Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2025

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

10. Fair Value of Financial Instruments

We have various assets and liabilities that are considered financial instruments. We estimate that the carrying value of cash and cash equivalents and accounts payable and accrued expenses approximate their fair values. We estimate the fair value of our interest and rent receivables using Level 2 inputs such as discounting the estimated future cash flows using the current rates at which similar receivables would be made to others with similar credit ratings and for the same remaining maturities. The fair value of our mortgage loans and other loans are estimated by using Level 2 inputs such as discounting the estimated future cash flows using the current rates which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. We determine the fair value of our senior notes using Level 2 inputs such as quotes from securities dealers and market makers. We estimate the fair

value of our revolving credit facility and term loans using Level 2 inputs based on the present value of future payments, discounted at a rate which we consider appropriate for such debt.

Fair value estimates are made at a specific point in time, are subjective in nature, and involve uncertainties and matters of significant judgment. Settlement of such fair value amounts may not be a prudent management decision.

The following table summarizes fair value estimates for our financial instruments (in thousands):

	December 31, 2025							December 31, 2024
Asset (Liability)	Book Value				Fair Value			Book Value				Fair Value
Interest and rent receivables	$	19,210			$	19,907		$	36,327			$	36,432
Loans(1)		624,243		(2)		624,369			467,120		(2)		470,380
Debt, net		(9,697,835	)			(8,980,547	)		(8,848,112	)			(7,301,395	)

(1)Includes all loan investments other than those accounted for under the fair value option method, as noted below.

(2)Includes $7.5 million and $7.9 million of mortgage loans, a $388.9 million and $315.5 million shareholder loans included in investments in unconsolidated real estate joint ventures, $45.4 million and $39.7 million of loans that are part of our investments in unconsolidated operating entities, and $182.4 million and $104.0 million of other loans at December 31, 2025 and December 31, 2024, respectively.

Items Measured at Fair Value on a Recurring Basis

Our equity investment and related loan to the international joint venture, our loan investment in the real estate of three hospitals operated by subsidiaries of the international joint venture in Colombia, and our investment in PHP Holdings (which was sold in July 2025) are measured at fair value on a recurring basis as we elected to account for these investments using the fair value option at the point of initial investment. We elected to account for these investments at fair value due to the size of the investments and because we believed this method was more reflective of current values.

At December 31, 2025 and 2024, the amounts recorded under the fair value option method were as follows (in thousands):

	December 31, 2025				December 31, 2024
Asset (Liability)	Fair Value		Original Cost		Fair Value		Original Cost		Asset Type Classification
Mortgage loans	$	116,113	$	151,692	$	111,985	$	129,968	Mortgage loans
Equity investment and other loans		4,285		264,160		154,229		910,594	Investments in unconsolidated operating entities/Other loans

Our loans to the international joint venture and its subsidiaries are recorded at fair value by discounting the estimated future contractual cash flows using a credit-adjusted rate of return, which is derived from market rates of return on similar loans with similar credit quality and remaining maturity. Our equity investment in the international joint venture and our investment in PHP Holdings (as of December 31, 2024 only) are recorded at fair value by using a market approach (for our equity investment in the international joint venture) and a market approach based on the agreed upon price in the transaction (for our investment in PHP Holdings), which requires significant estimates of our investee, such as projected revenue, expenses, and working capital, and appropriate consideration of the underlying risk profile of the forecasted assumptions associated with the investee. We classify our valuations of these investments as Level 3, as we use certain unobservable inputs to the valuation methodology that are significant to the fair value measurement, and the valuations require management judgment due to the absence of quoted market prices. For the market approach model used for our investment in PHP Holdings (as of December 31, 2024 only), our unobservable inputs include purchase price adjustments related to expected balance sheet values at the time of the transaction close, and an adjustment for a marketability discount ("DLOM") of 14.2%. In regard to the underlying projections used in the discounted cash flow model for our investment in the international joint venture, such projections are provided by the investees. However, we may modify such projections as needed based on our review and analysis of historical results, meetings with key members of management, and our understanding of trends and developments within the healthcare industry.

In 2025, we recorded a net unfavorable adjustment to the investments accounted for under the fair value option method of approximately $169 million, primarily related to our investment in three hospitals in Colombia and our investment in PHP Holdings. In 2024, we recorded a net unfavorable adjustment to the investments accounted for under the fair value option method of approximately $790 million, primarily related to the loan to the international joint venture and our investment in PHP Holdings.

Items Measured at Fair Value on a Nonrecurring Basis

In addition to items that are measured at fair value on a recurring basis, we have assets and liabilities that are measured, from time-to-time, at fair value on a nonrecurring basis, such as for impairment purposes of our real estate, financial instruments, and for certain equity investments without a readily determinable fair value.

Impairment and Fair Value Adjustments of Non-Real Estate Investments

2024

Prior to the global settlement in September 2024 (as described in Note 3 to the consolidated financial statements) in which our claims were released, our non-real estate investments in Steward and related affiliates included our 9.9% equity investment, working capital and other secured loans, and a loan made to a Steward affiliate in 2021, proceeds of which were used to redeem a similarly sized convertible loan held by Steward’s former private equity sponsor. In addition, the loan to the international joint venture was collateralized by the equity of Steward held by an investor in both Steward and the international joint venture. To assess recovery of these investments, we performed a valuation of Steward’s business at March 31, 2024, with assistance from a third-party, independent valuation firm. The valuation approaches utilized included the cost, market, and income approaches. The fair value analysis was performed under a non-going concern, orderly liquidation premise of value and assuming normal exposure to market participants. We utilized this premise of value due to Steward’s ongoing financial distress and subsequent filing of bankruptcy. Accordingly, the valuation approaches used, including the Level 3 inputs, were based on the financial performance of the Steward assets. For profitable hospitals, Level 3 inputs included a weighted average EBITDA multiple of 6.48x from a selected range of 5x to 7x in reference to comparable transactions. We also used a weighted average discount rate of 15.03% from a selected range of 15% to 16%. For unprofitable hospitals, Level 3 inputs included a weighted average net revenue multiple of 0.275x from a selected range of 0.25x to 0.30x in reference to comparable transactions. We also considered the reported book values inclusive of various adjustments for unprofitable hospitals. After reducing the derived fair value of Steward's business for Steward's secured debt (including our working capital and other secured loans) and their working capital deficit, we arrived at only a nominal remaining value that could not support the carrying value of the loan to a Steward affiliate from 2021 or our remaining 9.9% equity investment. In addition, the value of the investor's share of the remaining 90.1% of Steward's equity that collateralized the loan to the international joint venture was deemed insufficient to support recovery of this investment. As a result, we recorded impairment charges and negative fair value adjustments in the 2024 first quarter of approximately $625 million, as discussed further in Note 3 to the consolidated financial statements.

In the third quarter of 2024, as a result of the Company’s global settlement with Steward (as discussed further in Note 3 to the consolidated financial statements), the Company recorded impairment charges of approximately $425 million for the working capital loans and other secured loans previously advanced to Steward.

2023

To assess recovery of our non-real estate investments in Steward in 2023, along with the $219 million loan to the international joint venture that was collateralized by the equity of Steward held by an investor in both Steward and the international joint venture, we performed a valuation of Steward's business at December 31, 2023, with assistance from a third-party, independent valuation firm, using a market valuation approach, with Level 3 inputs including the selected revenue multiple range of 0.50x to 0.60x in reference to comparable transactions. After reducing the derived fair value for the loans to Steward discussed above, we arrived at a fair value for Steward's equity. We then compared our equity investment's carrying value to our 9.9% share of the fair value of Steward's equity, which resulted in the need for an impairment charge of approximately $90 million. The value of the investor's share of the remaining 90.1% of Steward's equity that collateralized the loan to the international joint venture was deemed sufficient to support recovery of this investment at that time.

Impairment of Real Estate Investments

See the Steward and Prospect subheadings under "Leasing Operations (Lessor)" in Note 3 to the consolidated financial statements for a discussion around the use of fair value and related assumptions in the impairment of our real estate investments.

Equity Investments Without a Readily Determinable Fair Value

For our equity investment in Swiss Medical (which does not have a readily determinable fair value), we marked our investment to fair value in the 2023 third quarter based on the price paid by a new investor in the same security, resulting in a CHF 20 million favorable adjustment.