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April 26, 2005
Mail Stop 0409
Edward K. Aldag, Jr.
Chairman, President, Chief Executive Officer and Secretary
Medical Properties Trust, Inc.
1000 Urban Center Drive, Suite 501
Birmingham, Alabama 35242
Re: Medical Properties Trust, Inc.
Amendment No. 2 to
Registration Statement on Form S-11, Filed April 7, 2005
Registration No. 333-119957
Dear Mr. Aldag:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We have received your letter dated April 18, 2005 and the
accompanying materials. We will provide comments, if any, on the
opinions, directed share materials and supplemental materials in
our
next letter.
2. We note your response to prior comment 1. With respect to the
probable acquisitions and developments for which you expect to use
the net proceeds of this offering, please provide a supplemental
analysis of whether the transaction agreements, including the
letters
of commitment, are binding on and enforceable by the parties
thereto.
In particular, please identify whether you or the seller may
terminate these agreements at your discretion without legal
consequence. Please include a statement as to whether or not you
have conferred with your counsel with respect to the
enforceability
of these agreements. Furthermore, please confirm that you
consider
each of these acquisitions and developments probable for purposes
of
Rule 3-14 of Regulation S-X.
3. We have read and considered your response to comment 3. Please
address the following comments.
a. We will await the inclusion of pro forma per share information
in
the next amendment to the registration statement.
b. Refer to the tax status of the dividends declared in 2004 and
2005
on page 43. Explain to us why you believe $0.21 per share of the
distributions in 2004 represent ordinary income while the
remaining
$0.08 per share declared are undeterminable until the end of 2005.
Also, please address the status of the $0.11 per share
distribution
you declared in March 2005 in your revised disclosure.
Cover Page
4. We have reviewed your response to Comment 6 from our last
comment
letter regarding the potential that the debt payments by Vibra may
be
recharacterized as equity which could have the effect of causing
you
to violate the REIT requirements. We believe that the risk is
sufficiently material to warrant disclosure on the cover page.
Please revise.
Summary
Our Company, page 1
5. We refer to your statement that you lease your facilities to
"experienced healthcare operators." This statement does not
appear
to be accurate in light of the fact that 6 of the 7 facilities you
own are leased to Vibra who has limited operations and is newly
formed. Please revise to remove your statement that you lease
your
properties to experienced operators.
Our Current Portfolio of Facilities, page 2
6. Since the 2005 and 2006 contractual based rent and the
projected
development costs for your development properties are estimates,
please provide this information in a separate table.
Our Pending Acquisitions and Developments, page 4
7. Since the gross purchase price for your development properties
and
the Hammond, Louisiana property are estimates, please provide this
information in a separate table.
Summary Risk Factors, page 7
8. We note your response to comment 5. Please revise the summary
risk factor and the risk factor on page 37 to first state that
Friedman, Billings, Ramsey & Co., Inc. has interests in the
offering
other than underwriting discounts and commissions. Next, include
a
description of its share holdings and the engagement agreement.
Finally, please include disclosure regarding the fact that FBR has
an
incentive, as a result of its position as a large shareholder, to
ensure that the offering will go through which could affect the
level
of due diligence it conducts.
Distribution Policy, page 12
9. Please disclose the estimated return of capital percentages for
the dividends.
Risk Factors, page 16
10. We refer to the introductory paragraph on page 16. Please
remove
your statement that "additional risks and uncertainties not
presently
known to us, or not identified below, may also materially affect
our
business, liquidity, financial condition and results of
operations."
Your disclosure should include all known material risks. Please
revise accordingly.
Failure by our tenants to repay loans currently outstanding or
loans
we have committed to make or to pay us commitment or other fees
that
they are obligated to pay, in an aggregate amount of approximately
$44.1 million, would have a material adverse effect on our
revenues
and our ability to make distributions to our stockholders, page
18.
11. Please disclose that Vibra failed to comply with the loan
covenants and that you have recently amended the agreement.
12. Please disclose the amount of the Merrill facility.
Our facilities are currently leased to only three tenants, two of
which were recently organized and have limited or no operating
histories, and failure of any of these tenants and the guarantors
of
their leases to meet their obligations to us would have a material
adverse effect on our revenues and our ability to make
distributions
to our stockholders, page 19
13. Please clarify that nearly half of the assets of Vibra are
goodwill, or intangible assets.
Our tenants are subject to fraud and abuse laws, the violation of
which by a tenant may jeopardize the tenant`s ability to make
lease
and loan payments to us, page 28.
14. Please revise this risk factor to include statements similar
to
those added to page 65 regarding your ability to comply with these
regulations.
Use of Proceeds, page 39
15. Please revise to separately identify the amount of proceeds to
be
used for each pending acquisition and development.
Distribution Policy, page 43
16. Since you have a limited operating history it is important for
investors to understand the extent that your historical dividends
represent a return of capital. The current disclosure does not
provide such an understanding. Please disclose the actual or
approximate percentage of your historical dividends that represent
a
return of capital or supplementally advise us why this is not
possible.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 46
Disclosure of Contractual Obligations, page 50
17. Please include your long term debt obligations in the table.
Refer to Item 303 of Regulation S-K.
Our Portfolio, page 69
Vibra Facilities and Loans, page 70
18. Please briefly disclose the financial covenants with which
Vibra
was not in compliance when the leases were amended on March 31,
2005.
Desert Valley Facilities-Expansion Commitment, page 75
19. Please provide additional detail regarding the commitment,
including the interest rate and maturity of the loan.
Our Pending Acquisitions and Developments, page 80
20. We note your use of the phrase "we expect" to describe the
anticipated transaction terms. Please revise the disclosure in
this
section to distinguish between transaction terms that are provided
for in a binding purchase contract or letter of commitment, and
transaction terms you expect to negotiate but that are not subject
to
a binding agreement.
21. Please supplementally provide us with your analysis with
respect
to the potential for integration of the offers and sales of
operating
partnership units that may be issued in the Covington and Denham
Springs transactions.
Other Letters of Commitment, page 88
22. Please update, as necessary, to indicate whether the
definitive
documents relating to the DSI development project have closed
prior
to April 30, 2005 or whether either party requested a 30-day
extension.
United States Federal Income Tax Considerations, page 112
23. We note your response to comment 25. However, it is not clear
from the new disclosure that your counsel has opined that you have
satisfied the REIT operational requirements.
Underwriting, page 132
24. It appears that your estimate of the offering expenses you
will
pay excludes the amounts to be reimbursed to the selling
stockholders
and Friedman, Billings, Ramsey & Co., Inc. Please revise the
estimate to include these amounts.
Unaudited Pro Forma Consolidated Financial Information
25. Refer to footnotes (2) and (3) regarding your pro forma
adjustments for the Desert Valley and Gulf States acquisitions.
Please clearly label on the face of the pro forma financial
statements and the related footnotes, which of these acquisitions
are
completed and which are probable. As previously requested,
present
the effect of completed acquisitions with a subtotal column before
the adjustments for the probable transactions.
26. We note from pages 4 and 5 that you identify several pending
acquisitions that are under contract or letter of commitment.
Reconcile these acquisitions with the ones you indicated in
footnote
(3). In that regard, tell us and clarify which acquisitions are
probable and how you applied Rule 3-14 of Regulation S-X for these
acquisitions.
27. Refer to footnote (5). We note your pro forma adjustments to
give effect to the compensation expense as a result of restricted
stock awards issued to senior management and other employees upon
the
completion of the offering. In that regard, explain and disclose
your methodologies in calculating the expense in the footnote.
28. In footnote (6) you state that depreciation was calculated as
though "constructing and occupying the properties was completed on
January 1, 2004". Please confirm and revise your disclosures as
appropriate to clarify that you are not including the effects of
property acquisitions prior to completion of the construction.
29. Refer to footnote (7). We cannot locate your pro forma
adjustment
to give effect to the loan made in the pro forma balance sheet.
Please explain or revise accordingly.
30. Explain why you did not include pro forma adjustments to give
effect of your distribution of $0.11 per share declared in March
2005
or revise to provide the adjustments in your next amendment.
Reference is made to SAB Topic 1.B.3.
Medical Properties Trust
Financial Statements for the year ended December 31, 2004
Report of Independent Registered Public Accounting Firm, page F-8
31. Revise to delete the legend included in your audit opinion and
the similar wording in Exhibit 23.1 in your amendment to the
registration statement.
Financial Statements and Notes
Note 2. Summary of Significant Accounting Policies
New Accounting Pronouncements, page F-17
32. You state that the adoption of SFAS 123(R) is expected to have
material impact on the financial statements of the Company
commencing
with the third quarter of the year ending December 31, 2006. So
we
may better understand your disclosures, explain to us and disclose
why the impact will become material beginning the third quarter of
2006. Revise the disclosure on page 50 to disclose the material
impact you anticipate upon adoption.
Unbilled Rent Receivable and Unbilled Rent
33. Reference is made to Note 2 on page F-17. You state that the
fair value of unbilled rent receivable has been estimated based on
expected payment dates and discounted at a rate which the Company
considers appropriate for such assets considering their credit
quality and maturity. Please clarify the nature of the discounts
recorded, whether they represent an allowance for credit losses
and
your basis in GAAP for discounting these amounts. Advise us and
clarify your accounting policy for determining the amounts of
unbilled rent receivable and unbilled rent revenue in the
financial
statements. Supplementally advise us why you have such a
significant
amount of unbilled revenue and confirm that it represents effect
of
straight-lined rents for the respective periods in the financial
statements.
Note 4. Long-term Debt and Loan Payable
34. We have read and considered your response to comment 34.
Please
expand your disclosure to include your representation that the
differences in using the intrinsic method and another fair value
method as prescribed by SFAS 123 would not be materially
different.
Note 5. Commitments and Contingencies, page F-19
35. To provide transparency, tell us and disclose, if material,
the
amount of the provision you recorded related to the settlement
offer
to a former consultant pursuant to the terminated consulting
agreement.
Note 7. Leasing Operations, page F-21
36. Reference is made to the last paragraph of your footnote. Are
there two different lease rates in effect for these properties
based
on whether the property is in the development or operational
phase?
Please clarify the rental revenue recognition for properties
during
the construction and operating period and your basis in GAAP for
your
treatment.
Vibra Financial Statements
37. We have reviewed and considered your response to comment 35.
In
light of the brief operating history of the tenant, financial
statements of the guarantors should also be included to satisfy
the
reporting requirements under Rule 3-14 of Regulation S-X.
Further,
expand your disclosures as appropriate to clarify the limitations
to
the resources available to the guarantors as described in your
response.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Andrew Mew at (202) 942-2913 or Cicely
Luckey,
Accounting Branch Chief, at (202) 942-1975 if you have questions
regarding comments on the financial statements and related
matters.
Please contact Michael McTiernan, Attorney-Advisor, at (202) 824-
5445, or me at (202) 942-1971 with any other questions.
Sincerely,
Owen Pinkerton
Senior Counsel
cc: Thomas O. Kolb, Esq. (via facsimile)
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
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Medical Properties Trust, Inc.
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