UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2018~~2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-32559

Commission file number 333-177186

MEDICAL PROPERTIES TRUST, INC.

MPT OPERATING PARTNERSHIP, L.P.

(Exact Name of Registrant as Specified in Its Charter)

MARYLAND

DELAWARE

20-0191742

20-0242069

(State or other jurisdiction of

incorporation or organization)

(I. R. S. Employer

Identification No.)

1000 URBAN CENTER DRIVE, SUITE 501

BIRMINGHAM, AL

35242

(Address of principal executive offices)

(Zip Code)

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 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	☐
		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 Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001	MPW	The New York Stock Exchange

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~August 2, ~~2018,~~2019, Medical Properties Trust, Inc. had ~~364,941,199~~446,293,287 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~~six months ended ~~September~~June 30, ~~2018~~2019 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~~June 30, ~~2018~~2019

Table of Contents

	Page
PART I — FINANCIAL INFORMATION	3
Item 1 Financial Statements	3
Medical Properties Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	3
Condensed Consolidated Statements of Net Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	4
Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	5
Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2019 and 2018	6
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	67
MPT Operating Partnership, L.P. and Subsidiaries
Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018	78
Condensed Consolidated Statements of Net Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	89
Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	910
Condensed Consolidated Statements of Capital for the Three and Six Months Ended June 30, 2019 and 2018	11
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018	1012
Medical Properties Trust, Inc. and MPT Operating Partnership, L.P.
Notes to Condensed Consolidated Financial Statements	1113
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	2225
Item 3 Quantitative and Qualitative Disclosures about Market Risk	3336
Item 4 Controls and Procedures	3437
PART II — OTHER INFORMATION	3538
Item 1 Legal Proceedings	3538
Item 1A Risk Factors	3538
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	3538
Item 3 Defaults Upon Senior Securities	3538
Item 4 Mine Safety Disclosures	3538
Item 5 Other Information	3538
Item 6 Exhibits	3639
SIGNATURE	3740

PART I — ~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial Statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
(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	$	4,926,462		$	5,944,220		$	6,552,944		$	5,268,459
Mortgage loans		1,428,069			1,778,316			1,216,442			1,213,322
Net investment in direct financing leases		690,897			698,727			686,599			684,053
Gross investment in real estate assets		7,045,428			8,421,263			8,455,985			7,165,834
Accumulated depreciation and amortization		(432,279	)		(455,712	)		(531,880	)		(464,984	)
Net investment in real estate assets		6,613,149			7,965,551			7,924,105			6,700,850
Cash and cash equivalents		710,965			171,472			451,652			820,868
Interest and rent receivables		87,939			78,970			24,103			25,855
Straight-line rent receivables		195,329			185,592			268,901			220,848
Equity investments								799,058			520,058
Other loans		482,453			150,209			370,631			373,198
Other assets		684,681			468,494			284,761			181,966
Total Assets	$	8,774,516		$	9,020,288		$	10,123,211		$	8,843,643
Liabilities and Equity
Liabilities
Debt, net	$	4,043,849		$	4,898,667		$	4,878,310		$	4,037,389
Accounts payable and accrued expenses		202,033			211,188			192,948			204,325
Deferred revenue		11,162			18,178			10,449			13,467
Lease deposits and other obligations to tenants		30,964			57,050
Total liabilities		4,288,008			5,185,083
Obligations to tenants and other lease liabilities								117,869			27,524
Total Liabilities								5,199,576			4,282,705
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 — 364,858 shares at September 30, 2018 and 364,424 shares at December 31, 2017		365			364
Common stock, $0.001 par value. Authorized 500,000 shares; issued and outstanding — 394,425 shares at June 30, 2019 and 370,637 shares at December 31, 2018								394			371
Additional paid-in capital		4,343,768			4,333,027			4,855,310			4,442,948
Retained earnings (deficit)		179,703			(485,932	)
Retained earnings								121,772			162,768
Accumulated other comprehensive loss		(50,569	)		(26,049	)		(66,530	)		(58,202	)
Treasury shares, at cost		(777	)		(777	)		(777	)		(777	)
Total Medical Properties Trust, Inc. Stockholders’ Equity		4,472,490			3,820,633			4,910,169			4,547,108
Non-controlling interests		14,018			14,572			13,466			13,830
Total equity		4,486,508			3,835,205
Total Equity								4,923,635			4,560,938
Total Liabilities and Equity	$	8,774,516		$	9,020,288		$	10,123,211		$	8,843,643

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 June 30,						For the Six Months Ended June 30,
(In thousands, except per share amounts)	2018			2017			2018			2017			2019			2018			2019			2018
Revenues
Rent billed	$	118,238		$	110,930		$	369,076		$	311,140		$	110,882		$	122,827		$	219,480		$	250,838
Straight-line rent		18,293			17,505			49,157			46,561			25,136			15,073			45,787			30,864
Income from direct financing leases		18,998			19,115			55,613			55,307			17,386			18,934			34,666			36,615
Interest and fee income		41,467			29,030			130,098			86,776
Interest and other income														39,145			45,068			73,070			88,631
Total revenues		196,996			176,580			603,944			499,784			192,549			201,902			373,003			406,948
Expenses
Interest		57,215			42,759			172,364			120,498			52,326			58,126			102,877			115,149
Real estate depreciation and amortization		29,949			31,915			100,217			88,994			33,976			34,466			67,328			70,268
Property-related		2,719			1,519			6,823			4,000			8,290			1,920			11,356			4,104
General and administrative		20,982			15,011			58,352			43,287			22,272			19,552			45,723			37,370
Acquisition costs		506			7,434			917			20,996			—			411			—			411
Total expenses		111,371			98,638			338,673			277,775			116,864			114,475			227,284			227,302
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	)
(Loss) gain on sale of real estate, net														(147	)		24,151			(147	)		25,618
Earnings from equity interests														4,441			4,155			8,161			7,426
Other		5,711			3,865			6,245			8,999			(333	)		(2,153	)		(129	)		(6,892	)
Total other income (expense)		652,915			(531	)		679,067			(2,364	)
Total other income														3,961			26,153			7,885			26,152

Income before income tax		738,540			77,411			944,338			219,645			79,646			113,580			153,604			205,798
Income tax expense		(2,064	)		(530	)		(4,802	)		(783	)
Income tax benefit (expense)														274			(1,563	)		2,607			(2,738	)

Net income		736,476			76,881			939,536			218,862			79,920			112,017			156,211			203,060
Net income attributable to non-controlling interests		(442	)		(417	)		(1,334	)		(1,013	)		(482	)		(450	)		(951	)		(892	)
Net income attributable to MPT common stockholders	$	736,034		$	76,464		$	938,202		$	217,849		$	79,438		$	111,567		$	155,260		$	202,168

Earnings per common share — basic
Net income attributable to MPT common stockholders	$	2.01		$	0.21		$	2.56		$	0.63

Earnings per common share — diluted
Earnings per common share — basic and diluted
Net income attributable to MPT common stockholders	$	2.00		$	0.21		$	2.56		$	0.63		$	0.20		$	0.30		$	0.40		$	0.55

Weighted average shares outstanding — basic		365,024			364,315			364,934			345,076			394,574			364,897			387,563			364,889
Weighted average shares outstanding — diluted		366,467			365,046			365,784			345,596			395,692			365,541			388,683			365,442

Dividends declared per common share	$	0.25		$	0.24		$	0.75		$	0.72		$	0.25		$	0.25		$	0.50		$	0.50

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 June 30,						For the Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017			2019			2018			2019			2018
Net income	$	736,476		$	76,881		$	939,536		$	218,862		$	79,920		$	112,017		$	156,211		$	203,060
Other comprehensive income:
Foreign currency translation (loss) gain		(8,216	)		17,426			(24,520	)		57,738
Unrealized loss on interest rate swap														(1,486	)		—			(5,258	)		—
Foreign currency translation gain (loss)														2,848			(32,392	)		(3,070	)		(16,304	)
Total comprehensive income		728,260			94,307			915,016			276,600			81,282			79,625			147,883			186,756
Comprehensive income attributable to non-controlling interests		(442	)		(417	)		(1,334	)		(1,013	)		(482	)		(450	)		(951	)		(892	)
Comprehensive income attributable to MPT common stockholders	$	727,818		$	93,890		$	913,682		$	275,587		$	80,800		$	79,175		$	146,932		$	185,864

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited)

	Preferred				Common
(In thousands, except per share amounts)	Shares		Par Value		Shares		Par Value		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Treasury Stock			Non- Controlling Interests			Total Equity
Balance at December 31, 2018		—	$	—		370,637	$	371	$	4,442,948	$	162,768		$	(58,202	)	$	(777	)	$	13,830		$	4,560,938
Net income		—		—		—		—		—		75,822			—			—			469			76,291
Unrealized loss on interest rate swap		—		—		—		—		—		—			(3,772	)		—			—			(3,772	)
Foreign currency translation loss		—		—		—		—		—		—			(5,918	)		—			—			(5,918	)
Stock vesting and amortization of stock-based compensation		—		—		1,055		1		6,714		—			—			—			—			6,715
Distributions to non-controlling interests		—		—		—		—		—		—			—			—			(645	)		(645	)
Proceeds from offering (net of offering costs)		—		—		20,147		20		354,010		—			—			—			—			354,030
Dividends declared ($0.25 per common share)		—		—		—		—		—		(97,163	)		—			—			—			(97,163	)
Balance at March 31, 2019		—	$	—		391,839	$	392	$	4,803,672	$	141,427		$	(67,892	)	$	(777	)	$	13,654		$	4,890,476
Net income		—		—		—		—		—		79,438			—			—			482			79,920
Unrealized loss on interest rate swap		—		—		—		—		—		—			(1,486	)		—			—			(1,486	)
Foreign currency translation gain		—		—		—		—		—		—			2,848			—			—			2,848
Stock vesting and amortization of stock-based compensation		—		—		119		—		6,317		—			—			—			—			6,317
Distributions to non-controlling interests		—		—		—		—		—		—			—			—			(670	)		(670	)
Proceeds from offering (net of offering costs)		—		—		2,467		2		45,321		—			—			—			—			45,323
Dividends declared ($0.25 per common share)		—		—		—		—		—		(99,093	)		—			—			—			(99,093	)
Balance at June 30, 2019		—	$	—		394,425	$	394	$	4,855,310	$	121,772		$	(66,530	)	$	(777	)	$	13,466		$	4,923,635

	Preferred				Common
(In thousands, except per share amounts)	Shares		Par Value		Shares		Par Value		Additional Paid-in Capital			Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Treasury Stock			Non- Controlling Interests			Total Equity
Balance at December 31, 2017		—	$	—		364,424	$	364	$	4,333,027		$	(485,932	)	$	(26,049	)	$	(777	)	$	14,572		$	3,835,205
Net income		—		—		—		—		—			90,601			—			—			442			91,043
Cumulative effect of change in accounting principles		—		—		—		—		—			1,938			—			—			—			1,938
Foreign currency translation gain		—		—		—		—		—			—			16,088			—			—			16,088
Stock vesting and amortization of stock-based compensation		—		—		271		1		1,855			—			—			—			—			1,856
Redemption of MOP units		—		—		—		—		(816	)		—			—			—			—			(816	)
Distributions to non-controlling interests		—		—		—		—		—			—			—			—			(620	)		(620	)
Proceeds from offering (net of offering costs)		—		—		—		—		(94	)		—			—			—			—			(94	)
Dividends declared ($0.25 per common share)		—		—		—		—		—			(91,411	)		—			—			—			(91,411	)
Balance at March 31, 2018		—	$	—		364,695	$	365	$	4,333,972		$	(484,804	)	$	(9,961	)	$	(777	)	$	14,394		$	3,853,189
Net income		—		—		—		—		—			111,567			—			—			450			112,017
Foreign currency translation loss		—		—		—		—		—			—			(32,392	)		—			—			(32,392	)
Stock vesting and amortization of stock-based compensation		—		—		36		—		4,869			—			—			—			—			4,869
Distributions to non-controlling interests		—		—		—		—		—			—			—			—			(638	)		(638	)
Proceeds from offering (net of offering costs)		—		—		—		—		(43	)		—			—			—			—			(43	)
Dividends declared ($0.25 per common share)		—		—		—		—		—			(91,547	)		—			—			—			(91,547	)
Balance at June 30, 2018		—	$	—		364,731	$	365	$	4,338,798		$	(464,784	)	$	(42,353	)	$	(777	)	$	14,206		$	3,845,455

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 Six Months Ended June 30,
	2018			2017			2019			2018
	(In thousands)						(In thousands)
Operating activities
Net income	$	939,536		$	218,862		$	156,211		$	203,060
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		106,508			93,805			69,430			74,441
Amortization of deferred financing costs and debt discount		5,543			4,748			3,816			3,590
Direct financing lease interest accretion		(7,213	)		(7,276	)		(4,569	)		(4,743	)
Straight-line rent revenue		(64,840	)		(47,678	)		(49,501	)		(41,664	)
Share-based compensation		11,695			7,148			13,032			6,725
Gain from sale of real estate and other, net		(672,822	)		(7,431	)
Loss (gain) from sale of real estate, net								147			(25,618	)
Straight-line rent and other write-off		17,615			1,117			3,002			13,294
Debt refinancing costs		-			18,794
Unutilized financing fees								914			—
Other adjustments		(21,354	)		(7,140	)		12,774			(14,718	)
Changes in:
Interest and rent receivables		(10,158	)		(14,613	)		(265	)		(7,285	)
Accounts payable and accrued expenses		(5,387	)		(40,378	)		(6,885	)		(10,603	)
Net cash provided by operating activities		299,123			219,958			198,106			196,479
Investing activities
Cash paid for acquisitions and other related investments		(1,166,618	)		(2,152,069	)		(1,402,315	)		(273,728	)
Net proceeds from sale of real estate		1,513,666			64,362			3,449			221,931
Principal received on loans receivable		531,772			6,760			420			262,862
Investment in loans receivable		(174,494	)		(18,574	)		(2,992	)		(169,435	)
Construction in progress and other		(32,425	)		(52,953	)		(39,987	)		(22,875	)
Other investments, net		(63,080	)		(73,982	)
Net cash provided by (used for) investing activities		608,821			(2,226,456	)
Capital additions and other investments, net								(165,486	)		(20,400	)
Net cash used for investing activities								(1,606,911	)		(1,645	)
Financing activities
Proceeds from term debt		759,735			2,355,280			837,240			—
Payments of term debt		-			(688,221	)
Revolving credit facilities, net		(818,116	)		155,089			12,976			(4,618	)
Distributions paid		(272,360	)		(239,211	)		(192,582	)		(180,813	)
Lease deposits and other obligations to tenants		(25,511	)		(8,346	)		3,485			(28,001	)
Proceeds from sale of common shares, net of offering costs		-			548,055			399,353			—
Other financing activities		(3,106	)		(27,167	)		(9,432	)		(2,328	)
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
Net cash provided by (used for) financing activities								1,051,040			(215,760	)
Decrease in cash, cash equivalents and restricted cash for period								(357,765	)		(20,926	)
Effect of exchange rate changes		(8,313	)		15,136			(8,050	)		(3,477	)
Cash, cash equivalents and restricted cash at beginning of period		172,247			84,882			822,425			172,247
Cash, cash equivalents and restricted cash at end of period	$	712,520		$	188,999		$	456,610		$	147,844
Interest paid	$	175,715		$	131,708		$	97,184		$	115,245
Supplemental schedule of non-cash financing activities:
Distributions declared, not paid	$	91,547		$	87,519
Distributions declared, unpaid							$	99,093		$	91,547
Cash, cash equivalents and restricted cash are comprised of the following:
Beginning of period:
Cash and cash equivalents	$	171,472		$	83,240		$	820,868		$	171,472
Restricted cash, included in Other assets		775			1,642			1,557			775
	$	172,247		$	84,882		$	822,425		$	172,247
End of period:
Cash and cash equivalents	$	710,965		$	188,224		$	451,652		$	146,569
Restricted cash, included in Other assets		1,555			775			4,958			1,275
	$	712,520		$	188,999		$	456,610		$	147,844

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	June 30, 2019			December 31, 2018
(In thousands)	(Unaudited)			(Note 2)
Assets
Real estate assets
Land, buildings and improvements, intangible lease assets, and other	$	6,552,944		$	5,268,459
Mortgage loans		1,216,442			1,213,322
Net investment in direct financing leases		686,599			684,053
Gross investment in real estate assets		8,455,985			7,165,834
Accumulated depreciation and amortization		(531,880	)		(464,984	)
Net investment in real estate assets		7,924,105			6,700,850
Cash and cash equivalents		451,652			820,868
Interest and rent receivables		24,103			25,855
Straight-line rent receivables		268,901			220,848
Equity investments		799,058			520,058
Other loans		370,631			373,198
Other assets		284,761			181,966
Total Assets	$	10,123,211		$	8,843,643
Liabilities and Capital
Liabilities
Debt, net	$	4,878,310		$	4,037,389
Accounts payable and accrued expenses		93,523			108,574
Deferred revenue		10,449			13,467
Obligations to tenants and other lease liabilities		117,869			27,524
Payable due to Medical Properties Trust, Inc.		99,035			95,361
Total Liabilities		5,199,186			4,282,315
Capital
General Partner — issued and outstanding — 3,944 units at June 30, 2019 and 3,706 units at December 31, 2018		49,797			46,084
Limited Partners:
Common units — issued and outstanding — 390,481 units at June 30, 2019 and 366,931 units at December 31, 2018		4,927,292			4,559,616
LTIP units — issued and outstanding — 232 units at June 30, 2019 and 232 units at December 31, 2018		—			—
Accumulated other comprehensive loss		(66,530	)		(58,202	)
Total MPT Operating Partnership, L.P. capital		4,910,559			4,547,498
Non-controlling interests		13,466			13,830
Total capital		4,924,025			4,561,328
Total Liabilities and Capital	$	10,123,211		$	8,843,643

See accompanying notes to condensed consolidated financial statements.

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

Condensed Consolidated ~~Balance Sheets~~Statements of Net Income

(Unaudited)

September 30,
2018

December 31,
2017

(In thousands)

(Unaudited)

(Note 2)

Assets

Real estate assets

Land, buildings and improvements, intangible lease assets, and other

$
4,926,462

$
5,944,220

Mortgage loans

1,428,069

1,778,316

Net investment in direct financing leases

690,897

698,727

Gross investment in real estate assets

7,045,428

8,421,263

Accumulated depreciation and amortization

(432,279
)

(455,712
)
Net investment in real estate assets

6,613,149

7,965,551

Cash and cash equivalents

710,965

171,472

Interest and rent receivables

87,939

78,970

Straight-line rent receivables

195,329

185,592

Other loans

482,453

150,209

Other assets

684,681

468,494

Total Assets

$
8,774,516

$
9,020,288

Liabilities and Capital

Liabilities

Debt, net

$
4,043,849

$
4,898,667

Accounts payable and accrued expenses

110,155

121,465

Deferred revenue

11,162

18,178

Lease deposits and other obligations to tenants

30,964

57,050

Payable due to Medical Properties Trust, Inc.

91,488

89,333

Total liabilities

4,287,618

5,184,693

Capital

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 — 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

(50,569
)

(26,049
)
Total MPT Operating Partnership, L.P. Capital

4,472,880

3,821,023

Non-controlling interests

14,018

14,572

Total capital

4,486,898

3,835,595

Total Liabilities and Capital

$
8,774,516

$
9,020,288

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands, except per unit amounts)	2019			2018			2019			2018
Revenues
Rent billed	$	110,882		$	122,827		$	219,480		$	250,838
Straight-line rent		25,136			15,073			45,787			30,864
Income from direct financing leases		17,386			18,934			34,666			36,615
Interest and other income		39,145			45,068			73,070			88,631
Total revenues		192,549			201,902			373,003			406,948
Expenses
Interest		52,326			58,126			102,877			115,149
Real estate depreciation and amortization		33,976			34,466			67,328			70,268
Property-related		8,290			1,920			11,356			4,104
General and administrative		22,272			19,552			45,723			37,370
Acquisition costs		—			411			—			411
Total expenses		116,864			114,475			227,284			227,302
Other income (expense)
(Loss) gain on sale of real estate, net		(147	)		24,151			(147	)		25,618
Earnings from equity interests		4,441			4,155			8,161			7,426
Other		(333	)		(2,153	)		(129	)		(6,892	)
Total other income		3,961			26,153			7,885			26,152

Income before income tax		79,646			113,580			153,604			205,798
Income tax benefit (expense)		274			(1,563	)		2,607			(2,738	)

Net income		79,920			112,017			156,211			203,060
Net income attributable to non-controlling interests		(482	)		(450	)		(951	)		(892	)
Net income attributable to MPT Operating Partnership partners	$	79,438		$	111,567		$	155,260		$	202,168

Earnings per unit — basic and diluted
Net income attributable to MPT Operating Partnership partners	$	0.20		$	0.30		$	0.40		$	0.55

Weighted average units outstanding — basic		394,574			364,897			387,563			364,889
Weighted average units outstanding — diluted		395,692			365,541			388,683			365,442

Dividends declared per unit	$	0.25		$	0.25		$	0.50		$	0.50

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Net~~Comprehensive Income

(Unaudited)

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

(In thousands, except per unit amounts)

2018

2017

2018

2017

Revenues

Rent billed

$
118,238

$
110,930

$
369,076

$
311,140

Straight-line rent

18,293

17,505

49,157

46,561

Income from direct financing leases

18,998

19,115

55,613

55,307

Interest and fee income

41,467

29,030

130,098

86,776

Total revenues

196,996

176,580

603,944

499,784

Expenses

Interest

57,215

42,759

172,364

120,498

Real estate depreciation and amortization

29,949

31,915

100,217

88,994

Property-related

2,719

1,519

6,823

4,000

General and administrative

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
)

Income before income tax

738,540

77,411

944,338

219,645

Income tax expense

(2,064
)

(530
)

(4,802
)

(783
)

Net income

736,476

76,881

939,536

218,862

Net income attributable to non-controlling interests

(442
)

(417
)

(1,334
)

(1,013
)
Net income attributable to MPT Operating
   Partnership partners

$
736,034

$
76,464

$
938,202

$
217,849

Earnings per unit — basic

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

$
2.00

$
0.21

$
2.56

$
0.63

Weighted average units outstanding — basic

365,024

364,315

364,934

345,076

Weighted average units outstanding — diluted

366,467

365,046

365,784

345,596

Dividends declared per unit

$
0.25

$
0.24

$
0.75

$
0.72

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2019			2018			2019			2018
Net income	$	79,920		$	112,017		$	156,211		$	203,060
Other comprehensive income:
Unrealized loss on interest rate swap		(1,486	)		—			(5,258	)		—
Foreign currency translation gain (loss)		2,848			(32,392	)		(3,070	)		(16,304	)
Total comprehensive income		81,282			79,625			147,883			186,756
Comprehensive income attributable to non-controlling interests		(482	)		(450	)		(951	)		(892	)
Comprehensive income attributable to MPT Operating Partnership partners	$	80,800		$	79,175		$	146,932		$	185,864

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of ~~Comprehensive Income~~Capital

(Unaudited)

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

(In thousands)

2018

2017

2018

2017

Net income

$
736,476

$
76,881

$
939,536

$
218,862

Other comprehensive income:

Foreign currency translation (loss) gain

(8,216
)

17,426

(24,520
)

57,738

Total comprehensive income

728,260

94,307

915,016

276,600

Comprehensive income attributable to non-controlling
interests

(442
)

(417
)

(1,334
)

(1,013
)
Comprehensive income attributable to MPT Operating
Partnership partners

$
727,818

$
93,890

$
913,682

$
275,587

	General					Limited Partners									Accumulated
	Partner					Common					LTIPs				Other			Non-
(In thousands, except per unit amounts)	Units		Unit Value			Units		Unit Value			Units		Unit Value		Comprehensive Loss			Controlling Interests			Total Capital
Balance at December 31, 2018		3,706	$	46,084			366,931	$	4,559,616			232	$	—	$	(58,202	)	$	13,830		$	4,561,328
Net income		—		758			—		75,064			—		—		—			469			76,291
Unrealized loss on interest rate swap		—		—			—		—			—		—		(3,772	)		—			(3,772	)
Foreign currency translation loss		—		—			—		—			—		—		(5,918	)		—			(5,918	)
Unit vesting and amortization of unit-based compensation		11		68			1,044		6,647			—		—		—			—			6,715
Distributions to non-controlling interests		—		—			—		—			—		—		—			(645	)		(645	)
Proceeds from offering (net of offering costs)		201		3,540			19,946		350,490			—		—		—			—			354,030
Distributions declared ($0.25 per unit)		—		(972	)		—		(96,191	)		—		—		—			—			(97,163	)
Balance at March 31, 2019		3,918	$	49,478			387,921	$	4,895,626			232	$	—	$	(67,892	)	$	13,654		$	4,890,866
Net income		—		794			—		78,644			—		—		—			482			79,920
Unrealized loss on interest rate swap		—		—			—		—			—		—		(1,486	)		—			(1,486	)
Foreign currency translation gain		—		—			—		—			—		—		2,848			—			2,848
Unit vesting and amortization of unit-based compensation		1		63			118		6,254			—		—		—			—			6,317
Distributions to non-controlling interests		—		—			—		—			—		—		—			(670	)		(670	)
Proceeds from offering (net of offering costs)		25		453			2,442		44,870			—		—		—			—			45,323
Distributions declared ($0.25 per unit)		—		(991	)		—		(98,102	)		—		—		—			—			(99,093	)
Balance at June 30, 2019		3,944	$	49,797			390,481	$	4,927,292			232	$	—	$	(66,530	)	$	13,466		$	4,924,025

	General					Limited Partners											Accumulated
	Partner					Common						LTIPs					Other			Non-
(In thousands, except per unit amounts)	Units		Unit Value			Units			Unit Value			Units			Unit Value		Comprehensive Loss			Controlling Interests			Total Capital
Balance at December 31, 2017		3,644	$	38,489			360,780		$	3,808,583			292		$	—	$	(26,049	)	$	14,572		$	3,835,595
Net income		—		906			—			89,695			—			—		—			442			91,043
Cumulative effect of change in accounting principles		—		19			—			1,919			—			—		—			—			1,938
Foreign currency translation gain		—		—			—			—			—			—		16,088			—			16,088
Unit vesting and amortization of unit-based compensation		3		19			268			1,837			—			—		—			—			1,856
Conversion of LTIP units to common units		—		—			60			—			(60	)		—		—			—			—
Redemption of common units		—		—			(60	)		(816	)		—			—		—			—			(816	)
Distributions to non-controlling interests		—		—			—			—			—			—		—			(620	)		(620	)
Proceeds from offering (net of offering costs)		—		(1	)		—			(93	)		—			—		—			—			(94	)
Distributions declared ($0.25 per unit)		—		(914	)		—			(90,497	)		—			—		—			—			(91,411	)
Balance at March 31, 2018		3,647	$	38,518			361,048		$	3,810,628			232		$	—	$	(9,961	)	$	14,394		$	3,853,579
Net income		—		1,115			—			110,452			—			—		—			450			112,017
Foreign currency translation loss		—		—			—			—			—			—		(32,392	)		—			(32,392	)
Unit vesting and amortization of unit-based compensation		—		49			36			4,820			—			—		—			—			4,869
Distributions to non-controlling interests		—		—			—			—			—			—		—			(638	)		(638	)
Proceeds from offering (net of offering costs)		—		—			—			(43	)		—			—		—			—			(43	)
Distributions declared ($0.25 per unit)		—		(915	)		—			(90,632	)		—			—		—			—			(91,547	)
Balance at June 30, 2018		3,647	$	38,767			361,084		$	3,835,225			232		$	—	$	(42,353	)	$	14,206		$	3,845,845

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 Six Months Ended June 30,
	2018			2017			2019			2018
	(In thousands)						(In thousands)
Operating activities
Net income	$	939,536		$	218,862		$	156,211		$	203,060
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		106,508			93,805			69,430			74,441
Amortization of deferred financing costs and debt discount		5,543			4,748			3,816			3,590
Direct financing lease interest accretion		(7,213	)		(7,276	)		(4,569	)		(4,743	)
Straight-line rent revenue		(64,840	)		(47,678	)		(49,501	)		(41,664	)
Unit-based compensation		11,695			7,148			13,032			6,725
Gain from sale of real estate and other, net		(672,822	)		(7,431	)
Loss (gain) from sale of real estate, net								147			(25,618	)
Straight-line rent and other write-off		17,615			1,117			3,002			13,294
Debt refinancing costs		-			18,794
Unutilized financing fees								914			—
Other adjustments		(21,354	)		(7,140	)		12,774			(14,718	)
Changes in:
Interest and rent receivables		(10,158	)		(14,613	)		(265	)		(7,285	)
Accounts payable and accrued expenses		(5,387	)		(40,378	)		(6,885	)		(10,603	)
Net cash provided by operating activities		299,123			219,958			198,106			196,479
Investing activities
Cash paid for acquisitions and other related investments		(1,166,618	)		(2,152,069	)		(1,402,315	)		(273,728	)
Net proceeds from sale of real estate		1,513,666			64,362			3,449			221,931
Principal received on loans receivable		531,772			6,760			420			262,862
Investment in loans receivable		(174,494	)		(18,574	)		(2,992	)		(169,435	)
Construction in progress and other		(32,425	)		(52,953	)		(39,987	)		(22,875	)
Other investments, net		(63,080	)		(73,982	)
Net cash provided by (used for) investing activities		608,821			(2,226,456	)
Capital additions and other investments, net								(165,486	)		(20,400	)
Net cash used for investing activities								(1,606,911	)		(1,645	)
Financing activities
Proceeds from term debt		759,735			2,355,280			837,240			—
Payments of term debt		-			(688,221	)
Revolving credit facilities, net		(818,116	)		155,089			12,976			(4,618	)
Distributions paid		(272,360	)		(239,211	)		(192,582	)		(180,813	)
Lease deposits and other obligations to tenants		(25,511	)		(8,346	)		3,485			(28,001	)
Proceeds from sale of units, net of offering costs		-			548,055			399,353			—
Other financing activities		(3,106	)		(27,167	)		(9,432	)		(2,328	)
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
Net cash provided by (used for) financing activities								1,051,040			(215,760	)
Decrease in cash, cash equivalents and restricted cash for period								(357,765	)		(20,926	)
Effect of exchange rate changes		(8,313	)		15,136			(8,050	)		(3,477	)
Cash, cash equivalents and restricted cash at beginning of period		172,247			84,882			822,425			172,247
Cash, cash equivalents and restricted cash at end of period	$	712,520		$	188,999		$	456,610		$	147,844
Interest paid	$	175,715		$	131,708		$	97,184		$	115,245
Supplemental schedule of non-cash financing activities:
Distributions declared, not paid	$	91,547		$	87,519
Distributions declared, unpaid							$	99,093		$	91,547
Cash, cash equivalents, and restricted cash are comprised of the following:
Beginning of period:
Cash and cash equivalents	$	171,472		$	83,240		$	820,868		$	171,472
Restricted cash, included in Other assets		775			1,642			1,557			775
	$	172,247		$	84,882		$	822,425		$	172,247
End of period:
Cash and cash equivalents	$	710,965		$	188,224		$	451,652		$	146,569
Restricted cash, included in Other assets		1,555			775			4,958			1,275
	$	712,520		$	188,999		$	456,610		$	147,844

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. ANDAND 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 ~~2004.~~April 6, 2004 and elected REIT status upon the filing in September 2005 of the calendar year 2004 federal income tax return. 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 are conducted by entities which we elected to be treated as taxable REIT subsidiaries (“TRS”). Our 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 the local ~~taxes;~~taxes of the jurisdictions where our properties reside and/or legal entities are domiciled; however, we do not expect to incur additional taxes in the U.S. as the majority of such ~~real estate related~~ income ~~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, and 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.~~hospitals. 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. ~~Our~~All of our properties are currently located in the U.S., Europe, and ~~Europe.~~Australia.

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 (“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~~six months ended ~~September~~June 30, ~~2018,~~2019, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018.~~2019. The condensed consolidated balance sheet at December 31, ~~2017~~2018 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, ~~2017, and as updated in our Form 10-Q for the quarters ended March 31, 2018 and June 30,~~ 2018. There have been no material changes to these significant accounting ~~policies.~~policies other than the following:

~~Recent Accounting Developments:~~

~~Leases~~

~~In February 2016, the Financial~~On January 1, 2019, we adopted Accounting Standards ~~Board (the “FASB”~~Update (“ASU”) ~~issued ASU~~ 2016-02, “Leases”, ~~which~~(“ASU 2016-02”). ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). We adopted this standard using the modified retrospective approach and have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits the following: no reassessment of whether existing contracts are or contain a lease; no reassessment of lease classification for existing leases; and no reassessment of initial direct costs for existing leases. Additionally, we made certain elections permitted in accordance with ASU 2018-11, “Leases (Topic 842): – Targeted Improvements.” which (1) permits entities to apply the transition provisions of the new standard at its adoption date instead of at the earliest comparative period presented in its financial statements and (2) permits lessors to account for lease and non-lease components as a single lease component in a contract if certain criteria are met.

The ~~new~~ standard requires lessees to apply a dual approach, classifying leases as either 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 (for finance leases) or on a straight-line basis (for operating leases) 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 greater than 12 months regardless of their classification. Leases with a term of 12 months or less will ~~be accounted for~~remain off balance sheet with lease expense recognized on a straight-line basis over the lease term, similar to ~~existing~~previous guidance for operating ~~leases today.~~leases. The ~~new~~ standard requires lessors to account for leases using an approach that is substantially equivalent to ~~existing~~previous 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 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. We do have~~For our 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, we ~~will record~~recorded a right-of-use asset and aoffsetting lease liability ~~on our balance sheet~~of approximately $84 million upon adoption of this standard ~~with any difference recorded as a~~– resulting in no material cumulative ~~adjustment in equity.~~effect adjustment. From a lessor perspective, we dodid not ~~expect any~~ change in the ~~current~~ classification ~~and~~or accounting of our existing ~~leases. However,~~leases except, we ~~do expect certain non-lease components (such as~~are now grossing up our income statement for certain operating expenses, such as property taxes and insurance, that ~~we pay and~~the tenants of our ~~tenants~~facilities are required to reimburse us for pursuant to our “triple-net” ~~leases)~~leases. See Note 10 for additional detail.

Recent Accounting Developments:

Measurement of Credit Losses on Financial Instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). This standard requires a new forward-looking “expected loss” model to be ~~recorded gross versus net~~used for our financing receivables, including direct financing leases and loan receivables, which the FASB believes will result in more timely recognition of such losses. ASU 2016-13 is effective for us beginning January 1, 2020. We are still evaluating the ~~respective expenses upon adoption~~impact of this standard, in 2019 in accordance with ASU No. 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,but we do not believe such impact will ~~continue to present on a net basis.~~be material.

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, 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, 2018 (in thousands):

VIE Type

Maximum Loss
Exposure(1)

Asset Type
Classification

Carrying
Amount(2)

Loans, net

$
329,340

Mortgage and other loans

$
228,960

Equity investments

$
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 borrowers or investees) that most significantly impact the VIE’s economic performance. As of September 30, 2018, we were not required to provide financial support through a liquidity arrangement or otherwise to our unconsolidated VIEs, including circumstances in which they 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 Note 10 for additional description of the nature, purpose and activities of our more significant VIEs and interests therein, 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):

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2018			2017			2019		2018
Assets Acquired
Land and land improvements	$	57,452		$	220,864		$	242,682	$	16,121
Building		467,164			928,687			784,184		232,409
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
Other loans		336,458			-
Mortgage loans		-			700,000
Intangible lease assets — subject to amortization (weighted average useful life 18.5 years for 2019 and 20.0 years for 2018)								91,050		25,198
Equity investments		245,267			100,000			284,399		—
Liabilities assumed		-			(878	)
Total assets acquired	$	1,166,618		$	2,152,069		$	1,402,315	$	273,728
Loans repaid		(525,426	)		-
Loans repaid(1)								—		(259,378	)
Total net assets acquired	$	641,192		$	2,152,069		$	1,402,315	$	14,350

(1)

Includes $259.4 million of loans advanced to Steward Health Care System LLC (“Steward”) in 2017 and repaid in 2018 as described more fully below.

~~2018~~2019 Activity

~~Joint Venture Transaction~~

On ~~August 31, 2018,~~June 10, 2019, we ~~completed a joint venture arrangement with Primotop Holdings S.à.r.l.~~acquired seven community hospitals in Kansas for approximately $145.4 million. The properties are leased to an affiliate of Saint Luke’s Health System (“~~Primotop”~~SLHS”) pursuant to ~~which~~seven individual in-place leases with an average remaining lease term of 14 years. The leases provide for fixed escalations every five years and include two five-year extension options. All seven hospitals were constructed in either 2018 or 2019, and the leases are guaranteed by SLHS.

On June 6, 2019, we ~~contributed 71 of our post-acute~~acquired 11 hospitals in ~~Germany,~~Australia for a purchase price of approximately AUD$1.2 billion plus stamp duties and registration fees of AUD$66.6 million. The properties are leased to Healthscope, Ltd. (“Healthscope”) pursuant to master lease agreements that have an average initial term of 20 years with annual fixed escalations of 2.5% and multiple extension options. Healthscope was acquired in a simultaneous transaction by Brookfield Business Partners L.P. and certain of its institutional partners.

On May 27, 2019, we invested in a portfolio of 13 acute care campuses and two additional properties in Switzerland for an aggregate purchase price of approximately CHF 236.6 million. The investment was effected through our purchase of a 46% stake in a Swiss healthcare real estate company, Infracore SA, from the previous majority shareholder, Aevis Victoria SA (“Aevis”). The facilities are leased to Swiss Medical Network, a wholly-owned Aevis subsidiary, pursuant to leases with an ~~aggregate fair value of €1.635 billion,~~average 23-year

remaining term subject to annual escalation provisions. We are accounting for ~~a 50% interest, while Primotop contributed cash for its 50%~~our 46% interest in ~~the~~this 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~~method. Additionally, we purchased a ~~€290~~4.9% stake in Aevis for approximately CHF 47 million ~~shareholder loan (with terms identical to Primotop’s shareholder loan).~~on June 28, 2019.

Other ~~Transactions~~

~~On August 31, 2018, we acquired an~~acquisitions throughout the first half of 2019 included two acute care ~~facility~~hospitals and one inpatient rehabilitation hospital for an aggregate investment of approximately $80 million. One of the acute care hospitals, acquired on April 12, 2019 and located in ~~Pasco, Washington for $17.5 million. The property~~Big Spring, Texas, is leased to ~~RCCH Healthcare Partners (“RCCH”),~~Steward pursuant to the ~~existing long-term~~Steward master lease, ~~entered into~~while the other, located in Poole, England and acquired on April 3, 2019, is leased to BMI Healthcare pursuant to an in-place lease with ~~RCCH in April 2016.~~

~~On August 28, 2018, we acquired three~~14 years remaining on its term and fixed 2.5% annual escalators. The inpatient rehabilitation ~~hospitals~~hospital, acquired on February 8, 2019, is located 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 fourth quarter of 2018. The properties areand leased to affiliates of Median Kliniken S.à.r.l. (“MEDIAN”)~~, pursuant to a new 27-year master lease with annual escalators at the greater of 1% or 70% of the change in German consumer price index (“CPI”)~~.

~~During the second and third quarters of~~2018 Activity

On June 27, 2018, we acquired the fee simple real estate of ~~four~~two 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~~$259.4 million of mortgage loans made to Steward in October 2016, ~~and March 2018,~~ along with an additional $14.4 million in cash consideration. These properties are being leased to Steward pursuant to the original master ~~lease from October 2016 that 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, which separately completed its acquisition of IASIS on September 29, 2017. Our investment in the portfolio included the acquisition of eight acute care hospitals and one behavioral health facility for approximately $700 million, the 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. The initial term, extension options, and interest rate of the mortgage 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 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 MEDIAN, pursuant to a third master lease that has a fixed term ending in August 2043 with annual escalators at the greater of 1% or 70% of the change in German 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. This property is leased to MEDIAN pursuant to the original master lease agreement effective in 2015 and expiring December 2042 with annual escalators at the greater of 1% or 70% of the change in German 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 acquire in September 2016 for an aggregate amount of €44.1 million. This property is leased to MEDIAN, pursuant to the original long-term master lease agreement reached with MEDIAN in 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”), 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 operated by Alecto. 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.

Development Activities

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

Property	Commitment		Costs Incurred as of June 30, 2019		Estimated Rent Commencement Date
Circle Health (Birmingham, England)	$	45,520	$	34,452	1Q 2020
Circle Health Rehabilitation (Birmingham, England)		20,520		15,564	1Q 2020
Surgery Partners (Idaho Falls, Idaho)		113,468		69,312	1Q 2020
	$	179,508	$	119,328

During the first ~~nine~~six months of 2018, we completed ~~the~~ construction on Ernest Flagstaff. This $25.5 million inpatient rehabilitation facility located in Flagstaff, Arizona opened on March 1, 2018 and is being leased to Ernest pursuant to a stand-alone lease, with terms generally similar to the original master lease.

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

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

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~~has 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~~Leasing Operations (Lessor)

~~On March 31, 2017,~~As noted earlier, we ~~sold~~acquire and develop healthcare facilities and lease the ~~EASTAR Health System real estate located~~facilities to healthcare operating companies under long-term net leases (typical initial fixed terms ranging from 10 to 15 years) and most include renewal options at the election of our tenants, generally in ~~Muskogee, Oklahoma, which was leased~~five year increments. More than 95% of our leases provide annual rent escalations based on increases in the consumer price index (or similar index outside the U.S.) and/or fixed minimum annual escalations ranging from 0.5% to ~~RCCH. Total proceeds~~3.0%. Many of our domestic leases contain purchase options with pricing set at various terms but in no case less than our total investment. For five properties with a carrying value of $210 million, our leases require a residual value guarantee from ~~this transaction were approximately $64 million, resulting in a gain~~the tenant. Our leases typically require the tenant to handle and bear most of ~~$7.4 million, partially offset by a $0.6 million non-cash charge~~the costs associated with our properties including repair/maintenance, property taxes, and insurance. We routinely inspect our properties to ~~revenue to write-off related straight-line rent receivables on this property.~~

~~Summary~~ensure the residual value of ~~Operations~~each of our assets is being maintained. Except for ~~Disposed Assets in 2018~~leases noted below as direct finance leases (“DFLs”), all of our leases are classified as operating leases.

The ~~properties sold during 2018 do not meet the definition~~following table summarizes future minimum lease payments to be received, excluding operating expense reimbursements, from tenants under noncancelable leases as of ~~discontinued operations. However, the following represents the operating results from these properties (excluding the St. Joseph sale in March 2018) for the periods presented~~June 30, 2019 (in thousands):

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

	Total Under Operating Leases		Total Under DFLs		Total
2019 (six months only)	$	240,424	$	30,427	$	270,851
2020		488,865		62,072		550,937
2021		497,542		63,313		560,855
2022		503,549		64,579		568,128
2023		512,114		65,871		577,985
Thereafter		10,776,966		1,400,026		12,176,992
	$	13,019,460	$	1,686,288	$	14,705,748

~~(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~~Direct Financing Leases

At ~~September~~June 30, ~~2018,~~2019, leases on 14 Ernest facilities, ten Prime Healthcare Services, Inc. (“Prime”) facilities, and two Alecto Healthcare Services LLC (“Alecto”) facilities are accounted for as ~~direct financing leases (“DFLs”).~~DFLs. The components of our net investment in DFLs consisted of the following (in thousands):

	As of September 30, 2018			As of December 31, 2017			As of June 30, 2019			As of December 31, 2018
Minimum lease payments receivable	$	2,190,840		$	2,294,081		$	2,063,918		$	2,091,504
Estimated residual values		434,769			448,339			420,733			424,719
Less: Unearned income		(1,934,712	)		(2,043,693	)		(1,798,052	)		(1,832,170	)
Net investment in direct financing leases	$	690,897		$	698,727		$	686,599		$	684,053

On March 15, 2018, we 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~~had an initial 15-year fixed term (ending March 2033) with three extension options of five years each. With this transaction, we incurred a non-cash charge of $1.5 million to write-off DFL unbilled interest associated with the previous lease to Ernest on this property.

Twelve Oaks Facility

On April 11, 2019, we re-leased our Twelve Oaks facility to a new tenant, Advanced Diagnostics Health System, LLC, pursuant to a 10-year lease, subject to four additional five-year extension options.

Adeptus Health – Transition Properties

As noted in previous filings, effective October 2, 2017, we ~~have~~had 16 properties transitioning away from Adeptus Health, Inc. (“Adeptus”) in stages over a two year period as part of ~~Adeptus Health’s~~Adeptus’ confirmed plan of reorganization under Chapter 11 of the Bankruptcy Code. ~~Through October 1, 2018, Adeptus Health vacated and stopped making rent payments on 15 properties. As a result~~At June 30, 2019, nine 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 final property will be transitioned away from Adeptus Health on October 1, 2019.

~~In August and early October 2018, we~~have been re-leased ~~three of the vacant facilities in the Houston market and five in the San Antonio market, respectively,~~ at rates consistent with that of the previous Adeptus ~~Health lease. At September 30, 2018, our investment~~lease, and two properties in the Dallas market were sold in April 2019 and in July 2019 at their approximate book value. Of the five remaining ~~eight transition~~ facilities ~~(that have not been re-leased) approximates~~(representing less than 1%0.5% of our total ~~assets.~~assets at June 30, 2019), four remain vacant and the final property will be transitioned away from Adeptus on October 1, 2019.

At June 30, 2019, Adeptus is current on its rent obligations to us. Although no assurances can be made that we ~~expect to re-tenant and/~~will not recognize a loss in the future, we believe, at June 30, 2019, that the sale or ~~sell~~re-leasing of the remaining ~~eight~~five transition facilities will not result in the near future, we lowered the carrying value of the seven remaining vacant facilities by $18 million to fair value in the three months ended September 30, 2018, based on market data received during the 2018 third quarter.any material loss or additional impairment.

Gilbert ~~and Florence Facilities~~Facility

In the first quarter of 2018, we terminated the lease at our Gilbert, ~~and Florence,~~ Arizona ~~facilities~~facility due to the tenant not meeting its rent obligations pursuant to the lease. As a result of the lease terminating, we recorded a charge ~~of $1.1 million~~ to reserve against the straight-line rent receivables. All outstanding receivables ~~in February 2018. On April 25, 2018, this~~due from the former tenant ~~filed for involuntary bankruptcy.~~of Gilbert are completely reserved. At ~~September~~June 30, ~~2018, all outstanding receivables were completely reserved.~~2019, our Gilbert facility is vacant. Although no assurances can be made that we will not have any impairment charges in the future, we believe our investment in the Gilbert ~~and Florence facilities of $37.5 million or 0.4%~~facility (less than 0.2% of total assets at ~~September~~June 30, ~~2018,~~2019), is fully recoverable.

Alecto ~~Healthcare facilities~~Facilities

At ~~September~~June 30, ~~2018,~~2019, we own four acute care facilities that are leased to Alecto and have a mortgage loan on a fifth property. ~~Our~~With the decline in the operating results of the facility tenant, we recorded a charge to reserve against the straight-line rent and other receivables outstanding in the 2019 first quarter and did not recognize any rent revenue in the three months ended June 30, 2019.

At June 30, 2019, our total overall investment in these properties is ~~approximately~~less than 1% of our total assets. ~~Through October 2018,~~On August 7, 2019, Alecto ~~is current on its rent and interest obligations to us. However,~~announced closure of two facilities in the Ohio Valley region, which we have ~~seen continued softening~~an investment in ~~their markets through the 2018 third quarter, which could impact their ability to meet future obligations to us. Thus,~~of approximately $30 million. Although no assurances can be made that we will not recognize any impairment charges in the ~~2018 third quarter,~~future, we ~~lowered the carrying value of the four owned~~believe our investment in these properties ~~by $30 million to fair value.~~at June 30, 2019 is recoverable.

Loans

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

��
As of September 30, 2018

As of December 31, 2017

Mortgage loans

$
1,428,069

$
1,778,316

Acquisition loans

117,376

118,448

Working capital and other loans

365,077

31,761

$
1,910,522

$
1,928,525

	As of June 30, 2019		As of December 31, 2018
Mortgage loans	$	1,216,442	$	1,213,322
Other loans		370,631		373,198
Total	$	1,587,073	$	1,586,520

~~The decrease in mortgage~~Other loans ~~relates to the use~~typically consist of ~~four Steward mortgage~~ loans to ~~fund~~ our ~~acquisition of the related fee simple real estate of the four facilities during 2018, while the increase to~~tenants for acquisitions and working capital purposes, and ~~other loans primarily relates to~~include our ~~€290 million~~ shareholder loan made to the joint venture with Primotop ~~– see “Acquisitions”~~Holdings S.à.r.l. (“Primotop”) in ~~this Note 3 for further information. At September 30, 2018, acquisition loans includes $113.3 million in loans to Ernest; however, as described in Note 10,~~ the ~~full Ernest acquisition loan balance was repaid on October 4, 2018.~~amount of €290 million.

Concentrations of Credit Risk

We monitor concentration risk in several ways due to the nature of our real estate assets that are vital to the communities in which they are located and given our history of being able to replace inefficient operators of our facilities if needed, with more effective operators:

Facility concentration – At ~~September~~June 30, ~~2018,~~2019, we had no investment ofin any single property greater than 4% of our total assets, which is consistent with December 31, ~~2017.~~2018.

Operator concentration – For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, revenue from Steward and Prime ~~MEDIAN,~~of $176.3 million and ~~Ernest represented 37%, 16%, 16% and 9%, respectively.~~$64.0 million, respectively, exceeded 10% of our total revenues. Of these two tenants, no single property represents greater than 4% of our total revenues. In comparison, ~~these operators represented 23%~~Steward ($147.9 million), ~~19%, 15%~~Prime ($63.6 million) and ~~11%~~MEDIAN ($57.3 million), respectively, exceeded 10% of our total revenues for the first ~~nine~~six months of ~~2017.~~2018.

Geographic concentration – At ~~September~~June 30, ~~2018,~~2019, investments in the U.S., Europe, and Australia represented approximately 75%, 18%, and 7%, respectively, of our total assets. In comparison, investments in the U.S. and Europe represented approximately 80% and 20%, respectively, of our total assets ~~which is consistent with~~at December 31, ~~2017.~~2018.

Facility type concentration – For the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, approximately ~~72%~~86% of our revenues are from our general acute care facilities, while rehabilitation and long-term acute care facilities make up ~~24%~~10% and 4%, respectively. These percentages are similar to those for the first ~~nine~~six months of ~~2017.~~2018.

4. Debt

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

	As of September 30, 2018			As of December 31, 2017			As of June 30, 2019			As of December 31, 2018
Revolving credit facility(A)	$	22,153		$	840,810		$	40,627		$	28,059
Term loan		200,000			200,000			200,000			200,000
4.000% Senior Unsecured Notes due 2022(B)		580,200			600,250
Australian term loan facility(B)								842,400			—
4.000% Senior Unsecured Notes due 2022(C)								568,650			573,350
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)		580,200			600,250
3.325% Senior Unsecured Notes due 2025(C)								568,650			573,350
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			1,400,000
	$	4,082,553		$	4,941,310		$	4,920,327		$	4,074,759
Debt issue costs, net		(38,704	)		(42,643	)		(42,017	)		(37,370	)
	$	4,043,849		$	4,898,667		$	4,878,310		$	4,037,389

(A)	Includes ~~£17~~£32 million and £8£22 million of GBP-denominated borrowings that reflect the exchange rate at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

(B)	This note is Australian dollar-denominated and reflects the exchange rate at June 30, 2019.

(C)	These notes are Euro-denominated and reflect the exchange rate at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

As of ~~September~~June 30, ~~2018,~~2019, principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):

2018	$	-
2019		-	$	—
2020		-		—
2021		22,153		40,627
2022		780,200		768,650
2023				—
Thereafter		3,280,200		4,111,050
Total	$	4,082,553	$	4,920,327

~~2018 Activity~~

~~In preparation of the joint venture with Primotop described under “Acquisitions” in Note 3,~~On May 23, 2019, 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~~

On February 1, 2017, we replaced our previous unsecured credit facility with a new revolving credit and term loan agreement (“Credit Facility”). The 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.

~~On March 4, 2017, we redeemed the €200 million aggregate principal amount of our 5.750% Senior Unsecured Notes due 2020.~~

On March 24, 2017, we completed a €500 million senior unsecured notes offering (“3.325% Senior Unsecured Notes due 2025”). A portion of the proceeds from this offering were used to prepay and extinguish the €200 million term loan facility portion of our Credit Facility on March 30, 2017.

On September 7, 2017, we completed a $1.4 billion senior unsecured notes offering (“5.000% Senior Unsecured Notes due 2027”). 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 on October 7, 2017.

~~Furthermore, the completion of the 5.000% Senior Unsecured Notes due 2027 offering resulted in the cancellation of the $1.0~~entered into an AUD$1.2 billion term loan facility ~~commitment~~agreement with Bank of America, N.A., as administrative agent, and several lenders from ~~JP Morgan Chase Bank, N.A. that we received~~time 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.~~

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~~time are parties thereto. The term loan facility ~~commitment, and~~matures on May 23, 2024. We used the ~~payment~~proceeds under the facility to finance our acquisition of the Healthscope portfolio. The interest rate under the term loan is adjustable based on a pricing grid from 0.85% to 1.65%, dependent on our ~~$12.9 million mortgage loan,~~current senior unsecured credit rating. On June 27, 2019, we ~~incurred a debt refinancing charge~~entered into an interest rate swap transaction (effective July 3, 2019) to fix the interest rate to approximately 1.20% for the duration of ~~$18.8~~the loan. The current applicable margin for the pricing grid (which can vary based on the Company’s credit rating) is 1.25% for an all-in fixed rate of 2.45%. We paid approximately $8 million in ~~the first nine months of 2017.~~one-time structuring and underwriting fees associated with this term loan facility.

Covenants

Our debt facilities impose certain restrictions on us, including restrictions on our ability to: incur debts; create or incur liens; provide guarantees in respect of obligations of any other entity; make redemptions and repurchases of our capital stock; prepay, redeem or repurchase debt; engage in mergers or consolidations; enter into affiliated transactions; dispose of real estate or other assets; and change our business. In addition, the credit agreements governing our revolving credit and term loan agreement (“Credit ~~Facility~~Facility”) limit the amount of dividends we can pay as a percentage of normalized adjusted funds from operations, as defined in the agreements, on a rolling four quarter basis. At ~~September~~June 30, ~~2018,~~2019, the dividend restriction was 95% of normalized adjusted 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 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. ~~The~~This 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~~June 30, ~~2018,~~2019, we were in compliance with all such financial and operating covenants.

5. Common Stock/Partners’ Capital

Medical Properties Trust, Inc.

~~On May 1, 2017,~~In the first half of 2019, we ~~completed an underwritten public offering of approximately 43.1~~sold 22.6 million shares ~~(including the exercise~~ of ~~the underwriters’ 30-day option to purchase an additional 5.6 million shares) of our~~ common stock under our at-the-market equity offering program, resulting in net proceeds of approximately ~~$548 million, after deducting offering expenses.~~$399 million.

MPT Operating Partnership, L.P.

At ~~September~~June 30, ~~2018,~~2019, the Company has a ~~99.92%~~99.9% ownership interest in the Operating Partnership with the remainder owned by two other partners, ~~who~~which are employees.

During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2019, the Operating Partnership issued approximately ~~43.1~~22.6 million units in direct response to the common stock offerings by Medical Properties Trust, Inc. during the same period.

6. Stock Awards

We adopted the ~~2013~~2019 Equity Incentive Plan (the “Equity Incentive Plan”) during the second quarter of ~~2013,~~2019, 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.~~other stock-based awards. The Equity Incentive Plan is administered by the Compensation Committee of the Board of ~~Directors. We~~Directors, and we have reserved ~~8,196,770~~12.9 million shares of common stock for ~~awards under the Equity Incentive Plan, out of which 1,697,002 shares remain available for~~ future ~~stock awards as of September 30, 2018.~~awards. Share-based compensation expense totaled ~~$11.7~~$13.0 million and ~~$7.1~~$6.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, 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~~other 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 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):

	As of						As of						As of						As of
	September 30, 2018						December 31, 2017						June 30, 2019						December 31, 2018
Asset (Liability)	Book Value			Fair Value			Book Value			Fair Value			Book Value			Fair Value			Book Value			Fair Value
Interest and rent receivables	$	87,939		$	87,067		$	78,970		$	78,028		$	24,103		$	23,241		$	25,855		$	24,942
Loans (1)		1,681,562			1,700,346			1,698,471			1,722,101
Loans(1)														1,472,073			1,515,485			1,471,520			1,490,758
Debt, net		(4,043,849	)		(4,087,207	)		(4,898,667	)		(5,073,707	)		(4,878,310	)		(5,073,566	)		(4,037,389	)		(3,947,795	)

(1)

Excludes mortgage 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~~mortgage loans are measured at fair value on a recurring basis as we elected to account for these investments using the fair value option ~~method.~~method in 2012 when we acquired an equity interest in and made an acquisition loan to Ernest. Such equity interest was sold and the acquisition loan was paid off in October 2018. We ~~have~~ elected to account for these investments at fair value due to the size of the investments and because we believe this method iswas more reflective of current values. We have not made a similar election for other ~~currently~~investments existing ~~equity interests or loans.~~at June 30, 2019.

At ~~September~~June 30, ~~2018,~~2019, these amounts were as follows (in thousands):

Asset Type	Fair Value		Original Cost		Asset Type Classification	Fair Value		Original Cost		Asset Type Classification
Mortgage loans	$	115,000	$	115,000	Mortgage loans	$	115,000	$	115,000	Mortgage loans
Equity investment and other loans		108,373		117,260	Other loans/other assets
	$	223,373	$	232,260

Our ~~equity investment and other~~mortgage 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. ~~Because~~

During the ~~fair value~~first half of ~~the Ernest investments noted above is below our original cost,~~2018, we recognized an unrealized loss on our investment in Ernest. There was no gain or loss recorded during the ~~nine months~~first half of ~~2018. No unrealized gain/loss on the Ernest investments was recorded in the first nine months of 2017.~~2019.

8. Earnings Per Share

Medical Properties Trust, Inc.

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

	For the Three Months Ended September 30,						For the Three Months Ended June 30,
	2018			2017			2019			2018
Numerator:
Net income	$	736,476		$	76,881		$	79,920		$	112,017
Non-controlling interests’ share in net income		(442	)		(417	)		(482	)		(450	)
Participating securities’ share in earnings		(290	)		(82	)		(446	)		(323	)
Net income, less participating securities’ share in earnings	$	735,744		$	76,382		$	78,992		$	111,244
Denominator:
Basic weighted-average common shares		365,024			364,315			394,574			364,897
Dilutive potential common shares		1,443			731			1,118			644
Dilutive weighted-average common shares		366,467			365,046			395,692			365,541

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2018			2017			2019			2018
Numerator:
Net income	$	939,536		$	218,862		$	156,211		$	203,060
Non-controlling interests’ share in net income		(1,334	)		(1,013	)		(951	)		(892	)
Participating securities’ share in earnings		(808	)		(307	)		(922	)		(518	)
Net income, less participating securities’ share in earnings	$	937,394		$	217,542		$	154,338		$	201,650
Denominator:
Basic weighted-average common shares		364,934			345,076			387,563			364,889
Dilutive potential common shares		850			520			1,120			553
Dilutive weighted-average common shares		365,784			345,596			388,683			365,442

MPT Operating Partnership, L.P.

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

	For the Three Months Ended September 30,						For the Three Months Ended June 30,
	2018			2017			2019			2018
Numerator:
Net income	$	736,476		$	76,881		$	79,920		$	112,017
Non-controlling interests’ share in net income		(442	)		(417	)		(482	)		(450	)
Participating securities’ share in earnings		(290	)		(82	)		(446	)		(323	)
Net income, less participating securities’ share in earnings	$	735,744		$	76,382		$	78,992		$	111,244
Denominator:
Basic weighted-average units		365,024			364,315			394,574			364,897
Dilutive potential units		1,443			731			1,118			644
Diluted weighted-average units		366,467			365,046			395,692			365,541

	For the Nine Months Ended September 30,						For the Six Months Ended June 30,
	2018			2017			2019			2018
Numerator:
Net income	$	939,536		$	218,862		$	156,211		$	203,060
Non-controlling interests’ share in net income		(1,334	)		(1,013	)		(951	)		(892	)
Participating securities’ share in earnings		(808	)		(307	)		(922	)		(518	)
Net income, less participating securities’ share in earnings	$	937,394		$	217,542		$	154,338		$	201,650
Denominator:
Basic weighted-average units		364,934			345,076			387,563			364,889
Dilutive potential units		850			520			1,120			553
Diluted weighted-average units		365,784			345,596			388,683			365,442

9. Commitments and Contingencies

Commitments

On ~~June 6, 2018,~~May 31, 2019, we entered into a definitive ~~agreement~~agreements to acquire ~~four rehabilitation hospitals in Germany for a purchase price of approximately €23 million (including~~the real estate ~~transfer taxes). We have closed~~of Watsonville Community Hospital in Watsonville, California for $40.0 million. However, on ~~three~~July 21, 2019, the Pajaro Valley Community Health Trust (“the Trust”) exercised its right of first refusal to acquire the hospital. If the Trust is unable to complete the acquisition of the ~~facilities during~~hospital, we will acquire the ~~third quarter of 2018, with the remaining facility expected~~hospital and lease it to ~~close in the fourth quarter of 2018 for approximately €5.8 million (including real estate transfer taxes). See Note 3 “Acquisitions” for more details on this transaction.~~Halsen Healthcare.

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. Leases (Lessee)

~~10.~~We have leased land on which certain of our facilities reside, along with corporate office and equipment. Our leases have remaining lease terms of 5 years to 42.3 years, some of which may include options to extend the leases up to, or just beyond, the depreciable life of the properties that occupy the leased land. Renewal options that we are reasonably certain to exercise are recognized in our right-of-use assets and lease liabilities. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at lease commencement date in determining the present value of future payments.

Properties subject to ground leases are subleased to our tenants, except for three Adeptus transition properties.

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

	Classification	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Operating lease cost (1)	(2)	$	2,466		$	4,562
Finance lease cost:
Amortization of right-of-use assets	Real estate depreciation and amortization		13			26
Interest on lease liabilities	Interest expense		32			53
Sublease income	Interest and other income		(909	)		(1,809	)
Total lease cost		$	1,602		$	2,832

(1)

Includes short-term leases.

(2)

$1.5 million and $3.1 million for the three and six months ended June 30, 2019, respectively, included in Property-related, with the remainder reflected in General and administrative expenses.

Fixed minimum payments due over the remaining lease term under non-cancelable leases of more than one year and amounts to be received in the future from non-cancelable subleases over their remaining lease term at June 30, 2019 are as follows (amounts in thousands):

	Operating leases			Finance leases			Amounts to be received from subleases			Net payments
2019 (1)	$	3,111		$	62		$	(1,693	)	$	1,480
2020		6,341			125			(3,444	)		3,022
2021		6,533			126			(3,561	)		3,098
2022		6,734			128			(3,699	)		3,163
2023		6,800			129			(3,704	)		3,225
Thereafter		196,489			5,045			(95,622	)		105,912	(2)
Total undiscounted minimum lease payments	$	226,008		$	5,615		$	(111,723	)	$	119,900
Less: interest		(145,048	)		(3,685	)
Present value of lease liabilities	$	80,960		$	1,930

(1)

Represents remaining six months of 2019.

(2)

Reflects certain ground leases, in which we are the lessee, that have longer initial fixed terms than our existing sublease to our tenants. However, we would expect to either renew the related sublease, enter into a lease with a new tenant or early terminate the ground lease to reduce or avoid any significant impact from such ground leases.

Supplemental balance sheet information is as follows (in thousands, except lease terms and discount rate):

	Classification	June 30, 2019
Right of use assets:
Operating leases - real estate	Land, buildings and improvements, intangible lease assets, and other	$	63,748
Finance leases - real estate	Land, buildings and improvements, intangible lease assets, and other		1,913
Real estate right of use assets, net			65,661
Operating leases - corporate	Other assets		10,651
Total right of use assets, net		$	76,312

Lease liabilities:
Operating leases	Obligations to tenants and other lease liabilities	$	80,960
Financing leases	Obligations to tenants and other lease liabilities		1,930
Total lease liabilities		$	82,890

Weighted average remaining lease term:
Operating leases			32.1
Finance leases			37.4
Weighted average discount rate:
Operating leases			6.3	%
Finance leases			6.6	%

The following is supplemental cash flow information (in thousands):

	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,929
Operating cash flows from finance leases		52
Financing cash flows from finance leases		10
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		1,042
Finance leases		—

11. Subsequent Events

Acquisitions

On ~~October 4, 2018,~~July 23, 2019, we ~~finalized~~entered into definitive agreements with Secure Income REIT (“SIR”) to acquire freehold interests in eight private hospitals located throughout England for an aggregate purchase price of approximately £347 million. The hospitals will be leased to Ramsay Health Care (“Ramsay”) pursuant to in-place net leases with an approximate 18-year remaining lease term and include annual fixed and periodic market-based escalations.

On July 10, 2019, we entered into definitive agreements pursuant to which we will invest in a ~~recapitalization agreement~~portfolio of 14 acute care hospitals and two behavioral health facilities currently owned and operated by Prospect Medical Holdings, Inc. (“Prospect”) for a combined purchase price of approximately $1.55 billion. Our investment will consist of (i) the acquisition of the real estate of 11 acute care hospitals and two behavioral health facilities for $1.4 billion and the subsequent leasing of such facilities back to ~~sell~~Prospect in the form of two master leases; (ii) a $51.3 million mortgage loan, secured by a first mortgage on an acute care hospital; and (iii) a $112.9 million term loan which we expect will be converted into the acquisition of two additional acute care hospitals upon the satisfaction of certain conditions. The master leases, mortgage loan and term loan will be cross-defaulted and cross-collateralized. The master leases and mortgage loan have substantially similar terms, with a 15-year fixed term subject to three extension options, plus annual increases based on inflation.

Although no assurances can be made that these investments will occur, we believe the Prospect and SIR investments will close during the 2019 third quarter.

Financing

On July 18, 2019, we completed an underwritten public offering of 51.75 million shares (including the exercise of the underwriters’ 30-day option to purchase an additional 6.75 million shares) of our common stock, resulting in net proceeds of $858.1 million, after deducting underwriting discounts and commissions and estimated offering expenses.

On July 26, 2019, we completed a $900 million senior unsecured notes offering (“4.625% Senior Unsecured Notes due 2029”). Interest on the notes is payable semi-annually on February 1 and August 1 of each year, commencing on February 1, 2020. The notes were issued at 99.5% of par value, pay interest at a rate of 4.625% per year and mature on August 1, 2029. We may redeem some or all of the notes at any time prior to August 1, 2024 at a “make whole” redemption price. On or after August 1, 2024, 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, 2022, we may redeem up to 40% of the notes at a redemption price equal to 104.625% 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 intend to use the net proceeds from the 4.625% Senior Unsecured Notes due 2029 offering along with the proceeds from our July 2019 equity offering to help finance the commitments described above. Furthermore, the completion of the offerings described above resulted in the cancellation of a $1.55 billion senior unsecured bridge loan facility commitment from Barclays Bank PLC that we received on July 10, 2019, to fund our investment in the ~~operations~~Prospect portfolio. With this commitment, we paid $3.9 million of ~~Ernest Health Holdings, LLC~~underwriting and ~~be repaid for our outstanding acquisition loans, working capital loans, and any unpaid interest. Total proceeds received from this transaction approximated $176 million. We will retain ownership~~other fees, which we fully expensed upon the cancellation of the ~~real estate and secured mortgage loans of our Ernest properties.~~commitment.

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 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, ~~2017.~~2018.

Forward-Looking Statements.

This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or future performance, achievements or transactions or events to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our Annual Report on Form 10-K and as updated in our quarterly reports on Form 10-Q for future periods, and current reports on Form 8-K as we file them with the SEC under the Securities Exchange Act of 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 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 Prospect and Ramsay transactions described in Note 11 to Item 1 of this Quarterly Report on Form 10-Q) may not be satisfied;

~~the competitive environment in which we operate;~~

•

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;

~~the execution of our business plan;~~

•

the competitive environment in which we operate;

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

•

the execution of our business plan;

~~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 may not be satisfied;~~

•

financing risks;

~~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;

~~acquisition and development risks;~~

•

potential environmental contingencies and other liabilities;

~~potential environmental contingencies and other liabilities;~~

•

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

~~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;

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

•

our ability to maintain MPT’s status as a REIT for federal and state income tax purposes;

~~our ability to maintain our status as a real estate investment trust, or REIT, for U.S. federal and state income tax purposes;~~

•

our ability to attract and retain qualified personnel;

~~our ability to attract and retain qualified personnel;~~

•

changes in foreign currency exchange rates;

~~changes in foreign currency exchange rates;~~

•

changes in federal, state or local tax laws in the U.S., Europe, Australia or other jurisdictions in which we may own healthcare facilities;

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

•

healthcare and other regulatory requirements of the U.S., Europe, Australia and other foreign countries’; 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 political, economic, business, real estate and other market conditions of the U.S., Europe, Australia, and other foreign jurisdictions in which we may own healthcare facilities, which may have a negative effect on the following, among other things:

~~the financial condition of our tenants, our lenders, or institutions that hold our cash balances, which may expose us to increased risks of default by these parties;~~

•

the financial condition of our tenants, our lenders, or institutions that 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

•

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, 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.~~

•

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;~~

•

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 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’ or borrowers’ operating earnings both to facility rent and to facility rent plus other fixed costs, including debt costs;~~

•

the ratio of our tenants’ 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);

•

changes in revenue sources 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 liquidity; and~~

•

trends in tenants’ cash collections, including comparison to recorded net patient service revenues;

•

tenants’ free cash flows;

~~the competition and demographics of the local and surrounding areas in which the tenants or borrowers operate.~~
•
the effect of evolving healthcare legislation and other regulations on our tenants’ or borrowers’ profitability and 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;~~

•

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;~~

•

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~~

•

competition from other financing sources; and

~~the ability of our tenants and borrowers to access funds in the credit markets.~~
•
the ability of our tenants and borrowers to access funds in the credit markets.

CRITICAL ACCOUNTING POLICIES

Refer to our ~~2017~~2018 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include revenue recognition, 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~~six months ended ~~September~~June 30, ~~2018,~~2019, there were no material changes to these ~~policies.~~policies except for those described in Note 2 to Item 1 of this Form 10-Q.

Overview

We are a self-advised REIT focused on investing in and owning net-leased healthcare facilities across the U.S. and selectively in foreign jurisdictions. We have operated as a REIT since ~~2004.~~April 6, 2004, and accordingly, elected REIT status upon the filing of our calendar year 2004 federal income tax return. 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 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~~June 30, ~~2018,~~2019, our portfolio consisted of ~~275~~310 properties leased or loaned to 2934 operators, of which three are under development and 1110 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., Europe and ~~Europe.~~Australia. Our total assets are made up of the following (dollars in thousands):

	As of September 30, 2018		% of Total			As of December 31, 2017		% of Total			As of June 30, 2019		% of Total			As of December 31, 2018		% of Total
Real estate owned (gross)	$	5,557,563		63.3	%	$	6,595,252		73.1	%	$	7,120,215		70.3	%	$	5,868,340		66.4	%
Mortgage loans		1,428,069		16.3	%		1,778,316		19.7	%		1,216,442		12.0	%		1,213,322		13.7	%
Other loans		482,453		5.5	%		150,209		1.7	%		370,631		3.7	%		373,198		4.2	%
Construction in progress		59,796		0.7	%		47,695		0.5	%		119,328		1.2	%		84,172		1.0	%
Equity investments											��	799,058		7.9	%		520,058		5.9	%
Other assets		1,246,635		14.2	%		448,816		5.0	%		497,537		4.9	%		784,553		8.8	%
Total assets	$	8,774,516		100.0	%	$	9,020,288		100.0	%	$	10,123,211		100.0	%	$	8,843,643		100.0	%

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 Quarterly Report on Form 10-Q), our concentration as of ~~September~~June 30, ~~2018~~2019 as compared to December 31, ~~2017~~2018 is as follows (dollars in thousands):

Pro Forma Gross Assets by Operator

	As of September 30, 2018					As of December 31, 2017					As of June 30, 2019					As of December 31, 2018
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			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	%	$	3,931,171		30.3	%	$	3,823,625		38.0	%
Prospect												1,550,000		12.0	%		—		—
Prime		1,123,350		11.7	%		1,119,484		11.8	%		1,142,338		8.8	%		1,124,711		11.2	%
MEDIAN		1,091,987		11.4	%		1,229,325		13.0	%		1,048,949		8.1	%		1,075,504		10.7	%
RCCH		506,267		5.3	%		506,265		5.3	%
Ernest		499,335		5.2	%		629,161		6.6	%
Healthscope												897,175		6.9	%		858,569		8.5	%
Other operators		1,692,041		17.6	%		2,089,934		22.1	%		3,806,559		29.4	%		2,647,369		26.3	%
Other assets		1,052,186		11.0	%		444,659		4.7	%		577,764		4.5	%		528,669		5.3	%
Total	$	9,586,826		100.0	%	$	9,476,212		100.0	%	$	12,953,956		100.0	%	$	10,058,447		100.0	%

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

	As of September 30, 2018					As of December 31, 2017					As of June 30, 2019					As of December 31, 2018
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			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	%	$	1,482,850		11.4	%	$	1,469,423		14.6	%
Texas		1,109,034		11.6	%		1,257,390		13.3	%		1,222,846		9.4	%		1,126,217		11.2	%
California												1,081,076		8.3	%		522,753		5.2	%
Utah		1,026,296		10.7	%		1,035,501		10.9	%		1,060,375		8.2	%		1,054,539		10.5	%
California		522,756		5.5	%		542,876		5.7	%
Arizona		479,582		5.0	%		491,284		5.2	%
Pennsylvania												566,707		4.4	%		141,893		1.4	%
All other states		2,614,526		27.1	%		2,618,536		27.6	%		3,735,368		28.9	%		2,972,116		29.5	%
Other domestic assets		497,916		5.2	%		387,050		4.1	%		560,716		4.4	%		482,992		4.8	%
Total U.S.	$	7,628,645		79.5	%	$	7,629,863		80.5	%	$	9,709,938		75.0	%	$	7,769,933		77.2	%
Germany	$	1,182,318		12.3	%	$	1,581,726		16.7	%	$	1,142,033		8.8	%	$	1,164,973		11.6	%
United Kingdom, Italy, and Spain		221,593		2.4	%		207,014		2.2	%
Australia												897,175		6.9	%		858,569		8.5	%
United Kingdom												597,990		4.6	%		100,823		1.0	%
Switzerland												473,086		3.7	%		—		—
Italy and Spain												116,686		0.9	%		118,472		1.2	%
Other international assets		554,270		5.8	%		57,609		0.6	%		17,048		0.1	%		45,677		0.5	%
Total International	$	1,958,181		20.5	%	$	1,846,349		19.5	%	$	3,244,018		25.0	%	$	2,288,514		22.8	%
Grand Total	$	9,586,826		100.0	%	$	9,476,212		100.0	%	$	12,953,956		100.0	%	$	10,058,447		100.0	%

On an individual property basis, we had no investment ofin any single property greater than 4%2.9% of our total pro forma gross assets as of ~~September~~June 30, ~~2018.~~2019.

On an adjusted revenue basis (as defined in the “Reconciliation of Non-GAAP Financial Measures” section of Item 2 of this Quarterly Report on Form 10-Q), concentration for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 as compared to the prior year is as follows (dollars in thousands):

AdjustedRevenue by Operator

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)~~

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

	For the Six Months Ended June 30,
	2019					2018
Operators	Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue
Steward	$	176,290		43.0	%	$	147,868		36.3	%
Prime		63,996		15.6	%		63,590		15.6	%
MEDIAN		44,369		10.8	%		57,289		14.1	%
Ernest		25,921		6.3	%		34,542		8.5	%
LifePoint		22,960		5.6	%		20,414		5.0	%
Other operators		76,354		18.7	%		83,245		20.5	%
Total	$	409,890		100.0	%	$	406,948		100.0	%

AdjustedRevenue by U.S. State and Country

	For the Nine Months Ended September 30,										For the Six Months Ended June 30,
	2018					2017					2019					2018
U.S. States and Other Countries	Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue
Massachusetts											$	68,553		16.7	%	$	54,433		13.4	%
Texas	$	87,588		14.2	%	$	74,489		14.9	%		58,504		14.3	%		60,361		14.8	%
Massachusetts		85,054		13.8	%		79,741		16.0	%
Utah		62,598		10.1	%		7,999		1.6	%		43,409		10.6	%		41,734		10.3	%
California		45,326		7.3	%		49,681		9.9	%		32,362		7.9	%		29,422		7.2	%
Arizona		35,204		5.7	%		23,902		4.8	%		25,050		6.1	%		23,286		5.7	%
All other states		184,091		29.8	%		172,363		34.5	%		121,598		29.7	%		121,307		29.8	%
Total U.S.	$	499,861		80.9	%	$	408,175		81.7	%	$	349,476		85.3	%	$	330,543		81.2	%
Germany	$	106,198		17.2	%	$	88,525		17.7	%	$	48,326		11.8	%	$	74,176		18.2	%
United Kingdom, Italy, and Spain		11,633		1.9	%		3,084		0.6	%
Australia, United Kingdom, Switzerland, Italy, and Spain												12,088		2.9	%		2,229		0.6	%
Total International	$	117,831		19.1	%	$	91,609		18.3	%	$	60,414		14.7	%	$	76,405		18.8	%
Grand Total	$	617,692		100.0	%	$	499,784		100.0	%	$	409,890		100.0	%	$	406,948		100.0	%

Adjusted Revenue by Facility Type

	For the Nine Months Ended September 30,										For the Six Months Ended June 30,
	2018					2017					2019					2018
	Total Adjusted Revenue		Percentage of Total Adjusted Revenue			Total Adjusted Revenue		Percentage of Total Adjusted Revenue
Facility Types											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	%	$	326,677		79.7	%	$	293,043		72.0	%
Rehabilitation hospitals		145,442		23.5	%		125,829		25.2	%		68,555		16.7	%		100,009		24.6	%
Long-term acute care hospitals		22,805		3.7	%		32,315		6.4	%		14,658		3.6	%		13,896		3.4	%
Total revenues	$	617,692		100.0	%	$	499,784		100.0	%
Total											$	409,890		100.0	%	$	406,948		100.0	%

Results of Operations

Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared to ~~September~~June 30, ~~2017~~2018

Net income for the three months ended ~~September~~June 30, ~~2018,~~2019, was ~~$736~~$79.4 million, compared to ~~$76.5~~$111.6 million for the three months ended ~~September~~June 30, ~~2017.~~2018. This ~~increase~~decrease is primarily due to the ~~$695.2~~$24.2 million gain on the sale of ~~real estate~~three properties (operated by Vibra) in June 2018 and expected lower revenues as a result of property sales in 2018 including 71 properties sold to form the Primotop joint venture 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 at the end of 2017.quarter. This ~~increase~~decrease is partially offset by ~~the $48 million adjustment to lower the carrying value of certain real estate to fair value~~incremental revenue from new investments in 2018 ~~as described in Note 3 to Item 1 of this Form 10-Q, along with incremental interest expense~~ and ~~depreciation expense due primarily to the 2017 investments.~~2019. Funds from operations (“FFO”), after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was ~~$127.2~~$120.9 million for the 2019 second quarter as compared to $129.9 million for the 2018 ~~third quarter as compared~~second quarter. Similar to ~~$120.6 million for the 2017 third quarter. This 5.5% increase~~net income, this decrease in FFO is primarily due to ~~the increase in~~lower revenue from ~~acquisitions made in 2017 (primarily our Steward and MEDIAN investments), partially offset by higher interest expense to fund such investments.~~the property sales during 2018.

A comparison of revenues for the three month periods ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 is as follows (dollar amounts in thousands):

	2018		% of Total			2017		% of Total			Year over Year Change			2019		% of Total			2018		% of Total			Year over Year Change
Rent billed	$	118,238		60.0	%	$	110,930		62.8	%		6.6	%	$	110,882		57.6	%	$	122,827		60.8	%		-9.7	%
Straight-line rent		18,293		9.3	%		17,505		9.9	%		4.5	%		25,136		13.1	%		15,073		7.5	%		66.8	%
Income from direct financing leases		18,998		9.7	%		19,115		10.8	%		-0.6	%		17,386		9.0	%		18,934		9.4	%		-8.2	%
Interest and fee income		41,467		21.0	%		29,030		16.5	%		42.8	%
Interest and other income															39,145		20.3	%		45,068		22.3	%		-13.1	%
Total revenues	$	196,996		100.0	%	$	176,580		100.0	%		11.6	%	$	192,549		100.0	%	$	201,902		100.0	%		-4.6	%

Our total revenue for the ~~2018 third~~2019 second quarter is ~~up $20.4~~down $9.4 million, or ~~11.6%~~4.6%, ~~over~~from the prior year. This ~~increase~~decrease is made up of the following:

Operating lease revenue (includes rent billed and straight-line rent) – up $8.1 million over the prior year, of which $18.7 million is from incremental revenue from acquisitions (primarily the Steward and MEDIAN acquisitions in 2017) and $8.1 million is from rent recorded on the new Steward leases that converted from mortgage loans in 2018. These increases are partially offset by 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, 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.

•

Operating lease revenue (includes rent billed and straight-line rent) – down $1.9 million from the prior year of which $34.2 million of lower revenues is due to property dispositions in 2018 (majority of which relates to the formation of the

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.

Primotop joint venture in the 2018 third quarter) and approximately $2.1 million is from unfavorable foreign currency fluctuations. This decrease is partially offset by $21.3 million of additional lease revenue (of which $7 million represents straight-line rent) related to the conversion of five` Steward mortgage loans to fee simple assets in 2018, $6.8 million of less straight-line rent write-offs than in 2018, and $6.3 million of incremental revenue from acquisitions ($3.8 million of which relates to Healthscope).

Interest and fee income – up $12.4 million over the prior year of which $17.1 million is from incremental revenue from new loans (primarily the $700 million Steward mortgage loans in 2017), $0.4 million is from our annual escalations in interest rates in accordance with loan provisions. These increases are partially offset by $5.4 million of lower interest revenue related to loans converted to fee simple assets in 2018.
•
Income from direct financing leases – down $1.5 million primarily due to not recording rent on two Alecto properties during the three months ended June 30, 2019 as described in Note 3 to Item 1 of this Form 10-Q.

•

Interest and other income – down $5.9 million from the prior year due to the following:

Interest from loans – down $12.3 million over the prior year of which $14.1 million is the result of lower interest revenue related to Steward mortgage loans converted to fee simple assets in 2018 and $4.4 million is from the payoff of our Ernest acquisition and other loans in the fourth quarter of 2018. This decrease is partially offset by $4.2 million of interest revenue earned on the Primotop joint venture shareholder loan made in August 2018, along with $1.4 million from other loan investments made post the 2018 second quarter, and $0.3 million from our annual escalations in interest rates in accordance with loan provisions.

Other income – up $6.4 million due to the implementation of the lease accounting standard on January 1, 2019, whereby we are now reflecting certain payments made by our tenants, including ground lease payments and reimbursements of property taxes and insurance, as revenue. This revenue is offset by a corresponding expense in the “Property-related” line on the Condensed Consolidated Statements of Net Income.

Interest expense, for the quarters ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$57.2~~$52.3 million and ~~$42.8~~$58.1 million, respectively. This ~~increase~~decrease is primarily related to the ~~higher~~lower average revolving debt balance during the ~~2018 third~~2019 second quarter compared to the ~~prior year third~~2018 second quarter as we paid down our revolver with proceeds from property sales in order to fund our 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.2018. This ~~impact on interest expense is~~decrease was 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 three months ended September 30, 2018, as compared to 4.6%$0.9 million of accelerated commitment fee amortization expense in the ~~same period in 2017.~~2019 second quarter associated with our Australian term loan facility.

Real estate depreciation and amortization during the ~~third~~second quarter of ~~2018~~2019 decreased to ~~$29.9~~$34.0 million from ~~$31.9~~$34.5 million in ~~2017,~~2018, due to the ~~71 facilities sold on August 31,~~property sales in 2018, partially offset by new investments made and the conversion of the four Steward mortgage loans to fee simple assets.

Property-related expenses totaled $8.3 million and $1.9 million for the quarters ended June 30, 2019 and 2018, respectively. As noted above under the caption “Other income,” this increase was primarily due to the grossing up of certain expenses (such as ground lease, property taxes and insurance) as part of our implementation of the ~~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.~~lease accounting standard on January 1, 2019.

General and administrative expenses totaled ~~$21~~$22.3 million for the ~~2018 third~~2019 second quarter, which is a $6$2.7 million increase from the prior year ~~third~~second quarter. ~~As noted in~~The majority of the increase relates to stock compensation expense from our ~~2018 first and second quarter Form 10-Qs, general and administrative expenses are higher~~performance-based awards. Given our strong performance in 2018 ~~due to our adoption~~with a total shareholder return 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~~25% 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,our performance to-date in 2019, we ~~did incur $0.5 million in the current period related to the settlement of a contingency involving an acquisition~~believe it is more likely that ~~occurred prior to the adoption of ASU 2017-01.~~such performance awards will be earned and have adjusted our stock compensation expense accordingly.

During the three months ended ~~September~~June 30, 2018, we ~~completed~~sold three of our long-term acute care hospitals (operated by Vibra) at a gain of $24.2 million.

Earnings from equity interests totaled $4.4 million for the quarter ended June 30, 2019, a $0.3 million increase from the same period in 2018 due to our investment in the Primotop joint venture ~~transaction with Primotop (as more fully described~~ in ~~Note 3 to Item 1~~the third quarter 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 was2018, partially offset by ~~a $48 million adjustment~~slightly lower returns on other investments compared to lower the carrying value of 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 the short-term loan commitment entered into in anticipation of the 2017 Steward acquisition. There were no debt refinancing charges in the 2018 third quarter. prior year.

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 $0.3 million income tax ~~expense~~benefit for the three months ended ~~September~~June 30, ~~2018 reflects an increase over~~2019, represents the ~~prior year due to an increase~~benefit from our TRS in ~~financial taxable income~~the quarter. The benefit is partially offset by tax expense from our international investments. We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a full valuation allowance of $3 million should continue to be recorded against ~~the majority of our U.S. and~~ certain of our international net deferred tax assets at ~~September~~June 30, ~~2018.~~2019. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes in future ~~periods. 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~~periods as 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.~~earned.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 Compared to ~~September~~June 30, ~~2017~~2018

Net income for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, was ~~$938.2~~$155.3 million, compared to ~~$217.8~~$202.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. This ~~increase~~decrease is primarily due to expected lower revenues as a result of property sales post the ~~$720.8 million gain on~~2018 first half including 71 properties sold to form the ~~sale of real estate recognized~~Primotop joint venture in the ~~first nine months of~~ 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 the Steward and MEDIAN investments that were made in 2017.third quarter. This ~~increase~~decrease is partially offset by ~~increased interest expense~~additional revenue from ~~higher average outstanding debt balances to fund~~ new ~~investments in 2017, higher depreciation expense from~~ investments made in ~~2017,~~2018 and ~~the $48 million adjustment to lower the carrying value of certain real estate to fair value. FFO,~~2019. Funds from operations (“FFO”), after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was ~~$388.6~~$238.7 million for the first ~~nine~~six months of ~~2018~~2019 as compared to ~~$340.1~~$261.4 million for the first ~~nine~~six months of ~~2017. This 14.2% increase~~2018. Similar to net income, this decrease in FFO is primarily due to ~~the increase in~~lower revenue from ~~acquisitions and completed development projects made in 2017 (primarily our Steward and MEDIAN investments), partially offset by higher interest expense to fund such investments.~~the property sales post June 30, 2018.

A comparison of revenues for the ~~nine~~six month periods ended ~~September~~June 30, 2019 and 2018 ~~and 2017~~ is as follows (dollar amounts in thousands):

	2018		% of Total			2017		% of Total			Year over Year Change			2019		% of Total			2018		% of Total			Year over Year Change
Rent billed	$	369,076		61.1	%	$	311,140		62.3	%		18.6	%	$	219,480		58.8	%	$	250,838		61.6	%		-12.5	%
Straight-line rent		49,157		8.1	%		46,561		9.3	%		5.6	%		45,787		12.3	%		30,864		7.6	%		48.4	%
Income from direct financing leases		55,613		9.2	%		55,307		11.1	%		0.6	%		34,666		9.3	%		36,615		9.0	%		-5.3	%
Interest and fee income		130,098		21.6	%		86,776		17.3	%		49.9	%
Interest and other income															73,070		19.6	%		88,631		21.8	%		-17.6	%
Total revenues	$	603,944		100.0	%	$	499,784		100.0	%		20.8	%	$	373,003		100.0	%	$	406,948		100.0	%		-8.3	%

Our total revenue for the first ~~nine~~six months of ~~2018~~2019 is ~~up $104.2~~down $33.9 million, or ~~20.8%~~8.3%, ~~over~~from the prior year. This ~~increase~~decrease is made up of the following:

Operating lease revenue (includes rent billed and straight-line rent) – up $60.5 million over the prior year of which $78 million is from incremental revenue from acquisitions primarily due to the Steward and MEDIAN acquisitions in 2017 and the first nine months of 2018, $8.1 million is from rent recorded on the new Steward leases that converted from mortgage loans in 2018, $5 million is incremental revenue from capital additions, and approximately $6.6 million is from favorable foreign currency fluctuations. These increases are partially offset by 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, and approximately $13 million of higher straight-line rent write-offs in 2018.

•

Operating lease revenue (includes rent billed and straight-line rent) – down $16.4 million from the prior year of which $69.3 million of lower revenues is due to property dispositions post June 30, 2018 (majority of which relates to the formation of the Primotop joint venture in the 2018 third quarter) and approximately $5.1 million is from unfavorable foreign currency fluctuations. This decrease is partially offset by $40.2 million of additional lease revenue (of which $13.6 million represents straight-line rent) related to the conversion of five Steward mortgage loans to fee simple assets in 2018, approximately $8 million of less straight-line rent write-offs than in 2018, and approximately $10 million of incremental revenue from acquisitions ($3.8 million of which relates to Healthscope) along with expansion and development projects.

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.

•

Income from direct financing leases – down $1.9 million due to not recording rent on two Alecto properties during the three months ended June 30, 2019, as more fully described in Note 3 to Item 1 of this Form 10-Q.

•

Interest and other income – down $15.6 million from the prior year due to the following:

Interest and fee income – up $43.3 million over the prior year of which $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 escalations in interest rates in accordance with loan provisions. These increases are partially offset by $5.4 million of lower interest revenue related to the Steward mortgage loans that converted to operating leases in 2018.
-
Interest from loans – down $23.3 million over the prior year of which $26.6 million is the result of lower interest revenue related to Steward mortgage loans converted to fee simple assets in 2018 and $8.8 million is from the payoff of our Ernest acquisition and other loans in the fourth quarter of 2018. This is partially offset by $8.4 million of interest revenue earned on the Primotop joint venture shareholder loan made in August 2018, $3 million from additional loan investments, and $0.4 million from our annual escalations in interest rates in accordance with loan provisions.

Other income – up $7.7 million due to the implementation of the lease accounting standard on January 1, 2019, whereby we are now reflecting certain payments made by our tenants, including ground lease payments and reimbursements of property taxes and insurance, as revenue. This revenue is offset by a corresponding expense in the “Property-related” line on the Condensed Consolidated Statements of Net Income.

Interest expense, for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ totaled ~~$172.4~~$102.9 million and ~~$120.5~~$115.1 million, respectively. This ~~increase~~decrease is primarily related to the ~~higher~~lower average revolving debt balance during the first ~~nine~~six months of ~~2018~~2019 compared to the first ~~nine~~six months of ~~2017~~2018 as we paid down our revolver with proceeds from property sales in ~~order to fund our 2017 acquisition activity. The impact on interest expense is~~2018. This decrease was 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%$0.9 million of accelerated commitment fee amortization expense in the ~~same period in 2017.~~2019 second quarter associated with our Australian term loan facility.

Real estate depreciation and amortization during the first ~~nine~~six months of ~~2018 increased~~2019 decreased to ~~$100.2~~$67.3 million from ~~$89.0~~$70.3 million in the same period of ~~2017,~~2018, due to the ~~incremental depreciation from the facilities acquired (particularly the Steward and MEDIAN facilities acquired~~property sales in ~~2017)~~2018, partially offset by new investments made and the ~~development properties completed in 2017~~conversion of the five Steward mortgage loans to fee simple assets.

Property-related expenses totaled $11.4 million and ~~2018.~~$4.1 million for the six months ended June 30, 2019 and 2018, respectively. As noted above under the caption “Other income,” this increase was primarily due to the grossing up of certain expenses (such as ground lease, property taxes and insurance) as part of our implementation of the lease accounting standard on January 1, 2019.

General and administrative expenses totaled ~~$58.4~~$45.7 million for the first ~~nine~~six months of ~~2018,~~2019, which is ~~a $15.1~~an $8.4 million increase from the prior year. As noted previously, general and administrative expenses were higher during the first nine months of 2018 due to our adoption of ASU 2017-01. Excluding the $4.5 million of higher expense due to the accounting change, general and administrative expenses represented 8.9% of revenue in the first nine months of 2018, which was in line with the 8.7% in 2017. On a dollar basis (exclusiveThe majority of the ~~accounting change impact), general and administrative expenses were up $10.6 million~~increase relates to stock compensation expense from ~~the prior year due to travel and compensation expenses, which are up as~~our performance-based awards. Given our strong performance in 2018 with a ~~result~~total shareholder return 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~~25% along with deals completed subsequent to September 2017. In regards to the first nine months of 2018, all third party transaction costs directly related to acquisitions are now capitalized due to the adoption of ASU 2017-01 as noted previously. However,our performance to-date in 2019, we ~~did incur $0.9 million in the current period related to the settlement of contingencies involving acquisitions~~believe it is more likely that ~~occurred prior to the adoption of ASU 2017-01.~~such performance awards will be earned and have adjusted our stock compensation expense accordingly.

During the ~~nine~~six months ended ~~September~~June 30, 2018, we sold one acute care property (operated by Steward), and three of our long-term acute care ~~properties~~hospitals (operated by Vibra)~~, 71 inpatient rehabilitation hospitals (operated by MEDIAN) by way~~ at a gain of a$25.6 million.

Earnings from equity interests was $8.2 million for the first six months of 2019, up $0.8 million from the same period of 2018, primarily due to our investment in the Primotop joint venture ~~arrangement,~~in the third quarter of 2018.

During the six months ended June 30, 2018, we incurred other expenses of $6.9 million, primarily related to non-cash and one general acute care hospital located in Texas (operated by North Cypress), resulting in a total net gain of $720.8 million. This gain was partially offset by a $48 million adjustment to lower the carrying value of the real estate tounrealized fair value adjustments 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. In the first nine months of 2017, we~~Ernest investments that were sold ~~one RCCH property resulting~~or repaid in ~~a $7.4 million gain.~~

In the first nine months of 2017, we incurred $18.8 million of debt refinancing costs related to various debt refinancing activities as disclosed in Note 4 to Item 1 of this Form 10-Q. We did not have anyOctober 2018. No similar ~~charges~~fair value adjustments were recorded during the ~~first nine~~six months ~~of 2018.~~ended June 30, 2019.

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 $2.6 million income tax ~~expense~~benefit for the ~~nine~~six months ended ~~September~~June 30, ~~2018, reflects an increase~~2019, represents the benefit from ~~prior year due to an increase~~straight-line rent and other write-offs on our TRS in ~~financial taxable income~~this period. The benefit is partially offset by tax expense from our international investments. ~~See quarter-over-quarter comparison~~We utilize the asset and liability method of accounting for ~~additional information about~~income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a full valuation allowance of $3 million should continue to be recorded against certain of our international net deferred tax assets at June 30, 2019. In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes ~~including related valuation allowances.~~in future periods as income earned.

Reconciliation of Non-GAAP Financial Measures

Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. We compute FFO in accordance with the definition provided by the National Association of Real Estate Investment Trusts, or ~~NAREIT,~~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~~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~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017~~2018 (in thousands, except per share data):

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Six Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017			June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
FFO information:
Net income attributable to MPT common stockholders	$	736,034		$	76,464		$	938,202		$	217,849		$	79,438		$	111,567		$	155,260		$	202,168
Participating securities’ share in earnings		(290	)		(82	)		(808	)		(307	)		(446	)		(323	)		(922	)		(518	)
Net income, less participating securities’ share in earnings	$	735,744		$	76,382		$	937,394		$	217,542		$	78,992		$	111,244		$	154,338		$	201,650
Depreciation and amortization		32,641			32,618			104,314			90,744			40,407			35,156			80,261			71,673
Gain on sale of real estate and other, net		(647,204	)		(18	)		(672,822	)		(7,431	)
Loss (gain) on sale of real estate, net														147			(24,151	)		147			(25,618	)
Funds from operations	$	121,181		$	108,982		$	368,886		$	300,855		$	119,546		$	122,249		$	234,746		$	247,705
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
Write-off of straight-line rent and other, net of tax benefit														406			7,235			3,002			13,294
Unutilized financing fees														914			—			914			—
Acquisition costs, net of tax benefit														—			411			—			411
Normalized funds from operations	$	127,163		$	120,562		$	388,573		$	340,116		$	120,866		$	129,895		$	238,662		$	261,410
Per diluted share data:
Net income, less participating securities’ share in earnings	$	2.00		$	0.21		$	2.56		$	0.63		$	0.20		$	0.30		$	0.40		$	0.55
Depreciation and amortization		0.09			0.09			0.29			0.26			0.10			0.10			0.20			0.20
Gain on sale of real estate and other, net		(1.76	)		-			(1.84	)		(0.02	)
Loss (gain) on sale of real estate, net														—			(0.07	)		—			(0.07	)
Funds from operations	$	0.33		$	0.30		$	1.01		$	0.87		$	0.30		$	0.33		$	0.60		$	0.68
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
Write-off of straight-line rent and other, net of tax benefit														—			0.03			0.01			0.03
Unutilized financing fees														0.01			—			—			—
Acquisition costs, net of tax benefit														—			—			—			—
Normalized funds from operations	$	0.35		$	0.33		$	1.06		$	0.98		$	0.31		$	0.36		$	0.61		$	0.71

Pro Forma Gross Assets

Pro forma ~~total~~ gross assets is total assets before accumulated depreciation/amortization (adjusted for our unconsolidated joint ventures) and assumes all real estate binding commitments on new investments and unfunded amounts on development deals and commenced capital improvement projects as of the applicable reporting periods are fully funded, and assumes cash on hand is ~~fully~~ used in these ~~transactions and includes our pro rata portion of gross assets in joint venture arrangements.~~transactions. We believe ~~total~~pro forma 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			As of
	September 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Total Assets	$	8,774,516		$	9,020,288
Total assets							$	10,123,211		$	8,843,643
Add:
Binding real estate commitments on new investments(1)		7,897			17,500			1,990,551			865,165
Unfunded amounts on development deals and commenced capital improvement projects(2)		208,497			154,184			209,986			229,979
Accumulated depreciation and amortization		432,279			455,712			531,880			464,984
Incremental gross assets of our joint ventures(3)		380,031			-			549,980			375,544
Less:
Cash and cash equivalents		(216,394	)		(171,472	)		(451,652	)		(720,868	)
Total Pro Forma Gross Assets	$	9,586,826		$	9,476,212
Total pro forma gross assets							$	12,953,956		$	10,058,447

(1)

The ~~2018~~2019 column reflects a commitment to ~~acquire a facility~~invest in 16 facilities in the U.S. and eight facilities in the United Kingdom, while the 2018 column reflects the acquisition of 11 facilities in Australia in June 2019 along with the acquisition of one property in Germany ~~post September 30, 2018; while, the 2017 column includes a facility~~ in ~~Washington that ultimately closed in 2018.~~February 2019.

(2)

Includes ~~$119.9~~$60.2 million and ~~$137.4~~$94.1 million of unfunded amounts on ongoing development projects and ~~$88.6~~$149.8 million and ~~$16.8~~$135.9 million of unfunded amounts on capital improvement ~~projects~~ and development projects that have commenced rent, as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

(3)

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

Adjusted ~~Revenue~~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 Six Months Ended June 30,
	For the Nine Months Ended September 30, 2018		For the Nine Months Ended September 30, 2017		2019		2018
Total revenues	$	603,944	$	499,784	$	373,003	$	406,948
Revenue from properties owned through joint venture arrangements		13,748		-		36,887		—
Total adjusted revenue	$	617,692	$	499,784
Total adjusted revenues					$	409,890	$	406,948

LIQUIDITY AND CAPITAL RESOURCES

~~2018~~2019 Cash Flow Activity

During the ~~nine months ended September 30, 2018,~~first half of 2019, we generated ~~$299.1~~$198.1 million of cash flows from operating activities, primarily consisting of rent and interest from ~~mortgages~~mortgage 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.~~$192.6 million.

Certain investing and financing activities in the first ~~nine months~~half of ~~2018~~2019 included:

~~Generated $2.3~~Purchased $1.4 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~~real estate assets representing 36 facilities across 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;~~countries;

~~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~~$200 million ~~for~~of development, capital addition and ~~capital improvement~~other projects;

e)c)

~~Acquired four facilities operated by Steward by converting the $525.4~~Sold 22.6 million shares of common stock under our at-the-market equity offering program, resulting in ~~mortgage loans on the same properties plus cash consideration;~~net proceeds of approximately $399 million; and

f)d)

~~We used~~Closed on an Australian term loan facility for approximately $837 million to help fund 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.~~ Healthscope acquisition.

~~2017~~Subsequent to June 30, 2019, we completed an underwritten public offering of 51.75 million shares resulting in net proceeds of approximately $858.1 million and a $900 million senior unsecured notes offering resulting in net proceeds of approximately $885 million. We intend to use the net proceeds from these offerings to help finance the $2 billion of commitments described in Note 11 in Item 1 of this Form 10-Q.

2018 Cash Flow Activity

During the ~~nine months ended September 30, 2017,~~first half of 2018, we generated ~~$220~~$196.5 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~~$180.8 million and certain investing and financing (including a $4.6 million reduction in our revolving credit facility) activities.

Certain investing ~~and financing~~ activities in the first ~~nine months~~half of ~~2017~~2018 included:

~~On February 1, 2017, we replaced our credit facility with a new facility resulting in a $50~~Generated $221.9 million ~~reduction in our U.S. dollar term loan and a new €200 million term loan;~~of cash proceeds from the sale of properties;

~~On March 4, 2017, we redeemed our 5.750% Senior Unsecured Notes due 2020 for €200~~Completed $167.9 million ~~plus a redemption premium using proceeds from our €200 million term loan and cash on-hand;~~in mortgage loans;

~~On March 24, 2017, we completed a €500~~Funded approximately $23 million ~~senior unsecured notes offering~~of development and ~~used a portion of the proceeds to pay off our €200 million term loan,~~capital improvement projects; 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~~Purchased two 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 tooperated by Steward for ~~$1.4 billion and to make a $100~~$273.7 million ~~equity investment in Steward; and~~

~~On September 29, 2017, we prepaid our Northland~~by reducing the $259.4 million mortgage ~~loan in the amount of $12.9 million.~~loan.

Short-term Liquidity Requirements:

As of ~~September~~June 30, ~~2018,~~2019, we have no debt principal payments due in the next twelve months — see debt maturity schedule below. At ~~November~~August 2, ~~2018,~~2019, our availability under our revolving credit facility plus cash on-hand approximated $2$3.0 billion. We believe this liquidity along with our current monthly cash receipts from rent and loan interest, regular distributions from our joint venture arrangements, and availability under our at-the-market equity program, is sufficient to fund our operations, debt and interest obligations, our firm commitments (including expected funding requirements on our development projects), our approximate $2.0 billion of committed acquisitions as of August 2, 2019, and dividends in order to comply with REIT requirements for the next twelve months.

Long-term Liquidity Requirements:

As of ~~September~~June 30, ~~2018,~~2019, we have no debt principal payments due between now and January 2021 when our revolving credit facility comes due (which can be extended by one year). ~~With our~~Our liquidity at ~~November~~August 2, ~~2018~~2019 of approximately $2$3.0 billion, along with our current monthly cash receipts from rent and loan interest, regular distributions from our joint venture arrangements, and ~~the~~ availability under our at-the-market equity program, ~~we believe we have the liquidity available to us~~is sufficient to fund our operations, debt and interest obligations, ~~dividends in order to comply with REIT requirements, and~~our firm commitments (including expected funding requirements on our development projects), our $2.0 billion committed acquisitions as of August 2, 2019, and dividends in order to comply with REIT requirements for the ~~foreseeable future.~~next twelve months.

However, our acquisition pipeline continues to remain strong, so in order to fund our acquisitions in excess of the $2.0 billion currently committed and to fund debt maturities coming due in ~~2022 and~~ later years, we ~~may~~will need additional capital, and we believe the following sources of capital are generally available in the market ~~which~~and we may access one or a combination of them:

~~sale of equity securities;~~

•

sale of equity securities;

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

•

amending or entering into new bank term loans,

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

•

placing new secured loans on real estate located in and outside the U.S.;

~~proceeds from strategic property sales; and/or~~

•

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

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

•

proceeds from strategic property sales.

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

As of ~~September~~June 30, ~~2018,~~2019, principal payments due on our debt (which excludes the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):

2018	$	-
2019		-	$	—
2020		-		—
2021		22,153		40,627
2022		780,200		768,650
2023				—
Thereafter		3,280,200		4,111,050
Total	$	4,082,553	$	4,920,327

Disclosure of Contractual Obligations

We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018. Except for changes to our ~~operating lease commitments as updated in our Form 10-Q for the quarter ended March 31, 2018,~~debt, there have been no other significant changes ~~in those~~as of June 30, 2019. However, see Note 11 for activities subsequent to June 30, 2019.

The following table updates our contractual obligations ~~during the nine months ended September 30, 2018.~~schedule for updates to our debt (in thousands):

Contractual Obligations

Less Than

1 Year

1-3 Years

3-5 Years

After

5 Years

Total

Australian term loan facility

22,222

41,278

881,585

—

945,085

Distribution Policy

The table below is a summary of our distributions declared during the two year period ended ~~September~~June 30, ~~2018:~~2019:

Declaration Date

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

May 25, 2017

June 15, 2017

July 14, 2017

$
0.24

February 16, 2017

March 16, 2017

April 13, 2017

$
0.24

November 10, 2016

December 8, 2016

January 12, 2017

$
0.23

Declaration Date	Record Date	Date of Distribution	Distribution per Share
May 23, 2019	June 13, 2019	July 11, 2019	$	0.25
February 14, 2019	March 14, 2019	April 11, 2019	$	0.25
November 15, 2018	December 13, 2018	January 10, 2019	$	0.25
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

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 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. However, our Credit Facility limits the amount of dividends we can pay - see Note 4 in Item 1 toof this Form 10-Q for further information.

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~~June 30, ~~2018,~~2019, our outstanding debt totaled ~~$4.1~~$4.9 billion, which consisted of fixed-rate debt, after considering the interest rate swap on the Australian term loan, of approximately ~~$3.9~~$4.7 billion and variable rate debt of ~~$222 million.~~$0.2 billion. If market interest rates increase by 1%, the fair value of our debt at ~~September~~June 30, ~~2018~~2019 would decrease by ~~$9.6~~$5.4 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 $0.1 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 $0.1 million per year. This assumes that the average amount outstanding under our variable rate debt for a year is ~~$222 million,~~$0.2 billion, the balance of such variable rate debt at ~~September~~June 30, ~~2018.~~2019.

Foreign Currency Sensitivity

With our investments in Germany, the United Kingdom, Spain, Italy, Switzerland, and ~~Italy,~~Australia, we are subject to fluctuations in the euro, ~~and~~ British pound, Swiss franc and Australian dollar to U.S. dollar currency exchange rates. Increases or decreases in the value of the ~~euro to U.S.~~respective non-U.S. dollar ~~and the British pound~~currencies to U.S. dollar exchange rates may impact our financial condition and/or our results of operations. Based solely on ~~annualizing the~~ operating results ~~for the third quarter of 2018~~to-date in 2019 and ~~excluding the gain~~ on ~~sale of real estate as part of the joint venture transaction with Primotop,~~an annualized basis, if the euro exchange rate were to change by 5%, our net income and FFO would change by approximately $2$0.2 million and ~~$2.8~~$1.3 million, respectively. Based solely on ~~annualizing the~~ operating results ~~for the third quarter of 2018,~~to-date in 2019 and on an annualized basis, 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, respectively. Based solely on operating results to-date in 2019 and on an annualized basis, if the Australian dollar exchange rate were to change by 5%, our net income and FFO would change by approximately $0.1 million and $1.1 million, respectively.

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 providing reasonable assurance that information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

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

PART II — ~~OTH~~EROTHER INFORMATION

Item 1. Legal Proceedings.

The information contained in Note 9 “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.

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, ~~2017.~~2018.

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

(a)

None.

(b)	Not applicable.

(c)

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

(a)

None.

(b)

None.

Item 6. Exhibits

Exhibit Number		Description

10.1(1)* 10.1*		~~Amended and Restated Subscription~~Syndicated Facility Agreement ~~dated as of June 7, 2018 by and~~ among MPT Operating Partnership, L.P. and Evolution Trustees Limited as Trustee of MPT Australia Realty Trust, as borrowers, Medical Properties Trust, Inc. and certain subsidiaries, as guarantors, the several lenders and other entities from time to time parties thereto, Bank of America, N.A, as administrative agent, and Citizens Bank, N.A., ~~Primotop Holding S.à r.l.~~JPMorgan Change Bank, N.A., Suntrust Bank and ~~MPT RHM Holdco S.à r.l.~~Wells Fargo Bank, N.A., as co-syndication agents.

10.2(1)		Medical Properties Trust, Inc. 2019 Equity Incentive Plan

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- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH		Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

**	Furnished herewith.

(1)	~~Incorporated~~Incorporate by reference to ~~the registrants' Quarterly Report on Form 10-Q,~~Medical Properties Trust, Inc.’s definitive Proxy Statement filed with the ~~Commission~~Comission on ~~August 9, 2018.~~April 26, 2019.

~~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:		/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:		/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~~August 9, ~~2018~~2019

3740

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