3. Real Estate and Loans Receivable

Acquisitions

We acquired the following assets:


	2016			2015			2014
	(in thousands)
Assets Acquired
Land	$	91,176		$	120,746		$	22,569
Building		654,772			741,935			241,242
Intangible lease assets — subject to amortization (weighted average useful life of 28.5 years in 2016, 30.0 years in 2015 and 18.2 years in 2014)		94,614			176,383			22,513
Net investments in direct financing leases		178,000			174,801			—
Mortgage loans		600,000			380,000			—
Other loans		—			523,605			447,664
Equity investments and other assets		70,166			101,716			33,708
Liabilities assumed		(6,319	)		(317	)		—

Total assets acquired	$	1,682,409		$	2,218,869		$	767,696
Loans repaid(1)		(193,262	)		(385,851	)		—

Total net assets acquired	$	1,489,147		$	1,833,018		$	767,696

(1)

$93.3 million loans advanced to Capella in 2015 and repaid in 2016 as a part of the Capella transaction, and $100.0 million loans advanced to Prime in 2015 and repaid in 2016 as part of the sale leaseback conversion of four properties in New Jersey. $385.9 million loans advanced to MEDIAN in 2014 and repaid in 2015 as a part of the MEDIAN transaction.

Purchase price allocations attributable to acquisitions made during the 2016 fourth quarter are preliminary. When all relevant information is obtained, resulting changes, if any, to our provisional purchase price allocation will be 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

Acquisition of Steward Portfolio

On October 3, 2016, we closed on a portfolio of nine acute care hospitals in Massachusetts operated by Steward. Our investment in the portfolio includes the acquisition of five hospitals for $600 million, the making of $600 million in mortgage loans on four facilities, and a $50 million minority equity contribution in Steward, for a combined investment of $1.25 billion. The five facilities acquired are being leased to Steward under a master lease agreement that has a 15-year term with three 5-year extension options, plus annual inflation-based escalators. The terms of the mortgage loan are substantially similar to the master lease.

Other Acquisitions

From October 27, 2016 to December 31, 2016, we acquired 12 rehabilitation hospitals in Germany for an aggregate purchase price to us of €85.2 million. Of these acquisitions, five properties (totaling €35.7 million) are leased to affiliates of MEDIAN, pursuant to a master lease agreement reached with MEDIAN in 2015. (See “2015 Activity” below for further details of this master lease). The remaining seven properties (totaling €49.5 million) are leased to affiliates of MEDIAN, pursuant to a third master lease that has terms similar to the original master lease in 2015.

On October 21, 2016, we acquired three general acute care hospitals and one free-standing emergency department and health center in New Jersey from Prime (as originally contemplated in the agreements) by reducing the $100 million mortgage loan made in September 2015 and advancing an additional $15 million. We are leasing these properties to Prime pursuant to a fifth master lease, which has a 15-year term with three five-year extension options, plus consumer-price indexed increases.

On July 22, 2016, we acquired an acute care facility in Olympia, Washington in exchange for a $93.3 million loan and an additional $7 million in cash, as contemplated in the initial Capella acquisition transaction in 2015. The terms of the Olympia lease are substantially similar to those of the master lease with Capella post lease amendment. See the Capella Disposal Transaction under the subheading “Disposals” below for further details on the terms of the Capella leases.

On June 22, 2016, we closed on the final property of the initial MEDIAN transaction that began in 2014 for a purchase price of € 41.6 million. See “2015 and 2014 Activity” for a description of the initial MEDIAN Transaction.

On May 2, 2016, we acquired an acute care hospital in Newark, New Jersey for an aggregate purchase price of $63 million leased to Prime pursuant to the fifth master lease. 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 addition will be added to the basis upon which the lessee will pay us rents.

From the respective acquisition dates in 2016 through year-end, the properties acquired during the year ended December 31, 2016, contributed $37.4 million and $31.7 million of revenue and income (excluding related acquisition expenses), respectively, for the year ended December 31, 2016. In addition, we incurred $12.1 million of acquisition-related costs on the 2016 acquisitions for the year ended December 31, 2016.

2015 Activity

Acquisition of Capella Portfolio

In July 2015, we entered into definitive agreements to acquire a portfolio of seven acute care hospitals owned and operated by Capella for a combined purchase price and investment of approximately $900 million, adjusted for any cash on hand. The transaction included our investments in seven acute care hospitals (two of which were in the form of mortgage loans) for an aggregate investment of approximately $600 million, an acquisition loan for approximately $290 million and a 49% equity interest in the ongoing operator of the facilities.

In conjunction with the acquisition, MPT Camaro Opco, LLC, a wholly-owned subsidiary of MDS, formed a joint venture limited liability company, Capella Health Holdings, LLC (“Capella Holdings”), with an entity affiliated with the senior management of Capella (“ManageCo”). MPT Camaro Opco, LLC held 49% of the equity interests in Capella Holdings and the ManageCo held the remaining 51%. Capella and its operating subsidiaries were managed and operated by ManageCo pursuant to the terms of one or more management agreements, the terms of which included base management fees payable to ManageCo and incentive payments tied to agreed benchmarks. Pursuant to the limited liability company agreement of Capella Holdings, ManageCo and MPT Camaro Opco, LLC shared profits and distributions from Capella Holdings according to a distribution waterfall under which, if certain benchmarks were met, after taking into account interest paid on the acquisition loan, ManageCo and MPT Camaro Opco, LLC shared in cash generated by Capella Holdings in a ratio of 35% to ManageCo and 65% to MPT Camaro Opco, LLC. The limited liability company agreement provided that ManageCo managed Capella Holdings and MPT Camaro Opco, LLC had no management authority or control except for certain protective rights consistent with a passive ownership interest, such as a limited right to approve certain components of the annual budgets and the right to approve extraordinary transactions.

On August 31, 2015, we closed on six of the seven Capella properties, two of which were in the form of mortgage loans. We closed on the seventh property on July 22, 2016 (as discussed above). We entered into a master lease, a stand-alone lease, and mortgage loans for the acquired properties providing for 15-year terms with four 5-year extension options, plus consumer price-indexed increases, limited to a 2% floor and a 4% ceiling annually. The acquisition loan had a 15-year term and carried a fixed interest rate of 8%.

On October 30, 2015, we acquired an additional acute hospital in Camden, South Carolina for an aggregate purchase price of $25.8 million. We leased this hospital to Capella pursuant to the 2015 master lease. In connection with the transaction, we funded an additional acquisition loan to Capella of $9.2 million.

See the Capella Disposal Transaction under the subheading “Disposals” below for an update to this transaction.

MEDIAN Transaction

During early 2015, we made additional loans (as part of the initial MEDIAN transaction discussed below under “2014 Activity”) of approximately € 240 million on behalf of MEDIAN, to complete step one of a two step process to acquire the healthcare real estate of MEDIAN. On April 29, 2015, we entered into a series of definitive agreements with MEDIAN to complete step two, which involved the acquisition of 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 annual escalations of rent at the greater of one percent or 70% of the German consumer price index.

At each closing, the purchase price for each facility was reduced and offset against the interim loans made to affiliates of Waterland and MEDIAN and against the amount of any debt assumed or repaid by us in connection with the closing. As part of this transaction, we incurred approximately $37 million of real estate transfer tax in 2015. As of December 31, 2015, we had closed on 31 of the 32 properties for an aggregate amount of € 646 million, and we had no loans outstanding to MEDIAN.

Other Acquisitions

On December 3, 2015, we acquired a 266-bed outpatient rehabilitation clinic located in Hannover, Germany from MEDIAN (formally RHM) for €18.7 million. Upon acquisition, the facility was leased back under the initial master lease with MEDIAN in 2013, providing for a remaining term of 25 years at that time and annual rent increases of 2.0% in 2017 and 0.5% thereafter. On December 31, 2020 and every three years thereafter, rent will also be increased to reflect 70% of cumulative increases in the German CPI.

On November 18, 2015, we acquired seven acute care hospitals and a freestanding clinic in northern Italy for an aggregate purchase price to us of approximately €90 million. The acquisition was effected through a newly-formed joint venture between us and affiliates of AXA Real Estate, in which we own a 50% interest. The facilities are leased to an Italian acute care hospital operator, pursuant to a long-term master lease. We are accounting for our 50% interest in this joint venture under the equity method.

On September 30, 2015, we provided a $100 million mortgage financing to Prime for three general acute care hospitals and one free-standing emergency department and health center in New Jersey. The loan had a five-year term and provided for consumer-priced indexed interest increases, subject to a floor. As previously noted above, we acquired these facilities in October 2016 by reducing the mortgage loan and advancing an additional $15 million.

On September 9, 2015, we acquired the real estate of a general acute care hospital under development located in Valencia, Spain. The acquisition was effected through a newly-formed joint venture between us and clients of AXA Real Estate, in which we will own a 50% interest. Our expected share of the aggregate purchase and development price is €21.4 million. 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 be complete on this facility in the second quarter of 2017.

On August 31, 2015, we closed on a $30 million mortgage loan transaction with Prime for the acquisition of Lake Huron Medical Center, a 144-bed general acute care hospital located in Port Huron, Michigan. The loan provided for consumer-priced indexed interest increases, subject to a floor. The mortgage loan had a five-year term with conversion rights to our standard sale leaseback agreement, which we exercised on December 31, 2015, when we acquired the real estate of Lake Huron Medical Center for $20 million, which reduced the mortgage loan accordingly. The facility is being leased to Prime under our master lease agreement.

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 LTACH, 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 operates the rehabilitation hospital in a joint venture with Covenant Health System. Effective July 18, 2016, we amended the lease of the rehabilitation hospital to include the long-term acute care hospital. Ernest’s plans are to convert the long-term acute care facility into a rehabilitation facility by the second quarter of 2017.

On February 27, 2015, we acquired an inpatient rehabilitation hospital in Weslaco, Texas for $10.7 million. We have leased this hospital to Ernest pursuant to the 2012 master lease, which had a remaining 17-year fixed term at that time and three extension options of five years each. 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. 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 in 2015 through that year end, the properties and mortgage loans acquired in 2015 contributed $102.7 million and $87.7 million of revenue and income (excluding related acquisition expenses), respectively, for the year ended December 31, 2015. In addition, we incurred $58 million of acquisition related costs on the 2015 acquisitions for the year ended December 31, 2015.

2014 Activity

MEDIAN Transaction

On October 15, 2014, we entered into definitive agreements pursuant to which we would acquire substantially all the real estate assets of MEDIAN. The transaction was structured using a two step process in partnership with affiliates of Waterland. In the first step, an affiliate of Waterland acquired 94.9% of the outstanding equity interest in MEDIAN pursuant to a stock purchase agreement with MEDIAN’s current owners. We indirectly acquired the remaining 5.1% of the outstanding equity interest and provided or committed to provide interim acquisition loans to Waterland and MEDIAN in aggregate amounts of approximately €425 million, of which €349 million had been advanced at December 31, 2014. These interim loans bore interest at a rate similar to the initial lease rate under the planned sale and leaseback transactions. See “2015 and 2016 Activity” for an update on the second step of this transaction — the sale-leaseback of the real estate.

Other Acquisitions

In the fourth quarter of 2014, we acquired three RHM (now MEDIAN) rehabilitation facilities in Germany for an aggregate purchase price of € 63.6 million (approximately $81 million based on currency exchange rates at that time) including approximately € 3.0 million (or approximately $3.6 million) of transfer and other taxes that have been expensed as acquisition costs. These facilities included: Bad Mergentheim (211 beds), Bad Tolz (248 beds), and Bad Liebenstein (271 beds). All three properties are included under our initial master lease agreement with MEDIAN in 2013.

On October 31, 2014, we acquired a 237-bed acute care hospital, associated medical office buildings, and a behavioral health facility in Sherman, Texas for $32.5 million. Alecto is the tenant and operator pursuant to a 15-year lease agreement with three five-year extension options. In addition, we funded a working capital loan of $7.5 million, and we obtained a 20% interest in the operator of the facility.

On September 19, 2014, we acquired an acute care hospital in Fairmont, West Virginia for an aggregate purchase price of $15 million from Alecto. The facility was simultaneously leased back to the seller under a 15-year initial term with three five-year extension options. In addition, we made a $5 million working capital loan to the tenant with a five year term and a commitment to fund up to $5 million in capital improvements. Finally, we obtained a 20% interest in the operator of this facility.

On July 1, 2014, we acquired an acute care hospital in Peasedown St. John, United Kingdom from Circle Health Ltd. (“Circle”), through its subsidiary Circle Hospital (Bath) Ltd. The sale/leaseback transaction, excluding any transfer taxes, was valued at approximately £28.3 million (or approximately $48.0 million based on exchange rates at that time). The lease has an initial term of 15-years with a tenant option to extend the lease for an additional 15 years. The lease includes annual rent increases, which will equal the year-over-year change in the retail price index with a floor of 2% and a cap of 5%. With the transaction, we incurred approximately £1.1 million (approximately $1.9 million) of transfer and other taxes that have been expensed as acquisition costs.

On March 31, 2014, we acquired a general acute care hospital and an adjacent parcel of land for an aggregate purchase price of $115 million from a joint venture of LHP Hospital Group, Inc. and Hackensack University Medical Center Mountainside. The facility was simultaneously leased back to the seller under a lease with a 15-year initial term with a 3-year extension option, followed by a further 12-year extension option at fair market value. The lease provides for consumer price-indexed annual rent increases, subject to a specified floor and ceiling. The lease includes a customary right of first refusal with respect to a subsequent proposed sale of the facility.

From the respective acquisition dates in 2014 through that year end, the 2014 acquisitions contributed $12.4 million and $8.7 million of revenue and income (excluding related acquisition and financing expenses) for the period ended December 31, 2014. In addition, we incurred $26.4 million of acquisition related expenses in 2014, of which $25.2 million (including $5.8 million in transfer taxes as part of our MEDIAN and Circle transactions) related to acquisitions consummated as of December 31, 2014.

Pro Forma Information

The following unaudited supplemental pro forma operating data is presented below as if each acquisition was completed on January 1, 2015 and January 1, 2014 for the year ended December 31, 2016 and 2015, respectively. The unaudited supplemental pro forma operating data is not necessarily indicative of what the actual 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 Year Ended December 31, (Unaudited)
	2016		2015
Total revenues	$	627,583	$	624,443
Net income		310,019		306,756
Net income per share/unit	$	0.97	$	0.96

Development Activities

2016 Activity

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

•

Adeptus Health — We completed 19 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 $18.4 million 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.

On August 23, 2016, we entered into an agreement to finance the development of and lease an inpatient rehabilitation facility in Flagstaff, Arizona, for $28.1 million, which will be leased to Ernest pursuant to a stand-alone lease, which has terms generally similar to the original master lease. The facility is expected to be completed in the third quarter of 2017.

2015 Activity

During 2015, we completed construction and began recording rental income on the following facilities:

•

Adeptus Health — We completed 17 acute care facilities for this tenant during 2015 totaling $102.6 million. Fourteen of these facilities are leased pursuant to the master lease entered into in 2014 and are cross-defaulted with the original master lease executed with Adeptus Health in 2013. Three properties are leased pursuant to the master lease entered into in 2015 and are cross-defaulted with the master leases entered into in 2014 and 2013.

•

UAB Medical West — This $8.6 million acute care facility and medical office building located in Birmingham, Alabama is leased to Medical West, an affiliate of The University of Alabama at Birmingham, for 15 years and contains four renewal options of five years each. The rent increases 2% annually.

In April 2015, we executed an agreement with Adeptus Health that provides for the acquisition and development of general acute care hospitals and free standing emergency facilities with an aggregate commitment of $250 million. These facilities will be leased to Adeptus Health pursuant to the terms of the 2014 and 2015 master lease agreements that have a 15-year initial term with three extension options of five years each that provide for annual rent increases based on changes in the CPI with a 2% minimum. With this commitment, along with similar agreements entered into in 2014 and 2013, we have committed to fund up to $500 million in acute care facilities with Adeptus Health. At December 31, 2016, we have 54 completed and open facilities and five still under construction. See table below for an update on our remaining commitments to Adeptus Health.

2014 Activity

During 2014, we completed construction and began recording rental income on the following facilities:

•

Northern Utah Rehabilitation Hospital — This $19 million inpatient rehabilitation facility located in South Ogden, Utah is leased to Ernest pursuant to the 2012 master lease.

•

Oakleaf Surgical Hospital — This approximately $30 million acute care facility located in Altoona, Wisconsin. This facility is leased to National Surgical Hospitals for 15 years and contains two renewal options of five years each plus an additional option for nearly another five years, and the rent increases annually based on changes in the consumer price-index.

•

Adeptus Health — We completed 17 acute care facilities for this tenant during 2014 totaling approximately $83.0 million. These facilities are leased pursuant to the master lease entered into in 2013.

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


Operator	Commitment		Costs Incurred as of 12/31/16		Estimated Completion Date
Adeptus Health	$	5,848	$	2,710		1Q 2017
Adeptus Health		67,185		44,948		2Q 2017
Ernest Health		28,067		4,342		4Q 2017
Adeptus Health		7,804		1,648		1Q 2018
Adeptus Health		53,866		—		Various

	$	162,770	$	53,648

Disposals

2016 Activity

Capella Disposal Transaction

On March 21, 2016, we entered into definitive agreements with 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 would be merged with RegionalCare, forming 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 original Capella acquisition 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 (which was subsequently converted to real estate on July 22, 2016 as previously disclosed). 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 (to 13.5 years for the master lease and 11.5 years for the other stand-alone lease) , 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 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.

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. 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 the sale of 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 July 20, 2016, we sold three inpatient rehabilitation hospitals located in Texas and operated by HealthSouth for $111.5 million, resulting in a net gain of approximately $45 million.

Summary of Operations for Disposed Assets in 2016

The properties sold during 2016 did 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 Disposal Transaction) for the periods presented (in thousands):


	For the Year Ended December 31,
	2016			2015			2014
Revenues	$	7,851		$	18,112		$	18,225
Real estate depreciation and amortization		(1,754	)		(3,795	)		(3,789	)
Property-related expenses		(114	)		(121	)		(60	)
Other income (expense)		(23	)		1,079			462

Income from real estate dispositions, net	$	5,960		$	15,275		$	14,838

2015 Activity

On July 30, 2015, we sold a long-term acute care facility in Luling, Texas for approximately $9.7 million, resulting in a gain of $1.5 million. Due to this sale, we wrote off $0.9 million of straight-line receivables. On August 5, 2015, we sold six wellness centers in the U.S. for total proceeds of approximately $9.5 million (of which $1.5 million is in the form of a promissory note), resulting in a gain of $1.7 million. Due to this sale, we wrote off $0.9 million of billed rent receivables. With these disposals, we accelerated the amortization of the related lease intangible assets resulting in approximately $0.7 million of additional expense.

The sale of the Luling facility and the six wellness centers were not strategic shifts in our operations, and therefore the results of operations related to these facilities were not reclassified as discontinued operations.

2014 Activity

On December 31, 2014, we sold our La Palma facility for $12.5 million, resulting in a gain of $2.9 million. Due to this sale, we wrote-off $1.3 million of straight-line rent receivables.

On May 20, 2014, the tenant of our Bucks facility gave notice of their intent to exercise the lease’s purchase option. Pursuant to this purchase option, the tenant acquired the facility on August 6, 2014 for $35 million. We wrote down this facility to fair market value less cost to sell, resulting in a $3.1 million real estate impairment charge in the 2014 second quarter.

The sale of the Bucks and La Palma facilities was not a strategic shift in our operations, and therefore the results of the Bucks and La Palma operations were not reclassified as discontinued operations.

Intangible Assets

At December 31, 2016 and 2015, our intangible lease assets were $296.2 million ($263.8 million, net of accumulated amortization) and $257.0 million ($231.7 million, net of accumulated amortization), respectively.

We recorded amortization expense related to intangible lease assets of $13.4 million, $9.1 million, and $7.0 million in 2016, 2015, and 2014, respectively, and expect to recognize amortization expense from existing lease intangible assets as follows (amounts in thousands):


For the Year Ended December 31:
2017	$	22,130
2018		22,069
2019		22,021
2020		21,818
2021		21,751

As of December 31, 2016, capitalized lease intangibles have a weighted average remaining life of 22.1 years.

Leasing Operations

All of our leases are accounted for as operating leases, except we are accounting for 15 Ernest facilities and ten Prime facilities as DFLs. The components of our net investment in DFLs consisted of the following (in thousands):


	As of December 31, 2016			As of December 31, 2015
Minimum lease payments receivable	$	2,207,625		$	2,587,912
Estimated residual values		407,647			393,097
Less unearned income		(1,967,170	)		(2,354,013	)

Net investment in direct financing leases	$	648,102		$	626,996

Minimum rental payments due to us in future periods under operating leases and DFLs, which have non-cancelable terms extending beyond one year at December 31, 2016, are as follows (amounts in thousands):


	Total Under Operating Leases		Total Under DFLs		Total
2017	$	386,058	$	62,419	$	448,477
2018		388,808		63,668		452,476
2019		392,577		64,941		457,518
2020		395,339		66,240		461,579
2021		400,607		67,565		468,172
Thereafter		7,077,794		1,673,600		8,751,394

	$	9,041,183	$	1,998,433	$	11,039,616

Adeptus Health

On November 1, 2016, Adeptus Health announced their 2016 third quarter results showing a decline in net income over the prior year and disclosing collection issues associated with a third party billing agent among other things. At December 31, 2016, we have no outstanding receivables due from this tenant. Furthermore, Adeptus Health is current on its rent obligations to us through February 2017. In addition, we currently hold letters of credit approximating $12.4 million. At December 31, 2016, we have approximately $400 million invested in 59 properties (including five properties still under development) that are leased, pursuant to master lease agreements, to Adeptus Health, along with additional funding commitments as disclosed earlier. This investment represents approximately 7% of our total assets at December 31, 2016. At December 31, 2016, we believe this investment is fully recoverable; however, no assurances can be made that we will not have any impairment charges related to this investment in the future.

Hoboken Facility

In the 2015 third quarter, a subsidiary of the operator of our Hoboken facility acquired 10% of our subsidiary that owns the real estate for $5 million, which is reflected in the non-controlling interest line of our consolidated balance sheets.

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. As a result of the lease terminating, we recorded a charge of $1.9 million to reserve against the straight-line rent receivables. In addition, we accelerated the amortization of the related lease intangible asset resulting in $0.5 million of additional expense during 2015. This former tenant has continued to occupy the facility. During the third quarter of 2016, the tenant paid us 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 in 2017. The tenant is current on all of its obligations to us through February 2017. 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 December 31, 2016 is fully recoverable.

Monroe Facility

During 2014, the previous operator of our Monroe facility continued to underperform and became further behind on payments to us as required by the real estate lease agreement and working capital loan agreement. In August 2014, this operator filed for bankruptcy. Based on these developments and the fair value of our real estate and the underlying collateral of our loan (using Level 2 inputs), we recorded a $47.0 million impairment charge in 2014. Effective December 31, 2014, the bankruptcy court approved the purchase by Prime of the assets of the prior operator. Prime leases the facility from us pursuant to terms under an existing master lease. Prime has been current on its rent since lease inception. At December 31, 2016, our investment in Monroe is approximately $36 million, which we believe is fully recoverable.

Loans

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


	As of December 31, 2016					As of December 31, 2015
	Balance		Weighted Average Interest Rate			Balance		Weighted Average Interest Rate
Mortgage loans	$	1,060,400		8.8	%	$	757,581		9.5	%
Acquisition loans		121,464		13.7	%		610,469		9.1	%
Working capital and other loans		34,257		9.0	%		54,353		10.2	%

	$	1,216,121				$	1,422,403

Our mortgage loans cover 12 of our properties with four operators. The increase in mortgage loans relates to the loans made to Steward totaling $600 million for four properties in October 2016, partially offset by the repayment of two loans for $210 million by RCCH (formally Capella) and the conversion of a $100 million mortgage loan to Prime into a sale/leaseback of the property — See “2016 Activity” under the Disposal and Acquisition sections for more details.

Other loans typically consist of loans to our tenants for acquisitions and working capital purposes. At December 31, 2016, acquisition loans include our $115 million of loans to Ernest. The Capella acquisition loans of approximately $489 million at December 31, 2015 were paid in full during 2016 — See “2016 Activity” under the Disposal section for more details.

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. On October 1, 2016, we converted the remaining $3.3 million of our convertible note into a 15.1% of equity interest in the operator for a total 25% equity interest in the operator.

Concentration of Credit Risks

Revenue by Operator

(Dollar amounts in thousands)


	For the Years Ended December 31,
	2016					2015
Operators (A)	Total Revenue		Percentage of Total Revenue			Total Revenue		Percentage of Total Revenue
Prime	$	120,558		22.3	%	$	104,325		23.6	%
MEDIAN		93,425		17.3	%		78,540		17.8	%
Ernest		67,742		12.5	%		61,988		14.0	%
RCCH		52,720		9.7	%		28,567		6.4	%
Other operators		206,692		38.2	%		168,458		38.2	%

Total	$	541,137		100.0	%	$	441,878		100.0	%

(A) Steward is not included herein as the Steward transaction closed on October 3, 2016.

Revenue by U.S. State and Country

(Dollar amounts in thousands)


	For the Years Ended December 31,
	2016					2015
U.S. States and Other Countries	Total Revenue		Percentage of Total Revenue			Total Revenue		Percentage of Total Revenue
Texas	$	96,992		17.9	%	$	87,541		19.8	%
California		66,197		12.2	%		66,120		15.0	%
New Jersey		39,084		7.2	%		27,688		6.3	%
Massachusetts		26,098		4.8	%		69		0.0	%
Arizona		23,798		4.4	%		21,188		4.8	%
Other States		187,363		34.7	%		156,256		35.3	%

Total U.S.	$	439,532		81.2	%	$	358,862		81.2	%

Germany	$	97,382		18.0	%	$	78,540		17.8	%
United Kingdom, Italy, and Spain		4,223		0.8	%		4,476		1.0	%

Total International	$	101,605		18.8	%	$	83,016		18.8	%

Total	$	541,137		100.0	%	$	441,878		100.0	%

From an asset perspective, approximately 80% of our total assets are in the U.S., while 20% reside in Europe (primarily Germany) as of December 31, 2016, consistent with December 31, 2015.

Related Party Transactions

Lease and interest revenue earned from tenants in which we have an equity interest in were $282.9 million, $215.4 million and $101.8 million in 2016, 2015 and 2014, respectively.