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)

~~(205) 969-3755~~

REGISTRANT’S 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 ☒ 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 ofRegulation 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer,”~~filer”, “smaller reporting ~~company,”~~company” and “emerging growth company” inRule 12b-2 of the Exchange Act.


Large accelerated filer	☒	(Medical Properties Trust, Inc. only)	Accelerated filer	☐

Non-accelerated filer	☒	(MPT Operating Partnership, L.P. only)	Smaller reporting company	☐

		~~(Do not check if a smaller reporting company)~~	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~3, 2017,~~2, 2018, Medical Properties Trust, Inc. had ~~364,156,080~~364,941,199 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 nine months ended September 30, ~~2017,~~2018 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 ~~SEPTEMBER~~September 30, ~~2017~~2018

Table of Contents


		Page
PART I — FINANCIAL INFORMATION			4	3
Item 1 Financial Statements			4	3
Medical Properties Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets at September 30, ~~2017~~2018 and December 31, ~~2016~~2017			4	3
Condensed Consolidated Statements of Net Income for the Three ~~Months~~ and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			5	4
Condensed Consolidated Statements of Comprehensive Income for the Three ~~Months~~ and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			6	5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			7	6
MPT Operating Partnership, L.P. and Subsidiaries
Condensed Consolidated Balance Sheets at September 30, ~~2017~~2018 and December 31, ~~2016~~2017			8	7
Condensed Consolidated Statements of Net Income for the Three ~~Months~~ and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			9	8
Condensed Consolidated Statements of Comprehensive Income for the Three ~~Months~~ and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			10	9
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017			11	10
Medical Properties Trust, Inc. and MPT Operating Partnership, L.P.
Notes to Condensed Consolidated Financial Statements			12	11
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			30	22
Item 3 Quantitative and Qualitative Disclosures about Market Risk			41	33
Item 4 Controls and Procedures			42	34
PART II — OTHER INFORMATION			43	35
Item 1 Legal Proceedings			43	35
Item 1A Risk Factors			43	35
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			44	35
Item 3 Defaults Upon Senior Securities			44	35
Item 4 Mine Safety Disclosures			44	35
Item 5 Other Information			44	35
Item 6 Exhibits			45
~~INDEX TO EXHIBITS~~36			46
SIGNATURE	37
		47

PART I — ~~FINANCIAL~~FINANCIAL INFORMATION

Item 1. Financial Statements.

~~Item 1.~~

~~Financial Statements.~~

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
(In thousands, except per share amounts)	(Unaudited)			(Note 2)			(Unaudited)			(Note 2)
Assets
Real estate assets
Land, buildings and improvements, intangible lease assets, and other	$	5,795,286		$	4,317,866		$	4,926,462		$	5,944,220
Mortgage loans		1,777,555			1,060,400			1,428,069			1,778,316
Net investment in direct financing leases		695,829			648,102			690,897			698,727

Gross investment in real estate assets		8,268,670			6,026,368			7,045,428			8,421,263
Accumulated depreciation and amortization		(418,880	)		(325,125	)		(432,279	)		(455,712	)

Net investment in real estate assets		7,849,790			5,701,243			6,613,149			7,965,551
Cash and cash equivalents		188,224			83,240			710,965			171,472
Interest and rent receivables		105,817			57,698			87,939			78,970
Straight-line rent receivables		166,142			116,861			195,329			185,592
Other loans		151,709			155,721			482,453			150,209
Other assets		465,358			303,773			684,681			468,494

Total Assets	$	8,927,040		$	6,418,536		$	8,774,516		$	9,020,288

Liabilities and Equity
Liabilities
Debt, net	$	4,832,264		$	2,909,341		$	4,043,849		$	4,898,667
Accounts payable and accrued expenses		180,631			207,711			202,033			211,188
Deferred revenue		18,906			19,933			11,162			18,178
Lease deposits and other obligations to tenants		54,035			28,323			30,964			57,050

Total Liabilities		5,085,836			3,165,308
Total liabilities								4,288,008			5,185,083
Equity
Preferred stock, $0.001 par value. Authorized 10,000 shares; no shares outstanding		—			—			-			-
Common stock, $0.001 par value. Authorized 500,000 shares; issued and outstanding — 364,084 shares at September 30, 2017 and 320,514 shares at December 31, 2016		364			321
Additional paid in capital		4,330,495			3,775,336
Distributions in excess of net income		(468,473	)		(434,114	)
Common stock, $0.001 par value. Authorized 500,000 shares; issued and outstanding — 364,858 shares at September 30, 2018 and 364,424 shares at December 31, 2017								365			364
Additional paid-in capital								4,343,768			4,333,027
Retained earnings (deficit)								179,703			(485,932	)
Accumulated other comprehensive loss		(35,165	)		(92,903	)		(50,569	)		(26,049	)
Treasury shares, at cost		(777	)		(262	)		(777	)		(777	)

Total Medical Properties Trust, Inc. Stockholders’ Equity		3,826,444			3,248,378			4,472,490			3,820,633
Non-controlling interests		14,760			4,850			14,018			14,572

Total Equity		3,841,204			3,253,228

Total equity								4,486,508			3,835,205
Total Liabilities and Equity	$	8,927,040		$	6,418,536		$	8,774,516		$	9,020,288

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Net Income

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(In thousands, except per share amounts)	2017			2016			2017			2016			2018			2017			2018			2017
Revenues
Rent billed	$	110,930		$	82,387		$	311,140		$	234,408		$	118,238		$	110,930		$	369,076		$	311,140
Straight-line rent		17,505			9,741			46,561			26,509			18,293			17,505			49,157			46,561
Income from direct financing leases		19,115			14,678			55,307			47,181			18,998			19,115			55,613			55,307
Interest and fee income		29,030			19,749			86,776			79,756			41,467			29,030			130,098			86,776

Total revenues		176,580			126,555			499,784			387,854			196,996			176,580			603,944			499,784
Expenses
Interest														57,215			42,759			172,364			120,498
Real estate depreciation and amortization		31,915			23,876			88,994			67,850			29,949			31,915			100,217			88,994
Impairment charges		—			(80	)		—			7,295
Property-related		1,519			(93	)		4,000			1,592			2,719			1,519			6,823			4,000
Acquisition expenses		7,434			2,677			20,996			6,379
General and administrative		15,011			12,305			43,287			35,821			20,982			15,011			58,352			43,287
Acquisition costs														506			7,434			917			20,996
Total expenses														111,371			98,638			338,673			277,775
Other income (expense)
Gain on sale of real estate and other, net														647,204			18			672,822			7,431
Debt refinancing costs														-			(4,414	)		-			(18,794	)
Other														5,711			3,865			6,245			8,999
Total other income (expense)														652,915			(531	)		679,067			(2,364	)

Total operating expenses		55,879			38,685			157,277			118,937

Operating income		120,701			87,870			342,507			268,917
Other income (expense)
Interest expense		(42,759	)		(40,262	)		(120,498	)		(121,132	)
Gain on sale of real estate and other asset dispositions, net		18			44,616			7,431			61,294
Earnings (loss) from equity and other interests		3,384			1,245			7,898			(2,556	)
Unutilized financing fees/debt refinancing costs		(4,414	)		(22,535	)		(18,794	)		(22,539	)
Other income (expense)		481			99			1,101			(118	)
Income before income tax														738,540			77,411			944,338			219,645
Income tax expense		(530	)		(490	)		(783	)		(1,173	)		(2,064	)		(530	)		(4,802	)		(783	)

Net other expense		(43,820	)		(17,327	)		(123,645	)		(86,224	)

Income from continuing operations		76,881			70,543			218,862			182,693
Loss from discontinued operations		—			—			—			(1	)

Net income		76,881			70,543			218,862			182,692			736,476			76,881			939,536			218,862
Net income attributable to non-controlling interests		(417	)		(185	)		(1,013	)		(683	)		(442	)		(417	)		(1,334	)		(1,013	)

Net income attributable to MPT common stockholders	$	76,464		$	70,358		$	217,849		$	182,009		$	736,034		$	76,464		$	938,202		$	217,849

Earnings per common share — basic
Income from continuing operations attributable to MPT common stockholders	$	0.21		$	0.29		$	0.63		$	0.75
Loss from discontinued operations attributable to MPT common stockholders		—			—			—			—
Net income attributable to MPT common stockholders													$	2.01		$	0.21		$	2.56		$	0.63

Earnings per common share — diluted
Net income attributable to MPT common stockholders	$	0.21		$	0.29		$	0.63		$	0.75		$	2.00		$	0.21		$	2.56		$	0.63

Weighted average shares outstanding — basic		364,315			246,230			345,076			240,607			365,024			364,315			364,934			345,076

Earnings per common share — diluted
Income from continuing operations attributable to MPT common stockholders	$	0.21		$	0.28		$	0.63		$	0.75
Loss from discontinued operations attributable to MPT common stockholders		—			—			—			—

Net income attributable to MPT common stockholders	$	0.21		$	0.28		$	0.63		$	0.75

Weighted average shares outstanding — diluted		365,046			247,468			345,596			241,432			366,467			365,046			365,784			345,596

Dividends declared per common share	$	0.24		$	0.23		$	0.72		$	0.68		$	0.25		$	0.24		$	0.75		$	0.72

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Net income	$	76,881		$	70,543		$	218,862		$	182,692		$	736,476		$	76,881		$	939,536		$	218,862
Other comprehensive income:
Unrealized gain on interest rate swap		—			854			—			2,494
Foreign currency translation gain		17,426			4,450			57,738			10,354

Foreign currency translation (loss) gain														(8,216	)		17,426			(24,520	)		57,738
Total comprehensive income		94,307			75,847			276,600			195,540			728,260			94,307			915,016			276,600
Comprehensive income attributable to non-controlling interests		(417	)		(185	)		(1,013	)		(683	)		(442	)		(417	)		(1,334	)		(1,013	)

Comprehensive income attributable to MPT common stockholders	$	93,890		$	75,662		$	275,587		$	194,857		$	727,818		$	93,890		$	913,682		$	275,587

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

							For the Nine Months Ended September 30,
	For the Nine Months Ended September 30,						2018			2017
(In thousands)	2017			2016
							(In thousands)
Operating activities
Net income	$	218,862		$	182,692		$	939,536		$	218,862
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		93,805			69,720			106,508			93,805
Amortization of deferred financing costs and debt discount		4,748			5,799			5,543			4,748
Direct financing lease interest accretion		(7,276	)		(6,757	)		(7,213	)		(7,276	)
Straight-line rent revenue		(47,678	)		(27,009	)		(64,840	)		(47,678	)
Share-based compensation		7,148			5,832			11,695			7,148
Gain from sale of real estate and other asset dispositions, net		(7,431	)		(61,294	)
Impairment charges		—			7,295
Gain from sale of real estate and other, net								(672,822	)		(7,431	)
Straight-line rent and other write-off		1,117			3,063			17,615			1,117
Unutilized financing fees/debt refinancing costs		18,794			22,539
Debt refinancing costs								-			18,794
Other adjustments		(7,152	)		(8,398	)		(21,354	)		(7,140	)
Changes in:
Interest and rent receivables		(14,613	)		(12,790	)		(10,158	)		(14,613	)
Accounts payable and accrued expenses		(40,378	)		(12,403	)		(5,387	)		(40,378	)

Net cash provided by operating activities		219,946			168,289			299,123			219,958
Investing activities
Cash paid for acquisitions and other related investments		(2,152,069	)		(213,100	)		(1,166,618	)		(2,152,069	)
Net proceeds from sale of real estate		64,362			198,767			1,513,666			64,362
Principal received on loans receivable		6,760			804,809			531,772			6,760
Investment in loans receivable		(18,574	)		(102,909	)		(174,494	)		(18,574	)
Construction in progress and other		(52,953	)		(139,336	)		(32,425	)		(52,953	)
Investment in unsecured senior notes		—			(50,000	)
Proceeds from sale of unsecured senior notes		—			50,000
Other investments, net		(73,982	)		(52,701	)		(63,080	)		(73,982	)

Net cash (used for) provided by investing activities		(2,226,456	)		495,530
Net cash provided by (used for) investing activities								608,821			(2,226,456	)
Financing activities
Proceeds from term debt		2,355,280			1,000,000			759,735			2,355,280
Payments of term debt		(688,221	)		(515,221	)		-			(688,221	)
Revolving credit facilities, net		155,089			(1,100,000	)		(818,116	)		155,089
Distributions paid		(239,211	)		(160,060	)		(272,360	)		(239,211	)
Lease deposits and other obligations to tenants		(7,467	)		13,784			(25,511	)		(8,346	)
Proceeds from sale of common shares, net of offering costs		548,055			1,024,088			-			548,055
Debt issuance costs paid and other financing activities		(27,167	)		(31,317	)

Net cash provided by financing activities		2,096,358			231,274

Increase in cash and cash equivalents for period		89,848			895,093
Other financing activities								(3,106	)		(27,167	)
Net cash (used for) provided by financing activities								(359,358	)		2,095,479
Increase in cash, cash equivalents and restricted cash for period								548,586			88,981
Effect of exchange rate changes		15,136			4,283			(8,313	)		15,136
Cash and cash equivalents at beginning of period		83,240			195,541

Cash and cash equivalents at end of period	$	188,224		$	1,094,917

Cash, cash equivalents and restricted cash at beginning of period								172,247			84,882
Cash, cash equivalents and restricted cash at end of period							$	712,520		$	188,999
Interest paid	$	131,708		$	120,374		$	175,715		$	131,708
Supplemental schedule of non-cash investing activities:
(Decrease) increase in development project construction costs incurred, not paid	$	(9,036	)	$	17,458
Supplemental schedule of non-cash financing activities:
Distributions declared, not paid	$	87,519		$	58,333		$	91,547		$	87,519
Cash, cash equivalents and restricted cash are comprised of the following:
Beginning of period:
Cash and cash equivalents							$	171,472		$	83,240
Restricted cash, included in Other assets								775			1,642
							$	172,247		$	84,882
End of period:
Cash and cash equivalents							$	710,965		$	188,224
Restricted cash, included in Other assets								1,555			775
							$	712,520		$	188,999

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING ~~PARTNERSHIP,~~PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
(In thousands)	(Unaudited)			(Note 2)			(Unaudited)			(Note 2)
Assets
Real estate assets
Land, buildings and improvements, intangible lease assets, and other	$	5,795,286		$	4,317,866		$	4,926,462		$	5,944,220
Mortgage loans		1,777,555			1,060,400			1,428,069			1,778,316
Net investment in direct financing leases		695,829			648,102			690,897			698,727

Gross investment in real estate assets		8,268,670			6,026,368			7,045,428			8,421,263
Accumulated depreciation and amortization		(418,880	)		(325,125	)		(432,279	)		(455,712	)

Net investment in real estate assets		7,849,790			5,701,243			6,613,149			7,965,551
Cash and cash equivalents		188,224			83,240			710,965			171,472
Interest and rent receivables		105,817			57,698			87,939			78,970
Straight-line rent receivables		166,142			116,861			195,329			185,592
Other loans		151,709			155,721			482,453			150,209
Other assets		465,358			303,773			684,681			468,494

Total Assets	$	8,927,040		$	6,418,536		$	8,774,516		$	9,020,288

Liabilities and Capital
Liabilities
Debt, net	$	4,832,264		$	2,909,341		$	4,043,849		$	4,898,667
Accounts payable and accrued expenses		92,793			132,868			110,155			121,465
Deferred revenue		18,906			19,933			11,162			18,178
Lease deposits and other obligations to tenants		54,035			28,323			30,964			57,050
Payable due to Medical Properties Trust, Inc.		87,448			74,453			91,488			89,333

Total Liabilities		5,085,446			3,164,918
Total liabilities								4,287,618			5,184,693
Capital
General Partner — issued and outstanding — 3,641 units at September 30, 2017 and 3,204 units at December 31, 2016		38,639			33,436
General Partner — issued and outstanding — 3,648 units at September 30, 2018 and 3,644 units at December 31, 2017								45,261			38,489
Limited Partners:
Common units — issued and outstanding — 360,443 units at September 30, 2017 and 317,310 units at December 31, 2016		3,823,360			3,308,235
LTIP units — issued and outstanding — 292 units at September 30, 2017 and December 31, 2016		—			—
Common units — issued and outstanding — 361,210 units at September 30, 2018 and 360,780 units at December 31, 2017								4,478,188			3,808,583
LTIP units — issued and outstanding — 232 units at September 30, 2018 and 292 units at December 31, 2017								-			-
Accumulated other comprehensive loss		(35,165	)		(92,903	)		(50,569	)		(26,049	)

Total MPT Operating Partnership, L.P. Capital		3,826,834			3,248,768			4,472,880			3,821,023
Non-controlling interests		14,760			4,850			14,018			14,572

Total Capital		3,841,594			3,253,618

Total capital								4,486,898			3,835,595
Total Liabilities and Capital	$	8,927,040		$	6,418,536		$	8,774,516		$	9,020,288

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Net Income

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(In thousands, except per unit amounts)	2017			2016			2017			2016			2018			2017			2018			2017
Revenues
Rent billed	$	110,930		$	82,387		$	311,140		$	234,408		$	118,238		$	110,930		$	369,076		$	311,140
Straight-line rent		17,505			9,741			46,561			26,509			18,293			17,505			49,157			46,561
Income from direct financing leases		19,115			14,678			55,307			47,181			18,998			19,115			55,613			55,307
Interest and fee income		29,030			19,749			86,776			79,756			41,467			29,030			130,098			86,776

Total revenues		176,580			126,555			499,784			387,854			196,996			176,580			603,944			499,784
Expenses
Interest														57,215			42,759			172,364			120,498
Real estate depreciation and amortization		31,915			23,876			88,994			67,850			29,949			31,915			100,217			88,994
Impairment charges		—			(80	)		—			7,295
Property-related		1,519			(93	)		4,000			1,592			2,719			1,519			6,823			4,000
Acquisition expenses		7,434			2,677			20,996			6,379
General and administrative		15,011			12,305			43,287			35,821			20,982			15,011			58,352			43,287
Acquisition costs														506			7,434			917			20,996
Total expenses														111,371			98,638			338,673			277,775
Other income (expense)
Gain on sale of real estate and other, net														647,204			18			672,822			7,431
Debt refinancing costs														-			(4,414	)		-			(18,794	)
Other														5,711			3,865			6,245			8,999
Total other income (expense)														652,915			(531	)		679,067			(2,364	)

Total operating expenses		55,879			38,685			157,277			118,937

Operating income		120,701			87,870			342,507			268,917
Other income (expense)
Interest expense		(42,759	)		(40,262	)		(120,498	)		(121,132	)
Gain on sale of real estate and other asset dispositions, net		18			44,616			7,431			61,294
Earnings (loss) from equity and other interests		3,384			1,245			7,898			(2,556	)
Unutilized financing fees/debt refinancing costs		(4,414	)		(22,535	)		(18,794	)		(22,539	)
Other income (expense)		481			99			1,101			(118	)
Income before income tax														738,540			77,411			944,338			219,645
Income tax expense		(530	)		(490	)		(783	)		(1,173	)		(2,064	)		(530	)		(4,802	)		(783	)

Net other expense		(43,820	)		(17,327	)		(123,645	)		(86,224	)

Income from continuing operations		76,881			70,543			218,862			182,693
Loss from discontinued operations		—			—			—			(1	)

Net income		76,881			70,543			218,862			182,692			736,476			76,881			939,536			218,862
Net income attributable to non-controlling interests		(417	)		(185	)		(1,013	)		(683	)		(442	)		(417	)		(1,334	)		(1,013	)

Net income attributable to MPT Operating Partnership partners	$	76,464		$	70,358		$	217,849		$	182,009		$	736,034		$	76,464		$	938,202		$	217,849

Earnings per unit — basic
Income from continuing operations attributable to MPT Operating Partnership partners	$	0.21		$	0.29		$	0.63		$	0.75
Loss from discontinued operations attributable to MPT Operating Partnership partners		—			—			—			—
Net income attributable to MPT Operating Partnership partners													$	2.01		$	0.21		$	2.56		$	0.63

Earnings per unit — diluted
Net income attributable to MPT Operating Partnership partners	$	0.21		$	0.29		$	0.63		$	0.75		$	2.00		$	0.21		$	2.56		$	0.63

Weighted average units outstanding — basic		364,315			246,230			345,076			240,607			365,024			364,315			364,934			345,076

Earnings per unit — diluted
Income from continuing operations attributable to MPT Operating Partnership partners	$	0.21		$	0.28		$	0.63		$	0.75
Loss from discontinued operations attributable to MPT Operating Partnership partners		—			—			—			—

Net income attributable to MPT Operating Partnership partners	$	0.21		$	0.28		$	0.63		$	0.75

Weighted average units outstanding — diluted		365,046			247,468			345,596			241,432			366,467			365,046			365,784			345,596

Dividends declared per unit	$	0.24		$	0.23		$	0.72		$	0.68		$	0.25		$	0.24		$	0.75		$	0.72

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016			2018			2017			2018			2017
Net income	$	76,881		$	70,543		$	218,862		$	182,692		$	736,476		$	76,881		$	939,536		$	218,862
Other comprehensive income:
Unrealized gain on interest rate swap		—			854			—			2,494
Foreign currency translation gain		17,426			4,450			57,738			10,354

Foreign currency translation (loss) gain														(8,216	)		17,426			(24,520	)		57,738
Total comprehensive income		94,307			75,847			276,600			195,540			728,260			94,307			915,016			276,600
Comprehensive income attributable to non-controlling interests		(417	)		(185	)		(1,013	)		(683	)		(442	)		(417	)		(1,334	)		(1,013	)

Comprehensive income attributable to MPT Operating Partnership Partners	$	93,890		$	75,662		$	275,587		$	194,857

Comprehensive income attributable to MPT Operating Partnership partners													$	727,818		$	93,890		$	913,682		$	275,587

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

							For the Nine Months Ended September 30,
	For the Nine Months Ended September 30,						2018			2017
(In thousands)	2017			2016
							(In thousands)
Operating activities
Net income	$	218,862		$	182,692		$	939,536		$	218,862
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		93,805			69,720			106,508			93,805
Amortization of deferred financing costs and debt discount		4,748			5,799			5,543			4,748
Direct financing lease interest accretion		(7,276	)		(6,757	)		(7,213	)		(7,276	)
Straight-line rent revenue		(47,678	)		(27,009	)		(64,840	)		(47,678	)
Unit-based compensation		7,148			5,832			11,695			7,148
Gain from sale of real estate and other asset dispositions, net		(7,431	)		(61,294	)
Impairment charges		—			7,295
Gain from sale of real estate and other, net								(672,822	)		(7,431	)
Straight-line rent and other write-off		1,117			3,063			17,615			1,117
Unutilized financing fees/debt refinancing costs		18,794			22,539
Debt refinancing costs								-			18,794
Other adjustments		(7,152	)		(8,398	)		(21,354	)		(7,140	)
Changes in:
Interest and rent receivables		(14,613	)		(12,790	)		(10,158	)		(14,613	)
Accounts payable and accrued expenses		(40,378	)		(12,403	)		(5,387	)		(40,378	)

Net cash provided by operating activities		219,946			168,289			299,123			219,958
Investing activities
Cash paid for acquisitions and other related investments		(2,152,069	)		(213,100	)		(1,166,618	)		(2,152,069	)
Net proceeds from sale of real estate		64,362			198,767			1,513,666			64,362
Principal received on loans receivable		6,760			804,809			531,772			6,760
Investment in loans receivable		(18,574	)		(102,909	)		(174,494	)		(18,574	)
Construction in progress and other		(52,953	)		(139,336	)		(32,425	)		(52,953	)
Investment in unsecured senior notes		—			(50,000	)
Proceeds from sale of unsecured senior notes		—			50,000
Other investments, net		(73,982	)		(52,701	)		(63,080	)		(73,982	)

Net cash (used for) provided by investing activities		(2,226,456	)		495,530
Net cash provided by (used for) investing activities								608,821			(2,226,456	)
Financing activities
Proceeds from term debt		2,355,280			1,000,000			759,735			2,355,280
Payments of term debt		(688,221	)		(515,221	)		-			(688,221	)
Revolving credit facilities, net		155,089			(1,100,000	)		(818,116	)		155,089
Distributions paid		(239,211	)		(160,060	)		(272,360	)		(239,211	)
Lease deposits and other obligations to tenants		(7,467	)		13,784			(25,511	)		(8,346	)
Proceeds from sale of units, net of offering costs		548,055			1,024,088			-			548,055
Debt issuance costs paid and other financing activities		(27,167	)		(31,317	)

Net cash provided by financing activities		2,096,358			231,274

Increase in cash and cash equivalents for period		89,848			895,093
Other financing activities								(3,106	)		(27,167	)
Net cash (used for) provided by financing activities								(359,358	)		2,095,479
Increase in cash, cash equivalents and restricted cash for period								548,586			88,981
Effect of exchange rate changes		15,136			4,283			(8,313	)		15,136
Cash and cash equivalents at beginning of period		83,240			195,541

Cash and cash equivalents at end of period	$	188,224		$	1,094,917

Cash, cash equivalents and restricted cash at beginning of period								172,247			84,882
Cash, cash equivalents and restricted cash at end of period							$	712,520		$	188,999
Interest paid	$	131,708		$	120,374		$	175,715		$	131,708
Supplemental schedule of non-cash investing activities:
(Decrease) increase in development project construction costs incurred, not paid	$	(9,036	)	$	17,458
Supplemental schedule of non-cash financing activities:
Distributions declared, not paid	$	87,519		$	58,333		$	91,547		$	87,519
Cash, cash equivalents, and restricted cash are comprised of the following:
Beginning of period:
Cash and cash equivalents							$	171,472		$	83,240
Restricted cash, included in Other assets								775			1,642
							$	172,247		$	84,882
End of period:
Cash and cash equivalents							$	710,965		$	188,224
Restricted cash, included in Other assets								1,555			775
							$	712,520		$	188,999

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. ~~AND~~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 Maryland General Corporation Law 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.~~2004. Accordingly, we will generally not be subject to federal income tax in the United States (“U.S.”), provided that we continue to qualify as a REIT and our distributions to our stockholders equal or exceed our taxable income. Certain non-real estate activities we undertake ~~must be~~are conducted by entities which we elected to be treated as taxable REIT subsidiaries (“~~TRSs”~~TRS”). Our ~~TRSs~~TRS entities are subject to both U.S. federal and state income taxes. For our properties located outside the U.S., we are subject to local taxes; however, we do not expect to incur additional taxes in the U.S. as such real estate related income ~~will flow~~currently flows through our REIT.

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. ~~All of our~~Our properties are located in the U.S. and Europe.

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 U.S. for interim financial information, including rules and regulations of the Securities and Exchange ~~Commission.~~Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) 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 nine ~~month periods~~months ended September 30, ~~2017,~~2018, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2018. The condensed consolidated balance sheet at December 31, ~~2016~~2017 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 U.S. 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, ~~2016. During~~2017, and as updated in our Form 10-Q for the ~~nine months~~quarters ended ~~September~~March 31, 2018 and June 30, ~~2017, there were~~2018. There have been no material changes to these significant accounting policies.

Recent Accounting Developments:

~~Revenue from Contracts with Customers~~Leases

In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers.” Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. This standard is effective for us beginning January 1, 2018, and we plan to adopt under the modified retrospective approach. We do not expect this standard to have a significant impact on our financial results upon adoption, as a substantial portion of our revenue consists of rental income from leasing arrangements and interest income from loans, which are specifically excluded from ASU No. 2014-09. Under ASU No. 2014-09, we do expect more transactions to qualify as sales of real estate with gains on sales being recognized earlier than under current accounting guidance, as the new guidance is based on transfer of control versus whether or not the seller has continuing involvement. Thus, we expect to record an approximate $2 million adjustment to retained earnings upon adoption of ASU No. 2014-09 to fully recognize a gain on real estate sold in prior years that was required to be deferred under existing accounting guidance.

~~Clarifying the Definition of a Business~~

In January 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business” (“ASU 2017-01”). The amendments in ASU 2017-01 provide an initial screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, in which case, the transaction would be accounted for as an asset acquisition rather than as a business combination. In addition, ASU 2017-01 clarifies the requirements for a set of activities to be considered a business and narrows the definition of an output. A reporting entity must apply the amendments in ASU 2017-01 using a prospective approach. We will adopt ASU 2017-01 on January 1, 2018 for our 2018 fiscal year. Upon adoption, we expect to recognize a majority of our real estate acquisitions as asset transactions rather than business combinations, which will result in the capitalization of third party transaction costs that are directly related to an acquisition. Indirect and internal transaction costs will continue to be expensed, but we do not expect to include these costs as an adjustment in deriving normalized funds from operations in the future. We expect this change in accounting, once adopted, may decrease our normalized funds from operations by $1 million to $2 million per quarter.

~~Leases~~

~~In February 2016, the FASB~~ issued ASU 2016-02, “Leases”, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either ~~finance~~financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”), allowing companies to record a cumulative adjustment to retained earnings in the period of adoption rather than requiring the restatement of prior periods.

We ~~expect to~~will adopt this new standard on January 1, 2019. We are continuing to evaluate this standard and the impact to us from both a lessor and lessee perspective. ~~However, we~~We do have leases in which we are the lessee, including ground leases, on which certain of our facilities reside, along with corporate office and equipment leases. Although we do not expect any change in the current operating lease classification of these leases, ~~that~~we will ~~be required to be recorded~~record a right-of-use asset and a lease liability on our balance sheet upon adoption of this ~~standard.~~standard, with any difference recorded as a cumulative adjustment in equity. From a lessor perspective, we do not expect any change in the current classification and accounting of our existing leases. However, we do expect certain non-lease components ~~(including property taxes, insurance and other~~(such as certain operating expenses that ~~the~~we pay and our tenants ~~of our facilities are required to pay~~reimburse us for pursuant to our “triple-net” leases) to be recorded gross versus net of the respective expenses upon adoption of this standard in 2019 in accordance with ASU No. ~~2014-09.~~

2014-09, “Revenue from Contracts with Customers (Topic 606)”. For those operating expenses that our tenants pay directly to third parties pursuant to our leases, we will continue to present on a net basis.

Reclassifications

Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform to the current period presentation.

Variable Interest Entities

At September 30, ~~2017,~~2018, we had loans to and/or equity investments in certain variable interest entities (“VIEs”), which are also tenants of our facilities. We have determined that we are not the primary beneficiary of these VIEs. 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 September 30, ~~2017 are presented below~~2018 (in thousands):


VIE Type	Maximum Loss Exposure(1)		Asset Type Classification	Carrying Amount(2)		Maximum Loss Exposure(1)		Asset Type Classification	Carrying Amount(2)
Loans, net	$	331,857	Mortgage and other loans	$	235,287	$	329,340	Mortgage and other loans	$	228,960
Equity investments	$	13,242	Other assets	$	—	$	14,616	Other assets	$	-

(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.

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~~borrowers or investees) that most significantly impact the VIE’s economic performance. As of September 30, ~~2017,~~2018, we were not required to provide ~~any material~~ financial support through a liquidity arrangement or otherwise to our unconsolidated VIEs, including circumstances in which itthey 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, Note 7 and 7Note 10 for additional description of the nature, purpose and activities of our more significant VIEs and interests therein, ~~such as~~including Ernest Health Inc. (“Ernest”)., which makes up $329 million of the maximum loss exposure above at September 30, 2018.

3. Real Estate and Lending Activities

Acquisitions

We acquired the following assets (in thousands):


	Nine Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2018			2017
Assets Acquired
Land and land improvements	$	196,094		$	13,602		$	57,452		$	220,864
Building		987,442			125,744			467,164			928,687
Intangible lease assets — subject to amortization (weighted average useful life 28.7 years for 2017 and 19.4 years for 2016)		128,961			10,754
Intangible lease assets — subject to amortization (weighted average useful life 27.8 years for 2018 and 27.2 years for 2017)								60,277			162,946
Net investments in direct financing leases		40,450			63,000			-			40,450
Other loans								336,458			-
Mortgage loans		700,000			—			-			700,000
Equity investments		100,000			—			245,267			100,000
Liabilities assumed		(878	)		—			-			(878	)

Total assets acquired	$	2,152,069		$	213,100		$	1,166,618		$	2,152,069
Loans repaid (1)		—			(93,262	)

Loans repaid								(525,426	)		-
Total net assets acquired	$	2,152,069		$	119,838		$	641,192		$	2,152,069

~~(1)~~

~~$93.3 million loans advanced to Capella (now RCCH Healthcare Partners (“RCCH”)) in 2015 and repaid in 2016 as a part of the Capella Transaction discussed below.~~

2018 Activity

Joint Venture Transaction

On August 31, 2018, we completed a joint venture arrangement with Primotop Holdings S.à.r.l. (“Primotop”) pursuant to which we contributed 71 of our post-acute hospitals in Germany, with an aggregate fair value of €1.635 billion, for a 50% interest, while Primotop contributed cash for its 50% interest in the joint venture. As part of the transaction, we received an aggregate amount of approximately €1.14 billion, from the proceeds of the cash contributed by Primotop and the secured debt financing placed on the joint venture’s real estate (as more fully discussed in Note 4), and we recognized an approximate €500 million gain on sale. Our interest in the joint venture is made up of a 50% equity investment valued at approximately €211 million (included in “Other assets” on the condensed consolidated balance sheets), which is being accounted for under the equity method of accounting, and a €290 million shareholder loan (with terms identical to Primotop’s shareholder loan).

Other Transactions

On August 31, 2018, we acquired an acute care facility in Pasco, Washington for $17.5 million. The ~~purchase price allocations attributable~~property is leased to RCCH Healthcare Partners (“RCCH”), pursuant to the ~~2017 acquisitions and certain acquisitions made~~existing long-term master lease entered into with RCCH in April 2016.

On August 28, 2018, we acquired three inpatient rehabilitation hospitals in Germany for €17.3 million (including real estate transfer taxes). These hospitals are part of a four-hospital portfolio that we agreed to purchase for an aggregate amount of €23 million (including real estate transfer taxes). The final property is expected to close in the ~~last~~fourth quarter of ~~2016~~2018. The properties are ~~preliminary. When all relevant information is obtained, resulting changes, if any,~~leased to ~~our provisional purchase price allocation will be adjusted~~affiliates of Median Kliniken S.à.r.l. (“MEDIAN”), pursuant to ~~reflect~~a new ~~information obtained about~~27-year master lease with annual escalators at the ~~facts and circumstances that existed as~~greater of 1% or 70% of the ~~respective acquisition dates~~change in German consumer price index (“CPI”).

During the second and third quarters of 2018, we acquired the fee simple real estate of four general acute care hospitals, three of which are located in Massachusetts and one located in Texas, from Steward Health Care System LLC (“Steward”) in exchange for the reduction of $525.4 million of mortgage loans made to Steward in October 2016 and March 2018, along with additional cash consideration. These properties are being leased to Steward pursuant to the original master lease from October 2016 that ~~if known, would have affected the measurement of the amounts recognized as of those dates.~~had an initial 15-year term with three five-year extension options, plus CPI increases.

2017 Activity

Steward Transactions

On September 29, 2017, we acquired from IASIS Healthcare LLC (“IASIS”) a portfolio of ten acute care hospitals and one behavioral health facility, along with ancillary land and buildings, that are located in Arizona, Utah, Texas, and Arkansas. The portfolio is now operated by Steward, ~~Health Care System LLC (“Steward”),~~ which separately completed its acquisition of IASIS on September 29, 2017. Our investment in the portfolio ~~includes~~included the acquisition of eight acute care hospitals and one behavioral health facility for approximately $700 million, the ~~making~~origination of $700 million in mortgage loans on two acute care hospitals, and a $100 million minority equity contribution in Steward, for a combined investment of approximately $1.5 billion. The nine facilities acquired are being leased to Steward pursuant to the original long-term master lease agreement entered into in October ~~2016 that had an~~2016. The initial ~~15-year~~ term, ~~with three 5-year~~ extension options, ~~plus annual inflation-based escalators. The terms~~and interest rate of the mortgage ~~loan~~loans are substantially similar to the initial term, renewal options, and lease rate of the master lease.

On May 1, 2017, we acquired eight hospitals previously affiliated with Community Health Systems, Inc. in Florida, Ohio, and Pennsylvania for an aggregate purchase price of $301.3 million. These facilities are leased to Steward, pursuant to the original long-term master lease ~~with Steward.~~entered into in October 2016.

MEDIAN Transactions

During the third quarter of 2017, we acquired two rehabilitation hospitals in Germany for an aggregate purchase price of €39.2 million, in addition to 11 rehabilitation hospitals in Germany that we acquired in the second quarter of 2017 for an aggregate purchase price of €127 million. These 13 properties are leased to ~~affiliates of Median Kliniken S.a.r.l. (“MEDIAN”),~~MEDIAN, pursuant to a third master lease that has a fixed term ending in August 2043 with annual escalators at the greater of ~~one percent~~1% or 70% of the change in German ~~consumer price index.~~CPI. These acquisitions are the final properties of the portfolio of 20 properties in Germany that we agreed to acquire in July 2016 for €215.7 million, of which seven properties totaling €49.5 million closed in December 2016.

On June 22, 2017, we acquired an acute care hospital in Germany for a purchase price of €19.4 ~~million of which €18.6 million was paid upon closing with the remainder being paid over four years.~~million. This property is leased to ~~affiliates of~~ MEDIAN pursuant to ~~an existing~~the original master lease agreement ~~that ends~~effective in 2015 and expiring December 2042 with annual escalators at the greater of ~~one percent~~1% or 70% of the change in German ~~consumer price index.~~CPI.

On January 30, 2017, we acquired an inpatient rehabilitation hospital in Germany for €8.4 million. This acquisition was the final property to close as part of the six hospital portfolio that we agreed to ~~buy~~acquire in September 2016 for an aggregate amount of €44.1 million. This property is leased to ~~affiliates of~~ MEDIAN, pursuant to the original long-term master lease agreement reached with MEDIAN in ~~2015.~~2015 and as described above.

Other Transactions

On June 1, 2017, we acquired the real estate assets of Ohio Valley Medical Center, a 218-bed acute care hospital located in Wheeling, West Virginia, and the East Ohio Regional Hospital, a 139-bed acute care hospital in Martins Ferry, Ohio, from Ohio Valley Health Services, a not-for-profit entity in West Virginia, for an aggregate purchase price of approximately $40 million. We simultaneously leased the facilities to Alecto Healthcare Services LLC (“Alecto”), ~~the current operator of three facilities in our portfolio,~~ pursuant to a lease with a 15-year initial term with 2% annual minimum rent increases and three 5-year extension options. The facilities are cross-defaulted and cross-collateralized with our other hospitals ~~currently~~ operated by Alecto. ~~We also agreed to provide up to $20.0 million in capital improvement funding on these two facilities - none of which has been funded to date.~~ With these acquisitions, we also obtained a 20% interest in the operator of these facilities.

On May 1, 2017, we acquired the real estate of St. Joseph Regional Medical Center, a 145-bed acute care hospital in Lewiston, Idaho for $87.5 million. This facility is leased to RCCH, pursuant to the existing long-term master lease entered into with RCCH in April 2016.

From the respective acquisition dates, the properties acquired in 2017 contributed $16.7 million of revenue and $12.7 million of income (excluding related acquisition expenses and taxes) for the three months ended September 30, 2017, and $25.1 million of revenue and $18.8 million of income (excluding related acquisition expenses and taxes) for the nine months ended September 30, 2017. In addition, we expensed $5.4 million and $15.6 million of acquisition-related costs on these 2017 acquisitions for the three and nine months ended September 30, 2017, respectively.

~~2016 Activity~~

On July 22, 2016, we acquired an acute care facility in Olympia, Washington in exchange for a $93.3 million loan and an additional $7 million in cash. The property has been leased to RCCH on terms substantially similar to those of the existing long-term master lease entered into with RCCH in April 2016.

On June 22, 2016, we closed on the last property of the €688 million MEDIAN transaction, that was announced on April 29, 2015, for a purchase price of €41.6 million. Upon acquisition, this property became subject to an existing master lease between us and affiliates of MEDIAN that has a lease term ending December 2042 and annual escalators at the greater of one percent or 70% of the German consumer price index.

On May 2, 2016, we acquired an acute care hospital in Newark, New Jersey for an aggregate purchase price of $63 million leased to Prime Healthcare Services, Inc. (“Prime”) pursuant to a new fifth master lease, which had a 15-year term with three five-year extension options, plus consumer price-indexed increases, limited to a 2% floor. Furthermore, we committed to advance an additional $30 million to Prime over a three-year period to be used solely for capital additions to the real estate; any such additions will be added to the basis upon which the lessee will pay us rents. None of the additional $30 million has been funded to date.

From the respective acquisition dates, the properties acquired during the nine months ended September 30, 2016, contributed $4.6 million and $3.8 million of revenue and income (excluding related acquisition expenses), respectively, for the three months ended September 30, 2016. From the respective acquisition dates, the properties acquired during the nine months ended September 30, 2016 contributed $5.7 million and $4.9 million of revenue and income (excluding related acquisition expenses), respectively, for the nine months ended September 30, 2016. In addition, we incurred $2.4 million of acquisition-related costs on the 2016 acquisitions for the nine months ended September 30, 2016.

~~Pro Forma Information~~

The following unaudited supplemental pro forma operating data is presented for the three and nine months ended September 30, 2017 and 2016, as if each acquisition was completed on January 1, 2016 and January 1, 2015 for the period ended September 30, 2017 and 2016, respectively. Supplemental pro forma earnings were adjusted to exclude acquisition-related costs on consummated deals incurred. The unaudited supplemental pro forma operating data is not necessarily indicative of what the actual results of operations would have been assuming the transactions had been completed as set forth above, nor do they purport to represent our results of operations for future periods (in thousands, except per share/unit amounts).

   For the Three Months    For the Nine Months
   Ended September 30,    Ended September 30,
   2017    2016    2017    2016
Total revenues
   $ 209,368    $ 207,898    $ 623,635    $ 622,798
Net income
   $ 102,112    $ 107,863    $ 311,306    $ 307,645
Net income per share/unit — diluted
   $ 0.28    $ 0.30    $ 0.85    $ 0.84

Development Activities

During the first nine months of ~~2017,~~2018, we completed the construction on ~~the following facilities:~~

~~Adeptus Health, Inc. (“Adeptus Health”) – We completed four acute care facilities for this tenant during 2017 totaling approximately $68~~Ernest Flagstaff. This $25.5 million ~~in development costs. These facilities are leased pursuant to an existing long-term master lease.~~

~~IMED Group (“IMED”) – Our general acute~~inpatient rehabilitation facility located in ~~Valencia, Spain~~Flagstaff, Arizona opened on March ~~31, 2017,~~1, 2018 and is being leased to ~~IMED~~Ernest pursuant to a ~~30-year~~stand-alone lease, ~~that provides for quarterly fixed rent payments beginning six months from~~with terms similar to the lease start date with annual increases of 1% beginning April 1, 2020. Our ownership in this facility is effected through a joint venture between us and clients of AXA Real Estate, in which we own a 50% interest. Our share of the aggregate purchase and development cost of this facility is approximately €21 million.original master lease.

In April 2017, we completed the acquisition of the long leasehold interest of a development site in Birmingham, England from the Circle Health Group (“Circle”) (the tenant of our existing site in Bath, England) for a purchase price of £2.7 million. Simultaneously with the acquisition, we entered into contracts with the property landlord and the Circle committing us to construct an acute care hospital on the site. Our total development costs are anticipated to be approximately £30 million. Circle is contracted to enter into a lease of the hospital following completion of construction for an initial 15-year term with rent to be calculated based on our total development costs.

See table below for a status update on our current development projects (in thousands):

Property
   Commitment    Costs
Incurred
as of
September 30, 2017    Estimated
Completion
Date
Ernest (Flagstaff, Arizona)
   $ 28,067    $ 16,619    1Q 2018
Circle (Birmingham, England)
   43,221    11,389    1Q 2019





   $ 71,288    $ 28,008

Property	Commitment		Costs Incurred as of September 30, 2018		Estimated Rent Commencement Date
Circle Health (Birmingham, England)	$	44,228	$	24,113	1Q 2019
Circle Health Rehabilitation (Birmingham, England)		21,973		5,304	3Q 2019
Surgery Partners (Idaho Falls, Idaho)		113,468		30,379	1Q 2020
	$	179,669	$	59,796

~~Disposals~~

Disposals

2018 Activity

On August 31, 2018, we completed the previously described joint venture arrangement with Primotop, in which we contributed the real estate of 71 of our post-acute hospitals in Germany, with a fair value of approximately €1.635 billion, resulting in a gain of approximately €500 million. See “Acquisitions” in this Note 3 for further details on this transaction.

On August 31, 2018, we sold a general acute care hospital located in Houston, Texas that was leased and operated by North Cypress for $148 million. The transaction resulted in a gain on sale of $102.4 million, which was partially offset by a net $2.5 million non-cash charge to revenue to write-off related straight-line rent receivables.

On June 4, 2018, we sold three long-term acute care hospitals located in California, Texas, and Oregon, that were leased and operated by Vibra Healthcare, LLC (“Vibra”), which included our equity investment in operations of the Texas facility. Total proceeds from the transaction were $53.3 million in cash, a mortgage loan in the amount of $18.3 million, and a $1.5 million working capital loan. The transaction resulted in a gain on real estate of $24.2 million, which was partially offset by a $5.1 million non-cash charge to revenue to write-off related straight-line rent receivables.

On March 1, 2018, we sold the real estate of St. Joseph Medical Center in Houston, Texas, for approximately $148 million to Steward. In return, we received a mortgage loan equal to the purchase price, with such loan secured by the underlying real estate. The mortgage loan had terms consistent with the other mortgage loans in the Steward portfolio. This transaction resulted in a gain of $1.5 million, offset by a $1.7 million non-cash charge to revenue to write-off related straight-line rent receivables on this property.

2017 Activity

On March 31, 2017, we sold the EASTAR Health System real estate located in Muskogee, Oklahoma, which was leased to RCCH. Total proceeds from this transaction were approximately $64 million, resulting in a gain of $7.4 million, partially offset by a $0.6 million non-cash charge to revenue to write-off related straight-line rent receivables on this property.

~~2016 Activity~~

~~Capella Transaction~~

Effective April 30, 2016, our investment in the operator of Capella Healthcare, Inc. (“Capella”) merged with Regional Care Hospital Partners, Inc. (“Regional Care”) (an affiliate of certain funds managed by affiliates of Apollo Global Management, LLC. (“Apollo”)) to form RCCH. As part of the transaction, we received net proceeds of approximately $550 million including approximately $492 million for our equity investment and loans made as part of the original Capella transaction that closed on August 31, 2015. In addition, we received $210 million in prepayment of two mortgage loans for hospitals in Russellville, Arkansas, and Lawton, Oklahoma, that we made in connection with the original Capella transaction. We made a new $93.3 million loan for a hospital property in Olympia, Washington that was subsequently converted to real estate on July 22, 2016. Additionally, we and an Apollo affiliate invested $50 million each in unsecured senior notes issued by RegionalCare, which we sold to a large institution on June 20, 2016 at par. The proceeds from this transaction represented the recoverability of our investment in full, except for transaction costs incurred of $6.3 million.

We maintained our ownership of five hospitals in Hot Springs, Arkansas; Camden, South Carolina; Hartsville, South Carolina; Muskogee, Oklahoma; and McMinnville, Oregon. Pursuant to the transaction described above, the underlying leases, one of which is a master lease covering all but one property, was amended to shorten the initial fixed lease term, increase the security deposit, and

eliminate the lessees’ purchase option provisions. Due to this lease amendment, we reclassified the lease of the properties under the master lease from a direct finance lease (“DFL”) to an operating lease. This reclassification resulted in a write-off of $2.6 million in unbilled DFL rent in the 2016 second quarter.

~~Post Acute Transaction~~

On May 23, 2016, we sold five properties (three of which were in Texas and two in Louisiana) that were leased and operated by Post Acute Medical (“Post Acute”). As part of this transaction, our outstanding loans of $4 million were paid in full, and we recovered our investment in the operations. Total proceeds from this transaction were $71 million resulting in a net gain of approximately $15 million.

~~Corinth Transaction~~

On June 17, 2016, we sold the Atrium Medical Center real estate located in Corinth, Texas, which was leased and operated by Corinth Investor Holdings. Total proceeds from the transaction were $28 million resulting in a gain on real estate of approximately $8 million. This gain on real estate was offset by approximately $9 million of non-cash charges that included the write-off of our investment in the operations of the facility, straight-line rent receivables, and a lease intangible.

~~HealthSouth Transaction~~

On July 20, 2016, we sold three inpatient rehabilitation hospitals located in Texas and operated by HealthSouth Corporation (“HealthSouth”) for $111.5 million, resulting in a net gain of approximately $45 million.

~~The sales in 2017 and 2016 were not strategic shifts in our operations, and therefore the results of operations related to these facilities were not reclassified as discontinued operations.~~

Summary of Operations for Disposed Assets ~~Disposed~~ in ~~2016~~2018

The properties sold during 2018 do not meet the definition of discontinued operations. However, the following represents the operating results from these properties (excluding ~~gain on~~the St. Joseph sale ~~transaction costs, and impairment or other non-cash charges) from the properties which sold during 2016 (excluding loans repaid~~ in ~~the Capella Transaction)~~March 2018) for the periods presented (in thousands):

   For the Three Months
Ended September 30,    For the Nine Months
Ended September 30,
   2017    2016    2017    2016
Revenues
   $ —      $ 244    $ —      $ 7,851
Real estate depreciation and amortization
   —      —      —      (1,754 )
Property-related expenses
   —      —      —      (114 )
Other income (expense)
   —      45    —      (23 )








Income from real estate dispositions, net
   $ —      $ 289    $ —      $ 5,960

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Revenues(1)	$	20,115		$	35,846		$	88,838		$	95,320
Real estate depreciation and amortization(2)		(237	)		(8,786	)		(15,849	)		(23,092	)
Property-related expenses		(265	)		(388	)		(531	)		(394	)
Other(3)		692,362			(3,303	)		715,246			(11,211	)
Income from real estate dispositions, net	$	711,975		$	23,369		$	787,704		$	60,623

(1)

Includes $2.5 million and $7.6 million of straight-line rent and other write-offs associated with the disposal transactions for the three and nine months ended September 30, 2018, respectively.

(2)

Lower in 2018 as we stopped depreciation on properties once deemed held for sale, such as with the 71 properties on June 30, 2018.

(3)

Includes $695.2 million of gains on sale for the three months ended September 30, 2018 and $719.4 million for the nine months ended September 30, 2018.

Leasing Operations

At September 30, ~~2017,~~2018, leases on ~~two Alecto facilities, 15~~14 Ernest facilities, ten Prime Healthcare Services, Inc. (“Prime”) facilities, and ~~10 Prime~~two Alecto facilities are accounted for as ~~DFLs.~~direct financing leases (“DFLs”). The components of our net investment in DFLs consisted of the following (in thousands):

   As of September 30,
2017    As of December 31,
2016
Minimum lease payments receivable
   $ 2,312,621    $ 2,207,625
Estimated residual values
   448,098    407,647
Less: Unearned income
   (2,064,890 )    (1,967,170 )




Net investment in direct financing leases
   $ 695,829    $ 648,102

	As of September 30, 2018			As of December 31, 2017
Minimum lease payments receivable	$	2,190,840		$	2,294,081
Estimated residual values		434,769			448,339
Less: Unearned income		(1,934,712	)		(2,043,693	)
Net investment in direct financing leases	$	690,897		$	698,727

~~Adeptus Health~~

On ~~April 4, 2017,~~March 15, 2018, we ~~announced that~~entered into a new lease agreement of our long-term acute care facility in Boise, Idaho with a joint venture formed by Vibra and Ernest. The new lease has an initial 15-year fixed term (ending March 2033) with three extension options of five years each. With this transaction, we ~~had agreed in principle~~incurred a non-cash charge of $1.5 million to write-off DFL unbilled interest associated with ~~Deerfield Management Company, L.P. (“Deerfield”), a healthcare-only investment firm,~~the previous lease to ~~the restructuring in bankruptcy of~~ Ernest on this property.

Adeptus Health ~~a current tenant and operator of facilities representing less than 5% of our total gross assets. In furtherance of the restructuring,~~– Transition Properties

As noted in previous filings, we have 16 properties transitioning away from Adeptus Health and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code on April 19, 2017. Funds advised by Deerfield acquired Adeptus Health’s outstanding bank debt and Deerfield agreed to provide additional financing, along with operational and managerial support, to Adeptus Healthin stages over a two year period as part of ~~the restructuring.~~

~~The~~ Adeptus ~~Health restructuring and terms~~Health’s confirmed plan of our agreement with Deerfield provided for the payment to us of 100% of the rent payable during the restructuring and the assumption by Deerfield of all our master leases and related agreements with Adeptus Health at current rental rates. Through November 3, 2017, Adeptus Health is current on its rent obligations to us.

~~On September 29, 2017, the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, entered an order confirming the Debtors’ Third Amended Joint Plan of Reorganization~~reorganization under Chapter 11 of the Bankruptcy ~~Code (the “Plan”).~~Code. Through October 1, 2018, Adeptus Health vacated and stopped making rent payments on 15 properties. As a result of the shortening of our lease term on these properties, we recorded a $4 million charge to accelerate the amortization of the straight-line rent receivables in the first nine months of 2018. The ~~Plan became effective~~final property will be transitioned away from Adeptus Health on October ~~2, 2017 (the “Confirmation Effective Date”).~~ 1, 2019.

In ~~connection with the confirmation~~August and early October 2018, we re-leased three of the ~~Plan, Deerfield agreed~~vacant facilities in the Houston market and five in the San Antonio market, respectively, at rates consistent with that ~~it would assume all~~ of the ~~master leases and related agreements between us and~~previous Adeptus Health ~~cure all defaults that had arisen prior~~lease. At September 30, 2018, our investment in the remaining eight transition facilities (that have not been re-leased) approximates less than 1% of our total assets. Although we expect to the commencement of the bankruptcy proceedings with respect to all properties, and continue to pay rent with respect to all but 16 of the 56 Adeptus Health properties according to the terms of the master leases and related agreements. Rent will remain the same, and a previously disclosed rent concession was removed from the terms. We plan to re-lease re-tenant and/or sell the remaining ~~16 properties, and Adeptus Health will continue~~eight facilities in the near future, we lowered the carrying value of the seven remaining vacant facilities by $18 million to ~~pay rent with respect to those 16 properties until~~fair value in the earlier of (a) transition to a new operator is complete, (b) two years following the Confirmation Effective Date (for one facility), (c) one year following the Confirmation Effective Date (for seven facilities), (d) six months following the Confirmation Effective Date (for three facilities), and (e) three months ~~following~~ended September 30, 2018, based on market data received during the ~~Confirmation Effective Date (for five facilities). These~~2018 third quarter.

Gilbert and Florence Facilities

In the first quarter of 2018, we terminated the lease ~~or sale transactions are expected~~at our Gilbert and Florence, Arizona facilities due to ~~be completed by~~ the ~~end~~tenant not meeting its rent obligations pursuant to the lease. As a result of ~~2019.~~the lease terminating, we recorded a charge of $1.1 million to reserve against the straight-line rent receivables in February 2018. On April 25, 2018, this former tenant filed for involuntary bankruptcy. At September 30, 2018, all outstanding receivables were completely reserved. Although no assurances can be made that we will not ~~recognize a loss~~have any impairment charges in the future, we believe our investment in the ~~sale~~Gilbert and Florence facilities of $37.5 million or ~~re-leasing~~0.4% of total assets at September 30, 2018, is fully recoverable.

Alecto Healthcare facilities

At September 30, 2018, we own four acute care facilities that are leased to Alecto and have a mortgage loan on a fifth property. Our total investment in these properties is approximately 1% of our total assets. Through October 2018, Alecto is current on its rent and interest obligations to us. However, we have seen continued softening in their markets through the 2018 third quarter, which could impact their ability to meet future obligations to us. Thus, in the 2018 third quarter, we lowered the carrying value of the ~~assets related to these 16 facilities will not result in any material loss or impairment.~~

~~On April 4, 2017, we announced that our Louisiana freestanding emergency facilities then-operated~~four owned properties by Adeptus Health (with a total budgeted investment of approximately $24.5 million) had been re-leased to Ochsner Clinic Foundation (“Ochsner”), a health care system in the New Orleans area. We incurred a non-cash charge of $0.5$30 million to write-off the straight-line rent receivables associated with the previous Adeptus Health lease on these properties. On October 18, 2017, Ochsner agreed to an amended and restated lease that provided for initial terms of 15 years with a 9.2% average minimum lease rate based on our total development and construction cost, as well as the addition of three five-year renewal options.fair value.

~~Hoboken Facility~~

In the first half of 2017, a subsidiary of the operator of our Hoboken facility acquired 20% of our subsidiary that owns the real estate for $10 million, which increased its interest in our real estate entity to 30%. This transaction is reflected in the non-controlling interest line of our condensed consolidated balance sheets.

Loans

The following is a summary of our loans (in thousands):


	As of September 30, 2017		As of December 31, 2016		��	As of September 30, 2018		As of December 31, 2017
Mortgage loans	$	1,777,555	$	1,060,400		$	1,428,069	$	1,778,316
Acquisition loans		119,256		121,464			117,376		118,448
Working capital and other loans		32,453		34,257			365,077		31,761
						$	1,910,522	$	1,928,525
	$	1,929,264	$	1,216,121

~~As of September 30, 2017, our~~The decrease in mortgage loans ~~consist~~relates to the use of four Steward mortgage loans ~~made~~ to ~~four operators that are secured by~~fund our acquisition of the related fee simple real estate of ~~14 properties,~~the four facilities during 2018, while the increase to working capital and ~~include the $700 million investment made on September 29, 2017, as part of the Steward Transaction. Our non-mortgage~~other loans ~~typically consist of loans~~primarily relates to our ~~tenants~~€290 million shareholder loan to the joint venture with Primotop – see “Acquisitions” in this Note 3 for ~~acquisitions and working capital purposes.~~further information. At September 30, ~~2017,~~2018, acquisition loans includes ~~$114.4~~$113.3 million in loans to ~~Ernest.~~Ernest; however, as described in Note 10, the full Ernest acquisition loan balance was repaid on October 4, 2018.

Concentrations of Credit Risk

~~Our revenue~~We monitor concentration ~~for the nine months ended September 30, 2017 as compared~~risk in several ways due to the ~~prior year is as follows (dollars~~nature of our real estate assets that are vital to the communities in ~~thousands):~~which they are located and given our history of being able to replace inefficient operators of our facilities if needed, with more effective operators:

~~Revenue by Operator~~

   For the Nine Months Ended
September 30, 2017 For the Nine Months Ended
September 30, 2016
Operators
   Total
Revenue    Percentage of
Total Revenue Total
Revenue    Percentage of
Total Revenue
Steward (1)
   $ 114,776    23.0 % $ 20,969    5.4 %
Prime
   94,644    18.9 % 89,389    23.1 %
MEDIAN
   73,793    14.8 % 70,242    18.1 %
Ernest
   53,007    10.6 % 50,564    13.0 %
Adeptus Health
   39,638    7.9 % 25,873    6.7 %
RCCH
   30,668    6.1 % 42,776    11.0 %
Other operators
   93,258    18.7 % 88,041    22.7 %






Total
   $ 499,784    100.0 % $ 387,854    100.0 %

Facility concentration – At September 30, 2018, we had no investment of any single property greater than 4% of our total assets, which is consistent with December 31, 2017.

~~(1)~~

~~Includes approximately $21.6 million and $21 million of revenue for~~

Operator concentration – For the nine months ended September 30, ~~2017~~2018, revenue from Steward, Prime, MEDIAN, and ~~2016,~~Ernest represented 37%, 16%, 16% and 9%, respectively. In comparison, these operators represented 23%, 19%, 15% and 11%, respectively, ~~from facilities leased to IASIS prior to it being acquired by Steward on~~for the first nine months of 2017.

Geographic concentration – At September ~~29, 2017.~~

~~Revenue by U.S. State and Country~~

   For the Nine Months Ended
September 30, 2017 For the Nine Months Ended
September 30, 2016
U.S. States and Other Countries
   Total
Revenue    Percentage of
Total Revenue Total
Revenue    Percentage of
Total Revenue
Massachusetts
   $ 79,741    16.0 % $ —      —
Texas
   74,489    14.9 % 72,811    18.8 %
California
   49,681    9.9 % 49,724    12.8 %
New Jersey
   32,756    6.6 % 28,398    7.3 %
Arizona
   23,902    4.8 % 17,678    4.6 %
All other states
   147,606    29.5 % 143,289    36.9 %






Total U.S.
   $ 408,175    81.7 % $ 311,900    80.4 %
Germany
   $ 88,525    17.7 % $ 72,718    18.8 %
United Kingdom, Italy, and Spain
   3,084    0.6 % 3,236    0.8 %






Total International
   $ 91,609    18.3 % $ 75,954    19.6 %






Grand Total
   $ 499,784    100.0 % $ 387,854    100.0 %

On a total gross asset basis, which is total assets before accumulated depreciation/amortization, assumes all real estate binding commitments on new investments and unfunded amounts on development deals and commenced capital improvement projects are fully funded (see Notes 9 and 10 of Item 1 on this Form 10-Q), and assumes cash on hand is fully used in these transactions, our concentration as of September 30, 2017 as compared to December 31, 2016 is as follows (dollars in thousands):

~~Gross Assets by Operator~~

   As of September 30, 2017 As of December 31, 2016
Operators
   Total
Gross Assets    Percentage of
Total
Gross Assets Total
Gross Assets    Percentage of
Total
Gross Assets
Steward (1)
   $ 3,445,379    36.8 % $ 1,609,583    22.5 %
MEDIAN
   1,209,767    12.9 % 993,677    13.9 %
Prime
   1,118,070    12.0 % 1,144,055    16.0 %
Ernest
   631,501    6.7 % 627,906    8.8 %
RCCH
   506,265    5.4 % 566,600    7.9 %
Other operators
   1,992,448    21.3 % 1,900,397    26.7 %
Other assets
   452,505    4.9 % 300,903    4.2 %






Total
   $ 9,355,935    100.0 % $ 7,143,121    100.0 %

~~(1)~~

~~Includes~~30, 2018, investments in the U.S. and Europe represented approximately ~~$360 million~~80% and 20%, respectively, of ~~gross~~our total assets, ~~as of~~which is consistent with December 31, ~~2016 related~~2017.

Facility type concentration – For the nine months ended September 30, 2018, approximately 72% of our revenues are from our general acute care facilities, while rehabilitation and long-term acute care facilities make up 24% and 4%, respectively. These percentages are similar to ~~facilities leased to IASIS prior to it being acquired by Steward on September 29,~~those for the first nine months of 2017.

~~Gross Assets by U.S. State and Country~~

   As of September 30, 2017 As of December 31, 2016
U.S. States and Other Countries
   Total
Gross Assets    Percentage of
Total
Gross Assets Total
Gross Assets    Percentage of
Total
Gross Assets
Massachusetts
   $ 1,284,156    13.7 % $ 1,250,000    17.5 %
Texas
   1,275,784    13.6 % 947,443    13.3 %
Utah
   1,035,793    11.1 % 107,151    1.5 %
California
   542,879    5.8 % 542,889    7.6 %
Arizona
   498,844    5.3 % 331,834    4.6 %
All other states
   2,506,538    26.8 % 2,234,332    31.3 %
Other domestic assets
   397,850    4.3 % 264,215    3.7 %






Total U.S.
   $ 7,541,844    80.6 % $ 5,677,864    79.5 %
Germany
   $ 1,556,392    16.6 % $ 1,281,649    17.9 %
United Kingdom, Italy, and Spain
   203,044    2.2 % 146,920    2.1 %
Other international assets
   54,655    0.6 % 36,688    0.5 %






Total International
   $ 1,814,091    19.4 % $ 1,465,257    20.5 %






Grand Total
   $ 9,355,935    100.0 % $ 7,143,121    100.0 %

~~On an individual property basis, we had no investment of any single property greater than 3.8% of our total gross assets as of September 30, 2017.~~

4. Debt

The following is a summary of our debt ~~(dollar amounts in~~(in thousands):

							As of September 30, 2018			As of December 31, 2017
	As of September 30, 2017			As of December 31, 2016
Revolving credit facility^(A)	$	445,359		$	290,000
Term loans		200,000			263,101
6.375% Senior Unsecured Notes due 2022:
Principal amount		350,000			350,000
Unamortized premium		1,549			1,814

		351,549			351,814
5.750% Senior Unsecured Notes due 2020^(B)		—			210,340
4.000% Senior Unsecured Notes due 2022^(B)		590,700			525,850
Revolving credit facility(A)							$	22,153		$	840,810
Term loan								200,000			200,000
4.000% Senior Unsecured Notes due 2022(B)								580,200			600,250
5.500% Senior Unsecured Notes due 2024		300,000			300,000			300,000			300,000
6.375% Senior Unsecured Notes due 2024		500,000			500,000			500,000			500,000
3.325% Senior Unsecured Notes due 2025^(B)		590,700			—
3.325% Senior Unsecured Notes due 2025(B)								580,200			600,250
5.250% Senior Unsecured Notes due 2026		500,000			500,000			500,000			500,000
5.000% Senior Unsecured Notes due 2027		1,400,000			—			1,400,000			1,400,000
							$	4,082,553		$	4,941,310
	$	4,878,308		$	2,941,105
Debt issue costs, net		(46,044	)		(31,764	)		(38,704	)		(42,643	)
							$	4,043,849		$	4,898,667
	$	4,832,264		$	2,909,341

(A)	Includes £4£17 million and £8 million of GBP-denominated borrowings that reflect the exchange rate at September 30, ~~2017.~~2018 and December 31, 2017, respectively.

(B)	These notes are Euro-denominated and reflect the exchange rate at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

As of September 30, ~~2017,~~2018, principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):


2017	$	350,000	(A)
2018		—		$	-
2019		—			-
2020		—			-
2021		445,359			22,153
2022					780,200
Thereafter		4,081,400			3,280,200

Total	$	4,876,759		$	4,082,553

~~(A)~~

~~The $350 million 6.375% Senior Unsecured Notes due 2022 were redeemed on October 7, 2017 with proceeds from our $1.4 billion 5.000% Senior Unsecured Notes due 2027.~~

2018 Activity

In preparation of the joint venture with Primotop described under “Acquisitions” in Note 3, we issued secured debt on August 3, 2018, resulting in gross proceeds of €655 million. Subsequently, on August 31, 2018, the secured debt was contributed along with the related real estate of 71 properties to form the joint venture. Provisions of the secured debt include a term of seven years and a swapped fixed rate of approximately 2.3%.

2017 Activity

~~Credit Facility~~

On February 1, 2017, we replaced our previous unsecured credit facility with a new revolving credit and term loan agreement (“Credit Facility”). The ~~new agreement~~Credit Facility includes a $1.3 billion unsecured revolving loan facility, a $200 million unsecured term loan facility ($50 million lower than the previous term loan), and a new €200 million unsecured term loan facility. The new unsecured revolving loan facility matures in February 2021 and can be extended for an additional 12 months at our option. The $200 million unsecured term loan facility matures on February 1, 2022, and

the €200 million unsecured term loan facility had a maturity date of January 31, 2020; however, it was paid off on March 30, 2017 – see below. The commitment fee on the revolving loan facility is paid at a rate of 0.25%. The term loan and/or revolving loan commitments may be increased in an aggregate amount not to exceed $500 million.

At our election, loans under the Credit Facility may be made as either ABR Loans or Eurodollar Loans. The applicable margin for term loans that are ABR Loans is adjustable on a sliding scale from 0.00% to 0.95% based on our current credit rating. The applicable margin for term loans that are Eurodollar Loans is adjustable on a sliding scale from 0.90% to 1.95% based on our current credit rating. The applicable margin for revolving loans that are ABR Loans is adjustable on a sliding scale from 0.00% to 0.65% based on our current credit rating. The applicable margin for revolving loans that are Eurodollar Loans is adjustable on a sliding scale from 0.875% to 1.65% based on our current credit rating. The commitment fee is adjustable on a sliding scale from 0.125% to 0.30% based on our current credit rating and is payable on the revolving loan facility. At September 30, 2017, the interest rate in effect on our term loan and revolver was 2.74% and 2.48%, respectively.

On March 30, 2017, we prepaid and extinguished the €200 million of outstanding term loans under the euro term loan facility portion of our Credit Facility. To fund such prepayment, including accrued and unpaid interest thereon, we used part of the proceeds of the 3.325% Senior Unsecured Notes due 2025 – see discussion below.

~~5.750% Senior Unsecured Notes due 2020~~

On March 4, 2017, we redeemed the €200 million aggregate principal amount of our 5.750% Senior Unsecured Notes due 2020 and incurred a redemption premium of approximately $9 million. We funded this redemption, including the premium and accrued interest, with the proceeds of the new euro term loan (see discussion above) together with cash on hand.

~~3.325% Senior Unsecured Notes due 2025~~2020.

On March 24, 2017, we completed a €500 million senior unsecured notes offering (“3.325% Senior Unsecured Notes due 2025”). ~~Interest on~~A portion of the ~~notes is payable annually~~proceeds from this offering were used to prepay and extinguish the €200 million term loan facility portion of our Credit Facility on March 24 of each year. The notes pay interest in cash at a rate of 3.325% per year. The notes mature on March 24, 2025. We may redeem some or all of the 3.325% Senior Unsecured Notes due 2025 at any time. If the notes are redeemed prior to 90 days before maturity, the redemption price will be equal to 100% of their principal amount, plus a make-whole premium, plus accrued and unpaid interest up to, but excluding, the applicable redemption date. Within the period beginning on or after 90 days before maturity, the notes may be redeemed, in whole or in part, at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the applicable redemption date. The 3.325% Senior Unsecured Notes due 2025 are fully and unconditionally guaranteed on a senior unsecured basis by us. In the event of a change of control, each holder of the notes may require us to repurchase some or all of our notes at a repurchase price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest up to, but excluding, the date of the purchase.

~~5.000% Senior Unsecured Notes due 2027~~30, 2017.

On September 7, 2017, we completed a $1.4 billion senior unsecured notes offering (“5.000% Senior Unsecured Notes due 2027”). Interest on the notes is payable annually on April 15 and October 15 of each year, commencing on April 15, 2018. The notes pay interest in cash at a rate of 5.000% per year. The notes mature on October 15, 2027. We may redeem some or all of the notes at any time prior to October 15, 2022 at a “make whole” redemption price. On or after October 15, 2022, we may redeem some or all of the notes at a premium that will decrease over time. In addition, at any time prior to October 15, 2020, we may redeem up to 40% of the notes at a redemption price equal to 105% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, using proceeds from one or more equity offerings. In the event of a change in control, each holder of the notes may require us to repurchase some or all of the notes at a repurchase price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest to the date of purchase.

We used a portion of the net proceeds from the 5.000% Senior Unsecured Notes due 2027 offering to redeem the $350 million aggregate principal amount of our 6.375% Senior Unsecured Notes due ~~2022. The notes were repaid~~2022 on October 7, 2017, and we will incur a debt refinancing charge of approximately $14 million in the fourth quarter of 2017, consisting of an $11.2 million redemption premium along with the write-off of the unamortized premium and deferred debt issuance costs associated with the redeemed notes.2017.

Furthermore, the completion of the 5.000% Senior Unsecured Notes due 2027 offering resulted in the cancellation of the $1.0 billion term loan facility commitment from JP Morgan Chase Bank, N.A. that we received to assist in funding the September 2017 Steward transaction. With this commitment, we paid $5.2 million of underwriting and other fees, which we fully expensed upon the cancellation of the commitment.

~~Other~~

On September 29, 2017, we prepaid the principal amount of the mortgage loan on our property in Kansas City, Missouri at par in the amount of $12.9 million. To fund such prepayment, including accrued and unpaid interest thereon, we used borrowings from the revolving credit facility portion of our Credit Facility.

With the replacement of our old credit facility, the redemption of the 5.750% Senior Unsecured Notes due 2020, the payoff of our €200 million euro term loan, the cancellation of the $1.0 billion term loan facility commitment, and the payment of our $12.9 million mortgage loan, we incurred a debt refinancing charge of $18.8 million in the first nine months of 2017.

~~2016 Activity~~

~~5.250% Senior Unsecured Notes due 2026~~

On July 22, 2016, we completed a $500 million senior unsecured notes offering (“5.250% Senior Unsecured Notes due 2026”). Interest on the notes is payable on February 1 and August 1 of each year. Interest on the notes is to be paid in cash at a rate of 5.25% per year. The notes mature on August 1, 2026. We may redeem some or all of the notes at any time prior to August 1, 2021 at a “make whole” redemption price. On or after August 1, 2021, we may redeem some or all of the notes at a premium that will decrease over time. In addition, at any time prior to August 1, 2019, we may redeem up to 35% of the notes at a redemption price equal to 105.25% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, using proceeds from one or more equity offerings. In the event of a change in control, each holder of the notes may require us to repurchase some or all of the notes at a repurchase price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest to the date of purchase.

We used the net proceeds from the 5.250% Senior Unsecured Notes due 2026 offering to redeem our $450 million 6.875% Senior Unsecured Notes due 2021. This redemption resulted in a $22.5 million debt refinancing charge during the 2016 third quarter, consisting of a $15.5 million redemption premium along with the write-off of deferred debt issuance costs associated with the redeemed notes.

~~6.375% Senior Unsecured Notes due 2024~~

On February 22, 2016, we completed a $500 million senior unsecured notes offering (“6.375% Senior Unsecured Notes due 2024”). Interest on the notes is payable on March 1 and September 1 of each year. Interest on the notes is paid in cash at a rate of 6.375% per year. The notes mature on March 1, 2024. We may redeem some or all of the notes at any time prior to March 1, 2019 at a “make whole” redemption price. On or after March 1, 2019, we may redeem some or all of the notes at a premium that will decrease over time. In addition, at any time prior to March 1, 2019, we may redeem up to 35% of the notes at a redemption price equal to 106.375% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, using proceeds from one or more equity offerings. In the event of a change in control, each holder of the notes may require us to repurchase some or all of the notes at a repurchase price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest to the date of purchase.

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 Credit Facility limit the amount of dividends we can pay as a percentage of normalized adjusted funds from operations, ~~(“FFO”),~~ as defined in the agreements, on a rolling four quarter basis. At September 30, ~~2017,~~2018, the dividend restriction was 95% of normalized adjusted ~~FFO.~~funds from operations (“NAFFO”). The indentures governing our senior unsecured notes also limit the amount of dividends we can pay based on the sum of 95% of ~~FFO,~~NAFFO, proceeds of equity issuances and certain other net cash proceeds. Finally, our senior unsecured notes require us to maintain total unencumbered assets (as defined in the related indenture) of not less than 150% of our unsecured indebtedness.

In addition to these restrictions, the Credit Facility contains customary financial and operating covenants, including covenants relating to our total leverage ratio, fixed charge coverage ratio, secured leverage ratio, consolidated adjusted net worth, unsecured leverage ratio, and unsecured interest coverage ratio. ~~This~~The Credit 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 Credit Facility, the entire outstanding balance may become immediately due and payable. At September 30, ~~2017,~~2018, we were in compliance with all such financial and operating covenants.

5. Common Stock/Partners’ Capital

Medical Properties Trust, Inc.

~~2017 Activity~~

On May 1, 2017, we completed an underwritten public offering of approximately 43.1 million shares (including the exercise of the underwriters’ 30-day option to purchase an additional 5.6 million shares) of our common stock, resulting in net proceeds of approximately $548 million, after deducting offering expenses.

~~2016 Activity~~

On September 30, 2016, we completed an underwritten public offering of 57.5 million shares (including the exercise of the underwriters’ 30-day option to purchase an additional 7.5 million shares) of our common stock, resulting in net proceeds of $799.5 million, after deducting estimated offering expenses.

~~During the nine months ended September 30, 2016, we sold approximately 15 million shares of common stock under anat-the-market~~ equity offering program, resulting in net proceeds of approximately $224 million, after deducting approximately $2.8 million of commissions. There is no availability under this equity offering program at September 30, 2017.

MPT Operating Partnership, L.P.

At September 30, ~~2017,~~2018, the Company has a ~~99.89%~~99.92% ownership interest in the Operating Partnership with the remainder owned by ~~three~~two other partners, ~~two of whom~~who are ~~employees and one of whom is the estate of a former director.~~ employees.

During the nine months ended September 30, 2017, ~~and 2016,~~ the Operating Partnership issued approximately 43.1 million units ~~and approximately 72.5 million units, respectively,~~ in direct response to the common stock offerings by Medical Properties Trust, Inc. during the same period.

6. Stock Awards

We 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 is administered by the Compensation Committee of the Board of Directors. We have reserved 8,196,770 shares of common stock for awards under the Equity Incentive Plan, ~~for~~out of which ~~3.3 million~~1,697,002 shares remain available for future stock awards as of September 30, ~~2017.~~2018. Share-based compensation expense totaled ~~$7.1~~$11.7 million and ~~$5.8~~$7.1 million for the nine months ended September 30, 2018 and 2017, ~~and 2016, respectively, of which $0.4 million relates to the acceleration of vestings on time-based awards previously granted to three former board members.~~respectively.

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. 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 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 senior unsecured notes using Level 2 inputs such as quotes from securities dealers and market makers. We estimate the fair value of our revolving credit facility and term ~~loans~~loan 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):


	September 30, 2017						December 31, 2016						As of						As of
	Book			Fair			Book			Fair			September 30, 2018						December 31, 2017
Asset (Liability)	Value			Value			Value			Value			Book Value			Fair Value			Book Value			Fair Value
Interest and rent receivables	$	105,817		$	105,803		$	57,698		$	57,707		$	87,939		$	87,067		$	78,970		$	78,028
Loans (1)		1,698,866			1,722,912			986,987			1,017,428			1,681,562			1,700,346			1,698,471			1,722,101
Debt, net		(4,832,264	)		(5,032,821	)		(2,909,341	)		(2,966,759	)		(4,043,849	)		(4,087,207	)		(4,898,667	)		(5,073,707	)

~~(1)~~

(1)

Excludes loans related to Ernest since they are recorded at fair value and discussed below.

Items Measured at Fair Value on a Recurring Basis

Our equity interest in Ernest along with their related loans are 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 currently existing equity interests or loans.

At September 30, ~~2017,~~2018, these amounts were as follows (in thousands):


	Fair				Asset Type
Asset Type	Value		Cost		Classification		Fair Value		Original Cost		Asset Type Classification
Mortgage loans	$	115,000	$	115,000		Mortgage loans	$	115,000	$	115,000	Mortgage loans
Acquisition and other loans		115,398		115,398		Other loans
Equity investments		3,300		3,300		Other assets
Equity investment and other loans								108,373		117,260	Other loans/other assets
							$	223,373	$	232,260
	$	233,698	$	233,698

Our ~~mortgage~~equity investment and other loans with Ernest are recorded at fair value using a Level 1 input based on the proceeds of the October 4, 2018 transaction in which such equity investment was sold and such loans were repaid, as more fully described in Note 10 to this Form 10-Q. Our mortgage loans are recorded at fair value based on Level 2 inputs by discounting the estimated future cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities. Our equity investment in Ernest is 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 the equity investment 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 the cash flow model, our observable inputs include use of a capitalization rate, discount rate (which is based on a weighted-average cost of capital), market interest rates, and our unobservable input includes an adjustment for a marketability discount (“DLOM”) on our equity investment of 40% at September 30, 2017.

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 Ernest’s historical results, meetings with key members of management, and our understanding of trends and developments within the healthcare industry.

In arriving at the DLOM, we started with a DLOM range based on the results of studies supporting valuation discounts for other transactions or structures without a public market. To select the appropriate DLOM within the range, we then considered many qualitative factors including the percent of control, the nature of the underlying investee’s business along with our rights as an investor pursuant to the operating agreement, the size of investment, expected holding period, number of shareholders, access to 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
   $ (51 )
- 100 basis points
   51

Because the fair value of the Ernest investments noted above ~~approximate their~~is below our original cost, we ~~did not recognize any~~recognized an unrealized ~~gains/losses~~loss during the nine months of 2018. No unrealized gain/loss on the Ernest investments was recorded in the first nine months of ~~2017 or 2016. To date, we have not received any distribution payments from our equity investment in Ernest.~~2017.

8. Earnings Per ~~Share/Common Unit~~Share

Medical Properties Trust, Inc.

Our earnings per share were calculated based on the following ~~(in~~(amounts in thousands):


	For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2017			2016			2018			2017
Numerator:
Net income	$	76,881		$	70,543		$	736,476		$	76,881
Non-controlling interests’ share in net income		(417	)		(185	)		(442	)		(417	)
Participating securities’ share in earnings		(82	)		(154	)		(290	)		(82	)

Net income, less participating securities’ share in earnings	$	76,382		$	70,204		$	735,744		$	76,382

Denominator:
Basic weighted-average common shares		364,315			246,230			365,024			364,315
Dilutive potential common shares		731			1,238			1,443			731

Dilutive weighted-average common shares		365,046			247,468			366,467			365,046


	For the Nine Months Ended September 30,
	2017			2016
Numerator:
Income from continuing operations	$	218,862		$	182,693
Non-controlling interests’ share in continuing operations		(1,013	)		(683	)
Participating securities’ share in earnings		(307	)		(430	)

Income from continuing operations, less participating securities’share in earnings		217,542			181,580
Loss from discontinued operations attributable to MPT common stockholders		—			(1	)

Net income, less participating securities’ share in earnings	$	217,542		$	181,579

Denominator:
Basic weighted-average common shares		345,076			240,607
Dilutive potential common shares		520			825

Dilutive weighted-average common shares		345,596			241,432

	For the Nine Months Ended September 30,
	2018			2017
Numerator:
Net income	$	939,536		$	218,862
Non-controlling interests’ share in net income		(1,334	)		(1,013	)
Participating securities’ share in earnings		(808	)		(307	)
Net income, less participating securities’ share in earnings	$	937,394		$	217,542
Denominator:
Basic weighted-average common shares		364,934			345,076
Dilutive potential common shares		850			520
Dilutive weighted-average common shares		365,784			345,596

MPT Operating Partnership, L.P.

Our earnings per common unit were calculated based on the following (in thousands):


	For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2017			2016			2018			2017
Numerator:
Net income	$	76,881		$	70,543		$	736,476		$	76,881
Non-controlling interests’ share in net income		(417	)		(185	)		(442	)		(417	)
Participating securities’ share in earnings		(82	)		(154	)		(290	)		(82	)

Net income, less participating securities’ share in earnings	$	76,382		$	70,204		$	735,744		$	76,382

Denominator:
Basic weighted-average units		364,315			246,230			365,024			364,315
Dilutive potential units		731			1,238			1,443			731

Dilutive weighted-average units		365,046			247,468

Diluted weighted-average units								366,467			365,046

   For the Nine Months
Ended September 30,
   2017    2016
Numerator:

Income from continuing operations
   $ 218,862    $ 182,693
Non-controlling interests’ share in continuing operations
   (1,013 )    (683 )
Participating securities’ share in earnings
   (307 )    (430 )




Income from continuing operations, less participating securities’ share in earnings
   217,542    181,580
Loss from discontinued operations attributable to MPT Operating Partnership partners
   —      (1 )




Net income, less participating securities’ share in earnings
   $ 217,542    $ 181,579




Denominator:

Basic weighted-average units
   345,076    240,607
Dilutive potential units
   520    825




Dilutive weighted-average units
   345,596    241,432

	For the Nine Months Ended September 30,
	2018			2017
Numerator:
Net income	$	939,536		$	218,862
Non-controlling interests’ share in net income		(1,334	)		(1,013	)
Participating securities’ share in earnings		(808	)		(307	)
Net income, less participating securities’ share in earnings	$	937,394		$	217,542
Denominator:
Basic weighted-average units		364,934			345,076
Dilutive potential units		850			520
Diluted weighted-average units		365,784			345,596

9. Commitments and Contingencies

Commitments

On ~~September 28, 2016,~~June 6, 2018, we entered into a definitive agreement to acquire ~~one acute care hospital~~four rehabilitation hospitals in ~~Washington~~Germany for a purchase price of approximately ~~$17.5 million. Upon closing, this facility will be leased to RCCH, pursuant to the current long-term master lease. Closing~~€23 million (including real estate transfer taxes). We have closed on three of the ~~transaction, which is expected to be completed no later than~~facilities during the ~~first~~third quarter of 2018, ~~is subject~~with the remaining facility expected to ~~customary~~close in the fourth quarter of 2018 for approximately €5.8 million (including real estate ~~regulatory and other closing conditions.~~transfer taxes). See Note 3 “Acquisitions” for more details on this transaction.

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.

10. Subsequent Events

On October ~~5, 2017,~~4, 2018, we ~~entered into definitive agreements~~finalized a recapitalization agreement to ~~acquire three rehabilitation hospitals~~sell our investment in ~~Germany~~the operations of Ernest Health Holdings, LLC and be repaid for ~~an aggregate purchase price to us of approximately €80~~our outstanding acquisition loans, working capital loans, and any unpaid interest. Total proceeds received from this transaction approximated $176 million. ~~Upon closing, the facilities~~We will ~~be leased to MEDIAN, pursuant to a newlong-term~~ ~~master lease. The lease will begin on the day the first property is funded, and the term will be 27 years from the funding date~~retain ownership of the third property. The lease provides for increases of the greater of 1% or 70% of the change in German CPI. Closing of the transaction, which is expected to begin during the fourth quarter of 2017, is subject to customary real estate ~~regulatory~~ and ~~other closing conditions.~~secured mortgage loans of our Ernest properties.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

The following discussion and analysis of the consolidated financial condition and consolidated results of operations are presented on a combined basis for Medical Properties Trust ~~Inc.~~ and MPT Operating Partnership, L.P. as there are no material differences between these two entities.

The following discussion and analysis of the consolidated financial condition and consolidated results of operations 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, ~~2016.~~2017.

Forward-Looking Statements.

This 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. 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 ~~Securities and Exchange Commission (SEC)~~SEC under the Securities Exchange Act of ~~1934.~~1934, as amended. Such factors include, among others, the following:

U.S. (both national and local) and European (in particular Germany, the United Kingdom, Spain and Italy) political, economic, business, real estate, and other market conditions;

the competitive environment in which we operate;

the execution of our business plan;

financing ~~risks;~~risks, such as our ability to repay, refinance, restructure, or extend our indebtedness as it becomes due;

the risk that a condition to closing under the agreements governing any or all of our outstanding transactions that have not closed as of the date hereof ~~(including the RCCH and MEDIAN transactions described in Notes 9 and 10)~~ may not be satisfied;

the possibility that the anticipated benefits from any or all of the transactions we enter into will take longer to realize than expected or will not be realized at all;

acquisition and development risks;

potential environmental contingencies and other liabilities;

adverse developments affecting the financial health of one or more of our tenants, including insolvency;

other factors affecting the real estate industry generally or the healthcare real estate industry in particular;

our ability ~~and willingness~~ to maintain our status as a real estate investment trust, or REIT, for U.S. federal and state income tax ~~purposes (particularly in light of current tax reform considerations);~~purposes;

our ability to attract and retain qualified personnel;

changes in foreign currency exchange rates;

U.S. (both federal and state) and European (in particular Germany, the United Kingdom, Spain and Italy) healthcare and other regulatory requirements; and

U.S. national and local economic conditions, as well as conditions in Europe and any other foreign jurisdictions where we own or will own healthcare facilities, which may have a negative effect on the following, among other things:

the financial condition of our tenants, our lenders, ~~counterparties to interest rate swaps and other hedged transactions and~~or institutions that ~~may~~ hold our cash balances, which may expose us to increased risks of default by these parties;

our ability to obtain equity or debt financing on attractive terms or at all, which may adversely impact our ability to pursue acquisition and development opportunities, our ability to refinance existing debt and our future interest expense; and

the value of our real estate assets, which may limit our ability to dispose of assets at attractive prices or obtain or maintain debt financing secured by our properties or on an unsecured basis.

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 and rehabilitative 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 and market conditions that may affect their profitability, which could impact our results. Accordingly, we monitor certain key factors, changes to which we believe may provide early indications of conditions that may affect the level of risk in our portfolio.

Key factors that we consider in underwriting prospective tenants and borrowers and in monitoring the performance of existing tenants and borrowers include the following:

admission levels and surgery/procedure/diagnosis volumes by type;

the current, historical and prospective operating margins (measured by earnings before interest, taxes, depreciation, amortization and facility rent) of each tenant or borrower and at each facility;

the ratio of our tenants’ ~~and~~or borrowers’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;

trends in the source of our tenants’ or borrowers’ revenue, including the relative mix of public payors (including Medicare, Medicaid/MediCal, managed care in the U.S. and pension funds in Germany) and private payors (including commercial insurance and private pay patients);

the effect of evolving healthcare legislation and other regulations on our tenants’ or borrowers’ profitability and ~~borrowers’ profitability;~~liquidity; and

the competition and demographics of the local and surrounding areas in which the tenants or borrowers operate.

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

trends in the cost and availability of capital, including market interest rates, that our prospective tenants may use for their real estate assets instead of financing their real estate assets through lease structures;

changes in healthcare regulations that may limit the opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate;

reductions in reimbursements from Medicare, state healthcare programs, and commercial insurance providers that may reduce our tenants’ or borrowers’ profitability and our lease rates;

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 ~~2016~~2017 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include revenue recognition, ~~investment~~investments in real estate, purchase price allocation, loans, losses from rent and interest receivables, stock-based compensation, our fair value option election, and our accounting policy on consolidation. During the nine months ended September 30, ~~2017,~~2018, there were no material changes to these policies.

Overview

We are a self-advised ~~real estate investment trust (“REIT”)~~REIT focused on investing in and owning net-leased healthcare facilities across the U.S. and selectively in foreign jurisdictions. We have operated as a REIT since ~~April 6, 2004, and accordingly, elected REIT status upon the filing of our calendar year 2004 federal income tax return.~~2004. 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. We also make mortgage loans to healthcare operators collateralized by their real estate assets. In addition, we selectively make loans to certain of our operators through our ~~TRSs,~~taxable REIT subsidiaries, the proceeds of which are typically used for acquisitions and working capital. Finally, from time to time, we acquire a profits or other equity interest in our tenants that gives us a right to share in such tenant’s profits and losses.

At September 30, ~~2017,~~2018, our portfolio consisted of ~~271~~275 properties leased or loaned to 3029 operators, of which ~~two~~three are under development and 1411 are in the form of mortgage loans.

Our investments in healthcare real estate, including mortgage and other loans, as well as any equity investments in our tenants are considered a single reportable segment. All of our investments are currently located in the U.S. and Europe. Our total assets are made up of the following (dollars in thousands):


	As of September 30, 2017		% of Total			As of December 31, 2016		% of Total			As of September 30, 2018		% of Total			As of December 31, 2017		% of Total
Real estate owned (gross)	$	6,463,107		72.4	%	$	4,912,320		76.6	%	$	5,557,563		63.3	%	$	6,595,252		73.1	%
Mortgage loans		1,777,555		19.9	%		1,060,400		16.5	%		1,428,069		16.3	%		1,778,316		19.7	%
Other loans		151,709		1.7	%		155,721		2.4	%		482,453		5.5	%		150,209		1.7	%
Construction in progress		28,008		0.3	%		53,648		0.8	%		59,796		0.7	%		47,695		0.5	%
Other assets		506,661		5.7	%		236,447		3.7	%		1,246,635		14.2	%		448,816		5.0	%

Total assets (1)	$	8,927,040		100.0	%	$	6,418,536		100.0	%

Total assets											$	8,774,516		100.0	%	$	9,020,288		100.0	%

~~(1)~~

~~Includes $1.8 billion and $1.3 billion~~

Additional Concentration Details

On a pro forma gross asset basis (as defined in the “Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Form 10-Q), our concentration as of ~~healthcare real estate assets in Europe at~~ September 30, 2018 as compared to December 31, 2017 ~~and December 31, 2016, respectively.~~

~~The following~~ is ~~our revenue by operating type (dollar amounts~~as follows (dollars in thousands):

Pro Forma Gross Assets by Operator

	As of September 30, 2018					As of December 31, 2017
Operators	Total Pro Forma Gross Assets		Percentage of Total Pro Forma Gross Assets			Total Pro Forma Gross Assets		Percentage of Total Pro Forma Gross Assets
Steward	$	3,621,660		37.8	%	$	3,457,384		36.5	%
Prime		1,123,350		11.7	%		1,119,484		11.8	%
MEDIAN		1,091,987		11.4	%		1,229,325		13.0	%
RCCH		506,267		5.3	%		506,265		5.3	%
Ernest		499,335		5.2	%		629,161		6.6	%
Other operators		1,692,041		17.6	%		2,089,934		22.1	%
Other assets		1,052,186		11.0	%		444,659		4.7	%
Total	$	9,586,826		100.0	%	$	9,476,212		100.0	%

Pro Forma Gross Assets by U.S. State and Country

	As of September 30, 2018					As of December 31, 2017
U.S. States and Other Countries	Total Pro Forma Gross Assets		Percentage of Total Pro Forma Gross Assets			Total Pro Forma Gross Assets		Percentage of Total Pro Forma Gross Assets
Massachusetts	$	1,378,535		14.4	%	$	1,297,226		13.7	%
Texas		1,109,034		11.6	%		1,257,390		13.3	%
Utah		1,026,296		10.7	%		1,035,501		10.9	%
California		522,756		5.5	%		542,876		5.7	%
Arizona		479,582		5.0	%		491,284		5.2	%
All other states		2,614,526		27.1	%		2,618,536		27.6	%
Other domestic assets		497,916		5.2	%		387,050		4.1	%
Total U.S.	$	7,628,645		79.5	%	$	7,629,863		80.5	%
Germany	$	1,182,318		12.3	%	$	1,581,726		16.7	%
United Kingdom, Italy, and Spain		221,593		2.4	%		207,014		2.2	%
Other international assets		554,270		5.8	%		57,609		0.6	%
Total International	$	1,958,181		20.5	%	$	1,846,349		19.5	%
Grand Total	$	9,586,826		100.0	%	$	9,476,212		100.0	%

On an individual property basis, we had no investment of any single property greater than 4% of our total pro forma gross assets as of September 30, 2018.

On an adjusted revenue basis (as defined in the “Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Form 10-Q), concentration for the nine months ended September 30, 2018 as compared to the prior year is as follows (dollars in thousands):

Adjusted Revenue by ~~property type:~~Operator

   For the Three
Months Ended
September 30, 2017    % of
Total For the Three
Months Ended
September 30, 2016    % of
Total
General Acute Care Hospitals (1)
   $ 119,572    67.7 % $ 78,622    62.1 %
Rehabilitation Hospitals
   46,485    26.3 % 37,075    29.3 %
Long-term Acute Care Hospitals
   10,523    6.0 % 10,858    8.6 %






Total revenue
   $ 176,580    100.0 % $ 126,555    100.0 %






   For the Nine
Months Ended
September 30, 2017    % of
Total For the Nine
Months Ended
September 30, 2016    % of
Total
General Acute Care Hospitals (1)
   $ 341,640    68.4 % $ 238,600    61.5 %
Rehabilitation Hospitals
   125,829    25.2 % 113,463    29.3 %
Long-term Acute Care Hospitals
   32,315    6.4 % 35,791    9.2 %






Total revenue
   $ 499,784    100.0 % $ 387,854    100.0 %

	For the Nine Months Ended September 30,
	2018					2017
Operators	Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue
Steward (1)	$	225,989		36.6	%	$	114,776		23.0	%
MEDIAN		99,924		16.2	%		73,793		14.8	%
Prime		95,439		15.5	%		94,644		18.9	%
Ernest		52,752		8.5	%		53,007		10.6	%
RCCH		31,484		5.1	%		30,668		6.1	%
Other operators		112,104		18.1	%		132,896		26.6	%
Total	$	617,692		100.0	%	$	499,784		100.0	%

~~(1)~~

(1)

Includes ~~three medical office buildings.~~revenue from IASIS prior to being acquired by Steward on September 29, 2017.

~~We have 62 employees as of November 3, 2017. We believe that any foreseeable increase in the number of our employees will have only immaterial effects on our operations~~Adjusted Revenue by U.S. State and ~~general and administrative expenses. We believe that our relations with our employees are good. None of our employees are members of any labor union.~~Country

	For the Nine Months Ended September 30,
	2018					2017
U.S. States and Other Countries	Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue
Texas	$	87,588		14.2	%	$	74,489		14.9	%
Massachusetts		85,054		13.8	%		79,741		16.0	%
Utah		62,598		10.1	%		7,999		1.6	%
California		45,326		7.3	%		49,681		9.9	%
Arizona		35,204		5.7	%		23,902		4.8	%
All other states		184,091		29.8	%		172,363		34.5	%
Total U.S.	$	499,861		80.9	%	$	408,175		81.7	%
Germany	$	106,198		17.2	%	$	88,525		17.7	%
United Kingdom, Italy, and Spain		11,633		1.9	%		3,084		0.6	%
Total International	$	117,831		19.1	%	$	91,609		18.3	%
Grand Total	$	617,692		100.0	%	$	499,784		100.0	%

Adjusted Revenue by Facility Type

	For the Nine Months Ended September 30,
	2018					2017
	Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue
General acute care hospitals	$	449,445		72.8	%	$	341,640		68.4	%
Rehabilitation hospitals		145,442		23.5	%		125,829		25.2	%
Long-term acute care hospitals		22,805		3.7	%		32,315		6.4	%
Total revenues	$	617,692		100.0	%	$	499,784		100.0	%

Results of Operations

Three Months Ended September 30, ~~2017~~2018 Compared to September 30, ~~2016~~2017

Net income for the three months ended September 30, ~~2017,~~2018, was ~~$76.5~~$736 million, compared to ~~$70.4~~$76.5 million for the three months ended September 30, ~~2016.~~2017. This increase is primarily due to the $695.2 million gain on the sale of real estate in the 2018 third quarter from the joint venture transaction with Primotop and North Cypress disposal described in Note 3 to Item 1 of this Form 10-Q, along with additional revenue from the Steward and MEDIAN investments that were made inat the ~~fourth quarter~~end of ~~2016 and during the first nine months of 2017,~~2017. This increase is partially offset by ~~increased depreciation and acquisition~~the $48 million adjustment to lower the carrying value of certain real estate to fair value in 2018 as described in Note 3 to Item 1 of this Form 10-Q, along with incremental interest expense and ~~$44.6 million of gains on real estate and other asset dispositions in~~depreciation expense due primarily to the ~~2016 third quarter.~~2017 investments. Funds from operations (“FFO”), after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was ~~$120.6~~$127.2 million ~~or $0.33 per diluted share~~ for the ~~2017~~2018 third quarter as compared to ~~$75.1~~$120.6 million ~~or $0.30 per diluted share~~ for the ~~2016~~2017 third quarter. This ~~61%~~5.5% increase in FFO ~~per share~~ is ~~primarily~~ due to the increase in revenue from acquisitions made in 2017 (primarily our ~~new investments made since September 2016,~~Steward and MEDIAN investments), partially offset by ~~more shares outstanding in 2017 from the May 2017 equity offering.~~higher interest expense to fund such investments.

A comparison of revenues for the three month periods ended September 30, ~~2017~~2018 and ~~2016~~2017 is as follows (dollar amounts in thousands):


	2017		% of Total			2016		% of Total			Year over Year Change			2018		% of Total			2017		% of Total			Year over Year Change
Rent billed	$	110,930		62.8	%	$	82,387		65.1	%		34.6	%	$	118,238		60.0	%	$	110,930		62.8	%		6.6	%
Straight-line rent		17,505		9.9	%		9,741		7.7	%		79.7	%		18,293		9.3	%		17,505		9.9	%		4.5	%
Income from direct financing leases		19,115		10.8	%		14,678		11.6	%		30.2	%		18,998		9.7	%		19,115		10.8	%		-0.6	%
Interest and fee income		29,030		16.5	%		19,749		15.6	%		47.0	%		41,467		21.0	%		29,030		16.5	%		42.8	%

Total revenues	$	176,580		100.0	%	$	126,555		100.0	%		39.5	%	$	196,996		100.0	%	$	176,580		100.0	%		11.6	%

Our total revenue for the ~~2017~~2018 third quarter is up ~~$50.0~~$20.4 million, or ~~39.5%~~11.6%, over the prior year. This increase is made up of the following:

Operating lease revenue ~~(including~~(includes rent billed and straight-line rent) – up ~~$36.3~~$8.1 million over the prior year, of which ~~$32.6~~$18.7 million is from incremental revenue from acquisitions ~~made after September 30, 2016, $4.2~~(primarily the Steward and MEDIAN acquisitions in 2017) and $8.1 million is ~~incremental revenue~~ from ~~development properties~~rent recorded on the new Steward leases that ~~were completed and put into service~~converted from mortgage loans in ~~late 2016 and 2017, $1.3 million is incremental revenue from capital additions made to existing facilities in late 2016 and 2017, and $2.0 million is due to an increase in exchange rates.~~2018. These increases ~~were~~are partially offset by ~~$1.8~~approximately $11 million of lower revenue as a result of the joint venture transaction with Primotop as more fully described in Note 3 to Item 1 of this Form 10-Q, approximately $3 million of lower revenue related to ~~dispositions.~~dispositions, approximately $4 million of higher straight-line rent write-offs in 2018 related to North Cypress and Adeptus Health, and approximately $0.3 million is from unfavorable foreign currency fluctuations.

Income from direct financing leases – remained relatively flat over the prior year primarily due to $0.3 million from annual escalations of rental rates in accordance with provisions in our leases. The increase was offset by the decrease of DFL unbilled interest no longer recorded on the Boise lease that converted from DFL to operating lease accounting classification upon execution of the new lease with the Vibra/Ernest joint venture in the 2018 first quarter - see Note 3 to Item 1 of this Form 10-Q for details.

Interest and fee income – up ~~$4.4~~$12.4 million over the prior year of which ~~$0.3~~$17.1 million is from ~~our annual escalation provisions in our leases, $1.1 million is~~ incremental revenue from ~~acquisitions made after September 30, 2016, and $3.0~~new loans (primarily the $700 million ~~relates to the conversion of certain Prime facilities, valued at approximately $100 million, in 2016 from~~Steward mortgage loans ~~into direct financing leases.~~

~~Interest from loans – up $9.3 million over the prior year of which~~in 2017), $0.4 million is from our annual ~~escalation provisions~~escalations in ~~our loans, $11.5 million is incremental revenue from new loans (primarily Steward mortgage loans) made after September 30, 2016. This increase was~~interest rates in accordance with loan provisions. These increases are partially offset by ~~$0.5~~$5.4 million of lower ~~revenue from loans that were repaid in 2016 and $2.2 million of lower~~interest revenue related to ~~the conversion of certain Prime facilities, valued at approximately $100 million, from mortgage~~ loans converted to ~~direct financing leases post September 30, 2016.~~

~~Real estate depreciation and amortization during the third quarter of 2017 increased to $31.9 million from $23.9 million~~fee simple assets in ~~2016, due to the incremental depreciation from the properties acquired since September 30, 2016 and the development properties completed in 2016 and 2017.~~2018.

Property expenses for the 2017 third quarter increased $1.6 million from the prior year quarter as the 2016 third quarter included $0.9 million reimbursement for property expenses incurred in multiple previous periods from the tenant of our Twelve Oaks facility.

Acquisition expenses increased from $2.7 million in 2016 to $7.4 million in 2017 primarily as a result of the Steward and MEDIAN acquisitions in 2017, including approximately $2.3 million of real estate transfer taxes.

General and administrative expenses totaled $15.0 million for the 2017 third quarter, which is 8.5% of total revenues, down from 9.7% of total revenues in prior year third quarter. The drop in general and administrative expenses as a percentage of revenue is primarily due to our business model as we can generally increase our revenue significantly without increasing our head count and related expenses at the same rate. On a dollar basis, general and administrative expenses were up $2.7 million from the prior year third quarter due primarily to the growth of our company, including increases in travel, international administration, costs associated with opening a European office, and compensation related to increased headcount.

Interest expense, for the quarters ended September 30, 2018 and 2017, ~~and 2016,~~ totaled ~~$42.8~~$57.2 million and ~~$40.3~~$42.8 million, respectively. This increase is primarily related to the higher average debt balance ~~for~~during the ~~2017~~2018 third quarter compared to the prior year third quarter in order to fund our ~~acquisition activity. The~~investment activity in the last half of 2017 and in 2018 along with approximately $2 million of interest expense representing one month of interest on the secured debt placed in advance of the joint venture transaction with Primotop - see Note 4 to Item 1 of this Form 10-Q for additional information. This impact on interest expense ~~from the higher debt balance was~~is partially offset by slightly lower weighted-average interest rates ~~year-over-year.~~period over period due to certain refinancing activities in our debt during 2017. Our weighted-average interest rate was ~~4.6%~~4.5% for the ~~quarter~~three months ended September 30, ~~2017,~~2018, as compared to ~~5.2%~~4.6% in ~~2016.~~the same period in 2017.

~~With~~Real estate depreciation and amortization during the ~~redemption~~third quarter of 2018 decreased to $29.9 million from $31.9 million in 2017, due to the 71 facilities sold on August 31, 2018 as part of the ~~$450~~joint venture transaction with Primotop. These assets were classified as held for sale as of June 30, 2018, so no depreciation expense was recognized for the 2018 third quarter.

General and administrative expenses totaled $21 million for the 2018 third quarter, which is a $6 million increase from the prior year third quarter. As noted in our 2018 first and second quarter Form 10-Qs, general and administrative expenses are higher in 2018 due to our adoption of the new accounting standard on asset acquisitions (ASU 2017-01). Excluding the $1.4 million of higher expense due to the accounting change, general and administrative expenses represented approximately 9.9% of revenue in the 2018 third quarter. On a dollar basis (exclusive of the accounting change impact), general and administrative expenses were up $4.5 million from the prior year third quarter due to travel and compensation expenses, which are up as a result of the growth and expansion of our company.

Acquisition costs decreased $6.9 million from the prior year. The $7.4 million of acquisition costs in 2017 primarily related to the Steward and MEDIAN transactions along with deals completed subsequent to September 2017. In regards to the 2018 third quarter, all third party transaction costs directly related to acquisitions are now capitalized due to the adoption of ASU 2017-01. However, we did incur $0.5 million in ~~senior unsecured notes during~~ the ~~quarter~~current period related to the settlement of a contingency involving an acquisition that occurred prior to the adoption of ASU 2017-01.

During the three months ended September 30, ~~2016,~~2018, we ~~incurred $22.5~~completed the joint venture transaction with Primotop (as more fully described in Note 3 to Item 1 of this Form 10-Q), in which we sold 71 inpatient rehabilitation hospitals by way of a joint venture arrangement, as well as one general acute care hospital located in Texas, resulting in a total gain of $695.2 million. This gain was partially offset by a $48 million ~~in debt refinancing charges ($15.5 million~~adjustment to lower the carrying value of ~~which was a redemption premium).~~ the real estate to fair value on seven of our transitioning Adeptus Health facilities and four of our Alecto facilities – see Note 3 to Item 1 of this Form 10-Q for further details.

During the 2017 third quarter, we incurred $4.4 million of debt refinancing charges primarily related to structuring and underwriting fees associated with the termination of theshort-term loan commitment ~~we made~~entered into in anticipation of the 2017 Steward acquisition.

~~During~~ There were no debt refinancing charges in the ~~three months ended September 30, 2016, we sold three HealthSouth properties resulting in a net gain on sale of approximately $45 million (see Note 3 to Item 1 of this Form 10-Q for further details).~~

~~Earnings from our equity interests was $3.4 million for the 2017~~2018 third quarter, up $2.1 million from the prior year primarily related to our increased ownership in and the improved operating results of the operator of our Hoboken facility, along with our first quarter to generate income on our IMED investment.quarter.

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 cumulativepre-tax book loss position in ~~many~~certain entities, we concluded that a full valuation allowance should continue to be recorded against the majority of our ~~U.S~~U.S. and certain of our international net deferred tax assets at September 30, ~~2017.~~2018. In the future, if we determine that it is more likely than not that we will realize our ~~U.S. and foreign~~ net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes in future periods. For example, on October 4, 2018, we sold the Ernest Health equity investment held by our TRS. Due to the sale, it is possible the TRS will have sufficient sources of future taxable income to realize the federal and state deferred tax assets. This would result in a reversal of the valuation allowance on the TRS of $6.8 million in the fourth quarter of 2018.

Nine Months Ended September 30, ~~2017~~2018 Compared to September 30, ~~2016~~2017

Net income for the nine months ended September 30, ~~2017,~~2018, was ~~$217.8~~$938.2 million, compared to ~~net income of $182.0~~$217.8 million for the nine months ended September 30, ~~2016,~~2017. This increase is primarily due to ~~additional revenue from~~ the ~~MEDIAN, Steward, and RCCH investments made~~$720.8 million gain on the sale of real estate recognized in ~~the fourth quarter of 2016 and~~ the first nine months of ~~2017, incremental~~2018 from the disposal of five properties and the joint venture transaction with Primotop described in Note 3 to Item 1 of this Form 10-Q, along with additional revenue from ~~completed development projects~~the Steward and

~~increased income from our equity~~ MEDIAN investments that were made in 2017. This increase is partially offset by increased interest expense from higher average outstanding debt balances to fund new investments in 2017, higher depreciation expense from investments made ~~subsequent~~in 2017, and the $48 million adjustment to ~~September 30, 2016, increased acquisition and travel expense due~~lower the carrying value of certain real estate to ~~more foreign investments, and approximately $54 million in higher gains on sale of properties in the first nine months of 2016.~~fair value. FFO, after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was ~~$340.1~~$388.6 million ~~or $0.98 per diluted share for the first nine months in 2017 as compared to $234.1 million, or $0.97 per diluted share~~ for the first nine months of ~~2016.~~2018 as compared to $340.1 million for the first nine months of 2017. This ~~45.3%~~14.2% increase in FFO is ~~primarily~~ due to the increase in revenue from acquisitions and completed development projects made ~~since September 2016, while FFO per share is only slightly~~in 2017 (primarily our Steward and MEDIAN investments), partially offset by higher ~~in the first nine months of 2017 compared~~interest expense to ~~prior year due to more shares outstanding from the September 2016 and May 2017 equity offerings.~~fund such investments.

A comparison of revenues for the nine month periods ended September 30, 2018 and 2017 ~~and 2016~~ is as follows (dollar amounts in thousands):


	2017		% of Total			2016		% of Total			Year over Year Change			2018		% of Total			2017		% of Total			Year over Year Change
Rent billed	$	311,140		62.3	%	$	234,408		60.4	%		32.7	%	$	369,076		61.1	%	$	311,140		62.3	%		18.6	%
Straight-line rent		46,561		9.3	%		26,509		6.8	%		75.6	%		49,157		8.1	%		46,561		9.3	%		5.6	%
Income from direct financing leases		55,307		11.1	%		47,181		12.2	%		17.2	%		55,613		9.2	%		55,307		11.1	%		0.6	%
Interest and fee income		86,776		17.3	%		79,756		20.6	%		8.8	%		130,098		21.6	%		86,776		17.3	%		49.9	%

Total revenues	$	499,784		100.0	%	$	387,854		100.0	%		28.9	%	$	603,944		100.0	%	$	499,784		100.0	%		20.8	%

Our total revenue for the first nine months of ~~2017~~2018 is up ~~$111.9~~$104.2 million, or ~~28.9%~~20.8%, over the prior year. This increase is made up of the following:

Operating lease revenue ~~(including~~(includes rent billed and straight-line rent) – up ~~$96.8~~$60.5 million over the prior year of which ~~$0.4~~$78 million is from ~~our annual escalation provisions in our leases, $83.1 million is~~ incremental revenue from acquisitions ~~made after September 30, 2016, $16.2~~primarily due to the Steward and MEDIAN acquisitions in 2017 and the first nine months of 2018, $8.1 million is ~~incremental revenue~~ from ~~development properties~~rent recorded on the new Steward leases that ~~were completed and put into service~~converted from mortgage loans in ~~2016 and 2017, $2.7~~2018, $5 million is incremental revenue from capital additions, ~~made to existing facilities in 2017~~ and ~~2016, $5.6~~approximately $6.6 million ~~relates to the conversion of certain RCCH facilities in 2016~~is from ~~direct financing leases into operating leases, and a $0.5 million straight-line rent write-off related to our Corinth facility in the 2016 second quarter.~~favorable foreign currency fluctuations. These increases are partially offset by ~~$8.5~~approximately $11 million of lower revenue related to the joint venture transaction with Primotop as more fully described in Note 3 to Item 1 of this Form 10-Q, approximately $13 million of lower revenue related to dispositions, ~~$1.1~~and approximately $13 million of higher straight-line rent write-offs in ~~2017 related to three Adeptus facilities re-leased to Ochsner and the sale of our Muskogee property, and foreign currency fluctuations.~~2018.

Income from direct financing leases – increased slightly over the prior year, of which $1.9 million is from incremental revenue from acquisitions made in 2017 and $0.8 million is from annual escalations of rental rates in accordance with provisions in our leases. The impact was partially offset by the write-off of $1.5 million of DFL unbilled interest and the loss of $0.9 million of DFL unbilled interest on the Boise lease that converted from DFL to operating lease accounting classification upon execution of the new lease with the Vibra/Ernest joint venture discussed in Note 3 to Item 1 of this Form 10-Q.

Interest and fee income – up ~~$8.1~~$43.3 million over the prior year of which ~~$0.6~~$47.2 million is primarily from incremental revenue from the new Steward mortgage loans made in 2017 and 2018, and $1 million is from our annual ~~escalation provisions~~escalations in ~~our leases, $3.7 million is incremental revenue from acquisitions made after September 30, 2016, $9.0 million relates to the conversion of certain Prime facilities~~interest rates in ~~2016 from mortgage loans to direct financing leases, and a $2.6 million write-off in 2016 related to the RCCH facilities that converted from direct financing leases into operating leases.~~accordance with loan provisions. These increases ~~were~~are partially offset by ~~$7.8 million of lower revenue related to those RCCH facilities that converted from direct financing leases into operating leases in the first half of 2016.~~

Interest from loans – up $7.0 million over the prior year of which $1.1 million is from annual escalation provisions and $34.0 million is incremental revenue from new loans (primarily Steward mortgage loans) made after September 30, 2016. These increases were partially offset by $21.6 million in less interest revenue earned in 2017 from loans that were repaid in 2016 (primarily from Capella Transaction) and $6.5$5.4 million of lower interest revenue related to the ~~conversion of certain Prime facilities, valued at approximately $100 million, from~~Steward mortgage loans that converted to ~~direct financing~~operating leases ~~post~~in 2018.

Interest expense, for the nine months ended September 30, ~~2016.~~

2018 and 2017, totaled $172.4 million and $120.5 million, respectively. This increase is primarily related to the higher average debt balance during the first nine months of 2018 compared to the first nine months of 2017 in order to fund our 2017 acquisition activity. The impact on interest expense is partially offset by slightly lower weighted average interest rates period over period due to certain refinancing activities in our debt during 2017. Our weighted-average interest rate was 4.5% for the nine months ended September 30, 2018, as compared to 4.6% in the same period in 2017.

Real estate depreciation and amortization during the first nine months of ~~2017~~2018 increased to ~~$89.0~~$100.2 million from ~~$67.9~~$89.0 million in the same period of ~~2016, primarily~~2017, due to the incremental depreciation from the ~~properties~~facilities acquired (particularly the Steward and MEDIAN facilities acquired in 2017) and the development properties completed in ~~2016~~2017 and ~~2017. In the 2016 second quarter, we accelerated the amortization of the lease intangible asset related to our Corinth facility resulting in $1.1~~2018.

General and administrative expenses totaled $58.4 million ~~of additional expense.~~

~~Property expenses~~ for the first nine months of ~~2017 increased $2.4~~2018, which is a $15.1 million ~~compared~~increase from the prior year. As noted previously, general and administrative expenses were higher during the first nine months of 2018 due to ~~2016. This increase is primarily~~our adoption of ASU 2017-01. Excluding the $4.5 million of higher expense due to the ~~reimbursement to us in the 2016 third quarter of $0.8 million by the tenant of our Twelve Oaks facility for property expenses incurred in previous periods.~~

Acquisition expenses increased from $6.4 million in 2016 to $21.0 million in 2017 primarily as a result of the MEDIAN and Steward acquisitions in 2017, including $11.7 million of real estate transfer taxes incurred on the MEDIAN acquisitions.

~~General~~accounting change, general and administrative expenses represented 8.9% of revenue in the first nine months of ~~2017 totaled $43.3 million,~~2018, which iswas in line with the 8.7% ~~of revenues down from 9.2% of revenues~~ in the prior year. The decline in general and administrative expenses as a percentage of revenues is primarily due to our business model as we can generally increase our revenues significantly without increasing our head count and related expense at the same rate.2017. On a dollar basis (exclusive of the accounting change impact), general and administrative expenses were up ~~$7.5~~$10.6 million from the prior year due to travel and compensation expenses, which are up as a result of the growth and expansion of our company.

Acquisition costs decreased $20 million from the prior year. The acquisition costs in 2017 primarily related to the MEDIAN transaction along with deals completed subsequent to September 2017. In regards to the first nine months ~~due primarily to increases in travel, international administration,~~of 2018, all third party transaction costs ~~associated with opening a European office, compensation~~directly related to ~~increased headcount and public company board expenses.~~acquisitions are now capitalized due to the adoption of ASU 2017-01 as noted previously. However, we did incur $0.9 million in the current period related to the settlement of contingencies involving acquisitions that occurred prior to the adoption of ASU 2017-01.

During the nine months ended September 30, ~~2017,~~2018, we sold ~~the Muskogee, Oklahoma facility~~one acute care property (operated by Steward), three long-term acute care properties (operated by Vibra), 71 inpatient rehabilitation hospitals (operated by MEDIAN) by way of a joint venture arrangement, and one general acute care hospital located in Texas (operated by North Cypress), resulting in a total net gain ~~on sale~~ of $720.8 million. This gain was partially offset by a $48 million adjustment to lower the carrying value of the real estate to fair value on seven of ~~$7.4 million, while in the first nine months~~our transitioning Adeptus Health facilities and four of ~~2016, we had various dispositions resulting in a net gain on sale of real estate and other asset dispositions of $61.3 million and impairment charges of $7.3 million (see~~our Alecto facilities – see Note 3 to Item 1 of this Form 10-Q for further ~~details).~~

Earnings from our equity interests increased from a loss of $2.6 million in 2016 to a gain of $7.9 million in 2017. The loss in 2016 includes $5.3 million of acquisition expenses, representing our share of such expenses incurred by our Italian joint venture to acquire its eight hospital properties.details. In addition, 2017 includes $4.7 million of additional income related to our increased ownership in and improved operating results of the operator of our Hoboken facility, along with additional income from our IMED investment in the 2017 third quarter.

~~Interest expense remained relatively flat year-over-year as we incurred $120.5 million for~~ the first nine months of 2017, ~~compared to $121.1~~we sold one RCCH property resulting in a $7.4 million for the first nine months of 2016. Our average debt balance for 2017 has been higher than 2016 due to continued growth of the company; however, its impact on interest expense has been more than offset by lower interest rates. Our weighted-average interest rate for the first nine months of 2017 was 4.6% versus 4.9% in the same period for 2016.gain.

With the redemption of the $450 million in senior unsecured notes, we incurred $22.5 million in debt refinancing charges ($15.5 million of which was a redemption premium) during the first nine months of 2016. DuringIn the first nine months of 2017, we incurred $18.8 million of debt refinancing ~~charges~~costs related to the replacement of our credit facility, the payoff of our €200 million euro loan, the prepayment of our $12.9 million term loan, and structuring and underwriting fees associated with the termination of the short-term loan commitment we madevarious debt refinancing activities as disclosed in ~~anticipation of the Steward acquisition (see~~ Note 4 to Item 1 of this Form ~~10-Q for further details).~~10-Q. We did not have any similar charges during the first nine months of 2018.

Income tax expense typically 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 income tax expense for the nine months ended September 30, ~~2017 decreased by $390 thousand~~2018, reflects an increase from ~~the same period in 2016 primarily~~prior year due to ~~$1.7 million of benefit recognized on approximately $10.7 million of acquisition costs incurred on our European investments~~an increase in ~~2017. This tax benefit recognized in 2017 was offset by additional tax expense~~financial taxable income from our international ~~investments, which were not realized in 2016 due to a~~investments. See quarter-over-quarter comparison for additional information about income taxes including related valuation ~~allowance position. These valuation allowances were released in the 2016 fourth quarter.~~allowances.

Reconciliation of Non-GAAP Financial Measures

~~Funds From Operations~~

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 and after adjustments for unconsolidated partnerships and joint ventures.

In addition to presenting FFO in accordance with the NAREIT definition, we also 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 necessary to maintain the operating performance of our properties, which can be significant economic costs that could materially impact our results of operations. FFO and normalized FFO should not be considered an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity.

The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 (in thousands, except per share data):

   For the Three Months Ended For the Nine Months Ended
   September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
FFO information:

Net income attributable to MPT common stockholders
   $ 76,464 $ 70,358 $ 217,849 $ 182,009
Participating securities’ share in earnings
   (82 ) (154 ) (307 ) (430 )


Net income, less participating securities’ share in earnings
   $ 76,382 $ 70,204 $ 217,542 $ 181,579
Depreciation and amortization
   32,618 24,374 90,744 69,181
Gain on sale of real estate
   (18 ) (44,515 ) (7,431 ) (67,168 )


Funds from operations
   $ 108,982 $ 50,063 $ 300,855 $ 183,592
Write-off of straight line rent and other
   — — 1,117 3,063
Transaction costs from non-real estate dispositions .
   — (101 ) — 5,874
Acquisition expenses, net of tax benefit
   7,166 2,689 19,350 11,723
Impairment charges
   — (80 ) — 7,295
Unutilized financing fees / debt refinancing costs
   4,414 22,535 18,794 22,539


Normalized funds from operations
   $ 120,562 $ 75,106 $ 340,116 $ 234,086


Per diluted share data:

Net income, less participating securities’ share in earnings
   $ 0.21 $ 0.28 $ 0.63 $ 0.75
Depreciation and amortization
   0.09 0.10 0.26 0.29
Gain on sale of real estate
   — (0.18 ) (0.02 ) (0.28 )


Funds from operations
   $ 0.30 $ 0.20 $ 0.87 $ 0.76
Write-off of straight line rent and other
   — — — 0.01
Transaction costs from non-real estate dispositions .
   — — — 0.03
Acquisition expenses, net of tax benefit
   0.02 0.01 0.06 0.05
Impairment charges
   — — — 0.03
Unutilized financing fees / debt refinancing costs
   0.01 0.09 0.05 0.09


Normalized funds from operations
   $ 0.33 $ 0.30 $ 0.98 $ 0.97

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
FFO information:
Net income attributable to MPT common stockholders	$	736,034		$	76,464		$	938,202		$	217,849
Participating securities’ share in earnings		(290	)		(82	)		(808	)		(307	)
Net income, less participating securities’ share in earnings	$	735,744		$	76,382		$	937,394		$	217,542
Depreciation and amortization		32,641			32,618			104,314			90,744
Gain on sale of real estate and other, net		(647,204	)		(18	)		(672,822	)		(7,431	)
Funds from operations	$	121,181		$	108,982		$	368,886		$	300,855
Write-off of straight-line rent and other		4,321			-			17,615			1,117
Debt refinancing costs		-			4,414			-			18,794
Acquisition and other transaction costs, net of tax benefit		1,661			7,166			2,072			19,350
Normalized funds from operations	$	127,163		$	120,562		$	388,573		$	340,116
Per diluted share data:
Net income, less participating securities’ share in earnings	$	2.00		$	0.21		$	2.56		$	0.63
Depreciation and amortization		0.09			0.09			0.29			0.26
Gain on sale of real estate and other, net		(1.76	)		-			(1.84	)		(0.02	)
Funds from operations	$	0.33		$	0.30		$	1.01		$	0.87
Write-off of straight-line rent and other		0.01			-			0.04			-
Debt refinancing costs		-			0.01			-			0.05
Acquisition and other transaction costs, net of tax benefit		0.01			0.02			0.01			0.06
Normalized funds from operations	$	0.35		$	0.33		$	1.06		$	0.98

~~Total~~Pro Forma Gross Assets

~~Total~~Pro forma total gross assets is total assets before accumulated depreciation/amortization, ~~and~~ assumes all real estate binding commitments on new investments and unfunded amounts on development deals and commenced capital improvement projects are fully funded, ~~and~~ assumes cash on hand is fully used in these ~~transactions.~~transactions and includes our pro rata portion of gross assets in joint venture arrangements. We believe total gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our binding commitments close and our other commitments are fully funded. The following table presents a reconciliation of total assets to total pro forma gross assets (in thousands):

							As of			As of
	As of September 30, 2017			As of December 31, 2016			September 30, 2018			December 31, 2017
Total Assets	$	8,927,040		$	6,418,536		$	8,774,516		$	9,020,288
Add:
Binding real estate commitments on new investments⁽¹⁾		112,012			288,647
Unfunded amounts on development deals and commenced capital improvement projects⁽²⁾		86,227			194,053
Binding real estate commitments on new investments(1)								7,897			17,500
Unfunded amounts on development deals and commenced capital improvement projects(2)								208,497			154,184
Accumulated depreciation and amortization		418,880			325,125			432,279			455,712
Incremental gross assets of our joint ventures(3)								380,031			-
Less:
Cash and cash equivalents		(188,224	)		(83,240	)		(216,394	)		(171,472	)

Total Gross Assets	$	9,355,935		$	7,143,121

Total Pro Forma Gross Assets							$	9,586,826		$	9,476,212

~~(1)~~

~~Reflects~~

(1)

The 2018 column reflects a commitment to acquire a facility in Germany post September 30, 2018; while, the 2017 ~~commitments, including one RCCH~~column includes a facility ~~and three facilities~~ in ~~Germany, and post December 31, 2016 transactions and commitments, including two RCCH facilities and 14 facilities~~Washington that ultimately closed in ~~Germany.~~2018.

~~(2)~~

(2)

Includes ~~$63.9~~$119.9 million and ~~$109.1~~$137.4 million of unfunded amounts on ongoing development projects and ~~$22.3~~$88.6 million and ~~$84.9~~$16.8 million of unfunded amounts on capital improvement projects and development projects that have commenced rent, as of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

(3)

Adjustment needed to reflect our share of our joint venture's gross assets.

Adjusted Revenue

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

	For the Nine Months Ended September 30, 2018		For the Nine Months Ended September 30, 2017
Total revenues	$	603,944	$	499,784
Revenue from properties owned through joint venture arrangements		13,748		-
Total adjusted revenue	$	617,692	$	499,784

LIQUIDITY AND CAPITAL RESOURCES

2018 Cash Flow Activity

During the nine months ended September 30, 2018, we generated $299.1 million of cash flows from operating activities, primarily consisting of rent and interest from mortgages and other loans. We used these operating cash flows along with cash on-hand to fund our dividends of $272.4 million and certain investing and financing activities.

Certain investing and financing activities in the first nine months of 2018 included:

Generated $2.3 billion of cash proceeds from the joint venture transaction with Primotop (which included the disposal of 71 inpatient rehabilitation hospitals in Germany and issuance of secured debt) and the sale of five other acute care and long-term acute care properties. Approximately $580 million was reinvested in the joint venture with Primotop in the form of an equity interest and shareholder loan;

Funded the acquisition of one property in Pasco, Washington for $17.5 million and three properties in Germany for €17.3 million;

Originated $174.5 million in mortgage loans;

Funded approximately $91.5 million for development and capital improvement projects;

Acquired four facilities operated by Steward by converting the $525.4 million in mortgage loans on the same properties plus cash consideration; and

We used the net cash received from the joint venture transaction with Primotop to reduce our revolver by approximately $820 million during the nine months ended September 30, 2018.

2017 Cash Flow Activity

During the nine months ended September 30, 2017, we generated ~~$219.9~~$220 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows along with cash on-hand to fund our dividends of $239.2 ~~million.~~million and certain investing activities.

Certain investing and financing activities in the first nine months of 2017 included:

On February 1, 2017, we replaced our credit facility with a new facility resulting in a $50 million reduction in our U.S. dollar term loan and a new €200 million term loan;

On March 4, 2017, we redeemed our 5.750% Senior Unsecured Notes due 2020 for €200 million plus a redemption premium using proceeds from our €200 million term loan and cash on-hand;

On March 24, 2017, we completed a €500 million senior unsecured notes offering and used a portion of the proceeds to pay off our €200 million term loan, and used the remaining proceeds to acquire 12 facilities leased to MEDIAN for €146.4 million;

On March 31, 2017, we sold the EASTAR Health System real estate in Muskogee, Oklahoma for approximately $64 million;

On May 1, 2017, we completed an underwritten public offering of 43.1 million shares resulting in net proceeds of approximately $548 million. We used a portion of these proceeds to acquire eight facilities for $301.3 million (leased to Steward), a facility in Idaho for $87.5 million (leased to RCCH) and two other facilities for $40 million (leased to Alecto);

On September 7, 2017, we completed a senior unsecured notes offering for $1.4 billion and used a portion of the proceeds to redeem our 6.375% Senior Unsecured Notes due 2022 in October 2017 for $350 million plus a redemption premium, and the remaining proceeds, along with borrowings from our revolving credit facility, were used to acquire 11 facilities and ancillary properties leased to Steward for $1.4 billion and to make a $100 million equity investment in Steward; and

On September 29, 2017, we prepaid our Northland mortgage loan in the amount of $12.9 million.

~~a) On February 1, 2017, we replaced our credit facility with a new facility resulting in a $50 million reduction in our U.S. dollar term loan and a new €200 million term loan;~~

~~b) On March 4, 2017, we redeemed our 5.750% Senior Unsecured Notes due 2020 for €200 million plus a redemption premium using proceeds from our €200 million term loan and cash on hand;~~

c) On March 24, 2017, we completed a €500 million senior unsecured notes offering and used a portion of the proceeds to pay off our €200 million term loan, and the remaining proceeds were used to acquire 12 facilities leased to MEDIAN for €146.4 million;

~~d) On March 31, 2017, we sold the EASTAR Health System real estate in Muskogee, Oklahoma for approximately $64 million;~~

e) On May 1, 2017, we completed an underwritten public offering of 43.1 million shares resulting in net proceeds of approximately $548 million. We used a portion of these proceeds to acquire eight facilities for $301.3 million (leased to Steward), a facility in Idaho for $87.5 million (leased to RCCH) and two other facilities for $40 million (leased to Alecto);

f) On September 7, 2017, we completed a senior unsecured notes offering for $1.4 billion and used a portion of the proceeds to redeem our 6.375% Senior Unsecured Notes due 2022 in October 2017 for $350 million plus a redemption premium, and the remaining proceeds, along with borrowings from our revolving credit facility, were used to acquire 11 facilities and ancillary properties leased to Steward for $1.4 billion and to make a $100 million equity investment in Steward; and

~~g) On September 29, 2017, we prepaid our Northland mortgage loan in the amount of $12.9 million.~~

~~2016 Cash Flow Activity~~

During the nine months ended September 30, 2016, we generated $168.3 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows along with cash on-hand to fund our dividends of $160.1 million and certain investing activities.

~~In regards to other financing activities, to, delever and finance the Steward acquisition in October 2016, we did the following:~~

~~a) On February 22, 2016, we completed a senior unsecured notes offering for $500 million.~~

b) On April 30, 2016, we closed on the Capella Transaction (as further discussed in Note 3 to Item 1 of this Form 10-Q) resulting in net proceeds of $550 million along with an additional $50 million once we sold our investment in RegionalCare bonds in June 2016.

~~c) On May 23, 2016, we sold our investment in five properties leased and operated by Post Acute for $71 million.~~

~~d) On June 17, 2016, we sold our investment in one property leased and operated by Corinth Investor Holdings for $28 million.~~

e) On July 13, 2016, we completed a new $500 million senior unsecured notes offering. We used the net proceeds from this offering to redeem our $450 million 6.875% Senior Unsecured Notes due 2021, which was completed on August 12, 2016. Net proceeds from the notes offering after redemption approximated $19 million, and we incurred a one-time charge of $22.5 million related to the redemption (see Note 4 to Item 1 of this Form 10-Q for further details).

~~f) On July 20, 2016, we sold three facilities leased to HealthSouth for $111.5 million, and~~

g) We sold 82.7 million shares (including 10.3 million sold to Cerberus affiliates on October 7, 2016) through our at-the-market equity offering program, a public equity offering and a private placement generating proceeds of approximately $1.2 billion.

Short-term Liquidity Requirements:

As of ~~November 3, 2017 (and after the redemption of the $350 million 6.375% Senior Unsecured~~

~~Notes due 2022 on October 7, 2017),~~September 30, 2018, we ~~do not~~ have ~~any~~no debt principal payments due ~~until~~in the ~~revolving credit facility comes due in~~

~~2021, which we can extend for an additional 12~~next twelve months — see debt maturity schedule below. At November ~~3, 2017,~~2, 2018, our availability under our revolving credit facility plus cash on-hand approximated ~~$0.7~~$2 billion. We believe this liquidity ~~and~~along with our current monthly cash receipts from rent and loan interest and availability under our at-the-market equity program is sufficient to fund our operations, ~~debt and~~ interest obligations, ~~the~~our firm commitments (including expected funding

requirements on our development ~~projects,~~projects), and dividends in order to comply with REIT requirements for the next twelve months.

Long-term Liquidity Requirements: ~~Exclusive~~

As of ~~the revolving credit facility (which~~September 30, 2018, we ~~can extend for an additional year to February~~

~~2022) and after the redemption of the $350 million 6.375% Senior Unsecured Notes due 2022, we do not~~ have ~~any~~no debt principal payments due ~~over the next five years (see debt maturity schedule below)~~between now and January 2021 when our revolving credit facility comes due (which can be extended by one year). With our liquidity at November ~~3, 2017~~2, 2018 of approximately ~~$0.7~~$2 billion, along with our current monthly cash receipts from rent and loan interest and the availability under our at-the-market equity program, we believe we have the liquidity available to us to fund our operations, debt and interest obligations, dividends in order to comply with REIT requirements, and ~~the~~firm commitments (including expected funding requirements on our development ~~projects currently.~~projects) for the foreseeable future.

However, in order ~~to fund our investment strategies, while maintaining a prudent leverage ratio, and~~ to fund debt maturities coming due in 2022 and later years, we may need additional capital, ~~will be needed,~~ and we believe the following sources of capital are generally available in the market, ~~and~~which we may access one or a combination of them:

~~entering into joint venture arrangements,~~

~~proceeds from strategic property sales,~~

sale of equity ~~securities,~~securities;

amending or entering into new bank term ~~loans,~~loans;

~~issuing~~issuance of new USD or EUR denominated debt securities, including senior unsecured ~~notes,~~notes;

proceeds from strategic property sales; and/or

placing new secured loans on real estate located in the U.S. and/or Europe.

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

As of September 30, ~~2017,~~2018, principal payments due on our debt (which ~~exclude~~excludes the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):


2017	$	350,000	(A)
2018		—		$	-
2019		—			-
2020		—			-
2021		445,359			22,153
2022					780,200
Thereafter		4,081,400			3,280,200

Total	$	4,876,759		$	4,082,553

~~(A)~~

~~The $350 million 6.375% Senior Unsecured Notes due 2022 were redeemed on October 7, 2017 with proceeds from our $1.4 billion 5.000% Senior Unsecured Notes due 2027.~~

Disclosure of Contractual Obligations

We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016. For~~2017. Except for changes to our operating lease commitments as updated in our Form 10-Q for the quarter ended March 31, 2018, there have been no significant changes in those obligations during the nine months ended September 30, 2017, changes to our debt related contractual obligations included the issuance of our new Credit Facility, the 3.325% Senior Unsecured Notes due 2025, and the 5.000% Senior Unsecured Notes due 2027, along with redemption of our 5.750% Senior Unsecured Notes due 2020 and prepayment of our $12.9 million term loan. Subsequent to September 30, 2017, we redeemed our 6.375% Senior Unsecured Notes due 2022. See Note 4 of Item 1 of this Form 10-Q for more detailed information.2018.

The following table updates our contractual obligations schedule for the debt activity, described above, for the nine months ended September 30, 2017 along with the post September 30, 2017 early redemption of our 6.375% Senior Unsecured Notes due 2022 (in thousands):

Contractual Obligations
   Less Than
1 Year    1-3 Years    3-5 Years    After
5 Years    Total
Revolving credit facility (1)
   $ 14,287    $ 28,574    $ 450,122    $ —      $ 492,983
Term loan
   5,556    11,127    207,444    —      224,127
3.325% Senior Unsecured Notes due 2025
   19,641    39,282    39,282    649,622    747,827
5.750% Senior Unsecured Notes due 2020
   —      —      —      —      —
6.375% Senior Unsecured Notes due 2022
   364,381    —      —      —      364,381
5.000% Senior Unsecured Notes due 2027
   39,667    140,000    140,000    1,785,000    2,104,667

~~(1)~~

As of September 30, 2017, we have a $1.3 billion revolving credit facility. However, this table assumes the balance outstanding under the revolver and rate in effect at September 30, 2017 remain in effect through maturity.

Distribution Policy

The table below is a summary of our distributions declared during the two year period ended September 30, ~~2017:~~2018:

Declaration Date

Record Date

Date of Distribution

Distribution per Share

Record Date

Date of Distribution

Distribution per Share

August 16, 2018

September 13, 2018

October 11, 2018

0.25

May 24, 2018

June 14, 2018

July 12, 2018

0.25

February 15, 2018

March 15, 2018

April 12, 2018

0.25

November 9, 2017

December 7, 2017

January 11, 2018

0.24

August 17, 2017

September 14, 2017

October 12, 2017

0.24

September 14, 2017

October 12, 2017

0.24

May 25, 2017

June 15, 2017

July 14, 2017

0.24

June 15, 2017

July 14, 2017

0.24

February 16, 2017

March 16, 2017

April 13, 2017

0.24

March 16, 2017

April 13, 2017

0.24

November 10, 2016

December 8, 2016

January 12, 2017

0.23

December 8, 2016

January 12, 2017

0.23

August 18, 2016

September 15, 2016

October 13, 2016

0.23

May 19, 2016

June 16, 2016

July 14, 2016

0.23

February 19, 2016

March 17, 2016

April 14, 2016

0.22

November 12, 2015

December 10, 2015

January 14, 2016

0.22

We intend to pay to our stockholders, within the time periods prescribed by the Internal Revenue Code (“Code”), all or substantially all of our annual taxable income, including taxable gains ~~(if any)~~ from the sale of real estate and recognized gains on the sale of securities. It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid corporate income and excise taxes on undistributed income. ~~See~~However, our Credit Facility limits the amount of dividends we can pay - see Note 4 ~~to our condensed consolidated financial statements~~ in Item 1 to this Form 10-Q for ~~any restrictions placed on dividends by our existing credit facility.~~further information.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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 our variable rate 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, all of which may affect our ability to refinance our debt, if necessary. The changes in the value of our facilities would be impacted also by changes in “cap” rates, which is measured by the current base rent divided by the current market value of a facility.

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 September 30, ~~2017,~~2018, our outstanding debt totaled ~~$4.8~~$4.1 billion, which consisted of fixed-rate debt of ~~$4.2~~approximately $3.9 billion and variable rate debt of ~~$0.6 billion.~~$222 million. If market interest rates increase by 1%, the fair value of our debt at September 30, ~~2017~~2018 would decrease by ~~$8.0~~$9.6 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 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by ~~$0.2~~$0.1 million per year. If market rates of interest on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by ~~$0.2~~$0.1 million per year. This assumes that the average amount outstanding under our variable rate debt for a year is ~~$0.6 billion,~~$222 million, the balance of such variable rate debt at September 30, ~~2017.~~2018.

Foreign Currency Sensitivity

With our investments in Germany, the United Kingdom, Spain, and ~~throughout Europe,~~Italy, we are subject to fluctuations in the euro and British pound to U.S. dollar currency exchange rates. Increases or decreases in the value of the euro to U.S. dollar and the British pound to U.S. dollar exchange rates may impact our financial condition and/or our results of operations. Based solely on annualizing the operating results ~~to-date in 2017~~for the third quarter of 2018 and excluding the gain on ~~an annualized basis,~~sale of real estate as part of the joint venture transaction with Primotop, if the euro exchange rate were to change by 5%, our net income and FFO would change by approximately ~~$4.0 million.~~$2 million and $2.8 million, respectively. Based solely on annualizing the operating results ~~to-date in 2017 and on an annualized basis,~~for the third quarter of 2018, if the British pound exchange rate were to change by 5%, our net income and FFO would change by approximately $0.1 million and less than $0.2 ~~million.~~million, respectively.

~~Item 4.~~

~~Controls and Procedures.~~

Item 4. Controls and Procedures.

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 ~~timely alerting them to material~~providing reasonable assurance that information required to be disclosed by us in the reports that we file ~~with~~under the ~~SEC.~~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.

PART II — ~~OTHER~~OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings.~~

Item 1. Legal Proceedings.

The information contained in Note 9 ~~“Contingencies”~~“Commitments and Contingencies” of Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1.

~~Item 1A.~~

~~Risk Factors.~~

~~Except to the extent set forth below or as otherwise disclosed in this Quarterly Report on Form 10-Q, there~~Item 1A. Risk Factors.

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, ~~2016.~~2017.

~~Our revenues are dependent upon our relationship with and success of our largest tenants, Steward, Prime, MEDIAN, Ernest, RCCH and Adeptus Health.~~

As of September 30, 2017, affiliates of Steward, MEDIAN, Prime, Ernest, RCCH and Adeptus Health represented 36.8%, 12.9%, 12.0%, 6.7%, 5.4% and 4.5%, respectively, of our total gross assets (which consist primarily of real estate leases and mortgage loans).

Our relationships with these operators and their financial performance and resulting ability to satisfy their lease and loan obligations to us are material to our financial results and our ability to service our debt and make distributions to our stockholders. We are dependent upon the ability of these operators to make rent and loan payments to us, and any failure to meet these obligations could have a material adverse effect on our financial condition and results of operations.

Our tenants operate in the healthcare industry, which is highly regulated by federal, state, and local laws and changes in regulations may negatively impact our tenants’ operations until they are able to make the appropriate adjustments to their business. For example, recent modifications to regulations concerning patient criteria and reimbursement for long-term acute care hospitals, or LTACHs, have resulted in volume and profitability declines in certain facilities operated by Ernest.

We are aware of various federal and state inquiries, investigations and other proceedings currently affecting several of our tenants and would expect such government compliance and enforcement activities to be ongoing at any given time with respect to one or more of our tenants, either on a confidential or public basis. During the second quarter of 2016, the Department of Justice joined a lawsuit against Prime alleging irregular admission practices intended to increase the number of inpatient care admissions of Medicare patients, including unnecessarily classifying some patients as “inpatient” rather than “observation”. Other large acute hospital operators have also recently defended similar allegations, sometimes resulting in financial settlements and agreements with regulators to modify admission policies, resulting in lower reimbursements for those patients.

Our tenants experience operational challenges from time-to-time, and this can be even more of a risk for those tenants that grow via acquisitions in a short time frame like Steward, Prime, Adeptus Health and others.

In May 2017, Prime advised that it would be delayed in furnishing its 2016 financial statements to its lenders and that it would take a significant write-down to its accounts receivables. Prime has received a notice of default from its lenders related to its failure to furnish its 2016 financials on a timely basis. As a result of these developments, S&P has downgraded Prime’s corporate credit rating and senior secured term loan credit rating. These financial and operational setbacks affecting Prime may adversely impact its ability to make required lease and interest payments to us.

The ability of our tenants and operators to integrate newly acquired businesses into their existing operational, financial reporting and collection systems is critical towards ensuring their continued success. If such integration is not successfully implemented in a timely manner, operators can be negatively impacted whether it be through write-offs of uncollectible accounts receivable (similar to Prime’s expected write-offs) or even insolvency in certain extreme cases.

Any further adverse result to any of Steward, Prime, MEDIAN, Ernest, RCCH or Adeptus Health in regulatory proceedings or financial or operational setbacks may have a material adverse effect on the relevant tenant’s operations and financial condition and on its ability to make required lease and loan payments to us. If any further one of these tenants files for bankruptcy protection, we may not be able to collect any pre-filing amounts owed to us by such tenant. In addition, in a bankruptcy proceeding, such tenant may terminate our lease(s), in which case we would have a general unsecured claim that would likely be for less than the full amount owed to us. Any secured claims we have against such tenant may only be paid to the extent of the value of the collateral, which may not cover any or all of our losses. If we are ultimately required to find one or more tenant-operators to lease one or more properties currently leased by such tenant, we may face delays and increased costs in locating a suitable replacement tenant. The protections that we have in place to protect against such failure or delay, which can include letters of credit, cross default provisions, parent guarantees, repair reserves and the right to exercise remedies including the termination of the lease and replacement of the operator, may prove to be insufficient, in whole or in part, or may entail further delays. In instances where we have an equity investment in our tenant’s operations, in addition to the effect on these tenants’ ability to meet their financial obligation to us, our ownership and investment interests may also be negatively impacted.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Item 2.~~

(a)

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

None.

~~(a)~~

(b)

~~None.~~

Not applicable.

~~(b)~~

(c)

~~Not applicable.~~

None.

~~(c)~~

~~None.~~

~~Item 3.~~

~~Defaults Upon Senior Securities.~~

Item 3. Defaults Upon Senior Securities.

None.

~~Item 4.~~

~~Mine Safety Disclosures.~~

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

~~Item 5.~~

(a)

~~Other Information.~~

None.

(b)

None.

Item 6. Exhibits

~~(a)~~

~~None.~~

~~(b)~~

~~None.~~

~~Item 6.~~ ~~Exhibits.~~


Exhibit Number		Description

4.1* 10.1(1)*		~~Twelfth Supplemental Indenture,~~ Amended and Restated Subscription Agreement dated as of ~~September 21, 2017,~~June 7, 2018 by and among MPT Operating Partnership, L.P., Primotop Holding S.à r.l. and MPT ~~Finance Corporation, as issuers, Medical Properties Trust, Inc., as parent and guarantor, and Wilmington Trust, National Association, as trustee.~~RHM Holdco S.à r.l.

10.1* 31.1*		Joinder and Amendment to Master Lease Agreement, dated as of September 29, 2017, by and among certain Affiliates of MPT Operating Partnership, L.P. and certain Affiliates of Steward Health Care System LLC.

10.2*		Joinder and Amendment to Real Estate Loan Agreement, dated as of September 29, 2017, by and among certain Affiliates of MPT Operating Partnership, L.P. and certain Affiliates of Steward Health Care System LLC.

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (Medical Properties Trust, Inc.)

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (Medical Properties Trust, Inc.)

31.3*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (MPT Operating Partnership, L.P.)

31.4*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (MPT Operating Partnership, L.P.)

32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Medical Properties Trust, Inc.)

32.2**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (MPT Operating Partnership, L.P.)

Exhibit 101.INS		XBRL Instance Document

Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

**	Furnished herewith.

~~INDEX TO EXHIBITS~~


~~Exhibit~~ ~~Number~~(1)		~~Description~~Incorporated by reference to the registrants' Quarterly Report on Form 10-Q, filed with the Commission on August 9, 2018.

4.1*		Twelfth Supplemental Indenture, dated as of September 21, 2017, by and among MPT Operating Partnership, L.P. and MPT Finance Corporation, as issuers, Medical Properties Trust, Inc., as parent and guarantor, and Wilmington Trust, National Association, as trustee.

10.1*		Joinder and Amendment to Master Lease Agreement, dated as of September 29, 2017, by and among certain Affiliates of MPT Operating Partnership, L.P. and certain Affiliates of Steward Health Care System LLC.

10.2*		Joinder and Amendment to Real Estate Loan Agreement, dated as of September 29, 2017, by and among certain Affiliates of MPT Operating Partnership, L.P. and certain Affiliates of Steward Health Care System LLC.

31.1*		~~Certification of Chief Executive Officer pursuant to Rule13a-14(a)~~ ~~under the Securities Exchange Act of 1934. (Medical Properties Trust, Inc.)~~

31.2*		~~Certification of Chief Financial Officer pursuant to Rule13a-14(a)~~ ~~under the Securities Exchange Act of 1934. (Medical Properties Trust, Inc.)~~

31.3*		~~Certification of Chief Executive Officer pursuant to Rule13a-14(a)~~ ~~under the Securities Exchange Act of 1934. (MPT Operating Partnership, L.P.)~~

31.4*		~~Certification of Chief Financial Officer pursuant to Rule13a-14(a)~~ ~~under the Securities Exchange Act of 1934. (MPT Operating Partnership, L.P.)~~

32.1**		~~Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule13a-14(b)~~ ~~under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Medical Properties Trust, Inc.)~~

32.2**		~~Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule13a-14(b)~~ ~~under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (MPT Operating Partnership, L.P.)~~

~~Exhibit 101.INS~~		~~XBRL Instance Document~~

~~Exhibit 101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~Exhibit 101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~Exhibit 101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~Exhibit 101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~Exhibit 101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

*	~~Filed herewith.~~

**	~~Furnished herewith.~~

~~SIGNATURE~~SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MEDICAL PROPERTIES TRUST, INC.


~~By:~~
By:		/s/ J. Kevin Hanna
		J. Kevin Hanna
		Vice President, Controller, Assistant Treasurer, and Chief Accounting Officer (Principal Accounting Officer)

MPT OPERATING PARTNERSHIP, L.P.


~~By:~~
By:		/s/ J. Kevin Hanna
		J. Kevin Hanna
		Vice President, Controller, Assistant
		Treasurer, and Chief Accounting Officer
		of the sole member of the general partner
		of MPT Operating Partnership, L.P.
		(Principal Accounting Officer)

Date: November 9, ~~2017~~

2018

4737