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Medical Properties Trust Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 9, 2012 05:27PM
Medical Properties Trust Inc. (MPW) filed Quarterly Report for the period ended 2012-06-30.
Highlight of Business Operations:Refer to our 2011 Annual Report on Form 10-K, as amended, 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, exchangeable senior notes, and our accounting policy on consolidation. During the six months ended June 30, 2012, there were no material changes to these policies, except we began using direct finance lease (DFL) accounting with the acquisition and lease of the real estate of Ernest. Under DFL accounting, future minimum lease payments are recorded as a receivable. Unearned income, which represents the net investment in the DFL less the sum of minimum lease payments receivable and the estimated residual values of the leased properties, is deferred and amortized to income over the lease term to provide a constant yield when collectability of the lease payments is reasonably assured. Investments in DFLs are presented net of unamortized and unearned income. DFLs are placed on non-accrual status when management determines that the collectability of contractual amounts is not reasonably assured. While on non-accrual status, DFLs are accounted for on a cash basis, in which income is recognized only upon receipt of cash.
Base rents for the 2012 second quarter increased 18.7% versus the prior year as a result of the additional rent generated from annual escalation provisions in our leases and $2.2 million of incremental revenue from properties acquired in 2011. In addition, we had a $1.5 million adjustment to reserve for outstanding receivables on our Denham Springs facility in 2011. Income from direct financing leases is solely related to the Ernest Transaction. Interest from loans is higher than the prior year due to the $6 million and $0.5 million of additional interest related to the Ernest and Hoboken loans, respectively.
Base rents for the 2012 first two quarters increased 18.3% versus the prior year as a result of the additional rent generated from annual escalation provisions in our leases, and $6.1 million of incremental revenue from the properties acquired in 2011. This more than offset the $1.5 million adjustment to reserve for outstanding receivables on our Denham Springs facility in the 2011 second quarter. Income from direct financing leases is solely related to the Ernest Transaction. Interest from loans is higher than the prior year due to the $7.7 million and $0.9 million of additional interest related to the Ernest and Hoboken loans, respectively.
In the 2012 second quarter, we recognized $0.9 million of earnings from equity and other interests in certain of our tenants, which is up significantly over the 2012 first quarter and the first six months of 2012.
Stocks Discussed: MPW,