MEDICAL PROPERTIES TRUST INC (MPT)

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

The following discussion and analysis of the consolidated financial condition and consolidated results of operations are presented on a combined basis for Medical Properties Trust, Inc. and MPT Operating Partnership, L.P. as there are no material differences between these two entities. Such discussion and analysis should be read together with the condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto contained in our 2025 Annual Report.

Forward-Looking Statements.

This Quarterly Report on Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can generally be identified by the use of forward-looking words such as "may", "will", "would", "could", "expect", "intend", "plan", "estimate", "target", "anticipate", "believe", "objectives", "outlook", "guidance", or other similar words, and include statements regarding our strategies, objectives, asset sales and other liquidity and debt repayment transactions (including the use of proceeds thereof), expected returns on investments and financial performance, and expected trends and performance across our various markets. 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 to be materially different from those expressed or implied by such forward-looking statements, including, but not limited to, the risks described in our 2025 Annual Report and as updated in our Quarterly Reports on Form 10-Q for future periods, and on our Current Reports on Form 8-K filed with the SEC. Such factors include, among others, the following:

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macroeconomic conditions, including due to geopolitical instability (such as ongoing armed conflicts in the Middle East and Ukraine) and the implementation of new and increased tariffs and other global trade disruptions, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries, persistent inflation and movements in currency exchange rates, and may negatively impact our financial condition and the financial condition of our tenants;

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the risk that property sales (including those discussed in Note 12 to the condensed consolidated financial statements), loan repayments, and other capital recycling transactions do not occur as anticipated or at all;

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the risk that the timing, outcome, and terms of Prospect's causes of action, that is collateral for DIP and other fundings that remain outstanding, will not be consistent with those anticipated by the Company;

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the risk that we are unable to successfully re-tenant or sell any currently vacant properties, on the terms we expect or at all;

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the risk that governments may take action adverse to our ownership and other rights in our properties;

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the risk that the private notes transaction disclosed in Note 12 to the condensed consolidated financial statements does not close as anticipated or at all;

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the risk that we are not able to attain our leverage, liquidity, and cost of capital objectives within a reasonable time period or at all;

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our ability to obtain debt financing on attractive terms or at all, as a result of changes in interest rates and other factors, which may adversely impact our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, or pursue acquisition and development opportunities;

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our ability to remain in compliance with financial covenants under our debt facilities;

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our ability to effectuate the extension of the revolving portion of our credit facility (the "Credit Facility") to June 30, 2027;

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any downgrades in our credit ratings;

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the ability of our tenants, operators, and borrowers (including those of our joint ventures) to satisfy their obligations under their respective contractual arrangements with us, including the rent ramp up provisions in the leases of former Steward and Prospect-operated facilities;

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the ability of our tenants and operators to operate profitably and generate positive cash flow, remain solvent, comply with applicable laws, rules and regulations in the operation of our properties, to deliver high-quality services, to attract and retain qualified personnel, and to attract patients;

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the cooperation of our joint venture partners, including adverse developments affecting the financial health of such joint venture partners or the joint venture itself;

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the economic, political, and social impact of, and uncertainty relating to, epidemics, pandemics or other public health crises (like COVID-19), which may adversely affect our and our tenants’ business, financial condition, results of operations, and liquidity;

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our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate, and integrate acquisitions and investments;

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the nature and extent of our current and future competition;

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

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our ability to maintain our status as a real estate investment trust ("REIT") for income tax purposes in the U.S. and U.K.;

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tax audit results and changes in federal, state, or local tax laws in the U.S., Europe, South America, or other jurisdictions in which we may own healthcare facilities or transact business;

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the risk that the operations of our tenants will be negatively impacted by changes to Medicaid funding introduced by the One Big Beautiful Bill Act;

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federal and state healthcare and other regulatory requirements, as well as those in the foreign jurisdictions where we own properties;

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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;

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loss of property owned through ground leases upon breach or termination of the ground leases;

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potential environmental contingencies and other liabilities;

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our ability to attract and retain qualified personnel;

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the risks and uncertainties of litigation or other regulatory proceedings and investigations; and

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the accuracy of our methodologies and estimates regarding corporate responsibility metrics and targets, tenant willingness and ability to collaborate towards reporting such metrics and meeting such goals and targets, and the impact of governmental regulation on our and our tenants’ corporate responsibility efforts.

Key Factors that May Affect Our Operations

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

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

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the scope and breadth of clinical services and programs, including utilization trends (both inpatient and outpatient) by service type;

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the size and composition of medical staff and physician leadership at our facilities, including specialty, tenure, and number of procedures performed and/or referrals;

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an evaluation of our operators’ management team, as applicable, including background and tenure within the healthcare industry;

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staffing trends, including ratios, turnover metrics, recruitment and retention strategies at corporate and individual facility levels;

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facility operating performance measured by current, historical, and prospective operating margins (measured by a tenant's earnings before interest, taxes, depreciation, amortization, management fees, and facility rent) of each tenant and at each facility;

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the ratio of our tenants' operating earnings to facility rent and to other fixed costs, including debt costs;

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changes in revenue sources of our tenants, including the relative mix of public payors (including Medicare, Medicaid/MediCal, and managed care in the U.S., as well as equivalent payors in Europe, and South America) and private payors (including commercial insurance and private pay patients);

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historical support (financial or otherwise) from governments and/or other public payor systems during major economic downturns/depressions;

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trends in tenants' cash collections, including comparison to recorded net patient service revenues, knowing and assessing current revenue cycle management systems and potential future planned upgrades or replacements;

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tenants' free cash flow;

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the potential impact of healthcare pandemics/epidemics, legislation, and other regulations (including changes in reimbursement) on our tenants', borrowers', and guarantors' profitability and liquidity;

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the potential impact of any legal, regulatory, or compliance proceedings with our tenants (including at the facility level);

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the potential impact of supply chain and inflation-related challenges as they relate to new developments or capital addition projects;

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an ongoing assessment of the operating environment of our tenants, including demographics, competition, market position, status of compliance, accreditation, quality performance, and health outcomes as measured by The Centers for Medicare and Medicaid Services ("CMS"), The Joint Commission, and other governmental bodies in which our tenants operate;

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the level of investment in the hospital infrastructure and health IT systems; and

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physical real estate due diligence, typically including property condition and Phase 1 environmental assessments, along with routine property inspections thereafter.

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

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trends in interest rates and other costs due to general inflation and availability and increased costs from labor shortages could adversely impact the operations of our tenants and their ability to meet their lease/loan obligations;

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

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reductions (or non-timely increases) in reimbursements from Medicare, state healthcare programs, and commercial insurance providers that may reduce our tenants’ or borrowers’ profitability and our revenues;

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regulatory restrictions on REIT healthcare investments;

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competition from other financing sources; and

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

Overview

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

We may make other loans to certain of our operators through our TRSs, which the operators use for working capital. Although it represents approximately 1% of our total assets at December 31, 2025, we consider our lending business an important element of our overall business strategy for two primary reasons: (1) it provides opportunities to make income-earning investments that could yield attractive risk-adjusted returns in an industry in which our management has expertise, and (2) by making debt capital available to certain qualified operators, we believe we create a competitive advantage for our company over other buyers of, and financing sources for, healthcare facilities.

At December 31, 2025, our portfolio (including real estate assets in joint ventures) consisted of 384 properties, of which 373 properties are leased or loaned to 52 operators, including facilities under development or in the form of mortgage loans.

The information set forth in this Item 7 is intended to provide readers with an understanding of our financial condition, changes in financial condition, and results of operations. This section generally discusses the results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024. For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, please refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 3, 2025.

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Selected Financial Data

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

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

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2025 Highlights

In 2025, our primary objectives were to manage our near-term debt maturities, securing as much value as possible while exiting our relationship with Prospect, restructuring our investments in Vibra, and continuing the ramp up of rents on the re-tenanted properties formerly leased to Steward. In regard to our near-term debt maturities, we made significant progress in refinancing our debt in 2025, clearing all debt maturities through June 30, 2027 (as we expect the revolving portion of our Credit Facility will be extended to June 2027), other than one issue of unsecured notes of €500 million due in October 2026 which we believe can be paid off with cash on-hand and/or availability under the revolving portion of our Credit Facility – see “Contractual Commitments” in Item 7 of this Annual Report on Form 10-K for further details of our debt maturity schedule.

See below for details of our 2025 activities:

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Financing activities:

(1)
Repaid the remaining outstanding balance of the British pound sterling term loan due 2025 at maturity in January 2025 of £493 million, with a combination of cash on hand and available capacity under the revolving portion of our Credit Facility;

(2)
Completed a private notes offering of $1.5 billion in aggregate principal amount of senior secured notes due 2032 and €1.0 billion aggregate principal amount of senior secured notes due 2032, proceeds of which were used to fund the redemption in full of our 3.325% Senior Unsecured Notes due 2025, 2.500% Senior Unsecured Notes due 2026, and 5.250% Senior Unsecured Notes due 2026, including related accrued interest, fees and expenses. Remaining proceeds were used to pay down the revolving portion of our Credit Facility;

(3)
Concurrent with the notes offering, we amended our Credit Facility which, among other things, (i) modified certain financial covenants and eliminated others including the minimum consolidated tangible net worth covenant; (ii) lowered borrowing spreads from 300 basis points to 225 basis points; (iii) removed the limitation on the payment of dividends in cash of $0.08 per share in any fiscal quarter; and (iv) provided for the Credit Facility to be secured and guaranteed ratably with the newly issued secured notes – see Note 4 to Item 8 of this Annual Report on Form 10-K for more information regarding this amendment;

(4)
Provided notice that we plan to exercise both of our 6-month extension options such that the maturity of the revolving portion of our Credit Facility would move to June 30, 2027 (subject to the satisfaction of certain conditions, with the primary condition of not being in default at the time of each extension option date);

(5)
Replaced the €655 million secured debt in our MEDIAN joint venture on June 17, 2025, that was due on June 30, 2025, with a new €702.5 million nonrecourse, 10-year non-amortizing secured debt;

(6)
Entered into an at-the-market equity offering program (the "ATM Program") on August 11, 2025, which provides for the sale, from time to time, of up to $500 million of our common stock with a commission rate up to 2%;

(7)
Our Board of Directors approved a stock repurchase program in October 2025 for up to $150 million, for which we acquired 4.5 million shares for $23.4 million in 2025; and

(8)
Increased our quarterly cash dividend by $0.01 to $0.09 per share as declared in November 2025.

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Tenant and property activity:

(1)
As more fully described in “Significant Tenants” in Item 1 of this Annual Report on Form 10-K, Prospect filed for Chapter 11 bankruptcy on January 11, 2025. On March 20, 2025, the bankruptcy court approved a global settlement (including a recovery waterfall) between us, Prospect, and other stakeholders. As part of the global settlement, we re-leased six California properties to NOR in December 2025. In addition, five of the remaining seven properties previously operated by Prospect have been sold to-date with the remaining two expected to be sold later in 2026.

We expect to receive our remaining investment of $61 million in 2026. With that said, Prospect's bankruptcy proceedings are continuing, and the ultimate outcome of such proceedings is uncertain. At this time, we cannot assure you that we will be able to recover in full our remaining investment in Prospect as of December 31, 2025. In addition, the bankruptcy court approved an order for up to $70 million in additional advances which we may be required to fund. However, any funds advanced are expected to be secured by recoveries, if any, from causes of action owned by the debtor;

(2)
Completed a restructuring of our relationship with Vibra including entering into a new 20-year master lease agreement covering several prope

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