Edgar Filing: MEDICAL PROPERTIES TRUST INC

Large accelerated filer

x (Medical Properties Trust, Inc. only)

Accelerated filer

Non-accelerated filer

x (MPT Operating Partnership, L.P. only)

(Do not check if a smaller reporting company)

Smaller reporting company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2016

¨	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)

(205) 969-3755

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

As of August 1, 2016, Medical Properties Trust, Inc. had 243,138,873 shares of common stock, par value $0.001, outstanding.

EXPLANATORY NOTE

This report combines the Quarterly Reports on Form 10-Q for the three and six months ended June 30, 2016, of Medical Properties Trust, Inc., a Maryland corporation, and MPT Operating Partnership, L.P., a Delaware limited partnership, through which Medical Properties Trust, Inc. conducts substantially all of its operations. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “we,” “us,” “our,” “our company,” “Medical Properties,” “MPT,” or “the company” refer to Medical Properties Trust, Inc. together with its consolidated subsidiaries, including MPT Operating Partnership, L.P. Unless otherwise indicated or unless the context requires otherwise, all references to “our operating partnership” or “the operating partnership” refer to MPT Operating Partnership, L.P. together with its consolidated subsidiaries.

MEDICAL PROPERTIES TRUST, INC. AND MPT OPERATING PARTNERSHIP, L.P.

AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED June 30, 2016

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 June 30, 2016 and December 31, 2015		3
Condensed Consolidated Statements of Net Income for the Three Months and Six Months Ended June 30, 2016 and 2015		4
Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2016 and 2015		5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015		6
MPT Operating Partnership, L.P. and Subsidiaries
Condensed Consolidated Balance Sheets at June 30, 2016 and December 31, 2015		7
Condensed Consolidated Statements of Net Income for the Three Months and Six Months Ended June 30, 2016 and 2015		8
Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2016 and 2015		9
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015		10
Medical Properties Trust, Inc. and MPT Operating Partnership, L.P.
Notes to Condensed Consolidated Financial Statements		11
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3 Quantitative and Qualitative Disclosures about Market Risk		32
Item 4 Controls and Procedures		33
PART II — OTHER INFORMATION		34
Item 1 Legal Proceedings		34
Item 1A Risk Factors		34
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		34
Item 3 Defaults Upon Senior Securities		34
Item 4 Mine Safety Disclosures		34
Item 5 Other Information		34
Item 6 Exhibits		35
SIGNATURE		36
INDEX TO EXHIBITS		37

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	June 30, 2016			December 31, 2015
(In thousands, except per share amounts)	(Unaudited)			(Note 2)
Assets
Real estate assets
Land, buildings and improvements, intangible lease assets, and other	$	3,482,199		$	3,297,705
Real estate held for sale		63,074			—
Mortgage loans		549,337			757,581
Net investment in direct financing leases		528,747			626,996

Gross investment in real estate assets		4,623,357			4,682,282
Accumulated depreciation and amortization		(278,590	)		(257,928	)

Net investment in real estate assets		4,344,767			4,424,354
Cash and cash equivalents		181,561			195,541
Interest and rent receivables		47,699			46,939
Straight-line rent receivables		95,988			82,155
Other loans		259,329			664,822
Other assets		188,589			195,540

Total Assets	$	5,117,933		$	5,609,351

Liabilities and Equity
Liabilities
Debt, net	$	2,758,635		$	3,322,541
Accounts payable and accrued expenses		148,218			137,356
Deferred revenue		20,997			29,358
Lease deposits and other obligations to tenants		22,845			12,831

Total Liabilities		2,950,695			3,502,086
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 — 240,341 shares at June 30, 2016 and 236,744 shares at December 31, 2015		240			237
Additional paid in capital		2,642,281			2,593,827
Distributions in excess of net income		(414,657	)		(418,650	)
Accumulated other comprehensive loss		(65,340	)		(72,884	)
Treasury shares, at cost		(262	)		(262	)

Total Medical Properties Trust, Inc. Stockholders’ Equity		2,162,262			2,102,268
Non-controlling interests		4,976			4,997

Total Equity		2,167,238			2,107,265

Total Liabilities and Equity	$	5,117,933		$	5,609,351

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 June 30,						For the Six Months Ended June 30,
(In thousands, except per share amounts)	2016			2015			2016			2015
Revenues
Rent billed	$	77,960		$	53,893		$	152,021		$	106,994
Straight-line rent		8,551			5,252			16,768			9,980
Income from direct financing leases		13,552			12,808			32,503			25,363
Interest and fee income		26,237			27,848			60,007			53,425

Total revenues		126,300			99,801			261,299			195,762
Expenses
Real estate depreciation and amortization		22,832			14,956			43,974			29,712
Impairment charges		7,375			—			7,375			—
Property-related		784			530			1,685			881
General and administrative		12,045			10,642			23,516			21,547
Acquisition expenses		4,767			25,809			3,702			32,048

Total operating expenses		47,803			51,937			80,252			84,188

Operating income		78,497			47,864			181,047			111,574
Other income (expense)
Interest expense		(41,501	)		(26,890	)		(80,874	)		(53,556	)
Gain on sale of real estate and other asset dispositions, net		16,638			—			16,678			—
Earnings (loss) from equity and other interests		1,200			1,853			(3,801	)		1,956
Other income (expense)		(546	)		225			(217	)		(571	)
Income tax expense		(364	)		(563	)		(683	)		(938	)

Net other expense		(24,573	)		(25,375	)		(68,897	)		(53,109	)

Income from continuing operations		53,924			22,489			112,150			58,465
Loss from discontinued operations		—			—			(1	)		—

Net income		53,924			22,489			112,149			58,465
Net income attributable to non-controlling interests		(200	)		(82	)		(498	)		(161	)

Net income attributable to MPT common stockholders	$	53,724		$	22,407		$	111,651		$	58,304

Earnings per common share — basic
Income from continuing operations attributable to MPT common stockholders	$	0.23		$	0.11		$	0.47		$	0.28
Loss from discontinued operations attributable to MPT common stockholders		—			—			—			—

Net income attributable to MPT common stockholders	$	0.23		$	0.11		$	0.47		$	0.28

Weighted average shares outstanding — basic		238,082			208,071			237,796			205,515

Earnings per common share — diluted
Income from continuing operations attributable to MPT common stockholders	$	0.22		$	0.11		$	0.47		$	0.28
Loss from discontinued operations attributable to MPT common stockholders		—			—			—			—

Net income attributable to MPT common stockholders	$	0.22		$	0.11		$	0.47		$	0.28

Weighted average shares outstanding — diluted		239,008			208,640			238,413			206,127

Dividends declared per common share	$	0.23		$	0.22		$	0.45		$	0.44

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 June 30,						For the Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Net income	$	53,924		$	22,489		$	112,149		$	58,465
Other comprehensive income:
Unrealized gain on interest rate swap		825			730			1,640			1,315
Foreign currency translation gain (loss)		(14,683	)		20,307			5,904			(39,286	)

Total comprehensive income		40,066			43,526			119,693			20,494
Comprehensive income attributable to non-controlling interests		(200	)		(82	)		(498	)		(161	)

Comprehensive income attributable to MPT common stockholders	$	39,866		$	43,444		$	119,195		$	20,333

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Six Months Ended June 30,
	2016			2015
(In thousands)
Operating activities
Net income	$	112,149		$	58,465
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,170			30,564
Straight-line rent revenue		(17,268	)		(9,980	)
Straight-line rent and other write-off		3,063			—
Impairment charges		7,375			—
Direct financing lease interest accretion		(4,766	)		(3,279	)
Share-based compensation		4,152			5,645
Gain from sale of real estate and other asset dispositions, net		(16,678	)		—
Amortization and write-off of deferred financing costs and debt discount		3,897			2,770
Other adjustments		(6,605	)		(2,383	)
Changes in:
Interest and rent receivable		(2,743	)		(15,685	)
Accounts payable and accrued expenses		9,544			21,327

Net cash provided by operating activities		137,290			87,444
Investing activities
Cash paid for acquisitions and other related investments		(109,991	)		(562,633	)
Net proceeds from sale of real estate		89,165			—
Principal received on loans receivable		705,501			354,952
Investment in loans receivable		(96,504	)		(347,768	)
Construction in progress and other		(108,065	)		(86,053	)
Investment in unsecured senior notes		(50,000	)		—
Proceeds from sale of unsecured senior notes		50,000			—

Net cash provided by (used for) investing activities		480,106			(641,502	)
Financing activities
Revolving credit facilities, net		(1,075,000	)		80,586
Proceeds from debt		500,000			—
Payments of term debt		(147	)		(140	)
Distributions paid		(104,788	)		(84,487	)
Proceeds from sale of common shares, net of offering costs		44,306			479,902
Lease deposits and other obligations to tenants		9,593			(14,453	)
Debt issuance costs paid and other financing activities		(8,465	)		(662	)

Net cash (used for) provided by financing activities		(634,501	)		460,746

Increase (decrease) in cash and cash equivalents for period		(17,105	)		(93,312	)
Effect of exchange rate changes		3,125			(5,325	)
Cash and cash equivalents at beginning of period		195,541			144,541

Cash and cash equivalents at end of period	$	181,561		$	45,904

Interest paid	$	57,118		$	52,130
Supplemental schedule of non-cash financing activities:
Distributions declared, unpaid	$	55,272		$	46,026

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	June 30, 2016			December 31, 2015
(In thousands)	(Unaudited)			(Note 2)
Assets
Real estate assets
Land, buildings and improvements, intangible lease assets, and other	$	3,482,199		$	3,297,705
Real estate held for sale		63,074			—
Mortgage loans		549,337			757,581
Net investment in direct financing leases		528,747			626,996

Gross investment in real estate assets		4,623,357			4,682,282
Accumulated depreciation and amortization		(278,590	)		(257,928	)

Net investment in real estate assets		4,344,767			4,424,354
Cash and cash equivalents		181,561			195,541
Interest and rent receivables		47,699			46,939
Straight-line rent receivables		95,988			82,155
Other loans		259,329			664,822
Other assets		188,589			195,540

Total Assets	$	5,117,933		$	5,609,351

Liabilities and Capital
Liabilities
Debt, net	$	2,758,635		$	3,322,541
Accounts payable and accrued expenses		92,623			84,628
Deferred revenue		20,997			29,358
Lease deposits and other obligations to tenants		22,845			12,831
Payable due to Medical Properties Trust, Inc.		55,205			52,338

Total Liabilities		2,950,305			3,501,696
Capital
General Partner — issued and outstanding — 2,400 units at June 30, 2016 and 2,363 units at December 31, 2015		22,299			21,773
Limited Partners:
Common units — issued and outstanding — 237,941 units at June 30, 2016 and 234,381 units at December 31, 2015		2,205,693			2,153,769
LTIP units — issued and outstanding — 292 units at June 30, 2016 and December 31, 2015		—			—
Accumulated other comprehensive loss		(65,340	)		(72,884	)

Total MPT Operating Partnership, L.P. Capital		2,162,652			2,102,658
Non-controlling interests		4,976			4,997

Total Capital		2,167,628			2,107,655

Total Liabilities and Capital	$	5,117,933		$	5,609,351

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Net Income

(Unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands, except per unit amounts)	2016			2015			2016			2015
Revenues
Rent billed	$	77,960		$	53,893		$	152,021		$	106,994
Straight-line rent		8,551			5,252			16,768			9,980
Income from direct financing leases		13,552			12,808			32,503			25,363
Interest and fee income		26,237			27,848			60,007			53,425

Total revenues		126,300			99,801			261,299			195,762
Expenses
Real estate depreciation and amortization		22,832			14,956			43,974			29,712
Impairment charges		7,375			—			7,375			—
Property-related		784			530			1,685			881
General and administrative		12,045			10,642			23,516			21,547
Acquisition expenses		4,767			25,809			3,702			32,048

Total operating expenses		47,803			51,937			80,252			84,188

Operating income		78,497			47,864			181,047			111,574
Other income (expense)
Interest expense		(41,501	)		(26,890	)		(80,874	)		(53,556	)
Gain on sale of real estate and other asset dispositions, net		16,638			—			16,678			—
Earnings (loss) from equity and other interests		1,200			1,853			(3,801	)		1,956
Other income (expense)		(546	)		225			(217	)		(571	)
Income tax expense		(364	)		(563	)		(683	)		(938	)

Net other expense		(24,573	)		(25,375	)		(68,897	)		(53,109	)

Income from continuing operations		53,924			22,489			112,150			58,465
Loss from discontinued operations		—			—			(1	)		—

Net income		53,924			22,489			112,149			58,465
Net income attributable to non-controlling interests		(200	)		(82	)		(498	)		(161	)

Net income attributable to MPT Operating Partnership partners	$	53,724		$	22,407		$	111,651		$	58,304

Earnings per unit — basic
Income from continuing operations attributable to MPT Operating Partnership partners	$	0.23		$	0.11		$	0.47		$	0.28
Loss from discontinued operations attributable to MPT Operating Partnership partners		—			—			—			—

Net income attributable to MPT Operating Partnership partners	$	0.23		$	0.11		$	0.47		$	0.28

Weighted average units outstanding — basic		238,082			208,071			237,796			205,515

Earnings per unit — diluted
Income from continuing operations attributable to MPT Operating Partnership partners	$	0.22		$	0.11		$	0.47		$	0.28
Loss from discontinued operations attributable to MPT Operating Partnership partners		—			—			—			—

Net income attributable to MPT Operating Partnership partners	$	0.22		$	0.11		$	0.47		$	0.28

Weighted average units outstanding — diluted		239,008			208,640			238,413			206,127

Dividends declared per unit	$	0.23		$	0.22		$	0.45		$	0.44

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2016			2015			2016			2015
Net income	$	53,924		$	22,489		$	112,149		$	58,465
Other comprehensive income:
Unrealized gain on interest rate swap		825			730			1,640			1,315
Foreign currency translation gain (loss)		(14,683	)		20,307			5,904			(39,286	)

Total comprehensive income		40,066			43,526			119,693			20,494
Comprehensive income attributable to non-controlling interests		(200	)		(82	)		(498	)		(161	)

Comprehensive income attributable to MPT Operating Partnership Partners	$	39,866		$	43,444		$	119,195		$	20,333

See accompanying notes to condensed consolidated financial statements.

MPT OPERATING PARTNERSHIP, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Six Months Ended June 30,
	2016			2015
(In thousands)
Operating activities
Net income	$	112,149		$	58,465
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,170			30,564
Straight-line rent revenue		(17,268	)		(9,980	)
Straight-line rent and other write-off		3,063			—
Impairment charges		7,375			—
Direct financing lease interest accretion		(4,766	)		(3,279	)
Unit-based compensation		4,152			5,645
Gain from sale of real estate and other asset dispositions, net		(16,678	)		—
Amortization and write-off of deferred financing costs and debt discount		3,897			2,770
Other adjustments		(6,605	)		(2,383	)
Changes in:
Interest and rent receivable		(2,743	)		(15,685	)
Accounts payable and accrued expenses		9,544			21,327

Net cash provided by operating activities		137,290			87,444
Investing activities
Cash paid for acquisitions and other related investments		(109,991	)		(562,633	)
Net proceeds from sale of real estate		89,165			—
Principal received on loans receivable		705,501			354,952
Investment in loans receivable		(96,504	)		(347,768	)
Construction in progress and other		(108,065	)		(86,053	)
Investment in unsecured senior notes		(50,000	)		—
Proceeds from sale of unsecured senior notes		50,000			—

Net cash provided by (used for) investing activities		480,106			(641,502	)
Financing activities
Revolving credit facilities, net		(1,075,000	)		80,586
Proceeds from debt		500,000			—
Payments of term debt		(147	)		(140	)
Distributions paid		(104,788	)		(84,487	)
Proceeds from sale of units, net of offering costs		44,306			479,902
Lease deposits and other obligations to tenants		9,593			(14,453	)
Debt issuance costs paid and other financing activities		(8,465	)		(662	)

Net cash (used for) provided by financing activities		(634,501	)		460,746

Increase (decrease) in cash and cash equivalents for period		(17,105	)		(93,312	)
Effect of exchange rate changes		3,125			(5,325	)
Cash and cash equivalents at beginning of period		195,541			144,541

Cash and cash equivalents at end of period	$	181,561		$	45,904

Interest paid	$	57,118		$	52,130
Supplemental schedule of non-cash financing activities:
Distributions declared, unpaid	$	55,272		$	46,026

See accompanying notes to condensed consolidated financial statements.

MEDICAL PROPERTIES TRUST, INC., AND MPT OPERATING PARTNERSHIP, L.P.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization

Medical Properties Trust, Inc., a Maryland corporation, was formed on August 27, 2003, under the Maryland General Corporation Law for the purpose of engaging in the business of investing in, owning, and leasing commercial real estate. Our operating partnership subsidiary, MPT Operating Partnership, L.P., (the “Operating Partnership”) through which we conduct all of our operations, was formed in September 2003. Through another wholly-owned subsidiary, Medical Properties Trust, LLC, we are the sole general partner of the Operating Partnership. At present, we directly own substantially all of the limited partnership interests in the Operating Partnership and have elected to report our required disclosures and that of the Operating Partnership on a combined basis except where material differences exist.

We have operated as a real estate investment trust (“REIT”) since April 6, 2004, and accordingly, elected REIT status upon the filing in September 2005 of the calendar year 2004 federal income tax return. 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 activities we undertake must be conducted by entities which we elected to be treated as taxable REIT subsidiaries (“TRSs”). Our TRSs are subject to both U.S. federal and state income taxes. For our properties located outside the U.S., we are subject to local taxes; however, we do not expect to incur additional taxes in the U.S. as such income will flow through our REIT.

Our primary business strategy is to acquire and develop real estate and improvements, primarily for long-term lease to providers of healthcare services such as operators of general acute care hospitals, inpatient physical rehabilitation hospitals, long-term acute care hospitals, surgery centers, centers for treatment of specific conditions such as cardiac, pulmonary, cancer, and neurological hospitals, and other healthcare-oriented facilities. We also make mortgage and other loans to operators of similar facilities. In addition, we may obtain profits or equity interests in our tenants, from time to time, in order to enhance our overall return. We manage our business as a single business segment. All of our properties are located in the U.S. and Europe.

2. Summary of Significant Accounting Policies

Unaudited Interim Condensed Consolidated Financial Statements: The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information, including rules and regulations of the Securities and Exchange Commission. 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 six month periods ended June 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. The condensed consolidated balance sheet at December 31, 2015 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, 2015. During the six months ended June 30, 2016, there were no material changes to these policies.

Recent Accounting Developments:

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration received for that specific good or service. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. On April 1, 2015, the FASB proposed deferring the effective date of this standard by one year to December 15, 2017, for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016. We are continuing to evaluate this standard; however, we do not expect it to have a significant impact on our financial results, as a substantial portion of our revenue consists of rental income from leasing arrangements, which are specifically excluded from ASU No. 2014-09.

Leases

In February 2016, the FASB issued ASU 2016-02 - Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The ASU is not effective for us until January 1, 2019 with early adoption permitted. We are continuing to evaluate this standard and the impact to us from both a lessor and a lessee perspective.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets not recorded at fair value based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU will be required to be implemented through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendments are effective. The ASU is not effective for us until January 1, 2019. We do not expect the adoption of the ASU to have a significant impact on our consolidated financial statements.

Variable Interest Entities

At June 30, 2016, we had loans to and/or equity investments in certain variable interest entities (“VIEs”), which are also tenants of our facilities, including Ernest Health, Inc. (“Ernest”). 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 June 30, 2016 (in thousands):


VIE Type	Maximum Loss Exposure(1)		Asset Type Classification	Carrying Amount(2)
Loans, net	$	295,822	Mortgage and other loans	$	226,101
Equity investments	$	37,309	Other assets	$	328

(1)

Our maximum loss exposure related to loans with VIEs represents our current aggregate gross carrying value of the loan plus accrued interest and any other related assets (such as rent receivables), less any liabilities. Our maximum loss exposure related to our equity investment in VIEs represents the current carrying values of such investment plus any other related assets (such as rent receivables) less any liabilities.

(2)	Carrying amount reflects the net book value of our loan or equity interest only in the VIE.

For the VIE types above, we do not consolidate the VIE because we do not have the ability to control the activities (such as the day-to-day healthcare operations of our borrower or investees) that most significantly impact the VIE’s economic performance. As of June 30, 2016, we were not required to provide any material financial support through a liquidity arrangement or otherwise to our unconsolidated VIEs, including circumstances in which it could be exposed to further losses (e.g., cash short falls).

Typically, our loans are collateralized by assets of the borrower (some assets of which are on the premises of facilities owned by us) and further supported by limited guarantees made by certain principals of the borrower.

See Note 3 and 7 for additional description of the nature, purpose and activities of our more significant VIEs and interests therein.

3. Real Estate and Lending Activities

Acquisitions

We acquired the following assets (in thousands):


	Six Months Ended June 30,
	2016		2015
Assets Acquired
Land and land improvements	$	9,398	$	62,434
Building		37,593		390,320
Intangible lease assets — subject to amortization (weighted average useful life 25.8 years)		—		42,262
Mortgage loans		—		40,000
Net investments in direct financing leases		63,000		10,700
Other loans		—		16,917

Total assets acquired	$	109,991	$	562,633
Loans repaid (1)		—		(183,826	)

Total net assets acquired	$	109,991	$	378,807

(1)

Loans advanced to MEDIAN in 2014 and repaid in 2015 as a part of the MEDIAN transaction.

The purchase price allocations attributable to the 2016 and certain 2015 acquisitions are preliminary. When all relevant information is obtained, resulting changes, if any, to our provisional purchase price allocation will be retrospectively adjusted to reflect new information obtained about the facts and circumstances that existed as of the respective acquisition dates that, if known, would have affected the measurement of the amounts recognized as of those dates.

2016 Activity

On May 2, 2016, we acquired an acute hospital in Newark, New Jersey for an aggregate purchase price of $63 million leased to Prime Healthcare Services, Inc. (“Prime”) pursuant to a fifth master lease, which has a 15-year term with three five-year extension options, plus consumer price-indexed increases, limited to a 2% floor. Furthermore, we committed to advance an additional $30 million to Prime over a three-year period to be used solely for capital additions to the real estate; any such additions will be added to the basis upon which the lessee will pay us rents.

On June 22, 2016, we closed on the final Median Kliniken S.à r.l., (“MEDIAN”) property for a purchase price of €41.6 million. See “2015 Activity” for a description of the initial MEDIAN Transaction.

From the respective acquisition dates, the properties acquired in 2016 contributed $1.1 million of revenue and income (excluding related acquisition expenses), for the three and six months ended June 30, 2016. In addition, we incurred $2.4 million of acquisition-related costs on the 2016 acquisitions for both the three and six months ended June 30, 2016.

2015 Activity

MEDIAN Transaction

On April 29, 2015, we entered into a series of definitive agreements with MEDIAN, a German provider of post-acute and acute rehabilitation services, to acquire the real estate assets of 32 hospitals owned by MEDIAN for an aggregate purchase price of approximately €688 million. Upon acquisition, each property became subject to a master lease between us and MEDIAN providing for the leaseback of the property to MEDIAN. The master lease had an initial term of 27 years and provided for an initial GAAP lease rate of 9.3%, with annual escalators at the greater of one percent or 70% of the German consumer price index.

MEDIAN is owned by an affiliate of Waterland Private Equity Fund V C.V. (“Waterland”), which acquired 94.9% of the outstanding equity interests in MEDIAN, and by a subsidiary of our operating partnership, which acquired the remaining 5.1% of the outstanding equity interests in MEDIAN, each in December 2014. In December 2014, we provided interim acquisition loans to affiliates of Waterland and MEDIAN in connection with Waterland’s acquisition of its stake in MEDIAN in an aggregate amount of approximately €425 million. In addition, we made further loans to MEDIAN during the first half of 2015 in an aggregate amount of approximately €240 million, which were used by MEDIAN to repay existing debt on properties we acquired.

Closing of the sale-leaseback transactions began in the second quarter of 2015. At each closing, the purchase price for each facility was reduced and offset against the interim loans made to affiliates of Waterland and MEDIAN as described above and against the amount of any debt assumed or repaid by us in connection with the closing. As of June 30, 2015, we had closed on 17 properties for an aggregate amount of €317 million.

Other Acquisitions

On June 16, 2015, we acquired the real estate of two facilities in Lubbock, Texas, a 60-bed inpatient rehabilitation hospital and a 37-bed long-term acute care hospital, for an aggregate purchase price of $31.5 million. We entered into a 20-year lease with Ernest for the rehabilitation hospital, which provides for three five-year extension options, and separately entered into a lease with Ernest for the long-term acute care hospital that has a final term ending December 31, 2034. In connection with the transaction, we funded an acquisition loan to Ernest of approximately $12.0 million. Ernest is operating the rehabilitation hospital in a joint venture with Covenant Health System, while the long-term acute care hospital continues to be operated by Fundamental Health under a new sublease with Ernest.

On February 27, 2015, we acquired an inpatient rehabilitation hospital in Weslaco, Texas for $10.7 million leased to Ernest pursuant to the 2012 master lease which had an original 20-year fixed term and three five-year extension options. This lease provides for consumer-priced-indexed annual rent increases, subject to a floor and a cap. In addition, we funded an acquisition loan in the amount of $5 million.

On February 13, 2015, we acquired two general acute care hospitals in the Kansas City area for $110 million. Affiliates of Prime is the tenant and operator pursuant to a new master lease that has similar terms and security enhancements as the other master lease agreements entered into in 2013. This master lease has a 10-year initial fixed term with two extension options of five years each. The lease provides for consumer-price-indexed annual rent increases, subject to a specified floor. In addition, we funded a mortgage loan in the amount of $40 million, which has a 10-year term.

From the respective acquisition dates, the properties and other assets acquired in 2015 contributed $4.2 million and $3.5 million of revenue and income (excluding related acquisition expenses), respectively, for the three months ended June 30, 2015. From the respective acquisition dates, the properties and other assets acquired in 2015 contributed $6.2 million and $4.9 million of revenue and income (excluding related acquisition expenses), respectively, for the six months ended June 30, 2015. In addition, we incurred $22.6 million and $26.7 million of acquisition-related costs on the 2015 acquisitions for the three and six months ended June 30, 2015, respectively.

Pro Forma Information

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


	For the Three Months Ended June 30, 2015		For the Six Months Ended June 30, 2015
Total revenues	$	109	$	219
Net income	$	50	$	100
Net income per share/unit — diluted	$	0.21	$	0.42

Development Activities

During the first six months of 2016, we completed construction and began recording rental income on the following facilities:

•

Adeptus Health, Inc. (“Adeptus Health”) – We completed seven acute care facilities for this tenant during 2016. These facilities are leased pursuant to the master leases entered into in both 2014 and 2015 and are cross-defaulted with each other and with the original master lease executed in 2013.

•

Ernest Toledo – This inpatient rehabilitation facility located in Toledo, Ohio opened on April 1, 2016 and is being leased to Ernest pursuant to the original 2012 master lease.

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


Property	Commitment		Costs Incurred as of 06/30/16		Estimated Completion Date
Adeptus Health	$	62,154	$	43,763		3Q 2016
Adeptus Health		53,836		15,343		4Q 2016
Adeptus Health		5,730		206		1Q 2017
Adeptus Health		61,997		16,311		2Q 2017
Adeptus Health		71,331		—		Various

	$	255,048	$	75,623

On September 9, 2015, we acquired the real estate of a general acute care hospital under development located in Spain, for an aggregate purchase and development price to us of approximately €21.4 million. The acquisition was effected through a joint venture between us and clients of AXA Real Estate, in which we will own a 50% interest. Upon completion, the facility will be leased to a Spanish operator of acute care hospitals, pursuant to a long-term lease. We expect construction to complete on this facility in the second quarter of 2017.

Disposals

Capella Transaction

On March 21, 2016, we entered into definitive agreements with RegionalCare Hospital Partners, Inc. (“RegionalCare”), an affiliate of certain funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”), under which our investment in the operations of Capella Healthcare, Inc. (“Capella”) would be merged with RegionalCare, forming RCCH Healthcare Partners (“RCCH”).

On April 29, 2016, this transaction closed and funded, effective April 30, 2016. As part of the transaction, we received net proceeds of approximately $550 million including approximately $492 million for our equity investment and loans made as part of the Capella transaction that closed on August 31, 2015. In addition, we received $210 million in prepayment of two mortgage loans for hospitals in Russellville, Arkansas, and Lawton, Oklahoma, that we made to subsidiaries of Capella in connection with the Capella transaction on August 31, 2015. We made a new $93.3 million loan for a hospital property in Olympia, Washington. Additionally, we and an Apollo affiliate invested $50 million each in unsecured senior notes issued by RegionalCare, which we sold to a large institution on June 20, 2016 at par. The proceeds from this transaction represented the recoverability of our investment in full, except for transaction costs incurred of $6.3 million.

We maintained our ownership of five Capella hospitals in Hot Springs, Arkansas; Camden, South Carolina; Hartsville, South Carolina; Muskogee, Oklahoma; and McMinnville, Oregon. Pursuant to the transaction described above, the underlying leases, one of which is a master lease covering all but one property, was amended to shorten the initial fixed lease term, increase the security deposit, and eliminate the lessees’ purchase option provisions. Due to this lease amendment, we reclassified the lease of the properties under the master lease from a direct finance lease (“DFL”) to an operating lease. This reclassification resulted in a write-off of $2.6 million in unbilled DFL rent in the 2016 second quarter.

On July 22, 2016, we acquired the Olympia, Washington property in exchange for the $93.3 million loan and an additional $7 million, which was contemplated in the original Capella transaction. The terms of the Olympia lease will be similar to the other leases with this tenant.

Post Acute Transaction

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

Corinth Transaction

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

HealthSouth Transaction

On May 20, 2016, we reached a firm commitment to sell three inpatient rehabilitation hospitals located in Texas and operated by HealthSouth Corporation (“HealthSouth”) for $111.5 million. At June 30, 2016, these facilities and related net assets were designated as held for sale and included the following (in thousands):


Real estate held for sale	$	63,074
Straight-line rent receivables		2,441
Other, net		(625	)

	$	64,890

On July 20, 2016, we completed this sale resulting in a net gain of approximately $45 million.

Summary of Operations for Disposed Assets

The properties which sold during the quarter and the assets held for sale at June 30, 2016, do not meet the definition of discontinued operations. However, the following represents the operating results (excluding gain on sale, transaction costs, and impairment or other non-cash charges) from these properties (excluding loans repaid in the Capella Transaction) for the periods presented (in thousands):


	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2016			2015			2016			2015
Revenues	$	3,092		$	4,525		$	7,607		$	9,075
Real estate depreciation and amortization		(805	)		(949	)		(1,754	)		(1,897	)
Property-related expenses		(72	)		(12	)		(113	)		(72	)
Other income (expense)		(9	)		228			(68	)		557

Income from real estate dispositions, net	$	2,206		$	3,792		$	5,672		$	7,663

Leasing Operations

All of our leases are currently accounted for as operating leases except for the master lease of 15 Ernest facilities and six Prime facilities which are accounted for as DFLs. The components of our net investment in DFLs (which includes the Capella properties for 2015 only) consisted of the following (in thousands):


	As of June 30, 2016			As of December 31, 2015
Minimum lease payments receivable	$	1,875,751		$	2,587,912
Estimated residual values		292,646			393,097
Less: Unearned income		(1,639,650	)		(2,354,013	)

Net investment in direct financing leases	$	528,747		$	626,996

Twelve Oaks Facility

In the third quarter of 2015, we sent notice of termination of the lease to the tenant at our Twelve Oaks facility. This former tenant continues to occupy the facility. We called their letter of credit for approximately $0.5 million in the 2016 first quarter. At June 30, 2016, all past due receivables are fully reserved. Although no assurances can be made that we will not have any impairment charges in the future, we believe our real estate investment in Twelve Oaks at June 30, 2016 is fully recoverable.

Subsequent to June 30, 2016, we received approximately $2.5 million representing substantially all of amounts owed to us and agreed to general terms of a new lease, which we expect to execute during the 2016 third quarter.

Loans

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


	As of June 30, 2016		As of December 31, 2015
Mortgage loans	$	549,337	$	757,581
Acquisition loans		216,100		610,469
Working capital and other loans		43,229		54,353

	$	808,666	$	1,422,403

The decrease in our mortgage and acquisition loans are related to the Capella Transaction as discussed previously.

Our non-mortgage loans typically consist of loans to our tenants for acquisitions and working capital purposes. At June 30, 2016, acquisition loans includes our original $93.2 million loan to Ernest and the $93.3 million loan to RCCH, which was repaid in July as discussed above.

On March 1, 2012, pursuant to our convertible note agreement, we converted $1.7 million of our $5.0 million convertible note into a 9.9% equity interest in the operator of our Hoboken University Medical Center facility. At June 30, 2016, $3.3 million remains outstanding on the convertible note, and we retain the option, subject to regulatory approvals, to convert this remainder into 15.1% of equity interest in the operator.

Concentrations of Credit Risk

Our revenue concentration for the six months ended June 30, 2016 as compared to the prior year is as follows (dollars in thousands):

Revenue by Operator


	For the Six Months Ended June 30, 2016					For the Six Months Ended June 30, 2015
Operators	Total Revenue		Percentage of Total Revenue			Total Revenue		Percentage of Total Revenue
Prime	$	58,859		22.5	%	$	49,869		25.5	%
MEDIAN		47,745		18.3	%		32,212		16.5	%
Ernest		33,322		12.8	%		29,695		15.2	%
RCCH		32,909		12.6	%		—		—
Adeptus Health		16,205		6.2	%		7,425		3.8	%

Revenue by U.S. State and Country


	For the Six Months Ended June 30, 2016					For the Six Months Ended June 30, 2015
U.S. States and Other Countries	Total Revenue		Percentage of Total Revenue			Total Revenue		Percentage of Total Revenue
Texas	$	48,256		18.5	%	$	42,689		21.8	%
California		33,187		12.7	%		33,065		16.9	%
All other states		129,896		49.7	%		85,620		43.7	%

Total U.S.	$	211,339		80.9	%	$	161,374		82.4	%
Germany	$	47,745		18.3	%	$	32,212		16.5	%
United Kingdom, Italy, and Spain		2,215		0.8	%		2,176		1.1	%

Total International	$	49,960		19.1	%	$	34,388		17.6	%

Grand Total	$	261,299		100.0	%	$	195,762		100.0	%

From an asset basis, our concentration as of June 30, 2016 as compared to December 31, 2015 is as follows (dollars in thousands):

Gross Assets by Operator


	As of June 30, 2016					As of December 31, 2015
Operators	Total Gross Assets		Percentage of Total Gross Assets			Total Gross Assets		Percentage of Total Gross Assets
	(A)		(B)			(A)		(B)
Prime	$	1,126,654		20.8	%	$	1,032,353		17.1	%
MEDIAN		1,054,368		19.4	%		1,031,039		17.1	%
Ernest		584,411		10.8	%		579,182		9.6	%
Adeptus Health		500,000		9.2	%		500,000		8.3	%
RCCH		458,659		8.5	%		1,059,989		17.6	%

Gross Assets by U.S. State and Country


	As of June 30, 2016					As of December 31, 2015
U.S. States and Other Countries	Total Gross Assets		Percentage of Total Gross Assets			Total Gross Assets		Percentage of Total Gross Assets
	(A)		(B)			(A)		(B)
Texas	$	920,959		17.0	%	$	1,060,990		17.6	%
California		547,079		10.1	%		547,085		9.1	%
All other states		2,530,018		46.6	%		3,047,204		50.5	%
Other domestic assets		189,358		3.5	%		177,317		2.9	%

Total U.S.	$	4,187,414		77.2	%	$	4,832,596		80.1	%
Germany	$	1,054,368		19.4	%	$	1,031,039		17.1	%
United Kingdom, Italy, and Spain		156,630		3.0	%		161,317		2.7	%
Other international assets		23,983		0.4	%		10,970		0.1	%

Total International	$	1,234,981		22.8	%	$	1,203,326		19.9	%

Grand Total	$	5,422,395		100.0	%	$	6,035,922		100.0	%

(A)	Gross Assets represents total assets plus accumulated depreciation/amortization assuming all real estate commitments as of the period end are fully funded.

(B)	Includes both leased and loaned assets.

On an individual property basis, we had no investment of any single property greater than 2.3% of our total assets as of June 30, 2016.

4. Debt

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


	As of June 30, 2016						As of December 31, 2015
	Balance			Interest Rate			Balance			Interest Rate
Revolving credit facility	$	25,000			Variable		$	1,100,000			Variable
2006 Senior Unsecured Notes		125,000			Various			125,000			Various
2011 Senior Unsecured Notes		450,000			6.875	%		450,000			6.875	%
2012 Senior Unsecured Notes:
Principal amount		350,000			6.375	%		350,000			6.375	%
Unamortized premium		1,991						2,168

		351,991						352,168
2013 Senior Unsecured Notes (A)		222,120			5.750	%		217,240			5.750	%
2014 Senior Unsecured Notes		300,000			5.500	%		300,000			5.500	%
2015 Senior Unsecured Notes (A)		555,300			4.000	%		543,100			4.000	%
2016 Senior Unsecured Notes		500,000			6.375	%		—			—
Term loans		263,253			Various			263,400			Various

	$	2,792,664					$	3,350,908
Debt issue costs, net		(34,029	)					(28,367	)

	$	2,758,635					$	3,322,541

(A)	These notes are Euro-denominated and reflect the exchange rate at June 30, 2016 and December 31, 2015, respectively.

As of June 30, 2016, principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):


2016	$	125,152	(A)
2017		320
2018		37,781
2019		250,000
2020		222,120
Thereafter		2,155,300

Total	$	2,790,673

(A)	$65 million of our 2006 Senior Unsecured Notes were paid in full in July 2016, while the remaining $60 million will mature in October 2016.

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

During the second quarter 2010, we entered into an interest rate swap to manage our exposure to variable interest rates by fixing $65 million of our 2006 Senior Unsecured Notes, which started July 31, 2011 (date on which the interest rate turned variable) through maturity date (or July 2016), at a rate of 5.507%. We also entered into an interest rate swap to fix $60 million of our 2006 Senior Unsecured Notes which started October 31, 2011 (date on which the related interest rate turned variable) through the maturity date (or October 2016) at a rate of 5.675%. The fair value of the interest rate swaps was $1.3 million and $2.9 million as of June 30, 2016 and December 31, 2015, respectively, which is reflected in accounts payable and accrued expenses on the consolidated balance sheets.

We account for our interest rate swaps as cash flow hedges. Accordingly, the effective portion of changes in the fair value of our swaps is recorded as a component of accumulated other comprehensive income/loss on the balance sheet and reclassified into earnings in the same period, or periods, during which the hedged transactions effect earnings, while any ineffective portion is recorded through earnings immediately. We did not have any hedge ineffectiveness from inception of our interest rate swaps through June 30, 2016 and therefore, there was no income statement effect recorded during the three and six month periods ended June 30, 2016 or 2015. We do expect current losses included in accumulated other comprehensive loss to be reclassified into earnings through October 2016. At June 30, 2016 and December 31, 2015, we have posted $0.8 million and $1.7 million of collateral related to our interest rate swaps, respectively, which is reflected in other assets on our consolidated balance sheets.

Covenants

Our debt facilities impose certain restrictions on us, including restrictions on our ability to: incur debts; create or incur liens; provide guarantees in respect of obligations of any other entity; make redemptions and repurchases of our capital stock; prepay, redeem or repurchase debt; engage in mergers or consolidations; enter into affiliated transactions; dispose of real estate or other assets; and change our business. In addition, the credit agreements governing our revolving credit facility and term loan limit the amount of dividends we can pay as a percentage of normalized adjusted funds from operations (“FFO”), as defined in the agreements, on a rolling four quarter basis. At June 30, 2016, the dividend restriction was 95% of normalized adjusted FFO. The indentures governing our senior unsecured notes also limit the amount of dividends we can pay based on the sum of 95% of funds from operations, proceeds of equity issuances and certain other net cash proceeds. Finally, our senior unsecured notes require us to maintain total unencumbered assets (as defined in the related indenture) of not less than 150% of our unsecured indebtedness.

In addition to these restrictions, the revolving credit facility and term loan contain customary financial and operating covenants, including covenants relating to our total leverage ratio, fixed charge coverage ratio, secured leverage ratio, consolidated adjusted net worth, unsecured leverage ratio, and unsecured interest coverage ratio. This facility also contains customary events of default, including among others, nonpayment of principal or interest, material inaccuracy of representations and failure to comply with our covenants. If an event of default occurs and is continuing under the facility, the entire outstanding balance may become immediately due and payable. At June 30, 2016, we were in compliance with all such financial and operating covenants.

At June 30, 2016, the unsecured leverage ratio covenant was 77.5%. In September 2016, the unsecured leverage ratio will reset to 65%. We are currently in compliance with the reset leverage covenant.

5. Common Stock/Partners’ Capital

Medical Properties Trust, Inc.

On March 1, 2016, we updated our at-the-market equity offering program, which gives us the ability to sell up to $227 million of stock with a commission rate of 1.25%. During the six months ended June 30, 2016, we sold approximately 3 million shares of our common stock under this program, resulting in net proceeds of approximately $45 million, after deducting approximately $0.6 million of commissions.

MPT Operating Partnership, L.P.

At June 30, 2016, the Company has a 99.83% ownership interest in the Operating Partnership with the remainder owned by three other partners, two of whom are employees and one of whom is a director. During the six months ended June 30, 2016 and 2015, the Operating Partnership issued 3 million units and 34.5 million units, respectively, in direct response to the common stock offerings by Medical Properties Trust, Inc.

6. Stock Awards

We adopted the 2013 Equity Incentive Plan (the “Equity Incentive Plan”) during the second quarter of 2013, which authorizes the issuance of common stock options, restricted stock, restricted stock units, deferred stock units, stock appreciation rights, performance units and awards of interests in our Operating Partnership. The Equity Incentive Plan is administered by the Compensation Committee of the Board of Directors. We have reserved 8,196,770 shares of common stock for awards under the Equity Incentive Plan for which 5,615,497 shares remain available for future stock awards as of June 30, 2016. We awarded the following stock awards during 2016 and 2015:

Time-based awards —We granted 45,528 shares to independent directors in 2016 and 217,177 shares to management, independent directors and certain employees in time-based restricted stock. These awards vest quarterly based on service, over three years, in equal amounts.

Performance-based awards —Our management team and certain employees were awarded 176,046 shares of performance based awards in 2015. No such awards have been granted in 2016. These awards vest ratably over a three-year period based on the achievement of certain total shareholder return measures, with a carry-back and carry-forward provision through December 31, 2017. Dividends on these awards are paid only upon achievement of the performance measures.

Multi-year Performance-based awards —We awarded 505,050 shares in 2015 of multi-year performance-based awards to management. No such awards have been granted in 2016. These shares are subject to three-year cumulative performance hurdles based on measures of total shareholder return. At the end of the three-year performance period, any earned shares will be subject to an additional two years of ratable time-based vesting on an annual basis. Dividends are paid on these shares only upon achievement of the performance measures.

7. Fair Value of Financial Instruments

We have various assets and liabilities that are considered financial instruments. We estimate that the carrying value of cash and cash equivalents, and accounts payable and accrued expenses approximate their fair values. Included in our accounts payable and accrued expenses are our interest rate swaps, which are recorded at fair value based on Level 2 observable market assumptions using standardized derivative pricing models. We estimate the fair value of our interest and rent receivables using Level 2 inputs such as discounting the estimated future cash flows using the current rates at which similar receivables would be made to others with similar credit ratings and for the same remaining maturities. The fair value of our mortgage loans and working capital loans are estimated by using Level 2 inputs 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 (excluding our 2006 Senior Unsecured Notes) using Level 2 inputs such as quotes from securities dealers and market makers. We estimate the fair value of our 2006 Senior Unsecured Notes, our revolving credit facility, and term loans using Level 2 inputs based on the present value of future payments, discounted at a rate which we consider appropriate for such debt.

Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be possible and may not be a prudent management decision. The following table summarizes fair value estimates for our financial instruments (in thousands):


	June 30, 2016						December 31, 2015
Asset (Liability)	Book Value			Fair Value			Book Value			Fair Value
Interest and rent receivables	$	47,699		$	47,653		$	46,939		$	46,858
Loans (1)		590,037			623,399			508,851			543,859
Debt, net		(2,758,635	)		(2,863,382	)		(3,322,541	)		(3,372,773	)

(1)	Excludes loans related to Ernest and Capella (2015 only) since they are recorded at fair value and discussed below.

Items Measured at Fair Value on a Recurring Basis

Our equity interest in Ernest and related loans, which were acquired in 2012, are being measured at fair value on a recurring basis as we elected to account for these investments using the fair value option method. We have elected to account for these investments at fair value due to the size of the investments and because we believe this method is more reflective of current values. We have not made a similar election for other equity interests or loans made in or prior to 2016, except for our investments in Capella that were disposed of in the 2016 second quarter.

At June 30, 2016, these amounts were as follows (in thousands):


Asset Type	Fair Value		Cost		Asset Type Classification
Mortgage loans	$	101,762	$	101,762		Mortgage loans
Acquisition and other loans		116,867		116,867		Other loans
Equity investments		3,300		3,300		Other assets

	$	221,929	$	221,929

Our mortgage loans with Ernest are recorded at fair value based on Level 2 inputs by discounting the estimated cash flows using the market rates which similar loans would be made to borrowers with similar credit ratings and the same remaining maturities. Our acquisition loans and equity investments in Ernest are recorded at fair value based on Level 3 inputs, by using a discounted cash flow model, which requires significant estimates of our investee such as projected revenue and expenses and appropriate consideration of the underlying risk profile of the forecast assumptions associated with the investee. We classify these loans and equity investments as Level 3, as we use certain unobservable inputs to the valuation methodology that are significant to the fair value measurement, and the valuation requires management judgment due to the absence of quoted market prices. For these cash flow models, our observable inputs include use of a capitalization rate, discount rate (which is based on a weighted-average cost of capital), and market interest rates, and our unobservable input includes an adjustment for a marketability discount (“DLOM”) on our equity investment of 40% at June 30, 2016.

In regards to the underlying projection of revenues and expenses used in the discounted cash flow model, such projections are provided by Ernest. However, we will modify such projections (including underlying assumptions used) as needed based on our review and analysis of Ernest’s historical results, meetings with key members of management, and our understanding of trends and developments within the healthcare industry.

In arriving at the DLOM, we started with a DLOM range based on the results of studies supporting valuation discounts for other transactions or structures without a public market. To select the appropriate DLOM within the range, we then considered many qualitative factors including the percent of control, the nature of the underlying investee’s business along with our rights as an investor pursuant to the operating agreement, the size of investment, expected holding period, number of shareholders, access to capital marketplace, etc. To illustrate the effect of movements in the DLOM, we performed a sensitivity analysis below by using basis point variations (dollars in thousands):


Basis Point Change in Marketability Discount	Estimated Increase (Decrease) In Fair Value
+100 basis points	$	(54	)
- 100 basis points		54

Because the fair value of Ernest investments noted above approximate their original cost, we did not recognize any unrealized gains/losses during the first half of 2016 or 2015.

8. Earnings Per Share/Common Unit

Medical Properties Trust, Inc.

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


	For the Three Months Ended June 30,
	2016			2015
Numerator:
Income from continuing operations	$	53,924		$	22,489
Non-controlling interests’ share in continuing operations		(200	)		(82	)
Participating securities’ share in earnings		(132	)		(250	)

Income from continuing operations, less participating securities’ share in earnings		53,592			22,157
Income from discontinued operations attributable to MPT common stockholders		—			—

Net income, less participating securities’ share in earnings	$	53,592		$	22,157

Denominator:
Basic weighted-average common shares		238,082			208,071
Dilutive potential common shares		926			569

Dilutive weighted-average common shares		239,008			208,640


	For the Six Months Ended June 30,
	2016			2015
Numerator:
Income from continuing operations	$	112,150		$	58,465
Non-controlling interests’ share in continuing operations		(498	)		(161	)
Participating securities’ share in earnings		(276	)		(516	)

Income from continuing operations, less participating securities’ share in earnings		111,376			57,788
Loss from discontinued operations attributable to MPT common stockholders		(1	)		—

Net income, less participating securities’ share in earnings	$	111,375		$	57,788

Denominator:
Basic weighted-average common shares		237,796			205,515
Dilutive potential common shares		617			612

Dilutive weighted-average common shares		238,413			206,127

MPT Operating Partnership, L.P.

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


	For the Three Months Ended June 30,
	2016			2015
Numerator:
Income from continuing operations	$	53,924		$	22,489
Non-controlling interests’ share in continuing operations		(200	)		(82	)
Participating securities’ share in earnings		(132	)		(250	)

Income from continuing operations, less participating securities’ share in earnings		53,592			22,157
Income from discontinued operations attributable to MPT Operating Partnership partners		—			—

Net income, less participating securities’ share in earnings	$	53,592		$	22,157

Denominator:
Basic weighted-average units		238,082			208,071
Dilutive potential units		926			569

Dilutive weighted-average units		239,008			208,640


	For the Six Months Ended June 30,
	2016			2015
Numerator:
Income from continuing operations	$	112,150		$	58,465
Non-controlling interests’ share in continuing operations		(498	)		(161	)
Participating securities’ share in earnings		(276	)		(516	)

Income from continuing operations, less participating securities’ share in earnings		111,376			57,788
Loss from discontinued operations attributable to MPT Operating Partnership partners		(1	)		—

Net income, less participating securities’ share in earnings	$	111,375		$	57,788

Denominator:
Basic weighted-average units		237,796			205,515
Dilutive potential units		617			612

Dilutive weighted-average units		238,413			206,127

9. Commitments and Contingencies

Contingencies

We are a party to various legal proceedings incidental to our business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect our financial position, results of operations or cash flows.

10. Subsequent Events

Stock Issuance

During the month of July, we sold 2.7 million shares of common stock under our at-the-market program generating net proceeds of $41.1 million.

Bond Issuance

On July 22, 2016, we completed a $500 million senior unsecured notes offering. Interest on the notes will be payable on February 1 and August 1 of each year, commencing on February 1, 2017. Interest on the notes will be paid in cash at a rate of 5.25% per year. The notes mature on August 1, 2026. We may redeem some or all of the notes at any time prior to August 1, 2021 at a “make whole” redemption price. On or after August 1, 2021, we may redeem some or all of the notes at a premium that will decrease over time. In addition, at any time prior to August 1, 2019, we may redeem up to 35% of the notes at a redemption price equal to 105.25% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, using proceeds from one or more equity offerings. In the event of a change in control, each holder of the notes may require us to repurchase some or all of the notes at a repurchase price equal to 101% of the aggregate principal amount of the notes plus accrued and unpaid interest to the date of purchase.

We used the net proceeds from this offering to redeem our $450 million 2011 bonds, which will be completed on August 12, 2016. We expect to incur a one-time charge related to the redemption of approximately $23 million.

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, 2015.

Forward-Looking Statements.

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

•

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

•

the competitive environment in which we operate;

•

the execution of our business plan;

•

financing risks;

•

acquisition and development risks;

•

potential environmental contingencies and other liabilities;

•

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

•

our ability to maintain our status as a REIT for U.S. federal and state income tax purposes;

•

our ability to attract and retain qualified personnel;

•

changes in foreign currency exchange rates;

•

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

•

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

•

the financial condition of our tenants, our lenders, counterparties to our interest rate swaps and other hedged transactions and 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, refinance existing debt and our future interest expense; and

•

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

Key Factors that May Affect Our Operations

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

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

•

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

•

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

•

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

•

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

•

the effect of evolving healthcare regulations on our tenants’ and borrowers’ profitability; and

•

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

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

•

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

•

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

•

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

•

competition from other financing sources; and

•

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

CRITICAL ACCOUNTING POLICIES

Refer to our 2015 Annual Report on Form 10-K, for a discussion of our critical accounting policies, which include revenue recognition, investment in real estate, purchase price allocation, loans, losses from rent receivables, stock-based compensation, our fair value option election, and our accounting policy on consolidation. During the six months ended June 30, 2016, there were no material changes to these policies.

Overview

We are a self-advised real estate investment trust (“REIT”) focused on investing in and owning net-leased healthcare facilities across the U.S. and selectively in foreign jurisdictions. We have operated as a REIT since April 6, 2004, and accordingly, elected REIT status upon the filing of our calendar year 2004 federal income tax return. Medical Properties Trust, Inc. was incorporated under Maryland law on August 27, 2004, 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 June 30, 2016, our portfolio consisted of 209 properties leased or loaned to 27 operators, of which 14 are under development and 12 are in the form of mortgage loans.

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


	As of June 30, 2016		% of Total			As of December 31, 2015		% of Total
Real estate owned (gross)	$	4,074,020		79.6	%	$	3,924,701		70.0	%
Mortgage loans		549,337		10.7	%		757,581		13.5	%
Other loans		259,329		5.1	%		664,822		11.9	%
Other assets		235,247		4.6	%		262,247		4.6	%

Total assets (1)	$	5,117,933		100.0	%	$	5,609,351		100.0	%

(1)	Includes $1.2 billion and $1.3 billion of healthcare real estate assets in Europe at June 30, 2016 and December 31, 2015, respectively.

The following is our revenue by operating type (dollar amounts in thousands):

Revenue by property type:


	For the Three Months Ended June 30, 2016		% of Total			For the Three Months Ended June 30, 2015		% of Total
General Acute Care Hospitals (1)	$	76,468		60.5	%	$	55,868		56.0	%
Rehabilitation Hospitals		38,265		30.3	%		30,528		30.6	%
Long-term Acute Care Hospitals		11,567		9.2	%		13,405		13.4	%

Total revenue	$	126,300		100.0	%	$	99,801		100.0	%


	For the Six Months Ended June 30, 2016		% of Total			For the Six Months Ended June 30, 2015		% of Total
General Acute Care Hospitals (1)	$	159,978		61.2	%	$	109,921		56.1	%
Rehabilitation Hospitals		76,388		29.3	%		58,994		30.2	%
Long-term Acute Care Hospitals		24,933		9.5	%		26,847		13.7	%

Total revenue	$	261,299		100.0	%	$	195,762		100.0	%

(1)	Includes three medical office buildings.

We have 54 employees as of August 1, 2016. We believe that any foreseeable increase in the number of our employees will have only immaterial effects on our operations and general and administrative expenses. We believe that our relations with our employees are good. None of our employees are members of any labor union.

Results of Operations

Three Months Ended June 30, 2016 Compared to June 30, 2015

Net income for the three months ended June 30, 2016, was $53.7 million, compared to $22.4 million for the three months ended June 30, 2015. This increase is due primarily to additional revenue from MEDIAN and Capella, completed development projects, and gains on real estate disposals, along with a reduction in acquisition expenses. Funds from operations (“FFO”), after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was $75.5 million, or $0.32 per diluted share for the 2016 second quarter as compared to $62.9 million, or $0.30 per diluted share for the 2015 second quarter. This 20% increase in FFO is primarily due to the increase in revenue from acquisitions and loan investments made since June 2015 along with the completion of development properties in 2016.

A comparison of revenues for the three month periods ended June 30, 2016 and 2015 is as follows (dollar amounts in thousands):


	2016		% of Total			2015		% of Total			Year over Year Change
Rent billed	$	77,960		61.7	%	$	53,893		54.0	%		44.7	%
Straight-line rent		8,551		6.8	%		5,252		5.3	%		62.8	%
Income from direct financing leases		13,552		10.7	%		12,808		12.8	%		5.8	%
Interest and fee income		26,237		20.8	%		27,848		27.9	%		(5.8	)%

Total revenues	$	126,300		100.0	%	$	99,801		100.0	%		26.6	%

Our total revenue for the 2016 second quarter is up $26.5 million or 26.6% over the prior year. This increase is made up of the following:

•

Operating lease revenue (including rent billed and straight-line rent) – up $27.4 million over the prior year of which $0.1 million is from our annual escalation provisions in our leases, $24.6 million is from incremental revenue from acquisitions made after June 2015, and $5.2 million is incremental revenue from development properties that were completed and put into service in 2015 and 2016. These increases are partially offset by a $0.5 million straight-line rent write-off related to our Corinth facility in the 2016 second quarter and $1.8 million of lower revenue related to dispositions post June 30, 2015.

•

Income from direct financing leases – up $0.7 million over the prior year of which $0.2 million is from our annual escalation provisions in our leases and $3.0 million is from incremental revenue from acquisitions made after June 2015, offset by a $2.6 million write-off of direct financing lease non-cash income related to the Capella Transaction.

•

Interest from loans – down $1.6 million over the prior year primarily attributable to approximately $11 million of revenue in 2015 from loans that were converted to real estate in connection with the MEDIAN Transaction on or after June 30, 2015 (see Note 3 to Item 1 of this Form 10-Q for further details). This decrease in revenue was partially offset by $9.5 million of additional interest in 2016 from new loans made on or after June 30, 2015.

Real estate depreciation and amortization during the second quarter of 2016 increased to $22.8 million from $15.0 million in 2015, due to the incremental depreciation from the properties acquired since June 30, 2015 and the development properties completed in 2015 and 2016. In the 2016 second quarter, we accelerated the amortization of the lease intangible asset related to our Corinth facility resulting in $1.1 million of additional expense.

Acquisition expenses decreased from $25.8 million in 2015 to $4.8 million in 2016 primarily as a result of the MEDIAN acquisitions in 2015, including approximately $21.5 million of real estate transfer taxes.

During the three months ended June 30, 2016, we had various dispositions resulting in a net gain on sale of real estate and other asset dispositions of $16.6 million and impairment charges of $7.4 million (see Note 3 to Item 1 of this Form 10-Q for further details).

General and administrative expenses totaled $12.0 million for the 2016 second quarter, which is 9.5% of total revenues compared to 10.7% in the 2015 second quarter. The decline in general and administrative expenses as a percentage of revenue is primarily due to our business model as we can generally increase our revenue significantly without increasing our head count and related expenses at the same rate. On a dollar basis, general and administrative expenses were up $1.4 million from the prior year second quarter due to higher international administrative expenses from the growth and expansion of our company along with approximately $0.8 million of higher professional expenses that we do not expect to incur next quarter. We expect general and administrative expenses to be in the $11 million range next quarter.

Interest expense, for the quarters ended June 30, 2016 and 2015, totaled $41.5 million and $26.9 million, respectively. This increase is primarily related to higher average debt balances in the current year quarter associated with our 2015 and 2016 Senior Unsecured Notes and our expanded credit facility. Our weighted average interest rate is 4.9% for the quarter ended June 30, 2016, which is a slight increase from 4.8% in 2015 due to obtaining more permanent financing in 2016. See Note 4 to our Condensed Consolidated Financial Statements in Item 1 to this Form 10-Q for further information on our debt activities.

Income tax expense typically includes U.S. federal and state income taxes on our TRS entities, as well as non-U.S. income based or withholding taxes on certain investments located in jurisdictions outside the U.S. The income tax expense for the three months ended June 30, 2016, was primarily due to our European 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 many entities, we concluded that a full valuation allowance should continue to be recorded against the majority of our U.S and foreign net deferred tax assets at June 30, 2016. In the future, if we determine that it is more likely than not that we will realize our U.S. and foreign net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes in future periods.

Six Months Ended June 30, 2016 Compared to June 30, 2015

Net income for the six months ended June 30, 2016, was $111.7 million compared to net income of $58.3 million for the six months ended June 30, 2015, primarily due to additional revenue from MEDIAN and Capella, completed development projects, and gains on real estate disposals, along with a reduction in acquisition expenses. FFO, after adjusting for certain items (as more fully described in Reconciliation of Non-GAAP Financial Measures), was $159.0 million, or $0.67 per diluted share for the first six months in 2016 as compared to $119.8 million, or $0.58 per diluted share for the first six months of 2015. This 33% increase in FFO is primarily due to the increase in revenue from acquisitions and completed development projects made since June 2015.

A comparison of revenues for the six month periods ended June 30, 2016 and 2015 is as follows (dollar amounts in thousands):


	2016		% of Total			2015		% of Total			Year over Year Change
Rent billed	$	152,021		58.2	%	$	106,994		54.7	%		42.1	%
Straight-line rent		16,768		6.4	%		9,980		5.1	%		68.0	%
Income from direct financing leases		32,503		12.4	%		25,363		12.9	%		28.2	%
Interest and fee income		60,007		23.0	%		53,425		27.3	%		12.3	%

Total revenues	$	261,299		100.0	%	$	195,762		100.0	%		33.5	%

Our total revenue for the first six months of 2016 is up $65.5 million or 33.5% over the prior year. This increase is made up of the following:

•

Operating lease revenue (including rent billed and straight-line rent) – up $51.8 million over the prior year of which $0.2 million is from our annual escalation provisions in our leases, $47.0 million is from incremental revenue from acquisitions made after June 2015, and $9.3 million is incremental revenue from development properties that were completed and put into service in 2015 and 2016. These increases are partially offset by a $0.5 million straight-line rent write-off related to our Corinth facility in the 2016 second quarter and $2.3 million related to dispositions.

•

Income from direct financing leases – up $7.1 million over the prior year of which $0.4 million is from our annual escalation provisions in our leases and $9.1 million is from incremental revenue from acquisitions made after June 2015, offset by a $2.6 million write-off of direct financing lease non-cash income related to the Capella Transaction.

•

Interest from loans – up $6.6 million over the prior year of which $26.5 million is from incremental revenue in 2016 from acquisitions (primarily from the Capella Transaction), partially offset by $20.2 million of interest revenue in 2015 from loans that were converted to real estate on or after June 30, 2015 in connection with the MEDIAN Transaction – see Note 3 to Item 1 of this Form 10-Q for further details.

Real estate depreciation and amortization during the first six months of 2016 increased to $44.0 million from $29.7 million in the same period of 2015 due to the incremental depreciation from the properties acquired and the development properties completed in 2015 and 2016. In the 2016 second quarter, we accelerated the amortization of the lease intangible asset related to our Corinth facility resulting in $1.1 million of additional expense.

Acquisition expenses decreased from $32.0 million in 2015 to $3.7 million in 2016 primarily as a result of the MEDIAN acquisitions in 2015, including $21.5 million of real estate transfer taxes.

During the six months ended June 30, 2016, we had various dispositions resulting in a net gain on sale of real estate and other asset dispositions of $16.7 million and impairment charges of $7.4 million (see Note 3 to Item 1 of this Form 10-Q for further details).

Earnings from our equity interests declined from $2.0 million of income in the first six months of 2015 to a loss of $(3.8) million in 2016. The loss in 2016 includes $5.3 million of acquisition expenses, representing our share of such expenses incurred by our Italian joint venture to acquire its eight hospital properties.

General and administrative expenses in the first six months of 2016 totaled $23.5 million, which is 9.0% of revenues down from 11.0% of revenues in the prior year. The decline in general and administrative expenses as a percentage of revenues is primarily due to our business model as we can generally increase our revenues significantly without increasing our head count and related expense at the same rate. On a dollar basis, general and administrative expenses were up $2.0 million from the prior year first six months due to higher international administrative expenses, which are up as a result of the growth and expansion of our company, and $0.8 million of non-recurring other professional fees.

Interest expense for the first six months of 2016 and 2015 totaled $80.9 million and $53.6 million, respectively. This increase is related to higher average debt balances in the current year associated with our 2015 and 2016 Senior Unsecured Notes and our expanded credit facility. Our weighted average interest rate is slightly lower period over period – 4.7% for the first six months of 2016 and 5.1% for the first six months of 2015. See Note 4 to our Condensed Consolidated Financial Statements in Item 1 to this Form 10-Q for further information on our debt activities.

Reconciliation of Non-GAAP Financial Measures

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

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

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

The following table presents a reconciliation of net income attributable to MPT common stockholders to FFO for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share data):


	For the Three Months Ended						For the Six Months Ended
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
FFO information:
Net income attributable to MPT common stockholders	$	53,724		$	22,407		$	111,651		$	58,304
Participating securities’ share in earnings		(132	)		(250	)		(276	)		(516	)

Net income, less participating securities’ share in earnings	$	53,592		$	22,157		$	111,375		$	57,788
Depreciation and amortization		23,335			14,956			44,807			29,712
Gain on sale of real estate		(22,613	)		—			(22,653	)		—

Funds from operations	$	54,314		$	37,113		$	133,529		$	87,500
Write-off of straight line rent and other		3,063			—			3,063			—
Transaction costs from non-real estate dispositions		5,975			—			5,975			—
Acquisition expenses		4,801			25,809			9,034			32,048
Impairment charges		7,375			—			7,375			—
Unutilized financing fees / debt refinancing costs		—			—			4			238

Normalized funds from operations	$	75,528		$	62,922		$	158,980		$	119,786


	For the Three Months Ended					For the Six Months Ended
	June 30, 2016			June 30, 2015		June 30, 2016			June 30, 2015
Per diluted share data:
Net income, less participating securities’ share in earnings	$	0.22		$	0.11	$	0.47		$	0.28
Depreciation and amortization		0.10			0.07		0.18			0.14
Gain on sale of real estate		(0.09	)		—		(0.09	)		—

Funds from operations	$	0.23		$	0.18	$	0.56		$	0.42
Write-off of straight line rent and other		0.01			—		0.01			—
Transaction costs from non-real estate dispositions		0.03			—		0.03			—
Acquisition expenses		0.02			0.12		0.04			0.16
Impairment charges		0.03			—		0.03			—
Unutilized financing fees / debt refinancing costs		—			—		—			—

Normalized funds from operations	$	0.32		$	0.30	$	0.67		$	0.58

LIQUIDITY AND CAPITAL RESOURCES

2016 Cash Flow Activity

During the first half of 2016, we generated $137.3 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows along with cash on-hand to fund our dividends of $104.8 million and certain investing activities.

On February 22, 2016, we completed the 2016 Senior Unsecured Notes offering for $500 million. On April 30, 2016, we closed on the Capella Transaction (as further discussed in Note 3 to Item 1 of this Form 10-Q) resulting in net proceeds of $550 million along with an additional $50 million once we sold our investment in RegionalCare bonds in June 2016. On May 23, 2016, we sold our investment in five properties leased and operated by Post Acute for $71 million. On June 17, 2016, we sold our investment in one property leased and operated by Corinth Investor Holdings for $28 million. Finally, during June, we sold 3 million shares under our at-the-market offering program realizing net proceeds of approximately $45 million. We used these proceeds to reduce our revolving credit facility by $1.1 billion during 2016 and fund our remaining investing activities.

Subsequent to June 30, 2016, we sold an additional 2.7 million shares of common stock under our at-the-market program generating net proceeds of $41.1 million. On July 13, 2016, we completed a new $500 million senior unsecured notes offering. We used the net proceeds from this offering to redeem our $450 million 2011 Senior Unsecured Notes, which will be completed on August 12, 2016. Net proceeds from the bond offering and redemption will approximate $19 million, and we expect to incur a one-time charge related to the redemption of approximately $23 million (see Note 10 to Item 1 of this Form 10-Q for further details). Finally, on July 20, 2016, we sold three facilities leased to HealthSouth for $111.5 million.

2015 Cash Flow Activity

During the six months ended June 30, 2015, we generated $87.4 million of cash flow 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 $84.5 million and certain investing activities including the additional funding of our development activities.

On January 14, 2015, we completed an underwritten public offering of 34.5 million shares (including the exercise of the underwriters’ 30-day option to purchase an additional 4.5 million shares) of our common stock, resulting in net proceeds of approximately $480 million, after deducting estimated offering expenses. We used the net proceeds from this offering along with $81 million from our revolving credit facility to fund our acquisitions and new loan investments in 2015.

Short-term Liquidity Requirements: As of June 30, 2016, we have $125.2 million in debt principal payments due in 2016 — see debt maturity schedule below. At August 1, 2016, our availability under our revolving credit facility plus cash on-hand approximated $1.5 billion. We have an at-the-market equity offering program under which we may sell up to an additional $140 million in shares, which may be used for general corporate purposes as needed. We believe any excess availability in our revolving credit facility, our current monthly cash receipts from rent and loan interest, and the availability under our at-the-market equity offering program is sufficient to fund our operations, debt and interest obligations, our firm commitments (including capital expenditures, if any, and expected funding requirements on our development projects), and dividends in order to comply with REIT requirements for the next twelve months.

Long-term Liquidity Requirements: Exclusive of the revolving credit facility (which we can extend for an additional year to June 2019), we have less than $150 million in debt principal payments due between now and June 2019 (see debt maturity schedule below). With our liquidity at August 1, 2016 of approximately $1.5 billion along with our current monthly cash receipts from rent and loan interest and with the availability under our at-the-market equity offering program, we believe we have the liquidity available to us to fund our operations, debt and interest obligations, dividends in order to comply with REIT requirements, and firm commitments (including capital expenditures, if any, and expected funding requirements on our development projects) currently.

However, access to capital is an integral part of our business plan. In order to fund debt maturities coming due in 2019 and later years, and as we consider strategic investment opportunities, while maintaining compliance with our debt covenants (as described in Note 4 to Item 1 of this Form 10-Q), we believe additional capital may be needed and we may access one or a combination of the following:

•

sale of equity securities,

•

proceeds from strategic property or other asset sales,

•

entering into new bank term loans,

•

issuing of new U.S. dollar or euro denominated debt securities, including senior unsecured notes,

•

entering into joint venture arrangements, and/or

•

amending our current credit facility.

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

As of June 30, 2016, principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) are as follows (in thousands):


2016	$	125,152	(A)
2017		320
2018		37,781
2019		250,000
2020		222,120
Thereafter		2,155,300

Total	$	2,790,673

(A)	$65 million of our 2006 Senior Unsecured Notes were paid in full in July 2016, while the remaining $60 million will mature in October 2016.

Disclosure of Contractual Obligations

We presented our contractual obligations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Except for the issuance of the 2016 Senior Unsecured Notes and the subsequent pay down of our revolving credit facility from this bond issuance and asset disposals, there have been no significant changes in those obligations during the six months ended June 30, 2016. See Note 4 of Item 1 of this Form 10-Q for more detailed information.

The following table updates our contractual obligations schedule for the reduction in our revolving credit facility and for the 2016 Senior Unsecured Notes offering (in thousands):


Contractual Obligations	Less Than 1 Year		1-3 Years		3-5 Years		After 5 Years		Total
Revolving credit facility (1)	$	4,368	$	29,222	$	—	$	—	$	33,590
2016 Senior Unsecured Notes		32,583		63,750		63,750		595,625		755,708

(1)	As of June 30, 2016, we have a $1.3 billion revolving credit facility. However, this table assumes the balance outstanding under the revolver and rate in effect at June 30, 2016 remain in effect through maturity.

Distribution Policy

The table below is a summary of our distributions declared during the two year period ended June 30, 2016:


Declaration Date	Record Date	Date of Distribution	Distribution per Share
May 19, 2016	June 16, 2016	July 14, 2016	$	0.23
February 19, 2016	March 17, 2016	April 14, 2016	$	0.22
November 12, 2015	December 10, 2015	January 14, 2016	$	0.22
August 20, 2015	September 17, 2015	October 15, 2015	$	0.22
May 14, 2015	June 11, 2015	July 9, 2015	$	0.22
February 23, 2015	March 12, 2015	April 9, 2015	$	0.22
November 13, 2014	December 4, 2014	January 8, 2015	$	0.21
August 21, 2014	September 18, 2014	October 15, 2014	$	0.21

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

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 exposure. 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.

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 June 30, 2016, our outstanding debt totaled $2.8 billion, which consisted of fixed-rate debt of $2.5 billion (including $125 million of floating debt swapped to fixed) and variable rate debt of $0.3 billion. If market interest rates increase by 1%, the fair value of our debt at June 30, 2016 would decrease by $4.2 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 $0.3 billion, the balance of such variable rate debt at June 30, 2016.

Foreign Currency Sensitivity

With our investments in Germany and throughout Europe, we are subject to fluctuations in the Euro and British Pound to U.S. dollar currency exchange rates. Increases or decreases in the value of the Euro to U.S. dollar and the British Pound to U.S. dollar exchange rates may impact our financial condition and/or our results of operations. Based solely on operating results to-date in 2016 and on an annualized basis, if the Euro exchange rate were to change by 5%, our FFO would change by approximately $3.0 million. Based solely on operating results to-date in 2016 and on an annualized basis, if the British Pound exchange rate were to change by 5%, our FFO would change by approximately $0.2 million.

Item 4. Controls and Procedures.

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

As required by Rule 13a-15(b), under the Securities Exchange Act of 1934, as amended, we have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be disclosed by us in the reports that we file with the SEC.

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

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Our Adjusted EBITDA is dependent upon our relationship with, and success of, our largest tenants, Prime, MEDIAN, Ernest, Adeptus Health and RCCH.

As of June 30, 2016, affiliates of Prime, MEDIAN, Ernest, Adeptus Health and RCCH leased or mortgaged facilities representing 21%, 19%, 11%, 9% and 9%, respectively, of our total gross assets assuming all current real estate commitments (such as remaining commitments on ongoing development projects) are fully funded.

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

In addition, the healthcare industry is highly regulated by federal, state, and local laws, and is directly affected by federal conditions of participation, state licensing requirements, facility inspections, state and federal reimbursement policies, regulations concerning capital and other expenditures, certification requirements and other such laws, regulations, and rules. We are aware of various federal and state inquiries, investigations, and other proceedings currently affecting several of our tenants and would expect such governmental compliance and enforcement activities to be ongoing at any given time with respect to one or more of our tenants, either on a confidential or public basis. During the second quarter of 2016, the Department of Justice joined a lawsuit against Prime alleging irregular admission practices intended to increase the number of inpatient care admissions of Medicare patients, including unnecessarily classifying some patients as “inpatient” rather than “observation”. Other large acute hospital operators have also recently defended such allegations, sometimes resulting in financial settlements and agreements with regulators to modify admission policies, resulting in lower reimbursements for those patients.

An adverse result to Prime or one of our other largest tenants in one or more such governmental proceedings may have a material adverse effect on the relevant tenant’s operations and financial condition and on its ability to make required lease and mortgage payments to us. In instances where we have an equity investment in our tenants’ operations, in addition to the effect on these tenants’ ability to meet their financial obligation to us, our ownership and investment interests may also be negatively impacted.

The United Kingdom’s anticipated exit from the European Union could adversely affect us.

On June 23, 2016, the United Kingdom held a referendum in which a majority of voters voted to exit the European Union, known as Brexit. Negotiations are expected to commence to determine the future terms of the United Kingdom’s relationship with the European Union, including, among other things, the terms of trade between the United Kingdom and the European Union. The effects of Brexit will depend on any agreements the United Kingdom makes to retain access to European Union markets either during a transitional period or more permanently. Brexit could adversely affect European and global economic or market conditions and could contribute to instability in global financial markets. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate. Any of these effects of Brexit, and others we cannot anticipate, may adversely affect us.

We currently hold, and may acquire additional, interests in healthcare facilities located in the United Kingdom and Europe, as well as other investments that are denominated in British Pounds and Euros. In addition, our operating partnership has issued, and may issue in the future, senior unsecured notes denominated in Euros. Any of the effects of Brexit described above, and others we cannot anticipate, could have a material adverse effect on our business, the value of our real estate and other investments, and our potential growth in Europe, and could amplify the currency risks faced by us.

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, 2015 other than what is noted above.

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

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

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

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

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

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

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

Exhibit 101.INS		XBRL Instance Document

Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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: August 9, 2016

INDEX TO EXHIBITS


Exhibit Number		Description

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

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

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

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

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

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

Exhibit 101.INS		XBRL Instance Document

Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document