Medical Properties Trust Inc: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of the consolidated financial condition and consolidated results of operations are presented on a combined basis for Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. as there are no material differences between these two entities. Such discussion and analysis should be read together with the condensed consolidated financial statements and notes thereto contained in this Form 10-Q and the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2024.

Forward-Looking Statements.

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can generally be identified by the use of forward-looking words such as "may", "will", "would", "could", "expect", "intend", "plan", "estimate", "target", "anticipate", "believe", "objectives", "outlook", "guidance", or other similar words, and include statements regarding our strategies, objectives, asset sales and other liquidity transactions (including the use of proceeds thereof), expected returns on investments and financial performance, expected trends and performance across our various markets, and expected outcomes from Prospect's bankruptcy process. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K and as updated in our quarterly reports on Form 10-Q for future periods, and current reports on Form 8-K as we file them with the SEC under the Exchange Act. Such factors include, among others, the following:

• macroeconomic conditions, including due to geopolitical instability and global trade disruptions, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries, rising inflation and movements in currency exchange rates, and may negatively impact the financial condition of our tenants;
• the risk that property sales, loan repayments, and other capital recycling transactions do not occur as anticipated or at all;
• the risk that the outcome and terms of the bankruptcy restructurings of affiliates of Prospect will not be consistent with those we anticipate and the risk that we are unable to recover the value of our real estate and other investments in the Prospect portfolio as a result of the bankruptcy restructuring, within a reasonable timeframe or at all;
• the risk that we are unable to successfully re-tenant or sell the remaining former Steward hospitals, on the terms we expect or at all;
• the risk that governments may exercise powers adverse to our ownership and other rights in our properties;
• the risk that we are not able to attain our leverage, liquidity, and cost of capital objectives within a reasonable time period or at all;
• our ability to obtain debt financing on attractive terms or at all (including debt in our joint venture arrangements), as a result of changes in interest rates and other factors, which may adversely impact our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, or pursue acquisition and development opportunities;
• our ability to remain in compliance with our financial covenants under our debt facilities;
• any downgrades in our credit ratings;
• the ability of our tenants, operators, and borrowers (including those of our joint ventures) to satisfy their obligations under their respective contractual arrangements with us;
• the ability of our tenants and operators to operate profitably and generate positive cash flow, remain solvent, comply with applicable laws, rules and regulations in the operation of our properties, to deliver high-quality services, to attract and retain qualified personnel, and to attract patients;
• the cooperation of our joint venture partners, including adverse developments affecting the financial health of such joint venture partners or the joint venture itself;
• the economic, political and social impact of, and uncertainty relating to, the potential impact from epidemics, pandemics or other public health crises (like COVID-19), which may adversely affect our and our tenants’ business, financial condition, results of operations, and liquidity;
• the risk that the operations of our tenants will be negatively impacted by changes to Medicaid funding introduced by the One Big Beautiful Bill Act;
• our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate, and integrate acquisitions and investments;
• the nature and extent of our current and future competition;
• factors affecting the real estate industry generally or the healthcare real estate industry in particular;
• our ability to maintain our status as a REIT for income tax purposes in the U.S. and U.K.;
• changes in federal, state, or local tax laws in the U.S., Europe, South America, or other jurisdictions in which we may own healthcare facilities or transact business;
• federal and state healthcare and other regulatory requirements, as well as those in the foreign jurisdictions where we own properties;
• the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain equity or debt financing secured by our properties or on an unsecured basis;
• loss of property owned through ground leases upon breach or termination of the ground leases;
• potential environmental contingencies and other liabilities;
• our ability to attract and retain qualified personnel;
• the risks and uncertainties of litigation or other regulatory proceedings and investigations; and
• the accuracy of our methodologies and estimates regarding corporate responsibility metrics and targets, tenant willingness and ability to collaborate towards reporting such metrics and meeting such goals and targets, and the impact of governmental regulation on our and our tenants’ corporate responsibility efforts.

Key Factors that May Affect Our Operations

Our revenue is derived from rents we earn pursuant to the lease agreements with our tenants, from interest income from loans to our tenants and other facility owners, and from profits or equity interests in certain of our tenants’ operations. Our tenants operate in the healthcare industry, generally providing medical, surgical, rehabilitative, and behavioral health care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants’ operations are subject to economic, regulatory, market, and other conditions that may affect their profitability, which could impact our results. Accordingly, we monitor certain key performance indicators that we believe provide us with early indications of conditions that could affect the level of risk in our portfolio.

Key factors that we may consider in underwriting prospective deals and in our ongoing monitoring of our tenants’ (and guarantors’) performance, as well as the condition of our properties, include, but are not limited to, the following:

• the scope and breadth of clinical services and programs, including utilization trends (both inpatient and outpatient) by service type;
• the size and composition of medical staff and physician leadership at our facilities, including specialty, tenure, and number of procedures performed and/or referrals;
• an evaluation of our operators’ management team, as applicable, including background and tenure within the healthcare industry;
• staffing trends, including ratios, turnover metrics, recruitment and retention strategies at corporate and individual facility levels;
• facility operating performance measured by current, historical, and prospective operating margins (measured by a tenant's earnings before interest, taxes, depreciation, amortization, management fees, and facility rent) of each tenant and at each facility;
• the ratio of our tenants' operating earnings to facility rent and to other fixed costs, including debt costs;
• changes in revenue sources of our tenants, including the relative mix of public payors (including Medicare, Medicaid/MediCal, and managed care in the U.S., as well as equivalent payors in Europe, and South America) and private payors (including commercial insurance and private pay patients);
• historical support (financial or otherwise) from governments and/or other public payor systems during major economic downturns/depressions;
• trends in tenants' cash collections, including comparison to recorded net patient service revenues, knowing and assessing current revenue cycle management systems and potential future planned upgrades or replacements;
• tenants' free cash flow;
• the potential impact of healthcare pandemics/epidemics, legislation, and other regulations (including changes in reimbursement) on our tenants', borrowers', and guarantors' profitability and liquidity;
• the potential impact of any legal, regulatory, or compliance proceedings with our tenants (including at the facility level);
• the potential impact of supply chain and inflation-related challenges as they relate to new developments or capital addition projects;
• an ongoing assessment of the operating environment of our tenants, including demographics, competition, market position, status of compliance, accreditation, quality performance, and health outcomes as measured by The Centers for Medicare and Medicaid Services ("CMS"), The Joint Commission, and other governmental bodies in which our tenants operate;
• the level of investment in the hospital infrastructure and health IT systems; and
• physical real estate due diligence, typically including property condition and Phase 1 environmental assessments, along with routine property inspections thereafter.

Certain business factors, in addition to those described above that may directly affect our tenants and borrowers, will likely materially influence our future results of operations. These factors include:

• trends in interest rates and other costs due to general inflation and availability and increased costs from labor shortages could adversely impact the operations of our tenants and their ability to meet their lease/loan obligations;
• changes in healthcare regulations that may limit the opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate;
• reductions (or non-timely increases) in reimbursements from Medicare, state healthcare programs, and commercial insurance providers that may reduce our tenants’ or borrowers’ profitability and our revenues;
• regulatory restrictions on REIT healthcare investments;
• competition from other financing sources; and
• the ability of our tenants and borrowers to access funds in the credit markets.

CRITICAL ACCOUNTING POLICIES

Refer to our 2024 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include investments in real estate, purchase price allocation, loans, credit losses, losses from rent and interest receivables, investments accounted for under the fair value option election, and our accounting policy on consolidation. During the six months ended June 30, 2025, there were no material changes to these policies.

Overview

We are a self-advised REIT focused on investing in and owning net-leased healthcare facilities across the U.S. and selectively in foreign jurisdictions. Medical Properties Trust, Inc. was incorporated under Maryland law on August 27, 2003, and MPT Operating Partnership, L.P. was formed under Delaware law on September 10, 2003. We conduct substantially all of our business through MPT Operating Partnership, L.P. We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases, which require the tenant to bear most of the costs associated with the property. The majority of our leased assets are owned 100%; however, we do own some leased assets through joint ventures with other partners that share our view that healthcare facilities are part of the infrastructure of any community, which we refer to as investments in unconsolidated real estate joint ventures. We also make mortgage loans to healthcare operators collateralized by their real estate assets. In addition, we may make loans to certain of our operators through our TRS, the proceeds of which are typically used for working capital and other purposes. From time-to-time, we may make noncontrolling investments in our tenants, which we refer to as investments in unconsolidated operating entities. These investments are typically made in conjunction with larger real estate transactions with the tenant that give us a right to share in such tenant’s profits and losses, and provide for certain minority rights and protections. Our business model facilitates acquisitions and recapitalizations, and allows operators of healthcare facilities to serve their communities by unlocking the value of their real estate assets to fund facility improvements, technology upgrades, and other investments in operations.

At June 30, 2025, our portfolio consisted of 392 properties leased or loaned to 53 operators, and all of our investments are located in the U.S., Europe, and South America. Our total assets are made up of the following (dollars in thousands):

Results of Operations

Three Months Ended June 30, 2025 Compared to June 30, 2024

Net loss for the three months ended June 30, 2025, was ($98.4) million, or ($0.16) per share compared to a net loss of ($320.6) million, or ($0.54) per share, for the three months ended June 30, 2024. This decrease in net loss is primarily driven by the $410 million impairment of real estate in our Massachusetts-based partnership with Macquarie in the second quarter of 2024 that is included in our "Earnings (loss) from equity interests" line of our condensed consolidated statements of net income, the approximate $160 million unfavorable fair value adjustment to our investment in PHP Holdings included in our "Other (including fair value adjustments on securities)" line of our condensed consolidated statements of net income in the second quarter of 2024 (compared to a $129 million unfavorable fair value adjustment in the second quarter of 2025), and $136 million more of real estate impairment and other charges in the second quarter of 2024 compared to the same period of 2025, partially offset by approximately $380 million more gains on sales of real estate in the 2024 second quarter compared to the 2025 second quarter. See Note 3 to the condensed consolidated financial statements for further details. Normalized FFO, after adjusting for certain items (as more fully described in the section titled “Reconciliation of Non-GAAP Financial Measures” in Item 2 of this Quarterly Report on Form 10-Q), was $81.4 million for the 2025 second quarter, or $0.14 per diluted share, as compared to $139.4 million, or $0.23 per diluted share, for the 2024 second quarter. This 42% decrease in Normalized FFO is primarily due to lower revenues as a result of various disposals in 2024 and 2025 and higher interest expense from our recent refinancing activities.

Revenues

A comparison of revenues for the three months ended June 30, 2025 and 2024 is as follows (dollar amounts in thousands):

Our total revenues for the 2025 second quarter are down $26.2 million, or 10%, over the same period in the prior year. This decrease is made up of the following:

• Operating lease revenue (includes rent billed and straight-line rent) – down $4.6 million from the prior year, primarily due to $19 million from rent collected from Steward in the 2024 second quarter (none in the 2025 second quarter) and $11.4 million of lower revenues from property sales in 2024 and early 2025. These decreases were partially offset by $15 million of operating lease revenue earned from the retenanting of the former Steward-operated facilities, more cash received from other cash basis tenants, an increase of $3 million due to increases in CPI above the contractual minimum escalations in our leases, $5.7 million of favorable foreign currency fluctuations, and $0.1 million from the completion of capital additions and development projects in 2024 and 2025.
• Income from financing leases – down $17.7 million primarily due to not receiving any cash for rent revenue from Prospect (cash basis tenant) in the second quarter of 2025, whereas we received and recorded approximately $18 million

of rent for this tenant in the 2024 second quarter. This decrease was partially offset by $0.1 million from the increase in CPI above the lease contractual minimum escalations.

• Interest and other income – down approximately $3.9 million from the prior year due to the following:
• Interest from loans – down $4.1 million, primarily due to an approximate $2 million decrease from loan payoffs and approximately $4 million less interest received from cash basis tenants in the second quarter of 2025 compared to the same period of 2024, partially offset by approximately $2 million of additional revenue from the funding of new loans.
• Other income – up $0.2 million from the prior year as we had more direct reimbursements from our cash basis tenants for ground leases, property taxes, and insurance.

Interest Expense

Interest expense for the quarters ended June 30, 2025 and 2024 totaled $129.7 million and $101.4 million, respectively. This increase is primarily related to higher interest from our February 2025 debt refinancing activities (see Note 4 to the condensed consolidated financial statements for further details), partially offset by lower interest expense from the decrease in average borrowings on our Credit Facility in the second quarter of 2025, compared to the same period of 2024, along with the payoff of our £493 million British pound sterling term loan in the first quarter of 2025. Overall, our weighted-average interest rate was 5.3% for the quarter ended June 30, 2025, compared to 4.1% for the same period in 2024.

Real Estate Depreciation and Amortization

Real estate depreciation and amortization during the second quarter of 2025 decreased to $66.7 million from $102.2 million in 2024. This decrease is primarily related to the $34 million increase in amortization expense in the second quarter of 2024 as a result of our change in the estimated useful life of the in-place lease intangible associated with the Steward master leases that ended well before the contractual term due to the bankruptcy process. The remaining decrease is due to the sale of various properties in 2024 and early 2025, partially offset by fluctuation in foreign currency.

Property-related

Property-related expenses totaled $10.9 million and $7.7 million for the quarters ended June 30, 2025 and 2024, respectively. Of the property expenses in the second quarter of 2025 and 2024, approximately $5.1 million and $4.9 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our condensed consolidated statements of net income. Net of reimbursement, our property-related expenses are higher than prior year due to having three additional vacant properties post Steward bankruptcy. We are in various stages of re-tenanting or selling our vacant properties, which make up less than 1% of our total assets.

General and Administrative

General and administrative expenses decreased to $26.2 million for the 2025 second quarter, compared to $35.3 million for the 2024 second quarter. Share-based compensation expense was $0.8 million for the second quarter of 2025, compared to $8.5 million in the 2024 second quarter, primarily due to the decrease in fair value of the 2024 performance awards that contain a cash-settlement feature and are marked to fair value quarterly, partially offset by additional expense from the 2025 stock awards granted in the quarter.

With certain performance awards granted in 2025 and 2024 having cash-settlement features, we expect there will be volatility in our stock compensation expense quarter-to-quarter. As of June 30, 2025, none of the 2025 or 2024 performance shares have been earned/vested and will not begin to earn/vest until, for 20 consecutive days, our total shareholder return reaches 20% (based on the April 15, 2025 grant date) for the 2025 performance award and our stock price reaches $7.00 per share for the 2024 performance award.

Gain on Sale of Real Estate

During the three months ended June 30, 2025, the gain on sale of real estate of $5.2 million relates to the sale of one facility. During the three months ended June 30, 2024, the gain on sale of real estate primarily relates to the sale of five Prime facilities and a 75% interest in five Utah facilities as part of the Utah Transaction as more fully described in Note 3 to the condensed consolidated financial statements.

Real Estate and Other Impairment Charges, Net

In the 2025 second quarter, we recognized $1.4 million of real estate and other impairment charges, primarily associated with our three hospitals in Colombia and non-real estate impairment charges, primarily property taxes and other obligations not paid by our cash-basis tenants. These charges were partially offset by an impairment recovery on our Prospect facilities as more fully described in Note 3 to the condensed consolidated financial statements. In the same period of 2024, we recognized $137.4 million of real estate and other impairment charges. Of these charges, approximately $100 million were real estate related due to ongoing re-tenanting and potentially selling of properties associated with our cash-basis tenants. The remaining approximately $40 million was non-real estate impairment charges, primarily property taxes and other obligations not paid by our cash-basis tenants.

Earnings (Loss) from Equity Interests

Earnings from equity interests was $25.3 million for the quarter ended June 30, 2025, compared to a loss of $(401.8) million for the same period in 2024. This increase is primarily due to the $410 million charge in the second quarter of 2024 associated with the real estate impairment in our Massachusetts-based partnership with Macquarie and our share of income in the Utah partnership that was formed in the 2024 second quarter, which included a $15 million positive fair value adjustment in the second quarter of 2025, primarily related to a favorable fair value adjustment on its investments in real estate (as further described in Note 3 to the condensed consolidated financial statements).

On June 17, 2025, we, along with our joint venture partner, finalized a refinancing of the €655 million secured debt that was due on June 30, 2025, as more fully described in Note 3 to the condensed consolidated financial statements. The refinancing will result in an increase in interest expense for the joint venture, which will impact our earnings from equity interests.

Debt Refinancing and Unutilized Financing Benefit (Costs)

Debt refinancing and unutilized financing benefit was $0.2 million for the second quarter of 2025 compared to costs of $3.0 million for the same period of 2024 which were incurred as a result of the reduction in revolving commitments under our Credit Facility and partial paydown of our British pound sterling term loan due 2025.

Other (Including Fair Value Adjustments on Securities)

Other expense for the second quarter of 2025 was $124.4 million, compared to expense of $167.7 million in the prior year. For the 2025 second quarter, we recognized approximately $125 million in unfavorable non-cash fair value adjustments from our investments marked to fair value, primarily due to an approximate $129 million unfavorable adjustment to our investment in PHP Holdings, partially offset by a favorable adjustment of approximately $4 million related to our investment in Aevis. For the 2024 second quarter, we recognized an approximate $160 million unfavorable adjustment to our investment in PHP Holdings. The remaining expense in the 2024 second quarter included approximately $11.7 million of legal and other professional expenses associated with, among other things, responding to certain defamatory statements published by certain parties.

With certain investments accounted for at fair value, we may have positive or negative fair value adjustments from quarter-to-quarter.

Income Tax Expense

Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $9.8 million income tax expense for the three months ended June 30, 2025, is primarily based on the income generated by our investments in the U.K. and Germany and is less than the $14.6 million income tax expense in the second quarter of 2024, due to a $5 million additional tax expense in the second quarter of 2024 as a result of the gain on the interest rate swap associated with the internal restructuring of the British pound sterling term loan due 2025.

We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $473 million should be reflected against certain of our international and domestic net deferred tax assets at June 30, 2025. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and potentially incur higher income tax expense in future periods as income is earned.

Six Months Ended June 30, 2025 Compared to June 30, 2024

Net loss for the six months ended June 30, 2025, was ($216.6) million, or ($0.36) per share compared to a net loss of ($1.2) billion, or ($1.99) per share, for the six months ended June 30, 2024. This decrease in net loss is primarily driven by the $830.5 million of impairment charges and negative fair value adjustments in 2024 primarily related to Steward and the international joint venture (all included in "Real estate and other impairment charges, net" line of the condensed consolidated statements of net income), whereas, we incurred only $77.5 million in the first six months of 2025. In addition, we had an approximate $360 million unfavorable fair value adjustment to our investment in PHP Holdings in the first six months of 2024 (compared to $147 million in the same period of 2025) as reflected in "Other (including fair value adjustments on securities) line of the condensed consolidated statements of net income, and the $410 million of impairment charges related to our Massachusetts-based partnership in the second quarter of 2024 reflected in "Earnings (loss) from equity interests" line of the condensed consolidated statements of net income. Normalized FFO, after adjusting for certain items (as more fully described in the section titled “Reconciliation of Non-GAAP Financial Measures” in Item 2 of this Quarterly Report on Form 10-Q), was $162.5 million for the first six months of 2025, or $0.27 per diluted share, as compared to $281.2 million, or $0.47 per diluted share, for the same period of 2024. This 42% decrease in Normalized FFO is primarily due to lower revenues as a result of various disposals in 2024 and 2025 and higher interest expense from our recent refinancing activities.

Revenues

A comparison of revenues for the six months ended June 30, 2025 and 2024 is as follows (dollar amounts in thousands):

Our total revenues for the first six months of 2025 are down $73.7 million, or 14%, over the same period in the prior year. This decrease is made up of the following:

• Operating lease revenue (includes rent billed and straight-line rent) – down $43.3 million from the same period in the prior year, primarily due to property sales in 2024 and early 2025, resulting in a loss of operating lease revenue in the first half of 2025 compared to the same period of 2024 of approximately $57 million and $30 million from rent collected from Steward in the first six months of 2024 (none in the same period of 2025). This decrease was partially offset by $25 million of operating lease revenue earned from the retenanting of the former Steward-operated facilities, an increase of $8 million due to increases in CPI above the contractual minimum escalations in our leases, $4.8 million of favorable foreign currency fluctuations, more cash received from other cash basis tenants, and a $0.9 million increase due to the completion of capital addition and development projects, including the commencement of rent on two development properties in 2024 and one in the 2025 first quarter.
• Income from financing leases – down $24.2 million from the same period in the prior year primarily due to not receiving any cash for rent revenue from Prospect (cash basis tenant) in the first half of 2025, whereas we received and recorded $25 million of rent from Prospect in the first six months of 2024. This decrease was partially offset by $0.3 million from the increase in CPI above the lease contractual minimum escalations.
• Interest and other income – down approximately $6.2 million from the same period in the prior year due to the following:
• Interest from loans – down $6.0 million from the same period in the prior year, primarily due to an approximate $3.5 million decrease from the sale of our interest in the Priory syndicated term loan in the first quarter of 2024 and other loan payoffs and approximately $5 million less interest received from cash basis

tenants in the first half of 2025 compared to the same period of 2024, partially offset by approximately $2 million of additional revenue from the funding of new loans.

• Other income – down $0.2 million from the prior year as we had less direct reimbursements from our cash basis tenants for ground leases, property taxes, and insurance.

Interest Expense

Interest expense for the six months ended June 30, 2025 and 2024 totaled $245.5 million and $210.1 million, respectively. This increase is primarily related to higher interest from our February 2025 debt refinancing activities (see Note 4 to the condensed consolidated financial statements for further details), partially offset by lower interest expense from the decrease in average borrowings on our Credit Facility in the first half of 2025, compared to the same period of 2024, along with the payoff of our £493 million British pound sterling term loan in the first quarter of 2025. Overall, our weighted-average interest rate was 5.1% for the six months ended June 30, 2025, compared to 4.1% for the same period in 2024.

Real Estate Depreciation and Amortization

Real estate depreciation and amortization for the first six months of 2025 decreased to $131.3 million from $177.8 million for the same period of the prior year. This decrease is primarily due to a $34 million increase in amortization expense in the second quarter of 2024 as a result of our change in the estimated useful life of the in-place lease intangible associated with the Steward master leases that ended well before the contractual term due to the bankruptcy process. The remaining decrease is due to the sale of various properties in 2024 and early 2025, partially offset by fluctuations in foreign currency.

Property-related

Property-related expenses totaled $17.9 million and $12.5 million for the six months ended June 30, 2025 and 2024, respectively. Of the property expenses in the first half of 2025 and 2024, approximately $7.1 million and $7.2 million, respectively, represents costs that were reimbursed by our tenants and included in the “Interest and other income” line on our condensed consolidated statements of net income. Net of reimbursement, our property-related expenses are higher than prior year due to having three additional vacant properties post Steward bankruptcy. We are in various stages of re-tenanting or selling our vacant properties, which make up less than 1% of our total assets.

General and Administrative

General and administrative expenses were $68.1 million for the first half of 2025, compared to $68.7 million for the same period of 2024. Share-based compensation expense was $18.5 million for the first six months of 2025, compared to $16.2 million for the same period of 2024, primarily due to the 2025 stock awards granted in the second quarter.

Gain on Sale of Real Estate

During the six months ended June 30, 2025, the gain on sale of real estate of $13.3 million relates to the sale of three facilities. During the six months ended June 30, 2024, the gain on sale of real estate of $383 million primarily relates to the sale of five Prime facilities and a 75% interest in five Utah facilities as part of the Utah Transaction as more fully described in Note 3 to the condensed consolidated financial statements.

Real Estate and Other Impairment Charges, Net

In the first half of 2025, we recognized $77.5 million of real estate and other impairment charges, primarily associated with our investments in Prospect and three hospitals in Colombia, as well as ongoing property taxes and other obligations not paid by our cash-basis tenants. In the same period of 2024, we recognized $830.5 million of real estate and other impairment charges and fair value adjustments, primarily associated with our investments in Steward and the international joint venture. Of these charges, approximately $100 million were real estate related due to ongoing re-tenanting and potentially selling of properties associated with our cash-basis tenants. The remaining $730 million recognized in the first six months of 2024 represents non-real estate impairment charges and unfavorable fair value adjustments associated with our equity and loan investments in Steward and the international joint venture, along with ongoing property taxes and other obligations not paid by our cash-basis tenants.

Earnings (Loss) from Equity Interests

Earnings from equity interests was $39.3 million for the six months ended June 30, 2025, compared to a loss of $(391.2) million for the same period in 2024. This increase is primarily due to the $410 million charge in the second quarter of 2024 associated with the real estate impairment in our Massachusetts-based partnership with Macquarie and our share of income in the Utah partnership that was formed in the 2024 second quarter, which included a $21 million positive fair value adjustment in the first half of 2025, primarily related to its interest rate swap and an unrealized gain on investments in real estate.

Debt Refinancing and Unutilized Financing Benefit (Costs)

Debt refinancing and unutilized financing costs were $3.6 million for the first half of 2025. These costs were incurred primarily as a result of the early redemption of our 3.325% Senior Unsecured Notes due 2025, 2.500% Senior Unsecured Notes due 2026, and 5.250% Senior Unsecured Notes due 2026. For the same period of 2024, these costs were $3.0 million and were incurred as a result of the reduction in revolving commitments under our Credit Facility and partial paydown of our British pound sterling term loan due 2025.

Other (Including Fair Value Adjustments on Securities)

Other expense for the first six months of 2025 was $169.6 million, compared to expense of $397.0 million in the same period of the prior year. For 2025, we recognized approximately $156 million in unfavorable non-cash fair value adjustments from our investments marked to fair value, primarily due to an approximate $147 million unfavorable adjustment to our investment in PHP Holdings and approximately $8 million related to our investment in Aevis. For the first six months of 2024, we recognized an approximate $360 million unfavorable adjustment to our investment in PHP Holdings. The remaining expense in the first half of 2024 included a $7.8 million economic loss from the sale of our interest in the Priory syndicated term loan and approximately $17.6 million of legal and other professional expenses associated with, among other things, responding to certain defamatory statements published by certain parties.

Income Tax Expense

Income tax expense includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The $19.2 million income tax expense for the six months ended June 30, 2025, is primarily based on the income generated by our investments in the U.K. and Germany and less than the $25.5 million income tax expense in the first half of 2024 due to a $5 million additional tax expense in the second quarter of 2024 as a result of the gain on the interest rate swap associated with the internal restructuring of the British pound sterling term loan due 2025.

We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately $473 million should be reflected against certain of our international and domestic net deferred tax assets at June 30, 2025. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and potentially incur higher income tax expense in future periods as income is earned.

Reconciliation of Non-GAAP Financial Measures

Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. We compute FFO in accordance with the definition provided by the National Association of Real Estate Investment Trusts, or Nareit, which represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of real estate and impairment charges on real estate assets, plus real estate depreciation and amortization, including amortization related to in-place lease intangibles, and after adjustments for unconsolidated partnerships and joint ventures.

In addition to presenting FFO in accordance with the Nareit definition, we disclose normalized FFO, which adjusts FFO for items that relate to unanticipated or non-core events or activities or accounting changes that, if not noted, would make comparison to prior period results and market expectations less meaningful to investors and analysts.

We believe that the use of FFO, combined with the required GAAP presentations, improves the understanding of our operating results among investors and the use of normalized FFO makes comparisons of our operating results with prior periods and other companies more meaningful. While FFO and normalized FFO are relevant and widely used supplemental measures of operating and financial performance of REITs, they should not be viewed as a substitute measure of our operating performance since the measures do not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs (if any are not paid by our tenants) to maintain the operating performance of our properties, which can be significant economic costs that could materially impact our results of operations. FFO and normalized FFO should not be considered an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.

The following table presents a reconciliation of net loss attributable to MPT common stockholders to FFO and Normalized FFO for the three and six months ended June 30, 2025 and 2024 (in thousands except per share data):

(1) Total share-based compensation expense is $0.9 million and $18.5 million for the three and six months ended June 30, 2025, respectively, (including certain awards that are to be settled in cash). Cash-settled awards are recorded in accordance with GAAP at fair value and measured at each balance sheet date until settlement. The resulting fluctuations, which are primarily driven by changes in our stock price rather than operational performance, can introduce significant volatility in our earnings. To enhance comparability and provide a more stable view of performance over time, normalized FFO reflects a $(9.5) million and less than $(0.1) million adjustment in the three and six months ended June 30, 2025, respectively, to arrive at total share-based compensation expense using grant date fair value for all awards (including cash-settled awards) of $10.4 million and $18.5 million for the three and six months ended June 30, 2025.

LIQUIDITY AND CAPITAL RESOURCES

2025 Cash Flow Activity

During the first six months of 2025, we generated approximately $52 million of cash flows from operating activities, which were lower than the first six months of 2024 primarily due to approximately $50 million of less cash rent received due to property sales in 2024 and the first half of 2025 and approximately $45 million less cash rent and interest received from tenants accounted for on a cash basis, partially offset by a $35 million decrease in interest paid for the first six months of 2025 compared to the same period of 2024. We used these operating cash flows, proceeds from our Credit Facility, and proceeds from asset sales to fund our dividends and other investing activities. During the first half of 2025, we repaid the remaining outstanding balance of the British pound sterling term loan due 2025 of £493 million, with a combination of cash on hand and available capacity under our Credit Facility. We also completed a private offering of $1.5 billion in aggregate principal amount of senior secured notes due 2032 and €1.0 billion aggregate principal amount of senior secured notes due 2032. The net proceeds from the offering were approximately $2.5 billion after deducting discounts, commissions, and other offering related expenses. We used the net proceeds from the offering to fund the redemption of our 3.325% Senior Unsecured Notes due 2025, 2.500% Senior Unsecured Notes due 2026, and 5.250% Senior Unsecured Notes due 2026, with the remainder of net proceeds used to paydown our Credit Facility by approximately $800 million.

As a result of our Quarterly Report on Form 10-Q for the period ending March 31, 2024 not being filed timely, we were ineligible to file a new shelf registration statement on Form S-3 for sales of securities until June 1, 2025. However, on June 2, 2025, we filed a new shelf registration statement giving us the ability, once again, to raise capital in the public markets, if we choose to do so.

Subsequent to June 30, 2025 (and as noted in Note 3 to the condensed consolidated financial statements), the bankruptcy court handling the Prospect bankruptcy approved, among other things, an interim order for additional loan advances to be made by us to the debtor including: a) up to $55 million, for which we are funding $15 million on August 8, 2025, to cover forecasted cash shortfalls by the debtor as it pursues sales of hospital operations and sales/leases of related real estate; b) approximately $25 million for the full repayment of the current senior debtor-in-possession lender; and c) up to $30 million in the form of a backstop facility to cover administrative and priority claims. Except for the $15 million funding on August 8, 2025, all of the other loan advances are conditioned on other events occurring including further bankruptcy court approvals and meeting other milestones or requirements. Any additional loan advances (other than the backstop facility) will rank senior in priority as it relates to the recovery waterfall; while any funds advanced under the backstop facility will be secured by recoveries, if any, from causes of actions owned by the debtor.

Debt Amendments, Restrictions, and Covenant Compliance

On February 13, 2025 and concurrent with the closing of the Senior Secured Notes due 2032 as discussed in Note 4 to the condensed consolidated financial statements, we amended the Credit Facility to among other things: (i) provide for the facility to be secured and guaranteed ratably with the senior notes issued concurrently, (ii) provide notice that we plan to exercise both of our maturity extension options such that the maturity of the revolving portion would move from June 30, 2026 to June 30, 2027, the same maturity date as our term loan facility (subject to the satisfaction of other conditions), (iii) reset the interest rate to SOFR plus 225 basis points (which had previously been moved to SOFR plus 300 basis points in August 2024), (iv) permanently remove financial covenants regarding minimum consolidated tangible net worth, maximum unsecured indebtedness to unencumbered asset value and minimum unsecured net operating income to unsecured interest expense, (v) amend certain definitions used in the financial covenant regarding maximum total indebtedness to total asset value to conform to corresponding definitions in our existing unsecured indentures and the secured notes issued concurrently and set the covenant level at 60%, (vi) set the maximum secured leverage ratio at 40%, and (vii) add mandatory prepayments of senior debt or addition of additional collateral in connection with any failure to (x) maintain a 65% maximum ratio of secured first lien debt to the undepreciated real estate value of the secured pool properties or (y) maintain a minimum senior secured debt service coverage ratio of 1.15:1.00 (increasing to 1.30:1.00 in 12 months).

As of August 5, 2025, we are in compliance with all such financial and operating covenants.

2024 Cash Flow Activity

During the first six months of 2024, we generated approximately $110 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. In addition to operating cash flows, we received approximately $1.5 billion during the first half of 2024 from the Utah Transaction and the sale of five Prime properties (as further discussed in Note 3 to the condensed consolidated financial statements), along with approximately $130 million from the sale of our interest in the syndicated Priory term loan and remaining minority interest in Lifepoint Behavioral. In May 2024, we closed on a new secured term loan, generating proceeds of approximately $800 million. We used our operating cash flows, asset sale proceeds, and term loan proceeds to fund our dividends of $183 million, approximately $316 million of new loans, pay down portions of our Credit Facility and British pound sterling term loan due 2025, and to pay off our British pound sterling secured term loan due 2024.

See below for further details of these transactions along with additional liquidity activity in the first half of 2024:

• we completed the sale of five properties to Prime for cash proceeds of $250 million along with a $100 million interest-bearing mortgage loan that was repaid on August 29, 2024;
• we completed the Utah Transaction (as discussed in Note 3 to the condensed consolidated financial statements) that generated cash proceeds of approximately $1.1 billion. With the proceeds from these asset sales, we paid off and terminated our $306 million Australian term loan facility that was due in May 2024 and reduced the outstanding balance on our Credit Facility;
• our Board of Directors declared a quarterly cash dividend of $0.15 per common share on April 12, 2024, that was paid on May 1, 2024, totaling approximately $90 million; and
• on May 24, 2024, we closed on a secured loan facility with a consortium of institutional investors that provides for a term loan in aggregate principal amount of approximately £631 million (approximately $800 million) secured by a portfolio of 27 properties located in the U.K. currently leased to affiliates of Circle. We used the majority of the net proceeds of the facility to pay down portions of our Credit Facility and British pound sterling term loan due 2025, and to pay off our British pound sterling secured term loan due 2024 (approximately £105 million).

Short-term Liquidity Requirements:

Our short-term liquidity requirements typically consist of general and administrative expenses, dividends in order to comply with REIT requirements, interest payments on our debt, and planned funding commitments on development and capital improvement projects for the next twelve months. Our monthly rent and interest receipts and distributions from our joint venture arrangements (which we expect such distributions to be at least $25 million in the second half of 2025) are typically enough to cover our short-term liquidity requirements.

Over the next twelve months, we expect our monthly rent and interest receipts to increase with our contractually required annual escalations but also from the ramp up of cash rents from the tenants that last year replaced Steward. We would expect these rent and interest increases to outpace the higher interest cost from the recent refinancings.

At August 5, 2025, we have no debt maturities coming due in the next twelve months, as we have provided notice of our intent to extend the revolving portion of our Credit Facility to 2027. In addition, we have liquidity of $1.2 billion (including cash on hand and availability under the $1.28 billion revolving portion of our Credit Facility). We believe this liquidity along with the expected cash receipts of rent and interest pursuant to our contractual agreements with our tenants/borrowers is sufficient to fund our short-term liquidity requirements, including any additional loan advances to the debtor as part of the ongoing Prospect bankruptcy, as discussed earlier.

Long-term Liquidity Requirements:

Our long-term liquidity requirements generally consist of the same requirements described above under “Short-term Liquidity Requirements” along with investments in real estate and the funding of debt maturities coming due after the next twelve months. At this time, we do not expect any material new investments of real estate in the foreseeable future.

As described previously, our monthly rent and interest receipts and distributions from our joint venture arrangements along with our current liquidity of approximately $1.2 billion at August 5, 2025, are typically enough to cover our short-term liquidity requirements. However, to further improve cash flows and to fund future debt maturities, we may need to look to other sources, which may include one or a combination of the following:

• further property sales or joint ventures;
• monetizing our investment in operators;
• reducing our dividend (or switching to a stock dividend), while still complying with REIT requirements and credit facility covenants;
• identifying and implementing cost reduction opportunities;
• entering into additional secured loans on real estate;
• extending the maturity or refinancing our existing Credit Facility and other term loans;
• entering into new bank term loans or issuing new USD, EUR, or GBP denominated debt securities; and
• sale of equity securities, which as noted earlier, we filed a new shelf registration statement on Form S-3 on June 2, 2025, giving us the ability to sell securities in the public market.

However, there is no assurance that conditions will be favorable for such possible transactions or that our plans will be successful. In addition, the Prospect bankruptcy related proceedings discussed previously could result in additional cash outflows as discussed above and/or negatively impact the timing, value, and/or our ability to sell or re-lease certain Prospect assets, which could negatively impact our liquidity.

Principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) as of August 5, 2025 are as follows (in thousands):

(1) $300 million represents the outstanding balance of our revolving credit facility for which we have provided notice of our intent to extend to 2027 - see Note 4 to the condensed consolidated financial statements for further details.

Contractual Commitments

We presented our contractual commitments in our 2024 Annual Report on Form 10-K, which factored in our debt refinancing activities in February 2025. There have been no significant changes through August 5, 2025 other than activity on the revolving portion of our Credit Facility as reflected in the table below as of August 5, 2025 (in thousands):

(1) This column represents obligations post August 5, 2025.

Distribution Policy

The table below is a summary of our distributions declared (and paid in cash) during the two year period ended June 30, 2025:

It is our policy to make sufficient distributions to stockholders in order for us to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and to efficiently manage corporate income and excise taxes on undistributed income. Although we have only made cash distributions historically, we may consider making stock dividends in the future for liquidity purposes, while still complying with REIT requirements. In addition, our Credit Facility limits the amount of cash dividends we can make- see Note 4 to the condensed consolidated financial statements for further information.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, and other market changes that affect market sensitive instruments. We seek to mitigate the effects of fluctuations in interest rates by matching the terms of new investments with new long-term fixed rate borrowings to the extent possible. We may or may not elect to use financial derivative instruments to hedge interest rate or foreign currency exposure. For interest rate hedging, these decisions are principally based on our policy to match investments with comparable borrowings, but are also based on the general trend in interest rates at the applicable dates and our perception of the future volatility of interest rates. For foreign currency hedging, these decisions are principally based on how our investments are financed, the long-term nature of our investments, the need to repatriate earnings back to the U.S., and the general trend in foreign currency exchange rates.

In addition, the value of our facilities will be subject to fluctuations based on changes in local and regional economic conditions and changes in the ability of our tenants to generate profits.

Our primary exposure to market risks relates to fluctuations in interest rates and foreign currency. The following analyses present the sensitivity of the market value, earnings, and cash flows of our significant financial instruments to hypothetical changes in interest rates and exchange rates as if these changes had occurred. The hypothetical changes chosen for these analyses reflect our view of changes that are reasonably possible over a one-year period. These forward-looking disclosures are selective in nature and only address the potential impact from these hypothetical changes. They do not include other potential effects which could impact our business as a result of changes in market conditions. In addition, they do not include measures we may take to minimize our exposure such as entering into future interest rate swaps to hedge against interest rate increases on our variable rate debt.

Interest Rate Sensitivity

For fixed rate debt, interest rate changes affect the fair market value but do not impact net income to common stockholders or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact net income to common stockholders and cash flows, assuming other factors are held constant. At June 30, 2025, our outstanding debt totaled $9.8 billion (excluding the effects of any discount or debt issue costs recorded), which consisted of fixed-rate debt of approximately $9.0 billion and variable rate debt of $0.8 billion. If market interest rates increase by 10% on our fixed rate debt, the fair value of our debt at June 30, 2025 would decrease by approximately $257 million. Changes in the fair value of our fixed rate debt will not have any impact on us unless we decided to repurchase the debt in the open market.

If market rates of interest on our variable rate debt increase by 10%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by $5.1 million per year. If market rates of interest on our variable rate debt decrease by 10%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by $5.1 million per year. This assumes that the average amount outstanding under our variable rate debt for a year is $0.8 billion, the balance of such variable rate debt at June 30, 2025.

Foreign Currency Sensitivity

With our investments in the U.K., Germany, Spain, Italy, Portugal, Switzerland, Finland, and Colombia, we are subject to fluctuations in the British pound, euro, Swiss franc, and Colombian peso to U.S. dollar currency exchange rates. Although we generally deem investments in these countries to be of a long-term nature, are typically able to match any non-U.S. dollar borrowings with investments in such currencies, and historically have not needed to repatriate a material amount of earnings back to the U.S., increases or decreases in the value of the respective non-U.S. dollar currencies to U.S. dollar exchange rates may impact our financial condition and/or our results of operations. Based on our 2025 results to-date, a 10% increase or decrease in exchange rates would have impacted our net loss by $1.9 million.

Medical Properties Trust, Inc. and MPT Operating Partnership, L.P.

We have adopted and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b), under the Securities Exchange Act of 1934, as amended, we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the Risk Factors as presented in our Annual Report on Form 10-K for the year ended December 31, 2024.