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November 24, 2004
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.
Registration Statement on Form S-11, Filed October 26, 2004
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 note that you intend to elect to be taxed as a REIT and that
your offering appears to constitute a "blind-pool" offering.
Accordingly, please revise to include prior performance
information
required under Item 8 and Appendix II of Industry Guide 5 and any
other applicable Guide 5 disclosures. Refer to Release 33-6900.
If
you do not believe your offering constitutes a "blind-pool"
offering,
please supplementally explain the basis for that belief.
2. Please supplementally provide us with your analysis with
respect
to the potential for integration of the offers and sales of common
stock issued in the private placements described in Item 33 of the
registration statement with the public offering of common stock
covered by the prospectus, including a discussion of any relevant
staff interpretations. In particular, please address the timing
of
resales that were made by Friedman Billings.
3. In the "Summary " and "Our Business" sections of the prospectus
you reference and rely on certain demographic and market data.
Please provide us with copies of the relevant portions of the
publications that include the information consistent with the
statements in the prospectus.
4. We note that throughout the prospectus you use the phrase "we
believe" or similar statements with respect to market trends or
conditions that support your business strategy. For example, see:
* p. 1 "Industry sources indicate that the U.S. healthcare
delivery
system is becoming..."
* p. 1 "We believe that this change is the result of..."
* p.1 "In response to these trends, we believe that..."
* p. 7 "We believe that a significant part of this healthcare
construction spending..."
* p. 56 "We believe that healthcare services are increasingly
delivered through smaller, more accessible facilities..."
* p. 57 "In our experience, the percentage of physicians and other
healthcare professionals who practice in a recognized
specialty..."
* p. 57 "We believe that healthcare service providers are
increasingly seeking to provide specific services..."
Please provide supplemental support for these statements.
5. Supplementally, please provide us with any pictures, graphics
or
artwork that will be used in the prospectus.
6. Please revise to include the market information disclosures
required by Item 201(a) of Regulation S-K with respect to the
trading
of your common stock on the Portal Market or tell us
supplementally
why you do not believe those disclosures are required.
7. If the age of your financial statements will be more than 134
days
from the effective date of your Registration Statement, please
update
the financial statements in your next amendment. Refer to Rule 3-
12
of Regulation S-X.
Prospectus Cover Page
8. We note the disclosure that the risk factors section contains
"some of the most significant risks..." The risk factor section
should disclose all of the most significant risks relevant to an
investment in your common stock. Refer to Item 503 of Regulation
S-
K. Please revise the sentence accordingly.
Summary
9. Please disclose when you purchased the Highmark Facilities,
including the material terms of the acquisition. In connection
with
this, we note a press release dated July 8, 2004, from Highmark
Healthcare announcing that it closed on the acquisition of these
properties through financing from Medical Properties Trust, Inc.
Please advise us as to whether you subsequently acquired these
properties from Highmark or whether the press release inaccurately
presented the nature of the transaction.
Our Company, page 1
10. We note the disclosure that your strategy distinguishes you as
a
"unique investment alternative" among REITs. Please
supplementally
explain how your strategy is unique compared to your REIT
competitors
in the healthcare REIT sector.
11. Please include in the summary a description of your two
tenants.
Acquisition Facilities, page 3
12. We note that the tables disclose "Prospective Tenants" and
"Projected Base Rents." Please note that the disclosure of
tenants
and base rent amounts are not appropriate unless you have a signed
lease or binding commitment from such tenants.
Competitive Strengths, page 5
13. Certain of your disclosure under this heading is repeated
elsewhere in the summary section. Please revise to remove
duplicative disclosure found in the summary section.
Summary Risk Factors, page 6
14. In the sixth and twelfth bullets, please quantify the risk by
disclosing the amounts currently outstanding. Similarly, please
quantify the amount of dilution that investors will incur.
15. In the eight bullet, please briefly state what development and
construction risks could adversely affect your ability to make
distributions.
16. Please include summary risk factors regarding the conflicts of
interest of the managing underwriter and the market overhang risk
created by the resale registration of the shares issued in the
private placement.
Registration Rights and Lockup Agreements, page 10
17. We note that you are required to file a resale registration
statement that includes shares held by the managing underwriter
that
they acquired as placement agent in connection with the private
placement. In the event the resale registration statement becomes
effective during the distribution period of your initial public
offering, please supplementally advise us of the legal and/or
contractual restrictions on the managing underwriter selling its
own
shares during the distribution period. Include an analysis of the
applicability of Regulation M and any contractual restrictions
contained in the underwriting agreement or elsewhere.
Registration Rights and Lock-Up Agreements, page 10
18. We refer to your statement that all other stockholders who
have
registration rights, aside form your officers and directors, have
agreed to a 60 day lockup period "if so requested by us or the
underwriters." Please clarify whether you or the underwriters
will
make such a request.
Restrictions on Ownership of Our Common Stock, page 10
19. If the ownership limitation of your charter is more
restrictive
than the limitations required by the REIT rules, it is not
appropriate to attribute your ownership limitation solely to the
REIT
rules. For example, if your definition of "person" for purposes
of
calculating ownership does not include the look-through provisions
of
the REIT rules, then your ownership provisions are more
restrictive.
Please make conforming changes throughout the prospectus.
Summary Selected Financial Information, pages 12-15, 42-44
20. Tell us if you consider Medical Properties Trust, LLC to be
your
predecessor. If so, advise us and consider expanding your
disclosure
as appropriate, to clarify how your financial results reflect the
operations of your predecessor for periods prior to your
existence.
21. We note your presentation of adjusted FFO, a non-GAAP measure.
Note that the presentation of such measure is subject to all of
the
provisions of Item 10(e) of Regulation S-K. Tell us how you
considered the guidance in Frequently Asked Question #8 Regarding
the
Use of Non-GAAP Financial Measures for adjustments outside of the
NAREIT definition of FFO. Similarly, revise your non-GAAP
financial
measures presentation on page 49 in MD&A, as appropriate.
Risk Factors, page 16
22. The introductory paragraph suggests that there may be material
risks that you have not identified. You must disclose all risks
that
you believe are material at this time.
23. Please include a risk factor relating to the conflict of
interest
inherent in the UPREIT structure.
24. In a few separate risk factor headings you discuss the
possibility that certain "forecasts" may not be achieved. Since
you
are not including specific forecasts in the prospectus, please
refrain from using such term.
We were formed in August 2003 and have a limited operating
history;
our management has a limited history of operating a REIT and a
public
company and may therefore have difficulty in successfully and
profitably operating our business, page 16.
25. Please disclose the risks "generally associated with the
formation of any new business."
We may be unable to acquire or develop the acquisition facilities
we
have under contract, which could harm our future operating results
and adversely affect our ability to make distributions to our
stockholders, page 16.
26. Please provide any examples of losses incurred by you as a
result
of a failure to complete acquisitions.
Dependence on our tenants for rent may adversely impact our
ability
to make distributions to our stockholders, page 17.
27. In your discussion of the difficulty in finding a replacement
tenant, please disclose that the transfer of healthcare facilities
is
regulated and thus may cause further delays in replacing a tenant.
In addition, please discuss the fact that the properties
themselves
may be difficult to re-let since their use may be limited to
healthcare facilities and may not be adaptable to other uses.
We are dependent on our tenants, both of whom are recently
organized
and have limited or no operating histories, for repayment of loans
made to acquire operations and for working capital, and failure by
these tenants 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 18.
28. Please add more detail regarding the financial condition of
your
two tenants in this risk factor or in the similar risk factor on
page
19.
Our use of debt financing will subject us to significant risks,
including refinancing risk and the risk of insufficient cash
available for distribution to our stockholders, page 19.
29. Please revise this risk factor to reduce the description of
the
specific terms of your loan commitments. The disclosure is
already
provided elsewhere in the prospectus and may obscure the
discussion
of the actual risks created by your use of debt.
Failure to hedge effectively against interest rate changes may
adversely affect our results of operations and our ability to make
distributions to our stockholders, page 20.
30. Please disclose how your status as a REIT limits your ability
to
hedge your interest rate exposure.
As the owner and lessor of real estate, we are subject to risks
under
environmental laws, the cost of compliance with which and any
violation of which could materially adversely affect us, page 24.
31. We note that you have obtained Phase I reports on all your
properties. If the Phase I reports identified any material issues
or
suggested remediation or additional investigation, please disclose
this.
The healthcare industry is heavily regulated and existing and new
laws or regulations, changes to existing laws or regulations, loss
of
licensure or certification or failure to obtain licensure or
certification could result in the inability of our tenants to make
lease payments to us, page 26.
32. Please discuss the potential impact of recent regulations
regarding physician referrals and how these regulations may impact
your business strategy, including your strategy of co-investing
with
physicians.
We depend on key personnel, the loss of any one of whom may
threaten
our ability to operate our business successfully, page 29
33. Please identify the specific officers upon whom you are
dependent
for your success.
We may experience conflicts of interest with our officers and
directors, which could result in our officers and directors acting
other than in our best interest, page 29.
34. We note you disclose the conflict with Mr. McKenzie as an
"example." Please disclose any additional existing conflicts of
officers and directors.
35. Please disclose if there are active negotiations, letters of
intent or contracts relating to the development of a facility in
which Mr. McKenzie`s organization is the tenant. If not, please
supplementally advise us of the basis for your estimate of the
aggregate investment amount.
Complying with REIT requirements may cause us to forego otherwise
attractive opportunities, page 32.
36. Please specifically describe the limitations imposed by the
REIT
rules on the amount of activities you may conduct through your
TRS.
You should not rely on the underwriters` lock-up agreements to
limit
the number of shares of common stock sold into the market, page 34
37. Please disclose, here and elsewhere, whether FBR has current
intention to waive the lock-up restrictions and, if not, what
circumstances may cause it to waive the restrictions. If FBR does
not expect to require a lock-up period, please revise your
disclosure
throughout the prospectus to indicate that the lock-up period is
unlikely to be requested by the underwriters.
We may be affected by conflicts of interest that arise out of
contractual relationships with one of our underwriters, page 35.
38. Please provide additional detail on the potential risks
created
by the managing underwriter`s ownership of a substantial amount of
your shares, including any effect it may have on the underwriter`s
due diligence activities. In addition, we note your disclosure
that
FBR is "one of [y]our largest stockholders." According to your
stockholders` table, however, it appears that FBR is your largest
stockholder. Please revise or advise.
Use of Proceeds, page 37
39. Please expand your disclosure to list the properties that you
will acquire using the net proceeds from this offering.
40. Please disclose the maturity of the secured credit facility.
Refer to Item 504 of Regulation S-K.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 45
41. Please disclose management`s expectations with respect to the
relative scope and importance of the lending business to your
overall
business strategy. Please disclose the current percentage of your
business that relates to leasing and lending, respectively.
42. Please discuss which business factors management believes will
materially influence future results of operations, including, for
example, supply side concerns and/ or regulatory matters, if
applicable.
Overview, page 45
43. We refer to the first paragraph under this heading. Please
clarify whether the rental rate increases of 1.5% to 3% refer to
or
are consistent with the properties you own or whether they refer
to
the current market environment.
Critical Accounting Policies, page 46
Purchase Price Allocation
44. You state that, "Because our strategy to a large degree
involves
sale-leaseback transactions with newly-originated leases at market
rates, we do not expect the above-market and below-market in-place
lease values to be significant for many of our anticipated
transactions." Generally, sale-leaseback transactions involve the
sale of a property by the owner and a lease of the property back
to
the seller. Please explain to us and expand your disclosures as
appropriate to clarify the nature of your transactions.
Results of Operations, page 50
45. Please briefly describe the nature of the unsuccessful
acquisition referenced under this heading, including an
explanation
of the nature of the costs.
Liquidity and Capital Resources, page 50
46. We refer to your statement that, along with the net proceeds
from
this offering and additional equity and debt financing which you
believe will be available you will be able to fund your cash
requirements for the foreseeable future. This appears to imply
that,
without the additional debt and equity financing, you will be
unable
to meet your cash requirements. Please advise. In addition,
please
clearly state whether you will need additional financing, other
than
the committed facilities that you reference under this heading, in
order to meet your cash requirements during the next 12 months.
47. Please disclose restrictions on the liquidity of your assets,
including illiquidity common to most real estate, but also
characteristics specific to your target asset type as well as any
contractual or regulatory restrictions.
48. Please disclose your contractual commitments assuming the
completion of this offering and the use of the proceeds as
described
in this prospectus.
49. Please disclose the source of the funds for the October 11,
2004
distribution. We note that your funds from operations for the six
months ended June 30, 2004 were $(1,561,834). Please disclose
what
percentage of the distribution was a return of capital.
Our Business, page 53
50. Where appropriate, please conform this section to the comments
made in the Summary section.
Underwriting Process, page 58
51. Please provide additional disclosure on your underwriting
process. For example, please disclose whether you have written
policies governing the underwriting process, whether you engage
third
parties to assist in the process, the number of employees
dedicated
to the process and the most senior member of management active in
the
underwriting process.
Asset Management, page 58
52. Please provide specific examples of ways you "work closely
with
[your] tenants" in order to foster a long-term working
relationship
and maximize the possibility of new business opportunities.
Our Formation Transactions, page 59
53. Please disclose why you and your founders agreed to redeem
their
shares of common stock that were issued at your founding following
completion of the private placement offering. In connection with
this, please disclose the material terms of the redemption,
including
the redemption price. We note your disclosure on page 90 that the
consideration was "nominal value." Please discuss why the
founders
would redeem their shares for nominal value.
Our Operating Partnership, page 60
54. Please disclose the rights of minority limited partners of
your
property owning limited partnerships, such as MPT West Houston
MOB,
L.P., including voting and distribution rights.
MPT Development Services, Inc., page 60
55. Please disclose the limitations imposed by the REIT rules on
the
amount of activities of your TRS.
Our Leases, page 60
56. Please disclose what, if any, property expenditures are not
paid
or reimbursed by the tenant.
Healthcare Regulatory Matters, page 62
57. We note your disclosure that the Medicare Prescription Drug
and
Modernization Act of 2003, and the related moratorium on the
availability of the Whole Hospital Exception, does not limit a
physician`s ability to hold an ownership interest in your
facilities.
Please disclose whether you believe this is still the case where
the
lease contains a percentage rent provision.
Our Portfolio, page 66
58. Please include in the property table the 2004 contractual
base
rent and the rent per square foot or similar metric for 2005.
Refer
to Item 15 of Form S-11.
Highmark Facilities, page 67
59. Please identify the unaffiliated third party from whom you
purchased the Highmark Facilities. In addition, please disclose
how
the purchase price of these properties was determined. We note
your
disclosure that the replacement cost for each was higher than the
appraisal value, but it`s not clear how the actual purchase was
determined.
60. Purchase Option. Please disclose the "limited circumstances"
in
which the tenant will have the right to propose substitute
facilities
and any parameters regarding the size or base rent of the proposed
facilities.
Bowling Green, Kentucky, page 69
61. We note your disclosure that the Bowling Green, Kentucky
facility
is 100% leased. Please provide similar disclosure for your other
properties.
Houston, Texas, page 71
62. Please disclose the expiration date of Stealth`s land option
relating to the Houston property.
63. Please disclose any financial or operating covenants related
to
your loans to Stealth and whether or not the loans are guaranteed.
If so, please disclose the guarantor(s).
64. Please disclose the information required by Item 15(g) and (h)
of
Form S-11 for each of your material properties.
65. Please provide additional disclosure on the mechanics of the
Stealth purchase option and right of first offer to purchase,
especially the timing of the process.
Executive Compensation, page 81
66. Please revise the table to include the range of bonuses that
may
be paid to your officers during 2004. We note, from your footnote
disclosure, that the amount included in the table is only the
minimum
amount of the bonus, and that each bonus may equal the officers`
base
salary.
Principal Stockholders, page 87
67. Please supplementally advise us of how Friedman Billings only
owns 2,826,157 shares. We note your disclosure that they were the
initial purchaser of 25,300,000 shares in the private placement
and
sold 20,244,426 of those shares. In addition they received
260,954
shares in fulfillment of their advisory fee. This would appear to
indicate that FBR owned 5,316,528 shares of common stock. Please
clarify whether FBR sold additional shares subsequent to the
disclosure found in Item 33 of Part II of the registration
statement
or advise us as to why the share ownership amount reflected in the
table on page 87 is lower.
Registration Rights and Lock-Up Agreements, page 88
68. Please clarify why you state that only "some" of the
purchasers
in your private offering are eligible to have their shares
registered
fro resale in this offering. In addition, please disclose the
number
of shares that are subject to the lock-up agreement entered into
with
"various" holders of your common stock.
69. We refer to your statement that the summary of the
registration
rights agreement is not complete. This implies that material
information about the agreement has not been included in the
prospectus. Please revise to remove this qualification. This
comment applies also to similar language found in the introductory
paragraphs on pages 97 and 106 of the prospectus.
Certain Relationships and Related Party Transactions, page 90
Our Formation, page 90
70. Please disclose Mr. Bennett`s claim in the "Legal Proceedings"
section on page 66. Please include the amount Mr. Bennett
believes
he is owed. In addition, please remove your statement that you
believe the claim to be without merit, or state that this belief
is
based upon the advice of counsel, identify counsel and include, as
an
exhibit, consent from counsel for this statement.
71. Please disclose whether you have written policies regarding
transactions between you and your officers and directors. Please
clarify whether such transactions require the vote of a majority
of
your independent and disinterested directors. We note slightly
different disclosure on page 96.
Relationship with One of our Underwriters, page 91
72. Please disclose the share ownership of FBR.
Partnership Agreement, page 106
73. We note your disclosure on page 107 that indicates that any
operating partnership units to be issued in the future will not be
redeemable until one year following the date of issuance unless
this
period is waived or shortened by the Board of Directors. Please
disclose potential reasons why the redemption rights period may be
waived or shortened by the Board and tell us supplementally why
you
do not believe that waiving or shortening of this period may also
result in the concurrent issuance of the common stock of the REIT
at
the same time as the issuance of the OP units.
United States Federal Income Tax Considerations, page 110
74. We refer to your disclosure that counsel is of the opinion
that
the company "will be" organized in conformity with the
requirements
for qualification as a REIT. Please revise to indicate that you
have
been organized in conformity with the requirements of
qualification
as a REIT. Counsel should be able to opine on whether you are
organized in conformity with the REIT rules.
75. Please supplementally advise us whether the Baker Donelson
opinion filed with the registration statement will include an
opinion
regarding the treatment of the MPT Development Services loans as
straight debt.
Underwriting, page 129
76. Please disclose the underwriting compensation and expenses to
be
paid by the selling stockholders.
77. Please disclose which expenses of Friedman Billing you will
reimburse.
78. Please disclose that the lockup provisions do not prohibit you
from filing a resale registration statement for the shares issued
in
the private placement.
79. When available, please provide us with copies of the materials
the underwriters plan to use in connection with the directed share
program.
Experts, page 132
80. We note your disclosure that the accountants have not examined
any financial forecast, or projection. Please supplementally
advise
us if the prospectus includes any such information.
Financial Statements:
Unaudited Pro Forma Consolidated Financial Information
Adjustments for Unaudited Pro Forma Balance Sheet as of June 30,
2004, page F-7
81. To provide transparency, please consider including a separate
column for each transaction depicted in your pro forma financial
statements. In this regard, you would separately present the pro
forma impact of your acquisitions separately from the adjustments
related to your offering. In addition, upon including pro forma
information for your Acquisition Facilities, consider including a
subtotal column to show the impact of all consummated transactions
prior to the columns for the proposed transactions involving the
Acquisition Facilities.
82. Reference is made to Note (1). Why are loans made to the
operator subsequent to acquisition included in your purchase price
allocation?
83. We note in Note (2) your recordation of pro forma adjustments
for
the estimated total cost of the development of the Houston
community
hospital and medical office building as though the project was
completed as of June 30, 2004. Tell us how you determined pro
forma
adjustments that include the effects of real estate properties for
periods prior to actual construction or completion are factually
supportable. Generally these types of adjustments would be a
forecast or projection. Please explain or revise accordingly.
Adjustments for Unaudited Pro Forma Statements of Operations for
the
Six Months Ended June 30, 2004 and for the period from Inception
(August 27, 2003) through December 31, 2003, pages F-7 and F-9
84. Refer to Note (5) and (13). Tell us your basis in presenting
adjustments for the operating results of the Houston community
hospital and medical office building as though they were completed
and occupied for the periods presented. As part of your
consideration, refer to the similar comment above.
85. We note that you omitted the presentation of pro forma (basic
and
diluted) earnings per share data on the face of the pro forma
statements of operations. Tell us and disclose your basis for
their
omission or provide them in your next amendment to the
Registration
Statement on Form S-11 in accordance with Article 11.02 (a)(7) of
Regulation S-X.
86. We note from page 41 that you declared a dividend of $0.10 per
common share on September 2, 2004. In that regard, explain why
you
did not have a pro forma adjustment for the dividend declared or
revise to include the adjustment in your pro forma financial
statements. Refer to SAB Topic 1.B.3.
87. Refer to Notes (4), (6), (7), (12), (13), (14) and (15) on
pages
F-8-F-9. Tell us and disclose as appropriate your assumptions and
calculations in deriving the pro forma adjustments to revenue,
depreciation expense, estimated interest income earned from loans
to
Highmark, and compensation expense related to restricted stock
awards
made to senior management and other employees as part of this
offering.
88. To the extent changes to your filing are made as a result of
the
above comments, appropriate modifications should be made to your
Selected Financial Information section on page 14 and elsewhere in
the filing as applicable.
Unaudited Pro Forma Consolidated Balance Sheet December 31, 2003
89. Advise us how your presentation of the unaudited pro forma
consolidated balance sheet as of December 31, 2003 complies with
Instruction 7(c) of Article 11 of Regulation S-X.
Medical Properties Trust
Financial Statements and Notes
Note 2. Subsequent Events, page F-15
90. As applicable, consider disclosing the significant terms of
your
loans to Highmark in this footnote consistent with what you
disclosed
on page 68 and elsewhere in the filing.
91. Reference is made to your discussion of dividends. Given your
accumulated deficit position, tell us why you believe these
amounts
represent a portion of the Company`s profit. If the amounts
disclosed represent distributions, that is, payments from cash
flow,
please revise your disclosures as appropriate to characterize the
amounts as such and clarify the tax status of the distribution
(i.e.
ordinary income, return of capital, etc.).
Note 4. Loan Payable, page F-18
92. Tell us and consider expanding your disclosure to clarify your
accounting for the warrant to purchase 35,000 common shares issued
to
your lender during the second quarter of 2004.
Note 6. Future Plans and Policies (Unaudited), page F-21
93. How did you evaluate FIN 46(R) as it relates to your various
contractual arrangements with Highmark?
Note 7. Equity Incentive and Other Stock Awards, page F-21
94. To the extent that you have equity instruments granted since
your
inception, please disclose in the notes to the financial
statements
the following information as applicable:
* For each grant date, disclose the number of options or shares
granted, the exercise price, the fair value of the common stock,
and
the intrinsic value, if any, per option;
* Disclose whether the valuation used to determine the fair value
of
the equity instruments was contemporaneous or retrospective;
* Indicate whether or not the valuation was performed by an
unrelated
third party.
In this regard, please disclose in MD&A the aggregate intrinsic
value
of all outstanding options based on the estimated IPO price.
Note 8. Leasing Operations, page F-22
95. You state that lease revenue to be received on the Company`s
properties currently under development is estimated based on the
expected cost of the properties at the end of its construction
period. Advise us and expand your disclosure as appropriate to
clarify your lease revenue earning process for properties
currently
under development and your basis in GAAP for your accounting
treatment. Also, include the significant terms of the lease
contract
with Stealth.
Highmark Healthcare, LLC and subsidiaries, page F-25
96. Tell us how the inclusion of the Highmark balance sheet
satisfies
your reporting requirements for significant acquisitions under
Regulation S-X. What guidance did you rely upon, and tell us if
you
considered these transactions to be the acquisition of a business
or
a property. What factors did you contemplate in determining
financial statements of the tenant / lessee is more meaningful
than
the historical financial statements of the property. Further, in
view of the limited operating history of Highmark, why did you
consider the financial statements of the tenant more meaningful
than
financial statements of the guarantor?
97. Advise us and expand your disclosures as appropriate to
clarify
why you have aggregated the results of multiple properties /
lessees
by presenting consolidated Highmark financial statements, rather
than
including the information on an individual property basis. In
this
regard, clarify in your footnotes if you had a common guarantor
for
all properties and whether there any cross default or cross
collateral provisions present for these properties to support your
presentation.
98. You state in Note 3 on page F-27 that the sole member of
Highmark, an affiliated company owned by the sole member and
Highmark
Management, LLC have guaranteed the $49.2 million in notes payable
to
MPT. We also note from Lease Guaranties and Security section on
page
69 that each Highmark lease is guaranteed by Mr. Hollinger,
Highmark,
Highmark Management, LLC and The Hollinger Group. Please address
the
following comments as applicable.
* Clarify whether the guarantors for the notes payable and the
leases
are the same entities.
* Provide the lease guarantee disclosures in your footnote
consistent
with your disclosures on page 69.
* Advise us and disclose the corresponding guaranteed amounts
provided by each of the above affiliated entities.
Note 2. Basis of Presentation, page F-25
99. You state, "...there can be no assurance that Highmark will in
fact meet all of its current and future obligations, and that if
the
obligations are met that Highmark will continue as a going
concern."
We also note you did not include a going concern paragraph in
Highmark`s audit report. Based on the conditional language in the
disclosures, tell us supplementally how it was determined that
there
is not substantial doubt about Highmark`s ability to continue as a
going concern and if applicable, Highmark management`s plan to
mitigate the adverse factors to continue as a going concern.
Explain
why the audit opinion does not include a going concern paragraph
in
view of this conditional language.
Part II. Information Not Required in Prospectus
Item 33. Recent Sales of Unregistered Securities
100. Please disclose the time period of the private placement
distribution and the factual basis for the claimed exemptions from
the Securities Act.
Exhibits
101. Please file copies of your legal and tax opinions or provide
us
with drafts of these opinions so that we have an opportunity to
review them. Please also file any material agreements required to
be
filed under Item 601 of Item S-K.
* * * *
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.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert this action as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
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, Staff Accountant, at (202) 942-
2913
or Cicely Luckey, Senior Staff Accountant, 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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