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The following discussion and analysis of the consolidated financial condition and consolidated results of operations are presented on a combined basis forMedical Properties Trust, Inc. andMPT Operating Partnership, L.P. as there are no material differences between these two entities. Such discussion and analysis should be read together with the condensed consolidated financial statements and notes thereto contained in this Form 10-Q and the consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Forward-Looking Statements.
This Quarterly Report on Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 theSEC under the Exchange Act. Such factors include, among others, the following:
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the political, economic, business, real estate, and other market conditions in theU.S. (both national and local),Europe (in particular theUnited Kingdom ,Germany ,Switzerland ,Spain ,Italy ,Finland , andPortugal ),Australia ,South America (in particularColombia ), and other foreign jurisdictions where we may own healthcare facilities or transact business, which may have a negative effect on the following, among other things: o the financial condition of our tenants, our lenders, or institutions that hold our cash balances or are counterparties to certain hedge agreements, which may expose us to increased risks of default by these parties; o 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 o 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 real estate assets or on an unsecured basis;
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the impact of COVID-19 on our business, our joint ventures, and the business of our tenants/borrowers and the economy in general, as well as the impact of other factors that may affect our business, our joint ventures or that of our tenants/borrowers that are beyond our control, including natural disasters, health crises, or other pandemics and subsequent government actions in reaction to such matters;
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the risk that a condition to closing under the agreements governing any or all of our pending transactions (including the transaction disclosed in Note 9 ) that have not closed as of the date hereof may not be satisfied;
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the possibility that the anticipated benefits of some or all of the transactions we have entered into or will enter into may take longer to materialize than expected or may not materialize at all;
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the competitive environment in which we operate;
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execution of our business plan;
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funding risks, in particular due to rising inflation;
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acquisition and development risks;
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potential environmental contingencies and other liabilities;
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adverse developments affecting the financial health of one or more of our tenants, including insolvency;
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other factors affecting the real estate industry generally or the healthcare real estate industry specifically;
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our ability to maintain our status as a REIT for
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our ability to attract and retain qualified personnel;
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changes in currency exchange rates;
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changes in federal, state, or local tax laws in theU.S. ,Europe ,Australia ,South America , or other jurisdictions in which we may own healthcare facilities or transact business;
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health care and other regulatory requirements of the
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the accuracy of our methodologies and estimates regarding environmental, social,
and governance ("ESG") metrics and targets, tenant willingness and ability to
collaborate towards reporting ESG metrics and meeting ESG goals and targets, and
the impact of governmental regulation on our and our tenants' ESG efforts.
Key factors that may affect our operations
Our revenue is derived from rents we earn pursuant to the lease agreements with our tenants, from interest income from loans to our tenants and other facility owners, and from profits or equity interests in certain of our tenants' operations. Our tenants operate in the healthcare industry, generally providing medical, surgical, rehabilitative, and behavioral health care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate is generally positive for efficient operators. However, our tenants' operations are subject to economic, regulatory, market, and other conditions (such as the impact of the COVID-19 pandemic) that may affect their profitability, which could impact our results. Accordingly, we monitor certain key performance indicators that we believe provide us with early indications of conditions that could affect the level of risk in our portfolio. Key factors that we may consider in underwriting prospective deals and in our ongoing monitoring of our tenants' (and guarantors') performance, as well as the condition of our properties, include, but are not limited to, the following:
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scope and breadth of clinical services and programs, including usage trends (for inpatients and outpatients) by type of service;
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the size and composition of medical staff and physician management at our facilities, including specialty, seniority, and number of procedures performed and/or referrals;
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an assessment of the administrative team of our operators, if any, including background and seniority in the healthcare industry;
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staffing trends, including ratios, turnover measures, recruitment and retention strategies at the corporate and individual facility levels;
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facility operating performance measured by current, historical, and prospective operating margins (measured by a tenant's earnings before interest, taxes, depreciation, amortization, management fees, and facility rent) of each tenant and at each facility;
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the ratio of our tenants’ operating profits to facility rent and other fixed costs, including debt costs;
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changes in revenue sources of our tenants, including the relative mix of public payors (including Medicare, Medicaid/MediCal, and managed care in theU.S. , as well as equivalent payors inEurope ,Australia , andSouth America ) and private payors (including commercial insurance and private pay patients);
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historical support (financial or otherwise) from governments and/or other public payer systems during major economic downturns/depressions;
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tenant revenue trends, including comparison to recorded net revenue from patient services;
• tenants' free cash flow;
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the potential impact of healthcare pandemics/epidemics, legislation, and other regulations (including changes in reimbursement) on our tenants' or borrowers' profitability and liquidity;
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the potential impact of any legal, regulatory or compliance proceedings with our tenants;
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an ongoing assessment of the operating environment of our tenants, including demographics, competition, market position, status of compliance, accreditation, quality performance, and health outcomes as measured by TheCenters for Medicare and Medicaid Services , Joint Commission, and other governmental bodies in which our tenants operate;
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the level of investment in hospital infrastructure and health information systems; and
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physical property due diligence, typically including property condition and Phase 1 environmental assessments, and annual property inspections thereafter.
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:
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trends in interest rates and other costs due to general inflation and increased availability and costs due to labor shortages could adversely impact our tenants’ operations and capacity to meet their rental obligations;
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changes in healthcare regulations that may limit opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate;
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reductions in reimbursements from Medicare, state health care programs and commercial insurers that may reduce the profitability of our tenants or borrowers and our revenues;
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competition from other funding sources; and
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the ability of our tenants and borrowers to access funds in the credit markets.
CRITICAL ACCOUNTING METHODS
Refer to our 2021 Annual Report on Form 10-K for a discussion of our critical accounting policies, which include investments in real estate, purchase price allocation, loans, credit losses, losses from rent and interest receivables, investments accounted for under the fair value option election, and our accounting policy on consolidation. During the three months endedMarch 31, 2022 , there were no material changes to these policies.
Insight
We are a self-advised REIT focused on investing in and owning net-leased healthcare facilities across theU.S. and selectively in foreign jurisdictions.Medical Properties Trust, Inc. was incorporated underMaryland law onAugust 27, 2003 , andMPT Operating Partnership, L.P. was formed underDelaware law onSeptember 10, 2003 . We conduct substantially all of our business throughMPT 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. From time-to-time, we may make noncontrolling investments in our tenants that gives us a right to share in such tenant's profits and losses and provide for certain minority rights and protections. Our business model facilitates acquisitions and recapitalization, and allows operators of healthcare facilities to unlock the value of their real estate assets to fund facility improvements, technology upgrades, and other investments in operations. AtMarch 31, 2022 , our portfolio consisted of 440 properties leased or loaned to 53 operators, of which two are under development and four are in the form of mortgage loans. We manage our business as a single business segment. AtMarch 31, 2022 , all of our investments are located in theU.S. ,Europe ,Australia , andSouth America . Our total assets are made up of the following (dollars in thousands): As of As of March 31, % of December 31, % of 2022 Total 2021 Total Real estate assets - at cost$ 16,316,567 82.3 %$ 17,425,765 84.9 % Accumulated real estate depreciation and amortization (1,054,361 ) -5.3 % (993,100 ) -4.8 % Cash and cash equivalents 248,846 1.3 % 459,227 2.2 % Investments in unconsolidated real estate joint ventures 1,534,514 7.7 % 1,152,927 5.6 % Investments in unconsolidated operating entities 1,455,842 7.3 % 1,289,434 6.3 % Other 1,316,426 6.7 % 1,185,548 5.8 % Total assets$ 19,817,834 100.0 %$ 20,519,801 100.0 %
Additional Concentration Details
On a pro forma gross asset basis (as defined in the "Reconciliation of Non-GAAP Financial Measures" section of Item 2 of this Quarterly Report on Form 10-Q), our concentration as ofMarch 31, 2022 as compared toDecember 31, 2021 is as follows (dollars in thousands): 27 --------------------------------------------------------------------------------
Total pro forma gross assets by operator
As of March 31, 2022 As of December 31, 2021
Percentage of Percentage of
Total Pro Forma Total Pro Forma Total Pro Forma Total Pro Forma
Operators Gross Assets Gross Assets Gross Assets Gross Assets
Steward
Florida market $ 1,337,192 6.0 % $ 1,334,834 6.0 %
Massachusetts market 1,173,852 5.3 % 1,177,914 5.3 %
Texas/Arkansas/Louisiana market 983,344 4.4 % 1,129,624 5.1 %
Arizona market 338,873 1.5 % 338,612 1.5 %
Ohio/Pennsylvania market 141,615 0.7 % 141,506 0.6 %
Circle 2,408,716 10.8 % 2,481,001 11.1 %
Prospect 1,639,588 7.4 % 1,631,691 7.3 %
Swiss Medical Network 1,299,524 5.8 % 1,300,431 5.8 %
HCA(1) 1,240,264 5.6 % 1,240,546 5.6 %
Other operators 10,643,938 47.9 % 10,632,605 47.6 %
Other assets 1,028,068 4.6 % 920,573 4.1 %
Total $ 22,234,974 100.0 % $ 22,329,337 100.0 %
(1)
Shown pro forma for transactions discussed in Note 9 to Item 1 of this Form 10-Q.
Total pro forma gross assets by
As of March 31, 2022 As of December 31, 2021
Percentage of Percentage of
Total Pro Forma Total Pro Forma Total Pro Forma Total Pro Forma
U.S. States and Other Countries Gross Assets Gross Assets Gross Assets Gross Assets
Texas $ 1,995,890 9.0 % $ 2,172,882 9.7 %
California 1,641,873 7.4 % 1,650,038 7.4 %
Florida 1,337,191 6.0 % 1,334,835 6.0 %
Utah 1,255,334 5.6 % 1,255,545 5.6 %
Massachusetts 1,179,252 5.3 % 1,183,313 5.4 %
All other states 5,141,829 23.1 % 5,131,596 23.0 %
Other domestic assets 730,743 3.3 % 692,280 3.1 %
Total U.S. $ 13,282,112 59.7 % $ 13,420,489 60.2 %
United Kingdom $ 4,362,100 19.6 % $ 4,492,918 20.1 %
Switzerland 1,299,524 5.9 % 1,300,431 5.8 %
Germany 1,222,002 5.5 % 1,257,482 5.6 %
Australia 986,926 4.4 % 1,043,399 4.7 %
Spain 258,343 1.2 % 264,965 1.2 %
All other countries 526,642 2.4 % 321,360 1.4 %
Other international assets 297,325 1.3 % 228,293 1.0 %
Total international $ 8,952,862 40.3 % $ 8,908,848 39.8 %
Grand total $ 22,234,974 100.0 % $ 22,329,337 100.0 %
On an individual property basis, we had no investment in any single property greater than 3% of our total pro forma gross assets at
On an adjusted revenues basis (as defined in the "Reconciliation of Non-GAAP Financial Measures" section of Item 2 of this Quarterly Report on Form 10-Q), concentration for the three months endedMarch 31, 2022 as compared to the prior year is as follows (dollars in thousands): 28 --------------------------------------------------------------------------------
Total adjusted revenue by operator
For the Three Months Ended March 31,
2022 2021
Percentage of Percentage of
Total Adjusted Total Adjusted Total Adjusted Total Adjusted
Operators Revenues Revenues Revenues Revenues
Steward
Massachusetts market $ 35,818 8.0 % $ 34,543 8.8 %
Utah market(1) 32,763 7.4 % 31,705 8.0 %
Florida market 25,304 5.7 % 4,985 1.3 %
Texas/Arkansas/Louisiana market 18,612 4.2 % 22,671 5.7 %
Arizona market 8,532 1.9 % 8,187 2.1 %
Ohio/Pennsylvania market 3,565 0.8 % 3,300 0.8 %
Circle 51,212 11.5 % 53,192 13.5 %
Prospect 38,684 8.7 % 38,066 9.7 %
Prime 30,132 6.8 % 30,415 7.7 %
MEDIAN 22,866 5.1 % 24,049 6.1 %
Other operators 177,288 39.9 % 143,304 36.3 %
Total $ 444,776 100.0 % $ 394,417 100.0 %
(1)
See Note 9 to Item 1 of this Form 10-Q for a potential transaction involving
this market.
Total Adjusted Revenues by
For the Three Months Ended March 31,
2022 2021
Percentage of Percentage of
Total Adjusted Total Adjusted Total Adjusted Total Adjusted
U.S. States and Other Countries Revenues Revenues Revenues Revenues
California $ 41,291 9.3 % $ 34,004 8.6 %
Massachusetts 35,981 8.1 % 34,702 8.8 %
Texas 34,844 7.8 % 39,128 9.9 %
Utah 33,768 7.6 % 32,677 8.3 %
Florida 25,305 5.7 % 5,547 1.4 %
All other states 125,907 28.3 % 111,102 28.2 %
Total U.S. $ 297,096 66.8 % $ 257,160 65.2 %
United Kingdom $ 83,906 18.9 % $ 76,560 19.4 %
Germany 24,883 5.6 % 26,162 6.6 %
All other countries 38,891 8.7 % 34,535 8.8 %
Total international $ 147,680 33.2 % $ 137,257 34.8 %
Grand total $ 444,776 100.0 % $ 394,417 100.0 %
Total Adjusted Revenues by Facility Type
For the Three Months Ended March 31,
2022 2021
Percentage of Percentage of
Total Adjusted Total Adjusted Total Adjusted Total Adjusted
Facility Types Revenues Revenues Revenues Revenues
General acute care hospitals$ 334,858 75.3 %$ 315,434 80.0 % Behavioral health facilities 50,897 11.4 % 19,754 5.0 % Inpatient rehabilitation hospitals 45,043 10.1 % 45,303 11.5 % Long-term acute care hospitals 8,302 1.9 % 8,186 2.1 % Freestanding ER/urgent care facilities 5,676 1.3 % 5,740 1.4 % Total$ 444,776 100.0 %$ 394,417 100.0 % 29
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Operating results
Three months completed
Net income for the three months endedMarch 31, 2022 , was$631.7 million compared to$163.8 million for the three months endedMarch 31, 2021 . This 286% increase in net income is primarily due to the gain on sale of real estate in the 2022 first quarter from the Macquarie Transaction as described in Note 3 to the condensed consolidated financial statements, partially offset by higher interest expense, depreciation expense, and general and administrative costs. Normalized funds from operations ("FFO"), after adjusting for certain items (as more fully described in the "Reconciliation of Non-GAAP Financial Measures" section of Item 2 of this Quarterly Report on Form 10-Q), was$282.5 million for the 2022 first quarter, or$0.47 per diluted share, as compared to$243.9 million , or$0.42 per diluted share, for the 2021 first quarter. This 16% increase in Normalized FFO is primarily due to incremental revenue from new investments made in 2021 and the first quarter of 2022.
A comparison of earnings for the completed three-month periods
Year over
% of % of Year
2022 Total 2021 Total Change
Rent billed $ 263,402 64.3 % $ 213,344 58.9 % 23.5 %
Straight-line rent 61,044 14.9 % 54,873 15.1 % 11.2 %
Income from financing leases 51,776 12.6 % 50,894 14.0 % 1.7 %
Interest and other income 33,578 8.2 % 43,654 12.0 % -23.1 %
Total revenues $ 409,800 100.0 % $ 362,765 100.0 % 13.0 %
Our total revenue for the first quarter of 2022 is up
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Operating lease revenue (includes rent billed and straight-line rent) - up$56.2 million over the prior year of which approximately$67.5 million is incremental revenue from acquisitions made in 2021 (including approximately$18.0 million each fromSpringstone , Steward'sSouth Florida operations, andPriory Group Transaction as described in Note 3 to the condensed consolidated financial statements) and early 2022 (primarily ourFinland acquisition). In addition, rent revenues are up due to approximately$5 million from increases in CPI above the minimum increases in the lease,$0.2 million from capital additions in 2022, and$0.5 million from the commencement of rent on a development property in the first quarter of 2022. This increase is partially offset by approximately$15.1 million of lower revenues from disposals in 2021 and early 2022 (including a$4.1 million decrease from the properties disposed of in the Macquarie Transaction as described in Note 3 to the condensed consolidated financial statements and$4.5 million of straight-line rent write-offs associated with non-Macquarie Transaction disposals in the first quarter of 2022) and$2.9 million of unfavorable foreign currency fluctuations.
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Finance lease income – up
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Interest and other income – down
o Interest from loans - down$12.9 million over the prior year due to$15.9 million of less interest revenue earned on the Priory loans from the conversion of the £800 million mortgage loan to fee simple assets in the second quarter of 2021 and the repayment of the £250 million acquisition loan in the 2021 fourth quarter as described in Note 3 , lower revenues from loans that were paid off since the first quarter of 2021, and$1.0 million of unfavorable foreign currency fluctuations. This decrease is partially offset by$5.6 million of incremental revenue earned on investments in 2021 (primarilySpringstone ) and early 2022 (Priory syndicated loan) and$0.6 million of income from annual escalations due to increases in CPI. o
Other income – up
Interest expense for the quarters endedMarch 31, 2022 and 2021 totaled$91.2 million and$87.0 million , respectively. This increase is primarily related to new debt issuances in 2021 to fund new investments, as our weighted-average interest rate of 3.1% for the quarter endedMarch 31, 2022 is lower than the 3.4% in the same period in 2021.
Depreciation and amortization of real estate during the first quarter of 2022 increased to
30 -------------------------------------------------------------------------------- Property-related expenses totaled$8.6 million and$5.5 million for the quarters endedMarch 31, 2022 and 2021, respectively. Of the property expenses in the first three months of 2022 and 2021, approximately$6.3 million and$3.5 million , respectively, represents costs that were reimbursed by our tenants and included in the "Interest and other income" line on our condensed consolidated statements of net income. As a percentage of revenue, general and administrative expenses represented 10.1% for the 2022 first quarter, slightly higher than 9.9% in the prior year. On a dollar basis, general and administrative expenses totaled$41.4 million for the 2022 first quarter, which is a$5.4 million increase from the prior year first quarter and reflective of the growth of the company, in particular higher compensation to non-executive employees (partially due to an increase in employee head count) and approximately$1 million of more charitable giving. During the three months endedMarch 31, 2022 , we completed the partnership with MAM in which we sold the real estate of eightMassachusetts -based general acute care hospitals, resulting in a gain on real estate of approximately$600 million , partially offset by approximately$125 million of write-offs of non-cash straight-line rent receivables. We also disposed of two other facilities and an ancillary property resulting in a net gain of$15 million . During the three months endedMarch 31, 2021 , we sold one facility and an ancillary property resulting in a net gain of$1.0 million . Earnings from equity interests was$7.3 million for the quarter endedMarch 31, 2022 , up$0.2 million from the same period in 2021, primarily due to$1.2 million of income generated on ourMassachusetts -based partnership with MAM entered into duringMarch 2022 , partially offset by the loss of equity interest income from the IMED joint venture that we acquired the remaining 50% interest of duringDecember 2021 . Debt refinancing and unutilized financing costs were$8.8 million and$2.3 million for the quarters endedMarch 31, 2022 and 2021, respectively. The costs incurred in the first quarter of 2022 were a result of the termination of our$1 billion interim credit facility (see Note 4 to the condensed consolidated financial statements for more detail). In 2021, these costs were a result of the early termination of ourJanuary 2021 Interim Credit Facility and the amendment to our Credit Facility.
In the first quarter of 2022, we recorded a favorable non-cash fair value adjustment of
Income tax expense includesU.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 theU.S. The$11.4 million income tax expense for the three months endedMarch 31, 2022 is primarily based on the income generated by our investments in theUnited Kingdom ,Colombia , andAustralia . In comparison, we incurred$8.4 million in income tax expense in the first quarter of 2021. This$3.0 million increase is primarily due to the Priory transaction in the first quarter of 2021 and our investment inSpringstone in the fourth quarter of 2021. We utilize the asset and liability method of accounting for income taxes. Deferred tax assets are recorded to the extent we believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is considered, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive and negative evidence, including our three-year cumulative pre-tax book loss position in certain entities, we concluded that a valuation allowance of approximately$77.5 million should be reflected against certain of our international and domestic net deferred tax assets atMarch 31, 2022 . In the future, if we determine that it is more likely than not that we will realize our net deferred tax assets, we will reverse the applicable portion of the valuation allowance, recognize an income tax benefit in the period in which such determination is made, and incur higher income taxes in future periods as income is earned.
Reconciliation of Non-GAAP Financial Measures
Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. We compute FFO in accordance with the definition provided by theNational 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 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. 31 -------------------------------------------------------------------------------- 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 and Normalized FFO for the three months endedMarch 31, 2022 and 2021 (amounts in thousands except per share data): For the Three Months Ended March 31, 2022 March 31, 2021 FFO information: Net income attributable to MPT common stockholders$ 631,681 $ 163,783 Participating securities' share in earnings (402 ) (370 )
Net profit less share of equity in profit
$ 631,279 $ 163,413 Depreciation and amortization 99,459 88,536 Gain on sale of real estate and other, net (451,638 ) (989 ) Funds from operations$ 279,100 $ 250,960 Write-off (recovery) of straight-line rent and other 2,604 (5,238 ) Non-cash fair value adjustments (8,023 ) (4,065 ) Debt refinancing and unutilized financing costs 8,816 2,269 Normalized funds from operations$ 282,497 $ 243,926 Per diluted share data: Net income, less participating securities' share in earnings $ 1.05 $ 0.28 Depreciation and amortization 0.17 0.15 Gain on sale of real estate and other, net (0.75 ) - Funds from operations $ 0.47 $ 0.43 Write-off (recovery) of straight-line rent and other - (0.01 ) Non-cash fair value adjustments (0.01 ) - Debt refinancing and unutilized financing costs 0.01 - Normalized funds from operations $ 0.47 $ 0.42 Total Pro Forma Gross Assets Total pro forma gross assets is total assets before accumulated depreciation/amortization (adjusted for our unconsolidated joint ventures) and assumes material real estate commitments on new investments are fully funded, and assumes cash on-hand at period-end and cash generated from or to be generated from financing activities subsequent to period-end are used in these transactions. We believe total pro forma gross assets is useful to investors as it provides a more current view of our portfolio and allows for a better understanding of our concentration levels as our commitments close. The following table presents a reconciliation of total assets to total pro forma gross assets (in thousands): As of As of March 31, 2022 December 31, 2021 Total assets$ 19,817,834 $ 20,519,801 Add: Accumulated depreciation and amortization 1,054,361
993 100
Incremental gross assets of our joint ventures and other(1) 1,611,625 1,713,603 Less: Cash on hand(2) (248,846 ) (897,167 ) Total pro forma gross assets$ 22,234,974 $ 22,329,337 (1) Adjustment to reflect our share of our joint ventures' gross assets and certain lease intangible assets. (2) Includes cash available on-hand plus cash generated from activities subsequent to period-end such as loan repayments, issuances of debt or equity, or dispositions. 32 --------------------------------------------------------------------------------
Total Adjusted Revenues
Total adjusted revenues are total revenues adjusted for our pro rata portion of
similar revenues in our real estate joint venture arrangements. We believe total
adjusted revenues are useful to investors as it provides a more complete view of
revenues across all of our investments and allows for better understanding of
our revenue concentration. The following table presents a reconciliation of
total revenues to total adjusted revenues (in thousands):
For the Three Months Ended March 31,
2022 2021
Total revenues $ 409,800 $ 362,765
Revenues from real estate properties owned through
joint venture
arrangements 34,976 31,652
Total adjusted revenues $ 444,776 $ 394,417
CASH AND CAPITAL RESOURCES
Cash activity 2022
During the 2022 first quarter, we generated approximately$179.4 million of cash flows from operating activities, primarily consisting of rent and interest from mortgage and other loans. We used these operating cash flows to fund our dividends of$176.5 million and certain investment activities. During the quarter, we received approximately$1.3 billion of proceeds from the Macquarie Transaction and obtained a 50% interest in the partnership valued at approximately$400 million (see Note 3 to Item 1 of this Form 10-Q for further details). We used these proceeds to pay off ourJuly 2021 Interim Credit Facility, pay down our revolving credit facility, and along with cash on-hand and cash from other disposal transactions, to invest in new real estate and other assets. Subsequent to quarter-end, we exercised the$500 million accordion feature to our revolving credit facility- see Note 10 to Item 1 of this Form 10-Q for additional details. 2021 Cash Flow Activity During the 2021 first quarter, we generated approximately$188.7 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$11 million received from Steward as a return of capital distribution, to fund our dividends of$147.7 million and certain investment activities. In addition, we invested approximately$1.8 billion in real estate and other assets, including the £1.1 billion Priory Group Transaction inJanuary 2021 (as more fully described in Note 3 to Item 1 of this Form 10-Q), using a combination of cash on-hand generated from the$779.2 million of net proceeds from the sales of stock during the quarter, £500 million of proceeds from an interim credit facility, and proceeds from our revolving facility. In lateMarch 2021 , we issued £850 million of senior unsecured notes and used such proceeds to pay off our interim credit facility in full and reduce our revolving credit facility balance to less than$200 million outstanding.
Short-term liquidity requirements:
AtMay 6, 2022 and after the exercise of the$500 million accordion under our unsecured revolving loan facility (as discussed in Note 10 to Item 1 of this Form 10-Q), our liquidity approximates$1.1 billion . We believe this liquidity along with our current monthly cash receipts from rent and loan interest and regular distributions from our joint venture arrangements, is sufficient to fund our operations, dividends in order to comply with REIT requirements, our current firm commitments (capital expenditures and expected funding requirements on development projects), and debt service obligations for the next twelve months (including contractual interest payments). We expect that other capital recycling transactions (that could include sales of single facilities) will further improve our liquidity and our leverage ratio, although no assurances can be given that our capital recycling efforts will be successful. 33 --------------------------------------------------------------------------------
Long-term liquidity requirements:
As ofMay 6, 2022 and after the exercise of the$500 million accordion under our unsecured revolving loan facility (as discussed in Note 10 to Item 1 of this Form 10-Q), our liquidity approximates$1.1 billion . We believe that our liquidity, along with our current monthly cash receipts from rent and loan interest and regular distributions from our joint venture arrangements, is sufficient to fund our operations, debt and interest obligations, our firm commitments, and dividends in order to comply with REIT requirements for the foreseeable future. However, in order to make additional investments, to fund debt maturities coming due in 2023 and beyond (as outlined below), to strategically refinance any existing debt in order to reduce interest rates, or to further improve our leverage ratios, we may need to access one or a combination of the following sources of capital:
•
sales of strategic properties or joint ventures;
• sale of equity securities; • new bank term loans; •
new debt securities denominated in USD, EUR or GBP, including senior unsecured notes; and or
•
new real estate secured loans.
However, there can be no assurance that conditions will be favorable to such possible transactions or that our plans will be successful.
Principal payments due on our debt (which exclude the effects of any discounts, premiums, or debt issue costs recorded) as ofMay 6, 2022 are as follows (in thousands): 2022 $ - 2023 493,920 2024 1,706,611 2025 1,391,910 2026 1,844,950 Thereafter 4,773,060 Total$ 10,210,451 Contractual Commitments We presented our contractual commitments in our 2021 Annual Report on Form 10-K. Except for changes to our purchase obligations and operating lease commitments, there have been no other significant changes throughMay 6, 2022 .
The following table updates our contractual commitment schedule for these updates as of
Contractual commitments 2022(1) 2023 2024 2025 2026 Thereafter Total Purchase obligations
Operating lease commitments 4,964 8,933 9,020 8,381 7,883 247 907 287,088
(1)
This column represents the obligations after
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Distributor policy
The table below is a summary of our distributions declared over the two-year period ended
Distribution
Declaration Date Record Date Date of Distribution per Share February 17, 2022 March 17, 2022 April 14, 2022 $ 0.29 November 11, 2021 December 9, 2021 January 13, 2022 $ 0.28 August 19, 2021 September 16, 2021 October 14, 2021 $ 0.28 May 26, 2021 June 17, 2021 July 8, 2021 $ 0.28 February 18, 2021 March 18, 2021 April 8, 2021 $ 0.28 November 12, 2020 December 10, 2020 January 7, 2021 $ 0.27 August 13, 2020 September 10, 2020 October 8, 2020 $ 0.27 May 21, 2020 June 18, 2020 July 16, 2020 $ 0.27 It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended, and to efficiently manage corporate income and excise taxes on undistributed income. However, our Credit Facility limits the amount of dividends we can pay- see Note 4 in Item 1 to this Form 10-Q for further information.
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