In the first quarter of 2025, we funded approximately $39 million to Steward Health Care System's ("Steward") secured lender to obtain control over certain real estate assets. As part of this transaction, Steward and its secured lenders agreed for Quorum Health ("Quorum"), one of the new tenants of the former Steward operated facilities as discussed below, to take over as manager of the transition services for the former Steward operated properties, including some that we do not own.

See table below for a status summary of our current development and capital addition projects (in thousands):


Property	Commitment		Costs Paid as of March 31, 2025		Cost Remaining
Lifepoint Behavioral (Kansas)	$	20,183	$	13,992	$	6,191
Surgery Partners (Idaho)		15,993		9,960		6,033
Lifepoint Behavioral (Arizona)		10,659		1,651		9,008
IMED Hospitales (Spain)		51,925		24,651		27,274
IMED Hospitales (Spain)		37,879		31,152		6,727
	$	136,639	$	81,406	$	55,233

We have two other development projects ongoing in Texas (Texarkana development) and Massachusetts (Norwood redevelopment). These are not highlighted above; however, we are presently completing construction to the stage where the building is "weathered in" and environmentally secure so as to physically protect our investment while we actively market the hospitals for sale or lease. As of March 31, 2025, we estimate that the cost to complete construction to this stage, plus costs of additional construction that we believe will be more efficient if completed in the near-term, approximates $35 million.

During the first quarter of 2025, we completed construction and began recording rental income on a $10.5 million capital addition project at an Arizona facility leased to Lifepoint Behavioral Health ("Lifepoint Behavioral").

During the first quarter of 2024, we completed construction and began recording rental income on a $35.4 million behavioral health facility located in McKinney, Texas, that is leased to Lifepoint Behavioral. We also completed construction and began recording rental income on a €46 million (approximately $49.0 million) general acute care facility located in Spain that is leased to IMED.

During the first three months of 2025, we completed the sale of two facilities and an ancillary facility for approximately $20 million, resulting in a gain on real estate of $8.1 million. These two facilities were held for sale at December 31, 2024, along with a third facility that is expected to be sold during the 2025 second quarter.

During the first three months of 2024, we completed the sale of three facilities and two ancillary facilities for approximately $7 million, resulting in a loss on real estate of approximately $1.4 million.

In the first quarter of 2024, we also sold our minority equity investment in Lifepoint Behavioral for approximately $12 million.

We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies. The initial fixed lease terms of these infrastructure-type assets are typically at least 15 years, and most include renewal options at the election of our tenants, generally in five year increments. Over 99% of our leases provide annual rent escalations based on increases in the Consumer Price

Index ("CPI") (or similar indices outside the U.S.) and/or fixed minimum annual rent escalations. Many of our domestic leases contain purchase options with pricing set at various terms but in no case less than our total initial investment. Our leases typically require the tenant to handle and bear most of the costs associated with our properties including repair/maintenance, property taxes, and insurance.

For all of our properties subject to lease, we are the legal owner of the property and the tenant's right to use and possess such property is guided by the terms of a lease. At March 31, 2025, we account for all of these leases as operating leases, except where GAAP requires alternative classification, including leases on 13 Ernest Health, Inc. ("Ernest") facilities that are accounted for as direct financing leases and leases on nine of our Prospect Medical Holdings, Inc. ("Prospect") facilities and five of our Ernest facilities that are accounted for as a financing. The components of our total investment in financing leases consisted of the following (in thousands):

At March 31, 2025, our vacant properties represent less than 1% of total assets. We are in various stages of either re-leasing or selling these vacant properties.

Our tenants’ 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 and make distributions to our stockholders. Our tenants operate in the healthcare industry, which is highly regulated, and changes in regulation (or delays in enacting regulation) may temporarily impact our tenants’ operations until they are able to make the appropriate adjustments to their business. In addition, our tenants may experience operational challenges from time-to-time as a result of many factors, including those external to them, such as cybersecurity attacks, public health crises, economic issues resulting in high inflation and spikes in labor costs, extreme or severe weather and climate-related events, and adverse market and political conditions. We monitor our tenants' operating results and the potential impact from these challenges. We may elect to provide support to our tenants from time-to-time in the form of short-term rent abatements or rent deferrals to be paid back in full, or in the form of temporary loans. See below for an update on some of our current and former tenants.

As discussed in previous filings, Steward experienced significant operational and liquidity challenges that led to rent payment shortfalls in the 2023 fourth quarter and our decision to move to the cash basis of accounting effective December 31, 2023. Steward's business worsened in 2024, and they ultimately filed for Chapter 11 bankruptcy on May 6, 2024 with the United States Bankruptcy Court for the Southern District of Texas. On September 11, 2024, the bankruptcy court entered an interim order, subsequently made final on September 18, 2024, approving a global settlement between Steward, its lenders, the unsecured creditors committee, and the Company. The order provided for the following: a) termination of our master lease with Steward; b) the release of claims against 23 of our properties (including the release of claims by the secured lender over its liens on equipment, inventory, and licenses), allowing us to begin the process of re-tenanting or selling these properties; and c) a full release of claims against us from all parties. In return, we consented to the sale of the operations and our real estate in three facilities in the Space Coast region of Florida, along with a full release of our claims in Steward including claims to past due rent and interest, outstanding loans, and our equity investment.

In regard to our real estate partnership with Macquarie that owned and leased eight properties in Massachusetts to Steward, the bankruptcy court approved the termination of the master lease with Steward during the 2024 third quarter. We and Macquarie entered into an agreement with the mortgage lender of the joint venture to transition the eight properties to them along with cash proceeds of approximately $40 million (representing our share), in return for full payment of the underlying mortgage debt and a release of claims against each party.

Due to the events discussed above, we recorded various impairment charges during 2024, including approximately $470 million in the 2024 first quarter to fully reserve our equity and certain loan investments in Steward. With this global settlement and termination of the joint venture master lease, our relationship with Steward effectively ended.

During the first quarter of 2024, we received and recorded rent and interest revenue from Steward of $11 million. In addition, we were benefited from rent paid by Steward to the Massachusetts joint venture of $38 million ($19 million representing our share) for the three months ended March 31, 2024.

Subsequent to the release of claims on the 23 properties as part of the global settlement, we reached definitive agreements with six operators (Healthcare Systems of America, Honor Health, Insight Health ("Insight"), Quorum, College Health, and Tenor Health) to lease 18 of these facilities in 2024 and early 2025. As of March 31, 2025, we have provided approximately $120 million in short-term working capital loans to these operators to assist in the takeover of these operations and the transition of certain services (such as revenue cycle management) away from Steward. Each of these leases includes a rent ramp up period, and based on these lease contracts, rent payments are ramped up to approximately 57% of contractual rent by the fourth quarter of 2025, 78% of contractual rent by second quarter 2026, and 100% of contractual rent starting October 2026. As of March 31, 2025, all of these new operators have paid the rent due under their respective leases, except for Insight who owes us less than $100 thousand for March 2025.

The remaining five former Steward properties, including two developments (see "Development and Capital Addition Activities" above), (with a net book value of 3% of our total assets) are in various stages of being re-tenanted or sold.

We lease real estate assets to Prospect in California and Connecticut (for which we account as financing leases), have a mortgage loan secured by four properties operated by Prospect in Pennsylvania, and have a $75 million asset-backed loan outstanding. In addition, we acquired a non-controlling ownership interest in May 2023 in PHP Holdings of approximately $654 million.

In recent periods, Prospect’s operating losses in multiple East Coast markets, including Pennsylvania and Rhode Island (a state in which we have no investment), have adversely impacted Prospect’s overall liquidity. Starting January 1, 2023, we began accounting for our leases and loans to Prospect on a cash basis. In the first three months of 2024, we received and recorded approximately $7 million of revenue on our California properties. However, Prospect has not made any scheduled rent or interest payments since the second quarter of 2024.

On October 5, 2022, we entered into definitive agreements to sell three Prospect facilities located in Connecticut to Yale in a transaction for which we are contractually entitled to receive $355 million at closing. In addition, on November 8, 2024, Astrana Health entered into a binding agreement to purchase the majority of PHP Holdings, pursuant to which we are contractually entitled to receive a portion of the proceeds.

Due to its ongoing operational and liquidity challenges, Prospect filed for Chapter 11 bankruptcy on January 11, 2025 with the United States Bankruptcy Court for the Northern District of Texas. Prospect’s bankruptcy filing constitutes a default under the terms of our master leases and loan agreements with Prospect, and imposes a stay on our ability to exercise contractual rights with respect to these defaults. The bankruptcy filing bars us from collecting pre-bankruptcy debts from Prospect unless we receive an order permitting us to do so from the bankruptcy court. On March 20, 2025, the bankruptcy court approved a recovery waterfall between us, Prospect, and other stakeholders.

The bankruptcy court has the power to approve and direct the sale of Prospect’s real estate free and clear of any associated mortgages and loans, whether or not there are sufficient net proceeds to repay them, in whole or in part. As a result, we may recover none or substantially less than the full value of our claims. In addition, the bankruptcy process related proceedings may negatively impact the sale of the three Connecticut facilities to Yale, and our ability to receive the full amount of proceeds we are contractually entitled to receive from the sale of PHP Holdings and the repayment of our asset-backed loan.

Due to the events discussed above, we recorded more than $400 million of impairment charges and negative fair value adjustments associated with our investments in Prospect in the 2024 fourth quarter, resulting in a full reserve of the asset-backed loan and our Pennsylvania mortgage loan, along with a decrease in the value in our Connecticut properties. No charge was recorded on our California properties. In the first quarter of 2025, we recorded approximately $55 million of additional impairment charges on our Connecticut properties as a result of the ongoing bankruptcy process. In determining the 2025 first quarter impairment charges, we compared the carrying value of our investments to our current estimate of expected proceeds (net of any possible future cash outlays) to be received under the bankruptcy court approved recovery waterfall, factoring in an estimated recovery of Prospect assets (including our real estate assets) and applying the priority of claims associated with the bankruptcy. In estimating the fair value of the real estate, we, along with assistance from a third-party, independent valuation firm, used a combination of cost, market, and income approaches using Level 3 inputs. The cost approach used comparable sales to value the land and cost manuals to value the improvements. The value derived from the market approach was based on sale prices of similar properties. For the income approach, we divided the expected operating income from the property by an estimated market capitalization rate (range from 8.25% to 8.5%).

In regard to our investment in PHP Holdings, we account for this investment using the fair value option method. Each quarter, we mark such investment to fair value as more fully described in Note 6 to the condensed consolidated financial statements. In the first quarter of 2025 and 2024, we recorded an approximate $18 million and $201 million negative fair value adjustment, respectively. The adjustment in 2025 was made based on the binding purchase agreement with Astrana Health and updates to PHP Holdings' working capital position, along with consultations with a third-party, independent valuation firm.

Prospect's bankruptcy proceedings are continuing and the ultimate outcome of such proceedings is uncertain. At this time, we are unable to predict the timing of any of the foregoing matters or the timing for a resolution of the Prospect bankruptcy proceeding. We cannot assure you that we will be able to recover or preserve the remaining approximately $746 million of our investments in Prospect and PHP Holdings in whole or in part.

As discussed in previous filings, we placed our loan to the international joint venture on the cash basis of accounting in 2023, as we determined that it was no longer probable that the borrower would pay its future interest in full. This loan, accounted for under the fair value option method, was collateralized by the equity of Steward held by an investor in both Steward and the international joint venture. Consistent with the discussion above on non-real estate investments in Steward, we recorded a $225 million unfavorable fair value adjustment in the 2024 first quarter to fully reserve for the loan and related equity investment. These investments were adjusted for after comparing our carrying value to an updated fair value analysis of the underlying collateral, with assistance from a third-party, independent valuation firm.

In the 2023 third quarter, we moved to cash basis of accounting for a tenant that comprised approximately 1% of our total assets due to declines in operating results. During 2024, we terminated the lease with this tenant and entered into a forbearance and restructuring agreement. This forbearance and restructuring agreement has since been amended to, among other things, give the former tenant more time to complete its third-party financing, which is now scheduled to be completed in the 2025 second quarter. The substantive terms of the amended forbearance and restructuring agreement include: repayment of $10 million of unpaid rent in cash, which we received on December 31, 2024; acquisition by this former tenant of certain of our facilities (with a net book value of approximately $39 million) for approximately $45 million, one of which closed in early January 2025 for approximately $3 million and we received a $20 million deposit in March 2025 in advance of two other closings; repayment of a mortgage loan; and entering into a new 20 year triple-net lease agreement of three properties with a net book value of approximately $154 million.

During the first quarter of 2025, we received and recorded approximately $5 million of rent as required by the amended forbearance and restructuring agreement.

Our primary business strategy is to acquire real estate and lease to providers of healthcare services. Typically, we directly own 100% of such investments. However, from time-to-time, we will co-invest with other investors that share a similar view that hospital real estate is a necessary infrastructure-type asset in communities. In these types of investments, we will own undivided interests of less than 100% of the real estate through unconsolidated real estate joint ventures. The underlying real estate and leases in these unconsolidated real estate joint ventures are generally structured similarly and carry a similar risk profile to the rest of our real estate portfolio.

The Utah partnership elected to apply specialized accounting and reporting for investment companies under Topic 946, which measures the underlying investments at fair value. For the quarter ending March 31, 2025, our share of the Utah partnership's favorable fair value adjustment was approximately $6 million, primarily related to its interest rate swap.

Our investments in unconsolidated operating entities are noncontrolling investments that are typically made in conjunction with larger real estate transactions in which the operators are vetted as part of our overall underwriting process. In many cases, we would

not be able to acquire the larger real estate portfolio without such investments in operators. These investments also offer the opportunity to enhance our overall return and provide for certain minority rights and protections.

For our investments marked to fair value (including our investments in PHP Holdings and Aevis), we recorded approximately $30 million in unfavorable non-cash fair value adjustments during the first three months of 2025; whereas, this was a $216 million unfavorable non-cash fair value adjustment for the same period of 2024.

In the first quarter of 2024, we sold our interest in the Priory Group ("Priory") syndicated term loan for £90 million (approximately $115 million), resulting in an approximate £6 million ($7.8 million) economic loss.

We apply a forward-looking "expected loss" model to all of our financing receivables, including financing leases and loans, based on historical credit losses of similar instruments.

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

Total Assets by Operator


	As of March 31, 2025					As of December 31, 2024
Operators	Total Assets (1)		Percentage of Total Assets			Total Assets (1)		Percentage of Total Assets
Circle Health Ltd ("Circle")	$	2,078,387		14.0	%	$	2,026,778		14.2	%
Priory		1,266,776		8.5	%		1,233,462		8.6	%
Healthcare Systems of America		1,205,404		8.1	%		1,187,006		8.3	%
Lifepoint Behavioral		817,661		5.5	%		813,584		5.7	%
Swiss Medical Network		728,874		4.9	%		719,632		5.1	%
Other operators		6,664,260		44.9	%		6,624,256		46.3	%
Other assets (2)		2,092,518		14.1	%		1,689,876		11.8	%
Total	$	14,853,880		100.0	%	$	14,294,594		100.0	%

(1)

Total assets by operator are generally comprised of real estate assets, mortgage loans, investments in unconsolidated real estate joint ventures, investments in unconsolidated operating entities, and other loans.

(2)

Includes our investment in PHP Holdings of approximately $131 million and $150 million as of March 31, 2025, and December 31, 2024, respectively - see tenant update described previously in this same Note 3.

Total Assets by U.S. State and Country (1)


	As of March 31, 2025					As of December 31, 2024
U.S. States and Other Countries	Total Assets		Percentage of Total Assets			Total Assets		Percentage of Total Assets
Texas	$	1,426,400		9.6	%	$	1,394,296		9.8	%
California		932,742		6.3	%		935,470		6.4	%
Florida		850,384		5.7	%		840,876		5.9	%
Arizona		383,582		2.6	%		379,801		2.7	%
Ohio		334,589		2.2	%		327,577		2.3	%
All other states		2,593,144		17.5	%		2,636,587		18.5	%
Other domestic assets		1,353,075		9.1	%		951,486		6.6	%
Total U.S.	$	7,873,916		53.0	%	$	7,466,093		52.2	%
United Kingdom	$	4,088,987		27.5	%	$	3,985,672		27.9	%
Switzerland		728,874		4.9	%		719,632		5.0	%
Germany		694,425		4.7	%		672,343		4.7	%
Spain		259,033		1.7	%		247,996		1.7	%
All other countries		469,202		3.2	%		464,468		3.3	%
Other international assets		739,443		5.0	%		738,390		5.2	%
Total international	$	6,979,964		47.0	%	$	6,828,501		47.8	%
Grand total	$	14,853,880		100.0	%	$	14,294,594		100.0	%

Total Assets by Facility Type (1)


	As of March 31, 2025					As of December 31, 2024
Facility Types	Total Assets		Percentage of Total Assets			Total Assets		Percentage of Total Assets
General acute care hospitals	$	8,601,253		57.9	%	$	8,493,331		59.4	%
Behavioral health facilities		2,419,999		16.3	%		2,376,460		16.7	%
Post acute care facilities		1,623,653		10.9	%		1,617,596		11.3	%
Freestanding ER/urgent care facilities		116,457		0.8	%		117,331		0.8	%
Other assets		2,092,518		14.1	%		1,689,876		11.8	%
Total	$	14,853,880		100.0	%	$	14,294,594		100.0	%

(1)

For geographic and facility type concentration metrics in the tables above, we allocate our investments in unconsolidated operating entities pro rata based on the gross book value of the real estate. Such pro rata allocations are subject to change from period to period.

On an individual property basis, our largest investment in any single property was less than 2% of our total assets as of March 31, 2025.

On a revenue basis, concentration for the quarter ended March 31, 2025 compared to the same period of 2024 is as follows:

Total Revenues by Operator

The following shows those tenants that represented 10% or more of our total revenues for the period:


	For the Three Months Ended March 31,
	2025					2024
Operators	Total Revenues		Percentage of Total Revenues			Total Revenues		Percentage of Total Revenues
Circle	$	50,711		22.7	%	$	51,012		18.8	%
Priory		24,941		11.1	%		25,882		9.5	%
CommonSpirit		—		0.0	%		29,353		10.8	%
Other operators		148,147		66.2	%		165,069		60.9	%
Total	$	223,799		100.0	%	$	271,316		100.0	%

Total Revenues by Geographic Location


	For the Three Months Ended March 31,
	2025					2024
Geographic Location	Total Revenues		Percentage of Total Revenues			Total Revenues		Percentage of Total Revenues
Total U.S.	$	116,840		52.2	%	$	163,456		60.2	%
United Kingdom		88,653		39.6	%		89,907		33.1	%
All other countries		18,306		8.2	%		17,953		6.7	%
Grand total	$	223,799		100.0	%	$	271,316		100.0	%

Total Revenues by Facility Type


	For the Three Months Ended March 31,
	2025					2024
Facility Types	Total Revenues		Percentage of Total Revenues			Total Revenues		Percentage of Total Revenues
General acute care hospitals	$	135,019		60.3	%	$	178,710		65.9	%
Behavioral health facilities		51,520		23.0	%		52,327		19.3	%
Post acute care facilities		35,256		15.8	%		34,545		12.7	%
Freestanding ER/urgent care facilities		2,004		0.9	%		5,734		2.1	%
Total	$	223,799		100.0	%	$	271,316		100.0	%