accelerated filer | x (MPT Operating Partnership, L.P. only) (Do not check if a smaller reporting company) |
Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 8, 2013, Medical Properties Trust, Inc. had 150,071,911 shares of common stock, par value $0.001, outstanding.
EXPLANATORY NOTE
This report combines the Quarterly Reports on Form 10-Q for the three and six months ended June 30, 2013 of Medical Properties Trust, Inc., a Maryland corporation, and MPT Operating Partnership, L.P., a Delaware limited partnership, through which Medical Properties Trust, Inc. conducts substantially all of its operations. Unless otherwise indicated or unless the context requires otherwise, all references in this report to we, us, our, our company, Medical Properties, MPT, or the company refer to Medical Properties Trust, Inc. together with its consolidated subsidiaries, including MPT Operating Partnership, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to our operating partnership or the operating partnership refer to MPT Operating Partnership, L.P. together with its consolidated subsidiaries.
MEDICAL PROPERTIES TRUST, INC. AND MPT OPERATING PARTNERSHIP, L.P.
AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED June 30, 2013
Page | ||||
3 | ||||
3 | ||||
Medical Properties Trust, Inc. and Subsidiaries |
||||
Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012 |
3 | |||
4 | ||||
5 | ||||
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 |
6 | |||
MPT Operating Partnership, L.P. and Subsidiaries |
||||
Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012 |
7 | |||
8 | ||||
9 | ||||
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 |
10 | |||
Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. |
||||
11 | ||||
Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations |
31 | |||
Item 3 Quantitative and Qualitative Disclosures about Market Risk |
39 | |||
40 | ||||
40 | ||||
40 | ||||
40 | ||||
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds |
41 | |||
41 | ||||
41 | ||||
42 | ||||
43 | ||||
43 | ||||
44 |
2
PART I FINANCIAL INFORMATION
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2013 |
December 31, 2012 |
|||||||
(In thousands, except per share amounts) | (Unaudited) | (Note 2) | ||||||
Assets |
||||||||
Real estate assets |
||||||||
Land, buildings and improvements, and intangible lease assets |
$ | 1,295,229 | $ | 1,262,099 | ||||
Real estate held for sale |
| 16,497 | ||||||
Mortgage loans |
368,650 | 368,650 | ||||||
Net investment in direct financing leases |
391,904 | 314,412 | ||||||
|
|
|
|
|||||
Gross investment in real estate assets |
2,055,783 | 1,961,658 | ||||||
Accumulated depreciation and amortization |
(141,877 | ) | (124,615 | ) | ||||
|
|
|
|
|||||
Net investment in real estate assets |
1,913,906 | 1,837,043 | ||||||
Cash and cash equivalents |
26,072 | 37,311 | ||||||
Interest and rent receivable |
54,231 | 45,289 | ||||||
Straight-line rent receivable |
41,347 | 35,860 | ||||||
Other loans |
157,251 | 159,243 | ||||||
Other assets |
61,669 | 64,140 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 2,254,476 | $ | 2,178,886 | ||||
|
|
|
|
|||||
Liabilities and Equity |
||||||||
Liabilities |
||||||||
Debt, net |
$ | 929,074 | $ | 1,025,160 | ||||
Accounts payable and accrued expenses |
58,694 | 65,961 | ||||||
Deferred revenue |
25,413 | 20,609 | ||||||
Lease deposits and other obligations to tenants |
18,455 | 17,342 | ||||||
|
|
|
|
|||||
Total liabilities |
1,031,636 | 1,129,072 | ||||||
Equity |
||||||||
Preferred stock, $0.001 par value. Authorized 10,000 shares; no shares outstanding |
| | ||||||
Common stock, $0.001 par value. Authorized 250,000 shares; issued and outstanding 149,314 shares at June 30, 2013 and 136,335 shares at December 31, 2012 |
149 | 136 | ||||||
Additional paid in capital |
1,472,961 | 1,295,916 | ||||||
Distributions in excess of net income |
(240,132 | ) | (233,494 | ) | ||||
Accumulated other comprehensive loss |
(9,876 | ) | (12,482 | ) | ||||
Treasury shares, at cost |
(262 | ) | (262 | ) | ||||
|
|
|
|
|||||
Total Equity |
1,222,840 | 1,049,814 | ||||||
|
|
|
|
|||||
Total Liabilities and Equity |
$ | 2,254,476 | $ | 2,178,886 | ||||
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
3
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
(In thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues |
||||||||||||||||
Rent billed |
$ | 31,359 | $ | 30,696 | $ | 63,196 | $ | 60,383 | ||||||||
Straight-line rent |
2,746 | 1,324 | 5,407 | 2,683 | ||||||||||||
Income from direct financing leases |
9,230 | 5,371 | 17,986 | 7,206 | ||||||||||||
Interest and fee income |
14,138 | 11,527 | 28,855 | 19,449 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
57,473 | 48,918 | 115,444 | 89,721 | ||||||||||||
Expenses |
||||||||||||||||
Real estate depreciation and amortization |
8,718 | 8,337 | 17,262 | 16,518 | ||||||||||||
Property-related |
649 | 586 | 1,062 | 813 | ||||||||||||
General and administrative |
7,225 | 6,697 | 15,044 | 14,289 | ||||||||||||
Acquisition expenses |
2,088 | 279 | 2,278 | 3,704 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
18,680 | 15,899 | 35,646 | 35,324 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
38,793 | 33,019 | 79,798 | 54,397 | ||||||||||||
Other income (expense) |
||||||||||||||||
Other income (expense) |
(23 | ) | (17 | ) | (248 | ) | (32 | ) | ||||||||
Earnings from equity and other interests |
1,176 | 879 | 1,668 | 879 | ||||||||||||
Interest expense |
(14,641 | ) | (14,889 | ) | (30,065 | ) | (27,684 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net other expense |
(13,488 | ) | (14,027 | ) | (28,645 | ) | (26,837 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations |
25,305 | 18,992 | 51,153 | 27,560 | ||||||||||||
Income from discontinued operations |
2,100 | 368 | 2,461 | 2,407 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
27,405 | 19,360 | 53,614 | 29,967 | ||||||||||||
Net income attributable to non-controlling interests |
(57 | ) | (44 | ) | (110 | ) | (87 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to MPT common stockholders |
$ | 27,348 | $ | 19,316 | $ | 53,504 | $ | 29,880 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per common share basic |
||||||||||||||||
Income from continuing operations attributable to MPT common stockholders |
$ | 0.17 | $ | 0.14 | $ | 0.35 | $ | 0.21 | ||||||||
Income from discontinued operations attributable to MPT common stockholders |
0.01 | | 0.02 | 0.02 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to MPT common stockholders |
$ | 0.18 | $ | 0.14 | $ | 0.37 | $ | 0.23 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per common share diluted |
||||||||||||||||
Income from continuing operations attributable to MPT common stockholders |
$ | 0.17 | $ | 0.14 | $ | 0.34 | $ | 0.21 | ||||||||
Income from discontinued operations attributable to MPT common stockholders |
0.01 | | 0.02 | 0.02 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to MPT common stockholders |
$ | 0.18 | $ | 0.14 | $ | 0.36 | $ | 0.23 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares outstanding: |
||||||||||||||||
Basic |
149,509 | 134,715 | 144,928 | 129,810 | ||||||||||||
Diluted |
151,056 | 134,715 | 146,291 | 129,810 | ||||||||||||
Dividends declared per common share |
$ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 |
See accompanying notes to condensed consolidated financial statements.
4
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
(In thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income |
$ | 27,405 | $ | 19,360 | $ | 53,614 | $ | 29,967 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized gain (loss) on interest rate swap |
1,779 | (1,045 | ) | 2,606 | (546 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive income (loss) |
29,184 | 18,315 | 56,220 | 29,421 | ||||||||||||
Comprehensive income attributable to non-controlling interests |
(57 | ) | (44 | ) | (110 | ) | (87 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) attributable to MPT common stockholders |
$ | 29,127 | $ | 18,271 | $ | 56,110 | $ | 29,334 | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, |
||||||||
2013 | 2012 | |||||||
(In thousands) | ||||||||
Operating activities |
||||||||
Net income |
$ | 53,614 | $ | 29,967 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Depreciation and amortization |
17,927 | 17,937 | ||||||
Straight-line rent revenue |
(5,407 | ) | (2,877 | ) | ||||
Direct financing lease interest accretion |
(2,498 | ) | (1,156 | ) | ||||
Share-based compensation |
4,204 | 3,637 | ||||||
(Gain) loss on sale of real estate |
(2,054 | ) | 1,446 | |||||
Amortization and write-off of deferred financing costs and debt discount |
1,752 | 1,711 | ||||||
Other adjustments |
4,605 | (708 | ) | |||||
Changes in: |
||||||||
Interest and rent receivable |
(8,943 | ) | (8,176 | ) | ||||
Accounts payable and accrued expenses |
(6,955 | ) | 2,642 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
56,245 | 44,423 | ||||||
Investing activities |
||||||||
Cash paid for acquisitions and other related investments |
(75,000 | ) | (396,500 | ) | ||||
Principal received on loans receivable |
3,293 | 7,966 | ||||||
Net proceeds from sale of real estate |
18,409 | 16,000 | ||||||
Investment in loans receivable |
(1,300 | ) | (1,293 | ) | ||||
Construction in progress and other |
(33,171 | ) | (20,655 | ) | ||||
|
|
|
|
|||||
Net cash used for investing activities |
(87,769 | ) | (394,482 | ) | ||||
Financing activities |
||||||||
Revolving credit facilities, net |
(85,000 | ) | (89,600 | ) | ||||
Additions to term debt |
| 300,000 | ||||||
Payments of term debt |
(11,124 | ) | (114 | ) | ||||
Distributions paid |
(57,846 | ) | (49,589 | ) | ||||
Proceeds from sale of common shares, net of offering costs |
172,853 | 220,160 | ||||||
Lease deposits and other obligations to tenants |
1,516 | 383 | ||||||
Debt issuance costs paid and other financing activities |
(114 | ) | (6,268 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
20,285 | 374,972 | ||||||
|
|
|
|
|||||
(Decrease) increase in cash and cash equivalents for period |
(11,239 | ) | 24,913 | |||||
Cash and cash equivalents at beginning of period |
37,311 | 102,726 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 26,072 | $ | 127,639 | ||||
|
|
|
|
|||||
Interest paid |
$ | 29,114 | $ | 21,784 | ||||
Supplemental schedule of non-cash investing activities: |
||||||||
Loan conversion to equity interest |
$ | | $ | 1,648 | ||||
Supplemental schedule of non-cash financing activities: |
||||||||
Distributions declared, unpaid |
$ | 30,081 | $ | 27,181 |
See accompanying notes to condensed consolidated financial statements.
6
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2013 |
December 31, 2012 |
|||||||
(In thousands) | (Unaudited) | (Note 2) | ||||||
Assets |
||||||||
Real estate assets |
||||||||
Land, buildings and improvements, and intangible lease assets |
$ | 1,295,229 | $ | 1,262,099 | ||||
Real estate held for sale |
| 16,497 | ||||||
Mortgage loans |
368,650 | 368,650 | ||||||
Net investment in direct financing leases |
391,904 | 314,412 | ||||||
|
|
|
|
|||||
Gross investment in real estate assets |
2,055,783 | 1,961,658 | ||||||
Accumulated depreciation and amortization |
(141,877 | ) | (124,615 | ) | ||||
|
|
|
|
|||||
Net investment in real estate assets |
1,913,906 | 1,837,043 | ||||||
Cash and cash equivalents |
26,072 | 37,311 | ||||||
Interest and rent receivable |
54,231 | 45,289 | ||||||
Straight-line rent receivable |
41,347 | 35,860 | ||||||
Other loans |
157,251 | 159,243 | ||||||
Other assets |
61,669 | 64,140 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 2,254,476 | $ | 2,178,886 | ||||
|
|
|
|
|||||
Liabilities and Capital |
||||||||
Liabilities |
||||||||
Debt, net |
$ | 929,074 | $ | 1,025,160 | ||||
Accounts payable and accrued expenses |
28,649 | 38,177 | ||||||
Deferred revenue |
25,413 | 20,609 | ||||||
Lease deposits and other obligations to tenants |
18,455 | 17,342 | ||||||
Payable due to Medical Properties Trust, Inc. |
29,654 | 27,394 | ||||||
|
|
|
|
|||||
Total liabilities |
1,031,245 | 1,128,682 | ||||||
Capital |
||||||||
General Partner issued and outstanding 1,487 units at June 30, 2013 and 1,357 units at December 31, 2012 |
12,335 | 10,630 | ||||||
Limited Partners: |
||||||||
Common units issued and outstanding 147,827 units at June 30, 2013 and 134,978 units at December 31, 2012 |
1,220,772 | 1,052,056 | ||||||
LTIP units issued and outstanding 221 units at June 30, 2013 and December 31, 2012 |
| | ||||||
Accumulated other comprehensive loss |
(9,876 | ) | (12,482 | ) | ||||
|
|
|
|
|||||
Total capital |
1,223,231 | 1,050,204 | ||||||
|
|
|
|
|||||
Total Liabilities and Capital |
$ | 2,254,476 | $ | 2,178,886 | ||||
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
7
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
(In thousands, except per unit amounts) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues |
||||||||||||||||
Rent billed |
$ | 31,359 | $ | 30,696 | $ | 63,196 | $ | 60,383 | ||||||||
Straight-line rent |
2,746 | 1,324 | 5,407 | 2,683 | ||||||||||||
Income from direct financing leases |
9,230 | 5,371 | 17,986 | 7,206 | ||||||||||||
Interest and fee income |
14,138 | 11,527 | 28,855 | 19,449 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
57,473 | 48,918 | 115,444 | 89,721 | ||||||||||||
Expenses |
||||||||||||||||
Real estate depreciation and amortization |
8,718 | 8,337 | 17,262 | 16,518 | ||||||||||||
Property-related |
649 | 586 | 1,062 | 813 | ||||||||||||
General and administrative |
7,225 | 6,697 | 15,044 | 14,289 | ||||||||||||
Acquisition expenses |
2,088 | 279 | 2,278 | 3,704 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
18,680 | 15,899 | 35,646 | 35,324 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
38,793 | 33,019 | 79,798 | 54,397 | ||||||||||||
Other income (expense) |
||||||||||||||||
Interest and other income (expense) |
(23 | ) | (17 | ) | (248 | ) | (32 | ) | ||||||||
Earnings from equity and other interests |
1,176 | 879 | 1,668 | 879 | ||||||||||||
Interest expense |
(14,641 | ) | (14,889 | ) | (30,065 | ) | (27,684 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net other expense |
(13,488 | ) | (14,027 | ) | (28,645 | ) | (26,837 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from continuing operations |
25,305 | 18,992 | 51,153 | 27,560 | ||||||||||||
Income from discontinued operations |
2,100 | 368 | 2,461 | 2,407 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
27,405 | 19,360 | 53,614 | 29,967 | ||||||||||||
Net income attributable to non-controlling interests |
(57 | ) | (44 | ) | (110 | ) | (87 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to MPT Operating Partnership partners |
$ | 27,348 | $ | 19,316 | $ | 53,504 | $ | 29,880 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per units basic |
||||||||||||||||
Income from continuing operations attributable to MPT Operating Partnership partners |
$ | 0.17 | $ | 0.14 | $ | 0.35 | $ | 0.21 | ||||||||
Income from discontinued operations attributable to MPT Operating Partnership partners |
0.01 | | 0.02 | 0.02 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to MPT Operating Partnership partners |
$ | 0.18 | $ | 0.14 | $ | 0.37 | $ | 0.23 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings per units diluted |
||||||||||||||||
Income from continuing operations attributable to MPT Operating Partnership partners |
$ | 0.17 | $ | 0.14 | $ | 0.34 | $ | 0.21 | ||||||||
Income from discontinued operations attributable to MPT Operating Partnership partners |
0.01 | | 0.02 | 0.02 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to MPT Operating Partnership partners |
$ | 0.18 | $ | 0.14 | $ | 0.36 | $ | 0.23 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average units outstanding: |
||||||||||||||||
Basic |
149,509 | 134,715 | 144,928 | 129,810 | ||||||||||||
Diluted |
151,056 | 134,715 | 146,291 | 129,810 | ||||||||||||
Dividends declared per unit |
$ | 0.20 | $ | 0.20 | $ | 0.40 | $ | 0.40 |
See accompanying notes to condensed consolidated financial statements.
8
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
(In thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income |
$ | 27,405 | $ | 19,360 | $ | 53,614 | $ | 29,967 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Unrealized gain (loss) on interest rate swap |
1,779 | (1,045 | ) | 2,606 | (546 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total comprehensive income (loss) |
29,184 | 18,315 | 56,220 | 29,421 | ||||||||||||
Comprehensive income attributable to non-controlling interests |
(57 | ) | (44 | ) | (110 | ) | (87 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income (loss) attributable to MPT Operating Partnership partners |
$ | 29,127 | $ | 18,271 | $ | 56,110 | $ | 29,334 | ||||||||
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
9
MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, |
||||||||
2013 | 2012 | |||||||
(In thousands) | ||||||||
Operating activities |
||||||||
Net income |
$ | 53,614 | $ | 29,967 | ||||
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
Depreciation and amortization |
17,927 | 17,937 | ||||||
Straight-line rent revenue |
(5,407 | ) | (2,877 | ) | ||||
Direct financing lease interest accretion |
(2,498 | ) | (1,156 | ) | ||||
Share-based compensation |
4,204 | 3,637 | ||||||
(Gain) loss on sale of real estate |
(2,054 | ) | 1,446 | |||||
Amortization and write-off of deferred financing costs and debt discount |
1,752 | 1,711 | ||||||
Other adjustments |
4,605 | (708 | ) | |||||
Changes in: |
||||||||
Interest and rent receivable |
(8,943 | ) | (8,176 | ) | ||||
Accounts payable and accrued expenses |
(6,955 | ) | 2,642 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
56,245 | 44,423 | ||||||
Investing activities |
||||||||
Cash paid for acquisitions and other related investments |
(75,000 | ) | (396,500 | ) | ||||
Principal received on loans receivable |
3,293 | 7,966 | ||||||
Proceeds from sale of real estate |
18,409 | 16,000 | ||||||
Investment in loans receivable |
(1,300 | ) | (1,293 | ) | ||||
Construction in progress and other |
(33,171 | ) | (20,655 | ) | ||||
|
|
|
|
|||||
Net cash used for investing activities |
(87,769 | ) | (394,482 | ) | ||||
Financing activities |
||||||||
Revolving credit facilities, net |
(85,000 | ) | (89,600 | ) | ||||
Additions to term debt |
| 300,000 | ||||||
Payments of term debt |
(11,124 | ) | (114 | ) | ||||
Distributions paid |
(57,846 | ) | (49,589 | ) | ||||
Proceeds from sale of units, net of offering costs |
172,853 | 220,160 | ||||||
Lease deposits and other obligations to tenants |
1,516 | 383 | ||||||
Debt issuance costs paid and other financing activities |
(114 | ) | (6,268 | ) | ||||
|
|
|
|
|||||
Net cash provided by financing activities |
20,285 | 374,972 | ||||||
|
|
|
|
|||||
Increase in cash and cash equivalents for period |
(11,239 | ) | 24,913 | |||||
Cash and cash equivalents at beginning of period |
37,311 | 102,726 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 26,072 | $ | 127,639 | ||||
|
|
|
|
|||||
Interest paid |
$ | 29,114 | $ | 21,784 | ||||
Supplemental schedule of non-cash investing activities: |
||||||||
Loan conversion to equity interest |
$ | | $ | 1,648 | ||||
Supplemental schedule of non-cash financing activities: |
||||||||
Distributions declared, unpaid |
$ | 30,081 | $ | 27,181 |
See accompanying notes to condensed consolidated financial statements.
10
MEDICAL PROPERTIES TRUST, INC., AND MPT OPERATING PARTNERSHIP, L.P.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Medical Properties Trust, Inc., a Maryland corporation, was formed on August 27, 2003, under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in, owning, and leasing commercial real estate. Our operating partnership subsidiary, MPT Operating Partnership, L.P., (the Operating Partnership) through which we conduct all of our operations, was formed in September 2003. Through another wholly-owned subsidiary, Medical Properties Trust, LLC, we are the sole general partner of the Operating Partnership. At present, we directly own substantially all of the limited partnership interests in the Operating Partnership and have elected to report our required disclosures and that of the Operating Partnership on a combined basis except where material differences exist.
We have operated as a real estate investment trust (REIT) since April 6, 2004, and accordingly, elected REIT status upon the filing in September 2005 of the calendar year 2004 federal income tax return. Accordingly, we will not be subject to U.S. federal income tax, provided that we continue to qualify as a REIT and our distributions to our stockholders equal or exceed our taxable income. Certain activities we undertake must be conducted by entities which we elected to be treated as taxable REIT subsidiaries (TRSs). Our TRSs are subject to both federal and state income taxes.
Our primary business strategy is to acquire and develop real estate and improvements, primarily for long-term lease to providers of healthcare services such as operators of general acute care hospitals, inpatient physical rehabilitation hospitals, long-term acute care hospitals, surgery centers, centers for treatment of specific conditions such as cardiac, pulmonary, cancer, and neurological hospitals, and other healthcare-oriented facilities. We also make mortgage and other loans to operators of similar facilities. In addition, we may obtain profits or equity interests in our tenants, from time to time, in order to enhance our overall return. We manage our business as a single business segment.
2. Summary of Significant Accounting Policies
Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, including rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month period ended June 30, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. The condensed consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
For information about significant accounting policies, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. During the six months ended June 30, 2013, there were no material changes to these policies.
Reclassifications: Certain reclassifications have been made to the condensed consolidated financial statements to conform to the 2013 consolidated financial statement presentation. These reclassifications had no impact on stockholders equity or net income.
Variable Interest Entities
At June 30, 2013, we had loans to and/or equity investments in several variable interest entities (VIEs) for which we are not the primary beneficiary. The carrying value and classification of the related assets and maximum exposure to loss as a result of our involvement with these VIEs are presented below at June 30, 2013 (in thousands):
VIE Type |
Maximum Loss Exposure(1) |
Asset Type Classification |
Carrying Amount(2) |
|||||||
Loans, net |
$ | 279,052 | Mortgage and other loans | $ | 225,742 | |||||
Equity investments |
$ | 19,318 | Other assets | $ | 5,209 |
(1) | Our maximum loss exposure related to loans with VIEs represents our current aggregate gross carrying value of the loan plus accrued interest and any other related assets (such as rent receivables), less any liabilities. Our maximum loss exposure related to our equity investment in VIEs represents the current carrying values of such investment plus any other related assets (such as rent receivables) less any liabilities. |
(2) | Carrying amount reflects the net book value of our loan or equity interest only in the VIE. |
11
For the VIE types above, we do not consolidate the VIE because we do not have the ability to control the activities (such as the day-to-day healthcare operations of our borrower or investee) that most significantly impact the VIEs economic performance. As of June 30, 2013, we were not required to provide financial support through a liquidity arrangement or otherwise to our unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash short falls).
Typically, our loans are collateralized by assets of the borrower (some assets of which are on the premises of facilities owned by us) and further supported by limited guarantees made by certain principals of the borrower.
See Note 3 for additional description of the nature, purpose and activities of our more significant VIEs and interests therein.
3. Real Estate and Lending Activities
Acquisitions
2013 Activity
On June 11, 2013, we acquired the real estate of two acute care hospitals in Kansas from affiliates of Prime Healthcare Services, Inc. (Prime) for a combined purchase price of $75 million and leased the facilities to the operator under a master lease agreement. The master lease is for 10 years and contains two renewal options of five years each, and the rent increases annually based on the greater of the consumer price-index or 2%. This lease is accounted for as a direct financing lease (DFL).
2012 Activity
On February 29, 2012, we made loans to and acquired assets from Ernest Health Inc. (Ernest) for a combined purchase price and investment of $396.5 million (Ernest Transaction).
Real Estate Acquisition and Mortgage Loan Financing
Pursuant to a definitive real property asset purchase agreement, we acquired from Ernest and certain of its subsidiaries (i) a portfolio of five rehabilitation facilities (including a ground lease interest relating to a community-based acute rehabilitation facility in Wyoming), (ii) seven long-term acute care facilities located in seven states and (iii) undeveloped land in Provo, Utah (collectively, the Acquired Facilities) for an aggregate purchase price of $200 million, subject to certain adjustments. The Acquired Facilities are leased to subsidiaries of Ernest pursuant to a master lease agreement. The master lease agreement has a 20-year term with three five-year extension options and provided for an initial rental rate of 9%, with consumer price-indexed increases, limited to a 2% floor and 5% ceiling annually thereafter. In addition, we made Ernest a $100 million loan secured by a first mortgage interest in four subsidiaries of Ernest, which has terms similar to the leasing terms described above.
Acquisition Loan and Equity Contribution
Through an affiliate of one of our TRSs, we made investments of approximately $96.5 million in Ernest Health Holdings, LLC, which is the owner of Ernest. These investments are structured as a $93.2 million acquisition loan and a $3.3 million equity contribution.
The interest rate on the acquisition loan is 15%. Ernest is required to pay us a minimum of 6% and 7% of the loan amount in years one and two, respectively, and 10% thereafter, although there are provisions in the loan agreement that are expected to result in full payment of the 15% preference when funds are sufficient. Any of the 15% in excess of the minimum that is not paid may be accrued and paid upon the occurrence of a capital or liquidity event and is payable at maturity. The loan may be prepaid without penalty at any time.
12
As part of these acquisitions, we purchased and invested in the following: (in thousands)
2013 | 2012 | |||||||
Net investments in direct financing leases |
$ | 75,000 | $ | 200,000 | ||||
Mortgage loans |
| 100,000 | ||||||
Other loans |
| 93,200 | ||||||
Equity investments |
| 3,300 | ||||||
|
|
|
|
|||||
Total |
$ | 75,000 | $ | 396,500 | ||||
|
|
|
|
Development Activities
On June 11, 2013, we entered into a master funding and development agreement with First Choice ER, LLC (First Choice) to develop up to 25 freestanding emergency room facilities for a maximum aggregate funding of $100 million.
On May 20, 2013, we entered into an agreement to finance the development of and lease an inpatient rehabilitation facility in South Ogden, Utah for $19.2 million, which will be leased to Ernest under the 2012 master lease. The facility is expected to be completed in the 2014 third quarter. We have funded $2.7 million through the end of the 2013 second quarter.
On March 4, 2013, we entered into an agreement to finance the development of and lease an inpatient rehabilitation facility in Post Falls, Idaho for $14.4 million, which will be leased to Ernest under the 2012 master lease. The facility is expected to be completed in the fourth quarter of 2013. We have funded $4.9 million through the end of the 2013 second quarter.
In regards to our Twelve Oaks facility, approximately 55% of this facility became occupied as of January 23, 2013, pursuant to a 15 year lease.
On May 4, 2012, we agreed to develop and lease a 26-bed facility next to our current facility in Victoria, Texas. Total development cost of the new facility is estimated to be $9.4 million, and it is expected to be completed in the third quarter of 2013. We have funded $7.9 million through the end of the 2013 second quarter.
On June 13, 2012, we entered into an agreement with Ernest to fund the development of and lease a 40-bed rehabilitation hospital in Lafayette, Indiana. The facility opened in the first quarter of 2013, and the cost of the land and building for this facility approximates $15 million. The initial lease term for this property is approximately 20 years.
On October 1, 2012, we agreed to fund the construction of an inpatient rehabilitation hospital in Spartanburg, South Carolina that will be operated by Ernest. Total development cost of the new facility is $18 million, and the construction is expected to be completed during the third quarter of 2013. We have funded $12.3 million through the end of the 2013 second quarter.
On October 14, 2011, we entered into agreements with a joint venture of Emerus Holding, Inc. and Vanguard Health System, a subsidiary of Baptist Health System, to acquire, provide for development funding and lease three emergency care focused acute care hospitals for $30.0 million in the suburban markets of San Antonio, Texas. The three facilities are subject to a master lease structure with an initial term of 15 years and three five-year extension options. Rent escalates annually based on consumer priced indexed increases and to be not less than one percent or greater than three percent. One of these properties was completed in the fourth quarter of 2012 with the remaining two being completed in the first quarter of 2013.
See table below for a status update on our current development projects (in thousands):
Property |
Location | Property Type | Operator | Original Commitment |
Costs Incurred as of June 30, 2013 |
Estimated Completion Date |
||||||||||||
Victoria |
Victoria, TX | Long-term Acute Care Hospital |
Post Acute Medical | $ | 9,400 | $ | 7,937 | 3rd Qtr 2013 | ||||||||||
Spartanburg |
Spartanburg, SC | Rehabilitation Hospital |
Ernest Health, Inc. | 17,805 | 12,275 | 3rd Qtr 2013 | ||||||||||||
Post Falls |
Post Falls, ID | Rehabilitation Hospital |
Ernest Health, Inc. | 14,387 | 4,937 | 4th Qtr 2013 | ||||||||||||
Oakleaf |
Altoona, WI | General Acute Care Hospital |
National Surgical Hospitals |
33,500 | 3,201 | 1st Qtr 2014 | ||||||||||||
Northern Utah Rehabilitation Hospital |
South Ogden, UT | Rehabilitation Hospital |
Ernest Health, Inc. | 19,153 | 2,650 | 3rd Qtr 2014 | ||||||||||||
First Choice Emergency Rooms |
Various | General Acute Care Hospital |
First Choice | 100,000 | | Various | ||||||||||||
|
|
|
|
|||||||||||||||
$ | 194,245 | $ | 31,000 | |||||||||||||||
|
|
|
|
13
Disposals
In April 2013, we sold two long-term acute care hospitals, Summit Hospital of Southeast Arizona and Summit Hospital of Southeast Texas, for total proceeds of $18.5 million, resulting in a gain of $2.1 million.
On June 15, 2012, we sold the HealthSouth Rehabilitation Hospital of Fayetteville in Fayetteville, Arkansas for $16 million, resulting in a loss of $1.4 million.
Leasing Operations
All of our leases are accounted for as operating leases except for the master lease of 12 Ernest facilities and four other facilities which are accounted for as DFLs. The components of our net investment in DFL consisted of the following (dollars in thousands):
As of June 30, 2013 |
As of December 31, 2012 |
|||||||
Minimum lease payments receivable |
$ | 1,531,874 | $ | 1,277,923 | ||||
Estimated residual values |
201,283 | 201,283 | ||||||
Less: Unearned income |
(1,341,253 | ) | (1,164,794 | ) | ||||
|
|
|
|
|||||
Net investment in direct financing leases |
$ | 391,904 | $ | 314,412 | ||||
|
|
|
|
Monroe facility
As of June 30, 2013, we have advanced $29.9 million to the operator/lessee of Monroe Hospital in Bloomington, Indiana, pursuant to a working capital loan agreement and also have $21.0 million of rent, interest and other charges owed to us by the operator, of which $6.0 million of interest receivables are significantly more than 90 days past due. Because the operator has not made all payments required by the working capital loan agreement and the related real estate lease agreement, we consider the loan to be impaired. During 2010, we recorded a $12 million impairment charge on the working capital loan and recorded a valuation allowance for unbilled straight-line rent in the amount of $2.5 million. We have not recognized any interest income on the Monroe loan since it was considered impaired and have not recorded any unbilled (straight-line) rent since 2010.
At June 30, 2013, our net investment (exclusive of the related real estate) of approximately $39 million is our maximum exposure to Monroe and the amount is presently deemed collectible/recoverable. In making this determination, we considered our first priority secured interest in (i) approximately $5 million in hospital patient receivables, (ii) cash balances of $0.6 million, (iii) our assessment of the realizable value of our other collateral and (iv) projected EBITDA of the hospital operations under various scenarios for sensitivity purposes. Although we believe our net investment in Monroe at June 30, 2013, is recoverable, beginning in April 2013, we stopped recognizing any future rental income until we begin receiving cash payments. However, no assurances can be made that we will not have additional impairment charges on our working capital loan or other receivables in the future.
Florence facility
On March 1, 2012, we received a certificate of occupancy for our approximate $30 million Florence acute care facility constructed near Phoenix, Arizona. With this, we started collecting and recognizing rent on this facility in March 2012. On March 6, 2013, the tenant of this facility filed for Chapter 11 bankruptcy. Florence is current on rent, and at June 30, 2013, we had less than $0.4 million of receivables outstanding. In addition, we have a letter of credit for approximately $1.2 million to cover any rent and other monetary payments not paid in the future. Although no assurances can be made that we will not have any impairment charges in the future, we believe our investment in Florence at June 30, 2013, is fully recoverable.
14
Loans
The following is a summary of our loans (in thousands):
As of June 30, 2013 |
As of December 31, 2012 |
|||||||
Mortgage loans |
$ | 368,650 | $ | 368,650 | ||||
Acquisition loans |
98,433 | 98,433 | ||||||
Working capital and other loans |
55,466 | 57,458 | ||||||
Convertible loan |
3,352 | 3,352 | ||||||
|
|
|
|
|||||
$ | 525,901 | $ | 527,893 | |||||
|
|
|
|
Our mortgage loans cover 9 of our properties with three operators.
On March 1, 2012, pursuant to our convertible note agreement, we converted $1.7 million of our $5.0 million convertible note into a 9.9% equity interest in the operator of our Hoboken University Medical Center facility. At June 30, 2013, $3.3 million remains outstanding on the convertible note, and we retain the option, through November 2014, to convert this remainder into 15.1% of equity interest in the operator.
Concentrations of Credit Risk
For the three months ended June 30, 2013 and 2012, revenue from affiliates of Ernest (including rent and interest from mortgage and acquisition loans) accounted for 20.3% and 22.8%, respectively, of total revenue. For the six months ended June 30, 2013 and 2012, revenue from affiliates of Ernest (including rent and interest from mortgage and acquisition loans) accounted for 20.3% and 16.8%, respectively, of total revenue. From an investment concentration perspective, Ernest represented 18.4% and 18.2% of our total assets at June 30, 2013 and December 31, 2012, respectively.
For the three months ended June 30, 2013 and 2012, revenue from affiliates of Prime (including rent and interest from mortgage loans) accounted for 32.3% and 22.4%, respectively, of total revenue. For the six months ended June 30, 2013 and 2012, revenue from affiliates of Prime (including rent and interest from mortgage loans) accounted for 31.7% and 24.4%, respectively, of total revenue. From an investment concentration perspective, Prime represented 30.3% and 27.9% of our total assets at June 30, 2013 and December 31, 2012, respectively.
On an individual property basis, we had no investment of any single property greater than 5% of our total assets as of June 30, 2013.
From a geographic perspective, all of our properties are currently located in the United States with 23.4% and 23.2% of our total assets at June 30, 2013, located in Texas and California, respectively.
4. Debt
The following is a summary of debt, net of discounts (dollar amounts in thousands):
As of June
30, 2013 |
As of December
31, 2012 |
|||||||||||||||
Balance | Interest Rate | Balance | Interest Rate | |||||||||||||
Revolving credit facility |
$ | 40,000 | Variable | $ | 125,000 | Variable | ||||||||||
2006 Senior Unsecured Notes |
125,000 | Various | 125,000 | Various | ||||||||||||
2011 Senior Unsecured Notes |
450,000 | 6.875 | % | 450,000 | 6.875 | % | ||||||||||
2012 Senior Unsecured Notes |
200,000 | 6.375 | % | 200,000 | 6.375 | % | ||||||||||
Exchangeable senior notes: |
||||||||||||||||
Principal amount (A) |
| N/A | 11,000 | 9.250 | % | |||||||||||
Unamortized discount |
| (37 | ) | |||||||||||||
|
|
|
|
|||||||||||||
| 10,963 | |||||||||||||||
Term loans |
114,074 | Various | 114,197 | Various | ||||||||||||
|
|
|
|
|||||||||||||
$ | 929,074 | $ | 1,025,160 | |||||||||||||
|
|
|
|
As of June 30, 2013, principal payments due for our debt are as follows (in thousands):
2013 |
$ | 125 | ||
2014 |
266 | |||
2015 |
40,283 | |||
2016 |
225,299 | |||
2017 |
320 | |||
Thereafter |
662,781 | |||
|
|
|||
Total |
$ | 929,074 | ||
|
|
(A) | The exchangeable senior notes were paid in full on April 1, 2013. |
15
To help fund the 2012 acquisitions disclosed in Note 3, on February 17, 2012, we completed a $200 million offering of senior unsecured notes (2012 Senior Unsecured Notes), resulting in net proceeds, after underwriting discount, of $196.5 million. In addition, on March 9, 2012, we closed on a $100 million senior unsecured term loan facility (2012 Term Loan) and exercised the $70 million accordion feature on our revolving credit facility, increasing its capacity from $330 million to $400 million.
During the second quarter 2010, we entered into an interest rate swap to manage our exposure to variable interest rates by fixing $65 million of our 2006 Senior Unsecured Notes, which started July 31, 2011 (date on which the interest rate turned variable) through maturity date (or July 2016), at a rate of 5.507%. We also entered into an interest rate swap to fix $60 million of our 2006 Senior Unsecured Notes which started October 31, 2011 (date on which the related interest rate turned variable) through the maturity date (or October 2016) at a rate of 5.675%. The fair value of the interest rate swaps was $9.9 million and $12.5 million as of June 30, 2013 and December 31, 2012, respectively, which is reflected in accounts payable and accrued expenses on the consolidated balance sheets.
We designated our interest rate swaps as cash flow hedges. Accordingly, the effective portion of changes in the fair value of our swaps is recorded as a component of accumulated other comprehensive income/loss on the balance sheet and reclassified into earnings in the same period, or periods, during which the hedged transactions effect earnings, while any ineffective portion is recorded through earnings immediately. We did not have any hedge ineffectiveness in the periods; therefore, there was no income statement effect recorded during the three and six month periods ended June 30, 2013 or 2012. We do not expect any of the current losses included in accumulated other comprehensive loss to be reclassified into earnings in the next 12 months. At June 30, 2013 and December 31, 2012, we had $5.5 million and $6.6 million, respectively, posted as collateral, which is currently reflected in other assets on our consolidated balance sheets.
Covenants
Our debt facilities impose certain restrictions on us, including restrictions on our ability to: incur debts; create or incur liens; provide guarantees in respect of obligations of any other entity; make redemptions and repurchases of our capital stock; prepay, redeem or repurchase debt; engage in mergers or consolidations; enter into affiliated transactions; dispose of real estate or other assets; and change our business. In addition, the credit agreements governing our revolving credit facility and 2012 Term Loan limit the amount of dividends we can pay as a percentage of normalized adjusted funds from operations, as defined in the agreements, on a rolling four quarter basis. The dividend restriction decreased to 95% of normalized adjusted FFO at June 30, 2013 and thereafter. The indentures governing our 2011 and 2012 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 2011 and 2012 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 revolving credit facility and 2012 Term Loan contain customary financial and operating covenants, including covenants relating to our total leverage ratio, fixed charge coverage ratio, mortgage secured leverage ratio, recourse mortgage secured leverage ratio, consolidated adjusted net worth, facility leverage ratio, 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 June 30, 2013, we were in compliance with all such financial and operating covenants.
5. Common Stock/Partners Capital
Medical Properties Trust, Inc.
On February 28, 2013, we completed an offering of 12,650,000 shares of our common stock (including 1,650,000 shares sold pursuant to the exercise in full of the underwriters option to purchase additional shares) at a price of $14.25 per share, resulting in net proceeds (after underwriting discount and expenses) of $172.9 million. A portion of the net proceeds from this offering were used to pay down our revolving credit facility.
To help fund the 2012 acquisitions disclosed in Note 3, on February 7, 2012, we completed an offering of 23,575,000 shares of our common stock (including 3,075,000 shares sold pursuant to the exercise in full of the underwriters overallotment option) at a price of $9.75 per share, resulting in net proceeds (after underwriting discount) of $220.2 million.
MPT Operating Partnership, L.P.
At June 30, 2013, the Company has a 99.8% ownership interest in Operating Partnership with the remainder owned by three other partners, two of which are employees and one of which is a director. During the six months ended June 30, 2013 and 2012, the partnership issued 12,650,000 and 23,575,000 units, respectively, in direct response to the common stock offerings by Medical Properties Trust, Inc.
16
6. Stock Awards
We have adopted the 2013 Equity Incentive Plan (the Equity Incentive Plan) during the second quarter of 2013 which authorizes the issuance of common stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights, performance units and awards of interests in our Operating Partnership. The Equity Incentive Plan replaced the 2004 Equity Incentive Plan (2004 Plan). The Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. We have reserved 7,395,132 shares of common stock for awards under the Equity Incentive Plan (including 495,132 shares remaining shares under the 2004 Plan that were transferred to the Equity Incentive Plan) for which 7,395,132 shares remain available for future stock awards as of June 30, 2013. For each share of common stock issued by Medical Properties Trust, Inc. pursuant to the Equity Incentive Plan, the Operating Partnership issues a corresponding number of operating partnership units. We awarded the following stock awards during the 2013 and 2012 first quarters:
Time-based awardsWe granted 240,425 and 275,464 shares in 2013 and 2012, respectively, of time-based restricted stock to management and independent directors. These awards vest quarterly based on service, over three years, in equal amounts.
Performance-based awardsOur management team and certain employees (2012 only) were awarded 204,255 and 252,566 performance based awards in 2013 and 2012, respectively. These awards vest ratably over a three year period based on the achievement of certain total shareholder return measures, with a carry-back and carry-forward provision through December 31, 2016 (for the 2012 awards) and December 31, 2017 (for the 2013 awards). Dividends on these awards are paid only upon achievement of the performance measures.
Multi-year Performance-based awardsWe awarded 550,000 and 649,793 shares in 2013 and 2012, respectively, of multi-year performance-based awards to management and certain employees (2012 only). These shares are subject to three-year cumulative performance hurdles based on measures of total shareholder return. At the end of the three-year performance period, any earned shares will be subject to an additional two years of ratable time-based vesting on an annual basis. Dividends are paid on these shares only upon achievement of the performance measures.
7. Fair Value of Financial Instruments
We have various assets and liabilities that are considered financial instruments. We estimate that the carrying value of cash and cash equivalents, and accounts payable and accrued expenses approximate their fair values. Included in our accounts payable and accrued expenses are our interest rate swaps, which are recorded at fair value based on Level 2 observable market assumptions using standardized derivative pricing models. We estimate the fair value of our interest and rent receivables using Level 2 inputs such as discounting the estimated future cash flows using the current rates at which similar receivables would be made to others with similar credit ratings and for the same remaining maturities. The fair value of our mortgage loans and working capital loans are estimated by using Level 2 inputs (except for the Monroe loan which we use Level 3 inputs) such as discounting the estimated future cash flows using the current rates which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. We determine the fair value of our exchangeable notes and 2011 and 2012 Senior Unsecured Notes, using Level 2 inputs such as quotes from securities dealers and market makers. We estimate the fair value of our 2006 Senior Unsecured Notes, revolving credit facilities, and term loans using Level 2 inputs based on the present value of future payments, discounted at a rate which we consider appropriate for such debt.
Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be possible and may not be a prudent management decision. The following table summarizes fair value estimates for our financial instruments (in thousands):
June 30, 2013 |
December 31, 2012 |
|||||||||||||||
Asset (Liability) |
Book Value |
Fair Value |
Book Value |
Fair Value |
||||||||||||
Interest and rent receivables |
$ | 54,231 | $ | 43,291 | $ | 45,289 | $ | 36,700 | ||||||||
Loans (1) |
332,701 | 329,859 | 334,693 | 335,595 | ||||||||||||
Debt, net |
(929,074 | ) | (969,694 | ) | (1,025,160 | ) | (1,082,333 | ) |
(1) | Excludes loans related to the Ernest Transaction since they are recorded at fair value and discussed below. |
Items Measured at Fair Value on a Recurring Basis
Our equity interest in Ernest and related loans, as discussed in Note 3, are being measured at fair value on a recurring basis as we elected to account for these investments using the fair value option method. We have elected to account for these investments at fair value due to the size of the investments and because we believe this method is more reflective of current values. We have not made a similar election for other equity interests or loans in or prior to 2013.
17
At June 30, 2013, these amounts were as follows (in thousands):
Asset Type |
Fair Value |
Cost | Asset Type Classification | |||||||
Mortgage loans |
$ | 100,000 | $ | 100,000 | Mortgage loans | |||||
Acquisition loan |
93,200 | 93,200 | Other loans | |||||||
Equity investments |
3,300 | 3,300 | Other assets | |||||||
|
|
|
|
|||||||
$ | 196,500 | $ | 196,500 | |||||||
|
|
|
|
Our mortgage loans with Ernest are recorded at fair value based on Level 3 inputs by discounting the estimated cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities. Our acquisition loan and equity investments in Ernest are recorded at fair value based on Level 3 inputs, by using a discounted cash flow model, which requires significant estimates of our investee such as projected revenue and expenses and appropriate consideration of the underlying risk profile of the forecast assumptions associated with the investee. We classify these loans and equity investments as Level 3, as we use certain unobservable inputs to the valuation methodology that are significant to the fair value measurement, and the valuation requires management judgment due to the absence of quoted market prices. For these cash flow models, our observable inputs include use of a capitalization rate, discount rate (which is based on a weighted-average cost of capital), and market interest rates, and our unobservable input includes an adjustment for a marketability discount (DLOM) on our equity investment of 40% at June 30, 2013.
In regards to the underlying projection of revenues and expenses used in the discounted cash flow model, such projections are provided by Ernest. However, we will modify such projections (including underlying assumptions used) as needed based on our review and analysis of Ernests 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 investees business along with our rights as an investor pursuant to the operating agreement, the size of investment, expected holding period, number of shareholders, access to capital marketplace, etc. To illustrate the effect of movements in the DLOM, we performed a sensitivity analysis below by using basis point variations (dollars in thousands):
Basis Point Change in Marketability Discount |
Estimated Increase (Decrease) In Fair Value | |
+100 basis points | $(300) | |
- 100 basis points | 300 |
Because the fair value of Ernest investments noted above approximate their original cost, we did not recognize any unrealized gains/losses during the first half of 2013.
8. Discontinued Operations
Including those properties discussed in Note 3 under the heading Disposals, we sold two properties during the six month period ending June 30, 2013 and five properties during 2012. We have classified current and prior year activity related to these transactions, along with the related operating results of the facilities prior to these transactions taking place, as discontinued operations. In addition, we have reclassified the related real estate assets to Real Estate Held for Sale in all prior periods.
The following table presents the results of discontinued operations, for the three and six months ended June 30, 2013 and 2012 (dollar amounts in thousands except per share/unit amounts):
For the Three
Months Ended June 30, |
For the Six
Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues |
$ | 62 | $ | 2,750 | $ | 531 | $ | 5,459 | ||||||||
Gain (loss) on sale |
2,054 | (1,446 | ) | 2,054 | (1,446 | ) | ||||||||||
Income |
2,100 | 368 | 2,461 | 2,407 | ||||||||||||
Earnings per share/unit diluted |
$ | 0.01 | $ | | $ | 0.02 | $ | 0.02 |
18
9. Earnings Per Share/Common Unit
Medical Properties Trust, Inc.
Our earnings per share were calculated based on the following (amounts in thousands):
For the Three
Months Ended June 30, |
||||||||
2013 | 2012 | |||||||
Numerator: |
||||||||
Income from continuing operations |
$ | 25,305 | $ | 18,992 | ||||
Non-controlling interests share in continuing operations |
(57 | ) | (44 | ) | ||||
Participating securities share in earnings |
(179 | ) | (238 | ) | ||||
|
|
|
|
|||||
Income from continuing operations, less participating securities share in earnings |
25,069 | 18,710 | ||||||
Income from discontinued operations attributable to MPT common stockholders |
2,100 | 368 | ||||||
|
|
|
|
|||||
Net income, less participating securities share in earnings |
$ | 27,169 | $ | 19,078 | ||||
|
|
|
|
|||||
Denominator: |
||||||||
Basic weighted-average common shares |
149,509 | 134,715 | ||||||
Dilutive potential common shares |
1,547 | | ||||||
|
|
|
|
|||||
Dilutive weighted-average common shares |
151,056 | 134,715 | ||||||
|
|
|
|
|||||
For the Six
Months Ended June 30, |
||||||||
2013 | 2012 | |||||||
Numerator: |
||||||||
Income from continuing operations |
$ | 51,153 | $ | 27,560 | ||||
Non-controlling interests share in continuing operations |
(110 | ) | (87 | ) | ||||
Participating securities share in earnings |
(372 | ) | (490 | ) | ||||
|
|
|
|
|||||
Income from continuing operations, less participating securities share in earnings |
50,671 | 26,983 | ||||||
Income from discontinued operations attributable to MPT common stockholders |
2,461 | 2,407 | ||||||
|
|
|
|
|||||
Net income, less participating securities share in earnings |
$ | 53,132 | $ | 29,390 | ||||
|
|
|
|
|||||
Denominator: |
||||||||
Basic weighted-average common shares |
144,928 | 129,810 | ||||||
Dilutive potential common shares |
1,363 | | ||||||
|
|
|
|
|||||
Dilutive weighted-average common shares |
146,291 | 129,810 | ||||||
|
|
|
|
MPT Operating Partnership, L.P.
Our earnings per common unit were calculated based on the following (amounts in thousands):
For the Three
Months Ended June 30, |
||||||||
2013 | 2012 | |||||||
Numerator: |
||||||||
Income from continuing operations |
$ | 25,305 | $ | 18,992 | ||||
Non-controlling interests share in continuing operations |
(57 | ) | (44 | ) | ||||
Participating securities share in earnings |
(179 | ) | (238 | ) | ||||
|
|
|
|
|||||
Income from continuing operations, less participating securities share in earnings |
25,069 | 18,710 | ||||||
Income from discontinued operations attributable to MPT Operating Partnership partners |
2,100 | 368 | ||||||
|
|
|
|
|||||
Net income, less participating securities share in earnings |
$ | 27,169 | $ | 19,078 | ||||
|
|
|
|
|||||
Denominator: |
||||||||
Basic weighted-average units |
149,509 | 134,715 | ||||||
Dilutive potential units |
1,547 | | ||||||
|
|
|
|
|||||
Dilutive weighted-average units |
151,056 | 134,715 | ||||||
|
|
|
|
For the Six
Months Ended June 30, |
||||||||
2013 | 2012 | |||||||
Numerator: |
||||||||
Income from continuing operations |
$ | 51,153 | $ | 27,560 | ||||
Non-controlling interests share in continuing operations |
(110 | ) | (87 | ) | ||||
Participating securities share in earnings |
(372 | ) | (490 | ) | ||||
|
|
|
|
|||||
Income from continuing operations, less participating securities share in earnings |
50,671 | 26,983 | ||||||
Income from discontinued operations attributable to MPT Operating Partnership partners |
2,461 | 2,407 | ||||||
|
|
|
|
|||||
Net income, less participating securities share in earnings |
$ | 53,132 | $ | 29,390 | ||||
|
|
|
|
|||||
Denominator: |
||||||||
Basic weighted-average units |
144,928 | 129,810 | ||||||
Dilutive potential units |
1,363 | | ||||||
|
|
|
|
|||||
Dilutive weighted-average units |
146,291 | 129,810 | ||||||
|
|
|
|
For the three and six months ended June 30, 2012, 0.1 million of options were excluded from the diluted earnings per share/unit calculation as they were not determined to be dilutive. In addition, shares/units that may be issued in the future in accordance with our exchangeable senior notes (which were paid off in April 1, 2013) were excluded from the 2012 diluted earnings per share/unit calculation as they were not determined to be dilutive.
19
10. Contingencies
We are a party to various legal proceedings incidental to our business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect our financial position, results of operations or cash flows.
11. Subsequent Events
On August 8, 2013, we entered into an agreement to acquire the real estate of three general acute care hospitals for $283.3 million. The seller / lessee is a well-known operator of multiple acute care facilities, and the transaction is subject to customary conditions and is expected to close during the third quarter of 2013.
On July 18, 2013, we acquired the real estate of Esplanade Rehab Hospital in Corpus Christi, Texas for $15.8 million and leased the facility to Ernest under the 2012 master lease.
12. Condensed Consolidating Financial Information
The following tables present the condensed consolidating financial information for (a) Medical Properties Trust, Inc. (Parent and a guarantor to our 2011 and 2012 Senior Unsecured Notes), (b) MPT Operating Partnership, L.P. and MPT Finance Corporation (Subsidiary Issuer), (c) on a combined basis, the guarantors of our 2011 and 2012 Senior Unsecured Notes (Subsidiary Guarantors), and (d) on a combined basis, the non-guarantor subsidiaries (Non-Guarantor Subsidiaries). Separate financial statements of the Subsidiary Guarantors are not presented because the guarantee by each 100% owned Subsidiary Guarantor is joint and several and we believe separate financial statements and other disclosures regarding the Subsidiary Guarantors are not material to investors. Furthermore, there are no significant legal restrictions on the Parents ability to obtain funds from its subsidiaries by dividend or loan.
The guarantees by the Subsidiary Guarantors may be released and discharged upon: (1) any sale, exchange or transfer of all of the capital stock of a Subsidiary Guarantor; (2) the merger or consolidation of a Subsidiary Guarantor with a Subsidiary Issuer or any other Subsidiary Guarantor; (3) the proper designation of any Subsidiary Guarantor by the Subsidiary Issuers as unrestricted for covenant purposes under the indenture governing the 2011 and 2012 Senior Unsecured Notes; (4) the legal defeasance or covenant defeasance or satisfaction and discharge of the indenture; (5) a liquidation or dissolution of a Subsidiary Guarantor permitted under the indenture governing the 2011 and 2012 Senior Unsecured Notes; or (6) the release or discharge of the Subsidiary Guarantor from its guarantee obligations under our revolving credit facility.
Subsequent to June 30, 2012, certain of our subsidiaries were re-designated as non-guarantors of our 2011 and 2012 Senior Unsecured Notes as the underlying properties were sold in 2012 and the first half of 2013. With these re-designations, we have restated the 2012 condensed consolidating financial information below to reflect these changes.
In the second quarter of 2013, we revised our condensed consolidating balance sheets as of December 31, 2012 and 2011 to adjust negative net intercompany receivables (payable) balances from Total Assets to Total Liabilities. The impact of this revision, was to increase total assets (and, correspondingly increase total liabilities) as of December 31, 2012 and 2011 for Subsidiaries Guarantors by $1,010.4 million and $888.9 million, respectively, and also to increase total assets (and, correspondingly increase total liabilities) for Non-Guarantor Subsidiaries by $390.9 million and $5.5 million respectively, with an offset to Eliminations. This revision is not material to the related financial statements for any prior periods and had no impact on our consolidated balance sheet. As prior period financial information is presented in future filings, we will similarly revise the condensed consolidating balance sheets.
20
Condensed Consolidated Balance Sheet
June 30, 2013
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Assets |
||||||||||||||||||||||||
Real estate assets |
||||||||||||||||||||||||
Land, buildings and improvements and intangible lease assets |
$ | | $ | | $ | 1,229,282 | $ | 65,947 | $ | | $ | 1,295,229 | ||||||||||||
Mortgage loans |
| | 268,650 | 100,000 | | 368,650 | ||||||||||||||||||
Net investment in direct financing leases |
| | 185,913 | 205,991 | | 391,904 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross investment in real estate assets |
| | 1,683,845 | 371,938 | | 2,055,783 | ||||||||||||||||||
Accumulated depreciation and amortization |
| | (134,575 | ) | (7,302 | ) | | (141,877 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net investment in real estate assets |
| | 1,549,270 | 364,636 | | 1,913,906 | ||||||||||||||||||
Cash and cash equivalents |
| 25,923 | | 149 | | 26,072 | ||||||||||||||||||
Interest and rent receivable |
| 700 | 29,376 | 24,155 | | 54,231 | ||||||||||||||||||
Straight-line rent receivable |
| | 33,821 | 7,526 | | 41,347 | ||||||||||||||||||
Other loans |
| 178 | | 157,073 | | 157,251 | ||||||||||||||||||
Net intercompany receivable |
29,654 | 1,371,376 | | | (1,401,030 | ) | | |||||||||||||||||
Investment in subsidiaries |
1,223,231 | 736,536 | 43,649 | | (2,003,416 | ) | | |||||||||||||||||
Other assets |
| 29,517 | 2,176 | 29,976 | | 61,669 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Assets |
$ | 1,252,885 | $ | 2,164,230 | $ | 1,658,292 | $ | 583,515 | $ | (3,404,446 | ) | $ | 2,254,476 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Equity |
||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Debt, net |
$ | | $ | 915,000 | $ | | $ | 14,074 | $ | | $ | 929,074 | ||||||||||||
Accounts payable and accrued expenses |
30,045 | 26,026 | 1,814 | 809 | | 58,694 | ||||||||||||||||||
Net intercompany payable |
| | 1,022,643 | 378,387 | (1,401,030 | ) | | |||||||||||||||||
Deferred revenue |
| (27 | ) | 19,410 | 6,030 | | 25,413 | |||||||||||||||||
Lease deposits and other obligations to tenants |
| | 16,677 | 1,778 | | 18,455 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
30,045 | 940,999 | 1,060,544 | 401,078 | (1,401,030 | ) | 1,031,636 | |||||||||||||||||
Total equity |
1,222,840 | 1,223,231 | 597,748 | 182,437 | (2,003,416 | ) | 1,222,840 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Liabilities and Equity |
$ | 1,252,885 | $ | 2,164,230 | $ | 1,658,292 | $ | 583,515 | $ | (3,404,446 | ) | $ | 2,254,476 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
21
Condensed Consolidated Statements of Income
For the Three Months Ended June 30, 2013
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Rent billed |
$ | | $ | | $ | 29,411 | $ | 5,063 | $ | (3,115 | ) | $ | 31,359 | |||||||||||
Straight-line rent |
| | 2,141 | 605 | | 2,746 | ||||||||||||||||||
Income from direct financing leases |
| | 8,664 | 5,509 | (4,943 | ) | 9,230 | |||||||||||||||||
Interest and fee income |
| 5,052 | 9,186 | 6,985 | (7,085 | ) | 14,138 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
| 5,052 | 49,402 | 18,162 | (15,143 | ) | 57,473 | |||||||||||||||||
Expenses |
||||||||||||||||||||||||
Real estate depreciation and amortization |
| | 8,293 | 425 | | 8,718 | ||||||||||||||||||
Property-related |
| 104 | 347 | 8,255 | (8,057 | ) | 649 | |||||||||||||||||
General and administrative |
| 7,674 | | (449 | ) | | 7,225 | |||||||||||||||||
Acquisition expenses |
| 2,088 | | | | 2,088 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
| 9,866 | 8,640 | 8,231 | (8,057 | ) | 18,680 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (expense) |
| (4,814 | ) | 40,762 | 9,931 | (7,086 | ) | 38,793 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||
Other income (expense) |
| (20 | ) | (1 | ) | (2 | ) | | (23 | ) | ||||||||||||||
Earnings from equity and other interests |
| | 233 | 943 | | 1,176 | ||||||||||||||||||
Interest income (expense) |
| (14,726 | ) | 319 | (7,320 | ) | 7,086 | (14,641 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net other income (expense) |
| (14,746 | ) | 551 | (6,379 | ) | 7,086 | (13,488 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from continuing operations |
| (19,560 | ) | 41,313 | 3,552 | | 25,305 | |||||||||||||||||
Income from discontinued operations |
| | | 2,100 | | 2,100 | ||||||||||||||||||
Equity in earnings of consolidated subsidiaries, net of income taxes |
27,405 | 46,965 | 1,121 | | (75,491 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
27,405 | 27,405 | 42,434 | 5,652 | (75,491 | ) | 27,405 | |||||||||||||||||
Net income (loss) attributable to non-controlling interests |
(57 | ) | (57 | ) | | | 57 | (57 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to MPT common stockholders |
$ | 27,348 | $ | 27,348 | $ | 42,434 | $ | 5,652 | $ | (75,434 | ) | $ | 27,348 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
22
Condensed Consolidated Statements of Income
For the Six Months Ended June 30, 2013
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Rent billed |
$ | | $ | | $ | 59,379 | $ | 9,567 | $ | (5,750 | ) | $ | 63,196 | |||||||||||
Straight-line rent |
| | 4,428 | 979 | | 5,407 | ||||||||||||||||||
Income from direct financing leases |
| | 16,868 | 10,994 | (9,876 | ) | 17,986 | |||||||||||||||||
Interest and fee income |
| 10,108 | 18,404 | 14,517 | (14,174 | ) | 28,855 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
| 10,108 | 99,079 | 36,057 | (29,800 | ) | 115,444 | |||||||||||||||||
Expenses |
||||||||||||||||||||||||
Real estate depreciation and amortization |
| | 16,412 | 850 | | 17,262 | ||||||||||||||||||
Property-related |
| 276 | 541 | 15,871 | (15,626 | ) | 1,062 | |||||||||||||||||
General and administrative |
| 14,419 | | 625 | | 15,044 | ||||||||||||||||||
Acquisition expenses |
| 2,278 | | | | 2,278 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
| 16,973 | 16,953 | 17,346 | (15,626 | ) | 35,646 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (expense) |
| (6,865 | ) | 82,126 | 18,711 | (14,174 | ) | 79,798 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||
Other income (expense) |
| (42 | ) | | (206 | ) | | (248 | ) | |||||||||||||||
Earnings from equity and other interests |
| | 233 | 1,435 | | 1,668 | ||||||||||||||||||
Interest income (expense) |
| (30,243 | ) | 629 | (14,625 | ) | 14,174 | (30,065 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net other income (expense) |
| (30,285 | ) | 862 | (13,396 | ) | 14,174 | (28,645 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from continuing operations |
| (37,150 | ) | 82,988 | 5,315 | | 51,153 | |||||||||||||||||
Income from discontinued operations |
| | (4 | ) | 2,465 | | 2,461 | |||||||||||||||||
Equity in earnings of consolidated subsidiaries net of income taxes |
53,614 | 90,764 | 2,242 | | (146,620 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
53,614 | 53,614 | 85,226 | 7,780 | (146,620 | ) | 53,614 | |||||||||||||||||
Net income (loss) attributable to non-controlling interests |
(110 | ) | (110 | ) | | | 110 | (110 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to MPT common stockholders |
$ | 53,504 | $ | 53,504 | $ | 85,226 | $ | 7,780 | $ | (146,510 | ) | $ | 53,504 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
23
Condensed Consolidated Statements of Comprehensive Income
For the Three Months Ended June 30, 2013
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Net income |
$ | 27,405 | $ | 27,405 | $ | 42,434 | $ | 5,652 | $ | (75,491 | ) | $ | 27,405 | |||||||||||
Other comprehensive income: |
||||||||||||||||||||||||
Unrealized gain on interest rate swap |
1,779 | 1,779 | | | (1,779 | ) | 1,779 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
29,184 | 29,184 | 42,434 | 5,652 | (77,270 | ) | 29,184 | |||||||||||||||||
Comprehensive income attributable to non-controlling interests |
(57 | ) | (57 | ) | | | 57 | (57 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income attributable to MPT common stockholders |
$ | 29,127 | $ | 29,127 | $ | 42,434 | $ | 5,652 | $ | (77,213 | ) | $ | 29,127 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2013
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Net income |
$ | 53,614 | $ | 53,614 | $ | 85,226 | $ | 7,780 | $ | (146,620 | ) | $ | 53,614 | |||||||||||
Other comprehensive income: |
||||||||||||||||||||||||
Unrealized gain on interest rate swap |
2,606 | 2,606 | | | (2,606 | ) | 2,606 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
56,220 | 56,220 | 85,226 | 7,780 | (149,226 | ) | 56,220 | |||||||||||||||||
Comprehensive income attributable to non-controlling interests |
(110 | ) | (110 | ) | | | 110 | (110 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income attributable to MPT common stockholders |
$ | 56,110 | $ | 56,110 | $ | 85,226 | $ | 7,780 | $ | (149,116 | ) | $ | 56,110 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
24
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2013
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Operating Activities |
||||||||||||||||||||||||
Net cash provided by (used in) operating activities |
$ | (35 | ) | $ | (29,249 | ) | $ | 83,956 | $ | 1,573 | $ | | $ | 56,245 | ||||||||||
Investing Activities |
||||||||||||||||||||||||
Cash paid for acquisitions and other related investments |
| | (75,000 | ) | | | (75,000 | ) | ||||||||||||||||
Principal received on loans receivable |
| | | 3,293 | | 3,293 | ||||||||||||||||||
Net proceeds from sale of real estate |
| | | 18,409 | | 18,409 | ||||||||||||||||||
Investments in and advances to subsidiaries |
(115,106 | ) | 1,417 | 22,149 | (23,601 | ) | 115,141 | | ||||||||||||||||
Investments in loans receivable |
| | | (1,300 | ) | | (1,300 | ) | ||||||||||||||||
Construction in progress and other |
| (621 | ) | (33,144 | ) | 594 | | (33,171 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by (used in) investing activities |
(115,106 | ) | 796 | (85,995 | ) | (2,605 | ) | 115,141 | (87,769 | ) | ||||||||||||||
Financing Activities |
||||||||||||||||||||||||
Revolving credit facilities, net |
| (85,000 | ) | | | | (85,000 | ) | ||||||||||||||||
Payments of term debt |
| (11,000 | ) | | (124 | ) | | (11,124 | ) | |||||||||||||||
Distributions paid |
(57,712 | ) | (57,846 | ) | | | 57,712 | (57,846 | ) | |||||||||||||||
Proceeds from sale of common shares/units, net of offering costs |
172,853 | 172,853 | | | (172,853 | ) | 172,853 | |||||||||||||||||
Lease deposits and other obligations to tenants |
| | 474 | 1,042 | | 1,516 | ||||||||||||||||||
Debt issuance costs paid and other financing activities |
| (114 | ) | | | | (114 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by financing activities |
115,141 | 18,893 | 474 | 918 | (115,141 | ) | 20,285 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Increase (decrease) in cash and cash equivalents for period |
| (9,560 | ) | (1,565 | ) | (114 | ) | | (11,239 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period |
| 35,483 | 1,565 | 263 | | 37,311 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | 25,923 | $ | | $ | 149 | $ | | $ | 26,072 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
25
Condensed Consolidated Balance Sheet
December 31, 2012
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Assets |
||||||||||||||||||||||||
Real estate assets |
||||||||||||||||||||||||
Land, buildings and improvements and intangible lease assets |
$ | | $ | 28 | $ | 1,196,124 | $ | 65,947 | $ | | $ | 1,262,099 | ||||||||||||
Real estate held for sale |
| | | 16,497 | | 16,497 | ||||||||||||||||||
Mortgage loans |
| | 268,650 | 100,000 | | 368,650 | ||||||||||||||||||
Investment in direct financing leases |
| | 110,155 | 204,257 | | 314,412 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross investment in real estate assets |
| 28 | 1,574,929 | 386,701 | | 1,961,658 | ||||||||||||||||||
Accumulated depreciation and amortization |
| | (118,163 | ) | (6,452 | ) | | (124,615 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net investment in real estate assets |
| 28 | 1,456,766 | 380,249 | | 1,837,043 | ||||||||||||||||||
Cash and cash equivalents |
| 35,483 | 1,565 | 263 | | 37,311 | ||||||||||||||||||
Interest and rent receivable |
| 212 | 29,159 | 15,918 | | 45,289 | ||||||||||||||||||
Straight-line rent receivable |
| | 29,314 | 6,546 | | 35,860 | ||||||||||||||||||
Other loans |
| 177 | | 159,066 | | 159,243 | ||||||||||||||||||
Net intercompany receivable |
27,393 | 1,373,941 | | | (1,401,334 | ) | | |||||||||||||||||
Investment in subsidiaries |
1,050,204 | 647,029 | 42,666 | | (1,739,899 | ) | | |||||||||||||||||
Other assets |
| 31,097 | 1,522 | 31,521 | | 64,140 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Assets |
$ | 1,077,597 | $ | 2,087,967 | $ | 1,560,992 | $ | 593,563 | $ | (3,141,233 | ) | $ | 2,178,886 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and Equity |
||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||
Debt, net |
$ | | $ | 1,010,962 | $ | | $ | 14,198 | $ | | $ | 1,025,160 | ||||||||||||
Accounts payable and accrued expenses |
27,783 | 26,658 | 10,492 | 1,028 | | 65,961 | ||||||||||||||||||
Net intercompany payable |
| | 1,000,117 | 401,217 | (1,401,334 | ) | | |||||||||||||||||
Deferred revenue |
| 143 | 19,621 | 845 | | 20,609 | ||||||||||||||||||
Lease deposits and other obligations to tenants |
| | 16,606 | 736 | | 17,342 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
27,783 | 1,037,763 | 1,046,836 | 418,024 | (1,401,334 | ) | 1,129,072 | |||||||||||||||||
Total equity |
1,049,814 | 1,050,204 | 514,156 | 175,539 | (1,739,899 | ) | 1,049,814 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Liabilities and Equity |
$ | 1,077,597 | $ | 2,087,967 | $ | 1,560,992 | $ | 593,563 | $ | (3,141,233 | ) | $ | 2,178,886 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
26
Condensed Consolidated Statements of Income
For the Three Months Ended June 30, 2012
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Rent billed |
$ | | $ | | $ | 28,674 | $ | 4,153 | $ | (2,131 | ) | $ | 30,696 | |||||||||||
Straight-line rent |
| | 949 | 375 | | 1,324 | ||||||||||||||||||
Income from direct financing leases |
| | 4,839 | 5,371 | (4,839 | ) | 5,371 | |||||||||||||||||
Interest and fee income |
| 5,034 | 6,509 | 7,007 | (7,023 | ) | 11,527 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
| 5,034 | 40,971 | 16,906 | (13,993 | ) | 48,918 | |||||||||||||||||
Expenses |
||||||||||||||||||||||||
Real estate depreciation and amortization |
| | 7,912 | 425 | | 8,337 | ||||||||||||||||||
Property-related |
| 130 | 368 | 7,058 | (6,970 | ) | 586 | |||||||||||||||||
General and administrative |
| 6,773 | | (76 | ) | | 6,697 | |||||||||||||||||
Acquisition expenses |
| 279 | | | | 279 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
| 7,182 | 8,280 | 7,407 | (6,970 | ) | 15,899 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
| (2,148 | ) | 32,691 | 9,499 | (7,023 | ) | 33,019 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||
Other income (expense) |
| (16 | ) | | (1 | ) | | (17 | ) | |||||||||||||||
Earnings from equity and other interests |
| | 453 | 426 | | 879 | ||||||||||||||||||
Interest income (expense) |
| (14,913 | ) | 253 | (7,252 | ) | 7,023 | (14,889 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net other income (expense) |
| (14,929 | ) | 706 | (6,827 | ) | 7,023 | (14,027 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from continuing operations |
| (17,077 | ) | 33,397 | 2,672 | | 18,992 | |||||||||||||||||
Income (loss) from discontinued operations |
| | (92 | ) | 460 | | 368 | |||||||||||||||||
Equity in earnings of consolidated subsidiaries, net of income taxes |
19,360 | 36,437 | 1,117 | | (56,914 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
19,360 | 19,360 | 34,422 | 3,132 | (56,914 | ) | 19,360 | |||||||||||||||||
Net income (loss) attributable to non-controlling interests |
(44 | ) | (44 | ) | | | 44 | (44 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to MPT common stockholders |
$ | 19,316 | $ | 19,316 | $ | 34,422 | $ | 3,132 | $ | (56,870 | ) | $ | 19,316 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
27
Condensed Consolidated Statements of Income
For the Six Months Ended June 30, 2012
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Rent billed |
$ | | $ | | $ | 56,690 | $ | 8,284 | $ | (4,591 | ) | $ | 60,383 | |||||||||||
Straight-line rent |
| | 1,939 | 744 | | 2,683 | ||||||||||||||||||
Income from direct financing leases |
| | 6,492 | 7,206 | (6,492 | ) | 7,206 | |||||||||||||||||
Interest and fee income |
| 7,978 | 11,703 | 10,414 | (10,646 | ) | 19,449 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
| 7,978 | 76,824 | 26,648 | (21,729 | ) | 89,721 | |||||||||||||||||
Expenses |
||||||||||||||||||||||||
Real estate depreciation and amortization |
| | 15,668 | 850 | | 16,518 | ||||||||||||||||||
Property-related |
| 261 | 464 | 11,171 | (11,083 | ) | 813 | |||||||||||||||||
General and administrative |
| 13,736 | | 553 | | 14,289 | ||||||||||||||||||
Acquisition expenses |
| 3,704 | | | | 3,704 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
| 17,701 | 16,132 | 12,574 | (11,083 | ) | 35,324 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
| (9,723 | ) | 60,692 | 14,074 | (10,646 | ) | 54,397 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||
Other income (expense) |
| (28 | ) | | (4 | ) | | (32 | ) | |||||||||||||||
Earnings from equity and other interests |
| | 452 | 427 | | 879 | ||||||||||||||||||
Interest income (expense) |
| (27,702 | ) | 479 | (11,107 | ) | 10,646 | (27,684 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net other income (expense) |
| (27,730 | ) | 931 | (10,684 | ) | 10,646 | (26,837 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from continuing operations |
| (37,453 | ) | 61,623 | 3,390 | | 27,560 | |||||||||||||||||
Income (loss) from discontinued operations |
| | (208 | ) | 2,615 | | 2,407 | |||||||||||||||||
Equity in earnings of consolidated subsidiaries net of income taxes |
29,967 | 67,420 | 2,238 | | (99,625 | ) | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
29,967 | 29,967 | 63,653 | 6,005 | (99,625 | ) | 29,967 | |||||||||||||||||
Net income (loss) attributable to non-controlling interests |
(87 | ) | (87 | ) | | | 87 | (87 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to MPT common stockholders |
$ | 29,880 | $ | 29,880 | $ | 63,653 | $ | 6,005 | $ | (99,538 | ) | $ | 29,880 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
28
Condensed Consolidated Statements of Comprehensive Income
For the Three Months Ended June 30, 2012
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Net income |
$ | 19,360 | $ | 19,360 | $ | 34,422 | $ | 3,132 | $ | (56,914 | ) | $ | 19,360 | |||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||
Unrealized loss on interest rate swap |
(1,045 | ) | (1,045 | ) | | | 1,045 | (1,045 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
18,315 | 18,315 | 34,422 | 3,132 | (55,869 | ) | 18,315 | |||||||||||||||||
Comprehensive income attributable to non-controlling interests |
(44 | ) | (44 | ) | | | 44 | (44 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income attributable to MPT common stockholders |
$ | 18,271 | $ | 18,271 | $ | 34,422 | $ | 3,132 | $ | (55,825 | ) | $ | 18,271 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income
For the Six Months Ended June 30, 2012
(in thousands)
Parent | Subsidiary Issuers |
Subsidiary Guarantors |
Non-Guarantor Subsidiaries |
Eliminations | Total Consolidated |
|||||||||||||||||||
Net income |
$ | 29,967 | $ | 29,967 | $ | 63,653 | $ | 6,005 | $ | (99,625 | ) | $ | 29,967 | |||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||||
Unrealized loss on interest rate swap |
(546 | ) | (546 | ) | | | 546 | (546 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total comprehensive income |
29,421 | 29,421 | 63,653 | 6,005 | (99,079 | ) | 29,421 | |||||||||||||||||
Comprehensive income attributable to non-controlling interests |
(87 | ) | (87 | ) | | | 87 | (87 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income attributable to MPT common stockholders |
$ | 29,334 | $ | 29,334 | $ | 63,653 | $ | 6,005 | $ | (98,992 | ) | $ | 29,334 | |||||||||||
|
|
<