REGISTRATION NO. 333-119957 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 2005. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- AMENDMENT NO. 2 TO FORM S-11 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES --------------------- MEDICAL PROPERTIES TRUST, INC. (Exact name of registrant as specified in its governing instruments) 1000 URBAN CENTER DRIVE, SUITE 501, BIRMINGHAM, ALABAMA 35242 (205) 969-3755 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) EDWARD K. ALDAG, JR. CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER MEDICAL PROPERTIES TRUST, INC. 1000 URBAN CENTER DRIVE, SUITE 501, BIRMINGHAM, ALABAMA 35242 (205) 969-3755 (Name, address, including zip code, and telephone number, including area code, of agent for service) WITH A COPY TO:

THOMAS O. KOLB DANIEL M. LEBEY B.G. MINISMAN, JR. EDWARD W. ELMORE, JR. BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, PC HUNTON & WILLIAMS LLP SUITE 1600 RIVERFRONT PLAZA, EAST TOWER 420 20TH STREET NORTH 951 EAST BYRD STREET BIRMINGHAM, ALABAMA 35203 RICHMOND, VIRGINIA 23219-4074 (205) 328-0480 (804) 788-8200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this registration statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ____________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- TITLE OF SECURITIES PROPOSED MAXIMUM AGGREGATE BEING REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE(2) - ------------------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value.................. $175,000,000 $22,050 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act. (2) Previously paid. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

The information in this prospectus is not complete and may be changed. We cannot sell any of the securities described in this prospectus until the registration statement that we have filed to cover the securities has become effective under the rules of the Securities and Exchange Commission. This prospectus is not an offer to sell the securities, nor is it a solicitation of an offer to buy the securities, in any state where an offer or sale of the securities is not permitted. SUBJECT TO COMPLETION, DATED APRIL 7, 2005 PROSPECTUS SHARES OF COMMON STOCK (MEDICAL PROPERTIES TRUST LOGO) We are a self-advised real estate company that acquires, develops and net-leases healthcare facilities. We expect to qualify as a real estate investment trust, or REIT, for federal income tax purposes and will elect to be taxed as a REIT under the federal income tax laws. This is our initial public offering of common stock. No public market currently exists for our common stock. We are offering shares of common stock and shares of common stock are being offered by the selling stockholders described in this prospectus. We will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders. We expect the initial public offering price to be between $ and $ per share. We intend to apply to list our common stock on the New York Stock Exchange under the symbol "MPW." SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS FOR THE MOST SIGNIFICANT RISKS RELEVANT TO AN INVESTMENT IN OUR COMMON STOCK, INCLUDING, AMONG OTHERS: - 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. - We may be unable to acquire or develop the facilities we have under letter of commitment or contract or facilities we have identified as potential candidates for acquisition or development as quickly as we expect or at all, which could harm our future operating results and adversely affect our ability to make distributions to our stockholders. - Our real estate investments will be concentrated in net-leased healthcare facilities, making us more vulnerable economically than if our investments were more diversified across several industries or property types. - Our facilities are currently leased to three tenants, two of which were recently organized and have limited or no operating histories, and the failure of any of these tenants to meet its obligations to us, including payment of rent, payment of loan commitment fees and repayment of loans we have made or intend to make to them, would have a material adverse effect on our revenues and our ability to make distributions to our stockholders. - Development and construction risks, including delays in construction, exceeding original estimates and failure to obtain financing, could adversely affect our ability to make distributions to our stockholders. - Reductions in reimbursement from third-party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rent or loan payments to us. - 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 or loan payments to us. - Failure to obtain or loss of our tax status as a REIT would have significant adverse consequences to us and the value of our common stock. - Common stock eligible for future sale, including up to shares that may be resold by our existing stockholders upon effectiveness of our resale registration statement, may result in increased selling which may have an adverse effect on our stock price. - If you purchase common stock in this offering, you will experience immediate dilution of approximately $ in net tangible book value per share. ---------------------

PER SHARE TOTAL --------- -------- Public offering price....................................... Underwriting discount....................................... Proceeds, before expenses, to us............................ Proceeds, before expenses, to selling stockholders..........
The underwriters may also purchase up to an additional shares of common stock from us at the public offering price, less the underwriting discount, within 30 days after the date of this prospectus solely to cover over-allotments, if any. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. We expect the shares of common stock to be available for delivery on or about , 2005. FRIEDMAN BILLINGS RAMSEY JPMORGAN THE DATE OF THIS PROSPECTUS IS , 2005.

TABLE OF CONTENTS

SUMMARY...................................... 1 Our Company.................................. 1 Our Portfolio................................ 2 Competitive Strengths........................ 6 Summary Risk Factors......................... 7 Market Opportunity........................... 8 Our Target Facilities........................ 9 Our Formation Transactions................... 9 Our Structure................................ 10 Registration Rights and Lock-Up Agreements... 11 Selling Stockholders......................... 12 Restrictions on Ownership of Our Common Stock...................................... 12 Distribution Policy.......................... 12 The Offering................................. 13 Tax Status................................... 13 Summary Financial Information................ 13 RISK FACTORS................................. 16 Risks Relating to Our Business and Growth Strategy................................... 16 Risks Relating to Real Estate Investments.... 22 Risks Relating to the Healthcare Industry.... 27 Risks Relating to Our Organization and Structure.................................. 29 Tax Risks Associated With Our Status as a REIT....................................... 33 Risks Relating to This Offering.............. 35 A WARNING ABOUT FORWARD LOOKING STATEMENTS... 38 USE OF PROCEEDS.............................. 39 CAPITALIZATION............................... 40 DILUTION..................................... 41 Net Tangible Book Value...................... 41 Dilution After This Offering................. 41 Differences Between New and Existing Stockholders in Number of Shares and Amount Paid....................................... 42 DISTRIBUTION POLICY.......................... 43 SELECTED FINANCIAL INFORMATION............... 44 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................. 46 OUR BUSINESS................................. 54 Our Company.................................. 54 Market Opportunity........................... 55 Our Target Facilities........................ 58 Underwriting Process......................... 59 Asset Management............................. 59 Our Formation Transactions................... 60 Our Operating Partnership.................... 61 MPT Development Services, Inc. .............. 62 Depreciation................................. 62 Our Leases................................... 62 Environmental Matters........................ 63 Competition.................................. 64 Healthcare Regulatory Matters................ 64 Insurance.................................... 68 Employees.................................... 69 Legal Proceedings............................ 69 OUR PORTFOLIO................................ 69 Our Current Portfolio........................ 69 Our Pending Acquisitions and Developments.... 80 Other Letters of Commitment.................. 88 Our Acquisition and Development Pipeline..... 90 MANAGEMENT................................... 91 Our Directors and Executive Officers......... 91 Corporate Governance -- Board of Directors and Committees............................. 93 Limited Liability and Indemnification........ 96 Director Compensation........................ 96 Executive Compensation....................... 97 Employment Agreements........................ 97 Benefit Plans................................ 100 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.............................. 102 INSTITUTIONAL TRADING OF OUR COMMON STOCK.... 102 PRINCIPAL STOCKHOLDERS....................... 103 SELLING STOCKHOLDERS......................... 104 REGISTRATION RIGHTS AND LOCK-UP AGREEMENTS... 104 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 107 INVESTMENT POLICIES AND POLICIES WITH RESPECT TO CERTAIN ACTIVITIES...................... 109 DESCRIPTION OF CAPITAL STOCK................. 113 Authorized Stock............................. 113 Common Stock................................. 113 Preferred Stock.............................. 114 Warrant...................................... 114 Power to Increase Authorized Stock and Issue Additional Shares of Our Common Stock and Preferred Stock............................ 114 Restrictions on Ownership and Transfer....... 114 Transfer Agent and Registrar................. 116 MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS..................... 117 The Board of Directors....................... 117 Business Combinations........................ 117 Control Share Acquisitions................... 118 Maryland Unsolicited Takeovers Act........... 119 Amendment to Our Charter..................... 119 Dissolution of Our Company................... 119 Advance Notice of Director Nominations and New Business............................... 119 Indemnification and Limitation of Directors' and Officers' Liability.................... 120 PARTNERSHIP AGREEMENT........................ 122 Management of Our Operating Partnership...... 122 Transferability of Interests................. 122 Capital Contribution......................... 123 Redemption Rights............................ 123 Distributions................................ 124 Allocations.................................. 125 Term......................................... 125 Tax Matters.................................. 125 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS............................. 126 Taxation of Our Company...................... 126 Requirements for Qualification............... 128 Other Tax Consequences....................... 142 Income Taxation of the Partnerships and Their Partners................................... 143 UNDERWRITING................................. 146 LEGAL MATTERS................................ 149 EXPERTS...................................... 150 WHERE YOU CAN FIND MORE INFORMATION.......... 150 INDEX TO FINANCIAL STATEMENTS................ F-1

SUMMARY The following summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus, including "Risk Factors" and our financial statements and pro forma financial information and related notes appearing elsewhere in this prospectus, before making a decision to invest in our common stock. In this prospectus, unless the context suggests otherwise, references to "MPT," "the company," "we," "us" and "our" mean Medical Properties Trust, Inc., including our operating partnership, MPT Operating Partnership, L.P., its general partner and our wholly-owned limited liability company, Medical Properties Trust, LLC, as well as our other direct and indirect subsidiaries. Unless otherwise indicated, the information included in this prospectus assumes no exercise by the underwriters of their over-allotment option to purchase up to an additional shares of common stock and that the common stock to be sold in this offering is sold at $ per share, which is the midpoint of the range set forth on the cover page of this prospectus. OUR COMPANY We are a self-advised real estate company that acquires, develops and leases healthcare facilities providing state-of-the-art healthcare services. We lease our facilities to experienced healthcare operators pursuant to long-term net-leases, which require the tenant to bear most of the costs associated with the property. From time to time, we also make loans to our tenants. We were formed in August 2003 and completed a private placement of our common stock in April 2004 in which we raised net proceeds of approximately $233.5 million. Shortly after completion of our private placement, we began to acquire our current portfolio of nine facilities, consisting of seven facilities that are in operation and two facilities that are under development. We acquired six operating facilities in July and August of 2004 for an aggregate purchase price of $127.4 million, including acquisition costs, from Care Ventures, Inc., and one operating facility in February 2005 for a purchase price of $28.0 million from Prime A Investments, LLC. We focus on acquiring and developing rehabilitation hospitals, long-term acute care hospitals, regional and community hospitals, women's and children's hospitals and ambulatory surgery centers as well as other specialized single-discipline and ancillary facilities. We believe that these types of facilities will capture an increasing share of expenditures for healthcare services. We believe that our strategy for acquisition and development of these types of net-leased facilities, which generally require a physician's order for patient admission, distinguishes us as a unique investment alternative among real estate investment trusts, or REITs. We believe that the U.S. healthcare delivery system is becoming decentralized and is evolving away from the traditional "one stop," large-scale acute care hospital. We believe that this change is the result of a number of trends, including increasing specialization and technological innovation within the healthcare industry and the desire of both physicians and patients to utilize more convenient facilities. We also believe that demographic trends in the U.S., including, in particular, an aging population, will result in continued growth in the demand for healthcare services, which in turn will lead to an increasing need for a greater supply of modern healthcare facilities. In response to these trends, we believe that healthcare operators increasingly prefer to conserve their capital for investment in operations and new technologies rather than investing in real estate and, therefore, increasingly prefer to lease, rather than own, their facilities. Given these trends and the size, scope and growth of this dynamic industry, we believe that there are significant opportunities to acquire and develop net-leased healthcare facilities at attractive, risk-adjusted returns. Our management team has extensive experience in acquiring, owning, developing, managing and leasing healthcare facilities; managing investments in healthcare facilities; acquiring healthcare companies; and managing real estate companies. Our management team also has substantial experience in healthcare operations and administration, which includes many years of service in executive positions for hospitals and other healthcare providers, as well as in physician practice management and hospital/physician relations. We believe that our management's ability to combine traditional real estate investment expertise with an understanding of healthcare operations enables us to successfully implement our strategy. 1

We intend to make an election to be taxed as a REIT under the Internal Revenue Code, or the Code, commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. Our principal executive offices are located at 1000 Urban Center Drive, Suite 501, Birmingham, Alabama 35242. Our telephone number is (205) 969-3755. Our Internet address is www.medicalpropertiestrust.com. The information on our website does not constitute a part of this prospectus. OUR PORTFOLIO OUR CURRENT PORTFOLIO OF FACILITIES Our current portfolio of facilities consists of nine healthcare facilities, seven of which are in operation and two of which are under development. Six of the facilities in operation, which consist of four rehabilitation hospitals and two long-term acute care hospitals, are leased to Vibra Healthcare, LLC, or Vibra, formerly known as Highmark Healthcare, LLC, a recently formed specialty healthcare provider with operations in six states. We refer to these facilities in this prospectus as the Vibra Facilities. The seventh facility in operation, a community hospital which has an integrated medical office building, is leased to Desert Valley Hospital, Inc., or DVH. We refer to this facility in this prospectus as the Desert Valley Facility. The facilities under development are a community hospital, which we refer to in this prospectus as the West Houston Hospital, and an adjacent medical office building, which we refer to in this prospectus as the West Houston MOB, and are leased to Stealth, L.P., or Stealth, a recently organized healthcare facility operator with no current operations. We refer to the West Houston Hospital and the West Houston MOB together in this prospectus as the West Houston Facilities. All of the leases for the hospitals currently in operation have initial terms of 15 years. The initial lease term for the West Houston Hospital began when construction commenced in July 2004 and will end 15 years after completion of construction. The initial lease term for the West Houston MOB began when construction commenced in July 2004 and will end 10 years after completion of construction. We target completion of construction of the West Houston MOB for August 2005 and completion of construction of the West Houston Hospital for October 2005. The leases for all of the facilities in our current portfolio provide for contractual base rent and an annual rent escalator. The leases for the Vibra Facilities also provide for "percentage rent," which means that once the tenant achieves a certain revenue threshold then, in addition to base rent, we will receive periodic rent payments based on an agreed percentage of the tenant's gross revenue. The following table sets forth information, as of March 31, 2005, regarding our current portfolio of facilities:

2005 2006 2004 CONTRACTUAL CONTRACTUAL NUMBER OF ANNUALIZED BASE BASE LOCATION TYPE TENANT BEDS(1) BASE RENT RENT(2) RENT(2) - -------- ----------------- -------------- --------- ----------- -------------- --------------- Operating Bowling Green, Kentucky............ Rehabilitation Vibra hospital Healthcare, LLC(4) 60 $ 3,916,695 $ 4,294,990 $ 4,790,118 Marlton, New Jersey(5)........... Rehabilitation(6) Vibra hospital Healthcare, LLC(4) 76 3,401,791 3,730,354 4,160,390 Victorville, California(7)....... Community Desert Valley hospital/Medical Hospital, Inc. 83 -- 2,341,004 2,856,000 Office Building New Bedford, Massachusetts....... Long-term Vibra acute care Healthcare, hospital LLC(4) 90 2,262,979 2,426,320 2,767,624 Fresno, California... Rehabilitation Vibra hospital Healthcare, LLC(4) 62 1,914,829 2,099,773 2,341,835 Thornton, Colorado... Rehabilitation Vibra hospital Healthcare, LLC(4) 117 870,377 933,200 1,064,471 GROSS PURCHASE PRICE OR PROJECTED LEASE LOCATION DEVELOPMENT COST(3) EXPIRATION - -------- -------------------- --------------- Operating Bowling Green, Kentucky............ $ 38,211,658 July 2019 Marlton, New Jersey(5)........... 32,267,622 July 2019 Victorville, California(7)....... 28,000,000 February 2020 New Bedford, Massachusetts....... 22,077,847 August 2019 Fresno, California... 18,681,255 July 2019 Thornton, Colorado... 8,491,481 August 2019
2

2005 2006 2004 CONTRACTUAL CONTRACTUAL NUMBER OF ANNUALIZED BASE BASE LOCATION TYPE TENANT BEDS(1) BASE RENT RENT(2) RENT(2) - -------- ----------------- -------------- --------- ----------- -------------- --------------- Kentfield, California.......... Long-term Vibra acute care Healthcare, hospital LLC(4) 60 783,339 858,998 958,024 --- ----------- ----------- ----------- SUBTOTAL............. -- -- 548 $13,150,010 $16,684,639 $18,938,462 --- ----------- ----------- ----------- Under Development Houston, Texas....... Community 105(9) $ -- $772,196(10) $ 4,652,481(10) hospital(8) Stealth, L.P. Houston, Texas....... Medical office building(12) Stealth, L.P. n/a -- 670,840(10) 2,025,936(10) ----------- ----------- ----------- SUBTOTAL............. -- -- 105 -- 1,443,036 6,678,417 --- ----------- ----------- ----------- TOTAL................ -- -- 653 $13,150,010 $18,127,675 $25,616,879 === =========== =========== =========== GROSS PURCHASE PRICE OR PROJECTED LEASE LOCATION DEVELOPMENT COST(3) EXPIRATION - -------- -------------------- --------------- Kentfield, California.......... 7,642,332 July 2019 ------------ SUBTOTAL............. $155,372,195 -- ------------ Under Development Houston, Texas....... $ 42,600,000 October 2020(11) Houston, Texas....... 20,500,000 August 2015(13) ------------ SUBTOTAL............. 63,100,000 -- ------------ TOTAL................ $218,472,195 -- ============
- --------------- (1) Based on the number of licensed beds. (2) Based on leases in place as of the date of this prospectus. (3) Includes acquisition costs. (4) The tenant in each case is a separate, wholly-owned subsidiary of Vibra Healthcare, LLC. (5) Our interest in this facility is held through a ground lease on the property. The purchase price shown for this facility does not include our payment obligations under the ground lease, the present value of which we have calculated to be $920,579. The calculation of the base rent to be received from Vibra for this facility takes into account the present value of the ground lease payments. (6) Thirty of the 76 beds are pediatric rehabilitation beds operated by HBA Management, Inc. (7) At any time after February 28, 2007, the tenant has the option to purchase the facility at a purchase price equal to the sum of (i) the purchase price of the facility, and (ii) that amount determined under a formula that would provide us an internal rate of return of 10% per year, increased by 2% of such percentage each year, taking into account all payments of base rent received by us. (8) Expected to be completed in October 2005. (9) Seventy-one of the 105 beds will be acute care beds operated by Stealth, L.P. and the remaining 34 beds will be long-term acute care beds operated by Triumph Southwest, L.P. (10) Based on estimated total development costs and estimated dates of completion. Assumes completion of construction in October 2005 for the West Houston Hospital and in August 2005 for the West Houston MOB. Does not include rents that accrue during the construction period and are payable over the remaining lease term following the completion of construction. (11) Following completion, the lease term will extend for a period of 15 years. At any time during the term of the lease, the tenant has the right to terminate the lease and purchase the community hospital from us at a purchase price equal to the greater of (i) that amount determined under a formula which would provide us an internal rate of return of at least 18% or (ii) appraised value assuming the lease is still in place. (12) Expected to be completed in August 2005. (13) Following completion, the lease term will extend for a period of 10 years. At any time during the term of the lease, the tenant has the right to terminate the lease and purchase the medical office building from us at a purchase price equal to the greater of (i) that amount determined under a formula which would provide us an internal rate of return of at least 18% or (ii) appraised value assuming the lease is still in place. OUR CURRENT LOANS AND FEES RECEIVABLE At the time we acquired the Vibra Facilities, we made secured loans to Vibra, the parent entity of our current tenants in those facilities, to enable Vibra to acquire the healthcare operations at these locations. These loans total approximately $41.4 million and are to be repaid over 15 years. Payment of the acquisition loans is secured by pledges of membership interests in Vibra and its subsidiaries that are our tenants and are guaranteed by affiliates of the tenant. The loans accrue interest at an annual rate of 10.25% with interest only for the first three years and the principal balances amortize over the remaining 12 year period. The acquisition loans may be prepaid at any time without penalty. In connection with the Vibra transactions, Vibra agreed to pay us commitment fees of approximately $1.5 million. We also made secured loans totaling approximately $6.2 million to Vibra and its subsidiaries for working capital purposes. The commitment fees were paid, and the working capital loans were repaid, on February 9, 2005. In connection with the development of the West Houston Facilities, Stealth has agreed to pay us a commitment fee of approximately $932,125, to be paid over 15 years following completion of the West Houston Hospital. The commitment fee is based on a percentage of total development costs and may be adjusted upon completion of construction of the West Houston Facilities based on actual development costs. We have agreed to make a working capital loan to Stealth of up to $1.62 million, to be repaid over 15 years. No funds have been borrowed by Stealth to date under the working capital loan. The promissory notes evidencing the loan and commitment fee provide for interest at an annual rate of 10.75% and are unsecured, but the promissory notes are cross-defaulted with our related facility leases with Stealth. 3

Stealth is obligated to pay us a project inspection fee for construction coordination services of $100,000 in the case of the West Houston Hospital and $50,000 in the case of the adjacent West Houston MOB. These fees are to be paid, with interest at the rate of 10.75% per year, over a 15 year period beginning on the date that the West Houston Hospital is completed, which we expect to be in October 2005. The obligation to pay these fees is evidenced by promissory notes and is unsecured, but the promissory notes are cross-defaulted with our related facility leases with Stealth. Any of the fees or the working capital loan may be prepaid at any time without penalty, except that a minimum prepayment of $500,000 is required for the working capital loan. OUR PENDING ACQUISITIONS AND DEVELOPMENTS We intend to use a portion of the net proceeds of this offering to expand our portfolio by acquiring or developing additional net-leased healthcare facilities that we have under contract or letter of commitment and consider to be probable acquisitions or developments as of the date of this prospectus, which we refer to in this prospectus as our Pending Acquisition and Development Facilities. Under the terms of the contracts or letters of commitment relating to these facilities, we expect the leases for each of these facilities to provide for contractual base rent and an annual rent escalator. The letters of commitment constitute agreements of the parties to consummate the acquisition or development transactions and enter into leases on the terms set forth in the letters of commitment subject to the satisfaction of certain conditions, including the execution of mutually-acceptable definitive agreements. The following table contains information regarding our Pending Acquisition and Development Facilities:

ANNUAL YEAR ONE MINIMUM GROSS NUMBER OF CONTRACTUAL INCREASE IN PURCHASE LEASE LOCATION TYPE TENANT BEDS(1) BASE RENT RENT PRICE EXPIRATION - -------- ---- --------------- --------- ------------ ----------- ------------ ---------- Operating Covington, Louisiana*........... Long-term Gulf States 58 $ 1,170,750(2) 2.5%(3) $ 11,150,000 April 2020(4) acute LTACH of care Covington, LLC hospital Denham Springs, Louisiana*...... Long-term Gulf States 59 630,000(2) 2.5%(3) 6,000,000 April 2020(4) acute LTACH of Denham care Springs, LLC hospital Hammond, Louisiana*(5).......... Long-term Hammond 40 840,000(6) 2.5%(3) 10,285,000 May 2021 acute Rehabilitation care Hospital, LLC hospital --- ------------ ------------ SUBTOTAL........................ 157 $ 2,640,750 $ 27,435,000 -- --------- --------------- --- ------------ ------------ ---------- Under Development Bensalem, Pennsylvania**........ Women's Bucks County 30 -- 2.5%(3) 38,000,000 (7) hospital/ Oncoplastic medical Institute, LLC office building Bloomington, Indiana*........... Community Monroe 32 -- 2.5%(3) $ 28,000,000 (7) hospital Hospital, L.L.C. Houston, Texas*................. Community North Cypress 64 -- 2.5%(3) 51,000,000 (7) hospital Medical Center Operating Company, Ltd. --- ------------ ------------ SUBTOTAL........................ -- -- 126 -- $117,000,000 -- === ------------ ============ TOTAL........................... -- -- 283 $ 2,640,750 $144,435,000 -- === ============ ============
- --------------- * Under letter of commitment. ** Under contract. (1) Based on the number of licensed beds. (2) Year One is the 12 month period commencing on an expected closing date of April 30, 2005. (3) The annual rent increase is the greater of 2.5% and any change in the Consumer Price Index, or CPI. (4) The lease expiration is based upon a 15 year term commencing on an expected closing date of April 30, 2005. (5) On April 1, 2005, we entered into a letter of commitment with Hammond Healthcare Properties, LLC, or Hammond Properties, and Hammond Rehabilitation Hospital, LLC, or Hammond Hospital, pursuant to which we have agreed to lend Hammond Properties $8.0 million and have agreed to a put-call option pursuant to which, during the 90 day period commencing on the first anniversary of the date of the loan closing, we expect to purchase from Hammond Properties a long-term acute care hospital located in Hammond, Louisiana for a purchase price between $10.3 million and $11.0 million. If we purchase the facility, we will lease it back to Hammond Hospital for an initial term of 15 years. The lease would be a net lease and would provide for contractual base rent and, beginning January 1, 2007, an annual rent escalator. (6) Based on one year contractual interest at the rate of 10.5% per year on the $8.0 million mortgage loan to Hammond Properties. We expect to exercise our option to purchase the Hammond facility in 2006. For the one year period following our purchase of the facility, contractual base rent would equal $1,080,030, based on 10.5% of an estimated purchase price of $10,285,000. (7) We expect that each of these leases will have a 15 year term commencing on the date that construction of the facility is completed. 4

OTHER LETTERS OF COMMITMENT In addition to our Pending Acquisition and Development Facilities, we have entered into the following letters of commitment: On February 28, 2005, we entered into a letter of commitment with DVH, pursuant to which we have agreed to fund up to $20.0 million for the purpose of expanding our Desert Valley Facility, a community hospital with an integrated medical office building in Victorville, California. We have agreed to begin funding and DVH has agreed to begin drawing on the commitment amount by February 28, 2006, in accordance with a disbursement schedule to be set forth in a definitive development agreement to be entered into between us and DVH at the time of the first draw. Upon receipt and approval of the development agreement, DVH is obligated to pay us a commitment fee in cash equal to 0.5% of the maximum commitment amount. This commitment fee will be adjusted following the full and final funding of the expansion to a sum equal to 0.5% of the actual amount funded. Except for any adjustments to the commitment fee that may result from funding less than the maximum commitment amount, the commitment fee is non-refundable. If DVH fails to provide a development agreement to us by January 29, 2006, we will have no further liability or obligation to provide the funding and will not receive any commitment fees. We do not expect to generate any revenues from this transaction in the near future. On March 3, 2005, we entered into a letter of commitment with Diversified Specialty Institutes, Inc., or DSI, pursuant to which we have agreed to make available to DSI or its affiliates acquisition and development funds in the total amount of $50.0 million to be used to finance the potential future acquisition or development of healthcare facilities, in each case subject to our due diligence and approval. DSI is the developer of our women's hospital and medical office building in Bensalem, Pennsylvania. We expect the commitment to remain outstanding until March 2, 2006, and be available to finance any acquisition or development facility that is subject to a definitive agreement as of March 2, 2006. At the time of DSI's purchase of any acquisition or development facility, we intend to purchase the facility or land from DSI and lease it back to an affiliate of DSI for an initial 15 year term. Under the terms of the letter of commitment, each lease will be a net lease providing for contractual base rent and an annual rent escalator. We cannot assure you that we will acquire or develop any of the Pending Acquisition and Development Facilities or complete any of the other transactions we have under letter of commitment on the terms described in this prospectus or at all, because each of these transactions is subject to a variety of conditions, including, in the case of the Pending Acquisition and Development Facilities under contract, our satisfactory completion of due diligence, receipt of appraisals and other third party reports, obtaining of government and third party approvals and consents and other customary closing conditions and, in the case of the transactions under letters of commitment, negotiation and execution of mutually-acceptable definitive agreements, our satisfactory completion of due diligence, receipt of appraisals and other third party reports, obtaining of government and third party approvals and consents, approval by our board of directors and other customary closing conditions. OUR ACQUISITION AND DEVELOPMENT PIPELINE In addition to the transactions described above, as of , 2005, we had facilities under letters of intent with an aggregate gross purchase price and estimated development costs totally approximately $ million. The letters of intent are non-binding, and we cannot assure you that we will acquire or develop any of the facilities under letters of intent because each of these transactions is subject to a variety of conditions, including the willingness of the parties to proceed with the contemplated transaction, negotiation and execution of a letter of commitment and mutually-acceptable definitive agreements, our satisfactory completion of due diligence, receipt of appraisals and other third party reports, obtaining of government and third party approvals and consents, approval by our board of directors and other customary closing conditions. We have also identified a number of opportunities to acquire or develop additional healthcare facilities. In some cases, we are actively negotiating agreements or letters of intent with the owners or 5

prospective tenants. In other instances, we have only identified the potential opportunity and had preliminary discussions with the owner or prospective tenant. None of these potential acquisitions or developments is under a letter of intent, letter of commitment or contract and we cannot assure you that we will complete any of these potential acquisitions or developments. OUR DEBT We employ leverage in our capital structure in amounts we determine from time to time. At present, we intend to limit our debt to approximately 60% of the aggregate cost of our facilities, although we may exceed that level from time to time. We expect our borrowings to be a combination of long-term, fixed- rate, non-recourse mortgage loans, variable-rate secured term and revolving credit facilities, and other fixed and variable-rate short to medium-term loans. We borrowed $75 million from Merrill Lynch Capital under a loan agreement with a term of three years for acquisition and development of additional facilities and other working capital needs. The loan bears interest at one month LIBOR (2.87% at March 31, 2005) plus 300 basis points. The loan is secured by our interests in the Vibra Facilities and requires us to comply with certain financial covenants. There was $74.1 million outstanding under this loan as of March 31, 2005. We have also entered into construction loan agreement in an aggregate amount of $43.4 million with Colonial Bank to fund construction costs for the West Houston Facilities being developed in Houston, Texas. Each construction loan has a term of up to 18 months and an option on the part of the borrower to convert the loan to a 30-month term loan upon completion of construction of the West Houston Facility securing that loan. The loans are secured by mortgages on the West Houston Facilities, as well as assignments of rents and leases on those facilities, and require us to comply with certain financial covenants. The loans bear interest at three month LIBOR (3.12% at March 31, 2005) plus 225 basis points during the construction period and three month LIBOR plus 250 basis points thereafter. The Colonial Bank loans are cross-defaulted. As of the date of this prospectus, we have made no borrowings under the Colonial Bank loans. COMPETITIVE STRENGTHS We believe that the following competitive strengths will enable us to execute our business strategy successfully: - Experienced Management Team. Our management team's experience enables us to offer innovative acquisition and net-lease structures that we believe will appeal to a variety of healthcare operators. We believe that our management's depth of experience in both traditional real estate investment and healthcare operations positions us favorably to take advantage of the available opportunities in the healthcare real estate market. - Comprehensive Underwriting Process. Our underwriting process focuses on both real estate investment and healthcare operations. Our acquisition and development selection process includes a comprehensive analysis of a targeted healthcare facility's profitability, cash flow, occupancy and patient and payor mix, financial trends in revenues and expenses, barriers to competition, the need in the market for the type of healthcare services provided by the facility, the strength of the location and the underlying value of the facility, as well as the financial strength and experience of the tenant. Through our detailed underwriting of healthcare acquisitions, which includes an analysis of both the underlying real estate and ongoing or expected healthcare operations at the property, we expect to deliver attractive risk-adjusted returns to our stockholders. - Active Asset Management. We actively monitor the operating results of our tenants by reviewing periodic financial reporting and operating data, as well as visiting each facility and meeting with the management of our tenants on a regular basis. Integral to our asset management philosophy is our desire to build long-term relationships with our tenants and, accordingly, we have developed a partnering approach which we believe results in the tenant viewing us as a member of its team. 6

- Favorable Lease Terms. We lease our facilities to healthcare operators pursuant to long-term net-lease agreements. A net-lease requires the tenant to bear most of the costs associated with the property, including property taxes, utilities, insurance and maintenance. Our current net-leases are for terms of at least 10 years, provide for annual base rental increases and, in the case of the Vibra Facilities, percentage rent. Similarly, we anticipate that our future leases will generally provide for base rent with annual escalators, tenant payment of operating costs and, when feasible and in compliance with applicable healthcare laws and regulations, percentage rent. - Diversified Portfolio Strategy. We focus on a portfolio of several different types of healthcare facilities in a variety of geographic regions. We also intend to diversify our tenant base as we acquire and develop additional healthcare facilities. - Access to Investment Opportunities. We believe our network of relationships in both the real estate and healthcare industries provides us access to a large volume of potential acquisition and development opportunities. The net proceeds of this offering will enhance our ability to capitalize on these and other investment opportunities. - Local Physician Investment. When feasible and in compliance with applicable healthcare laws and regulations, we expect to offer physicians an opportunity to invest in the facilities that we own, thereby strengthening our relationship with the local physician community. SUMMARY RISK FACTORS You should carefully consider the matters discussed in the section "Risk Factors" beginning on page 15 prior to deciding whether to invest in our common stock. Some of these risks include: - 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. - We may be unable to acquire or develop the Pending Acquisition and Development Facilities or facilities we have identified as potential candidates for acquisition or development as quickly as we expect or at all, which could harm our future operating results and adversely affect our ability to make distributions to our stockholders. - We expect to continue to experience rapid growth and may not be able to adapt our management and operational systems to integrate the net-leased facilities we have acquired and are developing or those that we expect to acquire and develop without unanticipated disruption or expense. - Our real estate investments will be concentrated in net-leased healthcare facilities, making us more vulnerable economically than if our investments were more diversified across several industries or property types. - Failure by our tenants to repay loans currently outstanding or loans we have committed to make or to pay us commitment and 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. - Our facilities are currently leased to only three tenants, two of which were recently organized and have limited or no operating histories, and the failure of any of these tenants to meet its obligations to us, including payment of rent, payment of loan commitment fees and repayment of loans we have made or intend to make to them, would have a material adverse effect on our revenues and our ability to make distributions to our stockholders. - Development and construction risks, including delays in construction, exceeding original estimates and failure to obtain financing, could adversely affect our ability to make distributions to our stockholders. 7

- Reductions in reimbursement from third-party payors, including Medicare and Medicaid, could adversely affect the profitability of our tenants and hinder their ability to make rent or loan payments to us. - 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 or loan payments to us. - Our use of debt financing will subject us to significant risks, including foreclosure and refinancing risks and the risk that debt service obligations will reduce the amount of cash available for distribution to our stockholders. We have entered into loan agreements pursuant to which we may borrow up to $117.5 million, $74.1 million of which was outstanding as of March 31, 2005. Our charter and other organizational documents do not limit the amount of debt we may incur. - Provisions of Maryland law, our charter and our bylaws may prevent or deter changes in management and third-party acquisition proposals that you may believe to be in our best interest, depress our stock price or cause dilution. - We depend on key personnel, the loss of any one of whom could threaten our ability to operate our business successfully. - Failure to obtain or loss of our tax status as a REIT would have significant adverse consequences to us and the value of our common stock. - Our loans to Vibra could be recharacterized as equity, in which case our rental income from Vibra would not be qualifying income under the REIT rules and we could lose our REIT status. - There is currently no public market for our common stock, and an active trading market for our common stock may never develop. - Common stock eligible for future sale, including up to shares that may be resold by our existing stockholders upon effectiveness of our resale registration statement, may result in increased selling which may have an adverse effect on our stock price. - Our engagement agreement with Friedman, Billings, Ramsey & Co., Inc. may preclude us from engaging investment banking firms other than Friedman, Billings, Ramsey & Co., Inc, until April 7, 2006 for future financing and other strategic transactions, and Friedman, Billings, Ramsey & Co., Inc. has an interest in this offering other than underwriting discounts and commissions. - If you purchase common stock in this offering, you will experience immediate dilution of approximately $ in net tangible book value per share. MARKET OPPORTUNITY According to the United States Department of Commerce, Bureau of Economic Analysis, healthcare is one of the largest industries in the U.S., and was responsible for approximately 15.3% of U.S. gross domestic product in 2003. Healthcare spending has consistently grown at rates greater than overall spending growth and inflation. We expect this trend to continue. According to the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, or CMS, healthcare expenditures are projected to increase by more than 7% in 2004 and 2005 to $1.8 trillion and $1.9 trillion, respectively, and are expected to reach $3.1 trillion by 2012. To satisfy this growing demand for healthcare services, a significant amount of new construction of healthcare facilities has been undertaken, and we expect significant construction of additional healthcare facilities in the future. In 2003 alone, $24.5 billion was spent on the construction of healthcare facilities, according to CMS. This represented more than a 9% increase over the $22.4 billion in healthcare construction spending for 2002. We believe that a significant part of this healthcare construction spending was for the types of facilities that we target. 8

OUR TARGET FACILITIES The market for healthcare real estate is extensive and includes real estate owned by a variety of healthcare operators. We focus on acquiring, developing and net leasing to healthcare operators facilities that are designed to address what we view as the latest trends in healthcare delivery methods. These facilities include: - Rehabilitation Hospitals: Rehabilitation hospitals provide inpatient and outpatient rehabilitation services for patients recovering from multiple traumatic injuries, organ transplants, amputations, cardiovascular surgery, strokes, and complex neurological, orthopedic, and other conditions. These hospitals are often the best medical alternative to traditional acute care hospitals where under the Medicare prospective payment system there is pressure to discharge patients after relatively short stays. - Long-term Acute Care Hospitals: Long-term acute care hospitals focus on extended hospital care, generally at least 25 days, for the medically-complex patient. Long-term acute care hospitals have arisen from a need to provide care to patients in acute care settings, including daily physician observation and treatment, before they are able to move to a rehabilitation hospital or return home. These facilities are reimbursed in a manner more appropriate for a longer length of stay than is typical for an acute care hospital. - Regional and Community Hospitals: We define regional and community hospitals as general medical/surgical hospitals whose practicing physicians generally serve a market specific area, whether urban, suburban or rural. We intend to limit our ownership of these facilities to those with market, ownership, competitive or technological characteristics that provide barriers to entry for potential competitors. - Women's and Children's Hospitals: These hospitals serve the specialized areas of obstetrics and gynecology, other women's healthcare needs, neonatology and pediatrics. We anticipate substantial development of facilities designed to meet the needs of women and children and their physicians as a result of the decentralization and specialization trends described above. - Ambulatory Surgery Centers: Ambulatory surgery centers are freestanding facilities designed to allow patients to have outpatient surgery, spend a short time recovering at the center, then return home to complete their recovery. Ambulatory surgery centers offer a lower cost alternative to general hospitals for many surgical procedures in an environment that is more convenient for both patients and physicians. Outpatient procedures commonly performed include those related to gastrointestinal, general surgery, plastic surgery, ear, nose and throat/audiology, as well as orthopedics and sports medicine. - Other Single-Discipline Facilities: The decentralization and specialization trends in the healthcare industry are also creating demands and opportunities for physicians to practice in hospital facilities in which the design, layout and medical equipment are specifically developed, and healthcare professional staff are educated, for medical specialties. These facilities include heart hospitals, ophthalmology centers, orthopedic hospitals and cancer centers. - Medical Office Buildings: Medical office buildings are office and clinic facilities occupied and used by physicians and other healthcare providers in the provision of healthcare services to their patients. The medical office buildings that we target are or will be master-leased and generally adjacent to our other targeted healthcare facilities. OUR FORMATION TRANSACTIONS The following is a summary of our formation transactions: - We were formed as a Maryland corporation on August 27, 2003 to succeed to the business of Medical Properties Trust, LLC, a Delaware limited liability company, which was formed by certain of our founders in December 2002. In connection with our formation, we issued our founders 9

1,630,435 shares of our common stock in exchange for nominal cash consideration and the membership interests of Medical Properties Trust, LLC. Upon completion of our private placement in April 2004, 1,108,527 shares of the 1,630,435 shares of common stock held by our founders were redeemed for nominal value and they now collectively hold 557,908 shares of our common stock, including shares purchased in our April 2004 private placement. - Our operating partnership, MPT Operating Partnership, L.P., was formed in September 2003. Our wholly-owned subsidiary, Medical Properties Trust, LLC, is the sole general partner of our operating partnership. We currently own all of the limited partnership interests in our operating partnership. - MPT Development Services, Inc., a Delaware corporation that we formed in January 2004, operates as our taxable REIT subsidiary. - In April 2004 we completed a private placement of 25,300,000 shares of common stock at an offering price of $10.00 per share. Friedman, Billings, Ramsey & Co., Inc., which is serving as a lead underwriter in this offering, acted as the initial purchaser and sole placement agent. The total net proceeds to us, after deducting fees and expenses of the offering, were approximately $233.5 million, and, together with borrowed funds, have been or will be used to acquire our current portfolio of nine facilities, consisting of seven facilities that are in operation and two that are under development, lend funds to one of our tenants, repay debt, pay pre-offering operating expenses and for working capital. Thus far we have utilized approximately $155.4 million to acquire our seven existing facilities, have loaned $47.6 million to Vibra to acquire the operations at the Vibra Facilities and for working capital purposes, $6.2 million of which has been repaid, and have funded approximately $29.4 million of a projected total of approximately $63.1 million of development costs for the West Houston Facilities. There are approximately 295 holders of our common stock as of the date of this prospectus. OUR STRUCTURE We conduct our business through a traditional umbrella partnership REIT, or UPREIT, in which our facilities are owned by our operating partnership, MPT Operating Partnership, L.P., and limited partnerships, limited liability companies or other subsidiaries of our operating partnership. Through our wholly-owned limited liability company, Medical Properties Trust, LLC, we are the sole general partner of our operating partnership and we presently own all of the limited partnership units of our operating partnership. In the future, we may issue limited partnership units to third parties from time to time in connection with facility acquisitions or developments. In addition, we may sell equity interests in subsidiaries of our operating partnership in connection with facility acquisitions or developments. 10

MPT Development Services, Inc., our taxable REIT subsidiary, is authorized to engage in development, management, lending, including but not limited to acquisition and working capital loans to our tenants, and other activities that we are unable to engage in directly under applicable REIT tax rules. The following chart illustrates our structure upon completion of this offering: (CHART) - --------------- (1) We own and in the future expect to own interests in our facilities through wholly owned or majority owned subsidiaries of our operating partnership, MPT Operating Partnership, L.P. Our operating partnership is a limited partner of MPT West Houston MOB, L.P. and MPT West Houston Hospital, L.P., which own, respectively, the West Houston MOB and the West Houston Hospital. MPT West Houston MOB, LLC and MPT West Houston Hospital, LLC, both of which are wholly-owned by our operating partnership, are, respectively, the general partners of these entities. We are offering up to 40% of the limited partnership interests in MPT West Houston MOB, L.P. to physicians. Stealth, the tenant of the West Houston Hospital, owns a 6% limited partnership interest in MPT West Houston Hospital, L.P. REGISTRATION RIGHTS AND LOCK-UP AGREEMENTS Registration Rights Agreement. Pursuant to a registration rights agreement among us, Friedman, Billings, Ramsey & Co., Inc. and certain holders of our common stock, we were required, among other things, to file with the SEC by January 6, 2005 a resale shelf registration statement registering all of the shares of common stock sold in our April 2004 private placement, and all of the shares of common stock issued to Friedman, Billings, Ramsey & Co., Inc. for financial advisory services. We are required to use our reasonable best efforts to cause the resale registration statement to become effective under the Securities Act as promptly as practicable after the filing and to maintain the resale registration statement continuously effective under the Securities Act of 1933, or the Securities Act, for a specified period. The resale registration statement was filed on January 6, 2005. If we default on our obligation to use reasonable best efforts to cause the effectiveness of, or fail to maintain the effectiveness of, the resale registration statement for the time periods described above, or certain other events occur, we may be 11

required to pay the holders of registrable shares, other than our affiliates, liquidated damages during the period of the default. Lock-up Agreements. All of our directors and executive officers, subject to limited exceptions, have agreed to be bound by lock-up agreements that prohibit these holders from selling or otherwise disposing of any of our common stock or securities convertible into our common stock that they own or acquire for 180 days after the date of this prospectus. In addition, the underwriters will require that all of our stockholders other than our executive officers and directors agree not to sell or otherwise dispose of any of the shares of our common stock or securities convertible into our common stock that they have acquired prior to the date of this prospectus and are not selling in this offering until 60 days after the date of this prospectus, subject to limited exceptions. Friedman, Billings, Ramsey & Co., Inc., on behalf of the underwriters, may, in its discretion, release all or any portion of the common stock subject to the lock-up agreements with our directors and executive officers at any time and without notice or stockholder approval, in which case our other stockholders would also be released from the restrictions under the registration rights agreement. SELLING STOCKHOLDERS Pursuant to, and subject to the terms and conditions of, the registration rights agreement among us, Friedman, Billings, Ramsey & Co., Inc. and certain holders of our common stock, persons who purchased our common stock in our private placement in April 2004 and their transferees have the right to sell their common stock in this offering. We are including shares of our common stock in this offering to be sold by selling stockholders. RESTRICTIONS ON OWNERSHIP OF OUR COMMON STOCK The Code imposes limitations on the concentration of ownership of REIT shares. Our charter generally prohibits any stockholder from actually or constructively owning more than 9.8% of our outstanding shares of common stock. The ownership limitation in our charter is more restrictive than the restrictions on ownership of our common stock imposed by the Code. Our board may, in its sole discretion, waive this ownership limitation with respect to particular stockholders if our board is presented with evidence satisfactory to it that the ownership will not then or in the future jeopardize our status as a REIT. DISTRIBUTION POLICY We intend to distribute to our stockholders each year all or substantially all of our REIT taxable income so as to avoid paying corporate income tax and excise tax on our REIT income and to qualify for the tax benefits afforded to REITs under the Code. The actual amount and timing of distributions, if any, will be at the discretion of our board of directors and will depend upon our actual results of operations and a number of other factors discussed in the section "Distribution Policy." On September 2, 2004, we declared a distribution of $0.10 per share of common stock, payable to stockholders of record as of September 16, 2004. We made this distribution on October 11, 2004. On November 11, 2004, we declared a distribution of $0.11 per share of common stock, payable to stockholders of record as of December 16, 2004. We made the distribution on January 11, 2005. On March 4, 2005, we declared a distribution of $0.11 per share of common stock, payable on April 15, 2005 to stockholders of record as of March 16, 2005. 12

THE OFFERING Shares of common stock offered by us(1)...................... shares Shares of common stock offered by selling stockholders....... shares Shares of common stock to be outstanding after this offering(1)(2)................ shares Use of Proceeds............... The net proceeds to us from the sale of the shares of common stock offered by this prospectus, after deducting the underwriting discount and the estimated offering expenses payable by us, will be approximately $ . We intend to use the net proceeds as follows: - approximately $ to fund the purchase or development of our Pending Acquisition and Development Facilities; - the remainder for general corporate and working capital purposes, including possible future acquisitions or developments of facilities, expansion of the Desert Valley Facility, funding of the DSI acquisition and development commitment, and repayment of indebtedness. Pending these uses, we intend to invest the net offering proceeds in interest-bearing, short-term marketable investment grade securities or money-market accounts which are consistent with our intention to qualify as a REIT. Proposed NYSE symbol.......... MPW - --------------- (1) Excludes shares of common stock that may be issued by us upon exercise of the underwriters' overallotment option. (2) Based on shares outstanding as of , 2005. Includes 114,500 shares of restricted common stock to be awarded upon completion of this offering under our Amended and Restated 2004 Equity Incentive Plan, which we refer to in this prospectus as our equity incentive plan. Excludes (i) 100,000 shares of common stock issuable upon the exercise of stock options granted to our independent directors under our equity incentive plan, one-third of which are vested; (ii) 5,000 shares of common stock issuable in October 2007 and 7,500 shares of common stock issuable in March 2008 pursuant to deferred stock units awarded under our equity incentive plan to our independent directors; (iii) 35,000 shares of common stock issuable upon the exercise of a warrant granted to an unaffiliated third-party, and (iv) 564,180 shares of common stock available for future awards under our equity incentive plan. TAX STATUS As long as we qualify for and maintain our REIT status, we will generally not incur federal income tax on our income to the extent that we distribute this income to our stockholders. However, we will be subject to tax at normal corporate rates on net income or capital gains not distributed to stockholders. Moreover, our taxable REIT subsidiary will be subject to federal and state income taxation on its taxable income. SUMMARY FINANCIAL INFORMATION You should read the following pro forma and historical information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical and pro forma consolidated financial statements and related notes thereto included elsewhere in this prospectus. 13

The following table sets forth our summary financial and operating data on an historical and pro forma basis. Our summary historical statements of operations information for the year ended December 31, 2004 and for the period from inception (August 27, 2003) through December 31, 2003 and our summary historical balance sheet information at December 31, 2004 and at December 31, 2003 have been derived from our historical financial statements audited by KPMG LLP, independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The unaudited pro forma consolidated balance sheet data as of December 31, 2004 are presented as if our acquisition of the current portfolio of facilities and completion of this offering and application of the net proceeds had occurred on December 31, 2004, and, our unaudited pro forma consolidated statement of operations data for the year ended December 31, 2004 are presented as if our acquisition of the current portfolio of facilities and completion of this offering and application of the net proceeds had occurred on January 1, 2004. The pro forma information is not necessarily indicative of what our actual financial position or results of operations would have been as of the dates or for the periods indicated, nor does it purport to represent our future financial position or results of operations.

FOR THE PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ------------------------------- ------------- PRO FORMA HISTORICAL HISTORICAL --------------- ------------- ------------- OPERATING INFORMATION: Revenues Rent income.................................... $ 23,766,315 $ 8,611,344 $ -- Interest income from loans..................... 5,877,049 2,282,115 -- ------------- ----------- ----------- Total revenues................................. 29,643,364 10,893,459 -- Operating expenses Depreciation and amortization.................. 4,257,054 1,478,470 -- General and administrative..................... 6,202,284 5,057,284 992,418 Total operating expenses....................... 11,325,189 7,214,601 1,023,276 Operating income (loss)........................ 18,318,175 3,678,858 (1,023,276) Net other income............................... 897,491 897,491 -- Net income (loss)................................. 19,215,666 4,576,349 (1,023,276) Net income (loss) per share, basic and diluted.... 0.24 (0.63) Weighted average shares outstanding -- basic...... 19,310,833 1,630,435 Weighted average shares outstanding -- diluted.... 19,312,634 1,630,435
AS OF DECEMBER 31, AS OF DECEMBER 31, 2004 2003 ------------------------------------------- ------------ PRO FORMA HISTORICAL HISTORICAL ------------ ------------ ------------ BALANCE SHEET INFORMATION: Gross investment in real estate assets............ $207,068,625 $151,690,293 $ -- Net investment in real estate..................... 205,590,155 150,211,823 -- Construction in progress.......................... 24,261,430 24,318,098 166,301 Cash and cash equivalents......................... 147,163,345 97,543,677 100,000 Loans receivable.................................. 50,224,069(1) 50,224,069(1) -- Total assets...................................... 411,506,063 306,506,063 468,133 Total debt........................................ -- 56,000,000 -- Total liabilities................................. 17,777,619 73,777,619 1,489,779 Total stockholders' equity (deficit).............. 392,728,444 231,728,444 (1,021,646) Total liabilities and stockholders' equity........ 411,506,063 306,506,063 468,133
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FOR THE PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH FOR THE YEAR ENDED DECEMBER DECEMBER 31, 2004 31, 2003 --------------------------- ----------- PRO FORMA HISTORICAL HISTORICAL ----------- ------------- ----------- OTHER INFORMATION: Funds from operations(2).................................. $23,472,720 $ 6,054,819 $(1,023,276) Cash Flows: Provided by operating activities........................ 9,918,898 368,133 Used for investing activities........................... (195,600,642) (166,301) Provided by (used for) financing activities............. 283,125,421 (101,832)
- --------------- (1) Includes $1.5 million in commitment fees payable to us by Vibra. (2) Funds from operations, or FFO, represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. Management considers funds from operations a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that funds from operations provides a meaningful supplemental indication of our performance. We compute funds from operations in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating funds from operations utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Funds from operations should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity. The following table presents a reconciliation of FFO to net income for the year ended December 31, 2004, on an actual and pro forma basis, and for the period from inception (August 27, 2003) through December 31, 2003 on an actual basis:
FOR THE PERIOD FROM INCEPTION (AUGUST 27, 2003) FOR THE YEAR ENDED THROUGH DECEMBER 31, 2004 DECEMBER ------------------------ 31, 2003 PRO ----------- FORMA HISTORICAL HISTORICAL ----------- ---------- ----------- FUNDS FROM OPERATIONS: Net income (loss).......................................... $19,215,666 $4,576,349 $(1,023,276) Depreciation and amortization.............................. 4,257,054 1,478,470 -- ----------- ---------- ----------- Funds from operations...................................... $23,472,720 $6,054,819 $(1,023,276) =========== ========== ===========
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RISK FACTORS An investment in our common stock involves a number of risks. The risks described below represent the risks that we believe are material as of the date of this prospectus that you should carefully consider before making an investment decision. If any of these risks occur, our business, liquidity, financial condition and results of operations could be materially and adversely affected, in which case the price of our common stock could decline significantly and you could lose all or a part of your investment. The risk factors described below are not the only risks that may affect us. Additional risks and uncertainties not presently known to us, or not identified below, may also materially adversely affect our business, liquidity, financial condition and results of operations. RISKS RELATING TO OUR BUSINESS AND GROWTH STRATEGY 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. We have only recently been organized and have a limited operating history. We are subject to the risks generally associated with the formation of any new business, including unproven business models, untested plans, uncertain market acceptance and competition with established businesses. Our management has limited experience in operating a REIT and a public company. Therefore, you should be especially cautious in drawing conclusions about the ability of our management team to execute our business plan. WE MAY NOT BE SUCCESSFUL IN DEPLOYING THE NET PROCEEDS OF THIS OFFERING FOR THEIR INTENDED USES AS QUICKLY AS WE INTEND OR AT ALL, WHICH COULD HARM OUR CASH FLOW AND ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. Upon completion of this offering, we will experience a capital infusion from the net offering proceeds, which we intend to use to acquire or develop additional net-leased facilities. If we are unable to use the net proceeds in this manner, we will have no specific designated use for a substantial portion of the net proceeds from this offering and you would be unable to evaluate the manner in which we invest the net proceeds or the economic merits of the assets acquired with the proceeds. We may not be able to invest this capital on acceptable terms or timeframes or at all, which may harm our cash flow and ability to make distributions to our stockholders. WE MAY BE UNABLE TO ACQUIRE OR DEVELOP THE PENDING ACQUISITION AND DEVELOPMENT FACILITIES, WHICH COULD HARM OUR FUTURE OPERATING RESULTS AND ADVERSELY AFFECT OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. Our future success depends in large part on our ability to continue to grow our business through the acquisition or development of additional facilities. We cannot assure you that we will acquire or develop any of the Pending Acquisition and Development Facilities on the terms described, or at all, because each of these transactions is subject to a variety of conditions, including, in the case of facilities under contract, our satisfactory completion of due diligence and the satisfaction of customary closing conditions, including the obtaining of any required government approvals and consents and, in the case of facilities under letters of commitment, execution of mutually-acceptable definitive agreements, our satisfactory completion of due diligence, receipt of appraisals and other third-party reports, receipt of government and third-party approvals and consents, approval by our board of directors and other customary closing conditions. We have incurred losses of $585,345 in connection with acquisitions that we were unable to complete, consisting primarily of legal fees, costs of third-party reports and travel expenses. If we are unsuccessful in completing the acquisition or development of additional facilities in the future, we will incur similar costs without achieving corresponding revenues, our future operating results will not meet expectations and our ability to make distributions to our stockholders will be adversely affected. 16

WE MAY NOT CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY OUR OTHER LETTERS OF COMMITMENT, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. We have entered into letters of commitment for a $20.0 million expansion of the Desert Valley Facility and a commitment to fund $50.0 million to DSI. Our funding of the expansion is subject to receipt of a development agreement, which we may not execute until January 29, 2006. If we enter into a development agreement, we may not begin construction on the expansion for several months after that time and the expansion could take up to approximately one year to complete. Any acquisition or development of facilities pursuant to the DSI commitment is subject to DSI's identification, and our approval, of acquisition or development facilities. Each of these commitments is subject to a number of conditions. Thus we may not begin funding any of these transactions in the near future, or at all, and may not in the near future, or ever, generate any revenues from these commitments. WE MAY BE UNABLE TO ACQUIRE OR DEVELOP ANY OF THE FACILITIES WE HAVE UNDER NON-BINDING LETTERS OF INTENT OR FACILITIES WE HAVE IDENTIFIED AS POTENTIAL CANDIDATES FOR ACQUISITION OR DEVELOPMENT, WHICH COULD HARM OUR FUTURE OPERATING RESULTS AND ADVERSELY AFFECT OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. As of , 2005, we had entered into non-binding letters of intent for the acquisition or development of facilities having an estimated aggregate gross purchase price or development cost of approximately $ million and we have identified numerous other facilities that we believe would be suitable candidates for acquisition or development; however, none of these facilities is under a letter of commitment or contract and we cannot assure you that we will be successful in completing the acquisition or development of any of these facilities. Consummation of any of these acquisitions is subject to, among other things, the willingness of the parties to proceed with a contemplated transaction, negotiation of mutually acceptable definitive agreements, satisfactory completion of due diligence and satisfaction of customary closing conditions. If we are unsuccessful in completing the acquisition or development of additional facilities in the future, our future operating results will not meet expectations and our ability to make distributions to our stockholders will be adversely affected. WE EXPECT TO CONTINUE TO EXPERIENCE RAPID GROWTH AND MAY NOT BE ABLE TO ADAPT OUR MANAGEMENT AND OPERATIONAL SYSTEMS TO INTEGRATE THE NET-LEASED FACILITIES WE HAVE ACQUIRED AND ARE DEVELOPING OR THOSE THAT WE MAY ACQUIRE OR DEVELOP IN THE FUTURE WITHOUT UNANTICIPATED DISRUPTION OR EXPENSE. We are currently experiencing a period of rapid growth. We cannot assure you that we will be able to adapt our management, administrative, accounting and operational systems, or hire and retain sufficient operational staff, to integrate and manage the facilities we have acquired and are developing and those that we may acquire or develop. Our failure to successfully integrate and manage our current portfolio of facilities or any future acquisitions or developments could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders. WE MAY BE UNABLE TO ACCESS CAPITAL, WHICH WOULD SLOW OUR GROWTH. Our business plan contemplates growth through acquisitions and developments of facilities. As a REIT, we are required to make cash distributions which reduces our ability to fund acquisitions and developments with retained earnings. We are dependent on acquisition financings and access to the capital markets for cash to make investments in new facilities. Due to market or other conditions, there will be times when we will have limited access to capital from the equity and debt markets. During such periods, virtually all of our available capital will be required to meet existing commitments and to reduce existing debt. We may not be able to obtain additional equity or debt capital or dispose of assets, on favorable terms, if at all, at the time we need additional capital to acquire healthcare properties on a competitive basis or to meet our obligations. Our ability to grow through acquisitions and developments will be limited if we are unable to obtain debt or equity financing, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders. 17

DEPENDENCE ON OUR TENANTS FOR RENT MAY ADVERSELY IMPACT OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. We expect to qualify as a REIT and, accordingly, as a REIT operating in the healthcare industry, we are not permitted by current tax law to operate or manage the businesses conducted in our facilities. Accordingly, we rely almost exclusively on rent payments from our tenants for cash with which to make distributions to our stockholders. We have no control over the success or failure of these tenants' businesses. Significant adverse changes in the operations of any facility, or the financial condition of any tenant, could have a material adverse effect on our ability to collect rent payments and, accordingly, on our ability to make distributions to our stockholders. Facility management by our tenants and their compliance with state and federal healthcare laws could have a material impact on our tenants' operating and financial condition and, in turn, their ability to pay rent to us. Failure on the part of a tenant to comply materially with the terms of a lease could give us the right to terminate our lease with that tenant, repossess the applicable facility, cross default certain other leases with that tenant and enforce the payment obligations under the lease. However, we then would be required to find another tenant-operator. The transfer of most types of healthcare facilities is highly regulated, which may result in delays and increased costs in locating a suitable replacement tenant. The sale or lease of these properties to entities other than healthcare operators may be difficult due to the added cost and time of refitting the properties. If we are unable to re-let the properties to healthcare operators, we may be forced to sell the properties at a loss due to the repositioning expenses likely to be incurred by non-healthcare purchasers. Alternatively, we may be required to spend substantial amounts to adapt the facility to other uses. There can be no assurance that we would be able to find another tenant in a timely fashion, or at all, or that, if another tenant were found, we would be able to enter into a new lease on favorable terms. Defaults by our tenants under our leases may adversely affect the timing of and our ability to make distributions to our stockholders. 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. In connection with the acquisition of the Vibra Facilities, our taxable REIT subsidiary has made secured loans to Vibra in an aggregate amount of approximately $41.4 million to acquire the operations at the Vibra Facilities. Payment of these loans is secured by pledges of equity interests in Vibra and its subsidiaries that are tenants of ours. If Vibra defaulted on these loans, our primary recourse would be to foreclose on the equity interests in Vibra and its affiliates. This recourse may be impractical because of limitations imposed by the REIT tax rules on our ability to own these interests. Failure to adhere to these limitations could cause us to lose our REIT status. Vibra has entered into a credit facility with Merrill Lynch, and that loan is secured by an interest in Vibra's receivables. We are subordinate to Merrill Lynch with respect to the receivables. We have also agreed to make a working capital loan to Stealth of up to $1.62 million, although no amounts have been loaned to date. Stealth also owes us commitment and other fees of approximately $1.1 million. Payment of these fees and loan amounts is unsecured. We have also agreed to make a mortgage loan in the amount of $8.0 million to Hammond Properties. We are dependent upon the ability of these two tenants and Hammond Properties to repay these loans and fees. Failure by these tenants or Hammond Properties to meet these obligations would have a material adverse effect on our revenues and our ability to make distributions to our stockholders. ACCOUNTING RULES MAY REQUIRE CONSOLIDATION OF ENTITIES IN WHICH WE INVEST AND OTHER ADJUSTMENTS TO OUR FINANCIAL STATEMENTS. The Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51 (ARB No. 51)," in January 2003, and a further interpretation of FIN 46 in December 2003 (FIN 46-R, and collectively FIN 46). FIN 46 clarifies the application of ARB No. 51, "Consolidated Financial Statements," to certain entities in which equity investors do not have the characteristics of a controlling 18

financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties, referred to as variable interest entities. FIN 46 generally requires consolidation by the party that has a majority of the risk and/or rewards, referred to as the primary beneficiary. FIN 46 applies immediately to variable interest entities created after January 31, 2003. Under certain circumstances, generally accepted accounting principles may require us to account for loans to thinly capitalized companies such as Vibra as equity investments. The resulting accounting treatment of certain income and expense items may adversely affect our results of operations, and consolidation of balance sheet amounts may adversely affect any loan covenants. THE BANKRUPTCY OR INSOLVENCY OF OUR TENANTS UNDER OUR LEASES COULD SERIOUSLY HARM OUR OPERATING RESULTS AND FINANCIAL CONDITION. Two of our existing tenants, Stealth and Vibra, are, and some of our prospective tenants may be, newly organized, have limited or no operating history and may be dependent on loans from us to acquire the facility's operations and for initial working capital. Any bankruptcy filings by or relating to one of our tenants could bar us from collecting pre-bankruptcy debts from that tenant or their property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under our leases and loans, and could ultimately preclude collection of these sums. If a lease is assumed by a tenant in bankruptcy, we expect that all pre-bankruptcy balances due under the lease would be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any secured claims we have against our tenants may only be paid to the extent of the value of the collateral, which may not cover any or all of our losses. Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover none or substantially less than the full value of any unsecured claims, which would harm our financial condition. 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. Our existing facilities and the facilities we have under development are currently leased to Vibra, DVH and Stealth. Vibra and Stealth are recently organized, have limited or no operating histories and Vibra was dependent on us for an aggregate amount of $47.6 million in loans to acquire operations at the facilities and for initial working capital needs. As of December 31, 2004, Vibra had total assets of approximately $59 million, total liabilities of approximately $62.8 million, a deficit in owner's capital of approximately $3.8 million, and for the period from inception through December 31, 2004 had a loss from operations of approximately $5.1 million and a net loss of approximately $3.8 million. Stealth had approximately approximately $5.7 million in equity as of December 31, 2004 and will have substantial pre-opening and start-up costs upon completion of construction of its facilities. We cannot assure you that, should its equity be insufficient to cover its costs, it could access additional debt or equity financing. Each Vibra lease is guaranteed by Brad E. Hollinger, chief executive officer of The Hollinger Group, Vibra, Vibra Management, LLC and The Hollinger Group; however, Mr. Hollinger's personal liability for the lease guaranty, the loan guaranty and for environmental indemnification is limited to $5.0 million in the aggregate. As of October 31, 2004, DVH had tangible assets of approximately $23.5 million, liabilities of approximately $14.9 million and stockholders' equity of approximately $8.6 million, and for the ten month period ended October 31, 2004 had net income of approximately $8.7 million. The lease for the Desert Valley Facility is guaranteed by Desert Valley Health System, Inc., Desert Valley Medical Group, Inc. and Prime A Investments, LLC. If any of our tenants were to experience financial difficulties, the tenant may not be able to pay its rent. Guarantors of our leases with Vibra and DVH may not have sufficient assets to cover our losses under these leases. The failure of our tenants and their guarantors to meet their obligations to us would have a material adverse effect on our revenues and our ability to make distributions to our stockholders. 19

OUR BUSINESS IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE SUCCESSFULLY. We compete for development opportunities and opportunities to purchase healthcare facilities with, among others: - private investors; - healthcare providers, including physicians; - other REITs; - real estate partnerships; - financial institutions; and - local developers. Many of these competitors have substantially greater financial and other resources than we have and may have better relationships with lenders and sellers. Competition for healthcare facilities from competitors, including other REITs, may adversely affect our ability to acquire or develop healthcare facilities and the prices we pay for those facilities. If we are unable to acquire or develop facilities or if we pay too much for facilities, our revenue and earnings growth and financial return could be materially adversely affected. Certain of our facilities and additional facilities we may acquire or develop will face competition from other nearby facilities that provide services comparable to those offered at our facilities and additional facilities we may acquire or develop. Some of those facilities are owned by governmental agencies and supported by tax revenues, and others are owned by tax-exempt corporations and may be supported to a large extent by endowments and charitable contributions. Those types of support are not available to our facilities and additional facilities we may acquire or develop. In addition, competing healthcare facilities located in the areas served by our facilities and additional facilities we may acquire or develop may provide healthcare services that are not available at our facilities and additional facilities we may acquire or develop. From time to time, referral sources, including physicians and managed care organizations, may change the healthcare facilities to which they refer patients, which could adversely affect our rental revenues. 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. Our charter and other organizational documents do not limit the amount of debt we may incur. We have targeted our debt level at up to approximately 60% of our aggregate facility acquisition and development costs. However, we may modify our target debt level at any time without stockholder or board of director approval. We cannot assure you that our use of financial leverage will prove to be beneficial. We borrowed $75 million from Merrill Lynch Capital under a loan agreement. We have also entered into loan agreements with Colonial Bank for construction loans in an aggregate amount of $43.4 million. As of March 31, 2005, we had $74.1 million of long-term debt outstanding. We may borrow from other lenders in the future, or we may issue corporate debt securities in public or private offerings. The loans from Merrill Lynch Capital and Colonial Bank are secured by the Vibra Facilities and our facilities under construction in Houston, Texas, respectively. Some of our other borrowings in the future may be secured by additional facilities we may acquire or develop. In addition, in connection with debt financing from Merrill Lynch Capital and Colonial Bank we are, and in connection with other debt financing in the future we may be, subject to covenants that may restrict our operations. We cannot assure you that we will be able to meet our debt payment obligations or restrictive covenants and, to the extent that we cannot, we risk the loss of some or all of our facilities to foreclosure. In addition, debt service obligations will reduce the amount of cash available for distribution to our stockholders. We anticipate that much of our debt will be non-amortizing and payable in balloon payments. Therefore, we will likely need to refinance at least a portion of that debt as it matures. There is a risk that we may not be able to refinance then-existing debt or that the terms of any refinancing will not be as favorable as the terms of the then-existing debt. If principal payments due at maturity cannot be 20

refinanced, extended or repaid with proceeds from other sources, such as new equity capital or sales of facilities, our cash flow may not be sufficient to repay all maturing debt in years when significant balloon payments come due. Additionally, we may incur significant penalties if we choose to prepay the 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. Upon completion of this offering, we expect to have $ in variable interest rate debt. We may seek to manage our exposure to interest rate volatility by using interest rate hedging arrangements that involve risk, including the risk that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that these arrangements may result in higher interest rates than we would otherwise have. Moreover, no hedging activity can completely insulate us from the risks associated with changes in interest rates. Failure to hedge effectively against interest rate changes may materially adversely affect results of operations and our ability to make distributions to our stockholders. OUR CURRENT TENANTS HAVE, AND PROSPECTIVE TENANTS MAY HAVE, AN OPTION TO PURCHASE THE FACILITIES WE LEASE TO THEM WHICH COULD DISRUPT OUR OPERATIONS. Our current tenants have, and some prospective tenants will have, the option to purchase the facilities we lease to them. At the expiration of each Vibra lease, each tenant will have the option to purchase the facility at a purchase price equal to the greater of (i) the appraised value of the facility, determined assuming the lease is still in place, or (ii) the purchase price we paid for the facility, including acquisition costs, increased by 2.5% per year from the date of purchase. At any time after February 28, 2007, so long as DVH, and its affiliates are not in default under any lease with us or any of the leases with its subtenants, DVH will have the option, upon 90 days' prior written notice, to purchase the Desert Valley Facility at a purchase price equal to the sum of (i) the purchase price of the facility, and (ii) that amount determined under a formula that would provide us an internal rate of return of 10% per year, increased by 2% of such percentage each year, taking into account all payments of base rent received by us. If during the term of the lease we receive from the previous owner or any of its affiliates, a written offer to purchase the Desert Valley Facility and we are willing to accept the offer, so long as DVH and its affiliates are not in default under any lease with us or any of the subleases with its subtenants, we must first present the offer to DVH and allow DVH the right to purchase the facility upon the same price, terms and conditions as set forth in the offer; however, if the offer is made after February 28, 2007, in lieu of exercising its right of first refusal, DVH may exercise its option to purchase as provided above. After the first full 12 month period after construction of the West Houston MOB and the West Houston Hospital, respectively, as long as Stealth is not in default under either of its leases with us or any of the leases with its physician subtenants, it has the right to purchase the West Houston MOB or the West Houston Hospital at a price equal to the greater of (i) that amount determined under a formula that would provide us an internal rate of return of at least 18% and (ii) the appraised value based on a 15 year lease in place. Upon written notice to us within 90 days of the expiration of the applicable lease, as long as Stealth is not in default under either of its leases with us or any of the leases with its physician subtenants, Stealth will have the option to purchase the West Houston MOB or the West Houston Hospital at a price equal to the greater of (i) the total development costs (including any capital additions funded by us, but excluding any capital additions funded by Stealth) increased by 2.5% per year, and (ii) the appraised value based on a 15 year lease in place. The Stealth leases also provide that under certain limited circumstances, Stealth will have the right to present us with a choice of one out of three proposed exchange facilities to be substituted for the leased facility. All of our arrangements which provide or will provide tenants the option to purchase the facilities we lease to them are subject to regulatory requirements that such purchases be at fair market value. We cannot assure you that the formulas we have developed for setting the purchase price will yield a fair market value purchase price. Any purchase not at fair market value may present risks of challenge from enforcement authorities. 21

In the event our tenants and prospective tenants determine to purchase the facilities they lease either during the lease term or after their expiration, the timing of those purchases will be outside of our control and we may not be able to re-invest the capital on as favorable terms, or at all. Any of these purchases would disrupt our cash flow by eliminating lease payments from these tenants. Our inability to effectively manage the turn-over of our facilities could materially adversely affect our ability to execute our business plan and our results of operations. PROPERTY OWNED IN LIMITED LIABILITY COMPANIES AND PARTNERSHIPS IN WHICH WE ARE NOT THE SOLE EQUITY HOLDER MAY LIMIT OUR ABILITY TO ACT EXCLUSIVELY IN OUR INTERESTS. We own, and in the future expect to own, interests in our facilities through wholly or majority owned subsidiaries of our operating partnership. Stealth, L.P., the tenant of our West Houston Hospital, owns a 6% limited partnership interest in MPT West Houston Hospital, L.P., which owns the West Houston Hospital. We are offering to physicians up to 40% of the limited partnership interests in MPT West Houston MOB, L.P., the entity that owns our West Houston MOB. We may offer limited liability company and limited partnership interests to tenants, subtenants and physicians in the future. Investments in partnerships, limited liability companies or other entities with co-owners may, under certain circumstances, involve risks not present were a co-owner not involved, including the possibility that partners or other co-owners might become bankrupt or fail to fund their share of required capital contributions. Partners or other co-owners may have economic or other business interests or goals that are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have potential risks pertaining to healthcare regulatory compliance, particularly when partners or other co-owners are physicians, and of impasses on major decisions, such as sales or mergers, because neither we nor our partners or other co-owners would have full control over the partnership, limited liability company or other entity. Disputes between us and our partners or other co-owners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business. Consequently, actions by or disputes with our partners or other co-owners might result in subjecting facilities owned by the partnership, limited liability company or other entity to additional risk. In addition, we may in certain circumstances be liable for the actions of our partners or other co-owners. The occurrence of any of the foregoing events could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders. TERRORIST ATTACKS, SUCH AS THE ATTACKS THAT OCCURRED IN NEW YORK AND WASHINGTON, D.C. ON SEPTEMBER 11, 2001, U.S. MILITARY ACTION AND THE PUBLIC'S REACTION TO THE THREAT OF TERRORISM OR MILITARY ACTION COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND THE MARKET ON WHICH OUR COMMON STOCK WILL TRADE. There may be future terrorist threats or attacks against the United States or U.S. businesses. These attacks may directly impact the value of our facilities through damage, destruction, loss or increased security costs. Losses due to wars or terrorist attacks may be uninsurable, or insurance may not be available at a reasonable price. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economies. RISKS RELATING TO REAL ESTATE INVESTMENTS OUR REAL ESTATE INVESTMENTS WILL BE CONCENTRATED IN NET-LEASED HEALTHCARE FACILITIES, MAKING US MORE VULNERABLE ECONOMICALLY THAN IF OUR INVESTMENTS WERE MORE DIVERSIFIED. We have acquired and are developing and expect to continue acquiring and developing net-leased healthcare facilities. We are subject to risks inherent in concentrating investments in real estate. The risks resulting from a lack of diversification become even greater as a result of our business strategy to invest in net-leased healthcare facilities. A downturn in the real estate industry could materially adversely affect the 22

value of our facilities. A downturn in the healthcare industry could negatively affect our tenants' ability to make lease or loan payments to us and, consequently, our ability to meet debt service obligations or make distributions to our stockholders. These adverse effects could be more pronounced than if we diversified our investments outside of real estate or outside of healthcare facilities. OUR NET-LEASED FACILITIES AND TARGETED NET-LEASED FACILITIES MAY NOT HAVE EFFICIENT ALTERNATIVE USES, WHICH COULD IMPEDE OUR ABILITY TO FIND REPLACEMENT TENANTS IN THE EVENT OF TERMINATION OR DEFAULT UNDER OUR LEASES. All of the facilities in our current portfolio are and all of the facilities we acquire or develop in the future will be net-leased healthcare facilities. If we or our tenants terminate the leases for these facilities or if these tenants lose their regulatory authority to operate these facilities, we may not be able to locate suitable replacement tenants to lease the facilities for their specialized uses. Alternatively, we may be required to spend substantial amounts to adapt the facilities to other uses. Any loss of revenues or additional capital expenditures occurring as a result could have a material adverse effect on our financial condition and results of operations and could hinder our ability to meet debt service obligations or make distributions to our stockholders. ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD SIGNIFICANTLY IMPEDE OUR ABILITY TO RESPOND TO ADVERSE CHANGES IN THE PERFORMANCE OF OUR FACILITIES AND HARM OUR FINANCIAL CONDITION. Real estate investments are relatively illiquid. Our ability to quickly sell or exchange any of our facilities in response to changes in economic and other conditions will be limited. No assurances can be given that we will recognize full value for any facility that we are required to sell for liquidity reasons. Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. DEVELOPMENT AND CONSTRUCTION RISKS COULD ADVERSELY AFFECT OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. We are developing a community hospital and an adjacent medical office building in Houston, Texas which we expect to complete in 2005. We have entered into letters of commitment and contracts to develop properties in the future. Our development and related construction activities may subject us to the following risks: - we may have to compete for suitable development sites; - our ability to complete construction is dependent on there being no title, environmental or other legal proceedings arising during construction; - we may be subject to delays due to weather conditions, strikes and other contingencies beyond our control; - we may be unable to obtain, or suffer delays in obtaining, necessary zoning, land-use, building, occupancy healthcare regulatory and other required governmental permits and authorizations, which could result in increased costs, delays in construction, or our abandonment of these projects; - we may incur construction costs for a facility which exceed our original estimates due to increased costs for materials or labor or other costs that we did not anticipate; and - we may not be able to obtain financing on favorable terms, which may render us unable to proceed with our development activities. Additionally, the time frame required for development and construction of these facilities means that we may have to wait years for a significant cash return. Because we are required to make cash distributions to our stockholders, if the cash flow from operations or refinancings is not sufficient, we may be forced to borrow additional money to fund distributions. We cannot assure you that we will complete our current construction projects on time or within budget or that future development projects will not be 23

subject to delays and cost overruns. Risks associated with our development projects may reduce anticipated rental revenue which could affect the timing of, and our ability to make, distributions to our stockholders. OUR FACILITIES MAY NOT ACHIEVE EXPECTED RESULTS OR WE MAY BE LIMITED IN OUR ABILITY TO FINANCE FUTURE ACQUISITIONS, WHICH MAY HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS AND OUR ABILITY TO MAKE THE DISTRIBUTIONS TO OUR STOCKHOLDERS REQUIRED TO MAINTAIN OUR REIT STATUS. Acquisitions and developments entail risks that investments will fail to perform in accordance with expectations and that estimates of the costs of improvements necessary to acquire and develop facilities will prove inaccurate, as well as general investment risks associated with any new real estate investment. We anticipate that future acquisitions and developments will largely be financed through externally generated funds such as borrowings under credit facilities and other secured and unsecured debt financing and from issuances of equity securities. Because we must distribute at least 90% of our REIT taxable income, excluding net capital gain, each year to maintain our qualification as a REIT, our ability to rely upon income from operations or cash flow from operations to finance our growth and acquisition activities will be limited. Accordingly, if we are unable to obtain funds from borrowings or the capital markets to finance our acquisition and development activities, our ability to grow would likely be curtailed, amounts available for distribution to stockholders could be adversely affected and we could be required to reduce distributions, thereby jeopardizing our ability to maintain our status as a REIT. Newly-developed or newly-renovated facilities do not have the operating history that would allow our management to make objective pricing decisions in acquiring these facilities (including facilities that may be acquired from certain of our executive officers, directors and their affiliates). The purchase prices of these facilities will be based in part upon projections by management as to the expected operating results of the facilities, subjecting us to risks that these facilities may not achieve anticipated operating results or may not achieve these results within anticipated time frames. IF WE SUFFER LOSSES THAT ARE NOT COVERED BY INSURANCE OR THAT ARE IN EXCESS OF OUR INSURANCE COVERAGE LIMITS, WE COULD LOSE INVESTMENT CAPITAL AND ANTICIPATED PROFITS. We have purchased general liability insurance (lessor's risk) that provides coverage for bodily injury and property damage to third parties resulting from our ownership of the healthcare facilities that are leased to and occupied by our tenants. Our leases require our tenants to carry general liability, professional liability, loss of earnings, all risk, and extended coverage insurance in amounts sufficient to permit the replacement of the facility in the event of a total loss, subject to applicable deductibles. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, floods, hurricanes and acts of terrorism, that may be uninsurable or not insurable at a price we or our tenants can afford. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impracticable to use insurance proceeds to replace a facility after it has been damaged or destroyed. Under such circumstances, the insurance proceeds we receive might not be adequate to restore our economic position with respect to the affected facility. If any of these or similar events occur, it may reduce our return from the facility and the value of our investment. CAPITAL EXPENDITURES FOR FACILITY RENOVATION MAY BE GREATER THAN ANTICIPATED AND MAY ADVERSELY IMPACT RENT PAYMENTS BY OUR TENANTS AND OUR ABILITY TO MAKE DISTRIBUTIONS TO STOCKHOLDERS. Facilities, particularly those that consist of older structures, have an ongoing need for renovations and other capital improvements, including periodic replacement of furniture, fixtures and equipment. Although our leases require our tenants to be primarily responsible for the cost of such expenditures, renovation of facilities involves certain risks, including the possibility of environmental problems, construction cost overruns and delays, uncertainties as to market demand or deterioration in market demand after commencement of renovation and the emergence of unanticipated competition from other facilities. All of these factors could adversely impact rent and loan payments by our tenants, could have a material adverse effect on our financial condition and results of operations and could adversely effect our ability to make distributions to our stockholders. 24

ALL OF OUR HEALTHCARE FACILITIES ARE SUBJECT TO PROPERTY TAXES THAT MAY INCREASE IN THE FUTURE AND ADVERSELY AFFECT OUR BUSINESS. Our facilities are subject to real and personal property taxes that may increase as property tax rates change and as the facilities are assessed or reassessed by taxing authorities. Our leases generally provide that the property taxes are charged to our tenants as an expense related to the facilities that they occupy. As the owner of the facilities, however, we are ultimately responsible for payment of the taxes to the government. If property taxes increase, our tenants may be unable to make the required tax payments, ultimately requiring us to pay the taxes. If we incur these tax liabilities, our ability to make expected distributions to our stockholders could be adversely affected. OUR PERFORMANCE AND THE PRICE OF OUR COMMON STOCK WILL BE AFFECTED BY RISKS ASSOCIATED WITH THE REAL ESTATE INDUSTRY. Factors that may adversely affect the economic performance and price of our common stock include: - changes in the national, regional and local economic climate, including but not limited to changes in interest rates; - local conditions such as an oversupply of, or a reduction in demand for, rehabilitation hospitals, long-term acute care hospitals, ambulatory surgery centers, medical office buildings, specialty hospitals and treatment centers; - attractiveness of our facilities to healthcare providers and other types of tenants; and - competition from other rehabilitation hospitals, long-term acute care facilities, medical office buildings, outpatient treatment facilities, ambulatory surgery centers and specialty hospitals and treatment centers. 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. Our operating expenses could be higher than anticipated due to the cost of complying with existing and future environmental and occupational health and safety laws and regulations. Various environmental laws may impose liability on a current or prior owner or operator of real property for removal or remediation of hazardous or toxic substances. Current or prior owners or operators may also be liable for government fines and damages for injuries to persons, natural resources and adjacent property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence or disposal of the hazardous or toxic substances. The cost of complying with environmental laws could materially adversely affect amounts available for distribution to our stockholders and could exceed the value of all of our facilities. In addition, the presence of hazardous or toxic substances, or the failure of our tenants to properly dispose of or remediate such substances, including medical waste generated by physicians and our other healthcare tenants, may adversely affect our tenants or our ability to use, sell or rent such property or to borrow using such property as collateral which, in turn, could reduce our revenue and our financing ability. We have obtained on all facilities we have acquired and are developing and intend to obtain on all future facilities we acquire Phase I environmental assessments. However, even if the Phase I environmental assessment reports do not reveal any material environmental contamination, it is possible that material environmental liabilities may exist of which we are unaware. In April 2003, Stealth, which then owned the property on which the West Houston Facilities are being constructed, arranged for a Phase I environmental assessment to be performed. The assessor recommended further investigation based on field screening of soil samples collected during a geotechnical investigation. Accordingly, the tenant arranged for a Phase II environmental soil sampling to be performed in June 2003 to assess shallow soils for the presence of petroleum hydrocarbons and volatile organic compounds. Based on the findings of this sampling, the tenant was advised that no further tests were warranted and that the property was suitable for the proposed development. 25

Although the leases for our facilities generally require our tenants to comply with laws and regulations governing their operations, including the disposal of medical waste, and to indemnify us for certain environmental liabilities, the scope of their obligations may be limited. We cannot assure you that our tenants would be able to fulfill their indemnification obligations. In addition, environmental and occupational health and safety laws constantly are evolving, and changes in laws, regulations or policies, or changes in interpretations of the foregoing, could create liabilities where none exists today. COSTS ASSOCIATED WITH COMPLYING WITH THE AMERICANS WITH DISABILITIES ACT OF 1993 MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND OPERATING RESULTS. Under the Americans with Disabilities Act of 1993, all public accommodations are required to meet certain federal requirements related to access and use by disabled persons. While our facilities are generally in compliance with these requirements, a determination that we are not in compliance with the Americans with Disabilities Act of 1993 could result in imposition of fines or an award of damages to private litigants. In addition, changes in governmental rules and regulations or enforcement policies affecting the use and operation of the facilities, including changes to building codes and fire and life-safety codes, may occur. If we are required to make substantial modifications at our facilities to comply with the Americans with Disabilities Act of 1993 or other changes in governmental rules and regulations, this may have a material adverse effect on our financial condition and results of operations and could adversely affect our ability to make distributions to our stockholders. OUR FACILITIES MAY CONTAIN OR DEVELOP HARMFUL MOLD OR SUFFER FROM OTHER AIR QUALITY ISSUES, WHICH COULD LEAD TO LIABILITY FOR ADVERSE HEALTH EFFECTS AND COSTS OF REMEDIATING THE PROBLEM. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our facilities could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected facilities or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants and others if property damage or health concerns arise. OUR INTERESTS IN FACILITIES THROUGH GROUND LEASES EXPOSE US TO THE LOSS OF THE FACILITY UPON BREACH OR TERMINATION OF THE GROUND LEASE AND MAY LIMIT OUR USE OF THE FACILITY. We have acquired our interest in one of our facilities by acquiring a leasehold interest in the land on which the facility is located rather than an ownership interest in the facility, and we may acquire additional facilities in the future through ground leases. As lessee under ground leases, we are exposed to the possibility of losing the property upon termination, or an earlier breach by us, of the ground lease. Ground leases may also restrict our use of facilities. Our current ground lease in Marlton, New Jersey limits our use of the property to operation of a 76 bed rehabilitation hospital. This restriction and any similar future restrictions in ground leases will limit our flexibility in renting the facility and may impede our ability to sell the property. 26

RISKS RELATING TO THE HEALTHCARE INDUSTRY REDUCTIONS IN REIMBURSEMENT FROM THIRD-PARTY PAYORS, INCLUDING MEDICARE AND MEDICAID, COULD ADVERSELY AFFECT THE PROFITABILITY OF OUR TENANTS AND HINDER THEIR ABILITY TO MAKE RENT PAYMENTS TO US. Sources of revenue for our tenants and operators may include the federal Medicare program, state Medicaid programs, private insurance carriers and health maintenance organizations, among others. Efforts by such payors to reduce healthcare costs will likely continue, which may result in reductions or slower growth in reimbursement for certain services provided by some of our tenants. In addition, the failure of any of our tenants to comply with various laws and regulations could jeopardize their ability to continue participating in Medicare, Medicaid and other government-sponsored payment programs. The healthcare industry continues to face various challenges, including increased government and private payor pressure on healthcare providers to control or reduce costs. We believe that our tenants will continue to experience a shift in payor mix away from fee-for-service payors, resulting in an increase in the percentage of revenues attributable to managed care payors, government payors and general industry trends that include pressures to control healthcare costs. Pressures to control healthcare costs and a shift away from traditional health insurance reimbursement have resulted in an increase in the number of patients whose healthcare coverage is provided under managed care plans, such as health maintenance organizations and preferred provider organizations. In addition, due to the aging of the population and the expansion of governmental payor programs, we anticipate that there will be a marked increase in the number of patients reliant on healthcare coverage provided by governmental payors. These changes could have a material adverse effect on the financial condition of some or all of our tenants, which could have a material adverse effect on our financial condition and results of operations and could negatively affect our ability to make distributions to our stockholders. 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. The healthcare industry is highly regulated by federal, state and local laws, and is directly affected by federal conditions of participation, state licensing requirements, facility inspections, state and federal reimbursement policies, regulations concerning capital and other expenditures, certification requirements and other such laws, regulations and rules. In addition, establishment of healthcare facilities and transfers of operations of healthcare facilities are subject to regulatory approvals not required for establishment of or transfers of other types of commercial operations and real estate. Sanctions for failure to comply with these regulations and laws include, but are not limited to, loss of or inability to obtain licensure, fines and loss of or inability to obtain certification to participate in the Medicare and Medicaid programs, as well as potential criminal penalties. The failure of any tenant to comply with such laws, requirements and regulations could affect its ability to establish or continue its operation of the facility or facilities and could adversely affect the tenant's ability to make lease payments to us which could have a material adverse effect on our financial condition and results of operations and could negatively affect our ability to make distributions to our stockholders. In addition, restrictions and delays in transferring the operations of healthcare facilities, in obtaining new third-party payor contracts including Medicare and Medicaid provider agreements, and in receiving licensure and certification approval from appropriate state and federal agencies by new tenants may affect our ability to terminate lease agreements, remove tenants that violate lease terms, and replace existing tenants with new tenants. Furthermore, these matters may affect new tenants ability to obtain reimbursement for services rendered, which could adversely affect their ability to pay rent to us and to pay principal and interest on their loans from us. 27

ADVERSE TRENDS IN HEALTHCARE PROVIDER OPERATIONS MAY NEGATIVELY AFFECT OUR LEASE REVENUES AND OUR ABILITY TO MAKE DISTRIBUTIONS TO OUR STOCKHOLDERS. We believe that the healthcare industry is currently experiencing: - changes in the demand for and methods of delivering healthcare services; - changes in third-party reimbursement policies; - significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas; - continuing pressure by private and governmental payors to reduce payments to providers of services; and - increased scrutiny by federal and state authorities of billing, referral and other practices. These factors may adversely affect the economic performance of some or all of our tenants and, in turn, our revenues. Accordingly, these factors could have a material adverse effect on our financial condition and results of operations and could negatively affect our ability to make distributions to our stockholders. 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. The federal government and numerous state governments have passed laws and regulations that attempt to eliminate healthcare fraud and abuse by prohibiting business arrangements that induce patient referrals or the ordering of specific ancillary services. In addition, the Balanced Budget Act of 1997 strengthened the federal anti-fraud and abuse laws to provide for stiffer penalties for violations. Violations of these laws may result in the imposition of criminal and civil penalties, including possible exclusion from federal and state healthcare programs. Imposition of any of these penalties upon any of our tenants could jeopardize any tenant's ability to operate a facility or to make lease and loan payments, thereby potentially adversely affecting us. In the past several years, federal and state governments have significantly increased investigation and enforcement activity to detect and eliminate fraud and abuse in the Medicare and Medicaid programs. In addition, legislation has been adopted at both state and federal levels which severely restricts the ability of physicians to refer patients to entities in which they have a financial interest. It is anticipated that the trend toward increased investigation and enforcement activity in the area of fraud and abuse, as well as self-referrals, will continue in future years and could adversely affect our prospective tenants and their operations, and in turn their ability to make lease and loan payments to us. In connection with Vibra's acquisition of the operations at the Vibra facilities, Vibra accepted an assignment of the previous operator's Medicare provider agreement. Vibra and other new-operator tenants that take assignment of Medicare provider agreements might be subject to federal or state regulatory, civil and criminal investigations of the previous owner's operations and claims submissions. While we conduct due diligence in connection with the acquisition of such facilities, these types of issues may not be discovered prior to purchase. Adverse decisions, fines or recoupments might negatively impact our tenants' financial condition. CERTAIN OF OUR LEASE ARRANGEMENTS MAY BE SUBJECT TO FRAUD AND ABUSE OR PHYSICIAN SELF-REFERRAL LAWS. Local physician investment in our operating partnership or our subsidiaries that own our facilities could subject our lease arrangements to scrutiny under fraud and abuse and physician self-referral laws. Under the federal Ethics in Patient Referrals Act of 1989, or Stark Law, and regulations adopted thereunder, if our lease arrangements do not satisfy the requirements of an applicable exception, that noncompliance could adversely affect the ability of our tenants to bill for services provided to Medicare beneficiaries pursuant to referrals from physician investors and subject us and our tenants to fines, which 28

could impact their ability to make lease and loan payments to us. On March 26, 2004 CMS issued Phase II final rules under the Stark Law, which, together with the 2001 Phase I final rules, set forth CMS' current interpretation and application of the Stark Law prohibition on referrals of designated health services, or DHS. These rules provide us additional guidance on application of the Stark Law through the implementation of "bright-line" tests, including additional regulations regarding the indirect compensation exception, but do not eliminate the risk that our lease arrangements and business strategy of physician investment may violate the Stark Law. Finally, the Phase II rules implemented an 18-month moratorium on physician investment in specialty hospitals imposed by the Medicare Prescription Drug, Improvement and Modernization Act. We intend to use our good faith efforts to structure our lease arrangements to comply with these laws; however, if we are unable to do so, this failure may restrict our ability to permit physician investment or, where such physicians do participate, may restrict the types of lease arrangements into which we may enter, including our ability to enter into percentage rent arrangements. STATE CERTIFICATE OF NEED LAWS MAY ADVERSELY AFFECT OUR DEVELOPMENT OF FACILITIES AND THE OPERATIONS OF OUR TENANTS. Certain healthcare facilities in which we invest may also be subject to state laws which require regulatory approval in the form of a certificate of need prior to initiation of certain projects, including, but not limited to, the establishment of new or replacement facilities, the addition of beds, the addition or expansion of services and certain capital expenditures. State certificate of need laws are not uniform throughout the United States and are subject to change. We cannot predict the impact of state certificate of need laws on our development of facilities or the operations of our tenants. In addition, certificate of need laws often materially impact the ability of competitors to enter into the marketplace of our facilities. Finally, in limited circumstances, loss of state licensure or certification or closure of a facility could ultimately result in loss of authority to operate the facility and require re-licensure or new certificate of need authorization to re-institute operations. As a result, a portion of the value of the facility may be related to the limitation on new competitors. In the event of a change in the certificate of need laws, this value may markedly decrease. RISKS RELATING TO OUR ORGANIZATION AND STRUCTURE PROVISIONS OF MARYLAND LAW, OUR CHARTER AND OUR BYLAWS MAY PREVENT OR DETER CHANGES IN MANAGEMENT AND THIRD-PARTY ACQUISITION PROPOSALS THAT YOU MAY BELIEVE TO BE IN YOUR BEST INTEREST, DEPRESS OUR STOCK PRICE OR CAUSE DILUTION. Our charter contains ownership limitations that may restrict business combination opportunities, inhibit change of control transactions and reduce the value of our stock. To qualify as a REIT under the Code, no more than 50% in value of our outstanding stock, after taking into account options to acquire stock, may be owned, directly or indirectly, by five or fewer persons during the last half of each taxable year, other than our first REIT taxable year. Our charter generally prohibits direct or indirect ownership by any person of more than 9.8% in value or in number, whichever is more restrictive, of outstanding shares of any class or series of our securities, including our common stock. Generally, common stock owned by affiliated owners will be aggregated for purposes of the ownership limitation. Any transfer of our common stock that would violate the ownership limitation will be null and void, and the intended transferee will acquire no rights in such stock. Instead, such common stock will be designated as "shares-in-trust" and transferred automatically to a trust effective on the day before the purported transfer of such stock. The beneficiary of that trust will be one or more charitable organizations named by us. The ownership limitation could have the effect of delaying, deterring or preventing a change in control or other transaction in which holders of common stock might receive a premium for their common stock over the then-current market price or which such holders otherwise might believe to be in their best interests. The ownership limitation provisions also may make our common stock an unsuitable investment vehicle for any person seeking to obtain, either alone or with others as a group, ownership of more than 9.8% of either the value or number of the outstanding shares of our common stock. Our board of directors, in its sole 29

discretion, may waive or modify, subject to limitations, the ownership limit with respect to one or more stockholders if it is satisfied that ownership in excess of their limit will not jeopardize our status as a REIT. See "Description of Capital Stock -- Restrictions on Ownership and Transfer." Certain provisions of Maryland law may limit the ability of a third party to acquire control of our company. Certain provisions of the Maryland General Corporation Law, or the MGCL, could have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares, including: - "business combination" provisions that, subject to limitations, prohibit certain business combinations between us and an "interested stockholder" (defined generally as a person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations; and - "control share" provisions that provide that "control shares" of our company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of "control shares") have no voting rights except to the extent approved by our stockholders by the affirmative vote of the holders of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. We have opted out of these provisions of the MGCL pursuant to provisions in our charter. However, we may, by amendment to our charter with approval of our stockholders, opt in to the business combination and control share provisions of the MGCL in the future. Additionally, Title 8, Subtitle 3 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter and our amended and restated bylaws, or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not presently have. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring or preventing a change of control of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price of our common stock. Maryland law does not impose heightened standards on directors in takeover situations. The MGCL provides that an act of a director relating to or affecting an acquisition or potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director. Therefore, directors of a Maryland corporation are not required to act in the same manner as directors of a Delaware corporation in takeover situations. Our charter and bylaws contain provisions that may impede third-party acquisition proposals that may be in your best interests. Our charter and bylaws also provide that our directors may only be removed by the affirmative vote of the holders of two-thirds of our stock, that stockholders are required to give us advance notice of director nominations and new business to be conducted at our annual meetings of stockholders and that special meetings of stockholders can only be called by our president, our board of directors or the holders of at least 25% of stock entitled to vote at the meetings. These and other charter and bylaw provisions may delay or prevent a change of control or other transaction in which holders of our common stock might receive a premium for their common stock over the then-current market price or which such holders otherwise might believe to be in their best interests. 30

Our board of directors may issue additional shares that may cause dilution and could deter change of control transactions that you may believe to be in your best interest. Our charter authorizes our board, without stockholder approval, to: - issue up to 10,000,000 shares of preferred stock, having preferences, conversion or other rights, voting powers, restrictions, limitations as to distribution, qualifications, or terms or conditions of redemption as determined by the board; - amend the charter to increase or decrease the aggregate number of shares of capital stock or the number of shares of stock of any class or series that we have the authority to issue; - cause us to issue additional authorized but unissued shares of common stock or preferred stock; and - classify or reclassify any unissued shares of common or preferred stock by setting or changing in any one or more respects, from time to time before the issuance of such shares, the preferences, conversion or other rights and other terms of such classified or reclassified shares, including the issuance of additional shares of common stock or preferred stock that have preference rights over the common stock with respect to dividends, liquidation, voting and other matters. WE DEPEND ON KEY PERSONNEL, THE LOSS OF ANY ONE OF WHOM MAY THREATEN OUR ABILITY TO OPERATE OUR BUSINESS SUCCESSFULLY. We depend on the services of Edward K. Aldag, Jr., William G. McKenzie, Emmett E. McLean, R. Steven Hamner and Michael G. Stewart to carry out our business and investment strategy. If we were to lose any of these executive officers, it may be more difficult for us to locate attractive acquisition targets, complete our acquisitions and manage the facilities that we have acquired or are developing. Additionally, as we expand, we will continue to need to attract and retain additional qualified officers and employees. The loss of the services of any of our executive officers, or our inability to recruit and retain qualified personnel in the future, could have a material adverse effect on our business and financial results. 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. As described below, our officers and directors may have conflicts of interest in connection with their duties to us and the limited partners of our operating partnership and with allocation of their time between our business and affairs and their other business interests. In addition, from time to time, we may acquire or develop facilities in transactions involving prospective tenants in which our directors or officers have an interest. In transactions of this nature, there will be conflicts between our interests and the interests of the director or officer involved, and that director or officer may be in a position to influence the terms of those transactions. In the event we purchase properties from executive officers or directors in exchange for units of limited partnership in our operating partnership, the interests of those persons with the interests of the company may conflict. Where a unitholder has unrealized gains associated with his limited partnership interests in our operating partnership, these holders may incur adverse tax consequences in the event of a sale or refinancing of those properties. Therefore the interest of these executive officers or directors of our company could be different from the interests of the company in connection with the disposition or refinancing of a property. Conflicts of interest with our officers and directors could result in our officers and directors acting other than in our best interest. OUR EXECUTIVE OFFICERS HAVE AGREEMENTS THAT PROVIDE THEM WITH BENEFITS IN THE EVENT THEIR EMPLOYMENT IS TERMINATED BY US WITHOUT CAUSE, BY THE EXECUTIVE FOR GOOD REASON, OR UNDER CERTAIN CIRCUMSTANCES FOLLOWING A CHANGE OF CONTROL TRANSACTION THAT YOU MAY BELIEVE TO BE IN YOUR BEST INTEREST. We have entered into agreements with certain of our executive officers that provide them with severance benefits if their employment is terminated by us without cause, by them for good reason (which includes, among other reasons, failure to be elected to the board for Mr. Aldag and failure to have their agreements automatically renewed for Messrs. Aldag, McLean, Hamner and McKenzie), or under certain 31

circumstances following a change of control of our company. Certain of these benefits and the related tax indemnity could prevent or deter a change of control of our company that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders. THE VICE CHAIRMAN OF OUR BOARD OF DIRECTORS, WILLIAM G. MCKENZIE, HAS OTHER BUSINESS INTERESTS THAT MAY HINDER HIS ABILITY TO ALLOCATE SUFFICIENT TIME TO THE MANAGEMENT OF OUR OPERATIONS, WHICH COULD JEOPARDIZE OUR ABILITY TO EXECUTE OUR BUSINESS PLAN. Our employment agreement with the vice chairman of our board of directors, Mr. McKenzie, permits him to continue to own, operate and control facilities that he owned as of the date of his employment agreement and requires that he only provide a limited amount of his time per month to our company. In addition, the terms of Mr. McKenzie's employment agreement permit him to compete against us with respect to these previously owned healthcare facilities. ALL MANAGEMENT RIGHTS ARE VESTED IN OUR BOARD OF DIRECTORS AND OUR STOCKHOLDERS HAVE LIMITED RIGHTS. Our board of directors is responsible for our management and strategic business direction, and management is responsible for our day-to-day operations. Our major policies, including our policies with respect to REIT qualification, acquisitions and developments, leasing, financing, growth, operations, debt limitation and distributions, are determined by our board of directors. Our board of directors may amend or revise these and other policies from time to time without a vote of our stockholders. Investment and operational policy changes could adversely affect the market price of our common stock and our ability to make distributions to our stockholders. THE ABILITY OF OUR BOARD OF DIRECTORS TO REVOKE OUR REIT STATUS WITHOUT STOCKHOLDER APPROVAL MAY CAUSE ADVERSE CONSEQUENCES TO OUR STOCKHOLDERS. Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we would become subject to federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on total return to our stockholders. OUR RIGHTS AND THE RIGHTS OF OUR STOCKHOLDERS TO TAKE ACTION AGAINST OUR DIRECTORS AND OFFICERS ARE LIMITED. Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter eliminates our directors' and officers' liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action. Our bylaws and indemnification agreements require us to indemnify our directors and officers for liability resulting from actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors and officers. See "Certain Provisions of Maryland Law and of Our Charter and Bylaws -- Indemnification and Limitation of Directors' and Officers' Liability." Directors may be removed with or without cause by the affirmative vote of the holders of two-thirds of the votes entitled to be cast in the election of directors. OUR UPREIT STRUCTURE MAY RESULT IN CONFLICTS OF INTEREST BETWEEN OUR STOCKHOLDERS AND THE HOLDERS OF OUR OPERATING PARTNERSHIP UNITS. We are organized as an UPREIT, which means that we hold our assets and conduct substantially all of our operations through an operating limited partnership, and may in the future issue limited partnership units to third parties. Persons holding operating partnership units would have the right to vote on certain amendments to the partnership agreement of our operating partnership, as well as on certain other matters. 32

Persons holding these voting rights may exercise them in a manner that conflicts with the interests of our stockholders. Circumstances may arise in the future, such as the sale or refinancing of one of our facilities, when the interests of limited partners in our operating partnership conflict with the interests of our stockholders. As the general partner of our operating partnership, we have fiduciary duties to the limited partners of our operating partnership that may conflict with fiduciary duties our officers and directors owe to our stockholders. These conflicts may result in decisions that are not in your best interest. THROUGH WHOLLY-OWNED SUBSIDIARIES, WE ARE THE GENERAL PARTNER OF OUR OPERATING PARTNERSHIP AND OUR OPERATING PARTNERSHIP, THROUGH WHOLLY-OWNED SUBSIDIARIES, IS THE GENERAL PARTNER OF OTHER SUBSIDIARIES WHICH OWN OUR FACILITIES AND, SHOULD ANY OF THESE WHOLLY-OWNED GENERAL PARTNERS BE DISREGARDED, THEN WE OR OUR OPERATING PARTNERSHIP COULD BECOME LIABLE FOR THE DEBTS AND OTHER OBLIGATIONS OF OUR SUBSIDIARIES BEYOND THE AMOUNT OF OUR INVESTMENT. Through our wholly-owned subsidiary, Medical Properties Trust, LLC, we are the sole general partner of our operating partnership, and also currently own 100% of the limited partnership interests in the operating partnership. In addition, our operating partnership, through other wholly-owned subsidiaries, is the general partner of other subsidiaries which own our facilities. If any of our wholly-owned subsidiaries which act as general partner were disregarded, we would be liable for the debts and other obligations of the subsidiaries that own our facilities. In such event, if any of these subsidiaries were unable to pay their debts and other obligations, we would be liable for such debts and other obligations beyond the amount of our investment in these subsidiaries. These obligations could include unforeseen contingent liabilities. TAX RISKS ASSOCIATED WITH OUR STATUS AS A REIT FAILURE TO ATTAIN OR LOSS OF OUR TAX STATUS AS A REIT WOULD HAVE SIGNIFICANT ADVERSE CONSEQUENCES TO US AND THE VALUE OF OUR COMMON STOCK. We expect to qualify as a REIT for federal income tax purposes and will elect to be taxed as a REIT under the federal income tax laws commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. Our qualification as a REIT will depend on our ability to meet various requirements concerning, among other things, the ownership of our outstanding common stock, the nature of our assets, the sources of our income and the amount of our distributions to our stockholders. The REIT qualification requirements are extremely complex, and interpretations of the federal income tax laws governing qualification as a REIT are limited. Accordingly, there is no assurance that we will be successful in operating so as to qualify as a REIT. At any time, new laws, regulations, interpretations or court decisions may change the federal tax laws relating to, or the federal income tax consequences of, qualification as a REIT. It is possible that future economic, market, legal, tax or other considerations may cause our board of directors to revoke the REIT election, which it may do without stockholder approval. If we fail to achieve, lose or revoke our REIT status, we will face serious tax consequences that will substantially reduce the funds available for distribution because: - we would not be allowed a deduction for distributions to stockholders in computing our taxable income; therefore we would be subject to federal income tax at regular corporate rates and we might need to borrow money or sell assets in order to pay any such tax; - we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes; and - unless we are entitled to relief under statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify. As a result of all these factors, a failure to achieve or a loss or revocation of our REIT status could have a material adverse effect on our financial condition and results of operations and would adversely affect the value of our common stock. 33

FAILURE TO MAKE REQUIRED DISTRIBUTIONS WOULD SUBJECT US TO TAX. In order to qualify as a REIT, each year we must distribute to our stockholders at least 90% of our REIT taxable income, excluding net capital gain. To the extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed income. In addition, we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of: - 85% of our ordinary income for that year; - 95% of our capital gain net income for that year; and - 100% of our undistributed taxable income from prior years. We intend to pay out our income to our stockholders in a manner that satisfies the distribution requirement and avoids corporate income tax and the 4% excise tax. We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require us to borrow money or sell assets to pay out enough of our taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. In the future, we may borrow to pay distributions to our stockholders and the limited partners of our operating partnership. Any funds that we borrow would subject us to interest rate and other market risks. WE WILL PAY SOME TAXES AND THEREFORE MAY HAVE LESS CASH AVAILABLE FOR DISTRIBUTION TO OUR STOCKHOLDERS. Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay some U.S. federal, state and local taxes on the income from the operations of our taxable REIT subsidiary, MPT Development Services, Inc. A taxable REIT subsidiary is a fully taxable corporation and may be limited in its ability to deduct interest payments made to us. In addition, we will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our taxable REIT subsidiary and us are not comparable to similar arrangements among unrelated parties. To the extent that we are or our taxable REIT subsidiary is required to pay U.S. federal, state or local taxes, we will have less cash available for distribution to stockholders. COMPLYING WITH REIT REQUIREMENTS MAY CAUSE US TO FOREGO OTHERWISE ATTRACTIVE OPPORTUNITIES. To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. In order to meet these tests, we may be required to forego attractive business or investment opportunities. Overall, no more than 20% of the value of our assets may consist of securities of one or more taxable REIT subsidiaries, and no more than 25% of the value of our assets may consist of securities that are not qualifying assets under the test requiring that 75% of a REIT's assets consist of real estate and other related assets. Further, a taxable REIT subsidiary may not directly or indirectly operate or manage a healthcare facility. For purposes of this definition a "healthcare facility" means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a service provider that is eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to the facility. Thus, compliance with the REIT requirements may limit our flexibility in executing our business plan. OUR LOANS TO VIBRA COULD BE RECHARACTERIZED AS EQUITY, IN WHICH CASE OUR RENTAL INCOME FROM VIBRA WOULD NOT BE QUALIFYING INCOME UNDER THE REIT RULES AND WE COULD LOSE OUR REIT STATUS. In connection with the acquisition of the Vibra Facilities, our taxable REIT subsidiary has made loans to Vibra in an aggregate amount of approximately $41.4 million to acquire the operations at the Vibra Facilities. Our taxable REIT subsidiary also made a loan of approximately $6.2 million to Vibra and its 34

subsidiaries for working capital purposes, which has been paid in full. The acquisition loan bears interest at an annual rate of 10.25%. Our operating partnership loaned the funds to our taxable REIT subsidiary to make these loans. The loans from our operating partnership to our taxable REIT subsidiary bear interest at an annual rate of 9.25%. The Internal Revenue Service, or IRS, may take the position that the loans to Vibra should be treated as equity interests in Vibra rather than debt, and that our rental income from Vibra should not be treated as qualifying income for purposes of the REIT gross income tests. If the IRS were to successfully treat the loans to Vibra as equity interests in Vibra, Vibra would be a "related party tenant" with respect to our company and the rent that we receive from Vibra would not be qualifying income for purposes of the REIT gross income tests. As a result, we could lose our REIT status. In addition, if the IRS were to successfully treat the loans to Vibra as interests held by our operating partnership rather than by our taxable REIT subsidiary and to treat the loans as other than straight debt, we would fail the 10% asset test with respect to such interests and, as a result, could lose our REIT status, which would subject us to corporate level income tax and adversely affect our ability to make distributions to our stockholders. RISKS RELATING TO THIS OFFERING THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON STOCK, AND AN ACTIVE TRADING MARKET FOR OUR COMMON STOCK MAY NEVER DEVELOP FOLLOWING THIS OFFERING. There has not been any public market for our common stock prior to this offering. We intend to apply to list our common stock on the NYSE in connection with this offering, but even if our shares are approved for listing, an active trading market for our common stock may never develop or be sustained. Currently, certain shares of our common stock are eligible for trading on The Portal(SM) Market, a subsidiary of The Nasdaq Stock Market, Inc., which permits secondary sales of eligible securities to qualified institutional buyers in accordance with Rule 144A under the Securities Act. The last trade of our common stock on The Portal(SM) Market occurred on March 29, 2005 at a price of $10.25 per share, which may not be indicative of the prices at which our shares of common stock will trade after this offering. THE MARKET PRICE AND TRADING VOLUME OF OUR COMMON STOCK MAY BE VOLATILE FOLLOWING THIS OFFERING. Even if an active trading market develops for our common stock after this offering, the market price of our common stock may be highly volatile and be subject to wide fluctuations. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the initial public offering price. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include: - actual or anticipated variations in our quarterly operating results or distributions; - changes in our funds from operations or earnings estimates or publication of research reports about us or the real estate industry; - increases in market interest rates that lead purchasers of our shares of common stock to demand a higher yield; - changes in market valuations of similar companies; - adverse market reaction to any increased indebtedness we incur in the future; - additions or departures of key management personnel; - actions by institutional stockholders; 35

- speculation in the press or investment community; and - general market and economic conditions. BROAD MARKET FLUCTUATIONS COULD NEGATIVELY IMPACT THE MARKET PRICE OF OUR COMMON STOCK. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market price of many companies in industries similar or related to ours and that have been unrelated to these companies' operating performances. These broad market fluctuations could reduce the market price of our common stock. Furthermore, our operating results and prospects may be below the expectations of public market analysts and investors or may be lower than those of companies with comparable market capitalizations, which could lead to a material decline in the market price of our common stock. COMMON STOCK ELIGIBLE FOR FUTURE SALE MAY HAVE ADVERSE EFFECTS ON OUR STOCK PRICE. We cannot predict the effect, if any, of future sales of common stock, or the availability of shares for future sales, on the market price of our common stock. Sales of substantial amounts of common stock, or the perception that these sales could occur, may adversely affect prevailing market prices for our common stock. In addition, under a registration rights agreement, we have granted holders of the 25,300,000 shares of our common stock issued in our April 2004 private placement the right to have their shares registered for resale under the Securities Act. If any or all of these holders sell a large number of securities in the public market, the sale could reduce the trading price of our common stock and could impede our ability to raise future capital. We also may issue from time to time additional common stock or units of our operating partnership in connection with the acquisition of facilities and we may grant additional demand or piggyback registration rights in connection with these issuances. Sales of substantial amounts of common stock or the perception that these sales could occur may adversely effect the prevailing market price for our common stock. In addition, the sale of these shares could impair our ability to raise capital through a sale of additional equity securities. YOU SHOULD NOT RELY ON THE UNDERWRITERS' LOCK-UP AGREEMENTS TO LIMIT THE NUMBER OF SHARES OF COMMON STOCK SOLD INTO THE MARKET. All of our directors and executive officers, subject to limited exceptions, have agreed to be bound by lock-up agreements that prohibit these holders from selling or otherwise disposing of any of our common stock or securities convertible into our common stock that they own or acquire for 180 days after the date of this prospectus. In addition, the underwriters will require that all of our stockholders other than our executive officers and directors agree not to sell or otherwise dispose of any of the shares of our common stock or securities convertible into our common stock that they have acquired prior to the date of this prospectus and are not selling in this offering until 60 days after the date of this prospectus, subject to limited exceptions. Friedman, Billings, Ramsey & Co., Inc., on behalf of the underwriters, may, in its discretion, release all or any portion of the common stock subject to the lock-up agreements with our directors and executive officers, at any time and without notice or stockholder approval, in which case our other stockholders would also be released from the restrictions under the registration rights agreement. There are no present agreements between the underwriters and us or any of our executive officers, directors or stockholders releasing them or us from these lock-up agreements. However, we cannot predict the circumstances or timing under which Friedman, Billings, Ramsey & Co., Inc. may waive these restrictions. If the restrictions under the lock-up agreements and the registration rights agreement are waived or terminated, up to approximately shares of common stock will be available for sale into the market, subject only to applicable securities rules and regulations, which could reduce the market price for our common stock. 36

AN INCREASE IN MARKET INTEREST RATES MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR SECURITIES. One of the factors that investors may consider in deciding whether to buy or sell our securities is our distribution rate as a percentage of our price per share of common stock, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher distribution or interest rate on our securities or seek securities paying higher distributions or interest. The market price of our common stock likely will be based primarily on the earnings that we derive from rental income with respect to our facilities and our related distributions to stockholders, and not from the underlying appraised value of the facilities themselves. As a result, interest rate fluctuations and capital market conditions can affect the market price of our common stock. In addition, rising interest rates would result in increased interest expense on our variable-rate debt, thereby adversely affecting cash flow and our ability to service our indebtedness and make distributions. IF YOU PURCHASE COMMON STOCK IN THIS OFFERING, YOU WILL EXPERIENCE IMMEDIATE DILUTION. We expect the initial public offering price of our common stock to be higher than the book value per share of our outstanding common stock. Assuming that the common stock sold in this offering is sold at $ per share, if you purchase common stock in this offering, you will experience immediate dilution of approximately $ in book value per share. This means that investors who purchase our common stock in this offering: - will likely pay a price per share that exceeds the book value of our assets after subtracting our liabilities; and - will have contributed, in the aggregate, approximately % of our funding since inception but will own only % of our fully diluted equity interests. OUR ENGAGEMENT AGREEMENT WITH FRIEDMAN, BILLINGS, RAMSEY & CO., INC. MAY PRECLUDE US FROM ENGAGING INVESTMENT BANKING FIRMS OTHER THAN FRIEDMAN, BILLINGS, RAMSEY & CO., INC. UNTIL APRIL 7, 2006 FOR FUTURE FINANCING AND OTHER STRATEGIC TRANSACTIONS, AND FRIEDMAN, BILLINGS, RAMSEY & CO., INC. HAS AN INTEREST IN THIS OFFERING OTHER THAN UNDERWRITING DISCOUNTS AND COMMISSIONS. Our engagement letter with Friedman, Billings, Ramsey & Co., Inc. dated November 13, 2003 may preclude us until April 7, 2006 from using competing investment banks or financial advisors for many financial and strategic transactions. Accordingly, in planning and completing some transactions, including public offerings of our stock, we may not be able to utilize the services of competitors of Friedman, Billings, Ramsey & Co., Inc. and thereby obtain pricing, distribution and other benefits that we otherwise could and we may be dependent on the ability of Friedman, Billings, Ramsey & Co., Inc. to execute certain financing and other strategic transactions on our behalf. In addition, Friedman, Billings, Ramsey Group, Inc., an affiliate of Friedman, Billings, Ramsey & Co., Inc., is currently our largest stockholder and therefore Friedman, Billings, Ramsey & Co., Inc. will have an interest in the successful completion of this offering beyond the underwriting discounts and commissions it will receive. 37

A WARNING ABOUT FORWARD LOOKING STATEMENTS We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. Statements regarding the following subjects, among others, are forward-looking by their nature: - our business strategy; - our projected operating results; - our ability to acquire or develop net-leased facilities; - availability of suitable facilities to acquire or develop; - our ability to enter into, and the terms of, our prospective leases; - our ability to use effectively the proceeds of this offering; - our ability to obtain future financing arrangements; - estimates relating to, and our ability to pay, future distributions; - our ability to compete in the marketplace; - market trends; - projected capital expenditures; and - the impact of technology on our facilities, operations and business. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our common stock, along with, among others, the following factors that could cause actual results to vary from our forward-looking statements: - the factors referenced in this prospectus, including those set forth under the sections captioned "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations;" "Our Business" and "Our Portfolio;" - general volatility of the capital markets and the market price of our common stock; - changes in our business strategy; - changes in healthcare laws and regulations; - availability, terms and development of capital; - availability of qualified personnel; - changes in our industry, interest rates or the general economy; and - the degree and nature of our competition. When we use the words "believe," "expect," "may," "potential," "anticipate," "estimate," "plan," "will," "could," "intend" or similar expressions, we are identifying forward-looking statements. You should not place undue reliance on these forward-looking statements. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The safe harbor protections provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act do not apply to the forward-looking statements contained in this prospectus. 38

USE OF PROCEEDS We expect to receive net proceeds from the sale of the shares of common stock offered by this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us, of approximately $ . If the underwriters exercise their over-allotment option in full, we expect to receive net proceeds of approximately $ million. We intend to use the net proceeds as follows: - approximately $ to fund the purchase or development of our Pending Acquisition and Development Facilities; - the remainder for general corporate and working capital purposes, including possible future acquisitions or developments of net-leased facilities, expansion of the Desert Valley Facility, funding of the DSI acquisition and development commitment, and repayment of indebtedness under our term loan with Merrill Lynch. Pending these uses, we intend to invest the net offering proceeds in interest-bearing, short-term marketable investment grade securities or money-market accounts that are consistent with our intention to qualify as a REIT. These investments may include, for example, government and government agency securities, certificates of deposit, interest-bearing bank deposits and mortgage loan participations. Our loan with Merrill Lynch bears interest at one month LIBOR (2.87% at March 31, 2005) plus 300 basis points. As of March 31, 2005, $74.1 million was outstanding under this loan. This loan is secured by the six facilities we have leased to Vibra and matures on December 31, 2007. We are required to pay an exit fee of 1% of the total loan amount if the loan is paid down to below $40,000,000 during the first 18 months of the loan's term. After that time, 100% of the loan may be prepaid without penalty. These funds were borrowed for the purpose of funding acquisitions and developments. 39

CAPITALIZATION The following table sets forth: - our actual capitalization as of December 31, 2004; and - our pro forma capitalization, as adjusted to give effect to the sale of shares of common stock in this offering at an assumed public offering price of $ per share and application of the net proceeds as described in "Use of Proceeds."

AS OF DECEMBER 31, 2004 --------------------------- PRO FORMA, HISTORICAL AS ADJUSTED ------------ ------------ LONG TERM DEBT.............................................. $ 56,000,000 $ -- STOCKHOLDERS' EQUITY: Preferred stock, $0.001 par value. 10,000,000 shares authorized; no shares issued and outstanding........... -- -- Common stock, $0.001 par value. 100,000,000 shares authorized; 26,082,862 shares issued and outstanding at December 31, 2004; shares issued and outstanding, as adjusted(1)............................ 26,083 Additional paid in capital............................. 233,626,690 Accumulated deficit.................................... (1,924,329) ------------ ------------ Total stockholders' equity........................... 231,728,444 392,728,444 ------------ ------------ Total capitalization................................. $287,728,444 $392,728,444 ============ ============
- --------------- (1) Includes 114,500 shares of restricted common stock to be awarded upon completion of this offering. Excludes (i) shares of common stock that may be issued by us upon exercise of the underwriters' overallotment option; (ii) 100,000 shares of common stock issuable upon the exercise of stock options granted to our independent directors under our equity incentive plan, one-third of which are vested; (iii) 35,000 shares of common stock issuable upon the exercise of a vested warrant granted to an unaffiliated third party; (iv) 5,000 shares of common stock issuable in October 2007 and 7,500 shares of common stock issuable in March 2008 pursuant to deferred stock units awarded under our equity incentive plan to our independent directors and (v) 564,180 shares of common stock available for future awards under our equity incentive plan. 40

DILUTION NET TANGIBLE BOOK VALUE As of December 31, 2004, we had a net tangible book value of approximately $ million, or approximately $ per share. Net tangible book value per share represents the amount of our total tangible assets less our total liabilities and total minority interests, divided by the number of shares of our common stock outstanding. DILUTION AFTER THIS OFFERING Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of common stock in this offering and the net tangible book value per share of common stock immediately after this offering and the application of the estimated net offering proceeds. After giving effect to: - the sale of the common stock offered by us under this prospectus at an assumed initial public offering price of $ per share, and our receipt of approximately $ million in net proceeds from this offering, after deducting the underwriting discount and estimated offering expenses payable by us; - the issuance of 114,500 shares of restricted stock to our senior management team and other employees upon completion of this offering; - the issuance of 100,000 shares of common stock issuable upon the exercise of outstanding stock options granted to our independent directors and 35,000 shares of common stock issuable upon the exercise of a warrant granted to an unaffiliated third party; and - the issuance of 12,500 shares of common stock underlying deferred stock units awarded to our independent directors, our pro forma net tangible book value as of December 31, 2004 would have been approximately $ million (includes the proceeds to be received from the exercise of options for common stock), or $ per share of common stock. This amount represents an immediate increase in net tangible book value of $ per share to existing stockholders prior to this offering and an immediate dilution in pro forma net tangible book value of $ per share to investors in this offering. The following table illustrates this per share dilution:

Initial public offering price per share..................... Net tangible book value per share as of December 31, 2004(1)................................................ Increase in pro forma net tangible book value per share to existing stockholders attributable to this offering(2)............................................ Decrease in pro forma net tangible book value per share to existing stockholders attributable to the issuance of restricted stock....................................... Increase in pro forma net tangible book value per share to existing stockholders attributable to the exercise of stock options and a warrant............................ Pro forma net tangible book value per share after this offering(3)............................................... ------ Dilution in pro forma net tangible book value per share to new investors(4).......................................... ======
- --------------- (1) Net tangible book value per share of common stock is determined by dividing net tangible book value as of December 31, 2004 (net book value of the tangible assets consisting of total assets less accrued rental income, intangible assets, and deferred costs) by the number of shares of common stock outstanding prior to the offering. (2) After deducting underwriting discounts, commissions and other expenses of this offering. (3) Based on pro forma net tangible book value attributable to common stockholders of approximately $ divided by the sum of shares of our common stock to be outstanding, the issuance of 114,500 shares of restricted stock, the issuance of 41

195,000 shares of common stock issuable upon the exercise of outstanding stock options and warrants and the issuance of 20,000 shares of common stock underlying deferred stock units awarded to our independent directors. (4) Dilution is determined by subtracting (i) pro forma net tangible book value per share of our common stock after giving effect to this offering and the application of the net proceeds therefrom from (ii) the initial public offering price per share paid by a new investor in this offering. DIFFERENCES BETWEEN NEW AND EXISTING STOCKHOLDERS IN NUMBER OF SHARES AND AMOUNT PAID The table below summarizes, as of December 31, 2004, on the pro forma basis discussed above but excluding options and warrants to purchase shares of common stock that will be outstanding upon completion of this offering, the differences between the number of shares of common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and by the new investors purchasing common stock in this offering. The options and warrants described in the preceding sentence are exercisable at a weighted average exercise price of $ per share and will remain outstanding upon the completion of this offering. To the extent that these outstanding options are exercised in the future, there will be further dilution to new investors. We used an assumed initial public offering price of $ per share, and we have not deducted estimated underwriting discounts and commissions and estimated offering expenses in our calculations.

CASH/TANGIBLE BOOK SHARES ISSUED VALUE CASH/TANGIBLE --------------------- --------------------- BOOK VALUE NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE -------- ---------- -------- ---------- ------------- Existing stockholders........ New investors in the offering................... Total........................
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DISTRIBUTION POLICY We intend to make regular quarterly distributions to our stockholders so that we distribute each year all or substantially all of our REIT taxable income, if any, so as to avoid paying corporate level income tax and excise tax on our REIT income and to qualify for the tax benefits accorded to REITs under the Code. In order to qualify as a REIT, we must distribute to our stockholders an amount at least equal to 90% of our REIT taxable income, excluding net capital gain. See "United States Federal Income Tax Considerations." The distributions will be authorized by our board of directors and declared by us based upon a number of factors, including: - our actual results of operations; - the rent received from our tenants; - the ability of our tenants to meet their other obligations under their leases and their obligations under their loans from us; - debt service requirements; - capital expenditure requirements for our facilities; - our taxable income; - the annual distribution requirement under the REIT provisions of the Code; and - other factors that our board of directors may deem relevant. To the extent not inconsistent with maintaining our REIT status, we may retain accumulated earnings of our taxable REIT subsidiaries in those subsidiaries. Our ability to make distributions to our stockholders will depend on our receipt of distributions from our operating partnership. On September 2, 2004, we declared a quarterly distribution of $0.10 per share of common stock, payable to stockholders of record as of September 16, 2004. We made this distribution on October 11, 2004. On November 11, 2004, we declared a distribution of $0.11 per share of common stock, payable on January 11, 2005 to stockholders of record as of December 16, 2004. We made this distribution on January 11, 2005. On March 4, 2005, we declared a distribution of $0.11 per share of common stock, payable on April 15, 2005 to stockholders of record as of March 16, 2005. We cannot assure you that we will have cash available for future quarterly distributions at these levels, or at all. See "Risk Factors." Of the $0.21 per share total distributions declared in 2004, $0.13 per share is reportable as ordinary income by our stockholders in 2004 and $0.08 per share is reportable in 2005. However, the character of this $0.08 per share distribution, as ordinary income, capital gain, or return of capital, cannot be determined until the end of 2005. 43

SELECTED FINANCIAL INFORMATION You should read the following pro forma and historical information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical and pro forma consolidated financial statements and related notes thereto included elsewhere in this prospectus. The following table sets forth our selected financial and operating data on an historical and pro forma basis. Our selected historical statements of operations information for the year ended December 31, 2004 and for the period from inception (August 27, 2003) through December 31, 2003 and our selected historical balance sheet information at December 31, 2004 and at December 31, 2003 have been derived from our historical financial statements audited by KPMG LLP, independent registered public accounting firm, whose report with respect thereto is included elsewhere in this prospectus. The unaudited pro forma consolidated balance sheet data as of December 31, 2004 are presented as if our acquisition of the current portfolio of facilities and completion of this offering and application of the net proceeds had occurred on December 31, 2004, and, our unaudited pro forma consolidated statement of operations data for the year ended December 31, 2004 are presented as if our acquisition of the current portfolio of facilities and completion of this offering and application of the net proceeds had occurred on January 1, 2004. The pro forma information is not necessarily indicative of what our actual financial position or results of operations would have been as of the dates or for the periods indicated, nor does it purport to represent our future financial position or results of operations.

FOR THE PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ------------------------- ------------- PRO FORMA HISTORICAL HISTORICAL ----------- ----------- ------------- OPERATING INFORMATION: Revenues Rent income.............................. $23,766,315 $ 8,611,344 $ -- Interest income from loans............... 5,877,049 2,282,115 -- ----------- ----------- ----------- Total revenues........................... 29,643,364 10,893,459 -- Operating expenses Depreciation and amortization............ 4,257,054 1,478,470 -- General and administrative............... 6,202,284 5,057,284 992,418 Total operating expenses................. 11,325,189 7,214,601 1,023,276 Operating income (loss).................. 18,318,175 3,678,858 (1,023,276) Net other income......................... 897,491 897,491 -- Net income (loss)........................... 19,215,666 4,576,349 (1,023,276) Net income (loss) per share, basic and diluted.................................. 0.24 (.63) Weighted average shares outstanding -- basic..................... 19,310,833 1,630,435 Weighted average shares outstanding -- diluted................... 19,312,634 1,630,435
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AS OF AS OF DECEMBER 31, DECEMBER 31, 2004 2003 --------------------------- ------------ PRO FORMA HISTORICAL HISTORICAL ------------ ------------ ------------ BALANCE SHEET INFORMATION: Gross investment in real estate assets... $207,068,625 $151,690,293 $ -- Net investment in real estate............ 205,590,155 150,211,823 -- Construction in progress................. 24,261,430 24,318,098 166,301 Cash and cash equivalents................ 147,165,345 97,543,677 100,000 Loans receivable......................... 50,224,069(1) 50,224,069(1) -- Total assets............................. 411,506,063 306,506,063 468,133 Total debt............................... -- 56,000,000 -- Total liabilities........................ 17,777,619 73,777,619 1,489,779 Total stockholders' equity (deficit)..... 392,728,444 231,728,444 (1,021,646) Total liabilities and stockholders' equity................................ 411,506,063 306,506,063 468,133
FOR THE PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 -------------------------------- ------------- PRO FORMA HISTORICAL HISTORICAL ------------- --------------- ------------- OTHER INFORMATION: Funds from operations(2)................ $23,472,720 $ 6,054,819 $(1,023,276) Cash Flows: Provided by operating activities..... 9,918,898 368,133 Used for investing activities........ (195,600,642) (166,301) Provided by (used for) financing activities......................... 283,125,421 (101,832)
- --------------- (1) Includes $1.5 million in commitment fees payable to us by Vibra. (2) Funds from operations, or FFO, represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. Management considers funds from operations a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that funds from operations provides a meaningful supplemental indication of our performance. We compute funds from operations in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, in its March 1995 White Paper (as amended in November 1999 and April 2002), which may differ from the methodology for calculating funds from operations utilized by other equity REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations, or other commitments and uncertainties, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Funds from operations should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as indicators of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity. The following table presents a reconciliation of FFO to net income for the year ended December 31, 2004, on an actual and pro forma basis, and for the period from inception (August 27, 2003) through December 31, 2003 on an actual basis:
FOR THE PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH FOR THE YEAR ENDED DECEMBER 31, DECEMBER 31, 2004 2003 ------------------------------- ------------ PRO FORMA HISTORICAL HISTORICAL ------------ ----------- ------------ Funds from operations:(2) Net income (loss)........................................ $19,215,666 $4,576,349 $(1,023,276) Depreciation and amortization............................ 4,257,054 1,478,470 -- ----------- ---------- ----------- Funds from operations.................................... $23,472,720 $6,054,819 $(1,023,276) =========== ========== ===========
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We were recently formed and did not commence revenue generating operations until June 2004. Please see "Risk Factors -- Risks Relating to Our Business and Growth Strategy" for a discussion of risks relating to our limited operating history. The following discussion should be read in conjunction with our audited financial statements and the related notes thereto included elsewhere in this prospectus. OVERVIEW We were incorporated under Maryland law on August 27, 2003 primarily for the purpose of investing in and owning net-leased healthcare facilities. Our existing tenants are, and our prospective tenants will generally be, hospital operating companies and other healthcare providers that use substantial real estate assets in their operations. We offer financing for these operators' real estate through 100% lease financing and generally seek lease terms of at least 10 years with a series of shorter renewal terms at the option of our tenants; we also intend to include annual contractual rental rate increases that in the current market range from 1.5% to 3.0%. Our existing portfolio escalators range from 2.0% to 2.5%. In addition to the base rent, our leases generally require our tenants to pay all operating costs and expenses associated with the facility. We conduct substantially all of our operations through our operating partnership. We own all of the membership interests in the sole general partner of our operating partnership and thereby control the operating partnership. At present, we also own 100% of the limited partnership interests, although we may issue units of limited partnership in exchange for interests in healthcare facilities from time to time in the future. Sellers of healthcare facilities who receive limited partnership units of our operating partnership in exchange for interests in their facilities may be able to defer recognition of any gain that would be recognized in a cash sale until such time that they redeem the operating partnership units. Upon their election to redeem their units, we may redeem them either for cash or shares of our common stock on a one-for-one basis. In addition, we may sell equity interests in subsidiaries of our operating partnership in connection with the acquisition or development of facilities. Whenever we issue shares of our common stock for cash, we are obligated to contribute any net proceeds we receive from the sale of the stock to our operating partnership and our operating partnership is, in turn, obligated to issue an equivalent number of limited partnership units to us. Our operating partnership distributes the income it generates from its operations to us. In turn, we expect to distribute a substantial majority of the amounts we receive from our operating partnership to our stockholders in the form of quarterly cash distributions. We intend to qualify as a REIT for federal tax purposes, thereby generally avoiding federal and state corporate income taxes on most of the earnings that we distribute to our stockholders. We conduct business operations in one segment. We acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases. At December 31, 2004 our real estate and loan assets comprised approximately 49% and 16%, respectively, of our total assets. We do not expect our loan assets to exceed this level in the future. Our lending business is important to our overall business strategy for two primary reasons: (1) it provides opportunities to make income-earning investments that yield attractive risk-adjusted returns in an industry in which our management has expertise, and (2) by making debt capital available to certain qualified operators, we believe we create for our company a competitive advantage over other buyers of, and financing sources for, healthcare facilities. We currently own four rehabilitation hospitals and two long-term acute care hospitals that are leased to a single operating company and one community hospital with an integrated medical office building leased to another operating company and we are developing a community hospital and an adjacent medical office building that are leased to a separate operating company. We have also made and in the future may make loans to our tenants to facilitate the acquisition of healthcare businesses and for working capital and from time to time may make mortgage loans to facility owners. 46

Our revenues are derived from rents we earn pursuant to the lease agreements we have with our tenants and from interest income from loans we make to our tenants and other facility owners. Our tenants operate in the healthcare industry, generally providing medical, surgical and rehabilitative care to patients. The capacity of our tenants to pay our rents and interest is dependent upon their ability to conduct their operations at profitable levels. We believe that the business environment of the industry segments in which our tenants operate in is generally positive for efficient operators. However, our tenants' operations are subject to economic, regulatory and market conditions that may affect their profitability. Accordingly, we monitor certain key factors, changes to which we believe may provide early indications of conditions that may affect the level of risk in our lease and loan portfolio. Key factors that we consider in underwriting prospective tenants and in monitoring the performance of existing tenants include the following: - the historical and prospective operating margins (measured by a tenant's earnings before interest, taxes, depreciation, amortization and facility rent) of each tenant and at each facility; - the ratio of our tenants' operating earnings to facility rent and to facility rent plus other fixed costs, including debt costs; - trends in the source of our tenants' revenue, including the relative mix of Medicare, Medicaid/MediCal, commercial insurance, and private pay patients; - the effect of evolving healthcare regulations on our tenants' profitability Certain business factors, in addition to those described above that directly affect our tenants, will likely materially influence our future results of operations. These factors include: - trends in the cost and availability of capital, including market interest rates, that our prospective tenants may use for their real estate assets instead financing their real estate assets through lease structures; - unforeseen changes in healthcare regulations that may limit the opportunities for physicians to participate in the ownership of healthcare providers and healthcare real estate; - reductions in reimbursements from Medicare, state healthcare programs and commercial insurance providers that may reduce our tenants' profitability and our lease rates; and - competition from other financing sources. CRITICAL ACCOUNTING POLICIES In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, we must make estimates about certain types of transactions and account balances. We believe that our estimates of the amount and timing of lease revenues, credit losses, fair values and periodic depreciation of our real estate assets, stock compensation expense, and the effects of any derivative and hedging activities will have significant effects on our financial statements. Each of these items involves estimates that require us to make judgments that are subjective in nature. We intend to rely on our experience, collect historical data and current market data, and develop relevant assumptions in order to arrive at what we believe to be reasonable estimates. Under different conditions or assumptions, materially different amounts could be reported related to the accounting policies described below. In addition, application of these accounting policies involves the exercise of judgments on the use of assumptions as to future uncertainties and, as a result, actual results could materially differ from these estimates. Our accounting estimates will include the following: Revenue Recognition. Our revenues, which are comprised largely of rental income, include rents that each tenant pays in accordance with the terms of its respective lease reported on a straight-line basis over the initial term of the lease. Since some of our leases provide for rental increases at specified intervals, straight-line basis accounting requires us to record as an asset, and include in revenues, unbilled rent that we will only receive if the tenant makes all rent payments required through the expiration of the term of the lease. Accordingly, our management must determine, in its judgment, to what extent the unbilled rent 47

receivable applicable to each specific tenant is collectible. We will review each tenant's unbilled rent receivable on a quarterly basis and take into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the facility is located. In the event that the collectibility of unbilled rent with respect to any given tenant is in doubt, we are required to record an increase in our allowance for uncollectible accounts or record a direct write-off of the specific rent receivable, which would have an adverse effect on our net income for the year in which the reserve is increased or the direct write-off is recorded and would decrease our total assets and stockholders' equity. We make loans to our tenants and from time to time may make mortgage loans to facility owners. We recognize interest income on loans as earned based upon the principal amount outstanding. These loans are generally secured by interests in real estate, receivables, equity interests of a tenant or corporate and individual guarantees. As with unbilled rent receivables, our management must also periodically evaluate loans to determine what amounts may not be collectible. Accordingly, a provision for losses on loans receivable is recorded when it becomes probable that the loan will not be collected in full. The provision is an amount which reduces the loan to its estimated net receivable value based on a determination of the eventual amounts to be collected either from the debtor or from the collateral, if any. At that time, we discontinue recording interest income on the loan to the tenant. Investments in Real Estate. We record investments in real estate at cost, and capitalize improvements and replacements when they extend the useful life or improve the efficiency of the asset. To the extent that we incur costs of repairs and maintenance, we expense those costs as incurred. We compute depreciation using the straight-line method over the estimated useful life of 40 years for buildings and improvements, five to seven years for equipment and fixtures and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests. We are required to make subjective assessments as to the useful lives of our facilities for purposes of determining the amount of depreciation expense to record on an annual basis with respect to our investments in real estate improvements. These assessments have a direct impact on our net income because, if we were to shorten the expected useful lives of our investments in real estate improvements, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis. We have adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes a single accounting model for the impairment or disposal of long-lived assets including discontinued operations. SFAS 144 requires that the operations related to facilities that have been sold or that we intend to sell be presented as discontinued operations in the statement of operations for all periods presented, and facilities we intend to sell be designated as "held for sale" on our balance sheet. When circumstances such as adverse market conditions indicate a possible impairment of the value of a facility, we will review the recoverability of the facility's carrying value. The review of recoverability will be based on our estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the facility's use and eventual disposition. Our forecast of these cash flows will consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If impairment exists due to the inability to recover the carrying value of a facility, an impairment loss will be recorded to the extent that the carrying value exceeds the estimated fair value of the facility. We will be required to make subjective assessments as to whether there are impairments in the values of our investments in real estate. Purchase Price Allocation. We record above-market and below-market in-place lease values, if any, for the facilities we own which are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. We amortize any resulting capitalized above-market lease values as a reduction of rental income 48

over the remaining non-cancelable terms of the respective leases. We amortize any resulting capitalized below-market lease values (presented in the accompanying balance sheet as value of assumed lease obligations) as an increase to rental income over the initial term and any fixed-rate renewal periods in the respective leases. Because our strategy to a large degree involves the origination of long term lease arrangements 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. We measure the aggregate value of other intangible assets to be acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management's estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. We also consider information obtained about each targeted facility as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which we expect to range primarily from six to 18 months, depending on specific local market conditions. Management also estimates costs to execute similar leases including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction. The total amount of other intangible assets to be acquired, if any, is further allocated to in-place lease values and customer relationship intangible values based on management's evaluation of the specific characteristics of each prospective tenant's lease and our overall relationship with that tenant. Characteristics to be considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, including those existing under the terms of the lease agreement, among other factors. We expect to amortize the value of in-place leases, if any, to expense over the initial term of the respective leases, which we expect to range primarily from 10 to 15 years. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense. Accounting for Derivative Financial Investments and Hedging Activities. We expect to account for our derivative and hedging activities, if any, using SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and SFAS No. 149, which requires all derivative instruments to be carried at fair value on the balance sheet. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. We expect to formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking each hedge transaction. We plan to review periodically the effectiveness of each hedging transaction, which involves estimating future cash flows. Cash flow hedges, if any, will be accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in other comprehensive income within stockholders' equity. Amounts will be reclassified from other comprehensive income to the income statement in the period or periods the hedged forecasted transaction affects earnings. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges under SFAS No. 133. We are not currently a party to any derivatives contracts. 49

Variable Interest Entities. In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. In December 2003, the FASB issued a revision to FIN 46, which is termed FIN 46R. FIN 46R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements and provides guidance on the identification of entities for which control is achieved through means other than through voting rights and how to determine when and which business enterprise should consolidate such an entity. This model for consolidation applies to an entity in which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. We periodically evaluate the terms of our relationships with our tenants and borrowers to determine whether we are required to consolidate any tenants or borrowers. Stock Based Compensation. We currently apply the intrinsic value method to account for the issuance of stock options under our equity incentive plan in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees. In this regard, we anticipate that a substantial portion of our options will be granted to individuals who are our officers or directors. Accordingly, because the grants are expected to be at exercise prices that represent fair value of the stock at the date of grant, we do not currently record any expense related to the issuance of these options under the intrinsic value method. If the actual terms vary from the expected, the impact to our compensation expense could differ. In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which is a revision of SFAS No. 123, "Accounting for Stock Based Compensation." SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. The Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro forma disclosures of fair value were required. SFAS No. 123(R) becomes effective for public companies with their first interim or annual reporting period that begins after June 15, 2005. For non-public companies, the standard becomes effective for their first fiscal year beginning after December 15, 2005. We are currently evaluating the impact of SFAS No. 123(R) on our financial position and results of operations. However, we do not expect that SFAS No. 123(R) will have a material effect on our financial position and results of operations. Our existing equity incentive plan allows for stock-based awards to be in the form of options, restricted stock, restricted stock units and deferred stock units. The impact of SFAS No. 123(R) will also be affected by the types of stock-based awards that our board of directors chooses to grant. DISCLOSURE OF CONTRACTUAL OBLIGATIONS The following table summarizes known material contractual obligations associated with investing and financing activities as of December 31, 2004:

LESS THAN 2-3 4-5 AFTER CONTRACTUAL OBLIGATIONS 1 YEAR YEARS YEARS 5 YEARS TOTAL - ----------------------- ----------- ----------- -------- ---------- ----------- Construction contracts....................... $32,077,264 $ -- $ -- $ -- $32,077,264 Operating lease commitments.................. 275,106 685,728 712,080 2,200,532 3,873,446
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Investors and analysts following the real estate industry utilize funds from operations, or FFO, as a supplemental performance measure. While we believe net income available to common stockholders as defined by GAAP is the most appropriate measure, our management considers FFO an appropriate supplemental measure given its wide use by and relevance to investors and analysts. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assume that the value of real estate diminishes predictably over time. As defined by the National Association of Real Estate Investment Trusts, or NAREIT, FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (losses) on sales of 50

real estate, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We compute FFO in accordance with the NAREIT definition. FFO should not be viewed as a substitute measure of our company's operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs that could materially impact our results of operations. The following table presents a reconciliation of FFO to net income for the year ended December 31, 2004, on an actual and pro forma basis, and for the period from inception (August 27, 2003) through December 31, 2003 on an actual basis:

FOR THE PERIOD FROM INCEPTION FOR THE YEAR ENDED DECEMBER 31, (AUGUST 27, 2003) 2004 THROUGH -------------------------------- DECEMBER 31, 2003 HISTORICAL PRO FORMA HISTORICAL ------------- -------------- ----------------- Funds from operations: Net income (loss)...................... $4,576,349 $19,215,666 $(1,023,276) Depreciation and amortization.......... 1,478,470 4,257,054 -- ---------- ----------- ----------- Funds from operations.................. $6,054,819 $23,472,720 $(1,023,276) ========== =========== ===========
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2004 Net income for the year ended December 31, 2004 was $4,576,349. Revenue, which was $10,893,459, was comprised primarily of rents (79%) and interest from loans (21%). Interest and dividends, primarily from the temporary investment of the net proceeds of our April 2004 private placement, was $930,260. We completed our private placement of common stock in April 2004 and received proceeds, net of offering costs and fees, of approximately $233.5 million. Expenses during the year, which totalled $7,214,601, were comprised primarily of compensation of $3,700,442, depreciation and amortization of $1,517,530, other general and administrative expenses of $1,336,897 and approximately $585,345 of costs associated with unsuccessful acquisitions. These costs, which consisted primarily of legal fees, costs of third party reports and travel, related to a portfolio of five facilities that were subject to a letter of intent with a prospective operator. During the second quarter of 2004, we declined to pursue the acquisition. INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 Our net loss for the period from inception (August 27, 2003) through December 31, 2003 was $1,023,276. Included in this loss is approximately $423,000 in accrued expenses that were incurred by Medical Properties Trust, LLC prior to August 27, 2003 and assumed by us in connection with our formation. These constitute all of the expenses of this company. We had no revenues during this period and substantially all of the expenses that comprised our net loss from inception through December 31, 2003 are related to start-up activities, including business development, identification of acquisition possibilities, legal, accounting, and consulting. We do not consider the results of our operations in this period to be meaningful with respect to an analysis of our expected operations. LIQUIDITY AND CAPITAL RESOURCES Our long-term liquidity requirements consist primarily of funds to pay the costs of acquiring and developing facilities and making distributions to our stockholders. We believe that our existing cash and cash equivalents, together with the net proceeds from this offering, cash flow from operations and borrowings under our Merrill Lynch and Colonial Bank loans, will be sufficient to acquire the Pending Acquisition and Development Facilities and to fund our cash requirements during the next 12 months. Our current portfolio of facilities, other than the Desert Valley Facility, serves as collateral for our current indebtedness. 51

We received approximately $233.5 million, net of offering costs and fees, from our April 2004 private placement. We have acquired and committed to develop healthcare facilities with an aggregate estimated cost of $387.3 million and have provided approximately $41.4 million in acquisition financing to one of our tenants. As of December 31, 2004, we had stockholders' equity of approximately $231.7 million, including approximately $97.5 million in cash and cash equivalents. Our sources of funds for future acquisitions and developments will primarily be our uncommitted cash balances, the net proceeds of this offering, operating cash flows and borrowings. We intend to use these cash resources in the acquisition and development of our Pending Acquisition and Development Facilities and to pay our operating expenses for the foreseeable future. To maintain our status as a REIT under the Code, we must distribute annually at least 90% of our taxable income. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for acquisitions, developments and operations. However, we believe that our current access to financings will provide us with financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new acquisition and development opportunities. We intend to utilize various types of debt to finance a portion of the costs to complete our proposed development facilities and acquire and develop additional facilities. We expect this debt will include long-term, fixed-rate mortgage loans, variable-rate term loans, secured revolving lines of credit and construction financing facilities. We believe we will be able generally to finance up to approximately 60% of the cost of our healthcare facilities; however, there is no assurance that we will be able to obtain or maintain this level of debt on our portfolio of real estate assets on favorable terms in the future. We borrowed $75 million from Merrill Lynch under a loan agreement with a term of three years for acquisition and development of additional facilities and other working capital needs. The loan bears interest at one month LIBOR (2.87% at March 31, 2005) plus 300 basis points. There was $74.1 million outstanding under this loan as of March 31, 2005. The term loan is secured by our interests in the Vibra Facilities and requires us to comply with certain financial covenants. We have also entered into construction loan agreements in an aggregate amount of $43.4 million with Colonial Bank to fund construction costs for our West Houston Facilities. Each construction loan has a term of 18 months and an option on the part of the borrower to convert the loan to a 30-month term loan upon completion of construction of the West Houston Facility securing that loan. The construction loans are secured by mortgages on the West Houston Facilities, as well as assignments of rents and leases on those facilities. The terms of the construction loan agreements require us to comply with a financial ratio relating to debt coverage. The construction loans bear interest at three month LIBOR (3.12% at March 31, 2005) plus 225 basis points, during the construction period and three month LIBOR plus 250 basis points, thereafter. The Colonial Bank loans are cross-defaulted. As of the date of this prospectus, we have made no borrowings under the Colonial Bank loans. Any other indebtedness we incur will likely be subject to continuing covenants, and we will likely be required to make continuing representations and warranties in connection with that debt. Moreover, some or all of our debt may be secured by some or all of our assets. If we default in the payment of interest or principal on any of our debt, breach any representation or warranty in connection with any borrowing or violate any covenant in any loan document, the lender may accelerate the maturity of the debt requiring us to immediately repay all outstanding principal and accrued interest. If we are unable to make the payment, our lender could foreclose on our assets that are pledged as collateral to the lender. The lender could also sue us or force us into bankruptcy. Any of these events would likely have a material adverse effect on the value of an investment in our common stock. Our real estate investments, like most commercial real estate investments, are relatively illiquid and our ability to sell one or more of our properties quickly and on favorable terms may be limited by a variety of factors beyond our control, including current market conditions, the cost and availability of debt financing, zoning and regulatory changes, and the need for capital improvements. Moreover, the length of our lease agreements, the specialized nature of our tenants' operations and the resulting design of our 52

facilities and the risk that the nature and profitability of our tenants' operations may be affected by healthcare regulations may further impact the liquidity of our facilities. DISTRIBUTION POLICY We expect to qualify as a REIT for federal income tax purposes and will elect to be taxed as a REIT commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income, excluding net capital gain, to our stockholders. It is our current intention to comply with these requirements, elect REIT status and maintain such status going forward. See "United States Federal Income Tax Considerations." On October 11, 2004 we made a distribution of $0.10 per share of common stock to stockholders of record on September 16, 2004. On January 11, 2005, we made a distribution of $0.11 per share of common stock to stockholders of record as of December 16, 2004. On March 5, 2005, we declared a distribution of $0.11 per share of common stock, payable on April 15, 2005 to stockholders of record as of March 16, 2005. The funds for these distributions were derived from our funds from operations in the third and fourth quarters of 2004 and the first quarter of 2005, respectively. Of the $0.21 per share total distributions declared by us in 2004, $0.13 per share is reportable as ordinary income by our stockholders in 2004 and $0.08 per share is reportable in 2005. However, the character of this $0.08 per share distribution, as ordinary income, capital gain, or return of capital, cannot be determined until the end of 2005. We intend to pay to our stockholders, within the time periods prescribed by the Code, all or substantially all of our annual taxable income, including taxable gains from the sale of real estate and recognized gains on the sale of securities. It is our policy to make sufficient cash distributions to stockholders in order for us to maintain our status as a REIT under the Code and to avoid corporate income and excise tax on undistributed income. INFLATION Our leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). In addition, all of our existing leases, and we intend that most of our new leases will, require the tenant to pay the operating expenses of the facility, including common area maintenance costs, real estate taxes and insurance. This may reduce our exposure to increases in costs and operating expenses resulting from inflation. However, if inflation rates exceed the contractual rental increases, our results of operations may be adversely affected, and inflation may also adversely impact our revenue from any leases that do not contain escalation provisions. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk. We may be exposed to the effects of interest rate changes primarily as a result of long-term debt used to maintain liquidity and to fund expansion of our portfolio and operations. Our interest rate risk-management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate our interest rate risk on a related financial instrument. We do not intend to enter into derivative transactions for speculative purposes. In addition to changes in interest rates, the value of our facilities will be subject to fluctuations based on changes in local and regional economic conditions and changes in the ability of our tenants to generate profits, all of which may affect our ability to refinance our debt if necessary. 53

OUR BUSINESS OUR COMPANY We are a self-advised real estate company that acquires, develops and leases healthcare facilities providing state-of-the-art healthcare services. We lease our facilities to experienced healthcare operators pursuant to long-term net-leases, which require the tenant to bear most of the costs associated with the property. From time to time, we also make loans to our tenants. We believe that the United States healthcare delivery system is becoming decentralized and is evolving away from the traditional "one stop," large-scale acute care hospital. We believe that this change is the result of a number of trends, including increasing specialization and technological innovation and the desire of both physicians and patients to utilize more convenient facilities. We also believe that demographic trends in the United States, including in particular an aging population, will result in continued growth in the demand for healthcare services, which in turn will lead to an increasing need for a greater supply of modern healthcare facilities. In response to these trends, we believe that healthcare operators increasingly prefer to conserve their capital for investment in operations and new technologies rather than investing in real estate and, therefore, increasingly prefer to lease, rather than own, their facilities. Given these trends and the size, scope and growth of this dynamic industry, we believe there are significant opportunities to acquire and develop net-leased healthcare facilities that are integral components of local healthcare delivery systems. Our strategy is to lease the facilities that we acquire or develop to experienced healthcare operators pursuant to long-term net-leases. We focus on acquiring and developing rehabilitation hospitals, long-term acute care hospitals, ambulatory surgery centers, cancer hospitals, women's and children's hospitals and regional and community hospitals, as well as other specialized single-discipline facilities and ancillary facilities. We believe that these types of facilities will capture an increasing share of expenditures for healthcare services. We believe that our strategy for acquisition and development of these types of net-leased facilities, which generally require a physician's order for patient admission, distinguish us as a unique investment alternative among REITs. Our management team has extensive experience in acquiring, owning, developing, managing and leasing healthcare facilities; managing investments in healthcare facilities; acquiring healthcare companies; and managing real estate companies. Our management team also has substantial experience in healthcare operations and administration, which includes many years of service in executive positions for hospitals and other healthcare providers, as well as in physician practice management and hospital/physician relations. Therefore, in addition to understanding investment characteristics and risk levels typically important to real estate investors, our management understands the changing healthcare delivery environment, including changes in healthcare regulations, reimbursement methods and patient demographics, as well as the technological innovations and other advances in healthcare delivery generally. We believe that this experience gives us the specialized knowledge necessary to select attractively-located net-leased facilities, underwrite our tenants, analyze facility-level operations and understand the issues and potential problems that may affect the healthcare industry generally and the tenant service area and facility in particular. We believe that our management's experience in healthcare operations and real estate management and finance will enable us to take advantage of numerous attractive opportunities to acquire, develop and lease healthcare facilities. We completed a private placement of our common stock in April 2004 in which we raised net proceeds of approximately $233.5 million. Shortly after completion of our private placement, we began to acquire our current portfolio of nine facilities, consisting of seven facilities that are in operation and two facilities that are under development. Four of the facilities that are in operation are rehabilitation hospitals, two are long-term acute care hospitals and one is a community hospital with an integrated medical office building. The facilities under development are a community hospital and an adjacent medical office building. With the proceeds of this offering, we intend to expand our portfolio of facilities by acquiring or developing additional net-leased healthcare facilities. 54

We employ leverage in our capital structure in amounts determined from time to time by our board of directors. At present, we intend to limit our debt to approximately 60% of the aggregate costs of our facilities, although we may temporarily exceed that level from time to time. We expect our borrowings to be a combination of long-term, fixed-rate, non-recourse mortgage loans, variable-rate secured term and revolving credit facilities, and other fixed and variable-rate short to medium-term loans. We borrowed $75 million from Merrill Lynch under a loan agreement which has a term of three years. We have used the loan proceeds for acquisition of our current portfolio of facilities and plan to use the loan proceeds for acquisition and development of additional facilities and other working capital needs. The loan bears interest at one month LIBOR (2.87% at March 31, 2005) plus 300 basis points. There is $74.1 million outstanding under this loan as of March 31, 2005. The loan is secured by our interests in the Vibra Facilities. The loan with Merrill Lynch includes financial covenants requiring us to meet an interest coverage ratio (ratio of our earnings before interest, taxes, depreciation and amortization to interest expense) of 2 to 1, a fixed charge coverage ratio (ratio of earnings before interest, taxes, depreciation and amortization to the sum of total debt service, assumed capital expenditures pertaining to the Vibra Facilities, income taxes and preferred dividends) greater than 1.65 to 1, a net debt to total asset valuation ratio (ratio of total net debt to the product of nine and the sum of net income, interest expense, depreciation and amortization minus management fees not exceeding 1% of net revenue and $300 per licensed bed per annum) not greater than 70%, and, for each Vibra Facility, a base rent coverage ratio (ratio of earnings of the applicable lessee of the Vibra Facility before interest, taxes, depreciation, amortization, rent and management fees to base rent payable by the lessee) equal to or greater than 1.25 to 1 and to maintain minimum tangible net worth of at least $200 million. As of the date of this prospectus, we are in compliance with all material financial covenants under our loan with Merrill Lynch. We have also entered into construction loan agreements in an aggregate amount of $43.4 million with Colonial Bank to fund construction costs for our West Houston Facilities. Each construction loan has a term of 18 months and an option on the part of the borrower to convert the loan to a 30-month term loan upon completion of construction of the West Houston Facility securing that loan. The construction loans are secured by mortgages on the West Houston Facilities, as well as assignments of rents and leases on those facilities. The terms of the construction loan agreements prevent us from allowing the net operating income of the facility used as collateral for any calendar quarter to be less than 1.25 times the principal and interest payments then due and payable under the promissory note for the designated period until the loan is paid in full. In the event that our net operating income falls below the minimum debt service requirement, we must prepay a portion of the principal balance of the promissory note so that the debt service requirement is satisfied and maintained within 10 days of our non-compliance. The construction loans bear interest at the three month LIBOR (3.12% at March 31, 2005) plus 225 basis points during the construction period and three month LIBOR plus 250 basis points thereafter. The Colonial Bank loans are cross-defaulted. As of the date of this prospectus, we have made no borrowings under the Colonial Bank loans. We expect to qualify as a REIT for federal income tax purposes and will elect to be taxed as a REIT under the federal income tax laws commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. MARKET OPPORTUNITY According to the United States Department of Commerce, Bureau of Economic Analysis, healthcare is one of the largest industries in the United States, and was responsible for approximately 15.3% of United States gross domestic product in 2003. Healthcare spending has consistently grown at rates greater than overall spending growth and inflation. As the chart below reflects, healthcare expenditures are projected to increase by more than 7% in 2004 and 2005 to $1.8 trillion and $1.9 trillion, respectively, and are expected to reach $3.1 trillion by 2012. 55

(GRAPH) We believe that the fundamental reasons for this growth in the demand for healthcare services include the aging and growth of the United States population, the advances in medical technology and treatments, and the increase in life expectancy. As illustrated by the chart below, the projected compound annual growth rate (or CAGR), from 2000 to 2030 of the population of senior citizens is three times the rate projected for the total United States population. This demographic trend is projected to result in an increase in the percentage of United States citizens who are age 65 or older from 12.4% in 2000 to 19.6% in 2030. (GRAPH) Source: United States Bureau of the Census 56

To satisfy this growing demand for healthcare services, there is a significant amount of new construction of healthcare facilities. In 2003 alone, $24.5 billion was spent on the construction of healthcare facilities, according to CMS. This represented more than a 9% increase over the $22.4 billion in healthcare construction spending for 2002. The following chart reflects the growth and expected growth in healthcare construction expenditures over the period that began in 1990 and ends in 2012: (GRAPH) We believe that the United States healthcare delivery system is evolving away from reliance on the traditional "one-stop," large-scale acute care hospital to one that relies on specialty hospitals and healthcare facilities that focus on single disciplines. We believe that there will be an increasing demand for more accessible, specialized and technologically-advanced healthcare delivery services as the population grows and ages. We own and have targeted for acquisition and development net-leased healthcare facilities providing state-of-the-art healthcare services because we believe these types of facilities represent the future of healthcare delivery. We believe that United States healthcare operators are in the early stages of a long-term evolution from a model that favors ownership of healthcare facilities to one that favors long-term net leasing of these facilities. We see two primary reasons for this: - First, in our experience, financial arrangements such as bond financing gave non-profit healthcare providers access to inexpensive capital, usually at 100% of the building cost. However, budget constraints on local governments and tighter underwriting standards have greatly reduced the availability of this very inexpensive capital. - Second, in our experience, healthcare providers were reimbursed on cost-based reimbursement plans (calculated in part by reference to a provider's total cost in plant and equipment) which provided no incentive for healthcare providers to make efficient use of their capital. With the evolution of the prospective payment reimbursement system, which reimburses healthcare providers for specific procedures or diagnoses and thus rewards the most efficient providers, healthcare providers are no longer assured of returns on investments in non-revenue producing assets such as the real estate where they operate. Accordingly, in recent years, healthcare providers have begun to convert their owned facilities to long-term lease arrangements thereby accessing substantial amounts of previously unproductive capital to invest in high margin operations and assets. In summary, the following market trends have shaped our investment strategy: - Decentralization: We believe that healthcare services are increasingly delivered through smaller, more accessible facilities that are designed for specific treatments and medical conditions and that are located near physicians and their patients. Based upon our experience, more healthcare services are delivered in specialized facilities than in acute care hospitals. 57

- Specialization: In our experience, the percentage of physicians and other healthcare professionals who practice in a recognized specialty or subspecialty has been increasing for many years. We believe that this creates opportunities for development of additional specialized healthcare facilities as advances in technologies and recognition of new practice specialties result in new treatments for difficult medical conditions. - Convenient Patient Care: We believe that healthcare service providers are increasingly seeking to provide specific services in a single location for the convenience of both patients and physicians. These single-discipline centers are primarily located in suburban areas, near patients and physicians, as opposed to the traditional urban hospital setting. - Aging Population: We believe that demographic trends in the United States, including in particular an aging population, will result in continued growth in the demand for healthcare services, which in turn will lead to an increasing need for a greater supply of modern healthcare facilities. - Use of Capital: We believe that healthcare operators increasingly prefer to conserve their capital for investment in their operations and for new technologies rather than investing it in real estate. OUR TARGET FACILITIES The market for healthcare real estate is extensive and includes real estate owned by a variety of healthcare operators. We focus on acquiring and developing those net-leased facilities that are specifically designed to reflect the latest trends in healthcare delivery methods. These facilities include: - Rehabilitation Hospitals: Rehabilitation hospitals provide inpatient and outpatient rehabilitation services for patients recovering from multiple traumatic injuries, organ transplants, amputations, cardiovascular surgery, strokes, and complex neurological, orthopedic, and other conditions. These hospitals are often the best medical alternative to traditional acute care hospitals where under the Medicare prospective payment system there is pressure to discharge patients after relatively short stays. - Long-term Acute Care Hospitals: Long-term acute care hospitals focus on extended hospital care, generally at least 25 days, for the medically-complex patient. Long-term acute care hospitals have arisen from a need to provide care to patients in acute care settings, including daily physician observation and treatment, before they are able to move to a rehabilitation hospital or return home. These facilities are reimbursed in a manner more appropriate for a longer length of stay than is typical for an acute care hospital. - Regional and Community Hospitals: We define regional and community hospitals as general medical/surgical hospitals whose practicing physicians generally serve a market specific area, whether urban, suburban or rural. We intend to limit our ownership of these facilities to those with market, ownership, competitive and technological characteristics that provide barriers to entry for potential competitors. - Women's and Children's Hospitals: These hospitals serve the specialized areas of obstetrics and gynecology, other women's healthcare needs, neonatology and pediatrics. We anticipate substantial development of facilities designed to meet the needs of women and children and their physicians as a result of the decentralization and specialization trends described above. - Ambulatory Surgery Centers: Ambulatory surgery centers are freestanding facilities designed to allow patients to have outpatient surgery, spend a short time recovering at the center, then return home to complete their recovery. Ambulatory surgery centers offer a lower cost alternative to general hospitals for many surgical procedures in an environment that is more convenient for both patients and physicians. Outpatient procedures commonly performed include those related to gastrointestinal, general surgery, plastic surgery, ear, nose and throat/audiology, as well as orthopedics and sports medicine. 58

- Other Single-Discipline Facilities: The decentralization and specialization trends in the healthcare industry are also creating demands and opportunities for physicians to practice in hospital facilities in which the design, layout and medical equipment are specifically developed, and healthcare professional staff are educated, for medical specialties. These facilities include heart hospitals, ophthalmology centers, orthopedic hospitals and cancer centers. - Medical Office Buildings: Medical office buildings are office and clinic facilities occupied and used by physicians and other healthcare providers in the provision of outpatient healthcare services to their patients. The medical office buildings that we target are or will be master-leased and generally adjacent to our other targeted healthcare facilities. UNDERWRITING PROCESS Our real estate and loan underwriting process focuses on healthcare operations and real estate investment. This process is described in a written policy that requires, among other things, completion of specific elements of due diligence at the appropriate stages, including appraisals, engineering evaluations and environmental assessments, all provided by qualified and independent third parties. Our chief operating officer is presently responsible for the acquisition and due diligence process and reports to our chief executive officer. Approximately five employees report directly to our chief operating officer with respect to acquisitions and due diligence. Our acquisition and development selection process includes a comprehensive analysis of the targeted healthcare facility's profitability, financial trends in revenues and expenses, barriers to competition, the need in the market for the type of healthcare services provided by the facility, the strength of the location and the underlying value of the facility, as well as the financial strength and experience of the prospective tenant. We also analyze the operating history of the specific facility, including the facility's earnings, cash flow, occupancy and patient and payor mix, in order to evaluate its financial and operating strength. When we identify an attractive acquisition or development opportunity based on historical operations and market conditions, we determine the financial value of a potential long-term net-lease arrangement based on our target long-term net-lease capitalization rates, which currently range from 9.5% to 11%, and fixed charge coverage ratios. We compare that financial value to the replacement costs that we estimate by consulting with major healthcare construction contractors, engaging construction engineers or facility assessment consultants as appropriate, and reviewing recent cost studies. In addition, our due diligence process includes obtaining and evaluating title, environmental and other customary third-party reports. Our current policy requires the approval of the investment committee of our board of directors for acquisitions or developments of facilities that exceed $10.0 million. We seek to build tenant relationships with experienced healthcare operators that we believe are positioned to prosper in the changing healthcare environment. We seek tenant relationships with operators who, based on our financial and operating analyses, have demonstrated the ability to manage in good and bad economic conditions. In certain cases, we lend funds to prospective tenants to assist them with their acquisition of the operations at the facilities that we intend to acquire and lease to them and for initial working capital needs. See "Our Portfolio -- Our Current Portfolio of Facilities." In these instances, where feasible and in compliance with applicable healthcare laws and regulations, we seek to obtain percentage rents based on the prospective tenant's revenues in addition to our base rent. Through our detailed underwriting of healthcare operations and real estate, we expect to deliver attractive risk-adjusted returns to our stockholders. ASSET MANAGEMENT We actively monitor our facilities, including reviewing periodic financial reporting and operating data, as well as visiting each facility and meeting with the management of our tenants on a regular basis. Integral to our asset management philosophy is our desire to build long-term relationships with the tenants and, accordingly, we have developed a partnering approach which we believe results in the tenant viewing us as a member of its team. We understand that in order to maximize the value of our investments, our 59

tenants must prosper. Therefore, we expect to work closely with our tenants throughout the terms of our leases in order to foster a long-term working relationship and to maximize the possibility of new business opportunities. For example, we and our prospective tenants typically conduct due diligence in a coordinated manner and share with each other the results of our respective due diligence investigations. During the lease term, we conduct joint evaluations of local facility operations and participate in discussions about strategic plans that may ultimately require our approval pursuant to the terms of our lease agreements. Our chief executive officer, chief financial officer and chief operating officer also communicate frequently with their counterparts at our tenants in order to maintain knowledge about changing regulatory and business conditions. We believe this knowledge equips us to anticipate changes in our tenants' operations in sufficient time to strategically and financially plan for, rather than react to, changing conditions. In addition to our ongoing analyses of our tenants' operations, our management team actively monitors and researches each healthcare segment in which we own and lease facilities in order to help us recognize changing economic, market and regulatory conditions. Our senior management is not only involved in the underwriting of each asset upon acquisition or development, but is also involved in the asset management process during the entire period in which we own the facility. OUR FORMATION TRANSACTIONS The following is a summary of our formation transactions: - We were formed as a Maryland corporation on August 27, 2003 to succeed to the business of Medical Properties Trust, LLC, a Delaware limited liability company, which was formed by certain of our founders in December 2002. In connection with our formation, we issued our founders 1,630,435 shares of our common stock in exchange for nominal cash consideration, the membership interests of Medical Properties Trust, LLC were transferred to us and Medical Properties Trust, LLC became our wholly-owned subsidiary. Upon its formation in September 2003, our operating partnership assumed certain obligations of Medical Properties Trust, LLC. Upon completion of our private placement in April 2004, 1,108,527 shares of the 1,630,435 shares of common stock held by our founders were redeemed and they now collectively hold 557,908 shares of our common stock, including shares purchased in our April 2004 private placement. Our founders agreed to the redemption of a portion of their shares of our common stock for nominal consideration primarily in order to facilitate the completion of our April 2004 private placement. - Our operating partnership, MPT Operating Partnership, L.P., was formed in September 2003. Through our wholly-owned subsidiary, Medical Properties Trust, LLC, we are the sole general partner of our operating partnership. We currently own all of the limited partnership interests in our operating partnership. - MPT Development Services, Inc., a Delaware corporation that we formed in January 2004, operates as our taxable REIT subsidiary. - In April 2004 we completed a private placement of 25,300,000 shares of common stock at an offering price of $10.00 per share. Friedman, Billings, Ramsey & Co., Inc. acted as the initial purchaser and sole placement agent. The total net proceeds to us, after deducting fees and expenses of the offering, were approximately $233.5 million, and, together with borrowed funds, have been or will be used to acquire our current portfolio of nine facilities, consisting of seven facilities that are in operation and two that are under development, repay debt, pay pre-offering operating expenses and for working capital. Thus far we have utilized approximately $155.4 million to acquire our seven existing facilities, have loaned $47.6 million to Vibra to acquire the operations at the Vibra Facilities and for working capital purposes, $6.2 million of which has been repaid, and have funded $29.4 million of a projected total of $63.1 million of development costs for the West Houston Facilities. There are approximately 295 holders of our common stock as of the date of this prospectus. 60

Edward K. Aldag, Jr., William G. McKenzie, Emmett E. McLean, R. Steven Hamner and James P. Bennett may be considered our founders. Mr. Aldag is serving as chairman of our board of directors and as our president and chief executive officer. Mr. McKenzie is serving as our vice chairman of the board. Mr. McLean is serving as our executive vice president, chief operating officer, treasurer and assistant secretary. Mr. Hamner is serving as our executive vice president and chief financial officer. Mr. Bennett formerly was an owner, officer, director of and consultant to the company's predecessor, Medical Properties Trust, LLC, but has not been affiliated with us since August 2003. OUR OPERATING PARTNERSHIP We own our facilities and conduct substantially all of our business through our operating partnership, MPT Operating Partnership, L.P., and its subsidiaries. MPT Operating Partnership, L.P. is a Delaware limited partnership organized by us in September 2003. Our wholly-owned limited liability company, Medical Properties Trust, LLC, serves as the sole general partner of, and holds a 1% interest in, our operating partnership. We also currently own all of the limited partnership interests in our operating partnership, constituting a 99% partnership interest, but may issue limited partnership units from time to time in connection with facility acquisitions and developments. Where permitted by applicable law, we intend to sell equity interests in subsidiaries of our operating partnership in connection with the acquisition and development of facilities. Holders of limited partnership units of our operating partnership, other than us, would be entitled to redeem their partnership units for shares of our common stock on a one-for-one basis, subject to adjustments for stock splits, dividends, recapitalizations and similar events. At our option, in lieu of issuing shares of common stock upon redemption of limited partnership units, we may redeem the partnership units tendered for cash in an amount equal to the then-current value of the shares of common stock. Holders of limited partnership units would be entitled to receive distributions equivalent to the dividends we pay to holders of our shares of common stock. As the sole owner of the general partner of our operating partnership, we have the power to manage and conduct our operating partnership's business, subject to the limitations described in the first amended and restated agreement of limited partnership of our operating partnership. See "Partnership Agreement." MPT Operating Partnership, L.P. is a limited partner of MPT West Houston MOB, L.P. and MPT West Houston Hospital, L.P., which respectively own the Houston medical office building and the Houston community hospital in our portfolio which are under development. MPT West Houston MOB, LLC and MPT West Houston Hospital, LLC, our wholly-owned subsidiaries, are the respective general partners of these entities. We are offering up to 40% of the limited partnership interests in MPT West Houston MOB, L.P. to physicians. Stealth, L.P., the tenant of the Houston community hospital under development and an entity majority-owned by physicians, owns a 6% limited partnership interest in MPT West Houston Hospital, L.P. In general, the management and control of the limited partnerships or limited liability companies that own our properties, such as MPT West Houston MOB, L.P. and MPT West Houston Hospital, L.P., rests with our operating partnership or its subsidiaries. The limited partners or other minority owners in these entities will not participate in the management or control of the business of the partnership or other entity. Although the partnership agreements or limited liability company agreements for future limited partnerships or limited liability companies may vary, our current limited partnership agreements require approval of the limited partners holding a majority of the units in the partnership other than the general partner and its affiliates to: - amend the partnership agreement in a manner that would: - adversely affect the financial or other rights of the limited partners who are not affiliates of the general partner or positively affect the financial rights or other rights of the general partner or reduce the general partner's obligations and responsibilities under the limited partnership agreement; 61

- impose on the limited partners who are not affiliates of the general partner any obligation to make additional capital contributions to the partnership; - adversely affect the rights of certain limited partners without similarly affecting the rights of other limited partners; - merge, consolidate or combine with another entity; or - determine the terms and the amount of consideration payable for any issuances of additional partnership units to our operating partnership, the general partner or any of their respective affiliates. In general, each partner or other equity owner will share in the partnership's profits, losses and available cash flow pro rata based upon his percentage interest in the partnership. We may hold properties we develop or acquire in the future through structures similar to the structure through which we hold the Houston facilities in our portfolio. MPT DEVELOPMENT SERVICES, INC. MPT Development Services, Inc., our taxable REIT subsidiary, was incorporated in January 2004 as a Delaware corporation. MPT Development Services, Inc. is authorized to provide third-party facility planning, project management, medical equipment planning and implementation services, medical office building management services, lending services, including but not limited to acquisition and working capital loans to our tenants, and other services that neither we nor our operating partnership can undertake directly under applicable REIT tax rules. Overall, no more than 20% of the value of our assets may consist of securities of one or more taxable REIT subsidiaries, and no more than 25% of the value of our assets may consist of securities that are not qualifying assets under the test requiring that 75% of a REIT's assets consist of real estate and other related assets. Further, a taxable REIT subsidiary may not directly or indirectly operate or manage a healthcare facility. For purposes of this definition a "healthcare facility" means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a service provider that is eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to the facility. MPT Development Services, Inc. will pay federal, state and local income taxes at regular corporate rates on its taxable income. MPT Development Services, Inc. has made, and from time to time may make, loans to tenants or prospective tenants to assist them with the acquisition of the operations at facilities leased or to be leased to them and for initial working capital needs. There are currently approximately $41.4 million in such loans outstanding. See "Our Portfolio -- Our Current Portfolio of Facilities." DEPRECIATION Generally, the federal tax basis for our facilities used to determine depreciation for federal income tax purposes will be our acquisition costs for such facilities. To the extent facilities are acquired with units of our operating partnership or its subsidiaries, we will acquire a carryover basis in the facilities. For federal income tax purposes, depreciation with respect to the real property components of our facilities, other than land, generally will be computed using the straight-line method over a useful life of 40 years, for a depreciation rate of 2.50% per year. OUR LEASES The leases for our facilities are "net" leases with terms requiring the tenant to pay all ongoing operating and maintenance expenses of the facility, including property, casualty, general liability and other insurance coverages, utilities and other charges incurred in the operation of the facilities, as well as real estate taxes, ground lease rent and the costs of capital expenditures, repairs and maintenance. Our leases also provide that our tenants will indemnify us for environmental liabilities. Our current leases range from 11 to 16 years and provide for annual rent escalation and, in the case of the Vibra Facilities, percentage 62

rent. Our leases require periodic reports and financial statements from our tenants. In addition, our leases contain customary default, termination, and subletting and assignment provisions. See "Our Portfolio -- Our Current Portfolio of Facilities." We anticipate that our future leases will have similar terms, including percentage rent where feasible and in compliance with applicable healthcare laws and regulations. ENVIRONMENTAL MATTERS Under various federal, state and local environmental laws and regulations, a current or previous owner, operator or tenant of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases or threats of releases at such property and may be held liable to a government entity or to third parties for property damage and for investigation, clean-up and monitoring costs incurred by such parties in connection with the actual or threatened contamination, including substances currently unknown, that may have been released on the real estate. These laws may impose clean-up responsibility and liability without regard to fault, or whether or not the owner, operator or tenant knew of or caused the presence of the contamination. The liability under these laws may be joint and several for the full amount of the investigation, clean-up and monitoring costs incurred or to be incurred or actions to be undertaken, although a party held jointly and severally liable might be able to obtain contributions from other identified, solvent, responsible parties of their fair share toward these costs. Investigation, clean-up and monitoring costs may be substantial and can exceed the value of the property. The presence of contamination, or the failure to properly remediate contamination, on a property may adversely affect the ability of the owner, operator or tenant to sell or rent that property or to borrow funds using such property as collateral and may adversely impact our investment in that property. In addition, if hazardous substances are located on or released from our properties, we could incur substantial liabilities through a private party personal injury claim, a property damage claim by an adjacent property owner, or claims by a governmental entity or others for other damages, such as natural resource damages. This liability may be imposed under environmental laws or common-law principles. Federal regulations require building owners and those exercising control over a building's management to identify and warn, via signs and labels, of potential hazards posed by workplace exposure to installed asbestos-containing materials and potentially asbestos-containing materials in their building. The regulations also set forth employee training, record keeping and due diligence requirements pertaining to asbestos-containing materials and potentially asbestos-containing materials. Government entities can assess significant fines for violation of these regulations. Building owners and those exercising control over a building's management may be subject to an increased risk of personal injury lawsuits by workers and others exposed to asbestos-containing materials and potentially asbestos-containing materials as a result of these regulations. The regulations may affect the value of a building containing asbestos-containing materials and potentially asbestos-containing materials in which we have invested. Federal, state and local laws and regulations also govern the removal, encapsulation, disturbance, handling and disposal of asbestos-containing materials and potentially asbestos-containing materials when such materials are in poor condition or in the event of construction, remodeling, renovation or demolition of a building. Such laws and regulations may impose liability for improper handling or a release to the environment of asbestos-containing materials and potentially asbestos-containing materials and may provide for fines to, and for third parties to seek recovery from, owners or operators of real property for personal injury or improper work exposure associated with asbestos-containing materials and potentially asbestos-containing materials. Prior to closing any facility acquisition, we obtain Phase I environmental assessments in order to attempt to identify potential environmental concerns at the facilities. These assessments will be carried out in accordance with an appropriate level of due diligence and will generally include a physical site inspection, a review of relevant federal, state and local environmental and health agency database records, one or more interviews with appropriate site-related personnel, review of the property's chain of title and review of historic aerial photographs and other information on past uses of the property. We may also conduct limited subsurface investigations and test for substances of concern where the results of the Phase I environmental assessments or other information indicates possible contamination or where our consultants recommend such procedures. 63

While we may purchase many of our facilities on an "as is" basis, we intend for all of our purchase contracts to contain an environmental contingency clause, which permits us to reject a facility because of any environmental hazard at the facility. COMPETITION We compete in acquiring and developing facilities with financial institutions, institutional pension funds, real estate developers, other REITs, other public and private real estate companies and private real estate investors. Among the factors adversely affecting our ability to compete are the following: - we may have less knowledge than our competitors of certain markets in which we seek to purchase or develop facilities; - many of our competitors have greater financial and operational resources than we have; and - our competitors or other entities may determine to pursue a strategy similar to ours. To the extent that we experience vacancies in our facilities, we will also face competition in leasing those facilities to prospective tenants. The actual competition for tenants varies depending on the characteristics of each local market. Virtually all of our facilities operate in a competitive environment, and patients and referral sources, including physicians, may change their preferences for a healthcare facilities from time to time. HEALTHCARE REGULATORY MATTERS The following discussion describes certain material federal healthcare laws and regulations that may affect our operations and those of our tenants. However, the discussion does not address state healthcare laws and regulations, except as otherwise indicated. These state laws and regulations, like the federal healthcare laws and regulations, could affect our operations and those of our tenants. Moreover, the discussion relating to reimbursement for healthcare services addresses matters that are subject to frequent review and revision by Congress and the agencies responsible for administering federal payment programs. Consequently, predicting future reimbursement trends or changes is inherently difficult. Ownership and operation of hospitals and other healthcare facilities are subject, directly and indirectly, to substantial federal, state and local government healthcare laws and regulations. Our tenants' failure to comply with these laws and regulations could adversely affect their ability to meet their lease obligations. Physician investment in us or in our facilities also will be subject to such laws and regulations. We intend for all of our business activities and operations to conform in all material respects with all applicable laws and regulations. Anti-Kickback Statute. 42 U.S.C. sec.1320a-7b(b), or the Anti-Kickback Statute, prohibits, among other things, the offer, payment, solicitation or acceptance of remuneration directly or indirectly in return for referring an individual to a provider of services for which payment may be made in whole or in part under a federal healthcare program, including the Medicare or Medicaid programs. Violation of the Anti-Kickback Statute is a crime and is punishable by criminal fines of up to $25,000 per violation, five years imprisonment or both. Violations may also result in civil sanctions, including civil penalties of up to $50,000 per violation, exclusion from participation in federal healthcare programs, including Medicare and Medicaid, and additional monetary penalties in amounts treble to the underlying remuneration. The Anti-Kickback Statute defines the term "remuneration" very broadly and, accordingly, local physician investment in our facilities could trigger scrutiny of our lease arrangements under the Anti-Kickback Statute. In addition to certain statutory exceptions, the Office of Inspector General of the Department of Health and Human Services, or OIG, has issued "Safe Harbor Regulations" that describe practices that will not be considered violations of the Anti-Kickback Statute. These include a safe harbor for space rental arrangements which protects payments made by a tenant to a landlord under a lease arrangement meeting certain conditions. We intend to use our commercially reasonable efforts to structure lease arrangements involving facilities in which local physicians are investors and tenants so as to satisfy, 64

or meet as closely as possible, the conditions for the safe harbor for space rental. There is no assurance, however, that we will meet all the conditions for the safe harbor, and it may be unlikely that we will meet all conditions, particularly in those instances in which percentage rent is contemplated and we have physician investors. In addition, federal regulations require that our tenants with purchase options pay fair market value purchase prices for facilities in which we have physician investment. We intend our lease agreement purchase option prices to be fair market value; however, we cannot assure you that all of our purchase options will be fair market value. Any purchase not at fair market value may present risks of challenge from enforcement authorities. The fact that a particular arrangement does not fall within a statutory exception or safe harbor does not mean that the arrangement violates the Anti-Kickback Statute. The statutory exception and Safe Harbor Regulations simply provide a guaranty that qualifying arrangements will not be prosecuted under the Anti-Kickback Statute. The implication of the Anti-Kickback Statute could limit our ability to include local physicians as investors or tenants or restrict the types of leases into which we may enter if we wish to include such physicians as investors having direct or indirect ownership interests in our facilities. Federal Physician Self-Referral Statute. Any physicians investing in our company or its subsidiary entities could also be subject to the Ethics in Patient Referrals Act of 1989, or the Stark Law (codified at 42 U.S.C. sec. 1395nn). Unless subject to an exception, the Stark Law prohibits a physician from making a referral to an "entity" furnishing "designated health services" paid by Medicare or Medicaid if the physician or a member of his immediate family has a "financial relationship" with that entity. A reciprocal prohibition bars the entity from billing Medicare or Medicaid for any services furnished pursuant to a prohibited referral. Financial relationships are defined very broadly to include relationships between a physician and an entity in which the physician or the physician's family member has (i) a direct or indirect ownership or investment interest that exists in the entity through equity, debt or other means and includes an interest in an entity that holds a direct or indirect ownership or investment interest in any entity providing designated health services; or (ii) a direct or indirect compensation arrangement with the entity. The Stark Law as originally enacted in 1989 only applied to referrals for clinical laboratory tests reimbursable by Medicare. However, the law was amended in 1993 and 1994 and, effective January 1, 1995, became applicable to referrals for an expanded list of designated health services reimbursable under Medicare or Medicaid. The Stark Law specifies a number of substantial sanctions that may be imposed upon violators. Payment is to be denied for Medicare claims related to designated health services referred in violation of the Stark Law. Further, any amounts collected from individual patients or third-party payors for such designated health services must be refunded on a timely basis. A person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is also subject to civil monetary penalties of up to $15,000 per claim, civil money penalties of up to $100,000 per arrangement and possibly even exclusion from participation in the Medicare and Medicaid programs. Final regulations applicable only to physician referrals for clinical laboratory services were published in August 1995. A proposed rule applicable to physician referrals for all designated health services was published in January 1998. In January 2001, CMS published the "Phase I" final rule, which finalized a significant portion of the 1998 proposed rule. On March 26, 2004, CMS issued the second phase of its final regulations addressing physician referrals to entities with which they have a financial relationship (the "Phase II" rule). The Phase II rule addresses and interprets a number of exceptions for ownership and compensation arrangements involving physicians, including the exceptions for space and equipment rentals and the exception for indirect compensation arrangements. The Phase II rule also includes exceptions for physician ownership and investment, including physician ownership of rural providers and hospitals. The new regulation revises the hospital ownership exception to reflect the 18-month moratorium that began December 8, 2003 on physician ownership of specialty hospitals, which was enacted in Section 507 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The Phase II rule became effective on July 26, 2004. 65

In those cases where physicians invest in us or our facilities, we intend to fashion our lease arrangements with healthcare providers to meet the applicable indirect compensation exceptions under the Stark Law, however, no assurance can be given that our leases will satisfy these Stark Law exception requirements. Unlike the Anti-kickback Statute Safe Harbor Regulations, a financial arrangement which implicates the Stark Law must meet the requirements of an applicable exception to avoid a violation of the Stark Law. This may lead to obstacles in permitting local physicians to invest in our facilities or restrict the types of lease arrangements we may enter into if we wish to include such physicians as investors. State Self-Referral Laws. In addition to the Anti-Kickback Statute and the Stark Law, state physician self-referral laws could limit physician investment in our company or restrict the types of leases we may enter into if such physician investment is permitted. Recent Regulatory and Legislative Developments. On August 1, 2003, CMS published the fiscal year 2004 Final Rule for inpatient rehabilitation facilities, or IRFs. Under the Final Rule, all IRFs have received an increase in their prospective payment system rate for fiscal year 2004 due to an across the board 3.2% IRF market basket increase. On July 30, 2004, CMS published the fiscal year 2005 Final Rule which updated the prospective payment rates for IRFs for fiscal year 2005. In updating the fiscal year 2005 payment rates, CMS applied an increase factor to the fiscal year 2004 IRF prospective payment system rates that is equal to the IRF market basket. According to CMS, the projected fiscal year 2005 IRF market basket increase factor is 3.1%. Additionally, the Final Rule calculates the labor-related share for fiscal year 2005. These increases benefit those tenants of ours who operate IRFs. On May 7, 2004, CMS issued a Final Rule to revise the classification criterion, commonly known as the "75 percent rule," used to classify a hospital or hospital unit as an IRF. The compliance threshold is used to distinguish an IRF from an acute care hospital for purposes of payment under the Medicare IRF prospective payment system. The Final Rule implements a three-year period to analyze claims and patient assessment data to determine whether CMS will continue to use a compliance threshold that is lower than 75% or not. For cost reporting periods beginning on or after July 1, 2004, and before July 1, 2005, the compliance threshold will be 50% of the IRF's total patient population. The compliance threshold will increase to 60% of the IRF's total patient population for cost reporting periods beginning on or after July 1, 2005 and before July 1, 2006, to 65% for cost reporting periods beginning on or after July 1, 2006 and before July 1, 2007, and to 75% for cost reporting periods after July 1, 2007. On December 8, 2003, President Bush signed into law the Medicare Prescription Drug and Modernization Act of 2003, or the Act, which contains sweeping changes to the federal health insurance program for the elderly and disabled. The Act includes provisions affecting program payment for inpatient and outpatient hospital services. In total, the Congressional Budget Office estimates that hospitals will receive $24.8 billion over ten years in additional funding due to the Act. Rural hospitals, which may include regional or community hospitals, one of our targeted types of facilities, will benefit most from the reimbursement changes in the Act. Some examples of these reimbursement changes include (i) providing that payment for all hospitals, regardless of geographic location, will be based on the same, higher standardized amount which was previously available only for hospitals located in large urban areas, (ii) reducing the labor share of the standardized amount from 71% to 62% for hospitals with an applicable wage index of less than 1.0, (iii) giving hospitals the ability to seek a higher wage index based on the number of hospital employees who take employment out of the county in which the hospital is located with an employer in a neighboring county with a higher wage index, and (iv) improving critical access hospital program conditions of participation requirements and reimbursement. Medicare disproportionate share hospital, or DSH, payment adjustments for hospitals that are not large urban or large rural hospitals will be calculated using the DSH formula for large urban hospitals, up to a 12% cap in 2004 for all hospitals other than rural referral centers, which are not subject to the cap. The Act provides that sole community hospitals, as defined in 42 U.S.C. sec. 1395 ww(d)(5)(D)(iii), located in rural areas, rural hospitals with 100 or fewer beds, and certain cancer and children's hospitals shall receive Transitional Outpatient Payments, or TOPs, such that these facilities 66

will be paid as much under the Medicare outpatient prospective payment system, or OPPS, as they were paid prior to implementation of OPPS. As of January 1, 2004 all TOPs for community mental health centers and all other hospitals were otherwise discontinued. The "hold harmless" TOPs provided for under the Act will continue for qualifying rural hospitals for services furnished through December 31, 2005 and for sole community hospitals for cost reporting periods beginning on or after January 1, 2004 and ending on December 31, 2005. Hold harmless TOPs payments continue permanently for cancer and children's hospitals. The Act also requires CMS to provide supplemental payments to acute care hospitals that are located more than 25 road miles from another acute care hospital and have low inpatient volumes, defined to include fewer than 800 discharges per fiscal year, effective on or after October 1, 2004. Total supplemental payments may not exceed 25 percent of the otherwise applicable prospective payment rate. Finally, the Act assures inpatient hospitals that submit certain quality measure data a full inflation update equal to the hospital market basket percentage increase for fiscal years 2005 through 2007. The market basket percentage increase refers to the anticipated rate of inflation for goods and services used by hospitals in providing services to Medicare patients. For fiscal year 2005, the market basket percentage increase for hospitals paid under the inpatient prospective payment system is 3.3 percent. For those inpatient hospitals that do not submit such quality data, the Act provides for an update of market basket minus 0.4 percentage points. The Act also imposes an 18 month moratorium limiting the availability of the "whole hospital exception," or Whole Hospital Exception, under the Stark Law for specialty hospitals. The moratorium began upon enactment of the Act and will continue until June 8, 2005. Prior to the moratorium's expiration, Congress will reevaluate this provision to determine whether it should sunset, be extended or be made permanent. On January 12, 2005, as part of its mandated report on specialty hospitals, the Medicare Payment Advisory Committee, or MedPAC, recommended that Congress extend the 18 month moratorium for an additional period until January 1, 2007. Under the Whole Hospital Exception, the Stark Law currently permits a physician to refer a Medicare or Medicaid patient to a hospital in which the physician has an ownership or investment interest so long as the physician maintains staff privileges at the hospital and the physician's ownership or investment interest is in the hospital as a whole, rather than a subdivision of the facility. Specialty hospitals are defined to mean a hospital subject to the inpatient prospective payment system that is located outside of Puerto Rico, which was neither in operation nor under development as of November 18, 2003, and is primarily or exclusively engaged in treating patients with cardiac or orthopedic conditions, undergoing surgery or receiving any other specialized category of services that the Secretary designates. If a specialty hospital that was in operation or under development as of November 18, 2003 increases the number of physician investors, adds certain new clinical services, augments its bed capacity or violates other requirements to be designated by the Secretary it will become subject to the moratorium. The Act also prohibits physicians from investing in rural specialty hospitals from invoking the alternative Stark Law exception for physician ownership in rural providers. Any acquisition or development of specialty hospitals must comply with the current application and interpretation of the Stark Law. CMS may clarify or modify its definition of specialty hospital, which may result in physicians who own interests in our tenants being forced to divest their ownership. Although the specialty hospital moratorium limits physician ownership or investment in "specialty hospitals" as defined by CMS, it does not limit a physician's ability to hold an ownership or investment interest in facilities which may be leased to hospital operators or other healthcare providers, assuming the lease arrangement conforms to the requirements of an applicable exception under the Stark Law. We intend to structure all of our leases, including leases containing percentage rent arrangements, to comply with applicable exceptions under the Stark Law and to comply with the Anti-kickback Statute. We believe that strong arguments can be made that percentage rent arrangements, when structured properly, should be permissible under the Stark Law and the Anti-kickback law; however, these laws are subject to continued regulatory interpretation and there can be no assurance that such arrangements will continue to be 67

permissible. Accordingly, although we do not currently have any percentage rent arrangements where physicians own an interest in our facilities, we may be prohibited from entering into percentage rent arrangements in the future where physicians own an interest in our facilities. In the event we enter into such arrangements at some point in the future and later find the arrangements no longer comply with the Stark Law or Anti-Kickback Statute, we or our tenants may be subject to penalties under the statutes. The California Department of Health Services recently adopted regulations, codified as Sections 70217, 70225 and 70455 of Title 22 of the California Code of Regulations, or CCR, which establish minimum, specific, numerical licensed nurse-to-patient ratios for specified units of general acute care hospitals. These regulations are effective January 1, 2004. The minimum staffing ratios set forth in 22 CCR 70217(a) co-exist with existing regulations requiring that hospitals have a patient classification system in place. 22 CCR, 70053.2 and 70217. The licensed nurse-to-patient ratios constitute the minimum number of registered nurses, licensed vocational nurses, and, in the case of psychiatric units, licensed psychiatric technicians, who shall be assigned to direct patient care and represent the maximum number of patients that can be assigned to one licensed nurse at any one time. Over the past several years many hospitals have, in response to managed care reimbursement contracts, cut costs by reducing their licensed nursing staff. The California Legislature responded to this trend by requiring a minimum number of licensed nurses at the bedside. Due to this new regulatory requirement, any acute care facilities we target for acquisition or development in California may be required to increase their licensed nursing staff or decrease their admittance rates as a result. On May 7, 2004, CMS issued a final rule to update the annual payment rates for the Medicare prospective payment system for services provided by long term care hospitals. The rule increases the Medicare payment rate for long-term care hospitals by 3.1% starting July 1, 2004. Medicare expects aggregate payment to these hospitals to increase to $2.96 billion during the 2005 long-term care hospital rate year. Long-term care hospitals, one of the types of facilities we are targeting, are defined generally as hospitals that have an average Medicare inpatient length of stay greater than 25 days. CMS issued a proposed rule on February 3, 2005 which contains the proposed annual payment rate updates under the prospective payment system for long-term care hospitals. The proposed rule contains the 2006 long-term care hospital prospective payment system rate for the year July 1, 2005 through June 30, 2006. According to CMS, the proposed standard federal rate for the 2006 long-term care hospital prospective payment system rate year would increase 3.1% compared to the 2005 long-term care hospital prospective payment system rate year standard federal rate due to the proposed update to the long-term care hospital prospective payment system federal rate. In addition, the proposed rule contains policy changes including the adoption of new labor market area definitions for long-term care hospitals which are based on the new Core-Based Statistical Areas announced by the OMB late in 2000. In addition to the extension of the specialty hospital moratorium discussed above, at its January 12, 2005 meeting, MedPAC made extensive recommendations to Congress and the Secretary of HHS including proposing revisions to DRG payments to more fully capture differences in severity of illnesses in an attempt to more equally pay for care provided at general acute care hospitals as compared to specialty hospitals. Furthermore, MedPAC made significant recommendations regarding paying healthcare providers relative to their performance and to the outcomes of the care they provided. MedPAC recommendations have historically provided strong indications regarding future directions of both the regulatory and legislative process. INSURANCE We have purchased general liability insurance (lessor's risk) that provides coverage for bodily injury and property damage to third parties resulting from our ownership of the healthcare facilities that are leased to and occupied by our tenants. Our leases with tenants also require the tenants to carry general liability, professional liability, all risks, loss of earnings and other insurance coverages and to name us as an additional insured under these policies. We expect that the policy specifications and insured limits will be appropriate given the relative risk of loss, the cost of the coverage and industry practice. 68

EMPLOYEES We employ 16 full-time employees and one part-time employee as of the date of this prospectus. We anticipate hiring approximately five to 10 additional full-time employees during the next 12 months, commensurate with our growth. We believe that our relations with our employees are good. None of our employees is a member of any union. LEGAL PROCEEDINGS We are not involved in any material litigation nor, to our knowledge, is any material litigation pending or threatened against us. OUR PORTFOLIO OUR CURRENT PORTFOLIO Our current portfolio of facilities consists of nine healthcare facilities, seven of which are in operation and two of which are under development. The Vibra Facilities consist of four rehabilitation hospitals and two long-term acute care hospitals. The Desert Valley Facility is a community hospital with an integrated medical office building. The facilities under development are the West Houston Hospital and the adjacent West Houston MOB that is master-leased by the tenant of the hospital. All of the leases for the hospitals currently in operation have initial terms of 15 years. The initial lease term for the West Houston Hospital began when construction commenced in July 2004 and will end 15 years after completion of construction. The initial lease term for the West Houston MOB began when construction commenced in July 2004 and will end 10 years after completion of construction. Construction of the West Houston MOB is projected to be completed in August 2005 and construction of the West Houston Hospital is projected to be completed in October 2005. The leases for all of the facilities in our current portfolio provide for contractual base rent and an annual rent escalator. The leases for the Vibra Facilities also provide for percentage rent based on an agreed percentage of the tenants' gross revenue. The following table sets forth information, as of March 31, 2005, regarding our current portfolio of facilities:

2005 2006 2004 CONTRACTUAL CONTRACTUAL NUMBER OF ANNUALIZED BASE BASE LOCATION TYPE TENANT BEDS(1) BASE RENT RENT(2) RENT(2) - -------- ----------------- -------------- --------- ----------- -------------- --------------- Operating Bowling Green, Kentucky............ Rehabilitation Vibra hospital Healthcare, LLC(4) 60 $ 3,916,695 $ 4,294,990 $ 4,790,118 Marlton, New Jersey(5)........... Rehabilitation(6) Vibra hospital Healthcare, LLC(4) 76 3,401,791 3,730,354 4,160,390 Victorville, California(7)....... Community Desert Valley hospital/Medical Hospital, Inc. 83 -- 2,341,004 2,856,000 Office Building New Bedford, Massachusetts....... Long-term Vibra acute care Healthcare, hospital LLC(4) 90 2,262,979 2,426,320 2,767,624 GROSS PURCHASE PRICE OR PROJECTED LEASE LOCATION DEVELOPMENT COST(3) EXPIRATION - -------- -------------------- --------------- Operating Bowling Green, Kentucky............ $ 38,211,658 July 2019 Marlton, New Jersey(5)........... 32,267,622 July 2019 Victorville, California(7)....... 28,000,000 February 2020 New Bedford, Massachusetts....... 22,077,847 August 2019
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2005 2006 2004 CONTRACTUAL CONTRACTUAL NUMBER OF ANNUALIZED BASE BASE LOCATION TYPE TENANT BEDS(1) BASE RENT RENT(2) RENT(2) - -------- ----------------- -------------- --------- ----------- -------------- --------------- Fresno, California... Rehabilitation Vibra hospital Healthcare, LLC(4) 62 1,914,829 2,099,773 2,341,835 Thornton, Colorado... Rehabilitation Vibra hospital Healthcare, LLC(4) 117 870,377 933,200 1,064,471 Kentfield, California.......... Long-term Vibra acute care Healthcare, hospital LLC(4) 60 783,339 858,998 958,024 --- ----------- ----------- ----------- SUBTOTAL............. -- -- 548 $13,150,010 $16,684,639 $18,938,462 --- ----------- ----------- ----------- Under Development Houston, Texas....... Community hospital(8) Stealth, L.P. 105(9) $ -- $772,196(10) $ 4,652,481(10) Houston, Texas....... Medical office building(12) Stealth, L.P. n/a -- 670,840(10) 2,025,936(10) ----------- ----------- ----------- SUBTOTAL............. -- -- 105 -- 1,443,036 6,678,417 --- ----------- ----------- ----------- TOTAL................ -- -- 653 $13,150,010 $18,127,675 $25,616,879 === =========== =========== =========== GROSS PURCHASE PRICE OR PROJECTED LEASE LOCATION DEVELOPMENT COST(3) EXPIRATION - -------- -------------------- --------------- Fresno, California... 18,681,255 July 2019 Thornton, Colorado... 8,491,481 August 2019 Kentfield, California.......... 7,642,332 July 2019 ------------ SUBTOTAL............. $155,372,195 -- ------------ Under Development Houston, Texas....... $ 42,600,000 October 2020(11) Houston, Texas....... 20,500,000 August 2015(13) ------------ SUBTOTAL............. $ 63,100,000 -- ------------ TOTAL................ $218,472,195 -- ============
- --------------- (1) Based on the number of licensed beds. (2) Based on leases in place as of the date of this prospectus. (3) Includes acquisition costs. (4) The tenant in each case is a separate, wholly-owned subsidiary of Vibra Healthcare, LLC. (5) Our interest in this facility is held through a ground lease on the property. The purchase price shown for this facility does not include our payment obligations under the ground lease, the present value of which we have calculated to be $920,579. The calculation of the base rent to be received from Vibra for this facility takes into account the present value of the ground lease payments. (6) Thirty of the 76 beds are pediatric rehabilitation beds operated by HBA Management, Inc. (7) At any time after February 28, 2007, the tenant has the option to purchase the facility at a purchase price equal to the sum of (i) the purchase price of the facility, and (ii) that amount determined under a formula that would provide us an internal rate of return of 10% per year, increased by 2% of such percentage each year (8) Expected to be completed in October 2005. (9) Seventy-one of the 105 beds will be acute care beds operated by Stealth, L.P. and the remaining 34 beds will be long-term acute care beds operated by Triumph Southwest, L.P. (10) Based on estimated total development costs and estimated dates of completion. Assumes completion of construction in October 2005 for the West Houston Hospital and in August 2005 for the West Houston MOB. Does not include rents that accrue during the construction period and are payable over the remaining lease term following the completion of construction. (11) Following completion, the lease term will extend for a period of 15 years. At any time during the term of the lease, the tenant has the right to terminate the lease and purchase the community hospital from us at a purchase price equal to the greater of (i) that amount determined under a formula which would provide us an internal rate of return of at least 18% or (ii) appraised value assuming the lease is still in place. (12) Expected to be completed in August 2005. (13) Following completion, the lease term will extend for a period of 10 years. At any time during the term of the lease, the tenant has the right to terminate the lease and purchase the medical office building from us at a purchase price equal to the greater of (i) that amount determined under a formula which would provide us an internal rate of return of at least 18% or (ii) appraised value assuming the lease is still in place. VIBRA FACILITIES AND LOANS General. We own or ground lease the six Vibra Facilities located in Bowling Green, Kentucky; Marlton, New Jersey; Fresno, California; Kentfield, California; Thornton, Colorado; and New Bedford, Massachusetts. We acquired these facilities from Care Ventures, Inc., an unaffiliated third party, in July and August 2004 for an aggregate purchase price of approximately $127.4 million, including acquisition costs. The purchase price was arrived at through arms-length negotiations with Care Ventures, Inc., based upon our analysis of various factors. These factors included the demographics of the area in which the facility is located, the capabilities of the tenant to operate the facility, healthcare spending trends in the geographic area, the structural integrity of the facility, governmental regulatory trends which may impact the services provided by the tenant, and the financial and economic returns which we require for making an investment. The Vibra Facilities are leased to subsidiaries of Vibra. Our leases of the Vibra Facilities require the tenant to carry customary insurance which is adequate to satisfy our underwriting standards. 70

Vibra is an affiliate of Senior Real Estate Holdings, LLC, D/B/A The Hollinger Group, or The Hollinger Group. Vibra has been recently formed and had engaged in no meaningful operations prior to entering into the leases for the Vibra Facilities in July and August 2004. The principals of The Hollinger Group have extensive experience in developing, acquiring, managing and operating specialty healthcare facilities and senior care facilities. Brad E. Hollinger, the founder and chief executive officer of The Hollinger Group, has 18 years experience in all phases of senior care and healthcare activities. For financial information respecting Vibra and its subsidiaries, see the audited financial statements included elsewhere in this prospectus. Vibra Loans and Fees Receivable. At the time we acquired the Vibra Facilities, MPT Development Services, Inc., our taxable REIT subsidiary, made loans of approximately $41.4 million to Vibra to acquire the operations at these locations. We refer to these loans as the acquisition loans. The acquisition loans accrue interest at the rate of 10.25% per year and are to be repaid over 15 years with interest only for the first three years and the principal balance amortizing over the remaining 12 year period. The acquisition loans may be prepaid at any time without penalty. In connection with the Vibra transactions, Vibra agreed to pay us commitment fees of approximately $1.5 million. MPT Development Services, Inc. also made secured loans totaling approximately $6.2 million to Vibra and its subsidiaries for working capital purposes. The commitment fees were paid, and the working capital loans were repaid, on February 9, 2005. As security for the acquisition loans, Vibra has pledged to us all of its interests in each of the tenants, and Mr. Hollinger has pledged to us his entire interest in Vibra. In addition, Mr. Hollinger, The Hollinger Group and Vibra Management, LLC, another affiliate of Mr. Hollinger, have guaranteed the repayment of the loans and the payment of the commitment fees; however, Mr. Hollinger's personal liability is limited. See "--Lease Guaranties and Security." Leases. Each Vibra lease provides that, so long as the acquisition loans are outstanding, after January 1, 2005, and beginning with the calendar month after the month in which aggregate gross revenues for the Vibra Facilities exceed a revenue threshold, the tenant will pay, in addition to base rent, percentage rent in an amount equal to 2% of revenues for the preceding month. Each calendar month thereafter during the term of each lease, the percentage rent will be decreased pro rata based on the amount of the principal reduction of the acquisition loans during the previous calendar month; however, the percentage rent will not be decreased below 1% of revenues. On March 31, 2005, the leases for the Vibra Facilities were amended to provide (i) that the testing of certain financial covenants will be deferred until the quarter beginning July 1, 2006 and ending September 30, 2006, (ii) that these same financial covenants will be tested on a consolidated basis for all of the Vibra Facilities, (iii) that the reduction in the rate of percentage rent will be made on a monthly rather than annual basis and (iv) that Vibra will escrow insurance premiums and taxes at our request. Prior to execution of this amendment, Vibra was not in compliance with certain of the financial covenants in all of its leases with us. Capital Improvements. The tenant under each Vibra lease is responsible for all capital expenditures required to keep the facility in compliance with applicable laws and regulations. Beginning on July 1, 2005, each tenant will make quarterly deposits into a capital improvement reserve account for the particular facility in the amount of $1,500 per bed per year, except that the first deposit will be pro-rated based on one-half of a year. On each January 1 thereafter, the payment of $1,500 per bed per year into the capital improvement reserve will be increased by 2.5%. All capital expenditures made in each year during the term of the lease will be funded first from the capital improvement reserve, and the tenant will pay into its respective capital improvement reserve such funds as necessary for all replacements and repairs. Lease Guaranties and Security. Each Vibra lease is guaranteed by Mr. Hollinger, Vibra, Vibra Management, LLC and The Hollinger Group. The guaranty is an absolute and irrevocable guarantee of full payment and performance; however, Mr. Hollinger's personal liability for lease guaranty, the loan guaranty and for environmental indemnification is limited to $5.0 million in the aggregate. Each Vibra lease is cross-defaulted with the other leases for the Vibra Facilities. In addition, Vibra has pledged to us all of its interests in each of the tenants, and Mr. Hollinger has pledged to us his interest in Vibra. As 71

security for the leases, each of the Vibra tenants has granted us a security interest in all personal property, other than receivables, located at the Vibra Facilities. The management fees that the Vibra tenants pay to Vibra Management, LLC are subordinated to the rents payable to us under the Vibra leases. Purchase Option. At the expiration of each Vibra lease, each tenant will have the option to purchase the facility at a purchase price equal to the greater of (i) the appraised value of the facility, determined assuming the lease is still in place, or (ii) the purchase price we paid for the facility, including acquisition costs, increased by 2.5% per annum from the date of purchase. Depreciation and Real Estate Taxes. The following table sets forth information, as of December 31, 2004, regarding the depreciation and real estate taxes for the Vibra Facilities:

DEPRECIATION FEDERAL TAX BASIS -------------------------------------- 2004 REAL ESTATE -------------------------- ANNUAL ----------------- LAND BUILDINGS RATE METHOD LIFE IN YEARS TAXES RATE ----------- ------------ ------ ------------- ------------- --------- ----- Bowling Green, KY......... $ 3,070,000 $ 35,141,658 2.5% Straight-line 40 $ 27,420 0.07% Thornton, CO.............. 2,130,000 6,361,481 2.5% Straight-line 40 185,317 2.18% Fresno, CA................ 1,550,000 17,131,255 2.5% Straight-line 40 113,558 0.61% Kentfield, CA............. 2,520,000 5,122,332 2.5% Straight-line 40 97,975 1.28% Marlton, NJ............... -- 32,267,622 2.5% Straight-line 40 321,903 1.00% New Bedford, NJ........... 1,400,000 20,677,847 2.5% Straight-line 40 251,476 1.14%
BOWLING GREEN, KENTUCKY General. This facility, licensed for 60 beds, is an approximately 62,500 gross square foot rehabilitation hospital located in Bowling Green, Kentucky, which is approximately 60 miles from Nashville, Tennessee. Construction of the facility was completed in 1992. We acquired a fee simple interest in this facility on July 1, 2004 for a purchase price of approximately $38.2 million including acquisition costs. Lease. This facility is 100% leased to 1300 Campbell Lane Operating Company, LLC, a wholly-owned subsidiary of Vibra, pursuant to a 15-year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The tenant has three options to renew for five years each. Beginning on July 1, 2005, the per annum base rent will be equal to 12.23% of the purchase price, including acquisition costs. On January 1, 2006 and on each January 1 thereafter, the base rent will be increased by 2.5%. MARLTON, NEW JERSEY General. This facility, licensed for 76 beds, is an approximately 89,139 gross square foot rehabilitation hospital located in Marlton, New Jersey, which is approximately 15 miles from Philadelphia, Pennsylvania. Construction of the facility was completed in 1994. We acquired a ground lease interest in this facility on July 1, 2004 for a purchase price of approximately $32.3 million including acquisition costs. We ground lease the property on which the facility is located from Virtua West Jersey Health System, a New Jersey non-profit corporation, pursuant to a ground lease dated July 15, 1993. The initial term of the ground lease expires in 2030. We have the right to renew the ground lease for an additional term of 35 years upon the satisfaction of certain conditions as set forth in the ground lease. Lease. This facility is 100% leased to 92 Brick Road Operating Company, LLC, a wholly-owned subsidiary of Vibra, pursuant to a 15 year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The tenant has three options to renew for five years each. Beginning on July 1, 2005, the per annum base rent will be equal to 12.23% of the purchase price, including acquisition costs. On January 1, 2006 and on each January 1 thereafter, the base rent will be increased by 2.5%. HBA Management, Inc., or HBA, has subleased the entire third floor of the hospital facility, approximately 26,896 square feet, for the operation of a 30-bed pediatric comprehensive rehabilitation unit 72

and related office use, together with certain fixtures, furnishings and equipment located in the subleased premises. The current term of the sublease expires on August 31, 2013. HBA has the option to extend the sublease term for two additional terms of five years each. Base annual rent due under the sublease through September 30, 2005 is approximately $1,112,980 per annum, with adjustments annually thereafter. In addition to base annual rent, HBA is required to pay its proportionate share of all reimbursable expenses. FRESNO, CALIFORNIA General. This facility, licensed for 62 beds, is an approximately 78,258 gross square foot rehabilitation hospital located in Fresno, California. Construction of the facility was completed in 1990. We acquired a fee simple interest in this facility on July 1, 2004 for approximately $18.7 million including acquisition costs. Lease. This facility is 100% leased to 7173 North Sharon Avenue Operating Company, LLC, a wholly-owned subsidiary of Vibra, pursuant to a 15 year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The tenant has three options to renew for five years each. Beginning on July 1, 2005, the per annum base rent will be equal to 12.23% of the purchase price, including acquisition costs. On January 1, 2006 and on each January 1 thereafter, the base rent will be increased by 2.5%. THORNTON, COLORADO General. This facility, licensed for 117 beds, is an approximately 141,388 gross square foot rehabilitation hospital located in Thornton, Colorado, which is approximately 10 miles from Denver, Colorado. Of the 117 beds, 70 are rehabilitation beds, 23 are psychiatric beds and 24 are skilled nursing care beds. Construction of the original facility was completed in 1962 with additions completed as recently as 1975. We acquired a fee simple interest in this facility on August 17, 2004 for a purchase price of approximately $8.5 million including acquisition costs. Lease. This facility is 100% leased to 8451 Pearl Street Operating Company, LLC, a wholly-owned subsidiary of Vibra, pursuant to a 15 year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The tenant has three options to renew for five years each. Beginning on August 17, 2005, the per annum base rent will be equal to 12.23% of the purchase price, including acquisition costs. On January 1, 2006 and on each January 1 thereafter, the base rent will be increased by 2.5%. NEW BEDFORD, MASSACHUSETTS General. This facility, licensed for 90 beds, is an approximately 70,657 gross square foot long-term acute care hospital located in New Bedford, Massachusetts, which is approximately 45 miles from Boston, Massachusetts. Construction of the original facility was completed in 1942 with additions completed as recently as 1995. We acquired a fee simple interest in this facility on August 17, 2004 for a purchase price of approximately $22.0 million including acquisition costs. Lease. This facility is 100% leased to 4499 Acushnet Avenue Operating Company, LLC, a wholly-owned subsidiary of Vibra, pursuant to a 15 year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The tenant has three options to renew for five years each. Beginning on August 17, 2005, the per annum base rent will be equal to 12.23% of the purchase price, including acquisition costs. On January 1, 2006 and on each January 1 thereafter, the base rent will be increased by 2.5%. KENTFIELD, CALIFORNIA General. This facility, licensed for 60 beds, is an approximately 43,500 gross square foot long-term acute care hospital located in Kentfield, California, which is approximately 15 miles from San Francisco, California. Construction of the facility was completed in 1963 with the last renovations in 1988. We 73

acquired a fee simple interest in this facility on July 1, 2004 for a purchase price of approximately $7.6 million including acquisition costs. Lease. This facility is 100% leased to 1125 Sir Francis Drake Boulevard Operating Company, LLC, a wholly-owned subsidiary of Vibra, pursuant to a 15 year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The tenant has three options to renew for five years each. Beginning on July 1, 2005, the per annum base rent will be equal to 12.23% of the purchase price, including acquisition costs. On January 1, 2006 and on each January 1 thereafter, the base rent will be increased by 2.5%. DESERT VALLEY FACILITY General. On February 28, 2005, we acquired a fee simple interest in the Desert Valley Facility located in Victorville, California, which is approximately 75 miles from Los Angeles, California. The approximately 122,140 square foot community hospital facility, built in 1994, is licensed for 83 beds and has an integrated medical office building comprising approximately 50,000 square feet. We acquired the facility from Prime A Investments, LLC, an unaffiliated third party, for a purchase price of approximately $28.0 million. The purchase price was determined through arms-length negotiations with Prime A Investments, LLC based upon our analysis of various factors. These factors included the demographics of the area in which the facility is located, the capability of the tenant to operate the facility, healthcare spending trends in the geographic area, the structural integrity of the facility, governmental regulatory trends which may impact the services provided by the tenant, and the financial and economic returns which we require for making an investment. Lease. This facility is 100% leased to DVH, an affiliate of Prime A Investments, LLC. The principals of DVH have experience in developing, acquiring, managing and operating acute care hospital facilities. The lease is a 15-year net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. DVH has three options to renew for five years each. Currently, the annual base rent is equal to 10% of the purchase price, or the annual rate of $2.8 million. On January 1, 2006, and on each January 1 thereafter, the base rent will be increased by an amount equal to the greater of (i) 2% per year of the prior year's base rent or (ii) the percentage by which the CPI as published by the United States Department of Labor, Bureau of Labor Statistics on January 1 shall have increased over the CPI figure in effect on the immediately preceding January 1, annualized based on the highest annual rate effective during the preceding year if the previous year's base rent is for a partial year. The lease requires DVH to carry customary insurance which is adequate to satisfy our underwriting standards. DVH has subleased approximately 40,110 square feet of space in the medical office portion of the facility to its affiliate, Desert Valley Medical Group, Inc., or DVMG, for office use. The DVMG lease requires DVMG to pay rent of $50,137.50 per month, to be adjusted commencing on January 1, 2006 by the CPI. The DVMG sublease expires on December 31, 2011. DVH has also subleased approximately 500 square feet of space in the facility to Network Pharmaceuticals, Inc. for the operation of a pharmacy. The pharmacy sublease requires the tenant to pay annual rent of $2,000 per month. The pharmacy sublease currently expires on May 15, 2007, subject to the pharmacy's option to renew for a term of 10 years. Lease Guaranties and Security. The Desert Valley lease is guaranteed by Prime A Investments, L.L.C., Desert Valley Health System, Inc. and Desert Valley Medical Group, Inc. The guaranty is an absolute and irrevocable guaranty. The lease is cross-defaulted with any other leases between us or any of our affiliates and DVH, any guarantor and any of their affiliates. In addition, as security for the lease, DVH has granted us a security interest in all personal property, other than receivables, located at the Desert Valley Facility, subject to purchase money liens on equipment. Desert Valley Hospital, Inc. has provided to us unaudited financial statements reflecting that, as of October 31, 2004, it had tangible assets of approximately $23.5 million, liabilities of approximately $14.9 million and stockholders' equity of 74

approximately $8.6 million, and for the ten month period ended October 31, 2004 had net income of approximately $8.7 million. Reserve for Extraordinary Repairs. DVH is responsible for all maintenance and repairs and all extraordinary repairs required to keep the facility in compliance with all applicable laws and regulations and as required under the lease. DVH is required to make quarterly deposits into a reserve account in the amount of $2,500 per bed per year. Beginning on January 1, 2006 and on each January 1 thereafter, the payment of $2,500 per bed per year into the improvement reserve will be increased by 2%. All extraordinary repair expenditures made in each year during the term of the lease are to be funded first from the reserve, and DVH is to pay into the reserve such funds as necessary for all extraordinary repairs. Purchase Options. At any time after February 28, 2007, so long as DVH and its affiliates are not in default under any lease with us or any of the leases with its subtenants, DVH will have the option, upon 90 days' prior written notice, to purchase the facility at a purchase price equal to the sum of (i) the purchase price of the facility, and (ii) that amount determined under a formula that would provide us an internal rate of return of 10% per year, increased by 2% of such percentage each year, taking into account all payments of base rent received by us. If during the term of the lease we receive from the previous owner or any of its affiliates a written offer to purchase the Desert Valley Facility and we are willing to accept the offer, so long as DVH and its affiliates are not in default under any lease with us or any of the subleases with its subtenants, we must first present the offer to DVH and allow DVH the right to purchase the facility upon the same price, terms and conditions as set forth in the offer; however, if the offer is made after February 28, 2007, in lieu of exercising its right of first refusal, DVH may exercise its option to purchase as provided above. Depreciation and Real Estate Taxes. The following table sets forth information, as of December 31, 2004, regarding the depreciation and real estate taxes for the Desert Valley Facility:

FEDERAL TAX BASIS DEPRECIATION 2004 REAL ESTATE ------------------------ --------------------------- ----------------- LAND BUILDINGS ANNUAL RATE METHOD LIFE IN YEARS TAXES RATE ---------- ----------- ----------- ------------- ---------------- --------- ----- Victorville, California......... $2,000,000 $26,000,000 2.5% Straight-line 40 $289,905 1.07%
Expansion Commitment. We have also entered into a commitment letter with DVH pursuant to which, subject to certain conditions, we have agreed to fund up to $20.0 million for the purpose of expanding our Desert Valley Facility. We have agreed to begin funding and DVH has agreed to begin drawing on the commitment amount before February 28, 2006, in accordance with a disbursement schedule to be provided in a definitive development agreement to be entered into between us and DVH at the time of the first draw. Upon receipt and approval of the development agreement, DVH is obligated to pay us a commitment fee in cash equal to 0.5% of the maximum commitment amount. This commitment fee will be adjusted following the full and final funding of the expansion to a sum equal to 0.5% of the actual amount funded. Except for any adjustments to the commitment fee that may result from funding less than the maximum commitment amount, the commitment fee is non-refundable. If DVH fails to provide a development agreement to us by January 29, 2006, we will have no further liability or obligation to provide the funding. We do not expect to generate any revenues from this transaction in the near future. HOUSTON, TEXAS General. In June 2004, we entered into agreements with Stealth, and GPMV to develop the West Houston Hospital and the adjacent West Houston MOB in Houston, Texas. We have engaged GPMV to develop the 105 bed, 121,884 gross square foot West Houston Hospital. Seventy-one beds will be acute care beds to be operated by Stealth and 34 will be long-term acute care beds to be operated by Triumph Southwest, L.P., or Triumph, a tenant of Stealth. We have engaged a third-party developer to develop the adjacent 120,000 gross square foot West Houston MOB on the property. Pursuant to the agreements with Stealth and GPMV, we have formed two Delaware limited partnerships, MPT West Houston Hospital, L.P., or the hospital limited partnership, which will own the West Houston Hospital, and MPT West Houston MOB, L.P., or the MOB limited partnership, which will own the adjoining West Houston MOB. Stealth will be required to maintain insurance that is adequate to satisfy our underwriting standards. 75

West Houston GP, L.P., an affiliate of GPMV, holds a 25% general partnership interest in Stealth. The limited partners of Stealth, which currently hold a 75% interest, consist of 85 physicians. The sole business of Stealth is the operation of the West Houston Hospital offering multi-specialty services and the West Houston MOB. Because those facilities are still in the construction phase, Stealth has had no meaningful operations to date. Our operating partnership owns an approximate 93% limited partnership interest in the hospital limited partnership and Stealth owns an approximate 6% limited partnership interest. MPT West Houston Hospital, LLC, a wholly-owned limited liability company of our operating partnership, owns the 1% general partnership interest in the hospital limited partnership. Currently, our operating partnership owns all of the limited partnership interests in the MOB limited partnership and MPT West Houston MOB, LLC, a wholly-owned subsidiary of our operating partnership, owns the 1% general partnership interest. We are in the process of offering up to 40% of the limited partnership interests in the MOB limited partnership to local physicians who are expected to be affiliated with the West Houston Hospital. The hospital limited partnership and MOB limited partnership each own a fee simple interest in the undeveloped land on which the facilities are being constructed, as well as adjacent undeveloped land. In addition, Stealth has an option throughout the term of the lease to reacquire approximately 14.5 acres of land owned by the hospital limited partnership, which land is located adjacent to the land on which the facilities are being constructed. The option price for this parcel is equal to the original cost to us. Stealth also has a right of first offer throughout the term of the lease to purchase this parcel should we determine to sell it to a third party. In connection with the development of the West Houston Facilities, we are entitled to a commitment fee of approximately $932,125. This fee is to be paid 15 years from the date of completion of the hospital facility, with interest thereon at the rate of 10.75% per year, and is unsecured but is cross-defaulted with the leases we have with Stealth at the West Houston Facilities. Stealth is to commence making monthly interest payments beginning the first month after completion of the West Houston Hospital. In addition, MPT Development Services, Inc., our taxable REIT subsidiary, has agreed to make a working capital loan to Stealth in an amount up to $1.62 million. To date, no funds have been drawn by Stealth. This loan is to be repaid 15 years from the date of completion of the West Houston Hospital, with interest at the rate of 10.75% per year, and is unsecured but cross-defaulted with the leases we have with Stealth at the West Houston Facilities. The loans are not guaranteed. The leases contain certain debt coverage ratio and other financial covenants, the default of which would constitute a default under the loans. Stealth is obligated to commence making monthly interest payments beginning the first month after completion of the West Houston Hospital. Either the fee or the working capital loan may be prepaid at any time without penalty, except that a minimum prepayment of $500,000 is required for the working capital loan. If either we or Stealth determine in good faith, after consultation with healthcare counsel, that healthcare law prohibitions or restrictions require the physician-limited partners to divest their ownership interests in Stealth, we have agreed to issue up to $6 million of limited partnership interests in the hospital limited partnership to Stealth to be used as part of the consideration to completely redeem the physician-limited partners' ownership interests in Stealth. We have agreed to lend Stealth the $6 million to purchase the limited partnership interests in the hospital limited partnership, which loan would accrue interest at the rate of not less than 10.75% per year, and would be paid over 10 years. If this transaction is necessary, we do not expect it to occur prior to the end of the second quarter of 2005. Development Agreements. The hospital limited partnership has agreed to pay GPMV a development fee of approximately $700,000, a construction management fee not to exceed $200,000, and a contingent funds fee of approximately $450,000. The MOB limited partnership has agreed to pay the developer of the West Houston MOB a development fee of approximately $550,000, a construction management fee of $300,000, and a contingent funds fee of approximately $350,000. Upon the completion of the development of the facilities, we will obtain independent as-built appraisals of the facilities. 76

Stealth is obligated to pay MPT Development Services, Inc., our taxable REIT subsidiary, a project inspection fee for construction coordination services of $100,000 in the case of the West Houston Hospital and $50,000 in the case of the adjacent West Houston MOB. These fees are to be paid, with interest at the rate of 10.75% per year, over a 15 year period beginning on the date that the West Houston Hospital is completed. The total development costs for the facilities, including acquisition cost, development services fee, commitment fee, project management fee, and construction costs, are estimated to be $42.6 million for the hospital facility and $20.5 million for the medical office building. Construction, which commenced in July 2004, is expected to be completed in October 2005 for the West Houston Hospital and in August 2005 for the adjacent West Houston MOB. During the construction period, we will advance funds pursuant to requests made in accordance with the terms of the development agreements between us and the developers. We have agreed to fund 100% of the total development costs for the West Houston Hospital and the adjacent West Houston MOB. Our agreement with Stealth provides that 60% of this funding will be in the form of debt for the West Houston Hospital and 80% in the form of debt for the adjoining West Houston MOB. If we obtain third-party construction financing, the debt portion of the development costs will be provided by the third-party lender. Leases. We are leasing the facilities to Stealth during the construction phase with rent accruing until the completion dates and the accrued rent to be paid over the remaining lease term once the facilities are completed. Following the completion dates, the lease term will extend for a period of 15 years for the West Houston Hospital and 10 years for the West Houston MOB. Stealth will have three options to renew each lease for a period of five years each. On January 1, 2006 and on each January 1 thereafter, the base rent for the West Houston Hospital will increase 2.5% and the base rent for the West Houston MOB will increase 2.0%. The leases are net-leases with Stealth responsible for all costs and expenses associated with the operation, maintenance and repair of the facilities. Triumph has subleased an entire floor of the West Houston Hospital in order to operate 34 long-term acute care beds. The sublease is for a term of 180 months following the completion of the construction of the West Houston Hospital. The sublease grants to Triumph options to extend the term of the sublease for three additional periods of five years each. The sublease requires Triumph to pay rent in an amount equal to 12% of all rent and other charges payable by Stealth to us under our lease with Stealth, with certain exclusions. The sublease provides that Stealth's obligations under the sublease are conditioned upon the execution of a guaranty by Triumph HealthCare of Texas, L.L.C. and Triumph HealthCare, L.L.P. The sublease grants Stealth the right to relocate Triumph to a new facility to be constructed adjacent to and attached to the West Houston Hospital. In order to exercise the relocation right, Stealth must give Triumph at least 270 days' notice prior to the date of such relocation. Triumph must vacate the subleased premises on or before the relocation date specified in the notice from Stealth, which cannot be earlier than 270 days after the date of the relocation notice. Triumph has subleased 9,726 square feet of net rentable area in the West Houston MOB for use as a medical office exclusively for the practice of medicine, the operation of a medical office and the provision of related administrative services, or medical related use. The sublease is for a term of 120 months following the earlier of the date of final completion of the leasehold improvements, or the date on which Triumph commences business in the subleased premises. The sublease grants to Triumph options to extend the term of the sublease for four additional periods of five years each. The sublease requires Triumph to pay annual base rent for year one through ten calculated at $20 per net rentable square foot. Beginning on the first anniversary of the lease and on each anniversary date thereafter, base rent is increased to an amount equal to 1.02 times or 102% of the base rent payable in the previous year. The lease also requires Triumph to pay its pro rata share of annual operating expenses, taxes and insurance relating to the West Houston MOB. The sublease provides that Stealth's obligations under the sublease are conditioned upon the execution of a guaranty by Triumph HealthCare of Texas, L.L.C. and Triumph HealthCare, L.L.P. The West Houston MOB sublease with Triumph also runs concurrently with Stealth's lease with us. In the event our lease with Stealth is terminated, the sublease on the hospital with Triumph is also terminated. Purchase Option. After the first full 12 month period after construction of each of the West Houston Facilities is completed, as long as Stealth is not in default under either of its leases with us or any of the leases 77

with its physician subtenants, Stealth has the right to purchase the West Houston MOB and the West Houston Hospital at a purchase price equal to the greater of (i) that amount determined under a formula that would provide us an internal rate of return of at least 18% or (ii) the appraised value based on a 15 year lease in place. To arrive at the appraised value, each of the parties chooses an appraiser. If the appraisals obtained are not materially different, (meaning a 10% or more variance), 50% of the sum of each appraised value is used as the option price. If the two appraisals are materially different, then the two appraisers appoint a third appraiser and the appraiser's valuation which differs greatest from the other two appraisers is excluded and 50% of the sum of the two remaining determinations is used as the option price. The costs of the appraisal process are borne equally by the parties. Upon written notice to us within 90 days of the expiration of the applicable lease, as long as Stealth is not in default under either of its leases with us or any of the leases with its physician subtenants, Stealth will have the option to purchase the West Houston MOB or the West Houston Hospital at a price equal to the greater of (i) the total development costs (including any capital additions funded by us, but excluding any capital additions funded by Stealth) increased by 2.5% per year, or (ii) the appraised value based on a 15 year lease in place. To arrive at the appraised value, each of the parties chooses an appraiser. If the appraisals obtained are not materially different, (meaning a 10% or more variance), 50% of the sum of each appraised value is used as the option price. If the two appraisals are materially different, then the two appraisers appoint a third appraiser and the appraiser's valuation which differs greatest from the other two appraisers is excluded and 50% of the sum of the two remaining determinations is used as the option price. The costs of the appraisal process are borne equally by the parties. The leases also provide that under certain limited circumstances, the tenant will have the right to present us with a choice of one out of three proposed exchange facilities to be substituted for the leased facility. The tenant will have the right to propose substitute facilities, if not in default, at any time prior to the expiration of the term, if (i) in the good faith judgment of the tenant the facility becomes uneconomic or unsuitable for its primary intended use, (ii) there is an eviction or interference caused by any claim of paramount title, or (iii) if for other prudent business reasons, the tenant desires to terminate the lease. The tenant will have the obligation to substitute facilities if it has discontinued use of the facility for a period in excess of one year, and we have not exercised our right to terminate the lease. Each proposed substitution facility must: (i) provide us with an annual return on our equity in such facility, or yield, substantially equivalent to our yield from the original facility (ii) provide us with rent with a substantially equivalent yield taking into account any cash adjustment paid or received by us and any other relevant factors, and (iii) have a fair market value in an amount equal to the fair market value of the original facility, taking into account any cash adjustment paid or received by us. If we elect to consummate the exchange, the existing lease would terminate and the parties would enter into a new lease for the substituted facility. If we elect not to proceed with the exchange, the tenant would have the right to terminate the lease and purchase the leased facility for appraised value, determined assuming the lease is still in place. Right of First Offer to Purchase. At any time during the term of the applicable lease for either of the West Houston Facilities, as long as Stealth is not in default under either of its leases with us or any of the leases with its physician subtenants, we are required to notify Stealth if we intend to sell either facility to a third party. If Stealth wishes to offer to purchase the facility, it must notify us in writing within 15 days, setting forth the terms and conditions of the proposed purchase. If we accept Stealth's offer, Stealth must close the purchase within 45 days of the date of our acceptance. Security. The leases for the West Houston Facilities are cross-defaulted and are guaranteed by West Houston G.P., L.P. and West Houston Joint Ventures, Inc., affiliates of Stealth. To secure its performance of its lease obligations under the West Houston Hospital lease, Stealth has obtained a certificate of deposit in the amount of $1,905,234, of which we are the beneficiary. The sublease between Stealth and Triumph requires Triumph to obtain a certificate of deposit in the amount of $400,000 to secure the performance of its obligations under its sublease with Stealth. However, subject to execution of definitive agreements, we, Stealth and Triumph have agreed that Triumph shall obtain and deliver to us a $400,000 letter of credit, in lieu of the certificate of deposit, to be held by us. The sublease has been assigned to us as collateral security for Stealth's performance under its lease. Under the lease and the sublease, each of Stealth and 78

Triumph, respectively, are required to give us a security interest in these certificates of deposit and to enter into control agreements with us and the issuing banks which provide that the banks will follow our instructions regarding the certificates of deposit. Once the West Houston Hospital commences operations, Stealth is required to substitute a letter of credit in the amount of $1,905,234 in place of the $1,905,234 certificate of deposit; and on May 1, 2005, the sublease requires that Triumph substitute a letter of credit in the amount of $1,000,000 in place of the $400,000 certificate of deposit. The lease further provides that the Stealth letter of credit may be released in two increments of 50% of the total amount of the letter of credit over a 2 year period following the date on which Stealth generates a total rent (excluding additional charges) coverage from EBITDAR of at least 200% for 12 consecutive months. Stealth has provided to us unaudited financial statements reflecting that, as of December 31, 2004, it had tangible assets of approximately $6.0 million, including cash of approximately $4.6 million, liabilities of approximately $281,328 and owners' equity of approximately $5.7 million. Neither of the guarantors has any substantial assets, other than its interest in Stealth. Capital Improvements. Stealth is responsible for all capital expenditures required to keep the West Houston Facilities in compliance with applicable laws and regulations. Beginning on January 1, 2005, Stealth will make monthly deposits into a capital improvement reserve in the amount of $3,000 per year in the case of the West Houston MOB and $2,500 per bed per annum in the case of the West Houston Hospital. On each January 1 thereafter, the payment into the capital improvement reserve will be increased by 2.0% in the case of the West Houston MOB and by 2.25% in the case of the West Houston Hospital. All capital expenditures made in each year during the term of the lease will be funded first from the capital improvement reserve, and the tenant will pay into its respective capital improvement reserve such funds as necessary for all replacements and repairs. Depreciation and Real Estate Taxes. The following table sets forth information, as of December 31, 2004, regarding the estimated depreciation and real estate taxes for the Houston Facilities:

DEPRECIATION ESTIMATED FEDERAL TAX BASIS -------------------------------------- 2004 REAL ESTATE ------------------------- ANNUAL ----------------- LAND BUILDINGS RATE METHOD LIFE IN YEARS TAXES RATE ----------- ----------- ------ ------------- ------------- ---------- ---- West Houston Hospital.... $ 8,400,000 $34,200,000 2.5% Straight-line 40 $1,324,860 3.11% West Houston MOB......... 1,800,000 18,700,000 2.5 Straight-line 40 637,550 3.11
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OUR PENDING ACQUISITIONS AND DEVELOPMENTS We intend to use a portion of the net proceeds of this offering to expand our portfolio by acquiring or developing Pending Acquisition and Development Facilities under the terms of the contacts or letters of commitment relating to these facilities. We expect the leases for each of these facilities to provide for contractual base rent and an annual rent escalator. The letters of commitment constitute agreements of the parties to consummate the acquisition or development transactions and enter into leases on the terms set forth in the letters of commitment subject to the satisfaction of certain conditions, including the execution of mutually-acceptable definitive agreements. The following table contains information regarding the Pending Acquisition and Development Facilities as of the date of this prospectus:

ANNUAL YEAR ONE MINIMUM GROSS NUMBER OF CONTRACTUAL INCREASE IN PURCHASE LOCATION TYPE TENANT BEDS(1) BASE RENT RENT PRICE - -------- ---- --------------- --------- ------------ ----------- ------------ Operating Covington, Louisiana*.................. Long-term Gulf States 58 $ 1,170,750(2) 2.5%(3) $ 11,150,000 acute LTACH of care Covington, LLC hospital Denham Springs, Louisiana*............. Long-term Gulf States 59 630,000(2) 2.5%(3) 6,000,000 acute LTACH of Denham care Springs, LLC hospital Hammond, Louisiana*(5)................. Long-term Hammond 40 840,000(6) 2.5%(3) 10,285,000 acute Rehabilitation care Hospital, LLC hospital --- ------------ ------------ SUBTOTAL............................... 157 $ 2,640,750 $ 27,435,000 --------- --------------- --- ------------ ------------ Under Development Bensalem, Pennsylvania**............... Women's Bucks County 30 -- 2.5%(3) 38,000,000 hospital/ Oncoplastic medical Institute, LLC office building Bloomington, Indiana*.................. Community Monroe 32 -- 2.5%(3) $ 28,000,000 hospital Hospital, L.L.C. Houston, Texas*........................ Community North Cypress 64 -- 2.5%(3) 51,000,000 hospital Medical Center Operating Company, Ltd. --- ------------ ------------ SUBTOTAL............................... -- -- 126 -- $117,000,000 === ============ ============ TOTAL.................................. -- -- 283 $ 2,640,750 $144,435,000 === ============ ============ LOCATION LEASE EXPIRATION - -------- ---------------- Operating Covington, Louisiana*.................. April 2020(4) Denham Springs, Louisiana*............. April 2020(4) Hammond, Louisiana*(5)................. May 2021 SUBTOTAL............................... -- ----------------- Under Development Bensalem, Pennsylvania**............... (7) Bloomington, Indiana*.................. (7) Houston, Texas*........................ (7) SUBTOTAL............................... -- TOTAL.................................. --
- --------------- * Under letter of commitment. ** Under contract. (1) Based on the number of licensed beds. (2) Year One is the 12 month period commencing on an expected closing date of April 30, 2005. (3) The annual rent increase is the greater of 2.5% and any change in the Consumer Price Index, or CPI. (4) The lease expiration is based upon a 15 year term commencing on an expected closing date of April 30, 2005. (5) On April 1, 2005, we entered into a letter of commitment with Hammond Healthcare Properties, LLC, or Hammond Properties, and Hammond Rehabilitation Hospital, LLC, or Hammond Hospital, pursuant to which we have agreed to lend Hammond Properties $8.0 million and have agreed to a put-call option pursuant to which, during the 90 day period commencing on the first anniversary of the date of the loan closing, we expect to purchase from Hammond Properties a long-term acute care hospital located in Hammond, Louisiana for a purchase price between $10.3 million and $11.0 million. If we purchase the facility, we will lease it back to Hammond Hospital for an initial term of 15 years. The lease would be a net lease and would provide for contractual base rent and, beginning January 1, 2007, an annual rent escalator. (6) Based on one year contractual interest at the rate of 10.5% per year on the $8.0 million mortgage loan to Hammond Properties. We expect to exercise our option to purchase the Hammond facility in 2006. For the one year period following our purchase of the facility, contractual base rent would equal $1,080,030, based on 10.5% of an estimated purchase price of $10,285,000. (7) We expect that each of these leases will have a 15 year term commencing on the date that construction of the facility is completed. COVINGTON AND DENHAM SPRINGS, LOUISIANA General. On March 14, 2005, we entered into a commitment letter with Covington Healthcare Properties, LLC, or Covington, and Denham Springs Healthcare Properties, LLC, or Denham Springs, both unaffiliated third parties, to purchase two long-term acute care hospital facilities. One facility, which we refer to as the Covington Facility, is located in Covington, Louisiana, which is approximately 35 miles from New Orleans, Louisiana. The Covington Facility contains approximately 43,250 square feet of space and is licensed for 58 beds. We expect our purchase price for the Covington Facility to be approximately $11,150,000. The other facility, which we refer to as to Denham Springs Facility, is located in Denham Springs, Louisiana, which is approximately 10 miles from Baton Rouge, Louisiana. The Denham Springs Facility contains approximately 36,000 square feet of space and is licensed for 59 beds. We expect our 80

purchase price for the Denham Springs Facility to be approximately $6 million. Also, at the request of Covington or Denham Springs, respectively, we will agree to structure the purchase of the facility as a contribution of the contract of sale to us, in exchange for cash and operating partnership units. In the event we pursue such a structure, the relative amounts of cash, the number of units and the per unit value will be mutually determined; provided, however, that the aggregate value of such units is not to expected to exceed $1 million collectively. The purchase price for each of the Covington Facility and the Denham Springs Facility was arrived at through arms-length negotiations based upon our analysis of various factors. These factors included the demographics of the area in which the facility is located, the capability of the tenant to operate the facility, healthcare spending trends in the geographic area, the structural integrity of the facility, governmental regulatory trends which may impact the services provided by the tenant, and the financial and economic returns which we require for making an investment. We intend to form a Delaware limited liability company, MPT of Covington, LLC, which will own the Covington Facility, and a Delaware limited liability company, MPT of Denham Springs, LLC, which will own the Denham Springs Facility. Initially, we expect our operating partnership to own all of the membership interests in each of these limited liability companies; however, at some point following closing, we have agreed to offer up to 30% of the interests in each of these limited liability companies to local physicians. Lease. At the time we purchase the Covington Facility, we intend to lease 100% of the facility to Gulf States LTACH of Covington, LLC or its affiliate for a 15-year term, with 3 options to renew for 5 years each. At the time we purchase the Denham Springs Facility, we intend to lease 100% of the facility to Gulf States LTACH of Denham Springs, LLC or its affiliate for a 15-year term, with 3 options to renew for 5 years each. We expect each lease to be a net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. Each lease is expected to require the tenant to pay base rent in an amount equal to 10.5% per annum of the purchase price plus any costs and charges that may be capitalized, which base rent will be payable in monthly installments. Each lease is also expected to provide that on each January 1, the base rent will be increased by an amount equal to the greater of (A) 2.5% per annum of the prior year's base rent, or (B) the percentage by which the CPI on January 1 shall have increased over the CPI figure in effect on the then just previous January 1; provided, however, on January 1, 2006, the adjustment shall be prorated. We also expect each lease to require the tenant to carry customary insurance which is adequate to satisfy our underwriting standards. Reserve for Extraordinary Repairs. We expect each lease to require the tenant to be responsible for all maintenance and repairs and all extraordinary repairs required to keep the facility in compliance with all applicable laws and regulations and as required under the lease. We also expect each lease to require the tenant, commencing on the date we purchase the facility, to make annual deposits into a reserve account. Each lease is expected to provide that on each January 1 following the date we purchase the facility, the payment into the reserve account will be increased, and that all extraordinary repair expenditures made in each year during the term of the lease will be funded first from the reserve, and the tenant will pay into the reserve such funds as necessary for all extraordinary repairs. Security. As security for each lease, we expect the tenant will grant us a security interest in all personal property, other than receivables, located and to be located at the respective facility. We also expect each lease to require the tenant to obtain and deliver to us an unconditional and irrevocable letter of credit from a bank acceptable to us, naming us beneficiary thereunder, in an amount equal to six months' base rent under the lease. We expect each lease to also provide that at such time as the operations in the facility have generated EBITDAR coverage of at least two times the base rent for eight consecutive fiscal quarters, the letter of credit may be reduced to an amount equal to three months of the base rent then in effect. If, however, after satisfying the conditions necessary to reduce the letter of credit to three months' base rent, EBITDAR coverage subsequently drops below two times base rent for two consecutive fiscal quarters, the letter of credit shall be increased to six months' base rent. The leases are 81

expected to be cross-defaulted with any other lease or agreement between the parties. Gulf States Health Services, Inc. has provided to us unaudited financial statements reflecting that, as of September 30, 2004, it had tangible assets of approximately $8.3 million, liabilities of approximately $8.1 million and stockholders' equity of approximately $1.5 million, and for the nine month period ended September 30, 2004 had net income of approximately $700,000. Team Rehab, LLC, which is one of the guarantors of the leases, has provided to us unaudited financial statements reflecting that, as of December 31, 2004, it had tangible assets of approximately $21.3 million, liabilities of approximately $9.2 million and owner's equity of approximately $12.1 million, and for the year ended December 31, 2004 had net income of approximately $1.7 million. We expect the lease for the Covington Facility to require that, as of the commencement date of the lease and at all times during the lease term, the tenant and its affiliates, Team Rehab, LLC, Gulf States Health Services, Inc. and Jamestown Properties, LLC, maintain an aggregate tangible net worth in an amount to be mutually agreed upon with us. We expect the lease for the Denham Springs Facility to require that, as of the commencement date of the lease and at all times during the lease, the tenant and its affiliates, Team Rehab, LLC, Gulf States Health Services, Inc. and Jamestown Properties, LLC, maintain an aggregate tangible net worth in an amount to be mutually agreed upon. Purchase Options. We expect each lease to provide that so long as the tenant is not in default, and no event has occurred which with the giving of notice or the passage of time or both would constitute a default under its (and its affiliates) leases with us or any of our affiliates or any of the leases with its subtenants, the tenant will have the option to purchase the facility (i) at the expiration of the initial term and each extension term of the lease, to be exercised by 90 days' written notice prior to the expiration of the initial term and each extension term, and (ii) within 90 days of written notification from us exercising our right to terminate the engagement of the tenant's or its affiliate's management company as the management company for the facility as a result of an event of default under the lease. Each lease is expected to provide that the purchase price shall be equal to the greater of (i) the appraised value of the facility, assuming the lease remains in effect for 15 years and not taking into account any purchase options contained therein, or (ii) the purchase price paid by us for the facility, increased annually by an amount equal to the greater of (A) 2.5% per annum from the date of the lease, or (B) the rate of increase in the CPI on each January 1. Commitment Fee. We will be entitled to a commitment fee at the closing of the purchase of the Covington Facility equal to 1% of the purchase price, $16,250 of which has already been paid. We will be entitled to a commitment fee at the closing of the purchase of the Denham Springs Facility equal to 1% of the purchase price, $6,250 of which has already been paid. Hammond, Louisiana General. On April 1, 2005, we entered into a commitment letter with Hammond Healthcare Properties, LLC, or Hammond Properties, and Hammond Rehabilitation Hospital, LLC, or Hammond Hospital, both unaffiliated third parties, to provide a mortgage loan to Hammond Properties and enter into a put-call option arrangement relating to our purchase of the facility from Hammond Properties and our leaseback of the facility to Hammond Hospital or its affiliates. The facility is a long-term acute care hospital located in Hammond, Louisiana, which is approximately 45 miles from New Orleans, Louisiana. The facility contains approximately 23,835 square feet of space and is licensed for 40 beds. Under the mortgage loan transaction, we expect to lend to Hammond Properties the sum of $8.0 million, which will bear interest at the rate of 10.5% per year and be payable interest only on a monthly basis with a balloon payment due and payable at the expiration of the put-call option period described below or, if the put-call option is exercised, at closing of our purchase of the facility. The loan is expected to be secured by a first mortgage on the facility and by the other collateral and guaranteed as described below. 82

At the time of the mortgage loan closing, we expect to enter into a put-call option agreement with Hammond Properties providing that either party will have the option, exercisable within 90 days following the one year anniversary of the loan closing, to cause the purchase and sale of the facility, subject to applicable conditions, for a purchase price of the greater of (i) $10,285,714 or (ii) the quotient determined by dividing the annual rental payments by .105 (but not to exceed $11 million). The purchase price was arrived at through arm's-length negotiations based upon our analysis of various factors, including the demographics of the area in which the facility is located, the capability of the tenant to operate the facility, healthcare spending in the geographic area, the structural integrity of the facility, governmental regulatory trends which may impact the services provided by the facility, and the financial and economic returns which we require for making an investment. If the put-call option is exercised, we will form a Delaware limited liability company, MPT of Hammond, LLC, which will own the facility. Initially, we expect our operating partnership to own all of the membership interests in this limited liability company; however, at some point following closing, we have agreed to offer up to 30% of the interests in this limited liability company to local physicians. Lease. If the put-call option is exercised, we intend to lease 100% of the facility to Hammond Hospital or its affiliate for a 15-year term, with 3 options to renew for 5 years each. We expect the lease to be a net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The lease is expected to require the tenant to pay base rent in an amount equal to 10.50% per annum of the purchase price plus any costs and charges that may be capitalized, which base rent will be payable in monthly installments. The lease is also expected to provide that on each January 1 beginning January 1, 2007, the base rent will be increased by an amount equal to the greater of (A) 2.5% per annum of the prior year's base rent, or (B) the percentage by which the CPI on January 1 shall have increased over the CPI figure in effect on the then just previous January 1. We also expect each lease to require the tenant to carry customary insurance which is adequate to satisfy our underwriting standards. Reserve for Extraordinary Repairs. We expect the lease to require the tenant to be responsible for all maintenance and repairs and all extraordinary repairs required to keep the facility in compliance with all applicable laws and regulations and as required under the lease. We also expect the lease to require the tenant, commencing on the date we purchase the facility, to make annual deposits into a reserve account. The lease is expected to provide that on each January 1 following the date we purchase the facility, the payment into the reserve account will be increased, and that all extraordinary repair expenditures made in each year during the term of the lease will be funded first from the reserve, and the tenant will pay into the reserve such funds as necessary for all extraordinary repairs. Security. As security for the mortgage loan and the lease, we expect Hammond Properties or the tenant, as the case may be, will grant us a security interest in all personal property, other than receivables, located and to be located at the facility. We also expect the loan and the lease to require Hammond Properties and the tenant to obtain and deliver to us an unconditional and irrevocable letter of credit from a bank acceptable to us, naming us beneficiary thereunder, in an amount equal to six months' debt service or base rent under the lease, as the case may be. We expect the lease to also provide that at such time as the operations in the facility have generated EBITDAR coverage of at least two times the base rent for eight consecutive fiscal quarters, the letter of credit may be reduced to an amount equal to three months of the base rent then in effect. If, however, after satisfying the conditions necessary to reduce the letter of credit to three months' base rent, EBITDAR coverage subsequently drops below two times base rent for two consecutive fiscal quarters, the letter of credit shall be increased to six months' base rent. The lease is expected to be cross-defaulted with any other lease or agreement between the parties. We expect the loan and lease to be jointly and severally guaranteed by Hammond Properties, certain affiliates of Hammond Properties and Gulf States Health Services, Inc. For information about the financial condition of Gulf States Health Services, Inc., see the description of the Covington and Denham Springs facilities above. Purchase Options. We expect the lease to provide that so long as the tenant is not in default, and no event has occurred which with the giving of notice or the passage of time or both would constitute a 83

default under its (and its affiliates) leases with us or any of our affiliates or any of the leases with its subtenants, the tenant will have the option to purchase the facility at the expiration of the initial term and each extension term of the lease. The lease is expected to provide that the purchase price shall be equal to the greater of (i) the appraised value of the facility, assuming the lease remains in effect for 15 years and not taking into account any purchase options contained therein, or (ii) the purchase price paid by us for the facility, increased annually by an amount equal to the greater of (A) 2.5% per annum from the date of the lease, or (B) the rate of increase in the CPI on each January 1. The parties will agree upon the notice and closing periods applicable to these purchase options. Net Worth Covenant. We expect the loan and lease documents to require that, as of the loan closing and throughout the loan and lease terms, Hammond Properties, Hammond Hospital and Gulf States Health Services, Inc. must maintain an aggregate tangible net worth in an amount to be mutually agreed upon with us. Commitment Fee. We will be entitled to a commitment fee at the closing of the loan equal to $80,000, $25,000 of which has already been paid. We will be entitled to a commitment fee at the closing of the sale transaction equal to 1% of the purchase price, less the amount of all commitment fees previously paid. BENSALEM, PENNSYLVANIA General. On March 3, 2005, we entered into a purchase and sales agreement with Bucks County Oncoplastic Institute, LLC, or BCO, Jerome S. Tannenbaum, M.D., M. Stephen Harrison and DSI Facility Development, LLC, or the developer, all unaffiliated third parties, to purchase land and develop a women's hospital facility with an incorporated medical office building in Bucks County, Pennsylvania, which is approximately 15 miles from Philadelphia, Pennsylvania. BCO expects to enter into a contract with the owner of the land upon which the facility will be constructed for the purchase of the land. We intend to enter into a development agreement with the developer to develop the facility. The total development costs to develop the facility, including the cost of the land, are estimated at approximately $38.0 million. We have agreed to advance up to $1.6 million of development costs prior to closing, which advances bear interest at the rate of 10.75% and are guaranteed to the extent of $1.3 million by Dr. Tannenbaum and $300,000 by Mr. Harrison. Lease. We have formed a Delaware limited partnership, MPT of Bucks County Hospital, L.P., to own the facility. At the time we purchase the land, we intend to lease back 100% of the land and all improvements to be constructed thereon to BCO for a 15-year term, with three options to renew for five years each. Alternatively, we may loan to BCO the amounts necessary for construction of the improvements and, subject to certain conditions, purchase from and lease to BCO the improvements upon their completion. The lease is to be a net-lease with BCO responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The lease will require BCO to pay monthly rent or, alternatively, interest during the construction period in a per annum amount equal to 10.75% multiplied by the total amount of the funds disbursed under the development agreement. The lease will require the tenant to pay, following the completion of construction of the facility, base rent in an amount equal to 10.75% per annum of the total development costs, which base rent will be payable in monthly installments. The lease will provide that on January 1, 2006, and on each January 1 thereafter, the base rent will be increased by an amount equal to the greater of (A) 2.5% per annum of the prior year's base rent, or (B) the percentage by which the CPI, has increased over the CPI figure in effect on the previous January 1. The lease will also require BCO to carry customary insurance which is adequate to satisfy our underwriting standards. The lease will require BCO to pay us on the commencement date of the lease an amount equal to $7,500 to cover the cost of the physical inspections of the facility, which fee will, beginning on January 1, 2006, and continuing on each January 1 thereafter, be increased by 2.5% per annum. In addition to the inspection fee, the total development costs will also include a fee equal to $75,000 to cover our inspection of the facility during the construction period. 84

Reserve for Extraordinary Repairs. The lease will require BCO to be responsible for all maintenance and repairs and all extraordinary repairs required to keep the facility in compliance with all applicable laws and regulations and as required under the lease. The lease will also require BCO, beginning on the completion of construction of the facility, to make annual deposits into a reserve account in the amount of $2,500 per bed per year. The lease will provide that beginning on the first January 1 after the completion of construction, the payment of $2,500 per bed per year into the improvement reserve will be increased by 2.5%, and that all extraordinary repair expenditures made in each year during the term of the lease will be funded first from the reserve, and BCO will pay into the reserve such funds as necessary for all extraordinary repairs. Security. As security for the lease, BCO will grant us a security interest in all personal property, other than receivables, located and to be located at the facility, which security interest will be subject to any lien of any purchase money lender. The lease will require BCO to obtain and deliver to us an unconditional and irrevocable letter of credit from a bank acceptable to us, naming us beneficiary thereunder, in an amount equal to one year's base rent under the lease. As a condition to closing and as a continuing covenant under the lease, BCO will be required to maintain a tangible net worth of $5 million or access to a working capital line of at least $5 million guaranteed by Dr. Tannenbaum and other approved guarantors. The lease will be cross-defaulted to any other lease or agreement between the parties. has provided to us unaudited financial statements reflecting that, as of , it had tangible assets of approximately $ , including cash of approximately $ , liabilities of approximately $ and owners' equity of approximately $ , and for the period ended , had net income (loss) of $ . Purchase Options. The lease will provide that so long as BCO is not in default under any lease with us or any of the leases with its subtenants, at the expiration of the lease BCO will have the option, upon 60 days prior written notice, to purchase the facility at a purchase price equal to the greater of (i) the appraised value of the facility, which assumes the lease remains in effect for 15 years, or (ii) the total development costs, including any capital additions funded by us, as increased by an amount equal to the greater of (A) 2.5% per annum from the date of the lease, or (B) the rate of increase in the CPI on each January 1. Commitment Fee. We are to receive at closing a commitment fee equal to 1% of the commitment amount, $15,000 of which has already been paid. BLOOMINGTON, INDIANA General. On February 28, 2005, we entered into a letter of commitment with Monroe Hospital, L.L.C. and Monroe Hospital Operating Company, an affiliate of Monroe Hospital, both unaffiliated third parties, to develop an acute care hospital in Bloomington, Indiana, which is approximately 50 miles from Indianapolis, Indiana. We expect to enter into a contract with Monroe Hospital and Monroe Hospital Operating Company to, among other things, purchase the land. We intend to enter into a development agreement with an affiliate of Monroe Hospital to develop the facility. We expect that the total development costs to develop the facility, including the cost of the land, will be approximately $28.0 million. Lease. We intend to form a Delaware limited liability company, MPT of Bloomington, LLC, which will own the facility. At the time we purchase the land, we intend to lease 100% of the land and all improvements to be constructed thereon to Monroe Hospital Operating Company for a 15-year term, with three options to renew for five years each. Alternatively, we may loan to Monroe Hospital the amounts necessary for construction of the improvements and, subject to certain conditions, purchase from and lease to Monroe Hospital the improvements upon their completion. We expect the lease to be a net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. The lease is expected to require the tenant to pay monthly rent or, alternatively, interest, during the construction period in a per annum amount equal to 10.50% multiplied by the total amount of the funds disbursed under the development agreement. We also expect the lease to require the tenant to 85

pay, following the completion of construction of the facility, base rent in an amount equal to 10.50% per annum of the total development costs, which base rent will be payable in monthly installments. The lease is also expected to provide that on January 1, 2006, and on each January 1 thereafter, the base rent will be increased by an amount equal to the greater of (A) 2.5% per annum of the prior year's base rent, or (B) the percentage by which the CPI on January 1 shall have increased over the CPI figure in effect on the then just previous January 1. We also expect the lease to require the tenant to carry customary insurance which is adequate to satisfy our underwriting standards. We expect the lease to require the tenant to pay us on the commencement date of the lease an amount equal to $5,000 to cover the cost of the physical inspections of the facility, which fee will, beginning on January 1, 2006, and continuing on each January 1 thereafter, be increased by 2.5% per annum. The lease will be cross-defaulted with any other lease between us and the tenant or its affiliates. Reserve for Extraordinary Repairs. We expect the lease to require the tenant to be responsible for all maintenance and repairs and all extraordinary repairs required to keep the facility in compliance with all applicable laws and regulations and as required under the lease. We also expect the lease to require the tenant, beginning on the completion of construction of the facility, to make annual deposits into a reserve account in the amount of $2,500 per bed per year. The lease is expected to provide that beginning on the first January 1 after the completion of construction, the payment of $2,500 per bed per year into the improvement reserve will be increased by 2.5%, and that all extraordinary repair expenditures made in each year during the term of the lease will be funded first from the reserve, and the tenant will pay into the reserve such funds as necessary for all extraordinary repairs. Security. As security for the lease, we expect that the tenant will grant us a security interest in all personal property, other than receivables, located and to be located at the facility. We also expect the lease to require the tenant to obtain and deliver to us an unconditional and irrevocable letter of credit from a bank acceptable to us, naming us beneficiary thereunder, in an amount equal to one year's base rent under the lease. We expect the lease to also provide that at such time as the operations in the facility generated EBITDAR coverage of at least two times the base rent for two consecutive fiscal years, the letter of credit may be reduced to an amount equal to six months of the base rent then in effect. We expect the lease to require the tenant to have received an equity contribution of $6 million. The lease is expected to be cross-defaulted to any other lease or agreement between the parties. has provided to us unaudited financial statements reflecting that, as of , it had tangible assets of approximately $ , including cash of approximately $ , liabilities of approximately $ and owners' equity of approximately $ , and for the period ended , had net income (loss) of approximately $ . Purchase Options. We expect the lease to provide that so long as Monroe Hospital is not in default under any lease with us or any of the leases with its subtenants, at the expiration of the lease Monroe Hospital will have the option, upon 60 days prior written notice, to purchase the facility at a purchase price equal to the greater of (i) the appraised value of the facility, which assumes the lease remains in effect for 15 years, or (ii) the total development costs, including any capital additions funded by us, as increased by an amount equal to the greater of (A) 2.5% per annum from the date of the lease, or (B) the rate of increase in the CPI on each January 1. Commitment Fee. We are entitled to a commitment fee at closing equal to 0.5% of $28.0 million if closing occurs before June 1, 2005, less the sum of $100,000 which we have already received as a commitment fee. We may increase the commitment fee if closing occurs after May 31, 2005. We will also be entitled to receive at closing the sum of $50,000 as a construction fee. HOUSTON, TEXAS General. On March 16, 2005, we entered into a commitment letter with North Cypress Medical Center Operating Company, Ltd., or North Cypress, an unaffiliated third party, to develop a general acute care hospital in Houston, Texas. We expect to enter into a ground lease with the current owner of the land, with an option for us to purchase the ground, and then sublease the ground to North Cypress. We 86

intend to enter into a development agreement with an affiliate of North Cypress to develop the facility. We expect that the total development costs to develop the facility, will be approximately $51.0 million. We have ordered an independent appraisal in connection with the lease of the land and the development of the facility and expect that the appraised value will not be less than the total development costs. Commitment Fee. In connection with the acquisition of the leasehold and development of the facility, North Cypress has agreed to pay us a commitment fee equal to 1% of the total development costs, which shall be due and paid to us at the time the lease is signed; provided, however, $100,000 of the total 1% commitment fee was paid to us at the time the commitment letter was executed. Sublease. We intend to form a Delaware limited partnership, MPT of North Cypress, LP, which will enter into the ground lease with the current owner. At the time we enter into the ground lease, we intend to sublease 100% of the land and all improvements to be constructed thereon to North Cypress or its affiliate for a cumulative term of the construction period and the 15-year period following the completion of construction, with three options to renew for five years each. Alternatively, we may loan to North Cypress the amounts necessary for construction of the improvements and, subject to certain conditions, purchase from and lease to North Cypress the improvements upon their completion. We expect the sublease to be a net-lease with the tenant responsible for all costs of the facility, including, but not limited to, all rent and other costs and expenses due and payable under the ground lease, taxes, utilities, insurance and maintenance. The sublease is expected to require the tenant to pay monthly rent or, alternatively, interest, during the construction period in a per annum amount equal to 10.50% multiplied by the total amount of the funds disbursed under the development agreement plus the sum of all rents paid pursuant to the ground lease. We also expect the sublease to require, following the completion of construction of the facility, the tenant to pay base rent in an amount equal to 10.50% per annum of the total development costs plus the sum of all rents paid pursuant to the ground lease, which base rent will be payable in monthly installments. The sublease is also expected to provide that on January 1, 2006, and on each January 1 thereafter, the base rent will be increased by an amount equal to the greater of (A) 2.5% per year of the prior year's base rent, or (B) the percentage by which the CPI on January 1 shall have increased over the CPI figure in effect on the then just previous January 1. We also expect the sublease to require the tenant to carry customary insurance which is adequate to satisfy our underwriting standards. We expect the sublease to require the tenant to pay us, commencing on January 1, 2006, an amount equal to $7,500 to cover the cost of the physical inspections of the Facility, which fee will, on each January 1, be increased by 2.5% per annum. In addition to the inspection fee, we expect the total development costs to include $75,000 to cover our inspection of the facility during the construction period. Reserve for Extraordinary Repairs. We expect the sublease to require the tenant to be responsible for all maintenance and repairs and all extraordinary repairs required to keep the Facility in compliance with all applicable laws and regulations and as required under the sublease. We also expect the sublease to require the tenant, beginning on the date that construction of the facility has been completed, to make annual deposits into a reserve account in the amount of $2,500 per bed per year. The sublease is expected to provide that on each January 1 thereafter, the payment of $2,500 per bed per year into the improvement reserve will be increased by 2.5%, and that all extraordinary repair expenditures made in each year during the term of the sublease will be funded first from the reserve, and the tenant will pay into the reserve such funds as necessary for all extraordinary repairs. Cash Infusion and Net Worth Covenant. We expect the sublease to require that, as of the commencement date of the sublease, tenant shall have received from its equity owners at least $15 million in cash equity to be used for operating expenses and which shall not be distributed to its equity owners. Those contributions shall include the letter of credit as described below. The lease is also expected to provide that upon our request tenant will provide to us evidence that such cash equity is in place and has not been distributed to tenant's equity owners. We further expect the sublease to require that North Cypress maintain at all times during the sublease a tangible net worth, the amount of which shall be negotiated prior to closing and execution of the sublease. 87

Security. As security for the sublease, we expect that the tenant will grant us a security interest in all personal property, other than receivables, located and to be located at the facility. We expect the sublease to be cross-defaulted with any other sublease between North Cypress, or its affiliates, and us, or our affiliates. We also expect the sublease to require the tenant to obtain and deliver to us an unconditional and irrevocable letter of credit from a bank acceptable to us, naming us beneficiary thereunder, in an amount equal to one year's base rent under the sublease. We expect the sublease to also provide that at such time as the operations in the facility have for two consecutive fiscal years generated EBITDAR coverage of at least two times the base rent, the letter of credit may be reduced to an amount equal to six months of the base rent then in effect. has provided to us unaudited financial statements reflecting that, as of , it had tangible assets of approximately $ , including cash of approximately $ , liabilities of approximately $ and owners' equity of approximately $ , and for the period ended , had net income (loss) of approximately $ . Purchase Options. So long as we have the corresponding rights under the ground lease, we expect the sublease to provide that so long as the tenant is not in default, and no event has occurred which with the giving of notice or the passage of time or both would constitute a default under its, and its affiliates, leases and subleases with us or any of our affiliates or any of the leases and subleases with its subtenants, at the expiration of the sublease, and at the expiration of each extension term, the tenant will have the option to purchase the facility at a purchase price equal to the greater of (i) the appraised value of the facility, or (ii) the total development costs, including any capital additions funded by us, as increased by an amount equal to the greater of (A) 2.5% per annum from the date of the sublease, or (B) the rate of increase in the CPI on each January 1. Sale Proceeds Distributions or Syndication. At the time we enter into the lease with the tenant, we intend to also enter into an agreement with the tenant granting the tenant the right to choose between two options relating to the facility. The first option is based on a sale of the facility and, after we receive from the sales proceeds an amount equal to the total development costs plus an internal rate of return equal to 15% any proceeds above that amount will be distributed to the tenant and us on an equal basis. The other option we expect to grant is that, subject to applicable healthcare regulatory requirements, if requested by tenant, we will offer the tenant or its physician partners opportunities to purchase up to 49% of the limited partnership equity interest in the limited partnership entity that will hold the title to the facility. The valuation of the limited partnership's equity interest will be based on the historical cost of the limited partnership's assets. To the extent that we elect to place debt on the facility, such debt will be non-recourse to the limited partners. Such offering will occur six to nine months following the occupancy of the facility. If tenant chooses this option, tenant and/or its physician partners will invest on an equal basis with us. OTHER LETTERS OF COMMITMENT Diversified Specialty Institutes, Inc. Acquisition and Development Funding General. On March 3, 2005, we entered into a letter of commitment with Diversified Specialty Institutes, Inc., or DSI, the developer of the women's hospital and medical office building in Bensalem, Pennsylvania that we have contracted to develop and leaseback, pursuant to which, subject to certain conditions set forth in the letter of commitment, we have agreed to make available to DSI or its affiliates acquisition and development funding in the total amount of $50 million to be used to finance the potential future acquisition or development of healthcare facilities, in each case subject to our due diligence and approval. We expect the commitment to remain outstanding until March 2, 2006, and be available to finance any acquisition facility or development facility that is subject to definitive agreements as of March 2, 2006, notwithstanding that the closing or completion of the acquisition facility or development facility may not have occurred as of March 2, 2006. We have agreed that the definitive documents relating to the commitment must close by April 30, 2005, unless a 30-day extension is requested by DSI or ourselves. 88

As funds are drawn from the commitment to fund an acquisition or development facility, as applicable, we expect to enter into definitive documents with DSI. With respect to any development facility, we expect to enter into a development agreement with a developer, which may be an affiliate of DSI, to develop the development facility. Commitment Fee. DSI has agreed to pay us a commitment fee equal to 1% of the commitment, $100,000 of which was paid when the letter of commitment was signed. The remainder of the commitment fee will be due and payable at the closing of future projects, with the fee on each project being equal to 1% of that project's purchase price. We have agreed to give DSI a credit on future payments of commitment fees for the $100,000 paid at the execution of the letter of commitment. Lease. We expect to form a Delaware limited liability company or a limited partnership to own each facility acquired or developed pursuant to the commitment. At the time of our purchase of any acquisition or development facility, we intend to lease back to the applicable tenant 100% of the land and all improvements, including improvements to be constructed in the case of a development facility, for a 15-year term, with 3 options to renew for five years each, so long as the options are exercised at least six months prior to the expiration of the lease or the applicable extended term. We further expect that each lease will be a net-lease with the tenant responsible for all costs of the facility, including, but not limited to, taxes, utilities, insurance and maintenance. For each development facility, the lease is expected to require the tenant to pay monthly rent during the construction period in a per year amount equal to 10.75% multiplied by the total amount of the funds disbursed under the development agreement. Alternatively, we may loan to DSI the amounts necessary for construction of the improvements and, subject to certain conditions, purchase from and lease to DSI the improvements upon their completion. We also expect the lease relating to a development facility to require the tenant to pay, following the completion of construction of the facility, base rent in an amount equal to 10.75% per year of the total development costs, payable in monthly installments. For an acquisition facility, we expect the lease to require the tenant to pay us base rent equal to 10.75% of the purchase price of the facility. Each lease is also expected to provide that commencing on the first January 1 following the commencement of the lease with respect to an acquisition facility, and on the first January 1 following the construction completion date with respect to a development facility, and on each January 1 thereafter, the base rent will be increased by an amount equal to the greater of (A) 2.5% per year of the prior year's base rent, or (B) the percentage by which the CPI on January 1 has increased over the CPI figure in effect on the then just previous January 1. We also expect the lease for an acquisition facility and a development facility to require the tenant to carry customary insurance which is adequate to satisfy our underwriting standards. We expect the lease to require the tenant to pay us on the commencement date of the lease an amount equal to $7,500 to cover the cost of the physical inspections of the facility. This inspection fee will increase at the rate of 2.5% per year starting on the first January 1 following the commencement date of the lease, in the case of an acquisition facility, or the completion date, in the case of a development facility. In addition to the inspection fee, we also expect the tenant to pay us a fee equal to $75,000 per development facility to cover our inspection of the development facility during the construction period. Reserve for Extraordinary Repairs. We expect the lease to require the tenant to be responsible for all maintenance and repairs and all extraordinary repairs required to keep the facility in compliance with all applicable laws and regulations and as required under the lease. We expect the lease to require, commencing on the date that construction has been completed with respect to a development facility, or on the date of commencement of the lease with respect to an acquisition facility, the tenant to make annual deposits into a reserve account in the amount of $2,500 per bed per year. The lease is expected to provide that on each January 1 thereafter, the payment of $2,500 per bed per year into the improvement reserve will be increased by 2.5%, and that all extraordinary repair expenditures made in each year during the term of the lease will be funded first from the reserve, and the tenant will pay into the reserve such funds as necessary for all extraordinary repairs. 89

Security. As security for the lease, we expect that the tenant will grant us a security interest in all personal property, other than receivables, located and to be located at the facility. We expect the lease to be cross-defaulted with any other leases between the tenant, or its affiliates, and us, or our affiliates. We also expect the lease to require the tenant to obtain and deliver to us an unconditional and irrevocable letter of credit from a bank acceptable to us, naming us beneficiary thereunder, in an amount equal to one year's base rent under the lease. We expect the lease to require that, as of the commencement date of the lease, the tenant to have a tangible net worth of no less than $5 million in cash equity or shall have access to a working capital line of no less than $5 million that is personally guaranteed by Dr. Tannenbaum and such other persons as may be approved by us. Purchase Options. We expect the lease to provide that so long as tenant is not in default, and no event has occurred which with the giving of notice or the passage of time or both would constitute a default under its, and its affiliates, leases with us or any of our affiliates or any of the leases with its subtenants, at the expiration of the initial term of the lease, and at the expiration of each extended term thereafter, upon at least 60 days' prior written notice, tenant will have the option to purchase the facility at a purchase price equal to the greater of (i) the appraised value of the facility, or, in the case of a development facility (ii) the total development costs (including any capital additions funded by us), as increased by an amount equal to the greater of (A) 2.5% per year from the date of the lease, or (B) the rate of increase in the CPI on each January 1, or, in the case of an acquisition facility, (ii) the amount of (A) the purchase price paid for the facility, including costs of third party reports, legal fees and all other acquisition costs. We cannot assure you that we will acquire or develop any of the Pending Acquisition and Development Facilities or complete any of the other transactions we have under letter of commitment on the terms described in this prospectus or at all, because each of these transactions is subject to a variety of conditions, including, in the case of the Pending Acquisition and Development Facilities under contract, our satisfactory completion of due diligence, receipt of appraisals and other third party reports, obtaining of government and third party approvals and consents and other customary closing conditions and, in the case of the transactions under letters of commitment, negotiation and execution of mutually-acceptable definitive agreements, our satisfactory completion of due diligence, receipt of appraisals and other third party reports, obtaining of government and third party approvals and consents, approval by our board of directors and other customary closing conditions. OUR ACQUISITION AND DEVELOPMENT PIPELINE In addition to the transactions described above, as of , 2005, we had facilities under letters of intent with an aggregate gross purchase price and estimated development costs totally approximately $ million. The letters of intent are non-binding, and we cannot assure you that we will acquire or develop any of the facilities under letters of intent because each of these transactions is subject to a variety of conditions, including the willingness of the parties to proceed with the contemplated transaction, negotiation and execution of a letter of commitment and mutually-acceptable definitive agreements, our satisfactory completion of due diligence, receipt of appraisals and other third party reports, obtaining of government and third party approvals and consents, approval by our board of directors and other customary closing conditions. We have also identified a number of opportunities to acquire or develop additional healthcare facilities. In some cases, we are actively negotiating agreements or letters of intent with the owners or prospective tenants. In other instances, we have only identified the potential opportunity and had preliminary discussions with the owner or prospective tenant. None of these potential acquisitions or developments is under a letter of intent, and we cannot assure you that we will complete any of these potential acquisitions or developments. 90

MANAGEMENT OUR DIRECTORS AND EXECUTIVE OFFICERS Our business and affairs are managed under the direction of our board of directors, which consists of eight members, three of whom are members of our senior management team and five of whom our board of directors has determined to be independent in accordance with the listing standards established by the New York Stock Exchange, or NYSE. Each director is elected to serve until the next annual meeting of stockholders and until his successor is elected and qualified. The terms of our present directors will expire at our 2005 annual meeting of stockholders. The following table sets forth certain information regarding our executive officers and directors:

NAME AGE POSITION - ---- --- -------- Edward K. Aldag, Jr. ..................... 41 Chairman of the Board, President and Chief Executive Officer R. Steven Hamner.......................... 47 Director, Executive Vice President and Chief Financial Officer William G. McKenzie....................... 46 Vice Chairman of the Board Emmett E. McLean.......................... 49 Executive Vice President, Chief Operating Officer, Treasurer and Assistant Secretary Michael G. Stewart........................ 50 Executive Vice President, Secretary and General Counsel Virginia A. Clarke........................ 47 Director G. Steven Dawson.......................... 46 Director Bryan L. Goolsby.......................... 55 Director Robert E. Holmes, Ph.D. .................. 62 Director* L. Glenn Orr, Jr. ........................ 65 Director
- ------------------------ * Mr. Holmes has been designated as our lead independent director. The following is a summary of certain biographical information concerning our directors and executive officers: Edward K. Aldag, Jr. is one of our founders and has served as our president and chief executive officer since August 2003, and as chairman of the board since March 2004. Mr. Aldag served as our vice chairman of the board from August 2003 until March 2004 and as our secretary from August 2003 until March 2005. Prior to that, Mr. Aldag served as an executive officer and director with our predecessor from its inception in August 2002 until August 2003. From 1986 to 2001, Mr. Aldag managed two private real estate companies, Guilford Capital Corporation and Guilford Medical Properties, Inc., that had aggregate assets valued at more than $500 million. Mr. Aldag played an integral role in the formation of investor groups, structuring the financing, and closing the transactions. Guilford Medical Properties, Inc. owned numerous rehabilitation hospitals across the country and net-leased them to four different national healthcare providers. Mr. Aldag served as president and a member of the board of directors of Guilford Medical Properties, Inc. from its inception until selling his interest in the company in 2001. Mr. Aldag was the president and a member of the board of directors of Guilford Capital Corporation from 1998 to 2001 and from 1990 to 1998 served as executive vice president, chief operating officer and a member of the board of directors. Mr. Aldag received his B.S. in Commerce & Business from the University of Alabama with a major in corporate finance. R. Steven Hamner is one of our founders and has served as our executive vice president and chief financial officer since September 2003 and as a director since February 2005. In August and September 2003, Mr. Hamner served as our executive vice president and chief accounting officer. From October 2001 through March 2004, he was the managing director of Transaction Analysis LLC, a company that provided interim and project-oriented accounting and consulting services to commercial real estate owners 91

and their advisors. From June 1998 to September 2001, he was vice president and chief financial officer of United Investors Realty Trust, a publicly-traded REIT. For the 10 years prior to becoming an officer of United Investors Realty Trust, he was employed by the accounting and consulting firm of Ernst & Young LLP and its predecessors. Mr. Hamner received a B.S. in Accounting from Louisiana State University. Mr. Hamner is a certified public accountant. William G. McKenzie is one of our founders and has served as the vice chairman of our board of directors since September 2003. Mr. McKenzie has served as a director since our formation and served as the executive chairman of our board of directors in August and September 2003. From May 2003 to August 2003, he was an executive officer and director of our predecessor. From 1998 to the present, Mr. McKenzie has served as president, chief executive officer and a board member of Gilliard Health Services, Inc., a privately-held owner and operator of acute care hospitals. From 1996 to 1998, he was executive vice president and chief operating officer of the Mississippi Hospital Association/Diversified Services, Inc. and the Health Insurance Exchange, a mutual company and HMO. From 1994 to 1996, Mr. McKenzie was senior vice president of Managed Care and executive vice president of Physician Solutions, Inc., a subsidiary of Vaughan HealthCare, a private healthcare company in Alabama. From 1981 to 1994, Mr. McKenzie was hospital administrator and chief financial officer and held other management positions with several private acute care organizations. Mr. McKenzie received a Masters of Science in Health Administration from the University of Colorado and a B.S. in Business Administration from Troy State University. He has served in numerous capacities with the Alabama Hospital Association. Emmett E. McLean is one of our founders and has served as our executive vice president, chief operating officer and treasurer since September 2003. Mr. McLean has served as assistant secretary since April 2004. In August and September 2003, Mr. McLean also served as our chief financial officer. Mr. McLean was one of our directors from September 2003 until April 2004. From June to September, 2003, Mr. McLean served as executive vice president, chief financial officer, and treasurer and board member of our predecessor. From 2000 to 2003, Mr. McLean was a private investor and, for part of that period, served as a consultant to a privately held company. From 1995 to 2000, Mr. McLean served as senior vice president -- development, secretary, treasurer and a board member of PsychPartners, L.L.C., a healthcare services and practice management company. From 1992 to 1994, he was senior vice president, chief financial officer and secretary of Diagnostic Health Corporation, a healthcare services company. From 1984 to 1992, he worked for Dean Witter Reynolds, Inc., now Morgan Stanley, and Smith Barney, now Citigroup, in the corporate finance departments of their respective investment banking businesses. From 1977 to 1982, Mr. McLean worked as a commercial banker for SunTrust Banks, Inc. Mr. McLean received an MBA from the University of Virginia and a B.A. in Economics from The University of North Carolina. Michael G. Stewart has served as our general counsel since October 2004 and as our executive vice president and secretary since March 2005. Prior to October 2004, Mr. Stewart worked as a private investor, healthcare consultant and novelist. He advised physician and surgery groups on emerging healthcare issues for four years before publishing three novels. From 1993 until 1995, he served as vice president and general counsel of Complete Health Services, Inc., a managed care company, and its successor corporation, United Healthcare of the South, a division of United Healthcare, Inc. (NYSE: UNH). Mr. Stewart was engaged in the private practice of law between 1988 and 1993. Mr. Stewart holds a J.D. degree from Cumberland School of Law of Samford University and a B.S. in Business Administration from Auburn University. Virginia A. Clarke has served as a member of our board of directors since February 2005. Ms. Clarke has been a search consultant in the global executive search firm of Spencer Stuart & Associates since 1997. Ms. Clarke was with DHR International, an executive search firm, during 1996. Prior to that, Ms. Clarke spent 10 years in the real estate investment management business with La Salle Partners and Prudential Real Estate Investors, where her activities included asset management, portfolio management, capital raising and client service, and two years with First National Bank of Chicago. Ms. Clarke is a member of the Pension Real Estate Association. Ms. Clarke graduated from the University of California at 92

Davis and received a master's degree in management from the J.L. Kellogg Graduate School of Management at Northwestern University. G. Steven Dawson has served as a member of our board of directors since April 2004. From July 1990 to September 2003, Mr. Dawson was chief financial officer and senior vice president-finance of Camden Property Trust (NYSE: CPT) and its predecessors, a REIT engaged in the development, ownership, management, financing and sale of multi-family properties throughout the southern United States. He serves as a director of AmREIT, Inc. (AMEX: AMY), and has served as the chairman of the audit committee of that company since 2000. Mr. Dawson is also the lead outside director and chairman of the compensation committee for AmREIT. He is a director and the chairman of the audit committee for Desert Capital REIT, Inc., a public, unlisted mortgage REIT based in Las Vegas. He also serves on the board of directors and as the audit committee chairman of American Campus Communities (NYSE: ACC), on the board of directors and on the compensation committee of Sunset Financial Resources, Inc. (NYSE: SFO) and is on the board of a private cabling contractor based in Houston. He is involved with various charitable, non-profit and educational organizations, including serving on the board of His Grace Foundation, a charity providing services to the families of children in the Bone Marrow Transplant Unit of Texas Children's Hospital, and as a member of the Real Estate Roundtable at the Mays Graduate School of Business at Texas A&M University. Mr. Dawson received a degree in business from Texas A&M University. Bryan L. Goolsby has served as a member of our board of directors since February 2005. Mr. Goolsby is the managing partner of the law firm Locke Liddell & Sapp LLP. Mr. Goolsby is an associate board member of the Board of Governors of the National Association of Real Estate Investment Trusts. He is also a member of the National Multi-Family Housing Association and the Pension Real Estate Association, and an associate board member of the Edwin L. Cox School of Business at Southern Methodist University. He serves as a director of Desert Capital REIT, Inc. and AmREIT, Inc. Mr. Goolsby received a J.D. degree from the University of Texas, and is a Certified Public Accountant. Robert E. Holmes, Ph.D., has served as a member of our board of directors since April 2004. Mr. Holmes, our lead independent director, is the Dean and Professor of Management of the School of Business at the University of Alabama at Birmingham, positions he has held since 1999. From 1995 to 1999, he was Dean of the Olin Graduate School of Business at Babson College in Wellesley, Massachusetts. Prior to that, he was Dean of the James Madison University College of Business in Harrisonburg, Virginia for 12 years. He is the author of more than 20 scholarly publications, is past president of the Southern Business Administration Association, and is actively involved in the International Association for Management Education. Mr. Holmes received a bachelor's degree from the University of Texas at Austin, an MBA from University of North Texas, and received his Ph.D. from the University of Arkansas with an emphasis on management strategy. L. Glenn Orr, Jr. has served as a member of our board of directors since February 2005. Mr. Orr has been president and chief executive officer of The Orr Group, which provides investment banking and consulting services for middle-market companies, since 1995. Prior to that, he was chairman of the board of directors, president and chief executive officer of Southern National Corporation from 1990 until its merger with Branch Banking & Trust in 1995. Mr. Orr is member of the board of directors, chairman of the governance/compensation committee and a member of the executive committee of Highwoods Properties, Inc. (NYSE: HIW). He is also a member of the boards of directors of General Parts, Inc., Village Tavern, Inc. and Broyhill Management Fund, Inc. Mr. Orr previously served as president and chief executive officer of Forsyth Bank and Trust Co., president of Community Bank in Greenville, South Carolina and president of the North Carolina Bankers Association. He is a trustee of Wake Forest University. CORPORATE GOVERNANCE -- BOARD OF DIRECTORS AND COMMITTEES Our board of directors has adopted a code of ethics and business conduct relating to the conduct of our business by our employees, officers and directors, and has also adopted corporate governance guidelines 93

to assist the board of directors in the administration of its duties. Our corporate governance guidelines and the listing standards of the NYSE require that a majority of the members of our board of directors be independent. Board members are recommended for nomination by our ethics, nominating and corporate governance committee. Nominations must satisfy the standards established by that committee for membership on our board of directors. Our directors generally meet quarterly or more frequently if necessary. The directors are regularly kept informed about our business at meetings of the board of directors and its committees and through supplemental reports and communications. Our independent directors meet regularly in executive sessions without the presence of any corporate officers. Mr. Holmes has been selected by the board of directors to serve as lead independent director and in that capacity presides at meetings of the non-management directors, coordinates the preparation for meetings of the board of directors with our chief executive officer, and serves as the liaison between the board of directors and our chief executive officer. Our board of directors has established audit, compensation, ethics, nominating and corporate governance and investment committees, the principal functions and membership of which are briefly described below. The charters of the audit, compensation and ethics, nominating and corporate governance committees, along with our code of ethics and business conduct and our corporate governance guidelines, will be available on our website upon completion of this offering. In February 2005, we expanded the size of our board of directors from seven to 11 directors and elected four new directors, Messrs. Goolsby, Hamner and Orr and Ms. Clarke. In connection with the election of these new directors, our board reconstituted our audit, compensation and ethics, nominating and corporate governance committees and established the investment committee of our board. On April 6, 2005, three of our independent directors who had become members of our board in April 2004 resigned as directors. AUDIT COMMITTEE Our board of directors has established an audit committee, which is comprised of three independent directors, Messrs. Dawson and Orr and Ms. Clarke. Mr. Dawson serves as the chairperson of the audit committee and also serves on the audit committees of three other public companies. Our board of directors has determined that Mr. Dawson's service on the audit committees of other public companies does not impair his ability to serve on our audit committee. The audit committee oversees (i) our accounting and financial reporting processes; (ii) the integrity and audits of our financial statements; (iii) our compliance with legal and regulatory requirements; (iv) the qualifications and independence of our independent auditors; and (v) the performance of our internal and independent auditors. The audit committee also: - has sole authority to appoint or replace our independent auditors; - has sole authority to approve in advance all audit and non-audit services by our independent auditors; - monitors compliance of our employees with our standards of business conduct and conflict of interest policies; and - meets at least quarterly with our senior executive officers, internal audit staff and our independent auditors in separate executive sessions. The specific functions and responsibilities of the audit committee are set forth in the audit committee's charter. Our board of directors has determined that each of the members of the audit committee is financially literate, as such term is interpreted by our board of directors. In addition, our board of directors has determined that Mr. Dawson qualifies as an "audit committee financial expert" under the current SEC regulations. 94

COMPENSATION COMMITTEE Our board of directors has established a compensation committee, which is comprised of three independent directors, Messrs. Dawson, Goolsby and Orr. Mr. Orr serves as the chairperson of the compensation committee. The principal functions of the compensation committee are to: - evaluate the performance of our executive officers; - review and approve the compensation for our executive officers; - review and make recommendation to the board with respect to our incentive compensation plans and equity-based plans; and - administer our equity incentive plan. The compensation committee also reviews and approves corporate goals and objectives relevant to the chief executive officer's compensation, evaluates the chief executive officer's performance in light of those goals and objectives, and establishes the chief executive officer's compensation levels based on its evaluation. The compensation committee has the authority to retain and terminate any compensation consultant to be used to assist in the evaluation of the compensation of the chief executive officer or any other executive officer or director. In 2004, the compensation committee engaged a compensation consultant to perform a comprehensive review and provide recommendations to the compensation committee regarding the compensation of our officers and directors. The specific functions and responsibilities of the compensation committee are set forth in more detail in the compensation committee's charter. ETHICS, NOMINATING AND CORPORATE GOVERNANCE COMMITTEE Our board of directors has established an ethics, nominating and corporate governance committee. Membership of the committee is comprised of three independent directors, Messrs. Dawson, Goolsby and Holmes. Mr. Holmes serves as the chairperson of this committee. The ethics, nominating and corporate governance committee is responsible for, among other things, recommending the nomination of qualified individuals to become directors, recommending the composition of committees of our board, periodically reviewing the board's performance and effectiveness as a body, recommending proposed changes to the board of directors, and periodically reviewing our corporate governance guidelines and policies. The specific functions and duties of the ethics, nominating and corporate governance committee are set forth in the committee's charter. INVESTMENT COMMITTEE Our board of directors has established an investment committee. Membership of the committee is comprised of all of our current directors. Mr. Aldag serves as the chairperson of this committee. The investment committee is responsible for, among other things, considering and taking action with respect to all acquisitions, developments and leasing of healthcare facilities in which our aggregate investment will exceed $10 million. VACANCIES ON OUR BOARD OF DIRECTORS Any director may resign at any time and may be removed with or without cause by the stockholders upon the affirmative vote of the holders of at least two-thirds of all of our common stock outstanding and entitled to vote generally for the election of directors. Unless filled by a vote of the stockholders in the event a director is removed as permitted by Maryland law, a vacancy created by death, resignation, removal, adjudicated incompetence or other incapacity of a director may be filled by a vote of a majority of the remaining directors although less than a quorum. Vacancies created by an increase in the number of directors must be filled by a vote of majority of the entire board. 95

LIMITED LIABILITY AND INDEMNIFICATION The MGCL permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholder for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter limits the personal liability of our directors and officers for money damages to the fullest extent permitted under Maryland law. The MGCL requires a corporation, unless its charter provides otherwise, which our charter does not, to indemnify a director or officer who has been successful on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. See "Certain Provisions of Maryland Law and of Our Charter and Bylaws -- Indemnification and Limitation of Directors' and Officers' Liability." We maintain a directors and officers liability insurance policy. We have also entered into indemnification agreements with each of our directors and executive officers, which we refer to in this context as indemnitees. The indemnification agreements provide that we will, to the fullest extent permitted by Maryland law, indemnify and defend each indemnitee against all losses and expenses incurred as a result of his current or past service as our director or officer, or incurred by reason of the fact that, while he was our director or officer, he was serving at our request as a director, officer, partners, trustee, employee or agent of a corporation, partnership, joint venture, trust, other enterprise or employee benefit plan. We have agreed to pay expenses incurred by an indemnitee before the final disposition of a claim provided that he provides us with a written affirmation that he has met the standard of conduct required for indemnification and a written undertaking to repay the amount we pay or reimburse if it is ultimately determined that he has not met the standard of conduct required for indemnification. We are to pay expenses within 20 days of receiving the indemnitee's written request for such an advance. Indemnitees are entitled to select counsel to defend against indemnifiable claims. The general effect to investors of any arrangement under which any person who controls us or any of our directors, officers or agents is insured or indemnified against liability is a potential reduction in distributions to our stockholders resulting from our payment of premiums associated with liability insurance and payment of indemnifiable expenses and losses. The SEC takes the position that indemnification against liabilities arising under the Securities Act is against public policy and unenforceable. As a result, indemnification of our directors and officers may not be allowed for liabilities arising from or out of a violation of state or federal securities laws. DIRECTOR COMPENSATION As compensation for serving on our board of directors, each of our independent directors receives an annual fee of $20,000 and an additional $1,000 for each board of directors meeting attended. In addition, each independent director is paid $1,000 for attendance at each meeting of a committee on which he serves. Committee chairmen receive an additional $5,000 per year except that the audit committee chairman receives an additional $10,000 per year. In addition, we reimburse our directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings. Directors who are also officers or employees of our company receive no additional compensation for their service as directors. At the time of each annual meeting of our stockholders following his or her election to the board of directors, each independent director will receive 2,000 shares of our common stock, restricted as to transfer for three years, or a comparable number of deferred stock units. Our compensation committee may change the compensation of our independent directors in its discretion. Upon joining our board of directors, each independent director received a non-qualified option to purchase 20,000 shares of our common stock with an exercise price of $10.00 per share. One-third of these options vested upon grant. One-half of the remaining options will vest on each of the first and second anniversaries of the date of grant. In addition to this option to purchase stock, each of our independent 96

directors has been awarded 2,500 deferred stock units, which represent the right to receive 2,500 shares of common stock at no cost in October 2007 for Messrs. Dawson and Holmes and 2,500 shares of common stock at no cost in March 2008 for Ms. Clarke and Messrs. Goolsby and Orr. EXECUTIVE COMPENSATION The following table sets forth the compensation paid or earned by our chief executive officer and our other executive officers for 2003 and 2004:

RESTRICTED STOCK OTHER ANNUAL ALL OTHER NAME AND POSITION YEAR SALARY BONUS AWARDS(1) COMPENSATION COMPENSATION - ----------------- ---- -------- -------- ---------------- ------------ ------------ Edward K. Aldag, Jr. .............. 2004 $350,000 $350,000 43,500 $50,462(2) $30,769(3) Chairman, Chief Executive 2003 145,833(4) 145,833 10,492(5) 9,249(6) Officer and President Emmett E. McLean................... 2004 $250,000 $250,000 20,500 $24,385(7) $15,385(3) Executive Vice President, 2003 104,167(4) 104,167 -- 10,896(8) Chief Operating Officer, Treasurer and Assistant Secretary R. Steven Hamner................... 2004 $250,000 $250,000 27,000 $24,385(7) $15,385(3) Executive Vice President 2003 104,167(4) 104,167 -- 5,918(9) and Chief Financial Officer William G. McKenzie................ 2004 $175,000 $175,000 15,000 $ 0 $ 0 Vice Chairman of the Board 2003 72,917(4) 72,917 -- --
Michael G. Stewart. 2004 (10),527 $ 42,188 -- $ 0 $ 0 Executive Vice President, 2003 -- -- -- -- -- Secretary and General Counsel....
- --------------- (1) To be awarded upon completion of this offering under our equity incentive plan. These restricted stock awards will vest at a rate of 8.33% per quarter beginning on the last day of the first calendar quarter after completion of this offering so long as each named executive officer remains an employee of ours. Dividends will be paid on the shares of restricted common stock. (2) Represents a $12,000 automobile allowance and $25,000 payable to Mr. Aldag to reimburse him for the cost of tax preparation and financial planning services and $13,462 to reimburse Mr. Aldag for his tax liabilities associated with such payment. (3) Represents reimbursement for life insurance premiums of $20,000 for Mr. Aldag and $10,000 for each of Messrs. McLean and Hamner and reimbursement of $10,769 for Mr. Aldag and $5,385 for each of Messrs. McLean and Hamner for tax liabilities associated with such premium reimbursements, but does not include any matching contributions under the 401(k) plan that we expect to adopt in 2004. (4) For the partial year period from our inception in August 2003 until December 31, 2003. (5) Represents a $7,000 automobile allowance and $3,492 payable to Mr. Aldag to reimburse him for the cost of tax preparation and financial planning services. (6) Represents reimbursement for life insurance premiums of $9,249. (7) Represents a $9,000 automobile allowance and $10,000 for the named executive officers to reimburse them for the cost of tax preparation services and $5,385 for the named executive officers to reimburse them for their tax liabilities associated with such tax preparation cost reimbursement. (8) Represents reimbursement for life insurance premiums of $10,896. (9) Represents reimbursement for life insurance premiums of $5,918. (10) For the partial year period from October 25, 2004, Mr. Stewart's date of hire, to December 31, 2004. Had Mr. Stewart been employed for the full year 2004, he would have been entitled to a base salary of $225,000 during 2004. EMPLOYMENT AGREEMENTS We have employment agreements with each of the named executive officers. These employment agreements provide the following annual base salaries: Edward K. Aldag, Jr., $350,000; Emmett E. McLean, $250,000; R. Steven Hamner, $250,000; Michael G. Stewart, $225,000; and William G. McKenzie, $175,000. The base salaries for Messrs. Aldag, McLean and Hamner were increased by 5% effective January 1, 2005, and Mr. Stewart's base salary was increased to $250,000. On each January 1 hereafter, each of the executive officers is to receive a minimum increase in his base salary equal to the increase in the Consumer Price Index. These agreements provide that the executive officers, other than Mr. McKenzie, agree to devote substantially all of their business time to our operation. Mr. Stewart's employment agreement may be terminated by either party, with or without cause immediately upon notice to the other party. Each employment agreement for Messrs. Aldag, McLean, Hamner and McKenzie is for a three year term which is automatically extended at the end of each year within such term for an 97

additional one year period, unless either party gives notice of non-renewal as provided in the agreement. These employment agreements permit us to terminate each executive's employment with appropriate notice for or without "cause." "Cause" is generally defined to mean: - conviction of, or the entry of a plea of guilty or nolo contendere to, a felony (excluding any felony relating to the negligent operation of a motor vehicle or a conviction or plea of guilty or nolo contendere arising under a statutory provision imposing per se criminal liability due to the position held by the executive with us, provided the act or omission of the executive or officer with respect to such matter was not taken or omitted to be taken in contravention of any applicable policy or directive of the board of directors); - a willful breach of the executive's duty of loyalty which is materially detrimental to us; - a willful failure to perform or adhere to explicitly stated duties that are consistent with the executive's employment agreement, or the reasonable and customary guidelines of employment or reasonable and customary corporate governance guidelines or policies, including, without limitation, the business code of ethics adopted by the board of directors, or the failure to follow the lawful directives of the board of directors provided such directives are consistent with the terms of the executive's employment agreement, which continues for a period of 30 days after written notice to the executive; and - gross negligence or willful misconduct in the performance of the executive's duties. Each of Messrs. Aldag, McLean, Hamner and McKenzie has the right under his employment agreement to resign for "good reason." The following constitute good reason under the employment agreements: (i) the employment agreement is not automatically renewed by the company; (ii) the termination of certain incentive compensation programs; (iii) the termination or diminution of certain employee benefit plans, programs or material fringe benefits (other than for Mr. McKenzie); (iv) the relocation of our principal office outside of a 100 mile radius of Birmingham, Alabama (in the case of Mr. Aldag); or (v) our breach of the employment agreement which continues uncured for 30 days. In addition, in the case of Mr. Aldag, the following constitute good reason: (i) his removal from the board of directors without cause or his failure to be nominated or elected to the board of directors; or (ii) any material reduction in duties, responsibilities or reporting requirements, or the assignment of any duties, responsibilities or reporting requirements that are inconsistent with his positions with us. The executive employment agreements provide a monthly car allowance of $1,000 for Mr. Aldag and $750 for each of Messrs. McLean, Hamner and Stewart. Messrs. Aldag, McLean and Hamner are also reimbursed for the cost of tax preparation and financial planning services, up to $25,000 annually for Mr. Aldag and $10,000 annually for each of Messrs. McLean and Hamner. We also reimburse each executive for the income tax he incurs on the receipt of these tax preparation and financial planning services. In addition, the employment agreements provide for annual paid vacation of six weeks for Mr. Aldag and three weeks for Messrs. McLean, Hamner and Stewart and various other customary benefits. The employment agreements also provide that Mr. Aldag will receive up to $20,000 per year in reimbursement for life insurance premiums, which amount is to increase annually based on the increase in the Consumer Price Index for such year, and that Messrs. McLean, Hamner and Stewart will receive up to $10,000 per year in reimbursement for life insurance premiums which amount is to increase annually based on the increase in the Consumer Price Index for such year. We also reimburse each executive for the income tax he incurs on the receipt of these premium reimbursements. We have the right to obtain a key man life insurance policy for the benefit of the company on the life of each of our executives with a death benefit equal to the death benefit of such executive's whole life policy. The employment agreements referred to above provide that the executive officers are eligible to receive the same benefits, including medical insurance coverage and retirement plan benefits in a 401(k) plan to the same extent as other similarly situated employees, and such other benefits as are 98

commensurate with their position. Participation in employee benefit plans is subject to the terms of said benefit plans as in effect from time to time. If the executive's employment ends for any reason, we will pay accrued salary, bonuses and incentive payments already determined, and other existing obligations. In addition, if we terminate the employment of Mr. Aldag, Mr. McLean, Mr. Hamner or Mr. McKenzie without cause or if any of them terminates his employment for good reason, we will be obligated to pay (i) a lump sum payment of severance equal to the sum of (x) the product of three and the sum of the salary in effect at the time of termination plus the average cash bonus (or the highest cash bonus, in the case of Mr. Aldag) paid to such executive during the preceding three years, grossed up for taxes in the case of Mr. Aldag, and (y) the incentive bonus prorated for the year in which the termination occurred, (ii) other than for Mr. McKenzie, the cost of the executive's continued participation in the company's benefit and welfare plans (other than the 401(k) plan) for a three year period (or for a five year period in the case of Mr. Aldag), and (iii) certain other benefits as provided for in the employment agreement. Additionally, in the event of a termination by us for any reason other than cause or by the executive for good reason, all of the options and restricted stock granted to the executive will become fully vested, and the executive will have whatever period remains under the options in which to exercise all vested options. In the event of a termination of the employment of our executives as a result of death, then in addition to the accrued salary, bonus and incentive payments due to them, they shall become fully vested in their options and restricted stock, and their respective beneficiaries will have whatever period remains under the options to exercise such options. In addition, the executives would be entitled to their prorated incentive bonuses. In the event the employment of our executives ends as a result of a termination by us for cause or by the executives without good reason, then in addition to the accrued salary, bonuses and incentive payments due to them, the executives would be entitled to exercise their vested stock options pursuant to the terms of the grant, but all other unvested options and restricted stock would be forfeited. Upon a change of control, the named executive officers will become fully vested in their options and restricted stock and will have whatever period remains under the option in which to exercise their options. In addition, if any executive's employment is terminated by us for cause or by the executive without good reason in connection with a change of control, the executive will be entitled to receive an amount equal to the largest cash compensation paid to the executive for any twelve month period during his tenure multiplied by three. In general terms, a change of control occurs: - if a person, entity or affiliated group (with certain exceptions) acquires more than 50% of our then-outstanding voting securities; - if we merge into or complete a share exchange, consolidation or other business combination transaction with another entity unless the holders of our voting stock immediately prior to the merger have at least 50% of the combined voting power of the securities in the merged entity or its parent; or - upon the liquidation, dissolution, sale or disposition of all or substantially all of our assets such that after that transaction the holders of our voting stock immediately prior to the transaction own less than 50% of the voting securities of the acquiror or its parent. If payments become due as a result of a change in control and the excise tax imposed by Code Section 4999 applies, the terms of the employment agreements require us to gross up the amount payable to the executive by the amount of this excise tax plus the amount of income and other taxes due as a result of the gross up payment. For an 18 month period after termination of an executive's employment for any reason other than (i) termination by us without cause or (ii) termination by the executive for good reason, each of the executives under these employment agreements has agreed not to compete with us by working with or 99

investing in, subject to certain limited exceptions, any enterprise engaged in a business substantially similar to our business as it was conducted during the period of the executive's employment with us. The employment agreements provide that these named executive officers are eligible to participate in our equity incentive plan, as described in the section below titled "Equity Incentive Plan." The employment agreements also provide that the named executive officers are eligible to receive annual bonuses under our bonus policy. See "Annual Incentive Bonus Policy." BENEFIT PLANS ANNUAL INCENTIVE BONUS POLICY We expect our compensation committee to adopt an annual cash incentive bonus policy. This policy will be subject to those provisions in our executive officers' employment agreements that provide that the executives will receive not less than 40% nor more than 100% of their base salaries under the policy. Our compensation committee will reevaluate the annual incentive bonus policy for our executive officers on an annual basis, subject to the maximum and minimum limitations previously described. In addition, the compensation committee may approve any additional bonus awards to any executive officer. 401(K) PLAN We intend to establish and maintain a retirement savings plan under Section 401(k) of the Code to cover our eligible employees. The plan will allow eligible employees to defer, within prescribed limits, up to 15% of their compensation on a pre-tax basis through contributions to the plan. In addition, we intend to reserve the right to make discretionary contributions on behalf of eligible participants. Our employees will be eligible to participate in the plan if they meet the plan's requirements, including a minimum period of credited service. Any company contributions may be subject to certain vesting requirements. EQUITY INCENTIVE PLAN We have adopted the Amended and Restated Medical Properties Trust, Inc. 2004 Equity Incentive Plan, or equity incentive plan, for the purpose of attracting and retaining directors, executive officers and other key employees and consultants, including officers and employees of our operating partnership. The equity incentive plan provides that the aggregate number of shares of common stock as to which awards can be made pursuant to the equity incentive plan is 791,180. There remain 564,180 shares available for awards under the equity incentive plan, of which 435,000 shares have been reserved by the compensation committee for awards of restricted stock after December 31, 2005 based on our performance and, in the case of our officers and employees, their individual performance in 2005 as measured in accordance with criteria to be established by our compensation committee. We intend to seek stockholder approval of an amendment to the equity incentive plan at our 2005 annual meeting in order to increase the shares of common stock available under the plan. Awards. The equity incentive plan authorizes the issuance of options to purchase shares of common stock, restricted stock awards, restricted stock units, deferred stock units, stock appreciation rights and performance units. The equity incentive plan contains an award limit on the maximum number of shares of common stock that may be awarded to an individual in any fiscal year of 300,000 shares. Vesting. Our compensation committee will determine the vesting of options and restricted stock and restricted stock units granted under the equity incentive plan, subject to any different vesting provisions agreed upon in a participant's employment agreement. In addition, our compensation committee will establish a standard vesting schedule for options, restricted stock and restricted stock units subject to any different vesting schedule which is agreed upon in a participant's employment or award agreement. Options. Each option granted pursuant to the equity incentive plan is designated at the time of grant as either an option intended to qualify as an incentive stock option under Section 422 of the Code, referred to as a qualified incentive option, or as an option that is not intended to so qualify, referred to as a non-qualified option. The equity incentive plan authorizes our compensation committee to grant incentive stock 100

options for common stock in an amount and at an exercise price to be determined by it, provided that the price cannot be less than 100% of the fair market value of the common stock on the date on which the option is granted. If an incentive stock option is granted to a 10% stockholder, additional requirements will apply to the option. The exercise price of non-qualified options will be equal to 100% of the fair market value of common stock on the date the option is granted unless otherwise determined by our compensation committee. The exercise price for any option is generally payable in cash or, in certain circumstances, by the surrender, at the fair market value on the date on which the option is exercised, of shares of our common stock having a value equal to the exercise price. The equity incentive plan provides that exercise may be delayed or prohibited if it would adversely affect our status as a REIT. In addition, the equity incentive plan permits optionholders to exercise their options prior to the date on which the options will vest, subject to Committee action. In such case, the optionholder will, upon payment for the shares, receive restricted stock having vesting terms on transferability that are identical to the vesting terms under the original option and subject to repurchase by us while the restrictions on vesting are in effect. In connection with certain extraordinary events, the compensation committee may make adjustments in the aggregate number and kind of shares of capital stock reserved for issuance, the number and kind of shares of capital stock covered by outstanding awards and the exercise prices specified therein as may be determined to be appropriate. Restricted Stock. The equity incentive plan also provides for the grant of restricted stock awards. A restricted stock award is an award of shares of common stock that is subject to restrictions on transferability and other restrictions, if any, as our compensation committee may impose at the date of grant. Shares of restricted common stock are subject to vesting as our compensation committee may approve or as may otherwise be agreed upon in a participant's employment or other award agreement. The restrictions may lapse separately or in combination at the times and under the circumstances, including without limitation, a specified period of employment or the satisfaction of pre-established criteria, in installments or otherwise, as our compensation committee may determine. Except to the extent restricted under the award agreement, a participant granted shares of restricted stock will have all of the rights of a stockholder, including, without limitation, the right to vote and the right to receive dividends on the restricted stock. Restricted Stock Units and Deferred Stock Units. Under the equity incentive plan, the compensation committee may award restricted stock units and deferred stock units, each for the duration that it determines in its discretion. Each restricted stock unit and each deferred stock unit is equivalent in value to one share of common stock and entitles the participant receiving the award to receive one share of common stock for each restricted stock unit at the end of the vesting period applicable to such restricted stock unit and for each deferred stock unit at the end of the deferral period. Participants are not required to pay any additional consideration in connection with the settlement of restricted stock units or deferred stock units. A holder of restricted stock units or deferred stock units has no voting rights, right to receive cash distributions or other rights as a stockholder until shares of common stock are issued to the holder in settlement of the stock units. However, participants holding restricted stock units or deferred stock units will be entitled to receive dividend equivalents with respect to any payment of cash dividends on an equivalent number of shares of common stock. Such dividend equivalents will be credited in the form of additional stock units. Performance Units. The equity incentive plan also provides for the grant of performance shares and performance units. Holders of performance units will be entitled to receive payment in cash or shares of our common stock (or in some combination of cash and shares) if the performance goals established by the compensation committee are achieved or the awards otherwise vest. Each performance unit will have an initial value established by the compensation committee. The compensation committee will set performance objectives, and such performance objectives may be based upon the achievement of company-wide, divisional or individual goals. Stock Appreciation Rights. The equity incentive plan also authorizes our compensation committee to grant stock appreciation rights. Stock appreciation rights are awards that give the recipient the right to 101

receive an amount equal to (1) the number of shares exercised under the right, multiplied by (2) the amount by which our stock price exceeds the exercise price. Payment may be in cash, in shares of our common stock with equivalent value, or in some combination, as determined by the administrator. The compensation committee will determine the exercise price, vesting schedule and other terms and conditions of stock appreciation rights; however, stock appreciation rights expire under the same rules that apply to stock options. Administration of the Plan. The equity incentive plan is administered by our compensation committee. Mr. Aldag is to make recommendations to the compensation committee as to which consultants, employees, and executive officers, other than himself, will be eligible to participate, subject to compensation committee review and approval. The compensation committee, in its absolute discretion, will determine the effect of an employee's termination on unvested options, restricted common stock and restricted stock units, unless otherwise provided in the equity incentive plan or the participant's employment or award agreement. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION There are no compensation committee interlocks and none of our employees participates on the compensation committee. INSTITUTIONAL TRADING OF OUR COMMON STOCK Currently, approximately 19.9 million shares of common stock issued in connection with our April 2004 private placement are eligible for trading in the Portal(SM) Market, a subsidiary of The Nasdaq Stock Market, Inc., which permits secondary sales of eligible unregistered securities to qualified institutional buyers in accordance with Rule 144A under the Securities Act. The last sale of our common stock on the Portal(SM) Market occurred on March 29, 2005 at a price of $10.25 per share. The following table shows the high and low sales prices for our common stock for each quarterly period since our common stock became eligible for trading in the Portal(SM) Market:

HIGH SALES LOW SALES PRICE PRICE ----------- ----------- April 6, 2004 to June 30, 2004.............................. $10.50 $10.00 July 1, 2004 to September 30, 2004.......................... 10.00 10.00 October 1, 2004 to December 31, 2004........................ 10.25 10.00 January 1, 2005 to March 31, 2005........................... 10.25 10.00
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PRINCIPAL STOCKHOLDERS The following table sets forth the beneficial ownership of our common stock as of March 31, 2005 by (i) each of our directors, (ii) each of our executive officers, (iii) all of our directors and executive officers as a group and (iv) each person known to us who is the beneficial owner of more than 5% of our common stock, as adjusted to give effect to the issuance of shares of restricted common stock issuable upon completion of this offering. The SEC has defined "beneficial" ownership of a security to mean the possession, directly or indirectly, of voting power or investment power. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (a) the exercise of any option, warrant or right, (b) the conversion of a security, (c) the power to revoke a trust, discretionary account or similar arrangement, or (d) the automatic termination of a trust, discretionary account or similar arrangement. Each beneficial owner named in the table has the sole voting and investment power with respect to all of the shares of our common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. Unless otherwise indicated, the address of each named beneficial owner is Medical Properties Trust, Inc., 1000 Urban Center Drive, Suite 501, Birmingham, Alabama, 35242.

PERCENTAGE OF ALL COMMON PERCENTAGE OF ALL NUMBER OF SHARES SHARES COMMON SHARES NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (PRE-OFFERING)(1) (POST-OFFERING)(1) - ------------------------ ------------------ ----------------- ------------------ Edward K. Aldag, Jr................... 282,217(2) 1.08% R. Steven Hamner...................... 73,804(3) * William G. McKenzie................... 97,680(4) * Emmett E. McLean...................... 105,207(5) * Michael G. Stewart.................... 0 * Virginia A. Clarke.................... 6,666(6) * G. Steven Dawson...................... 33,333(7) * Bryan L. Goolsby...................... 6,666(6) * Robert E. Holmes, Ph.D. .............. 14,333(7) * L. Glenn Orr, Jr. .................... 6,666(6) * All executive officers and directors as a group (10 persons).......... 625,672(8) 2.39% Friedman, Billings, Ramsey Group, Inc................................. 2,869,610(9) 11.00% 1001 Nineteenth St. North Arlington, Virginia 22209
- --------------- * Represents less than 1% of the number of shares of common stock outstanding. (1) Pre-offering calculations assume 26,082,862 shares of common stock outstanding as of March 31, 2005. Post-offering calculations assume shares of common stock outstanding. Shares of common stock that are deemed to be beneficially owned by a stockholder within 60 days after , 2005 are deemed outstanding for purposes of computing such stockholder's percentage ownership but are not deemed outstanding for the purpose of computing the percentage ownership of any other stockholder. (2) Excludes 43,500 shares of restricted common stock to be awarded upon completion of this offering. (3) Excludes 27,000 shares of restricted common stock to be awarded upon completion of this offering. (4) Excludes 15,000 shares of restricted common stock to be awarded upon completion of this offering. (5) Excludes 20,500 shares of restricted common stock to be awarded upon completion of this offering. (6) Includes 6,666 shares of common stock issuable upon exercise of a vested stock option. (7) Includes 13,333 shares of common stock issuable upon exercise of a vested stock option. (8) See notes (1)-(7) above. (9) Includes 1,795,571 shares of common stock owned directly by Friedman, Billings, Ramsey Group, Inc., the parent company of Friedman, Billings, Ramsey & Co., Inc., 79,039 shares owned directly by Friedman, Billings, Ramsey & Co., Inc. and 995,000 shares held by various investment funds over which Friedman, Billings, Ramsey Group, Inc., through a wholly-owned indirect subsidiary, exercises shared investment and voting power. We and our founders have agreed that the 521,908 shares of our common stock held by them that were issued in connection with our formation, which excludes the 36,000 shares in the aggregate that they purchased in our April 2004 private placement, will vest upon the effective date of the registration 103

statement of which this prospectus is a part. In addition, a founder's unvested shares will become 100% vested if the founder's employment is terminated by that founder with good reason or by us without cause, upon the founder's death or disability or upon a change of control of the company prior to completion of this offering. A founder's unvested shares will be forfeited if the founder's employment with us is terminated by us for good cause or by the founder without good reason prior to completion of this offering. SELLING STOCKHOLDERS The following table sets forth the beneficial ownership of shares of common stock by the selling stockholders as of , 2005, the maximum number of shares of common stock being offered by the selling stockholders under this prospectus and the beneficial ownership of shares of common stock by the selling stockholders on , 2005 as adjusted to give effect to the sale of shares of common stock offered by this prospectus. The SEC has defined "beneficial" ownership of a security to mean the possession, directly or indirectly, of voting power or investment power. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (a) the exercise of any option, warrant or right, (b) the conversion of a security, (c) the power to revoke a trust, discretionary account or similar arrangement, or (d) the automatic termination of a trust, discretionary account or similar arrangement. Shares of common stock may also be sold by donees, pledges or other transferees or successors in interest of the selling stockholder. Pursuant to a registration rights agreement between us and our existing stockholders, these stockholders have the right to sell in this offering all or a portion of their shares of common stock. In accordance with notices that we received pursuant to these registration rights, we are including shares of common stock in this offering.

PERCENTAGE OF BENEFICIAL OWNERSHIP NUMBER OF MAXIMUM ALL SHARES AFTER RESALE OF SHARES SHARES NUMBER OF BENEFICIALLY ------------------------- BENEFICIALLY SHARES BEING OWNED BEFORE NUMBER OF SELLING STOCKHOLDER OWNED OFFERED RESALE(1) SHARES PERCENTAGE(2) - ------------------- ------------ ------------ ------------- --------- -------------
- --------------- * Represents less than 1%. (1) Assumes shares of common stock outstanding as of , 2005. (2) Assumes shares of common stock outstanding as of , 2005, including shares of common stock issued in this offering. REGISTRATION RIGHTS AND LOCK-UP AGREEMENTS REGISTRATION RIGHTS The purchasers of our common stock in our April 2004 private placement are entitled to the benefits of a registration rights agreement among the purchasers of our stock in that offering, Friedman, Billings, Ramsey & Co., Inc. and us. In accordance with the registration rights agreement, we have agreed to include shares held by of these purchasers in this offering. At the request of us or the underwriters, the holders of our outstanding common stock not being sold in this offering will be prohibited from selling, contracting to sell or otherwise disposing of or hedging their common stock for specified periods of time following the date of this prospectus. These registration rights and lock-up agreements are described in detail below. The summary of the registration rights agreement is subject to and qualified in its entirety by reference to the registration rights agreement, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part. See "Where You Can Find More Information." Inclusion of Common Stock in this Offering. On or about November 12, 2004, we sent to all of our stockholders notice that we have filed a registration statement with the SEC for this offering. We sent this 104

notice pursuant to the registration rights agreement among our stockholders, Friedman, Billings, Ramsey & Co., Inc. and us, under which the persons who purchased our common stock in our private placement in April 2004 and their transferees have the right to sell in this offering all or a portion of their common stock, subject to various rights of the underwriters and other conditions referred to below. Because this offering is underwritten, the registration rights agreement: - requires the selling stockholders to enter into the underwriting agreement for this offering; - permits the underwriters, based on marketing factors, to limit the number of shares a selling stockholder may sell in this offering; and - conditions the selling stockholders' participation in this offering on compliance with applicable provisions of the registration rights agreement. Resale Registration Statement. Pursuant to the registration rights agreement, we also agreed for the benefit of the holders of shares of common stock sold in our April 2004 private placement or issued to Friedman, Billings, Ramsey & Co., Inc. in connection with our April 2004 private placement, that we would, at our expense, file with the SEC, no later than nine months following the closing of the offering, or January 6, 2005, a resale registration statement permitting the public offering and sale of the registrable securities. The resale registration statement was filed on January 6, 2005. Pursuant to a registration rights agreement between us, Friedman, Billings, Ramsey & Co., Inc. and certain holders of our common stock, we are required to pay most expenses in connection with the registration of the shares of common stock purchased in the April 2004 private placement. In addition, we will reimburse selling stockholders in an aggregate amount of up to $50,000, for the fees and expenses of one counsel and one accounting firm, as selected by Friedman, Billings, Ramsey & Co., Inc. for the selling stockholders to review any registration statement. Each selling stockholder participating in this offering will bear a proportionate share based on the total number of shares of common stock sold in this offering of all discounts and commissions payable to the underwriters, all transfer taxes and transfer fees and any other expense of the selling stockholders not allocated to us in the registration rights agreement. In addition, we agreed to use our reasonable best efforts to cause the resale registration statement to become effective under the Securities Act as promptly as practicable after the filing and to maintain the resale registration statement continuously effective under the Securities Act until the first to occur of (1) such time as all of the shares of common stock covered by the resale registration statement have been sold pursuant to the registration statement or pursuant to Rule 144 (or any successor or analogous rule) under the Securities Act, (2) such time as all of the common stock not held by affiliates of us, and covered by the resale registration statement, are eligible for sale pursuant to Rule 144(k) (or any successor or analogous rule) under the Securities Act, (3) such time as the shares of common stock have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer have been delivered by us and subsequent public distribution of such shares does not require registration, or (4) the second annual anniversary of the initial effective date of the resale registration statement. Notwithstanding the foregoing, we will be permitted, under limited circumstances, to suspend the use, from time to time, of the prospectus that is part of the resale registration statement, and therefore suspend sales under the registration statement, for certain periods, referred to as "blackout periods," if a majority of the independent directors of our board, in good faith, determines that we are in compliance with the terms of the registration rights agreement, that it is in our best interest to suspend the use of the registration statement, and: - that the offer or sale of any registrable shares would materially impede, delay or interfere with any material proposed acquisition, merger, tender offer, business combination, corporate reorganization, consolidation or similar material transaction; 105

- after the advice of counsel, sale of the registrable shares would require disclosure of non-public material information not otherwise required to be disclosed under applicable law; and - disclosure would have a material adverse effect on us or on our ability to close the applicable transaction. In addition, we may effect a blackout if a majority of independent directors of our board, in good faith, determines that we are in compliance with the terms of the registration rights agreement, that it is in our best interest to suspend the use of the registration statement, and, after advice of counsel, that it is required by law, rule or regulation to supplement the registration statement or file a post-effective amendment for the purposes of: - including in the registration statement any prospectus required under Section 10(a)(3) of the Securities Act; - reflecting any facts or events arising after the effective date of the registration statement that represents a fundamental change in information set forth therein; or - including any material information with respect to the plan of distribution or change to the plan of distribution not set forth therein. The cumulative blackout periods in any 12 month period commencing on the closing of the offering may not exceed an aggregate of 90 days and furthermore may not exceed 60 days in any 90 day period. We may not institute a blackout period more than three times in any 12 month period. Upon the occurrence of any blackout period, we are to use our reasonable best efforts to take all action necessary to promptly permit resumed use of the registration statement. If, among other matters, we fail to file a resale registration statement within nine months of the closing of the April 2004 private placement or fail to maintain its effectiveness, or, if our board of directors suspends the effectiveness of the resale registration statement in excess of the permitted blackout periods described above, the holders of registrable shares (other than our affiliates) will be entitled to receive liquidated damages from us for the period during which such failures or excess suspensions are continuing. The liquidated damages will accrue daily during the first 90 days of any such period at a rate of $0.25 per registrable share per year and will escalate by $0.25 per registrable share per year at the end of each 90 day period within any such period up to a maximum rate of $1.00 per registrable share per year. The liquidated damages will be payable quarterly, in arrears within ten days after the end of each applicable quarter. In connection with the registration of the shares sold in the April 2004 private placement, we agreed to use our reasonable best efforts to list our common stock on the NYSE or the Nasdaq National Market and thereafter to maintain the listing. LOCK-UP AGREEMENTS All of our directors and executive officers, subject to limited exceptions, have agreed to be bound by lock-up agreements that prohibit these holders from selling or otherwise disposing of any of our common stock or securities convertible into our common stock that they own or acquire for 180 days after the date of this prospectus. In addition, the underwriters will require that all of our stockholders other than our executive officers and directors agree not to sell or otherwise dispose of any of the shares of our common stock or securities convertible into our common stock that they have acquired prior to the date of this prospectus and are not selling in this offering until 60 days after the date of this prospectus, subject to limited exceptions. Friedman, Billings, Ramsey & Co., Inc., on behalf of the underwriters, may, in its discretion, release all or any portion of the common stock subject to the lock-up agreements with our directors and executive officers, at any time and without notice or stockholder approval, in which case our other stockholders would also be released from the restrictions under the registration rights agreement. 106

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OUR FORMATION We were formed as a Maryland corporation on August 27, 2003 to succeed to the business of Medical Properties Trust, LLC, a Delaware limited liability company, which was formed by certain of our founders in December 2002. In connection with our formation, we issued our founders 1,630,435 shares of our common stock in exchange for nominal cash consideration and the membership interests of Medical Properties Trust, LLC. Upon completion of our private placement in April 2004, 1,108,527 shares of the 1,630,435 shares of common stock held by our founders were redeemed for nominal value and they now collectively hold 557,908 shares of our common stock, including shares purchased in our April 2004 private placement. James P. Bennett was formerly an owner, officer, director and consultant of the company's predecessor, Medical Properties Trust, LLC, but has not been affiliated with us since August 2003. Our predecessor had a consulting agreement with Mr. Bennett pursuant to which he was to be paid a monthly consulting fee, certain fringe benefits and, under certain circumstances, a fee based upon the completion of specified acquisition transactions. We owe Mr. Bennett, and have accrued unpaid consulting fees in the amount of, $411,238. Mr. Bennett disputes this amount and has notified us that he believes he is entitled to be paid consulting fees of approximately $1.6 million. We intend to vigorously defend against this claim. From time to time, we may acquire or develop facilities in transactions involving prospective tenants in which our directors or executive officers have an interest. In accordance with our written conflicts of interest policy, we do not intend to engage in these transactions without the approval of a majority of our disinterested directors. OUR STRUCTURE Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any limited partner thereof, on the other. Our directors and officers have duties to our company and our stockholders under applicable Maryland law in connection with their management of our company. At the same time, we, through our wholly owned subsidiary, have fiduciary duties, as a general partner, to our operating partnership and to the limited partners under Delaware law in connection with the management of our operating partnership. Our duties, through our wholly owned subsidiary, as a general partner to our operating partnership and its partners may come into conflict with the duties of our directors and officers to our company and our stockholders. The partnership agreement of our operating partnership requires us to resolve such conflicts in favor of our stockholders. Pursuant to Maryland law, a contract or other transaction between us and a director or between us and any other corporation or other entity in which any of our directors is a director or has a material financial interest is not void or voidable solely on the grounds of such common directorship or interest, the presence of such director at the meeting at which the contract or transaction is authorized, approved or ratified or the counting of the director's vote in favor thereof. However, such transaction will not be void or voidable only if: - the material facts relating to the common directorship or interest and as to the transaction are disclosed to our board of directors or a committee of our board, and our board or committee authorizes, approves or ratifies the transaction or contract by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum; - the material facts relating to the common directorship or interest and as to the transaction are disclosed to our stockholders entitled to vote thereon, and the transaction is authorized, approved or ratified by a majority of the votes cast by the stockholders entitled to vote (other than the votes of shares owned of record or beneficially by the interested director); or 107

- the transaction or contract is fair and reasonable to us at the time it is authorized, ratified or approved. Furthermore, under Delaware law, where our operating partnership is formed, we, acting through the general partner, have a fiduciary duty to our operating partnership and, consequently, such transactions are also subject to the duties of care and loyalty that we, as a general partner, owe to limited partners in our operating partnership (to the extent such duties have not been eliminated pursuant to the terms of the partnership agreement). Where appropriate, in the judgment of the disinterested directors, our board of directors may obtain a fairness opinion, or engage independent counsel to represent the interests of non-affiliated security holders, although our board of directors will have no obligation to do so. RELATIONSHIP WITH ONE OF OUR UNDERWRITERS On November 13, 2003, we entered into an engagement letter agreement with Friedman, Billings, Ramsey & Co., Inc., one of the underwriters of this offering. The engagement letter gives Friedman, Billings, Ramsey & Co., Inc. the right to serve in the following capacities until April 2006: - as our financial advisor with respect to any future mergers, acquisitions or other business combinations; - as the sole book running and lead underwriter or sole placement agent in connection with any public or private offering of equity or any public offering of debt securities; and - as our agent in connection with the exercise of our warrants or options, other than warrants or options held by management or by Friedman, Billings, Ramsey & Co., Inc. On March 31, 2004, we entered into a Purchase/Placement Agreement with Friedman, Billings, Ramsey & Co., Inc., pursuant to which Friedman, Billings, Ramsey & Co., Inc. acted as initial purchaser and sole placement agent for our April 2004 private placement and received aggregate initial purchaser discounts and placement fees of $17.7 million. In addition, we issued 260,954 shares of our common stock to Friedman, Billings, Ramsey & Co., Inc. as payment for financial advisory services. As of March 31, 2005, Friedman, Billing, Ramsey Group, Inc., an affiliate of Friedman, Billings, Ramsey & Co., Inc., beneficially owned, directly or indirectly through affiliates, 2,869,610 shares of our common stock or approximately 11% of our outstanding common stock. We have an account with Friedman, Billings, Ramsey & Co., Inc. through which we manage approximately $96.1 million of our cash and cash equivalents. 108

INVESTMENT POLICIES AND POLICIES WITH RESPECT TO CERTAIN ACTIVITIES The following is a discussion of our investment policies and our policies with respect to certain other activities, including financing matters and conflicts of interest. These policies may be amended or revised from time to time at the discretion of our board of directors, without a vote of our stockholders. Any change to any of these policies by our board of directors, however, would be made only after a thorough review and analysis of that change, in light of then-existing business and other circumstances, and then only if, in the exercise of its business judgment, our board of directors believes that it is advisable to do so in our and our stockholders' best interests. We cannot assure you that our investment objectives will be attained. INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE We conduct our investment activities through our operating partnership and other subsidiaries. Our policy is to acquire or develop assets primarily for current income generation. In general, our investment strategy consists of the following elements: - Integral Healthcare Real Estate: We acquire and develop net-leased healthcare facilities providing state-of-the-art healthcare services. In our experience, healthcare service providers, including physicians and hospital operating companies, choose to remain in an established location for relatively long periods since changing the location of their physical facilities does not assure that other critical components of the healthcare delivery system, such as laboratory support, access to specialized equipment, patient referral sources, nursing and other professional support, and patient convenience, will continue to be available at the same level of quality and efficiency. Consequently, we believe market conditions will remain favorable for long-term net-leased healthcare facilities, and we do not presently expect high levels of tenant turnover. Moreover, we believe that our partnering approach will afford us the opportunity to play an integral role in the strategic planning process for the financing of replacement facilities and the development of alternative uses for existing facilities. - Net-lease Strategy: Our healthcare facilities are leased to healthcare operators pursuant to long-term net-lease agreements under which our tenants are responsible for virtually all costs of occupancy, including property taxes, utilities, insurance and maintenance. We believe an important investment consideration is that our leases to healthcare operators provide a means for us to participate in the anticipated growth of the healthcare sector of the United States economy. Our leases generally provide for either contractual annual rent increases ranging from 1.0% to 3.0% and, where feasible and in compliance with applicable healthcare laws and regulations, percentage rent. We expect that such rental rate adjustments will provide us with significant internal growth. - Diversified Investment Strategy: Our facilities and the Pending Acquisition and Development Facilities are diversified geographically, by service type within the healthcare industry and by types of operator. We have invested and intend to invest in a portfolio of net-leased healthcare facilities providing state-of-the-art healthcare services. Our facilities and Pending Acquisition and Development Facilities include new and established facilities, both small and large facilities, including rehabilitation hospitals, long-term acute care hospitals, ambulatory surgical centers, regional and community hospitals, medical office buildings and specialized single-discipline facilities. Our facilities are and we expect will continue to be located across the country. In addition, our tenants and prospective tenants are diversified across many healthcare service areas. Because of the expected diversity of our facilities in terms of facility type, geographic location and tenant, we believe that our financial performance is less likely to be materially affected by changes in reimbursement or payment rates by private or public insurers or by changes in local or regional economies. - Financing Strategy: We intend to employ leverage in our capital structure in amounts determined from time to time by our board of directors. At present, we intend to limit our debt to 109

approximately 60% of the aggregate costs of our facilities, although we may temporarily exceed that level from time to time. We expect our borrowings to be a combination of long-term, fixed-rate, non-recourse mortgage loans, variable-rate secured term and revolving credit facilities, and other fixed and variable-rate short to medium-term loans. There are no limitations on the amount or percentage of our total assets that may be invested in any one facility. Additionally, no limits have been set on the concentration of investments in any one location or facility type or with any one tenant. Our current policy requires the approval of our board of directors for acquisitions or developments of facilities which exceed $10 million. We believe that adherence to the investment strategy outlined above will allow us to achieve the following objectives: - increase in our stock value through increases in the cash flows and values of our facilities; - achievement of long-term capital appreciation, and preservation and protection of the value of our interest in our facilities; and - providing regular cash distributions to our stockholders, a portion of which may constitute a nontaxable return of capital because it will exceed our current and accumulated earnings and profits, as well as providing growth in distributions over time. INVESTMENTS IN SECURITIES OF OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE ACTIVITIES AND OTHER ISSUERS Generally speaking, we do not expect to engage in any significant investment activities with other entities, although we may consider joint venture investments with other investors or with healthcare service providers. We may also invest in the securities of other issuers in connection with acquisitions of indirect interests in facilities (normally general or limited partnership interests in special purpose partnerships owning facilities). We may in the future acquire some, all or substantially all of the securities or assets of other REITs or similar entities where that investment would be consistent with our investment policies and the REIT qualification requirements. There are no limitations on the amount or percentage of our total assets that may be invested in any one issuer, other than those imposed by the gross income and asset tests that we must satisfy to qualify as a REIT. However, we do not anticipate investing in other issuers of securities for the purpose of exercising control or acquiring any investments primarily for sale in the ordinary course of business or holding any investments with a view to making short-term profits from their sale. In any event, we do not intend that our investments in securities will require us to register as an "investment company" under the Investment Company Act, and we intend to divest securities before any registration would be required. We do not intend to engage in trading, underwriting, agency distribution or sales of securities of other issuers. DISPOSITIONS Although we have no current plans to dispose of any of our facilities, we will consider doing so, subject to REIT qualification rules, if our management determines that a sale of a facility would be in our best interests based on the price being offered for the facility, the operating performance of the facility, the tax consequences of the sale and other factors and circumstances surrounding the proposed sale. In addition, our tenants have, and we expect that some or all of our prospective tenants will have, the option to acquire the facilities at the end of or, in some cases, during the lease term. FINANCING POLICIES We intend to employ leverage in our capital structure in amounts determined from time to time by our board of directors. At present, we intend to limit our debt to approximately 60% of the aggregate costs of our facilities, although we may temporarily exceed that level from time to time. We expect our 110

borrowings to be a combination of long-term, fixed-rate, non-recourse mortgage loans, variable-rate secured term and revolving credit facilities, and other fixed and variable-rate short to medium-term loans. Our board of directors considers a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of indebtedness, including the purchase price of facilities to be acquired, the estimated market value of our facilities and the ability of particular facilities, and our company as a whole, to generate cash flow to cover expected debt service. Any of this indebtedness may be unsecured or may be secured by mortgages or other interests in our facilities, and may be recourse, non-recourse or cross-collateralized and, if recourse, that recourse may include our general assets and, if non-recourse, may be limited to the particular facility to which the indebtedness relates. In addition, we may invest in facilities subject to existing loans secured by mortgages or similar liens on the facilities, or may refinance facilities acquired on a leveraged basis. We may use the proceeds from any borrowings for working capital, to purchase additional interests in partnerships or joint ventures in which we participate, to refinance existing indebtedness or to finance acquisitions, expansion, redevelopment of existing facilities or development of new facilities. We may also incur indebtedness for other purposes when, in the opinion of our board of directors, it is advisable to do so. In addition, we may need to borrow to meet the taxable income distribution requirements under the Code if we do not have sufficient cash available to meet those distribution requirements. LENDING POLICIES We do not have a policy limiting our ability to make loans to persons other than our executive officers. We may consider offering purchase money financing in connection with the sale of facilities where the provision of that financing will increase the value to be received by us for the facility sold. We may make loans to joint ventures in which we may participate in the future. Although we do not intend to engage in significant lending activities in the future, we have and may in the future make acquisition and working capital loans to prospective tenants as well as mortgage loans to other facility owners. See "Summary -- Loans and Fees Receivable." EQUITY CAPITAL POLICIES Subject to applicable law, our board of directors has the authority, without further stockholder approval, to issue additional shares of authorized common stock and preferred stock or otherwise raise capital, including through the issuance of senior securities, in any manner and on the terms and for the consideration it deems appropriate, including in exchange for property. Existing stockholders will have no preemptive right to additional shares issued in any offering, and any offering might cause a dilution of investment. We may in the future issue common stock in connection with acquisitions. We also may issue limited partnership units in our operating partnership or equity interests in other subsidiaries in connection with acquisitions of facilities or otherwise. Our board of directors may authorize the issuance of preferred stock with terms and conditions that could have the effect of delaying, deterring or preventing a transaction or a change in control in us that might involve a premium price for holders of our common stock or otherwise might be in their best interests. Additionally, any shares of preferred stock could have dividend, voting, liquidation and other rights and preferences that are senior to those of our common stock. We may, under certain circumstances, purchase our common stock in the open market or in private transactions with our stockholders, if those purchases are approved by our board of directors. Our board of directors has no present intention of causing us to repurchase any shares, and any action would only be taken in conformity with applicable federal and state laws and the applicable requirements for qualifying as a REIT. In the future we may institute a dividend reinvestment plan, which would allow our stockholders to acquire additional common stock by automatically reinvesting their cash dividends. Shares would be acquired pursuant to the plan at a price equal to the then prevailing market price, without payment of 111

brokerage commissions or service charges. Stockholders who do not participate in the plan will continue to receive cash dividends as declared and paid. CODE OF ETHICS AND CONFLICT OF INTEREST POLICY We have adopted written policies that are intended to minimize actual or potential conflicts of interest. However, we cannot assure you that these policies will be successful in eliminating the influence of these conflicts. Our code of ethics and business conduct, or code of ethics, requires our directors, officers and employees to conduct themselves in a manner that avoids even the appearance of a conflict of interest, and to discuss any transaction or relationship that reasonably could be expected to give rise to a conflict of interest with our code of ethics contact person. Our code of ethics also addresses insider trading, company funds and property, corporate opportunities and fair dealing. In addition, we have adopted a policy that requires that all contracts and transactions between us, our operating partnership or any of our subsidiaries, on the one hand, and any of our directors or executive officers or any entity in which such director or executive officer is a director or has a material financial interest, on the other hand, must be approved by the affirmative vote of a majority of our disinterested directors. 112

DESCRIPTION OF CAPITAL STOCK The following summary of the material provisions of our capital stock is subject to and qualified in its entirety by reference to the Maryland general corporation law, or MGCL, and our charter and bylaws. Copies of our charter and bylaws are filed as exhibits to the registration statement of which this prospectus is a part. We recommend that you review these documents. See "Where You Can Find More Information." AUTHORIZED STOCK Our charter authorizes us to issue up to 100,000,000 shares of common stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par value $.001 per share. Upon completion of this offering, there will be shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. Our charter authorizes our board of directors to increase the aggregate number of authorized shares or the number of shares of any class or series without stockholder approval. Under Maryland law, stockholders generally are not liable for the corporation's debts or obligations. COMMON STOCK All shares of our common stock offered hereby will be duly authorized, fully paid and nonassessable. Subject to the preferential rights of any other class or series of stock and to the provisions of our charter regarding the restrictions on transfer of stock, holders of shares of our common stock are entitled to receive dividends on such stock when, as and if authorized by our board of directors out of funds legally available therefor and declared by us and to share ratably in the assets of our company legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up after payment of or adequate provision for all known debts and liabilities of our company, including the preferential rights on dissolution of any class or classes of preferred stock. Subject to the provisions of our charter regarding the restrictions on transfer of stock, each outstanding share of our common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors and, except as provided with respect to any other class or series of stock, the holders of such shares will possess the exclusive voting power. There is no cumulative voting in the election of our board of directors. Our directors are elected by a plurality of the votes cast at a meeting of stockholders at which a quorum is present. Holders of shares of our common stock have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and have no preemptive rights to subscribe for any securities of our company. Subject to the provisions of our charter regarding the restrictions on transfer of stock, shares of our common stock will have equal dividend, liquidation and other rights. Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, consolidate, sell all or substantially all of its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless approved by the corporation's board of directors and by the affirmative vote of stockholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less than a majority of all of the votes entitled to be cast on the matter) is set forth in the corporation's charter. Our charter does not provide for a lesser percentage for these matters. However, Maryland law permits a corporation to transfer all or substantially all of its assets without the approval of the stockholders of the corporation to one or more persons if all of the equity interests of the person or persons are owned, directly or indirectly, by the corporation. Because operating assets may be held by a corporation's subsidiaries, as in our situation, this may mean that a subsidiary of a corporation can transfer all of its assets without a vote of the corporation's stockholders. Our charter authorizes our board of directors to reclassify any unissued shares of our common stock into other classes or series of classes of stock and to establish the number of shares in each class or series and to set the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption for each such class or series. 113

PREFERRED STOCK Our charter authorizes our board of directors to classify any unissued shares of preferred stock and to reclassify any previously classified but unissued shares of any series. Prior to issuance of shares of each series, our board of directors is required by the MGCL and our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each such series. Thus, our board of directors could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a change of control transaction that might involve a premium price for holders of our common stock or which holders might believe to otherwise be in their best interest. As of the date hereof, no shares of preferred stock are outstanding, and we have no current plans to issue any preferred stock. WARRANT On April 7, 2004, we granted an unregistered warrant for 35,000 shares of common stock, with an exercise price of $9.30 per share, to an unaffiliated third party. The warrant is fully vested, and may be exercised at any time until the first to occur of a sale of all or substantially all of our assets or a similar transaction, the closing of our initial public offering or April 7, 2009. We are required to give the warrantholder notice at least 10 days prior to the closing of this offering. POWER TO INCREASE AUTHORIZED STOCK AND ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK AND PREFERRED STOCK We believe that the power of our board of directors, without stockholder approval, to increase the number of authorized shares of stock, issue additional authorized but unissued shares of our common stock or preferred stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to cause us to issue such classified or reclassified shares of stock will provide us with flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. The additional classes or series, as well as the common stock, will be available for issuance without further action by our stockholders, unless stockholder consent is required by applicable law or the rules of any national securities exchange or automated quotation system on which our securities may be listed or traded. RESTRICTIONS ON OWNERSHIP AND TRANSFER In order for us to qualify as a REIT under the Code, not more than 50% of the value of the outstanding shares of our stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year (other than the first year for which an election to be a REIT has been made by us). In addition, if we, or one or more owners (actually or constructively) of 10% or more of our stock, actually or constructively owns 10% or more of a tenant of ours (or a tenant of any partnership in which we are a partner), the rent received by us (either directly or through any such partnership) from such tenant will not be qualifying income for purposes of the REIT gross income tests of the Code. Our stock must also be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year (other than the first year for which an election to be a REIT has been made by us). Our charter contains restrictions on the ownership and transfer of our capital stock that are intended to assist us in complying with these requirements and continuing to qualify as a REIT. The relevant sections of our charter provide that, effective upon completion of this offering and subject to the exceptions described below, no person or persons acting as a group may own, or be deemed to own by virtue of the attribution provisions of the Code, more than (i) 9.8% of the number or value, whichever is more restrictive, of the outstanding shares of our common stock or (ii) 9.8% of the number or value, whichever is more restrictive, of the issued and outstanding preferred or other shares of any class or series of our stock. We refer to this restriction as the "ownership limit." The ownership limitation in our charter is more restrictive than the restrictions on ownership of our common stock imposed by the Code. 114

The ownership attribution rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals or entities to be owned constructively by one individual or entity. As a result, the acquisition of less than 9.8% of our common stock (or the acquisition of an interest in an entity that owns, actually or constructively, our common stock) by an individual or entity could nevertheless cause that individual or entity, or another individual or entity, to own constructively in excess of 9.8% of our outstanding common stock and thereby subject the common stock to the ownership limit. Our board of directors may, in its sole discretion, waive the ownership limit with respect to one or more stockholders if it determines that such ownership will not jeopardize our status as a REIT (for example, by causing any tenant of ours to be considered a "related party tenant" for purposes of the REIT qualification rules). As a condition of our waiver, our board of directors may require an opinion of counsel or IRS ruling satisfactory to our board of directors and representations or undertakings from the applicant with respect to preserving our REIT status. In connection with the waiver of the ownership limit or at any other time, our board of directors may decrease the ownership limit for all other persons and entities; provided, however, that the decreased ownership limit will not be effective for any person or entity whose percentage ownership in our capital stock is in excess of such decreased ownership limit until such time as such person or entity's percentage of our capital stock equals or falls below the decreased ownership limit, but any further acquisition of our capital stock in excess of such percentage ownership of our capital stock will be in violation of the ownership limit. Additionally, the new ownership limit may not allow five or fewer "individuals" (as defined for purposes of the REIT ownership restrictions under the Code) to beneficially own more than 49.5% of the value of our outstanding capital stock. Our charter generally prohibits: - any person from actually or constructively owning shares of our capital stock that would result in us being "closely held" under Section 856(h) of the Code; and - any person from transferring shares of our capital stock if such transfer would result in shares of our stock being beneficially owned by fewer than 100 persons (determined without reference to any rules of attribution). Any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our common stock that will or may violate any of the foregoing restrictions on transferability and ownership will be required to give notice immediately to us and provide us with such other information as we may request in order to determine the effect of such transfer on our status as a REIT. The foregoing provisions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. Pursuant to our charter, if any purported transfer of our capital stock or any other event would otherwise result in any person violating the ownership limits or the other restrictions in our charter, then any such purported transfer will be void and of no force or effect with respect to the purported transferee or owner (collectively referred to hereinafter as the "purported owner") as to that number of shares in excess of the ownership limit (rounded up to the nearest whole share). The number of shares in excess of the ownership limit will be automatically transferred to, and held by, a trust for the exclusive benefit of one or more charitable organizations selected by us. The trustee of the trust will be designated by us and must be unaffiliated with us and with any purported owner. The automatic transfer will be effective as of the close of business on the business day prior to the date of the violative transfer or other event that results in a transfer to the trust. Any dividend or other distribution paid to the purported owner, prior to our discovery that the shares had been automatically transferred to a trust as described above, must be repaid to the trustee upon demand for distribution to the beneficiary of the trust and all dividends and other distributions paid by us with respect to such "excess" shares prior to the sale by the trustee of such shares shall be paid to the trustee for the beneficiary. If the transfer to the trust as described above is not automatically effective, for any reason, to prevent violation of the applicable ownership limit, then our 115

charter provides that the transfer of the excess shares will be void. Subject to Maryland law, effective as of the date that such excess shares have been transferred to the trust, the trustee shall have the authority (at the trustee's sole discretion and subject to applicable law) (i) to rescind as void any vote cast by a purported owner prior to our discovery that such shares have been transferred to the trust and (ii) to recast such vote in accordance with the desires of the trustee acting for the benefit of the beneficiary of the trust, provided that if we have already taken irreversible action, then the trustee shall not have the authority to rescind and recast such vote. Shares of our capital stock transferred to the trustee are deemed offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price paid by the purported owner for the shares (or, if the event which resulted in the transfer to the trust did not involve a purchase of such shares of our capital stock at market price, the market price on the day of the event which resulted in the transfer of such shares of our capital stock to the trust) and (ii) the market price on the date we, or our designee, accepts such offer. We have the right to accept such offer until the trustee has sold the shares of our capital stock held in the trust pursuant to the provisions discussed below. Upon a sale to us, the interest of the charitable beneficiary in the shares sold terminates and the trustee must distribute the net proceeds of the sale to the purported owner and any dividends or other distributions held by the trustee with respect to such capital stock will be paid to the charitable beneficiary. If we do not buy the shares, the trustee must, within 20 days of receiving notice from us of the transfer of shares to the trust, sell the shares to a person or entity designated by the trustee who could own the shares without violating the ownership limits. After that, the trustee must distribute to the purported owner an amount equal to the lesser of (i) the net price paid by the purported owner for the shares (or, if the event which resulted in the transfer to the trust did not involve a purchase of such shares at market price, the market price on the day of the event which resulted in the transfer of such shares of our capital stock to the trust) and (ii) the net sales proceeds received by the trust for the shares. Any proceeds in excess of the amount distributable to the purported owner will be distributed to the beneficiary. All persons who own, directly or by virtue of the attribution provisions of the Code, more than 5% (or such other percentage as provided in the regulations promulgated under the Code) of the lesser of the number or value of the shares of our outstanding capital stock must give written notice to us within 30 days after the end of each calendar year. In addition, each stockholder will, upon demand, be required to disclose to us in writing such information with respect to the direct, indirect and constructive ownership of shares of our stock as our board of directors deems reasonably necessary to comply with the provisions of the Code applicable to a REIT, to comply with the requirements or any taxing authority or governmental agency or to determine any such compliance. All certificates representing shares of our capital stock will bear a legend referring to the restrictions described above. These ownership limits could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price over the then prevailing market price for the holders of some, or a majority, of our outstanding shares of common stock or which such holders might believe to be otherwise in their best interest. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is American Stock Transfer and Trust Co. 116

MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS The following is a summary of certain provisions of Maryland law and of our charter and bylaws. For a complete description, we refer you to the applicable Maryland laws and to our charter and bylaws, copies of which are exhibits to the registration statement of which this prospectus is a part. See "Where You Can Find More Information." THE BOARD OF DIRECTORS Our charter and bylaws provide that the number of our directors is to be established by our board of directors but may not be fewer than one nor more than 15. Currently, our board is comprised of seven directors. Any vacancy, other than one resulting from an increase in the number of directors, may be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the remaining directors, though less than a quorum. Any vacancy resulting from an increase in the number of our directors must be filled by a majority of the entire board of directors. A director elected to fill a vacancy shall be elected to serve until the next election of directors and until his successor shall be elected and qualified. Pursuant to our charter, each member of our board of directors is elected until the next annual meeting of stockholders and until his successor is elected, with the current members' terms expiring at the annual meeting of stockholders to be held in 2005. Holders of shares of our common stock have no right to cumulative voting in the election of directors. Consequently, at each annual meeting of stockholders, all of the members of our board of directors will stand for election and our directors will be elected by a plurality of votes cast. Directors may be removed with or without cause by the affirmative vote of two-thirds of the votes entitled to be cast in the election of directors. BUSINESS COMBINATIONS Maryland law prohibits "business combinations" between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, certain transfers of assets, certain stock issuances and reclassifications. Maryland law defines an interested stockholder as: - any person who beneficially owns 10% or more of the voting power of the corporation's voting stock; or - an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then-outstanding voting stock of the corporation. A person is not an interested stockholder if the board of directors approves in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving the transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors. After the five year prohibition, any business combination between a corporation and an interested stockholder generally must be recommended by the board of directors and approved by the affirmative vote of at least: - 80% of the votes entitled to be cast by holders of the then outstanding shares of voting stock; and - two-thirds of the votes entitled to be cast by holders of the voting stock other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or shares held by an affiliate or associate of the interested stockholder. 117

These super-majority vote requirements do not apply if stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The statute permits various exemptions from its provisions, including business combinations that are approved by the board of directors before the time that the interested stockholder becomes an interested stockholder. As permitted by Maryland law, our charter includes a provision excluding our company from these provisions of the MGCL and, consequently, the five-year prohibition and the super-majority vote requirements will not apply to business combinations between us and any interested stockholder of ours unless we later amend our charter, with stockholder approval, to modify or eliminate this exclusion provision. We believe that our ownership restrictions will substantially reduce the risk that a stockholder would become an "interested stockholder" within the meaning of the Maryland business combination statute. There can be no assurance, however, that we will not opt into the business combination provisions of the MGCL at a future date. CONTROL SHARE ACQUISITIONS The MGCL provides that "control shares" of a Maryland corporation acquired in a "control share acquisition" have no voting rights except to the extent approved at a special meeting by the affirmative vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror or by officers or directors who are our employees are excluded from shares entitled to vote on the matter. "Control shares" are voting shares which, if aggregated with all other shares previously acquired by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power except solely by virtue of a revocable proxy, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power: (i) one-tenth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more of all voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A "control share acquisition" means the acquisition of control shares, subject to certain exceptions. A person who has made or proposes to make a control share acquisition, upon satisfaction of certain conditions, including an undertaking to pay expenses, may compel a corporation's board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting. If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by Maryland law, then, subject to certain conditions and limitations, the corporation may redeem any or all of the control shares, except those for which voting rights have previously been approved, for fair value determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquirer or of any meeting of stockholders at which the voting rights of such shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to vote a majority of the shares entitled to vote, then all other stockholders are entitled to demand and receive fair value for their stock, or provided for in the "dissenters" rights provisions of the MGCL may exercise appraisal rights. The fair value of the shares as determined for purposes of such appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition. The control share acquisition statute does not apply (i) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (ii) to acquisitions approved or exempted by the charter or bylaws of the corporation. 118

Our charter contains a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock. There can be no assurance that we will not opt into the control share acquisition provisions of the MGCL in the future. MARYLAND UNSOLICITED TAKEOVERS ACT Maryland law also permits Maryland corporations that are subject to the Exchange Act and have at least three outside directors to elect by resolution of the board of directors or by provision in its charter or bylaws to be subject to some corporate governance provisions that may be inconsistent with the corporation's charter and bylaws. Under the applicable statute, a board of directors may classify itself without the vote of stockholders. A board of directors classified in that manner cannot be altered by amendment to the charter of the corporation. Further, the board of directors may, by electing into applicable statutory provisions and notwithstanding the charter or bylaws: - provide that a special meeting of the stockholders will be called only at the request of stockholders entitled to cast at least a majority of the votes entitled to be cast at the meeting; - reserve for itself the right to fix the number of directors; - provide that a director may be removed only by the vote of the holders of two-thirds of the stock entitled to vote; - retain for itself sole authority to fill vacancies created by the death, removal or resignation of a director; and - provide that all vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors, in office, even if the remaining directors do not constitute a quorum for the remainder of the full term of the class of directors in which the vacancy occurred. A board of directors may implement all or any of these provisions without amending the charter or bylaws and without stockholder approval. A corporation may be prohibited by its charter or by resolution of its board of directors from electing any of the provisions of the statute. We are not prohibited from implementing any or all of these provisions. While certain of these provisions are already addressed by our charter and bylaws, the law would permit our board of directors to override further changes to the charter or bylaws. If implemented, these provisions could discourage offers to acquire our stock and could increase the difficulty of completing an offer. AMENDMENT TO OUR CHARTER Our charter may be amended only if declared advisable by the board of directors and approved by the affirmative vote of the holders of at least two-thirds of all of the votes entitled to be cast on the matter. DISSOLUTION OF OUR COMPANY A voluntary dissolution of our company must be declared advisable by a majority of the entire board of directors and approved by the affirmative vote of the holders of at least two-thirds of all of the votes entitled to be cast on the matter. ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS Our bylaws provide that: - with respect to an annual meeting of stockholders, the only business to be considered and the only proposals to be acted upon will be those properly brought before the annual meeting: - pursuant to our notice of the meeting; - by, or at the direction of, a majority of our board of directors; or 119

- by a stockholder who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our bylaws; - with respect to special meetings of stockholders, only the business specified in our company's notice of meeting may be brought before the meeting of stockholders unless otherwise provided by law; and - nominations of persons for election to our board of directors at any annual or special meeting of stockholders may be made only: - by, or at the direction of, our board of directors; or - by a stockholder who is entitled to vote at the meeting and has complied with the advance notice provisions set forth in our bylaws. Generally, under our bylaws, a stockholder seeking to nominate a director or bring other business before our annual meeting of stockholders must deliver a notice to our secretary not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the date of mailing of the notice to stockholders for the prior year's annual meeting. For a stockholder seeking to nominate a candidate for our board of directors, the notice must describe various matters regarding the nominee, including name, address, occupation and number of shares of common stock held, and other specified matters. For a stockholder seeking to propose other business, the notice must include a description of the proposed business, the reasons for the proposal and other specified matters. INDEMNIFICATION AND LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY The MGCL permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter limits the personal liability of our directors and officers for monetary damages to the fullest extent permitted under current Maryland law, and our charter and bylaws provide that a director or officer shall be indemnified to the fullest extent required or permitted by Maryland law from and against any claim or liability to which such director or officer may become subject by reason of his or her status as a director or officer of our company. Maryland law allows directors and officers to be indemnified against judgments, penalties, fines, settlements, and expenses actually incurred in connection with any proceeding to which they may be made a party by reason of their service on those or other capacities unless the following can be established: - the act or omission of the director or officer was material to the cause of action adjudicated in the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; - the director or officer actually received an improper personal benefit in money, property or services; or - with respect to any criminal proceeding, the director or officer had reasonable cause to believe his or her act or omission was unlawful. The MGCL requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. However, under the MGCL, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. In 120

addition, the MGCL permits a corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of: - a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and - a written undertaking by the director or on the director's behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the director did not meet the standard of conduct. Our charter authorizes us to obligate ourselves to indemnify and our bylaws do obligate us, to the fullest extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to: - any present or former director or officer who is made a party to the proceeding by reason of his or her service in that capacity; or - any individual who, while a director or officer of our company and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise and who is made a party to the proceeding by reason of his or her service in that capacity. Our charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of ours in any of the capacities described above. Our stockholders have no personal liability for indemnification payments or other obligations under any indemnification agreements or arrangements. However, indemnification could reduce the legal remedies available to us and our stockholders against the indemnified individuals. This provision for indemnification of our directors and officers does not limit a stockholder's ability to obtain injunctive relief or other equitable remedies for a violation of a director's or an officer's duties to us or to our stockholders, although these equitable remedies may not be effective in some circumstances. In addition to any indemnification to which our directors and officers are entitled pursuant to our charter and bylaws and the MGCL, our charter and bylaws provide that, with the approval of our board of directors, we may indemnify other employees and agents to the fullest extent permitted under Maryland law, whether they are serving us or, at our request, any other entity. We have entered into indemnification agreements with each of our directors and executive officers, and we maintain a directors and officers liability insurance policy. See "Management -- Limited Liability and Indemnification." Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 121

PARTNERSHIP AGREEMENT The following is a summary of the material terms of the first amended and restated agreement of limited partnership of our operating partnership. This summary is subject to and qualified in its entirety by reference to the first amended and restated agreement of limited partnership of our operating partnership, a copy of which is an exhibit to the registration statement of which this prospectus is a part. See "Where You Can Find More Information." MANAGEMENT OF OUR OPERATING PARTNERSHIP MPT Operating Partnership, L.P., our operating partnership, was organized as a Delaware limited partnership on September 10, 2003. The initial partnership agreement was entered into on that date and amended and restated on March 1, 2004. Pursuant to the partnership agreement, as the owner of the sole general partner of the operating partnership, Medical Properties Trust, LLC, we have, subject to certain protective rights of limited partners described below, full, exclusive and complete responsibility and discretion in the management and control of the operating partnership. We have the power to cause the operating partnership to enter into certain major transactions, including acquisitions, dispositions, refinancings and selection of tenants, and to cause changes in the operating partnership's line of business and distribution policies. However, any amendment to the partnership agreement that would affect the redemption rights of the limited partners or otherwise adversely affect the rights of the limited partners requires the consent of limited partners, other than us, holding more than 50% of the units of our operating partnership held by such partners. TRANSFERABILITY OF INTERESTS We may not voluntarily withdraw from the operating partnership or transfer or assign our interest in the operating partnership or engage in any merger, consolidation or other combination, or sale of substantially all of our assets, in a transaction which results in a change of control of our company unless: - we receive the consent of limited partners holding more than 50% of the partnership interests of the limited partners, other than those held by our company or its subsidiaries; - as a result of such transaction, all limited partners will have the right to receive for each partnership unit an amount of cash, securities or other property equal in value to the greatest amount of cash, securities or other property paid in the transaction to a holder of one share of our common stock, provided that if, in connection with the transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding shares of our common stock, each holder of partnership units shall be given the option to exchange its partnership units for the greatest amount of cash, securities or other property that a limited partner would have received had it (i) exercised its redemption right (described below) and (ii) sold, tendered or exchanged pursuant to the offer shares of our common stock received upon exercise of the redemption right immediately prior to the expiration of the offer; or - we are the surviving entity in the transaction and either (i) our stockholders do not receive cash, securities or other property in the transaction or (ii) all limited partners receive for each partnership unit an amount of cash, securities or other property having a value that is no less than the greatest amount of cash, securities or other property received in the transaction by our stockholders. We also may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the successor or surviving entity, other than partnership units held by us, are contributed, directly or indirectly, to the partnership as a capital contribution in exchange for partnership units with a fair market value equal to the value of the assets so contributed as determined by the survivor in good faith and (ii) the survivor expressly agrees to assume all of our obligations under the partnership agreement and the partnership agreement shall be amended after any such merger or consolidation so as to arrive at a new method of calculating the amounts payable upon 122

exercise of the redemption right that approximates the existing method for such calculation as closely as reasonably possible. We also may (i) transfer all or any portion of our general partnership interest to (A) a wholly-owned subsidiary or (B) a parent company, and following such transfer may withdraw as general partner and (ii) engage in a transaction required by law or by the rules of any national securities exchange or automated quotation system on which our securities may be listed or traded. CAPITAL CONTRIBUTION We contributed to our operating partnership substantially all the net proceeds of our April 2004 private placement as a capital contribution in exchange for units of the operating partnership. The partnership agreement provides that if the operating partnership requires additional funds at any time in excess of funds available to the operating partnership from borrowing or capital contributions, we may borrow such funds from a financial institution or other lender and lend such funds to the operating partnership on the same terms and conditions as are applicable to our borrowing of such funds. Under the partnership agreement, we are obligated to contribute the proceeds of any offering of shares of our company's stock as additional capital to the operating partnership. We are authorized to cause the operating partnership to issue partnership interests for less than fair market value if we have concluded in good faith that such issuance is in both the operating partnership's and our best interests. If we contribute additional capital to the operating partnership, we will receive additional partnership units and our percentage interest will be increased on a proportionate basis based upon the amount of such additional capital contributions and the value of the operating partnership at the time of such contributions. Conversely, the percentage interests of the limited partners will be decreased on a proportionate basis in the event of additional capital contributions by us. In addition, if we contribute additional capital to the operating partnership, we will revalue the property of the operating partnership to its fair market value, as determined by us, and the capital accounts of the partners will be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property, that has not been reflected in the capital accounts previously, would be allocated among the partners under the terms of the partnership agreement if there were a taxable disposition of such property for its fair market value, as determined by us, on the date of the revaluation. The operating partnership may issue preferred partnership interests, in connection with acquisitions of property or otherwise, which could have priority over common partnership interests with respect to distributions from the operating partnership, including the partnership interests that our wholly-owned subsidiary owns as general partner. REDEMPTION RIGHTS Pursuant to Section 8.04 of the partnership agreement, the limited partners, other than us, will receive redemption rights, which will enable them to cause the operating partnership to redeem their limited partnership units in exchange for cash or, at our option, shares of our common stock on a one-for-one basis, subject to adjustment for stock splits, dividends, recapitalization and similar events. Currently, we own 100% of the issued limited partnership units of our operating partnership. Under Section 8.04 of our partnership agreement, holders of limited partnership units will be prohibited from exercising their redemption rights for 12 months after they are issued, unless this waiting period is waived or shortened by our board of directors. Notwithstanding the foregoing, a limited partner will not be entitled to exercise its redemption rights if the delivery of common stock to the redeeming limited partner would: - result in any person owning, directly or indirectly, common stock in excess of the stock ownership limit in our charter; - result in our shares of stock being owned by fewer than 100 persons (determined without reference to any rules of attribution); - result in our being "closely held" within the meaning of Section 856(h) of the Code; 123

- cause us to own, actually or constructively, 10% or more of the ownership interests in a tenant of our or the partnership's real property, within the meaning of Section 856(d)(2)(B) of the Code; or - cause the acquisition of common stock by such redeeming limited partner to be "integrated" with any other distribution of common stock for purposes of complying with the registration provisions of the Securities Act. We may, in our sole and absolute discretion, waive any of these restrictions. With respect to the partnership units issuable in connection with the acquisition or development of our facilities, the redemption rights may be exercised by the limited partners at any time after the first anniversary of our acquisition of these facilities; provided, however, unless we otherwise agree: - a limited partner may not exercise the redemption right for fewer than 1,000 partnership units or, if such limited partner holds fewer than 1,000 partnership units, the limited partner must redeem all of the partnership units held by such limited partner; - a limited partner may not exercise the redemption right for more than the number of partnership units that would, upon redemption, result in such limited partner or any other person owning, directly or indirectly, common stock in excess of the ownership limitation in our charter; and - a limited partner may not exercise the redemption right more than two times annually. We currently hold all the outstanding interests in our operating partnership and, accordingly, there are currently no units of our operating partnership subject to being redeemed in exchange for shares of our common stock. The number of shares of common stock issuable upon exercise of the redemption rights will be adjusted to account for stock splits, mergers, consolidations or similar pro rata stock transactions. The partnership agreement requires that the operating partnership be operated in a manner that enables us to satisfy the requirements for being classified as a REIT, to avoid any federal income or excise tax liability imposed by the Code (other than any federal income tax liability associated with our retained capital gains) and to ensure that the partnership will not be classified as a "publicly traded partnership" taxable as a corporation under Section 7704 of the Code. In addition to the administrative and operating costs and expenses incurred by the operating partnership, the operating partnership generally will pay all of our administrative costs and expenses, including: - all expenses relating to our continuity of existence; - all expenses relating to offerings and registration of securities; - all expenses associated with the preparation and filing of any of our periodic reports under federal, state or local laws or regulations; - all expenses associated with our compliance with laws, rules and regulations promulgated by any regulatory body; and - all of our other operating or administrative costs incurred in the ordinary course of business on behalf of the operating partnership. DISTRIBUTIONS The partnership agreement provides that the operating partnership will distribute cash from operations, including net sale or refinancing proceeds, but excluding net proceeds from the sale of the operating partnership's property in connection with the liquidation of the operating partnership, at such time and in such amounts as determined by us in our sole discretion, to us and the limited partners in accordance with their respective percentage interests in the operating partnership. Upon liquidation of the operating partnership, after payment of, or adequate provision for, debts and obligations of the partnership, including any partner loans, any remaining assets of the partnership will be 124

distributed to us and the limited partners with positive capital accounts in accordance with their respective positive capital account balances. ALLOCATIONS Profits and losses of the partnership, including depreciation and amortization deductions, for each fiscal year generally are allocated to us and the limited partners in accordance with the respective percentage interests in the partnership. All of the foregoing allocations are subject to compliance with the provisions of Sections 704(b) and 704(c) of the Code and Treasury regulations promulgated thereunder. The operating partnership expects to use the "traditional method" under Section 704(c) of the Code for allocating items with respect to contributed property acquired in connection with the offering for which the fair market value differs from the adjusted tax basis at the time of contribution. TERM The operating partnership will have perpetual existence, or until sooner dissolved upon: - our bankruptcy, dissolution, removal or withdrawal, unless the limited partners elect to continue the partnership; - the passage of 90 days after the sale or other disposition of all or substantially all the assets of the partnership; or - an election by us in our capacity as the owner of the sole general partner of the operating partnership. TAX MATTERS Pursuant to the partnership agreement, the general partner is the tax matters partner of the operating partnership. Accordingly, through our ownership of the general partner of the operating partnership, we have authority to handle tax audits and to make tax elections under the Code on behalf of the operating partnership. 125

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS This section summarizes the current material federal income tax consequences to our company and to our stockholders generally resulting from the treatment of our company as a REIT. Because this section is a general summary, it does not address all of the potential tax issues that may be relevant to you in light of your particular circumstances. Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., or Baker Donelson, has acted as our counsel, has reviewed this summary, and is of the opinion that the discussion contained herein fairly summarizes the federal income tax consequences that are material to a holder of shares of our common stock. The discussion does not address all aspects of taxation that may be relevant to particular stockholders in light of their personal investment or tax circumstances, or to certain types of stockholders that are subject to special treatment under the federal income tax laws, such as insurance companies, tax-exempt organizations (except to the limited extent discussed in "-- Taxation of Tax-Exempt Stockholders"), financial institutions or broker-dealers, and non-United States individuals and foreign corporations (except to the limited extent discussed in "-- Taxation of Non-United States Stockholders"). The statements in this section and the opinion of Baker Donelson, referred to as the Tax Opinion, are based on the current federal income tax laws governing qualification as a REIT. We cannot assure you that new laws, interpretations of law or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate. You should be aware that opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not challenge the conclusions set forth in those opinions. This section is not a substitute for careful tax planning. We urge you to consult your own tax advisors regarding the specific federal state, local, foreign and other tax consequences to you, in light of your own particular circumstances, of the purchase, ownership and disposition of shares of our common stock, our election to be taxed as a REIT and the effect of potential changes in applicable tax laws. TAXATION OF OUR COMPANY We were previously taxed as a subchapter S corporation. We revoked our subchapter S election on April 6, 2004 and we will elect to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year that began on April 6, 2004 and ended on December 31, 2004. We believe that we are organized and have operated in such a manner to enable us to qualify for taxation as a REIT under the Code. We further believe that our proposed future method of operation will enable us to qualify as a REIT. However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on our satisfying on a continuing basis numerous asset, income and distribution tests described below, the satisfaction of which depends, in part, on our operating results. The sections of the Code relating to qualification and operation as a REIT, and the federal income taxation of a REIT and its stockholders, are highly technical and complex. The following discussion sets forth only the material aspects of those sections. This summary is qualified in its entirety by the applicable Code provisions and the related rules and regulations. Our counsel has opined that, for federal income tax purposes, we have been organized in conformity with the requirements for qualification to be taxed as a REIT under the Code commencing with our initial short taxable year ended December 31, 2004, and our current and proposed method of operations as described in this prospectus and as represented to our counsel by us will enable us to continue to satisfy the requirements for such qualification and taxation as a REIT under the Code for future taxable years. This opinion, however, is based upon factual assumptions and representations made by us. Moreover, such qualification and taxation as a REIT depend upon our ability to meet, for each taxable year, various tests imposed under the Code as discussed below. Those qualification tests involve the percentage of income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our stock ownership, and the percentage of our earnings that we distribute. Baker Donelson will not review our compliance with those tests on a continuing basis. Accordingly, with respect to our current and future taxable years, no assurance can be given that the actual results of our operation will 126

satisfy such requirements. For a discussion of the tax consequences of our failure to qualify as a REIT. See "-- Failure to Qualify." If we qualify as a REIT, we generally will not be subject to federal income tax on the taxable income that we distribute to our stockholders. The benefit of that tax treatment is that it avoids the "double taxation," or taxation at both the corporate and stockholder levels, that generally results from owning stock in a corporation. However, we will be subject to federal tax in the following circumstances: - We are subject to the corporate federal income tax on taxable income, including net capital gain, that we do not distribute to stockholders during, or within a specified time period after, the calendar year in which the income is earned. - We are subject to the corporate "alternative minimum tax" on any items of tax preference that we do not distribute or allocate to stockholders. - We are subject to tax, at the highest corporate rate, on: - net income from the sale or other disposition of property acquired through foreclosure ("foreclosure property") that we hold primarily for sale to customers in the ordinary course of business, and - other non-qualifying income from foreclosure property. - We are subject to a 100% tax on net income from sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business. - If we fail to satisfy the 75% gross income test or the 95% gross income test, as described below under "-- Requirements for Qualification -- Gross Income Tests," but nonetheless continue to qualify as a REIT because we meet other requirements, we will be subject to a 100% tax on: - the greater of (i) the amount by which we fail the 75% test, or (ii) the excess of 90% (95% for taxable years beginning on and after January 1, 2005) of our gross income over the amount of gross income attributable to sources that qualify under the 95% test, multiplied by - a fraction intended to reflect our profitability. - If we fail to distribute during a calendar year at least the sum of: (i) 85% of our REIT ordinary income for the year, (ii) 95% of our REIT capital gain net income for the year, and (iii) any undistributed taxable income from earlier periods, then we will be subject to a 4% excise tax on the excess of the required distribution over the amount we actually distributed. - If we fail to satisfy one or more requirements for REIT qualification during a taxable year beginning on or after January 1, 2005, other than a gross income test or an asset test, we will be required to pay a penalty of $50,000 for each such failure. - We may elect to retain and pay income tax on our net long-term capital gain. In that case, a United States stockholder would be taxed on its proportionate share of our undistributed long-term capital gain (to the extent that we make a timely designation of such gain to the stockholder) and would receive a credit or refund for its proportionate share of the tax we paid. - We may be subject to a 100% excise tax on certain transactions with a taxable REIT subsidiary that are not conducted at arm's-length. - If we acquire any asset from a "C corporation" (that is, a corporation generally subject to the full corporate-level tax) in a transaction in which the basis of the asset in our hands is determined by reference to the basis of the asset in the hands of the C corporation, and we recognize gain on the disposition of the asset during the 10 year period beginning on the date that we acquired the asset, then the asset's "built-in" gain will be subject to tax at the highest regular corporate rate. 127

REQUIREMENTS FOR QUALIFICATION To qualify as a REIT, we must elect to be treated as a REIT, and we must meet various (i) organizational requirements, (ii) gross income tests, (iii) asset tests, and (iv) annual distribution requirements. Organizational Requirements. A REIT is a corporation, trust or association that meets each of the following requirements: (1) it is managed by one or more trustees or directors; (2) its beneficial ownership is evidenced by transferable stock, or by transferable certificates of beneficial interest; (3) it would be taxable as a domestic corporation, but for its election to be taxed as a REIT under Sections 856 through 860 of the Code; (4) it is neither a financial institution nor an insurance company subject to special provisions of the federal income tax laws; (5) at least 100 persons are beneficial owners of its stock or ownership certificates (determined without reference to any rules of attribution); (6) not more than 50% in value of its outstanding stock or ownership certificates is owned, directly or indirectly, by five or fewer individuals, which the federal income tax laws define to include certain entities, during the last half of any taxable year; and (7) it elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status. We must meet requirements one through four during our entire taxable year and must meet requirement five during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. If we comply with all the requirements for ascertaining information concerning the ownership of our outstanding stock in a taxable year and have no reason to know that we violated requirement six, we will be deemed to have satisfied requirement six for that taxable year. We do not have to satisfy requirements five and six for our taxable year ending December 31, 2004. After the issuance of common stock pursuant to our April 2004 private placement we had issued common stock with enough diversity of ownership to satisfy requirements five and six as set forth above. Our charter provides for restrictions regarding the ownership and transfer of our shares of common stock so that we should continue to satisfy these requirements. The provisions of our charter restricting the ownership and transfer of our shares of common stock are described in "Description of Capital Stock -- Restrictions on Ownership and Transfer." For purposes of determining stock ownership under requirement six, an "individual" generally includes a supplemental unemployment compensation benefits plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes. An "individual," however, generally does not include a trust that is a qualified employee pension or profit sharing trust under the federal income tax laws, and beneficiaries of such a trust will be treated as holding our shares in proportion to their actuarial interests in the trust for purposes of requirement six. A corporation that is a "qualified REIT subsidiary," or QRS, is not treated as a corporation separate from its parent REIT. All assets, liabilities, and items of income, deduction and credit of a QRS are treated as assets, liabilities, and items of income, deduction and credit of the REIT. A QRS is a corporation, all of the capital stock of which is owned by the REIT. Thus, in applying the requirements described herein, any QRS that we own will be ignored, and all assets, liabilities, and items of income, deduction and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction and credit. 128

An unincorporated domestic entity, such as a partnership, that has a single owner, generally is not treated as an entity separate from its parent for federal income tax purposes. An unincorporated domestic entity with two or more owners is generally treated as a partnership for federal income tax purposes. In the case of a REIT that is a partner in a partnership that has other partners, the REIT is treated as owning its proportionate share of the assets of the partnership and as earning its allocable share of the gross income of the partnership for purposes of the applicable REIT qualification tests. Thus, our proportionate share of the assets, liabilities and items of income of our operating partnership and any other partnership, joint venture, or limited liability company that is treated as a partnership for federal income tax purposes in which we acquire an interest, directly or indirectly, is treated as our assets and gross income for purposes of applying the various REIT qualification requirements. A REIT is permitted to own up to 100% of the stock of one or more "taxable REIT subsidiaries." A taxable REIT subsidiary is a fully taxable corporation that may earn income that would not be qualifying income if earned directly by the parent REIT. The subsidiary and the REIT must jointly file an election with the IRS to treat the subsidiary as a taxable REIT subsidiary. A taxable REIT subsidiary will pay income tax at regular corporate rates on any income that it earns. In addition, the taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to its parent REIT to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. Further, the rules impose a 100% excise tax on certain types of transactions between a taxable REIT subsidiary and its parent REIT or the REIT's tenants that are not conducted on an arm's-length basis. We may engage in activities indirectly through a taxable REIT subsidiary as necessary or convenient to avoid obtaining the benefit of income or services that would jeopardize our REIT status if we engaged in the activities directly. In particular, we would likely engage in activities through a taxable REIT subsidiary if we wished to provide services to unrelated parties which might produce income that does not qualify under the gross income tests described below. We might also dispose of an unwanted asset through a taxable REIT subsidiary as necessary or convenient to avoid the 100% tax on income from prohibited transactions. See description below under "Prohibited Transactions." A taxable REIT subsidiary may not operate or manage a healthcare facility. For purposes of this definition a "healthcare facility" means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a service provider which is eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to such facility. We have formed and made a taxable REIT subsidiary election with respect to MPT Development Services, Inc., a Delaware corporation formed in January 2004. We may form or acquire one or more additional taxable REIT subsidiaries in the future. See "Federal Income Tax Considerations -- Income Taxation of the Partnerships and the Partners -- Taxable REIT Subsidiaries." Gross Income Tests. We must satisfy two gross income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income for each taxable year must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income. Qualifying income for purposes of that 75% gross income test generally includes: - rents from real property; - interest on debt secured by mortgages on real property, or on interests in real property; - dividends or other distributions on, and gain from the sale of, shares in other REITs; - gain from the sale of real estate assets; - income derived from the temporary investment of new capital that is attributable to the issuance of our shares of common stock or a public offering of our debt with a maturity date of at least five years and that we receive during the one year period beginning on the date on which we received such new capital; and - gross income from foreclosure property. 129

Second, in general, at least 95% of our gross income for each taxable year must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities, income from certain hedging instruments or any combination of these. Gross income from our sale of property that we hold primarily for sale to customers in the ordinary course of business is excluded from both the numerator and the denominator in both income tests. In addition, for taxable years beginning on and after January 1, 2005, income and gain from "hedging transactions" that we enter into to hedge indebtedness incurred or to be incurred to acquire or carry real estate assets and that are clearly and timely identified as such also will be excluded from both the numerator and the denominator for purposes of the 95% gross income test (but not the 75% gross income test). The following paragraphs discuss the specific application of the gross income tests to us. Rents from Real Property. Rent that we receive from our real property will qualify as "rents from real property," which is qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met. First, the rent must not be based in whole or in part on the income or profits of any person. Participating rent, however, will qualify as "rents from real property" if it is based on percentages of receipts or sales and the percentages: - are fixed at the time the leases are entered into; - are not renegotiated during the term of the leases in a manner that has the effect of basing rent on income or profits; and - conform with normal business practice. More generally, the rent will not qualify as "rents from real property" if, considering the relevant lease and all the surrounding circumstances, the arrangement does not conform with normal business practice, but is in reality used as a means of basing the rent on income or profits. We have represented to Baker Donelson that we intend to set and accept rents which are fixed dollar amounts or a fixed percentage of gross revenue, and not determined to any extent by reference to any person's income or profits, in compliance with the rules above. Second, we must not own, actually or constructively, 10% or more of the stock or the assets or net profits of any tenant, referred to as a related party tenant, other than a taxable REIT subsidiary. Failure to adhere to this limitation would cause the rental income from the related party tenant to not be treated as qualifying income for purposes of the REIT gross income tests. The constructive ownership rules generally provide that, if 10% or more in value of our stock is owned, directly or indirectly, by or for any person, we are considered as owning the stock owned, directly or indirectly, by or for such person. We do not own any stock or any assets or net profits of any tenant directly. In addition, our charter prohibits transfers of our shares that would cause us to own, actually or constructively, 10% or more of the ownership interests in a tenant. We should not own, actually or constructively, 10% or more of any tenant other than a taxable REIT subsidiary. We have represented to counsel that we will not rent any facility to a related-party tenant. However, because the constructive ownership rules are broad and it is not possible to monitor continually direct and indirect transfers of our shares, no absolute assurance can be given that such transfers or other events of which we have no knowledge will not cause us to own constructively 10% or more of a tenant other than a taxable REIT subsidiary at some future date. MPT Development Services, Inc., our taxable REIT subsidiary, has made loans to Vibra Healthcare, LLC, the parent entity of our tenants, in an aggregate amount of approximately $41.4 million to acquire the operations at certain facilities. MPT Development Services, Inc. also made a loan of approximately $6.2 million to Vibra and its subsidiaries for working capital purposes which was repaid in February 2005. We believe that the loans to Vibra will be treated as debt rather than equity interests in Vibra, and that our rental income from Vibra will be treated as qualifying income for purposes of the REIT gross income tests. However, there can be no assurance that the IRS will not take a contrary position. If the IRS were to successfully treat the loans to Vibra as equity interests in Vibra, Vibra would be a related party tenant with respect to our company, the rent that we receive from Vibra would not be qualifying income for purposes of the REIT gross 130

income tests, and we could lose our REIT status. However, as stated above, we believe that the loans to Vibra will be treated as debt rather than equity interests in Vibra. As described above, we currently own 100% of the stock of MPT Development Services, Inc., a taxable REIT subsidiary, and may in the future own up to 100% of the stock of one or more additional taxable REIT subsidiaries. Under an exception to the related-party tenant rule described in the preceding paragraph, rent that we receive from a taxable REIT subsidiary will qualify as "rents from real property" as long as (i) the taxable REIT subsidiary is a qualifying taxable REIT subsidiary (among other things, it does not operate or manage a healthcare facility), (ii) at least 90% of the leased space in the facility is leased to persons other than taxable REIT subsidiaries and related party tenants, and (iii) the amount paid by the taxable REIT subsidiary to rent space at the facility is substantially comparable to rents paid by other tenants of the facility for comparable space. If in the future we receive rent from a taxable REIT subsidiary, we will seek to comply with this exception. Third, the rent attributable to the personal property leased in connection with a lease of real property must not be greater than 15% of the total rent received under the lease. The rent attributable to personal property under a lease is the amount that bears the same ratio to total rent under the lease for the taxable year as the average of the fair market values of the leased personal property at the beginning and at the end of the taxable year bears to the average of the aggregate fair market values of both the real and personal property covered by the lease at the beginning and at the end of such taxable year (the "personal property ratio"). With respect to each of our leases, we believe that the personal property ratio generally will be less than 15%. Where that is not, or may in the future not be, the case, we believe that any income attributable to personal property will not jeopardize our ability to qualify as a REIT. There can be no assurance, however, that the IRS would not challenge our calculation of a personal property ratio, or that a court would not uphold such assertion. If such a challenge were successfully asserted, we could fail to satisfy the 75% or 95% gross income test and thus lose our REIT status. Fourth, we cannot furnish or render noncustomary services to the tenants of our facilities, or manage or operate our facilities, other than through an independent contractor who is adequately compensated and from whom we do not derive or receive any income. However, we need not provide services through an "independent contractor," but instead may provide services directly to our tenants, if the services are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not considered to be provided for the tenants' convenience. In addition, we may provide a minimal amount of "noncustomary" services to the tenants of a facility, other than through an independent contractor, as long as our income from the services does not exceed 1% of our income from the related facility. Finally, we may own up to 100% of the stock of one or more taxable REIT subsidiaries, which may provide noncustomary services to our tenants without tainting our rents from the related facilities. We do not intend to perform any services other than customary ones for our tenants, other than services provided through independent contractors or taxable REIT subsidiaries. We have represented to Baker Donelson that we will not perform noncustomary services which would jeopardize our REIT status. Finally, in order for the rent payable under the leases of our properties to constitute "rents from real property," the leases must be respected as true leases for federal income tax purposes and not treated as service contracts, joint ventures, financing arrangements, or another type of arrangement. We generally treat our leases with respect to our properties as true leases for federal income tax purposes. We believe that our lease of the Desert Valley Facility is a true lease; however, because of the nature of the lessee's purchase option thereunder, there can be no assurance that the IRS would not consider this lease a financing arrangement instead of a true lease for federal income tax purposes. In that case, our income from the lease of the Desert Valley Facility would be interest income rather than rent and would be qualifying income for purposes of the 75% gross income test to the extent that our "loan" does not exceed the fair market value of the real estate assets associated with the Desert Valley Facility. All of the interest income from our loan would be qualifying income for purposes of the 95% gross income test. We believe that the characterization of the Desert Valley Facility lease as a financing arrangement would not adversely affect our ability to qualify as a REIT. 131

If a portion of the rent we receive from a facility does not qualify as "rents from real property" because the rent attributable to personal property exceeds 15% of the total rent for a taxable year, the portion of the rent attributable to personal property will not be qualifying income for purposes of either the 75% or 95% gross income test. If rent attributable to personal property, plus any other income that is nonqualifying income for purposes of the 95% gross income test, during a taxable year exceeds 5% of our gross income during the year, we would lose our REIT status. By contrast, in the following circumstances, none of the rent from a lease of a facility would qualify as "rents from real property": (i) the rent is considered based on the income or profits of the tenant; (ii) the tenant is a related party tenant or fails to qualify for the exception to the related-party tenant rule for qualifying taxable REIT subsidiaries; or (iii) we furnish more than a de minimis amount of noncustomary services to the tenants of the facility, or manage or operate the facility, other than through a qualifying independent contractor or a taxable REIT subsidiary. In any of these circumstances, we could lose our REIT status because we would be unable to satisfy either the 75% or 95% gross income test. Tenants may be required to pay, besides base rent, reimbursements for certain amounts we are obligated to pay to third parties (such as a tenant's proportionate share of a facility's operational or capital expenses), penalties for nonpayment or late payment of rent or additions to rent. These and other similar payments should qualify as "rents from real property." Interest. The term "interest" generally does not include any amount received or accrued, directly or indirectly, if the determination of the amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term "interest" solely because it is based on a fixed percentage or percentages of receipts or sales. Furthermore, to the extent that interest from a loan that is based upon the residual cash proceeds from the sale of the property securing the loan constitutes a "shared appreciation provision," income attributable to such participation feature will be treated as gain from the sale of the secured property. Prohibited Transactions. A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary course of a trade or business. We believe that none of our assets will be held primarily for sale to customers and that a sale of any of our assets will not be in the ordinary course of our business. Whether a REIT holds an asset "primarily for sale to customers in the ordinary course of a trade or business" depends, however, on the facts and circumstances in effect from time to time, including those related to a particular asset. Nevertheless, we will attempt to comply with the terms of safe-harbor provisions in the federal income tax laws prescribing when an asset sale will not be characterized as a prohibited transaction. We cannot assure you, however, that we can comply with the safe-harbor provisions or that we will avoid owning property that may be characterized as property that we hold "primarily for sale to customers in the ordinary course of a trade or business." We may form or acquire a taxable REIT subsidiary to hold and dispose of those facilities we conclude may not fall within the safe-harbor provisions. Foreclosure Property. We will be subject to tax at the maximum corporate rate on any income from foreclosure property, other than income that otherwise would be qualifying income for purposes of the 75% gross income test, less expenses directly connected with the production of that income. However, gross income from foreclosure property will qualify under the 75% and 95% gross income tests. Foreclosure property is any real property, including interests in real property, and any personal property incident to such real property acquired by a REIT as the result of the REIT's having bid on the property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law after actual or imminent default on a lease of the property or on indebtedness secured by the property, or a "Repossession Action." Property acquired by a Repossession Action will not be considered "foreclosure property" if (i) the REIT held or acquired the property subject to a lease or securing indebtedness for sale to customers in the ordinary course of business or (ii) the lease or loan was acquired or entered into with intent to take Repossession Action or in circumstances where the REIT had reason to know a default would occur. The determination of such intent or reason to know must be based on all 132

relevant facts and circumstances. In no case will property be considered "foreclosure property" unless the REIT makes a proper election to treat the property as foreclosure property. Foreclosure property includes any qualified healthcare property acquired by a REIT as a result of a termination of a lease of such property (other than a termination by reason of a default, or the imminence of a default, on the lease). A "qualified healthcare property" means any real property, including interests in real property, and any personal property incident to such real property which is a healthcare facility or is necessary or incidental to the use of a healthcare facility. For this purpose, a healthcare facility means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which, immediately before the termination, expiration, default, or breach of the lease secured by such facility, was operated by a provider of such services which was eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to such facility. However, a REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a mortgagee-in-possession and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases to be foreclosure property at the end of the third taxable year following the taxable year in which the REIT acquired the property (or, in the case of a qualified healthcare property which becomes foreclosure property because it is acquired by a REIT as a result of the termination of a lease of such property, at the end of the second taxable year following the taxable year in which the REIT acquired such property) or longer if an extension is granted by the Secretary of the Treasury. This period (as extended, if applicable) terminates, and foreclosure property ceases to be foreclosure property on the first day: - on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test, or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income test; - on which any construction takes place on the property, other than completion of a building or any other improvement, where more than 10% of the construction was completed before default became imminent; or - which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income. For this purpose, in the case of a qualified healthcare property, income derived or received from an independent contractor will be disregarded to the extent such income is attributable to (i) a lease of property in effect on the date the REIT acquired the qualified healthcare property (without regard to its renewal after such date so long as such renewal is pursuant to the terms of such lease as in effect on such date) or (ii) any lease of property entered into after such date if, on such date, a lease of such property from the REIT was in effect and, under the terms of the new lease, the REIT receives a substantially similar or lesser benefit in comparison to the prior lease. Hedging Transactions. From time to time, we may enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase such items, and futures and forward contracts. For taxable years beginning prior to January 1, 2005, any periodic income or gain from the disposition of any financial instrument for these or similar transactions to hedge indebtedness we incur to acquire or carry "real estate assets" should be qualifying income for purposes of the 95% gross income test, but not the 75% gross income test. For taxable years beginning on and after January 1, 2005, income and gain from "hedging transactions" will be excluded from gross income for purposes of the 95% gross income test (but not the 75% gross income test). For those taxable years, a "hedging transaction" will mean any transaction entered into in the normal course of our trade or business primarily to manage the risk of interest rate or price changes, or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets. We will be required to clearly identify any 133

such hedging transaction before the close of the day on which it was acquired, originated, or entered into. Since the financial markets continually introduce new and innovative instruments related to risk-sharing or trading, it is not entirely clear which such instruments will generate income which will be considered qualifying income for purposes of the gross income tests. We intend to structure any hedging or similar transactions so as not to jeopardize our status as a REIT. Failure to Satisfy Gross Income Tests. If we fail to satisfy one or both of the gross income tests for our 2004 taxable year, we nevertheless may qualify as a REIT for that year if we qualify for relief under certain provisions of the federal income tax laws. Those relief provisions generally will be available if: - our failure to meet these tests is due to reasonable cause and not to willful neglect; - we attach a schedule of the sources of our income to our tax return; and - any incorrect information on the schedule is not due to fraud with intent to evade tax. For taxable years beginning on and after January 1, 2005, those relief provisions will be available if: - our failure to meet those tests is due to reasonable cause and not to willful neglect, and - following our identification of such failure for any taxable year, a schedule of the sources of our income is filed in accordance with regulations prescribed by the Secretary of the Treasury. We cannot with certainty predict whether any failure to meet these tests will qualify for the relief provisions. As discussed above in "-- Taxation of Our Company," even if the relief provisions apply, we would incur a 100% tax on the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by a fraction intended to reflect our profitability. Asset Tests. To maintain our qualification as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year. First, at least 75% of the value of our total assets must consist of: - cash or cash items, including certain receivables; - government securities; - real estate assets, which includes interest in real property, leaseholds, options to acquire real property or leaseholds, interests in mortgages on real property and shares (or transferable certificates of beneficial interest) in other REITs; - stock in other REITs; and - investments in stock or debt instruments attributable to the temporary investment (i.e., for a period not exceeding 12 months) of new capital that we raise through equity offerings or offerings of debt with at least a five year term. With respect to investments not included in the 75% asset class, we may not hold securities of any one issuer (other than a taxable REIT subsidiary) that exceed 5% of the value of our total assets; nor may we hold securities of any one issuer (other than a taxable REIT subsidiary) that represent more than 10% of the voting power of all outstanding voting securities of such issuer, or more than 10% of the value of all outstanding securities of such issuer. In addition, we may not hold securities of one or more taxable REIT subsidiaries that represent in the aggregate more than 20% of the value of our total assets, irrespective of whether such securities may also be included in the 75% asset class (e.g., a mortgage loan issued to a taxable REIT subsidiary). Furthermore, no more than 25% of our total assets may be represented by securities that are not included in the 75% asset class, but this requirement will necessarily be satisfied if the 75% asset class requirement is satisfied. For purposes of the 5% and 10% asset tests, the term "securities" does not include stock in another REIT, equity or debt securities of a qualified REIT subsidiary or taxable REIT subsidiary, mortgage loans 134

that constitute real estate assets, or equity interests in a partnership. The term "securities," however, generally includes debt securities issued by a partnership or another REIT, except that for purposes of the 10% value test, the term "securities" does not include: - "Straight debt," defined as a written unconditional promise to pay on demand or on a specified date a sum certain in money if (i) the debt is not convertible, directly or indirectly, into stock, and (ii) the interest rate and interest payment dates are not contingent on profits, the borrower's discretion, or similar factors. "Straight debt" securities do not include any securities issued by a partnership or a corporation in which we or any controlled TRS (i.e., a TRS in which we own directly or indirectly more than 50% of the voting power or value of the stock) holds non-"straight debt" securities that have an aggregate value of more than 1% of the issuer's outstanding securities. However, "straight debt" securities include debt subject to the following contingencies: - a contingency relating to the time of payment of interest or principal, as long as either (i) there is no change to the effective yield of the debt obligation, other than a change to the annual yield that does not exceed the greater of 0.25% or 5% of the annual yield, or (ii) neither the aggregate issue price nor the aggregate face amount of the issuer's debt obligations held by us exceeds $1 million and no more than 12 months of unaccrued interest on the debt obligations can be required to be prepaid; and - a contingency relating to the time or amount of payment upon a default or prepayment of a debt obligation, as long as the contingency is consistent with customary commercial practice; - Any loan to an individual or an estate; - Any "section 467 rental agreement," other than an agreement with a related party tenant; - Any obligation to pay "rents from real property"; - Any security issued by a state or any political subdivision thereof, the District of Columbia, a foreign government of any political subdivision thereof, or the Commonwealth of Puerto Rico, but only if the determination of any payment thereunder does not depend in whole or in part on the profits of any entity not described in this paragraph or payments on any obligation issued by an entity not described in this paragraph; - Any security issued by a REIT; - Any debt instrument of an entity treated as a partnership for federal income tax purposes to the extent of our interest as a partner in the partnership; - Any debt instrument of an entity treated as a partnership for federal income tax purposes not described in the preceding bullet points if at least 75% of the partnership's gross income, excluding income from prohibited transaction, is qualifying income for purposes of the 75% gross income test described above in "-- Requirements for Qualification -- Income Tests." For purposes of the 10% value test, our proportionate share of the assets of a partnership is our proportionate interest in any securities issued by the partnership, without regard to securities described in the last two bullet points above. In connection with the acquisition of the facilities in our current portfolio, MPT Development Services, Inc., our taxable REIT subsidiary, has made loans to Vibra Healthcare, LLC, the parent entity of our tenants, in an aggregate amount of approximately $41.4 million to acquire the operations at those facilities. MPT Development Services, Inc. also made a loan of approximately $6.2 million to Vibra and its subsidiaries for working capital purposes which was repaid in February 2005. Those loans bear interest at an annual rate of 10.25%. Our operating partnership loaned the funds to MPT Development Services, Inc. to make these loans. The loans from our operating partnership to MPT Development Services, Inc. bear interest at an annual rate of 9.25%. 135

Baker Donelson is of the opinion that the loans to Vibra will be treated as debt rather than equity interests in Vibra, and that our rental income from Vibra will be treated as qualifying income for purposes of the REIT gross income tests. However, there can be no assurance that the IRS will not take a contrary position. If the IRS were to successfully treat the loans to Vibra as equity interests in Vibra, Vibra would be a "related party tenant" with respect to our company and the rent that we receive from Vibra would not be qualifying income for purposes of the REIT gross income tests. As a result, we could lose our REIT status. In addition, if the IRS were to successfully treat the loans to Vibra as interests held by our operating partnership rather than by MPT Development Services, Inc. and to treat the loans as other than straight debt, we would fail the 10% asset test with respect to such interests and, as a result, could lose our REIT status. Baker Donelson is of the opinion that the loans to Vibra will be treated as straight debt for federal income tax purposes. We will monitor the status of our assets for purposes of the various asset tests and will manage our portfolio in order to comply at all times with such tests. If we fail to satisfy the asset tests at the end of a calendar quarter, we will not lose our REIT status if: - we satisfied the asset tests at the end of the preceding calendar quarter; and - the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not wholly or partly caused by the acquisition of one or more non-qualifying assets. If we did not satisfy the condition described in the second item, above, we still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose. In the event that, at the end of any calendar quarter in a taxable year beginning on or after January 1, 2005, we violate the 5% or 10% test described above, we will not lose our REIT status if (1) the failure is de minimis (up to the lesser of 1% of our assets or $10 million) and (2) we dispose of assets or otherwise comply with the asset tests within six months after the last day of the quarter in which we identified the failure of the asset test. In the event of a more than de minimis failure of the 5% or 10% tests, or a failure of the other assets test, at the end of any calendar quarter in a taxable year beginning on or after January 1, 2005, as long as the failure was due to reasonable cause and not to willful neglect, we will not lose our REIT status if we (1) dispose of assets or otherwise comply with the asset tests within six months after the last day of the quarter in which we identified the failure of the asset test and (2) pay a tax equal to the greater of $50,000 or 35% of the net income from the nonqualifying assets during the period in which we failed to satisfy the asset tests. Distribution Requirements. Each taxable year, we must distribute dividends, other than capital gain dividends and deemed distributions of retained capital gain, to our stockholders in an aggregate amount not less than: - the sum of: - 90% of our "REIT taxable income," computed without regard to the dividends-paid deduction or our net capital gain or loss, and - 90% of our after-tax net income, if any, from foreclosure property, - minus - the sum of certain items of non-cash income. We must pay such distributions in the taxable year to which they relate, or in the following taxable year if we declare the distribution before we timely file our federal income tax return for the year and pay the distribution on or before the first regular dividend payment date after such declaration. We will pay federal income tax on taxable income, including net capital gain, that we do not distribute to stockholders. In addition, we will incur a 4% nondeductible excise tax on the excess of a 136

specified required distribution over amounts we actually distribute if we distribute an amount less than the required distribution during a calendar year, or by the end of January following the calendar year in the case of distributions with declaration and record dates falling in the last three months of the calendar year. The required distribution must not be less than the sum of: - 85% of our REIT ordinary income for the year; - 95% of our REIT capital gain income for the year; and - any undistributed taxable income from prior periods. We may elect to retain and pay income tax on the net long-term capital gain we receive in a taxable year. See " -- Taxation of Taxable United States Stockholders." If we so elect, we will be treated as having distributed any such retained amount for purposes of the 4% excise tax described above. We intend to make timely distributions sufficient to satisfy the annual distribution requirements and to avoid corporate income tax and the 4% excise tax. It is possible that, from time to time, we may experience timing differences between the actual receipt of income and actual payment of deductible expenses and the inclusion of that income and deduction of such expenses in arriving at our REIT taxable income. For example, we may not deduct recognized capital losses from our "REIT taxable income." Further, it is possible that, from time to time, we may be allocated a share of net capital gain attributable to the sale of depreciated property that exceeds our allocable share of cash attributable to that sale. As a result of the foregoing, we may have less cash than is necessary to distribute all of our taxable income and thereby avoid corporate income tax and the excise tax imposed on certain undistributed income. In such a situation, we may need to borrow funds or issue additional shares of common or preferred stock. Under certain circumstances, we may be able to correct a failure to meet the distribution requirement for a year by paying "deficiency dividends" to our stockholders in a later year. We may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able to avoid income tax on amounts distributed as deficiency dividends, we will be required to pay interest based upon the amount of any deduction we take for deficiency dividends. Recordkeeping Requirements. We must maintain certain records in order to qualify as a REIT. In addition, to avoid paying a penalty, we must request on an annual basis information from our stockholders designed to disclose the actual ownership of our shares of outstanding capital stock. We intend to comply with these requirements. Failure to Qualify. If we failed to qualify as a REIT in any taxable year and no relief provision applied, we would have the following consequences. We would be subject to federal income tax and any applicable alternative minimum tax at rates applicable to regular C corporations on our taxable income, determined without reduction for amounts distributed to stockholders. We would not be required to make any distributions to stockholders, and any distributions to stockholders would be taxable as ordinary income to the extent of our current and accumulated earnings and profits. Corporate stockholders could be eligible for a dividends-received deduction if certain conditions are satisfied. Unless we qualified for relief under specific statutory provisions, we would not be permitted to elect taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. For taxable years beginning on and after January 1, 2005, if we fail to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, we could avoid disqualification if the failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. In addition, there are relief provisions for a failure of the gross income tests and asset tests, as described above in "-- Income Tests" and "-- Asset Tests." Taxation of Taxable United States Stockholders. As long as we qualify as a REIT, a taxable "United States stockholder" will be required to take into account as ordinary income distributions made out of our current or accumulated earnings and profits that we do not designate as capital gain dividends or retained long-term capital gain. A United States stockholder will not qualify for the dividends-received 137

deduction generally available to corporations. The term "United States stockholder" means a holder of shares of common stock that, for United States federal income tax purposes, is: - a citizen or resident of the United States; - a corporation or partnership (including an entity treated as a corporation or partnership for United States federal income tax purposes) created or organized under the laws of the United States or of a political subdivision of the United States; - an estate whose income is subject to United States federal income taxation regardless of its source; or - any trust if (i) a United States court is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in place to be treated as a United States person. Distributions paid to a United States stockholder generally will not qualify for the new 15% tax rate for "qualified dividend income." The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum tax rate for qualified dividend income from 38.6% to 15% for tax years through 2008. Without future congressional action, the maximum tax rate on qualified dividend income will move to 35% in 2009 and 39.6% in 2011. Qualified dividend income generally includes dividends paid by domestic C corporations and certain qualified foreign corporations to most United States noncorporate stockholders. Because we are not generally subject to federal income tax on the portion of our REIT taxable income distributed to our stockholders, our dividends generally will not be eligible for the new 15% rate on qualified dividend income. As a result, our ordinary REIT dividends will continue to be taxed at the higher tax rate applicable to ordinary income. Currently, the highest marginal individual income tax rate on ordinary income is 35%. However, the 15% tax rate for qualified dividend income will apply to our ordinary REIT dividends, if any, that are (i) attributable to dividends received by us from non-REIT corporations, such as our taxable REIT subsidiary, and (ii) attributable to income upon which we have paid corporate income tax (e.g., to the extent that we distribute less than 100% of our taxable income). In general, to qualify for the reduced tax rate on qualified dividend income, a stockholder must hold our common stock for more than 60 days during the 120-day period beginning on the date that is 60 days before the date on which our common stock becomes ex-dividend. Distributions to a United States stockholder which we designate as capital gain dividends will generally be treated as long-term capital gain, without regard to the period for which the United States stockholder has held its common stock. We generally will designate our capital gain dividends as either 15%, 20% or 25% rate distributions. A corporate United States stockholder, however, may be required to treat up to 20% of certain capital gain dividends as ordinary income. We may elect to retain and pay income tax on the net long-term capital gain that we receive in a taxable year. In that case, a United States stockholder would be taxed on its proportionate share of our undistributed long-term capital gain. The United States stockholder would receive a credit or refund for its proportionate share of the tax we paid. The United States stockholder would increase the basis in its shares of common stock by the amount of its proportionate share of our undistributed long-term capital gain, minus its share of the tax we paid. A United States stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the distribution does not exceed the adjusted basis of the United States stockholder's shares. Instead, the distribution will reduce the adjusted basis of the shares, and any amount in excess of both our current and accumulated earnings and profits and the adjusted basis will be treated as capital gain, long-term if the shares have been held for more than one year, provided the shares are a capital asset in the hands of the United States stockholder. In addition, any distribution we declare in October, November, or December of any year that is payable to a United States stockholder of record on a specified date in any of those months will be treated as paid by us and received by the United States stockholder on December 31 of the year, provided we actually pay the distribution during January of the following calendar year. 138

Stockholders may not include in their individual income tax returns any of our net operating losses or capital losses. Instead, these losses are generally carried over by us for potential offset against our future income. Taxable distributions from us and gain from the disposition of shares of common stock will not be treated as passive activity income; stockholders generally will not be able to apply any "passive activity losses," such as losses from certain types of limited partnerships in which the stockholder is a limited partner, against such income. In addition, taxable distributions from us and gain from the disposition of common stock generally will be treated as investment income for purposes of the investment interest limitations. We will notify stockholders after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary income, return of capital, and capital gain. Taxation of United States Stockholders on the Disposition of Shares of Common Stock. In general, a United States stockholder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of our shares of common stock as long-term capital gain or loss if the United States stockholder has held the stocks for more than one year, and otherwise as short-term capital gain or loss. However, a United States stockholder must treat any loss upon a sale or exchange of common stock held for six months or less as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us which the United States stockholder treats as long-term capital gain. All or a portion of any loss that a United States stockholder realizes upon a taxable disposition of common stock may be disallowed if the United States stockholder purchases other shares of our common stock within 30 days before or after the disposition. Capital Gains and Losses. The tax-rate differential between capital gain and ordinary income for non-corporate taxpayers may be significant. A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-term capital gain or loss. The highest marginal individual income tax rate is currently 35%. The maximum tax rate on long-term capital gain applicable to individuals is 15% for sales and exchanges of assets held for more than one year and occurring on or after May 6, 2003 through December 31, 2008. The maximum tax rate on long-term capital gain from the sale or exchange of "section 1250 property" (i.e., generally, depreciable real property) is 25% to the extent the gain would have been treated as ordinary income if the property were "section 1245 property" (i.e., generally, depreciable personal property). We generally may designate whether a distribution we designate as capital gain dividends (and any retained capital gain that we are deemed to distribute) is taxable to non-corporate stockholders at a 15% or 25% rate. The characterization of income as capital gain or ordinary income may affect the deductibility of capital losses. A non-corporate taxpayer may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum of $3,000 annually. A non-corporate taxpayer may carry unused capital losses forward indefinitely. A corporate taxpayer must pay tax on its net capital gain at corporate ordinary-income rates. A corporate taxpayer may deduct capital losses only to the extent of capital gains, with unused losses carried back three years and forward five years. Information Reporting Requirements and Backup Withholding. We will report to our stockholders and to the IRS the amount of distributions we pay during each calendar year and the amount of tax we withhold, if any. A stockholder may be subject to backup withholding at a rate of up to 28% with respect to distributions unless the holder: - is a corporation or comes within certain other exempt categories and when required, demonstrates this fact; or - provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules. A stockholder who does not provide us with its correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder's income tax liability. In addition, we may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to us. For a 139

discussion of the backup withholding rules as applied to non-United States stockholders, see "Taxation of Non-United States Stockholders." Taxation of Tax-Exempt Stockholders. Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, referred to as pension trusts, generally are exempt from federal income taxation. However, they are subject to taxation on their "unrelated business taxable income." While many investments in real estate generate unrelated business taxable income, the IRS has issued a ruling that dividend distributions from a REIT to an exempt employee pension trust do not constitute unrelated business taxable income so long as the exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the pension trust. Based on that ruling, amounts we distribute to tax-exempt stockholders generally should not constitute unrelated business taxable income. However, if a tax-exempt stockholder were to finance its acquisition of common stock with debt, a portion of the income it received from us would constitute unrelated business taxable income pursuant to the "debt-financed property" rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans that are exempt from taxation under special provisions of the federal income tax laws are subject to different unrelated business taxable income rules, which generally will require them to characterize distributions they receive from us as unrelated business taxable income. Finally, in certain circumstances, a qualified employee pension or profit-sharing trust that owns more than 10% of our shares of common stock must treat a percentage of the dividends it receives from us as unrelated business taxable income. The percentage is equal to the gross income we derive from an unrelated trade or business, determined as if we were a pension trust, divided by our total gross income for the year in which we pay the dividends. This rule applies to a pension trust holding more than 10% of our shares only if: - the percentage of our dividends which the tax-exempt trust must treat as unrelated business taxable income is at least 5%; - we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our shares of common stock be owned by five or fewer individuals, which modification allows the beneficiaries of the pension trust to be treated as holding shares in proportion to their actual interests in the pension trust; and - either of the following applies: - one pension trust owns more than 25% of the value of our shares of common stock; or - a group of pension trusts individually holding more than 10% of the value of our shares of common stock collectively owns more than 50% of the value of our shares of common stock. Taxation of Non-United States Stockholders. The rules governing United States federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships, and other foreign stockholders are complex. This section is only a summary of such rules. We urge non-United States stockholders to consult their own tax advisors to determine the impact of federal, state, and local income tax laws on ownership of shares of common stock, including any reporting requirements. A non-United States stockholder that receives a distribution which (i) is not attributable to gain from our sale or exchange of "United States real property interests" (defined below) and (ii) we do not designate a capital gain dividend (or retained capital gain) will recognize ordinary income to the extent of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply unless an applicable tax treaty reduces or eliminates the tax. However, a non-United States stockholder generally will be subject to federal income tax at graduated rates on any distribution treated as effectively connected with the non-United States stockholder's conduct of a United States trade or business, in the same manner as United States stockholders are taxed on distributions. A corporate non-United States stockholder may, in addition, be subject to the 30% branch profits tax. We 140

plan to withhold United States income tax at the rate of 30% on the gross amount of any distribution paid to a non-United States stockholder unless: - a lower treaty rate applies and the non-United States stockholder files an IRS Form W-8BEN evidencing eligibility for that reduced rate with us; or - the non-United States stockholder files an IRS Form W-8ECI with us claiming that the distribution is effectively connected income. A non-United States stockholder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the excess portion of the distribution does not exceed the adjusted basis of the stockholder's shares of common stock. Instead, the excess portion of the distribution will reduce the adjusted basis of the shares. A non-United States stockholder will be subject to tax on a distribution that exceeds both our current and accumulated earnings and profits and the adjusted basis of its shares, if the non-United States stockholder otherwise would be subject to tax on gain from the sale or disposition of shares of common stock, as described below. Because we generally cannot determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits, we normally will withhold tax on the entire amount of any distribution at the same rate as we would withhold on a dividend. However, a non-United States stockholder may obtain a refund of amounts we withhold if we later determine that a distribution in fact exceeded our current and accumulated earnings and profits. We must withhold 10% of any distribution that exceeds our current and accumulated earnings and profits. We will, therefore, withhold at a rate of 10% on any portion of a distribution not subject to withholding at a rate of 30%. For any year in which we qualify as a REIT, a non-United States stockholder will incur tax on distributions attributable to gain from our sale or exchange of "United States real property interests" under the "FIRPTA" provisions of the Code. The term "United States real property interests" includes interests in real property and stocks in corporations at least 50% of whose assets consist of interests in real property. Under the FIRPTA rules, a non-United States stockholder is taxed on distributions attributable to gain from sales of United States real property interests as if the gain were effectively connected with the conduct of a United States business of the non-United States stockholder. A non-United States stockholder thus would be taxed on such a distribution at the normal capital gain rates applicable to United States stockholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non-United States corporate stockholder not entitled to treaty relief or exemption also may be subject to the 30% branch profits tax on such a distribution. We must withhold 35% of any distribution that we could designate as a capital gain dividend. A non-United States stockholder may receive a credit against our tax liability for the amount we withhold. For taxable years beginning on and after January 1, 2005, for non-U.S. stockholders of our publicly-traded shares, capital gain distributions that are attributable to our sale of real property will not be subject to FIRPTA and therefore will be treated as ordinary dividends rather than as gain from the sale of a United States real property interest, as long as the non-U.S. stockholder did not own more than 5% of the class of our stock on which the distributions are made during the taxable year. As a result, non-U.S. stockholders generally would be subject to withholding tax on such capital gain distributions in the same manner as they are subject to withholding tax on ordinary dividends. A non-United States stockholder generally will not incur tax under FIRPTA with respect to gain on a sale of shares of common stock as long as, at all times, non-United States persons hold, directly or indirectly, less than 50% in value of the outstanding common stock. We cannot assure you that this test will be met. In addition, a non-United States stockholder that owned, actually or constructively, 5% or less of the outstanding common stock at all times during a specified testing period will not incur tax under FIRPTA on gain from a sale of common stock if the stock is "regularly traded" on an established securities market. Any gain subject to tax under FIRPTA will be treated in the same manner as it would 141

be in the hands of United States stockholders subject to alternative minimum tax, but under a special alternative minimum tax in the case of nonresident alien individuals. A non-United States stockholder generally will incur tax on gain from the sale of common stock not subject to FIRPTA if: - the gain is effectively connected with the conduct of the non-United States stockholder's United States trade or business, in which case the non-United States stockholder will be subject to the same treatment as United States stockholders with respect to the gain; or - the non-United States stockholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, in which case the non-United States stockholder will incur a 30% tax on capital gains. OTHER TAX CONSEQUENCES Tax Aspects of Our Investments in the Operating Partnership. The following discussion summarizes certain federal income tax considerations applicable to our direct or indirect investment in our operating partnership and any subsidiary partnerships or limited liability companies we form or acquire, each individually referred to as a Partnership and, collectively, as Partnerships. The following discussion does not cover state or local tax laws or any federal tax laws other than income tax laws. Classification as Partnerships. We are entitled to include in our income our distributive share of each Partnership's income and to deduct our distributive share of each Partnership's losses only if such Partnership is classified for federal income tax purposes as a partnership (or an entity that is disregarded for federal income tax purposes if the entity has only one owner or member), rather than as a corporation or an association taxable as a corporation. An organization with at least two owners or members will be classified as a partnership, rather than as a corporation, for federal income tax purposes if it: - is treated as a partnership under the Treasury regulations relating to entity classification (the "check-the-box regulations"); and - is not a "publicly traded" partnership. Under the check-the-box regulations, an unincorporated entity with at least two owners or members may elect to be classified either as an association taxable as a corporation or as a partnership. If such an entity does not make an election, it generally will be treated as a partnership for federal income tax purposes. We intend that each Partnership will be classified as a partnership for federal income tax purposes (or else a disregarded entity where there are not at least two separate beneficial owners). A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market (or a substantial equivalent). A publicly traded partnership is generally treated as a corporation for federal income tax purposes, but will not be so treated for any taxable year for which at least 90% of the partnership's gross income consists of specified passive income, including real property rents, gains from the sale or other disposition of real property, interest, and dividends (the "90% passive income exception"). Treasury regulations, referred to as PTP regulations, provide limited safe harbors from treatment as a publicly traded partnership. Pursuant to one of those safe harbors, or private placement exclusion, interests in a partnership will not be treated as readily tradable on a secondary market or the substantial equivalent thereof if (i) all interests in the partnership were issued in a transaction or transactions that were not required to be registered under the Securities Act, and (ii) the partnership does not have more than 100 partners at any time during the partnership's taxable year. For the determination of the number of partners in a partnership, a person owning an interest in a partnership, grantor trust, or S corporation that owns an interest in the partnership is treated as a partner in the partnership only if (i) substantially all of the value of the owner's interest in the entity is attributable to the entity's direct or indirect interest in the partnership and (ii) a principal purpose of the use of the entity is to permit the partnership to satisfy the 100-partner limitation. Each Partnership should qualify for the private placement exclusion. 142

We have not requested, and do not intend to request, a ruling from the Internal Revenue Service that the Partnerships will be classified as partnerships for federal income tax purposes. If for any reason a Partnership were taxable as a corporation, rather than as a partnership, for federal income tax purposes, we likely would not be able to qualify as a REIT. See "-- Requirements for Qualification -- Income Tests" and " -- Requirements for Qualification -- Asset Tests." In addition, any change in a Partnership's status for tax purposes might be treated as a taxable event, in which case we might incur tax liability without any related cash distribution. See "-- Requirements for Qualification -- Distribution Requirements." Further, items of income and deduction of such Partnership would not pass through to its partners, and its partners would be treated as stockholders for tax purposes. Consequently, such Partnership would be required to pay income tax at corporate rates on its net income, and distributions to its partners would constitute dividends that would not be deductible in computing such Partnership's taxable income. INCOME TAXATION OF THE PARTNERSHIPS AND THEIR PARTNERS Partners, Not the Partnerships, Subject to Tax. A partnership is not a taxable entity for federal income tax purposes. We will therefore take into account our allocable share of each Partnership's income, gains, losses, deductions, and credits for each taxable year of the Partnership ending with or within our taxable year, even if we receive no distribution from the Partnership for that year or a distribution less than our share of taxable income. Similarly, even if we receive a distribution, it may not be taxable if the distribution does not exceed our adjusted tax basis in our interest in the Partnership. Partnership Allocations. Although a partnership agreement generally will determine the allocation of income and losses among partners, allocations will be disregarded for tax purposes if they do not comply with the provisions of the federal income tax laws governing partnership allocations. If an allocation is not recognized for federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the partners' interests in the partnership, which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. Each Partnership's allocations of taxable income, gain, and loss are intended to comply with the requirements of the federal income tax laws governing partnership allocations. Tax Allocations With Respect to Contributed Properties. Income, gain, loss, and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated in a manner such that the contributing partner is charged with, or benefits from, respectively, the unrealized gain or unrealized loss associated with the property at the time of the contribution. Similar rules apply with respect to property revalued on the books of a partnership. The amount of such unrealized gain or unrealized loss, referred to as built-in gain or built-in loss, is generally equal to the difference between the fair market value of the contributed or revalued property at the time of contribution or revaluation and the adjusted tax basis of such property at that time, referred to as a book-tax difference. Such allocations are solely for federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners. The United States Treasury Department has issued regulations requiring partnerships to use a "reasonable method" for allocating items with respect to which there is a book-tax difference and outlining several reasonable allocation methods. Our operating partnership generally intends to use the traditional method for allocating items with respect to which there is a book-tax difference. Basis in Partnership Interest. Our adjusted tax basis in any partnership interest we own generally will be: - the amount of cash and the basis of any other property we contribute to the partnership; - increased by our allocable share of the partnership's income (including tax-exempt income) and our allocable share of indebtedness of the partnership; and - reduced, but not below zero, by our allocable share of the partnership's loss, the amount of cash and the basis of property distributed to us, and constructive distributions resulting from a reduction in our share of indebtedness of the partnership. 143

Loss allocated to us in excess of our basis in a partnership interest will not be taken into account until we again have basis sufficient to absorb the loss. A reduction of our share of partnership indebtedness will be treated as a constructive cash distribution to us, and will reduce our adjusted tax basis. Distributions, including constructive distributions, in excess of the basis of our partnership interest will constitute taxable income to us. Such distributions and constructive distributions normally will be characterized as long-term capital gain. Depreciation Deductions Available to Partnerships. The initial tax basis of property is the amount of cash and the basis of property given as consideration for the property. A partnership in which we are a partner generally will depreciate property for federal income tax purposes under the modified accelerated cost recovery system of depreciation, referred to as MACRS. Under MACRS, the partnership generally will depreciate furnishings and equipment over a seven year recovery period using a 200% declining balance method and a half-year convention. If, however, the partnership places more than 40% of its furnishings and equipment in service during the last three months of a taxable year, a mid-quarter depreciation convention must be used for the furnishings and equipment placed in service during that year. Under MACRS, the partnership generally will depreciate buildings and improvements over a 39 year recovery period using a straight line method and a mid-month convention. The operating partnership's initial basis in properties acquired in exchange for units of the operating partnership should be the same as the transferor's basis in such properties on the date of acquisition by the partnership. Although the law is not entirely clear, the partnership generally will depreciate such property for federal income tax purposes over the same remaining useful lives and under the same methods used by the transferors. The partnership's tax depreciation deductions will be allocated among the partners in accordance with their respective interests in the partnership, except to the extent that the partnership is required under the federal income tax laws governing partnership allocations to use a method for allocating tax depreciation deductions attributable to contributed or revalued properties that results in our receiving a disproportionate share of such deductions. Under recently enacted legislation, a first-year bonus depreciation of 50% may be available for certain tenant improvements. In addition, certain qualified leasehold improvement property placed in service before January 1, 2006 will be depreciated over a 15-year recovery period using a straight method and a half-year convention. Sale of a Partnership's Property. Generally, any gain realized by a Partnership on the sale of property held for more than one year will be long-term capital gain, except for any portion of the gain treated as depreciation or cost recovery recapture. Any gain or loss recognized by a Partnership on the disposition of contributed or revalued properties will be allocated first to the partners who contributed the properties or who were partners at the time of revaluation, to the extent of their built-in gain or loss on those properties for federal income tax purposes. The partners' built-in gain or loss on contributed or revalued properties is the difference between the partners' proportionate share of the book value of those properties and the partners' tax basis allocable to those properties at the time of the contribution or revaluation. Any remaining gain or loss recognized by the Partnership on the disposition of contributed or revalued properties, and any gain or loss recognized by the Partnership on the disposition of other properties, will be allocated among the partners in accordance with their percentage interests in the Partnership. Our share of any Partnership gain from the sale of inventory or other property held primarily for sale to customers in the ordinary course of the Partnership's trade or business will be treated as income from a prohibited transaction subject to a 100% tax. Income from a prohibited transaction may have an adverse effect on our ability to satisfy the gross income tests for REIT status. See "-- Requirements for Qualification -- Income Tests." We do not presently intend to acquire or hold, or to allow any Partnership to acquire or hold, any property that is likely to be treated as inventory or property held primarily for sale to customers in the ordinary course of our, or the Partnership's, trade or business. Taxable REIT Subsidiaries. As described above, we have formed and have made a timely election to treat MPT Development Services, Inc. as a taxable REIT subsidiary and may form or acquire 144

additional taxable REIT subsidiaries in the future. A taxable REIT subsidiary may provide services to our tenants and engage in activities unrelated to our tenants, such as third-party management, development, and other independent business activities. We and any corporate subsidiary in which we own stock must make an election for the subsidiary to be treated as a taxable REIT subsidiary. If a taxable REIT subsidiary directly or indirectly owns shares of a corporation with more than 35% of the value or voting power of all outstanding shares of the corporation, the corporation will automatically also be treated as a taxable REIT subsidiary. Overall, no more than 20% of the value of our assets may consist of securities of one or more taxable REIT subsidiaries, irrespective of whether such securities may also qualify under the 75% assets test, and no more than 25% of the value of our assets may consist of the securities that are not qualifying assets under the 75% test, including, among other things, certain securities of a taxable REIT subsidiary, such as stock or non-mortgage debt. Rent we receive from our taxable REIT subsidiaries will qualify as "rents from real property" as long as at least 90% of the leased space in the property is leased to persons other than taxable REIT subsidiaries and related party tenants, and the amount paid by the taxable REIT subsidiary to rent space at the property is substantially comparable to rents paid by other tenants of the property for comparable space. The taxable REIT subsidiary rules limit the deductibility of interest paid or accrued by a taxable REIT subsidiary to us to assure that the taxable REIT subsidiary is subject to an appropriate level of corporate taxation. Further, the rules impose a 100% excise tax on certain types of transactions between a taxable REIT subsidiary and us or our tenants that are not conducted on an arm's-length basis. A taxable REIT subsidiary may not directly or indirectly operate or manage a healthcare facility. For purposes of this definition a "healthcare facility" means a hospital, nursing facility, assisted living facility, congregate care facility, qualified continuing care facility, or other licensed facility which extends medical or nursing or ancillary services to patients and which is operated by a service provider which is eligible for participation in the Medicare program under Title XVIII of the Social Security Act with respect to such facility. State and Local Taxes. We and our stockholders may be subject to taxation by various states and localities, including those in which we or a stockholder transacts business, owns property or resides. The state and local tax treatment may differ from the federal income tax treatment described above. Consequently, stockholders should consult their own tax advisors regarding the effect of state and local tax laws upon an investment in our common stock. 145

UNDERWRITING Friedman, Billings, Ramsey & Co., Inc. is acting as representative of the underwriters of this offering. Subject to the terms and conditions in the underwriting agreement entered into in connection with the sale of our common stock described in this prospectus, the underwriters named below have severally agreed to purchase the number of shares of common stock set forth opposite their respective names.

NUMBER OF SHARES UNDERWRITER OF COMMON STOCK - ----------- ---------------- Friedman, Billings, Ramsey & Co., Inc. ..................... J.P. Morgan Securities Inc. ................................ -------- TOTAL:...................................................... ========
The underwriting agreement provides that the obligations of the underwriters to purchase and accept delivery of the shares of common stock offered by this prospectus are subject to approval by their counsel of legal matters and to other conditions contained in the underwriting agreement including, among other items, the receipt of legal opinions from counsel, the receipt of comfort letters from our current auditors, the absence of any material adverse changes affecting us or our business and the absence of any objections from the National Association of Securities Dealers Inc. with respect to the fairness and reasonableness of the underwriting terms. The underwriters are obligated to purchase and accept delivery of all of the shares of common stock offered by this prospectus, other than those covered by the over-allotment option described below, if any shares are taken. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or, in the event that the purchase commitments of the defaulting underwriters represent more than 10% of the total number shares of common stock offered by this prospectus, the underwriting agreement may be terminated. The underwriters propose to offer the shares of common stock directly to the public at the public offering price indicated on the cover page of this prospectus and to various dealers at that price less a concession not to exceed $ per share, of which $ may be reallowed to other dealers. After this offering, the public offering price, concession and reallowance to dealers may be reduced by the underwriters. No reduction shall change the amount of proceeds to be received by us as indicated on the cover page of this prospectus. The common stock is offered by the underwriters as stated in this prospectus, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. We have granted to the underwriters an option, exercisable within 30 days after the date of this prospectus, to purchase from time to time up to an aggregate of additional shares of our common stock to cover over-allotments, if any, at the public offering price less the underwriting discount. If the underwriters exercise their over-allotment option to purchase any of the additional shares of common stock, each underwriter, subject to certain conditions, will become obligated to purchase these additional shares based on the underwriters' percentage purchase commitment in the offering as indicated in the table above. If purchased, these additional shares will be sold by the underwriters on the same terms as those on which the shares offered by this prospectus are being sold. The underwriters may exercise the over-allotment option to cover over-allotments made in connection with the sale of the shares of common stock offered in this offering. 146

The following table summarizes the underwriting compensation to be paid to the underwriters by us and the selling stockholders. These amounts assume both no exercise and full exercise of the underwriters' over-allotment option to purchase additional shares.

WITHOUT WITH OVER-ALLOTMENT OVER-ALLOTMENT -------------- -------------- By us: Per share:.............................................. Total:.................................................. By the selling stockholders: Per share:.............................................. Total:..................................................
Pursuant to a registration rights agreement between us, Friedman, Billings, Ramsey & Co., Inc. and certain holders of our common stock, we are required to pay substantially all of the expenses in connection with the registration of the shares of common stock purchased in the April 2004 private placement. In addition, we will reimburse selling stockholders in an aggregate amount of up to $50,000, for the fees and expenses of one counsel and one accounting firm, as selected by Friedman, Billings, Ramsey & Co., Inc. for the selling stockholders, to review any registration statement. Each selling stockholder participating in this offering will bear a proportionate share of the underwriting discounts payable to the underwriters, all transfer taxes and transfer fees and any other expense of the selling stockholders not allocated to us in the registration rights agreement. We have agreed to reimburse Friedman, Billings, Ramsey & Co., Inc. for certain of its reasonable out-of-pocket expenses in connection with this offering, including any fees or disbursements of its counsel, not to exceed $150,000. In addition to the items of compensation to be paid to the underwriters in connection with this offering, until April 7, 2006, we have appointed Friedman, Billings, Ramsey & Co., Inc. to act as lead underwriter or placement agent in connection with any public or private offerings in our equity securities and to act as our financial advisor in connection with any purchase or sale of stock, merger, corporate acquisition, business combination or other strategic combination in which we may engage. Other than with respect to this offering, the underwriters are not providing us with any financial advisory services. We estimate that the total expenses payable by us in connection with this offering, other than the items referred to above, will be approximately $ . We and the selling stockholders have agreed to indemnify the underwriters against various liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments the underwriters may be required to make because of any of those liabilities. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority. We will apply to list our common stock on the New York Stock Exchange upon the completion of this offering under the symbol "MPW." In connection with the listing of our common stock on the New York Stock Exchange, the underwriters will undertake to sell round lots of 100 shares or more to a minimum of 2,000 beneficial owners. Prior to this offering, there has been no public market for our common stock, other than limited trading on the Portal Market. The initial public offering price has been determined through negotiations between the underwriters and us. Among the factors considered in such determination were: - prevailing market conditions; - dividend yields and financial characteristics of publicly traded REITs that we and the underwriters believe to be comparable to us; - the present state of our financial and business operations; 147

- our management; - estimates of our business and earnings potential; and - the prospects for the industry in which we operate. Each of our executive officers and directors has agreed, subject to specified exceptions, not to: - offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, borrow or otherwise dispose of any shares of common stock, any of our or our subsidiaries' other equity securities or any securities convertible into or exercisable or exchangeable for shares of our common stock or any such equity securities; or - establish or increase any "put equivalent position" or liquidate or decrease any "call equivalent position" or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any of the economic consequences associated with the ownership of any shares of our common stock or of our or our subsidiaries' other equity securities (regardless of whether any of these transactions are to be settled by the delivery of common stock, other securities, cash or otherwise) for a period of 180 days after the date of this prospectus without the prior written consent of Friedman, Billings, Ramsey & Co., Inc. This restriction terminates after the close of trading of the common stock on and including the 180th day after the date of this prospectus. However, Friedman, Billings, Ramsey & Co., Inc. may, in its sole discretion and at any time or from time to time before the termination of the 180-day period, without notice, release all or any portion of the securities subject to lock-up agreements. There are no other existing agreements between the underwriters and any officer or director who has executed a lock-up agreement providing consent to the sale of shares prior to the expiration of the lock-up period. In addition, we have agreed that, for 180 days after the date of this prospectus, we will not, without the prior written consent of Friedman, Billings, Ramsey & Co., Inc., issue, sell, contract to sell, or otherwise dispose of, any shares of common stock, any options or warrants to purchase any shares of common stock or any securities convertible into, exercisable for or exchangeable for shares of common stock other than our sale of shares in this offering, the issuance of options or shares of common stock upon the exercise of outstanding options or warrants, the issuance of options or shares of common stock under existing stock option and incentive plans, or the issuance of common stock or other securities convertible into common stock issued in connection with the acquisition of properties. We also have agreed that we will not consent to the disposition of any shares held by officers or directors subject to lock-up agreements prior to the expiration of their respective lock-up periods unless pursuant to an exception to those agreements or with the consent of Friedman, Billings, Ramsey & Co., Inc. The lockup provisions do not prohibit us from filing a resale registration statement to register the shares issued in our April 2004 private placement. Our stockholders other than our executive officers and directors may not sell or otherwise dispose of any of the shares of our common stock or securities convertible into our common stock that they have acquired prior to the date of this prospectus and are not selling in this offering until 60 days after the date of this prospectus, subject to limited exceptions. In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock, including: - short sales; - syndicate covering transactions; - imposition of penalty bids; and - purchases to cover positions created by short sales. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. Stabilizing transactions may include making short sales of our common stock, which involves the sale by the underwriters of a 148

greater number of shares of common stock than they are required to purchase in this offering, and purchasing common stock from us or in the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares pursuant to the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchased in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position. The representatives also may impose a penalty bid on underwriters and selling group members. This means that if the representative purchases shares in the open market in stabilizing transactions or to cover short sales, the representative can require the underwriters or selling group members that sold those shares as part of this offering to repay underwriting discount or the selling concession received by them. As a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise. The underwriters do not expect sales to accounts over which they exercise discretionary authority to exceed 5% of the total number of shares of common stock offered by this prospectus. At our request, the underwriters have reserved up to % of the common stock being offered by this prospectus for sale to our directors, employees, business associates and related persons at the public offering price. The sales will be made by Friedman, Billings, Ramsey & Co., Inc. through a directed share program. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. These persons must commit to purchase no later than the close of business on the day following the date of this prospectus. Any directors, employees or other persons purchasing such reserved shares will be prohibited from disposing of or hedging such shares for a period of at least 180 days after the date of this prospectus. The common stock issued in connection with the directed share program will be issued as part of the underwritten public offering. We have an engagement letter with Friedman, Billings, Ramsey & Co., Inc. which gives Friedman, Billings, Ramsey & Co., Inc. the right to provide certain services to us. For a description of that engagement letter, see the discussion in "Certain Relationships and Related Transactions -- Relationship with One of our Underwriters." Subject to the terms of that engagement letter, the underwriters and their affiliates may from time to time engage in future transactions with us and our affiliates and provide services to us and our affiliates in the ordinary course of their business Friedman, Billings, Ramsey Group, Inc., an affiliate of Friedman, Billings, Ramsey & Co., Inc. is currently our largest stockholder and therefore Friedman, Billings, Ramsey & Co., Inc. will have an interest in the successful completion of this offering beyond the underwriting discounts and commissions it will receive. LEGAL MATTERS The validity of the common stock and certain tax matters, including REIT qualification and debt characterization, will be passed upon for us by Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. The summary of legal matters contained in the section of this prospectus under the heading "United States Federal Income Tax Considerations" is based on the opinion of Baker Donelson. Certain legal 149

matters in connection with this offering will be passed upon for the underwriters by Hunton & Williams LLP. EXPERTS Our consolidated financial statements and the accompanying financial statement schedule as of December 31, 2004, and 2003, and for the year ended December 31, 2004 and for the period from inception (August 27, 2003) through December 31, 2003, included herein, have been audited by KPMG LLP, independent registered public accounting firm, as stated in their report included herein. The consolidated financial statements of Vibra as of December 31, 2004 and for the period from inception (May 14, 2004) through December 31, 2004 included herein have been audited by Parente Randolph, LLC, independent registered public accounting firm, as stated in their report included herein. The independent registered public accounting firms have not examined, compiled or otherwise applied procedures to any financial forecast, projection or anticipated results presented herein and, accordingly, do not express an opinion or any other form of assurance on such. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-11, including exhibits, schedules and amendments filed with, or incorporated by reference in, this registration statement, under the Securities Act with respect to the shares of our common stock to be sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and exhibits and schedules to the registration statement. For further information with respect to our company and the shares of our common stock to be sold in this offering, reference is made to the registration statement, including the exhibits to the registration statement. Statements contained in this prospectus as to the contents of any contract or other document referred to in, or incorporated by reference in, this prospectus are not necessarily complete and, where that contract is an exhibit to the registration statement, each statement is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined without charge at the public reference room of the Securities and Exchange Commission, 450 Fifth Street, N.W. Room 1024, Washington, DC 20549. Information about the operation of the public reference room may be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0300. Copies of all or a portion of the registration statement can be obtained from the public reference room of the Securities and Exchange Commission upon payment of prescribed fees. Our Securities and Exchange Commission filings, including our registration statement, are also available to you on the Securities and Exchange Commission's website, www.sec.gov. As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act, and will file periodic reports, proxy statements and will make available to our stockholders annual reports containing audited financial information for each year, and quarterly reports for the first three quarters of each fiscal year containing unaudited interim financial information. 150

INDEX TO FINANCIAL STATEMENTS

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION Medical Properties Trust, Inc. and Subsidiaries Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2004...................................... F-3 Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2004................... F-4 Notes to Unaudited Pro Forma Financial Statements......... F-5 HISTORICAL FINANCIAL INFORMATION Medical Properties Trust, Inc. and Subsidiaries Report of Independent Registered Public Accounting Firm... F-8 Consolidated Balance Sheets as of December 31, 2004 and December 31, 2003...................................... F-9 Consolidated Statements of Operations for the Year Ended December 31, 2004 and for the Period from Inception (August 27, 2003) through December 31, 2003............ F-10 Consolidated Statements of Cash Flows for the Year Ended December 31, 2004 and for the Period from Inception (August 27, 2003) through December 31, 2003............ F-11 Consolidated Statements of Stockholders' Equity (Deficit) for the Year Ended December 31, 2004 and for the Period from Inception (August 27, 2003) through December 31, 2003................................................... F-12 Notes to Consolidated Financial Statements................ F-13 Schedule III -- Real Estate and Accumulated Depreciation.... F-24 Highmark Healthcare, LLC (now known as Vibra Healthcare, LLC) Report of Independent Registered Public Accounting Firm... F-25 Consolidated Balance Sheet as of December 31, 2004........ F-26 Consolidated Statement of Operations and Changes in Partner's Capital for the Period from Inception (May 14, 2004) through December 31, 2004.................... F-27 Consolidated Statement of Cash Flows for the Period from Inception (May 14, 2004) through December 31, 2004..... F-28 Notes to Consolidated Financial Statements................ F-29
F-1

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma consolidated financial information sets forth: - the historical financial information derived from our audited consolidated financial statements for the year ended December 31, 2004; - adjustments to give effect to acquisition of our facilities acquired and leased to Vibra and Desert Valley as if we owned them from the inception of each period presented; - adjustments to give effect to our loans made to Vibra; - adjustments to give effect to our probable acquisition properties; - adjustments to give effect to this offering and application of the net proceeds; and - our pro forma, as adjusted unaudited consolidated balance sheet as of December 31, 2004, and the pro forma, as adjusted, unaudited consolidated statement of operations for the year ended December 31, 2004, to give effect to our initial portfolio, our probable acquisition properties and this offering. This section contains forward-looking statements, which are projections of future performance and the assumptions upon which the forward-looking statements are based. Our actual results could differ materially from those expressed in our forward-looking statements as a result of various risks, including those set forth in "Risk Factors" and elsewhere in this prospectus. You should read the information below along with all other financial information and analysis presented in this prospectus, including the sections captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical financial statements and related notes. The unaudited pro forma consolidated financial information is presented for informational purposes only. We do not expect that this information will reflect our future results of operations or financial position. The unaudited pro forma adjustments and eliminations are based on available information and upon assumptions that we believe are reasonable. The unaudited pro forma financial information assumes that the above described transactions were completed as of December 31, 2004, for purposes of the unaudited pro forma consolidated balance sheets and as of the first day of the period presented for purposes of the unaudited pro forma consolidated statements of operations. F-2

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Unaudited Pro Forma Consolidated Balance Sheet December 31, 2004

EFFECT OF ACQUISITION TRANSACTIONS ------------------------------- EFFECT OF THIS DESERT VALLEY GULF STATES COMPANY PRO HISTORICAL OFFERING VICTORVILLE HEALTH FORMA ------------ -------------- ------------- ------------ ------------- (AUDITED) ASSETS Real estate assets Land.................................. $ 10,670,000 $ -- $ 2,000,000(2) $ 1,959,643(3) $ 14,629,643 Buildings and improvements............ 111,387,232 -- 24,994,553(2) 24,644,649(3) 161,026,434 Construction in progress.............. 24,318,098 -- (56,668)(2) -- 24,261,430 Intangible lease assets............... 5,314,963 -- 1,005,447(2) 830,708(3) 7,151,118 ------------ ------------ ------------ ------------ ------------- Gross investment in real estate assets............................ 151,690,293 -- 27,943,332 27,435,000 207,068,625 Accumulated depreciation and amortization........................ (1,478,470) -- -- -- (1,478,470) ------------ ------------ ------------ ------------ ------------- Net investment in real estate....... 150,211,823 -- 27,943,332 27,435,000 205,590,155 Cash and cash equivalents............... 97,543,677 105,000,000(1) (27,943,332)(2) (27,435,000)(3) 147,165,345 Interest receivable..................... 419,776 -- -- -- 419,776 Unbilled rent receivable................ 3,206,853 -- -- -- 3,206,853 Loans receivable........................ 50,224,069 -- -- 50,224,069 Other assets............................ 4,899,865 -- -- -- 4,899,865 ------------ ------------ ------------ ------------ ------------- Total Assets........................ $306,506,063 $105,000,000 $ -- $ -- $ 411,506,063 ============ ============ ============ ============ ============= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Long-term debt........................ $ 56,000,000 $(56,000,000)(1) $ -- $ -- $ -- Accounts payable and accrued expenses............................ 10,903,025 -- -- -- 10,903,025 Deferred revenue...................... 3,578,229 -- -- -- 3,578,229 Lease deposit......................... 3,296,365 -- -- -- 3,296,365 ------------ ------------ ------------ ------------ ------------- Total liabilities................... 73,777,619 (56,000,000) -- -- 17,777,619 Minority interest....................... 1,000,000 -- -- -- 1,000,000 Stockholders' equity Preferred stock, $0.001 par value. Authorized 10,000,000 shares; no shares outstanding.................. -- -- -- -- -- Common stock, $0.001 par value. Authorized 100,000,000 shares; issued and outstanding 26,082,862... 26,083 -- -- Additional paid in capital............ 233,626,690 -- -- Accumulated deficit................... (1,924,329) (1,145,000)(5) -- -- (3,069,329) ------------ ------------ ------------ ------------ ------------- Total stockholders' equity.......... 231,728,444 161,000,000 -- -- 392,728,444 ------------ ------------ ------------ ------------ ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $306,506,063 $105,000,000 $ -- $ -- $411,506,063 ============ ============ ============ ============ =============
See accompanying notes to Unaudited Pro Forma Consolidated Financial Statements. F-3

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Unaudited Pro Forma Consolidated Statement of Operations For the Year Ended December 31, 2004

EFFECT OF ACQUISITION PRO FORMA TRANSACTIONS EFFECT OF ---------------------------- VIBRA COMPLETED EFFECT OF THIS DESERT VALLEY- GULF STATES HISTORICAL FACILITIES TRANSACTIONS TRANSACTION VICTORVILLE HEALTH ----------- ----------- ------------ -------------- -------------- ----------- (AUDITED) REVENUES Rent income........................ $ 8,611,344 $ 9,774,139 (4) $18,385,483 $ -- $ 3,228,104 (6) $2,152,728 (7) Interest income from loans......... 2,282,115 2,754,934 (4) 5,037,049 -- -- 840,000 ----------- ----------- ----------- ----------- ----------- ---------- Total revenues................... 10,893,459 12,529,073 23,422,532 -- 3,228,104 2,992,728 OPERATING EXPENSES: Depreciation and amortization...... 1,478,470 1,660,526 (4) 3,138,996 -- 691,894 (6) 426,164 (7) Property expenses.................. 93,502 187,004 (4) 280,506 -- -- -- General and administrative......... 5,057,284 -- 5,057,284 1,145,000 (5) -- -- Costs of terminated acquisitions... 585,345 -- 585,345 -- -- -- ----------- ----------- ----------- ----------- ----------- ---------- Total operating expense.......... 7,214,601 1,847,530 9,062,131 1,145,000 691,894 426,164 ----------- ----------- ----------- ----------- ----------- ---------- Operating income (loss)........ 3,678,858 10,681,543 14,360,401 (1,145,000) 2,536,210 2,566,564 OTHER INCOME (EXPENSES) Interest income.................... 930,260 -- 930,260 -- -- -- Interest expense................... (32,769) -- (32,769) -- -- -- ----------- ----------- ----------- ----------- ----------- ---------- Net other income................. 897,491 -- 897,491 -- -- -- ----------- ----------- ----------- ----------- ----------- ---------- NET INCOME (LOSS).............. $ 4,576,349 $10,681,543 $15,257,892 $(1,145,000) $ 2,536,210 $2,566,564 =========== =========== =========== =========== =========== ========== NET LOSS PER SHARE -- BASIC.... $ 0.24 $ $ NET LOSS PER SHARE -- DILUTED............. $ 0.24 $ $ WEIGHTED AVERAGE SHARES OUTSTANDING -- BASIC......... 19,310,833 WEIGHTED AVERAGE SHARES OUTSTANDING -- DILUTED....... 19,312,634 COMPANY PRO FORMA ------------ REVENUES Rent income........................ $ 23,766,315 Interest income from loans......... 5,877,049 ------------ Total revenues................... 29,643,364 OPERATING EXPENSES: Depreciation and amortization...... 4,257,054 Property expenses.................. 280,506 General and administrative......... 6,202,284 Costs of terminated acquisitions... 585,345 ------------ Total operating expense.......... 11,325,189 ------------ Operating income (loss)........ 18,318,175 OTHER INCOME (EXPENSES) Interest income.................... 930,260 Interest expense................... (32,769) ------------ Net other income................. 897,491 ------------ NET INCOME (LOSS).............. $ 19,215,666 ============ NET LOSS PER SHARE -- BASIC.... $ NET LOSS PER SHARE -- DILUTED............. $ WEIGHTED AVERAGE SHARES OUTSTANDING -- BASIC......... WEIGHTED AVERAGE SHARES OUTSTANDING -- DILUTED.......
See accompanying Notes to Unaudited Pro Forma Consolidated Financial Statements. F-4

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS ADJUSTMENTS FOR UNAUDITED PRO FORMA BALANCE SHEET AS OF DECEMBER 31, 2004: (1) Records the issuance of million common shares at a public offering price of per share less underwriting commission and other expenses, calculated as follows:

Number of Shares Offered.................................... Price per Share............................................. $ ------------- Gross Proceeds.............................................. 175,000,000 Less: Underwriting discounts, commissions and other transaction costs......................................... (14,000,000) Less: Payment of long-term debt............................. (56,000,000) ------------- Net Proceeds................................................ $ 105,000,000 ============= Common stock at par value................................... $ Additional paid in capital.................................. Less: Payment of long-term debt............................. (56,000,000) ------------- Net proceeds................................................ $ 105,000,000 =============
(2) Records the acquisition of the Desert Valley -- Victorville facility as though we acquired it on December 31, 2004. Land........................................................ $ 2,000,000 Building.................................................... 24,944,553 Intangible lease assets..................................... 1,005,447 ----------- Total cost.................................................. 28,000,000 Less: Acquisition costs incurred to date.................... (56,668) ----------- Cash paid................................................... $27,943,332 ===========
(3) Records the acquisition of the three Gulf States Health facilities as though we acquired them on December 31, 2004. Land........................................................ $ 1,959,643 Building.................................................... 24,644,649 Intangible lease assets..................................... 830,708 ----------- Total cost.................................................. $27,435,000 ===========
F-5

ADJUSTMENTS FOR UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004: (4) Records year of rent income for the six Vibra initial property purchases as though we owned them from January 1, 2004, to December 31, 2004. Rent income is based on the monthly straight-line rent (as required by SFAS No. 13) for each property. Rent income from the Vibra properties is as follows:

ANNUAL RENT ----------- Bowling Green............................................... $ 5,471,964 Fresno...................................................... 2,675,182 Kentfield................................................... 1,094,393 Marlton..................................................... 4,752,598 New Bedford................................................. 3,171,528 Denver...................................................... 1,219,818 ----------- TOTAL..................................................... 18,385,483 Historical rent income for July 1 - December 31, 2004....... 8,611,344 ----------- Pro forma rent income....................................... $ 9,774,139 ===========
Records interest income from loans to Vibra entities as though the loans were made on January 1, 2004 and interest income was earned for the year ended December 31, 2004, at the stated rate of 10.25%.
ANNUAL INTEREST LOANS INCOME ----------- --------------- Bowling Green............................................ $11,771,389 $1,206,567 Fresno................................................... 6,561,308 672,534 Kentfield................................................ 5,422,387 555,795 Marlton.................................................. 11,203,366 1,148,345 New Bedford.............................................. 8,361,930 857,098 Denver................................................... 5,821,564 596,710 ----------- ---------- TOTAL.................................................. $49,141,944 5,037,049 =========== Historical interest income for July 1 - December 31, 2004................................................... 2,282,115 ---------- Pro forma interest income................................ $2,754,934 ==========
Depreciation of buildings (straight line using a 40 year life) and amortization of intangible lease assets (straight line using a fifteen year life) for the year ended December 31, 2004 as though the properties were acquired on January 1, 2004.
ANNUAL ANNUAL DEPRECIATION AMORTIZATION ------------ ------------ Bowling Green............................................... $ 839,268 $104,736 Fresno...................................................... 409,080 51,204 Kentfield................................................... 119,124 23,808 Marlton..................................................... 772,572 90,972 New Bedford................................................. 494,304 60,384 Denver...................................................... 150,324 23,220 ---------- -------- TOTAL..................................................... 2,784,672 354,324 Historical depreciation and amortization for July 1 - December 31, 2004..................................... 1,311,757 166,713 ---------- -------- Pro forma depreciation and amortization..................... $1,472,915 $187,611 ========== ========
F-6

Property expenses consist primarily of payments for the ground lease at Marlton for the year ended December 31, 2004. (5) Records compensation expense related to restricted stock awards made to senior management and other employees upon completion of this offering, calculated as follows:

Shares of common stock awarded.............................. [114,500] Value per share of common stock............................. $ -- ---------- Total value of shares awarded............................... $1,145,000 ========== Common stock at par value................................... $ -- Additional paid in capital.................................. -- ---------- Net proceeds................................................ $1,145,000 ==========
(6) Records one year of rent income for the Desert Valley -- Victorville facility as though we owned it from January 1, 2004, to December 31, 2004. Rent income is based on the straight-line rent (as required by SFAS No. 13) in the lease agreements between the Company and the lessee. Pro forma rent income for the Desert Valley -- Victorville for the year ended December 31, 2004 consists of the following:
ANNUAL RENT ----------- Desert Valley -- Victorville................................ $3,228,104
Depreciation of buildings (straight line using a 40 year life) and amortization of intangible lease assets (straight line using a fifteen year life) for the year ended December 31, 2004 as though constructing and occupying the properties was completed on January 1, 2004.
ANNUAL DEPRECIATION AND COST AMORTIZATION ----------- ---------------- Land..................................................... $ 2,000,000 $ -- Buildings................................................ 24,994,553 624,864 Intangible lease assets.................................. 1,005,447 67,030 -------- $691,894 ========
(7) Records one year of rent income for the two Gulf States Health facilities as though we owned them from January 1, 2004, to December 31, 2004. Rent income is based on the straight-line rent (as required by SFAS No. 13) in the lease agreements between the Company and the lessee. Pro forma rent income for the Gulf States Health facilities for the year ended December 31, 2004 consists of the following:
ANNUAL RENT ----------- Gulf States Health.......................................... $ 2,152,728
Depreciation of buildings (straight line using a 40 year life) for the year ended December 31, 2004 as though constructing and occupying the properties was completed on January 1, 2004.
ANNUAL DEPRECIATION AND COST AMORTIZATION ----------- ---------------- Land..................................................... $ 1,225,000 $ -- Buildings................................................ 15,252,102 381,304 Intangible lease assets.................................. 672,898 44,860 -------- $426,164 ========
Records a mortgage loan with a 10.5% annual interest rate on the third Gulf States Health facility as though the loan were made on January 1, 2004 and was outstanding for a full year before the option to purchase is exercised.
ANNUAL INTEREST LOANS INCOME ---------- --------------- Gulf States Health -- Hammond.............................. $8,000,000 $840,000
F-7

Immediately prior to the printing of the preliminary prospectus included in this S-11, we will be in a position to render the following report. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Medical Properties Trust, Inc.: We have audited the accompanying consolidated balance sheets of Medical Properties Trust, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 31, 2004 and for the period from inception (August 27, 2003) to December 31, 2003. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement Schedule III. These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Medical Properties Trust, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the year ended December 31, 2004 and for the period from inception (August 27, 2003) to December 31, 2003 in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Birmingham, Alabama March 16, 2005 F-8

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2004 and December 31, 2003

DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- ASSETS Real estate assets Land...................................................... $ 10,670,000 $ -- Buildings and improvements................................ 111,387,232 -- Construction in progress.................................. 24,318,098 166,301 Intangible lease assets................................... 5,314,963 -- ------------ ----------- Gross investment in real estate assets................. 151,690,293 166,301 Accumulated depreciation.................................. (1,311,757) -- Accumulated amortization.................................. (166,713) -- ------------ ----------- Net investment in real estate assets................... 150,211,823 166,301 Cash and cash equivalents................................... 97,543,677 100,000 Interest receivable......................................... 419,776 -- Unbilled rent receivable.................................... 3,206,853 -- Loans receivable............................................ 50,224,069 -- Other assets................................................ 4,899,865 201,832 ------------ ----------- TOTAL ASSETS................................................ $306,506,063 $ 468,133 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Liabilities Long-term debt............................................ $ 56,000,000 $ -- Accounts payable and accrued expenses..................... 10,903,025 1,389,779 Deferred revenue.......................................... 3,578,229 -- Lease deposit............................................. 3,296,365 -- Loan payable.............................................. -- 100,000 ------------ ----------- Total liabilities...................................... 73,777,619 1,489,779 Minority interest........................................... 1,000,000 -- Stockholders' equity (deficit) Preferred stock, $0.001 par value. Authorized 10,000,000 shares; no shares outstanding.......................... -- -- Common stock, $0.001 par value. Authorized 100,000,000 shares; issued and outstanding -- 26,082,862 shares at December 31, 2004 and 1,630,435 shares at December 31, 2003................................................... 26,083 1,630 Additional paid in capital................................ 233,626,690 -- Accumulated deficit....................................... (1,924,329) (1,023,276) ------------ ----------- Total stockholders' equity (deficit)................... 231,728,444 (1,021,646) ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)........ $306,506,063 $ 468,133 ============ ===========
See accompanying notes to consolidated financial statements. F-9

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Consolidated Statements of Operations Period from Inception (August 27, 2003) through December 31, 2003 and the Year Ended December 31, 2004

YEAR ENDED PERIOD FROM INCEPTION DECEMBER 31, (AUGUST 27, 2003) 2004 THROUGH DECEMBER 31, 2003 ------------ ------------------------- REVENUES Rent billed............................................. $ 6,162,278 $ -- Unbilled rent........................................... 2,449,066 -- Interest income from loans.............................. 2,282,115 -- ----------- ----------- Total revenues....................................... 10,893,459 -- EXPENSES Real estate depreciation................................ 1,311,757 -- Amortization of intangible lease assets................. 166,713 -- Other property expenses................................. 93,502 -- General and administrative.............................. 5,057,284 992,418 Costs of terminated acquisitions........................ 585,345 30,858 ----------- ----------- Total operating expenses............................. 7,214,601 1,023,276 ----------- ----------- Operating income (loss)............................ 3,678,858 (1,023,276) OTHER INCOME (EXPENSE) Interest income......................................... 930,260 -- Interest expense........................................ (32,769) -- ----------- ----------- Net other income..................................... 897,491 -- ----------- ----------- NET INCOME (LOSS).................................. $ 4,576,349 $(1,023,276) =========== =========== NET INCOME (LOSS) PER SHARE, BASIC................. $ 0.24 $ (0.63) WEIGHTED AVERAGE SHARES OUTSTANDING -- BASIC....... 19,310,833 1,630,435 NET INCOME (LOSS) PER SHARE, DILUTED............... $ 0.24 $ (0.63) WEIGHTED AVERAGE SHARES OUTSTANDING -- DILUTED..... 19,312,634 1,630,435
See accompanying notes to consolidated financial statements. F-10

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Period from Inception (August 27, 2003) through December 31, 2003 and the Year Ended December 31, 2004

PERIOD FROM INCEPTION YEAR ENDED (AUGUST 27, 2003) THROUGH DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- -------------------------- OPERATING ACTIVITIES Net income (loss)......................................... $ 4,576,349 $(1,023,276) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization......................... 1,517,530 -- Unbilled rent revenue................................. (2,449,066) -- Warrant issued to lender.............................. 24,500 -- Deferred stock units issued to directors.............. 125,000 -- Increase in: Interest receivable................................... (419,776) -- Other assets.......................................... (309,769) -- Increase in: Accounts payable and accrued expenses................. 6,644,130 1,391,409 Deferred revenue...................................... 210,000 -- ------------- ----------- Net cash provided by operating activities................. 9,918,898 368,133 INVESTING ACTIVITIES Real estate acquired.................................... (127,372,195) -- Loans receivable........................................ (44,317,263) -- Construction in progress................................ (23,151,797) (166,301) Equipment acquired...................................... (759,387) -- ------------- ----------- Net cash used for investing activities.................... (195,600,642) (166,301) FINANCING ACTIVITIES Addition to long-term debt.............................. 56,000,000 -- Proceeds from loan payable.............................. 200,000 100,000 Payment of loan payable................................. (300,000) -- Deferred financing costs................................ (3,869,767) (201,832) Distributions paid...................................... (2,608,286) -- Sale of common stock, net of offering costs............. 233,703,474 -- ------------- ----------- Net cash provided by (used for) financing activities...... 283,125,421 (101,832) ------------- ----------- Increase in cash and cash equivalents for period.......... 97,443,677 100,000 Cash at beginning of period............................. 100,000 -- ------------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 97,543,677 $ 100,000 ============= =========== Supplemental schedule of non-cash investing activities: Additions to unbilled rent receivables recorded as deferred revenue........................................ $ 757,787 $ -- Additions to loans receivable recorded as lease deposits and deferred revenue.................................... 5,906,807 -- Supplemental schedule of non-cash financing activities: Minority interest granted for contribution of land to development project................................... 1,000,000 -- Distributions declared, not paid........................ 2,869,116 -- Deferred offering costs charged to proceeds from sale of common stock.......................................... 201,832 -- Additional paid in capital from deferred stock units issued to directors................................... 125,000 -- Conversion of accounts payable and accrued expenses to common stock.......................................... -- 1,630 Interest expense paid....................................... 32,769 --
See accompanying notes to consolidated financial statements. F-11

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) Period from Inception (August 27, 2003) through December 31, 2003 and the Year Ended December 31, 2004

PREFERRED COMMON TOTAL ------------------ ---------------------- ADDITIONAL PAID ACCUMULATED STOCKHOLDERS' SHARES PAR VALUE SHARES PAR VALUE IN CAPITAL DEFICIT EQUITY ------ --------- ---------- --------- --------------- ----------- ------------- BALANCE AT INCEPTION (AUGUST 27, 2003).. -- $ -- -- $ -- $ -- $ -- $ -- Issuance of common stock............ -- -- 1,630,435 1,630 -- -- 1,630 Net loss........... -- -- -- -- -- (1,023,276) (1,023,276) ---- ----- ---------- ------- ------------ ----------- ------------ BALANCE AT DECEMBER 31, 2003........... -- -- 1,630,435 1,630 -- (1,023,276) (1,021,646) Redemption of founders' shares........... -- -- (1,108,527) (1,108) 1,108 -- -- Issuance of common stock in private placement (net of offering costs).. -- -- 25,560,954 25,561 233,476,082 -- 233,501,643 Value of warrants issued........... -- -- -- -- 24,500 -- 24,500 Deferred stock units issued to directors........ -- -- -- -- 125,000 -- 125,000 Distributions declared ($.21 per common share)........... -- -- -- -- -- (5,477,402) (5,477,402) Net income......... -- -- -- -- -- 4,576,349 4,576,349 ---- ----- ---------- ------- ------------ ----------- ------------ BALANCE AT DECEMBER 31, 2004........... -- $ -- 26,082,862 $26,083 $233,626,690 $(1,924,329) $231,728,444 ==== ===== ========== ======= ============ =========== ============
See accompanying notes to consolidated financial statements. F-12

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 1. ORGANIZATION Medical Properties Trust, Inc., a Maryland corporation (the Company), was formed on August 27, 2003 under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate. The Company's operating partnership subsidiary, MPT Operating Partnership, L.P. (the Operating Partnership), was formed in September 2003. Through another wholly owned subsidiary, Medical Properties Trust, LLC, the Company is the sole general partner of the Operating Partnership. The Company presently owns directly all of the limited partnership interests in the Operating Partnership. The Company succeeded to the business of Medical Properties Trust, LLC, a Delaware limited liability company, which was formed in December 2002. On the day of formation, the Company issued 1,630,435 shares of common stock, and the membership interests of Medical Properties Trust, LLC were transferred to the Company. Medical Properties Trust, LLC had no assets, but had incurred liabilities for costs and expenses related to acquisition due diligence, a planned offering of common stock, consulting fees and office overhead in an aggregate amount of approximately $423,000, which was assumed by the Operating Partnership and has been included in the accompanying consolidated statement of operations. The Company's primary business strategy is to acquire and develop real estate and improvements, primarily for long term lease to providers of healthcare services such as operators of inpatient physical rehabilitation hospitals, long-term acute care hospitals, surgery centers, centers for treatment of specific conditions such as cardiac, pulmonary, cancer, and neurological hospitals, and other healthcare-oriented facilities. The Company considers this to be a single business segment as defined in Statement of Financial Accounting Standard (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information. On April 6, 2004, the Company completed the sale of 25.6 million shares of common stock in a private placement to qualified institutional buyers and accredited investors. The Company received $233.5 million after deducting offering costs. The proceeds are being used to purchase properties, to pay debt and accrued expenses and for working capital and general corporate purposes. The Company has filed with the Securities and Exchange Commission (SEC) a Form S-11 registration statement for an Initial Public Offering (IPO) of common stock. The Company has not determined the number of shares nor price per share to be offered in the IPO. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation: Property holding entities and other subsidiaries of which the Company owns 100% of the equity or has a controlling financial interest evidenced by ownership of a majority voting interest are consolidated. All inter-company balances and transactions are eliminated. For entities in which the Company owns less than 100% of the equity interest, the Company consolidates the property if it has the direct or indirect ability to make decisions about the entities' activities based upon the terms of the respective entities' ownership agreements. For entities in which the Company owns less than 100% and does not have the direct or indirect ability to make decisions but does exert significant influence over the entities' activities, the Company records its ownership in the entity using the equity method of accounting. F-13

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) The Company periodically evaluates all of its transactions and investments to determine if they represent variable interests in a variable interest entity as defined by FASB Interpretation No. 46 (revised December 2003) (FIN 46-R), Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements. If the Company determines that it has a variable interest in a variable interest entity, the Company determines if it is the primary beneficiary of the variable interest entity. The Company consolidates each variable interest entity in which the Company, by virtue of its transactions with or investments in the entity, is considered to be the primary beneficiary. The Company re-evaluates its status as primary beneficiary when a variable interest entity or potential variable interest entity has a material change in its variable interests. Cash and Cash Equivalents: Certificates of deposit and short-term investments with remaining maturities of three months or less when acquired and money-market mutual funds are considered cash equivalents. Deferred Costs: Costs incurred prior to the completion of offerings of stock or other capital instruments that directly relate to the offering are deferred and netted against proceeds received from the offering. Costs incurred in connection with anticipated financings and refinancing of debt are capitalized as deferred financing costs in other assets and amortized over the lives of the related loans as an addition to interest expense to produce a constant effective yield on the loan (interest method). Costs that are specifically identifiable with, and incurred prior to the completion of, probable acquisitions are deferred and capitalized upon closing. The Company begins deferring costs when the Company and the seller have executed a letter of intent (LOI), commitment letter or similar document for the purchase of the property by the Company. Deferred acquisition costs are expensed when management determines that the acquisition is no longer probable. Leasing commissions and other leasing costs directly attributable to tenant leases are capitalized as deferred leasing costs and amortized on the straight-line method over the terms of the related lease agreements. Costs identifiable with loans made to lessees are recognized as a reduction in interest income over the life of the loan by the interest method. Revenue Recognition: The Company receives income from operating leases based on the fixed, minimum required rents (base rent) and from additional rent based on a percentage of tenant revenues once the tenant's revenue has exceeded an annual threshold (percentage rent). Base rent revenue is recorded on the straight-line method over the terms of the related lease agreements for new leases and the remaining terms of existing leases for acquired properties. Percentage rents are recognized in the period in which revenue thresholds are met. Differences between rental revenues earned and amounts due per the respective lease agreements are charged, as applicable, to unbilled rent receivable. Rental payments received prior to their recognition as income are classified as rent received in advance. Fees received from development and leasing services for lessees are initially recorded as deferred revenue and recognized as income over the initial term of an operating lease to produce a constant effective yield on the lease (interest method). Fees from lending services are recorded as deferred revenue and recognized as income over the life of the loan using the interest method. Acquired Real Estate Purchase Price Allocation: The Company allocates the purchase price of acquired properties to net tangible and identified intangible assets acquired based on their fair values in accordance with the provisions of SFAS No. 141, Business Combinations. In making estimates of fair values for purposes of allocating purchase prices, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. F-14

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) The Company records above-market and below-market in-place lease values, if any, for its facilities which are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management's estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The Company amortizes any resulting capitalized above-market lease values as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The Company amortizes any resulting capitalized below-market lease values as an increase to rental income over the initial term and any fixed-rate renewal periods in the respective leases. Because the Company's strategy largely involves the origination of long term lease arrangements at market rates, management does not expect the above-market and below-market in-place lease values to be significant for many anticipated transactions. The Company measures the aggregate value of other intangible assets to be acquired based on the difference between (i) the property valued with existing in-place leases adjusted to market rental rates and (ii) the property valued as if vacant. Management's estimates of value are expected to be made using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods considering current market conditions, and costs to execute similar leases. Management also considers information obtained about each targeted facility as a result of pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up periods, which are expected to range primarily from three to eighteen months, depending on specific local market conditions. Management also estimates costs to execute similar leases including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction. The total amount of other intangible assets to be acquired, if any, is further allocated to in-place lease values and customer relationship intangible values based on management's evaluation of the specific characteristics of each prospective tenant's lease and our overall relationship with that tenant. Characteristics to be considered by management in allocating these values include the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant's credit quality and expectations of lease renewals, including those existing under the terms of the lease agreement, among other factors. The Company amortizes the value of in-place leases, if any, to expense over the initial term of the respective leases, which range primarily from 10 to 15 years. The value of customer relationship intangibles is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event will the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and customer relationship intangibles would be charged to expense. Real Estate and Depreciation: Depreciation is calculated on the straight-line method over the estimated useful lives of the related assets, as follows:

Buildings and improvements....................... 40 years Tenant origination costs......................... Remaining terms of the related leases Tenant improvements.............................. Term of related leases Furniture and equipment.......................... 3-7 years
F-15

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) Real estate is carried at depreciated cost. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Significant renovations and improvements which improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful lives. In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of the Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets, including an estimated liquidation amount, during the expected holding periods are less than the carrying amounts of those assets. Impairment losses are measured as the difference between carrying value and fair value of assets. For assets held for sale, impairment is measured as the difference between carrying value and fair value, less cost of disposal. Fair value is based on estimated cash flows discounted at a risk-adjusted rate of interest. Construction in progress includes the cost of land, the cost of construction of buildings, improvements and equipment and costs for design and engineering. Other costs, such as interest, legal, property taxes and corporate project supervision, which can be directly associated with the project during construction, are also included in construction in progress. Loans Receivable: Real estate related loans consist of working capital loans and long-term loans. Interest income on loans is recognized as earned based upon the principal amount outstanding. The working capital and long-term loans are generally secured by interests in receivables and corporate and individual guaranties. Losses from Rent Receivables and Loans Receivable: A provision for losses on rent receivables and loans receivable is recorded when it becomes probable that the loan will not be collected in full. The provision is an amount which reduces the rent or loan to its estimated net realizable value based on a determination of the eventual amounts to be collected either from the debtor or from the collateral, if any. At that time, the Company discontinues recording interest income on the loan or rent receivable from the tenant. Net Income (Loss) Per Share: The Company reports earnings per share pursuant to SFAS No. 128, Earnings Per Share. Basic net income (loss) per share is computed by dividing the net income (loss) to common stockholders by the weighted average number of common shares and potential common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period, adjusted for the assumed conversion of all potentially dilutive outstanding share options. Income Taxes: For the period from January 1, 2004 through April 7, 2004, the Company has elected Sub-chapter S status for income tax purposes, at which time the Company filed its final tax returns as a Sub-chapter S company. Since April 7, 2004, the Company has conducted its business as a real estate investment trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Code). The Company will file its initial tax return as a REIT for the period from April 8, 2004, through December 31, 2004, at which time it must formally make an election to be taxed as a REIT. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to currently distribute to shareholders at least 90% of its ordinary taxable income. As a REIT, the Company generally will not be subject to federal income tax on taxable income that it distributes to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to federal income taxes on its taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the F-16

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) Company's net income and net cash available for distribution to shareholders. However, the Company believes that it will be organized and operate in such a manner as to qualify for treatment as a REIT and intends to operate in the foreseeable future in such a manner so that the Company will remain qualified as a REIT for federal income tax purposes. The Company's financial statements include the operations of a taxable REIT subsidiary, MPT Development Services, Inc. (MDS) that is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. MDS is authorized to provide property development, leasing and management services for third-party owned properties and makes loans to lessees and operators. Stock-Based Compensation: The Company currently sponsors a stock option and restricted stock award plan that was established in 2004. The Company accounts for its stock option plan under the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) and related interpretations. Under APB No. 25, no expense is recorded for options which are exercisable at the price of the Company's stock at the date the options are granted. Deferred compensation on restricted stock relates to the issuance of restricted stock to employees and directors of the Company. Deferred compensation is amortized to compensation expense based on the passage of time and certain performance criteria. Fair Value of Financial Instruments: The Company has various assets and liabilities that are considered financial instruments. The Company estimates that the carrying value of cash and cash equivalents, interest receivable and accounts payable and accrued expenses approximates their fair values. 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. The fair value of loans receivable is estimated based on the present value of future payments, discounted at a rate which the Company considers appropriate for such assets considering their credit quality and maturity. The Company estimates that the carrying value of the Company's long term debt should approximate fair value because the debt is variable rate and adjusts daily with changes in the underlying interest rate index. Reclassifications: Certain reclassifications have been made to the 2003 consolidated financial statements to conform to the 2004 consolidated financial statement presentation. These reclassifications have no impact on shareholders' equity or net income. New Accounting Pronouncements: The following is a summary of recently issued accounting pronouncements which have been issued but not yet adopted by the Company and which could have a material effect on the Company's financial position and results of operations. In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment, which is a revision of SFAS No. 123(R), Accounting for Stock Based Compensation. SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123(R) requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123(R), only certain pro-forma disclosures of fair value were required. SFAS No. 123(R) becomes effective for public companies with their first interim or annual reporting period that begins after June 15, 2005. For non-public companies, the standard becomes effective for their first fiscal year beginning after December 15, 2005. The adoption of this new accounting pronouncement is expected to have a material impact on the F-17

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) financial statements of the Company commencing with the third quarter of the year ending December 31, 2006. 3. PROPERTY ACQUISITIONS AND LOANS On July 1, 2004, the Company purchased four rehabilitation facilities at a price of $96.8 million, which were then leased to a new operator of the facilities, Vibra Healthcare, LLC and its operating subsidiaries (collectively, Vibra). The Company also made loans of $33.3 million to Vibra. On August 18, 2004, the Company purchased two additional rehabilitation facilities for $30.6 million, which were then leased to Vibra, and made additional loans to Vibra of $13.8 million. The Company made an additional $2 million loan to Vibra on October 1, 2004. Loans totaling $42.9 million accrue interest at the rate of 10.25% per year and are to be paid over 15 years with interest only for the first three years and the principal balance amortizing over the remaining 12 year period. Loans totaling $6.2 million accrue interest at the rate of 10.25% per year. Vibra will pay fees of $1.5 million to the Company for transacting the leases and loans. The Company has determined that Vibra is a variable interest entity as defined by FIN 46-R. The Company has also determined that it is not the primary beneficiary of Vibra and, therefore, has not consolidated Vibra in the Company's consolidated financial statements. For the year ended December 31, 2004, Vibra has been the only tenant which is required to make payments under operating leases and loans from the Company. The Company recorded intangible lease assets of $5,314,963 representing the estimated value of the Vibra leases which were entered into at the date the Company acquired the facilities. The Company recorded amortization expense of $166,713 and expects to recognize amortization expense of $354,324 in each of the next five years. As security for the loans, each of the Vibra tenants and Vibra have granted the Company a security interest in their respective rights to receive payments, directly or indirectly, for any goods or services provided to any persons or entities; any records or data related to those rights; and all cash and non-cash proceeds resulting from those rights. As additional security, Vibra has pledged to the Company all of its interests in each of the tenants. One individual is the majority owner of Vibra, The Hollinger Group and Vibra Management, LLC. The owner of Vibra has pledged his interest in Vibra to secure the loans. In addition, The Hollinger Group and Vibra Management have guaranteed the loans. The owner of Vibra has also provided a $5 million personal guarantee. 4. LONG-TERM DEBT AND LOAN PAYABLE In 2003, the Company entered into a loan agreement which provided for maximum borrowings of $300,000 if certain conditions were met by the Company. Borrowings under the agreement ($100,000 at December 31, 2003) accrued interest at 20% per annum and were due upon the earlier of (i) the third business day following the funding of the Company's private placement or (ii) March 29, 2004. During the first three months of 2004, the Company increased its borrowings on the loan to $300,000, which was paid in full in April 2004. Contemporaneous with the private placement, the Company issued to the lender a warrant to purchase up to 35,000 shares of the Company's common stock at a price per share equal to 93% of the price at which the Company's shares were offered to investors in the private placement. The warrant has been recorded in the consolidated balance sheet as an addition to Additional Paid-in Capital and as additional interest expense at a value of $.70 per warrant ($10.00 per share private placement price less $9.30 exercise price per warrant) or a total of $24,500. In December 2004, the Company received $56 million as part of a $75 million, three year term loan. In February 2005, the Company received the remaining $19 million of this loan. The loan requires F-18

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) monthly payments based on a 20 year amortization schedule and interest at the one month London Interbank Offered Rate (LIBOR) plus 300 basis points, which results in an interest rate of 5.42% at December 31, 2004. The loan is secured by the six Vibra facilities, which have a book value of $125.9 million, and requires the Company to meet financial coverage, ratio and total debt covenants typical of such loans. In December 2004, the Company closed a $43 million loan with a bank to finance the construction of the Company's medical office building and community hospital development project in Houston, Texas. The loan carries a construction period term of eighteen months, with the option to convert the loan into a thirty month term loan thereafter with a twenty-five year amortization. The loan requires interest payments only during the initial eighteen month term, and principal and interest payments during the optional thirty month term. The loan is secured by mortgages on the development property. The loan bears interest at a rate of three month LIBOR plus 225 basis points (4.81% at December 31, 2004) during the construction period and three month LIBOR plus 250 basis points (5.06% at December 31, 2004) during the thirty month optional period. The Company has paid a commitment fee of one per-cent for the construction loan with an additional .25% per-cent fee due if the Company exercises the term loan option. Proceeds may be drawn down by periodically presenting to the lender documentation of construction and development costs incurred. The Company has not drawn down any proceeds from this loan as of December 31, 2004. Maturities of long-term debt at December 31, 2004, are as follows:

2005........................................................ $ 2,566,663 2006........................................................ 2,799,996 2007........................................................ 50,633,341 ----------- $56,000,000 ===========
5. COMMITMENTS AND CONTINGENCIES In June 2004, the Company began construction of a hospital and medical office building with an expected total cost of $63.4 million. The Company plans to fund this project with a combination of its own and borrowed funds. At December 31, 2004, the Company has funded $24.2 million of the cost which has been financed with funds from the April 6, 2004 private placement. The remaining commitment for construction and development contracts at December 31, 2004, totals $32.1 million. Fixed minimum payments due under operating leases with non-cancellable terms of more than one year at December 31, 2004 are as follows: 2005........................................................ $ 275,106 2006........................................................ 339,570 2007........................................................ 346,158 2008........................................................ 352,746 2009........................................................ 359,334 Thereafter.................................................. 2,133,005 ---------- $3,805,919 ==========
A former consultant to the Company has made a claim for 2003 and 2004 consulting compensation under the terms of a now terminated consulting agreement with the Company. The Company disputes this claim and has made an offer of settlement based on the terms of the consulting agreement. The Company F-19

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) has made provision in the consolidated financial statements for the amount that it has determined is owed to the former officer and consultant. 6. EQUITY INCENTIVE PLAN AND OTHER STOCK AWARDS The Company has adopted the Medical Properties Trust, Inc. 2004 Amended and Restated Equity Incentive Plan (the Equity Incentive Plan) which authorizes the issuance of options to purchase shares of common stock, restricted stock awards, restricted stock units, deferred stock units, stock appreciation rights and performance units. The Company has reserved 791,180 shares of common stock for awards under the Equity Incentive Plan. The Equity Incentive Plan contains a limit of 300,000 shares as the maximum number of shares of common stock that may be awarded to an individual in any fiscal year. Upon their election to the board in April, 2004, each of our original independent directors was awarded options to acquire 20,000 shares of our common stock. These options have an exercise price of $10 per option, vested one-third upon grant and the remainder will vest one-half on each of the first and second anniversaries of the date of grant, and expire ten years from the date of grant. The Company has determined that the exercise price of these options is equal to the fair value of the common stock because the options were granted immediately following the private placement of its common stock in April, 2004. Accordingly, the options have no intrinsic value as that term is used in SFAS No. 123, Accounting for Stock-Based Compensation. No other options have been granted.

SHARES EXERCISE PRICE -------- -------------- Outstanding at January 1, 2004.............................. -- -- Granted..................................................... 100,000 $10.00 Exercised................................................... -- -- Forfeited................................................... -- -- -------- ------ Outstanding at December 31, 2004............................ 100,000 $10.00 ======== ====== Options exercisable at December 31, 2004.................... 33,333 $10.00 Weighted-average grant-date fair value of options granted... $ 1.21
Options exercisable at December 31, 2004, are as follows:
OPTIONS OPTIONS AVERAGE REMAINING EXERCISE PRICE OUTSTANDING EXERCISABLE CONTRACTUAL LIFE (YEARS) - -------------- ----------- ----------- ------------------------ $10.00 100,000 33,333 9.6
The Company follows APB No. 25 and related Interpretations in accounting for the Plan. In accordance with APB 25, no compensation expense has been recognized for stock options. Had compensation expense for the Company's stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the methods prescribed in SFAS No. 123, the Company's net income and income per share for the year ended December 31, 2004, would have been decreased by $67,000 and would have had no per share effect, respectively. In addition to these options to purchase common stock, each independent director was awarded 2,500 deferred stock units in October, 2004, valued by the Company at $10 per unit, which represent the right to receive 2,500 shares of common stock in October, 2007. Beginning in 2005, each independent director will receive 2,000 shares of restricted common stock annually, which will be restricted as to transfer for three years. The Company has recognized expense in the amount of $125,000 for the deferred stock units F-20

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) awarded to its' independent directors in 2004. The Company has also allocated 114,500 shares of restricted stock to be awarded to employees upon completion of its IPO. The Company uses the Black-Scholes pricing model to calculate the fair values of the options awarded, which are included in the pro forma amounts above. The following assumptions were used to derive the fair values: an option term of four to six years; no estimated volatility; a weighted average risk- free rate of return of 3.63%; and a dividend yield of 1.00% for 2004. 7. LEASING OPERATIONS For the properties purchased in July and August, 2004 (see Note 3), minimum rental payments due in future periods under operating leases which have non-cancelable terms extending beyond one year at December 31, 2004, are as follows:

2005........................................................ $ 14,343,635 2006........................................................ 16,082,461 2007........................................................ 16,484,523 2008........................................................ 16,896,636 2009........................................................ 17,319,052 Thereafter.................................................. 188,238,038 ------------ $269,364,346 ============
The leases are with tenants engaged in medical operations in California (two facilities), Colorado, Kentucky, Massachusetts, and New Jersey. Each of the six lease agreements are for an initial term of 15 years with options for the tenant to renew for three periods of five years each. Lease payments are calculated based on the total acquisition cost (aggregating approximately $127,000,000) and an initial lease rate of 10.25%; the rate increases to 12.23% on the first anniversary of lease commencement and upon each January 1 thereafter escalates at a rate of 2.5%. At such time that the tenants' aggregate net revenue exceeds a certain level, the leases further provide that the tenants will pay additional rent of between 1% and 2% of total net revenue. All of the leases are cross-defaulted. In addition, the Company is funding the acquisition and development costs for a community hospital and adjacent medical office building in Houston, Texas on land that is leased to the operator/tenant. During the development and construction period, the tenant is charged rent based on the lease rate (which averages 10.4%) and the amount funded, which aggregated $16,225,907 at December 31, 2004. Upon completion of development, the fixed lease term (15 and 10 years for the hospital and medical office building, respectively) will commence and any accrued construction period rent will be paid, with interest calculated at the lease rate, over the term of the respective lease. The Company expects to complete the construction of the hospital and the medical office building in October 2005 and August 2005, respectively. F-21

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) 8. FAIR VALUE OF FINANCIAL INSTRUMENTS

DECEMBER 31, 2004 DECEMBER 31, 2003 ------------------------- ----------------------- BOOK VALUE FAIR VALUE BOOK VALUE FAIR VALUE ----------- ----------- ---------- ---------- Cash and cash equivalents.......... $97,543,677 $97,543,677 $ 100,000 $ 100,000 Interest receivable................ 419,776 419,776 -- -- Unbilled rent receivable........... 3,206,853 1,679,450 -- -- Loans.............................. 50,224,069 50,646,695 100,000 100,000 Long-term debt..................... 56,000,000 56,000,000 -- -- Accounts payable and accrued expenses......................... 10,903,025 10,903,025 1,389,779 1,389,779
9. INCOME TAXES The following table reconciles the Company's net income as reported in its consolidated statement of operations prepared in accordance with generally accepted accounting principles with its taxable income under the REIT income tax regulations for the year ended December 31, 2004: Net income as reported...................................... $ 4,576,349 Less: Net income of the taxable REIT subsidiary............. (63,905) ----------- Net income from REIT operations............................. 4,512,444 Unbilled rent receivable.................................... (2,449,066) GAAP depreciation and amortization in excess of tax depreciation.............................................. 198,266 Expenses deductible in future tax periods................... 2,434,535 Other....................................................... 289,759 ----------- Taxable income subject to REIT distribution requirements.... $ 4,985,938 ===========
The Company paid distributions of $2,608,286 ($.10 per share) on October 10, 2004, and $2,869,115 ($.11 per share) on January 11, 2005. All of the October distribution and $755,546 of the January 2005, distribution will be subject to federal incomes taxes by the Company's stockholders in 2004. The remainder of the January, 2005, distribution will be subject to federal income taxes by the Company's stockholders in 2005. All of the distributions are taxable to the Company's shareholders at ordinary income federal tax rates. 10. SUBSEQUENT EVENTS On February 9, 2005, Vibra made a $7.8 million payment of principal and interest on its transaction fee and working capital loans from the Company. The payments left a $41.4 million loan payable to the Company by Vibra. The Company has no commitments to make additional loans to Vibra. In February, 2005, the Company purchased a community hospital for $28 million. The purchase price was paid from loan proceeds and from the proceeds of the Company's private placement. Upon closing the purchase of the hospital, the Company and the seller entered into a fifteen year lease of the hospital back to the seller, with renewal options for three additional five year terms. 11. EARNINGS PER SHARE The following is a reconciliation of the weighted average shares used in net income (loss) per common share to the weighted average shares used in net income (loss) per common share -- assuming F-22

MEDICAL PROPERTIES TRUST, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (AUGUST 27, 2003) THROUGH DECEMBER 31, 2003 AND FOR THE YEAR ENDED DECEMBER 31, 2004 -- (CONTINUED) dilution for the year ended December 31, 2004, and for the period from Inception (August 27, 2003) through December 31, 2003, respectively:

2004 2003 ---------- --------- Weighted average number of shares issued and outstanding.... 19,308,511 1,630,435 Vested deferred stock units................................. 2,322 -- ---------- --------- Weighted average shares -- basic............................ 19,310,833 1,630,435 Common stock warrants....................................... 1,801 -- ---------- --------- Weighted average shares -- diluted.......................... 19,312,634 1,630,435 ========== =========
12. RELATED PARTIES The Company's lead underwriter for its IPO and private placement is the largest stockholder, including shares owned directly and indirectly through funds it manages. In connection with services provided for its managing and underwriting of the private placement, the underwriter received approximately 261,000 shares of the Company's common stock. The Company also manages its cash and cash equivalents (approximately $96.1 million at December 31, 2004) through the underwriter. F-23

SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2004 AND DECEMBER 31, 2003

ADDITIONS SUBSEQUENT TO INITIAL COSTS ACQUISITION --------------------------- ------------------------------ LOCATION TYPE OF PROPERTY LAND BUILDINGS IMPROVEMENTS CARRYING COSTS - -------- ----------------------- ----------- ------------ ------------ -------------- Bowling Green, KY.............. Rehabilitation hospital $ 3,070,000 $ 33,570,541 $ -- $ -- Thornton, CO................... Rehabilitation hospital 2,130,000 6,013,142 -- -- Fresno, CA..................... Rehabilitation hospital 1,550,000 16,363,153 -- -- Kentfield, CA.................. Long term acute care 2,520,000 4,765,176 -- -- hospital Marlton, NJ.................... Rehabilitation hospital -- 30,903,051 -- -- New Bedford, NJ................ Long term acute care 1,400,000 19,772,169 -- -- hospital ----------- ------------ ----- TOTAL $10,670,000 $111,387,232 $ -- $ -- =========== ============ =====
COST AT DECEMBER 31, 2004 ----------------------------------------- ACCUMULATED DATE OF DATE LOCATION LAND BUILDINGS(1) TOTAL DEPRECIATION CONSTRUCTION ACQUIRED -------- ----------- ------------ ------------ ------------ ----------------- --------------- Bowling Green, KY................... $ 3,070,000 $33,570,541 $ 36,640,541 $ 419,634 1992 July 1, 2004 Thornton, CO........................ 2,130,000 6,013,142 8,143,142 56,371 1962, 1975 August 17, 2004 Fresno, CA.......................... 1,550,000 16,363,153 17,913,153 204,540 1990 July 1, 2004 Kentfield, CA....................... 2,520,000 4,765,176 7,285,176 59,562 1963 July 1, 2004 Marlton, NJ......................... -- 30,903,051 30,903,051 386,286 1994 July 1, 2004 New Bedford, NJ..................... 1,400,000 19,772,169 21,172,169 185,364 1962, 1975, 1992 August 17, 2004 ----------- ------------ ------------ ---------- TOTAL $10,670,000 $111,387,232 $122,057,232 $1,311,757 =========== ============ ============ ========== DEPRECIABLE LOCATION LIFE (YEARS) -------- ------------ Bowling Green, KY................... 40 Thornton, CO........................ 40 Fresno, CA.......................... 40 Kentfield, CA....................... 40 Marlton, NJ......................... 40 New Bedford, NJ..................... 40 TOTAL
DECEMBER 31, 2004 DECEMBER 31, 2003 ----------------- ----------------- COST Balance at beginning of period.......... $ -- $ -- Additions during the period Acquisitions........................ 122,057,232 -- ------------ -------- Balance at end of period................ $122,057,232 $ -- ============ ========
DECEMBER 31, 2004 DECEMBER 31, 2003 ------------------ ----------------- ACCUMULATED DEPRECIATION Balance at beginning of period.......... $ -- $ -- Additions during the period Depreciation........................ 1,311,757 -- ------------ -------- Balance at end of period................ $ 1,311,757 $ -- ============ ========
- --------------- (1) The gross cost for Federal income tax purposes is $116,702,195. F-24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Member Vibra Healthcare, LLC We have audited the accompanying consolidated balance sheet of Vibra Healthcare, LLC and subsidiaries (the "Company") as of December 31, 2004, and the related consolidated statements of operations, changes in partner's capital, and cash flows for the period from inception (May 14, 2004) through December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vibra Healthcare, LLC and subsidiaries as of December 31, 2004, and the results of their operations and their cash flows for the period from inception (May 14, 2004) through December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. /s/ Parente Randolph, LLC Harrisburg, Pennsylvania March 8, 2005, except Note 11, as to which the date is March 31, 2005 F-25

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2004

ASSETS Current assets: Cash and cash equivalents................................. $ 2,280,772 Patient accounts receivable, net of allowance for doubtful collections of $302,988................................ 17,319,154 Third party settlements receivable........................ 346,141 Prepaid insurance......................................... 719,480 Deposit for workers' compensation claims.................. 1,375,000 Other current assets...................................... 518,650 ----------- Total current assets................................... 22,559,197 Property and equipment, net................................. 2,662,546 Goodwill.................................................... 24,510,296 Intangible assets........................................... 4,260,000 Deposits.................................................... 3,485,387 Deferred financing and lease costs.......................... 1,543,424 ----------- Total assets........................................... $59,020,850 =========== LIABILITIES AND PARTNER'S CAPITAL Current liabilities: Accounts payable.......................................... $ 5,142,345 Accounts payable -- related parties....................... 262,144 Accrued liabilities....................................... 4,387,292 Accrued insurance claims.................................. 1,441,516 ----------- Total current liabilities.............................. 11,233,297 Deferred rent............................................... 2,460,308 Long-term debt, net of current maturities................... 49,141,945 ----------- Total liabilities........................................... 62,835,550 ----------- Partner's capital........................................... (3,814,700) ----------- Total liabilities and partner's capital................ $59,020,850 ===========
The accompanying notes are an integral part of these consolidated financial statements. F-26

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES Consolidated Statement of Operations and Changes in Partner's Capital For the Period from Inception (May 14, 2004) through December 31, 2004

REVENUE: Net patient service revenue............................... $48,266,019 ----------- EXPENSES: Cost of services.......................................... 34,528,924 General and administrative................................ 5,631,229 Rent expense.............................................. 8,859,233 Interest expense.......................................... 2,293,402 Management fee -- Vibra Management, LLC................... 982,668 Depreciation and amortization............................. 302,194 Bad debt expense.......................................... 776,780 ----------- Total expenses......................................... 53,374,430 ----------- Loss from operations................................. (5,108,411) Non-operating revenue..................................... 1,293,711 ----------- Net loss............................................. (3,814,700) Partner's capital -- beginning............................ -- ----------- Partner's capital -- ending............................... ($3,814,700) -----------
The accompanying notes are an integral part of these consolidated financial statements. F-27

VIBRA HEALTHCARE LLC AND SUBSIDIARIES Consolidated Statement of Cash Flows For the Period from Inception (May 14, 2004) through December 31, 2004

Operating activities: Net loss.................................................. $(3,814,700) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................ 302,194 Provision for bad debts.............................. 776,780 Changes in operating assets and liabilities, net of effects from acquisition of business: Accounts receivable including third party settlements......................................... (4,801,250) Prepaids and other current assets.................... (2,257,611) Deposits............................................. (133,671) Accounts payable..................................... 1,884,531 Accounts payable -- related party.................... 262,144 Accrued liabilities.................................. 1,608,634 Deferred rent........................................ 2,460,308 ----------- Net cash used in operating activities....................... (3,712,641) ----------- Investing activities: Purchases of property and equipment.................. (167,900) Cash acquired in business acquisition................ 201,280 ----------- Net cash provided by investing activities................... 33,380 ----------- Financing activities: Proceeds of notes payable............................ 6,050,458 Payment of deferred financing costs.................. (90,425) ----------- Net cash provided by financing activities................... 5,960,033 ----------- Net increase in cash and cash equivalents................... 2,280,772 Cash and cash equivalents -- beginning...................... -- ----------- Cash and cash equivalents -- ending......................... $ 2,280,772 =========== Supplemental cash flow information: Cash paid for interest............................... $ 2,293,402 =========== Non-cash transactions: Notes issued relating to acquisition................. $38,093,842 =========== Lease deposits funded by notes payable............... $ 3,296,365 =========== Deferred financing costs funded by notes payable..... $ 1,500,000 ===========
The accompanying notes are an integral part of these consolidated financial statements. F-28

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: Vibra Healthcare LLC ("Vibra" and the "Company") was formed May 14, 2004, and commenced operations with the acquisition of its subsidiaries consisting of four independent rehabilitation hospitals ("IRF") and two long-term acute care hospitals ("LTACH") located throughout the United States on July 1, 2004, and August 17, 2004. Vibra, a Delaware limited liability company ("LLC"), is a single member LLC with an infinite life. The members liability is limited to the capital contribution. Vibra was previously named Highmark Healthcare LLC until a name change in December 2004. Vibra's wholly-owned subsidiaries consist of:

SUBSIDIARIES LOCATION - ------------ ----------------- 92 Brick Road Operating Company LLC......................... Marlton, NJ 4499 Acushnet Avenue Operating Company LLC.................. New Bedford, MA 1300 Campbell Lane Operating Company LLC.................... Bowling Green, KY 8451 Pearl Street Operating Company LLC..................... Denver, CO 7173 North Sharon Avenue Operating Company LLC.............. Fresno, CA 1125 Sir Francis Drake Boulevard Operating Company LLC...... Kentfield, CA
The Company provides long-term acute care hospital services and inpatient acute rehabilitative hospital care at its hospitals. Patients in the Company's LTACHs typically suffer from serious and often complex medical conditions that require a high degree of care. Patients in the Company's IRFs typically suffer from debilitating injuries including traumatic brain and spinal cord injuries, and require rehabilitation care in the form of physical, psychological, social and vocational rehabilitation services. The Company also operates ten outpatient clinics affiliated with five of its six hospitals. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries controlled through sole membership interests in limited liability companies. All significant intercompany balances and transactions are eliminated in consolidation. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates market. Patient Accounts Receivable: Patient accounts receivable are reported at net realizable value. Accounts are written off when they are determined to be uncollectible based upon management's assessment of individual accounts. The allowance for doubtful collections is estimated based upon a periodic review of the accounts receivable aging, payor classifications and application of historical write-off percentages. Inventories: Inventories of pharmaceuticals and pharmaceutical supplies are stated at the lower of cost or market value. Cost is determined on a first-in, first-out basis. These inventories totaled $363,720 at December 31, 2004, and are included in other current assets in the accompanying consolidated balance sheet. F-29

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 Property and Equipment: Property and equipment are stated at cost net of accumulated depreciation. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate. The general range of useful lives is as follows:

Leasehold improvements...................................... 15 years Furniture and equipment..................................... 2-7 years
In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS No 144), the Company reviews the realizability of long-lived assets whenever events or circumstances occur which indicate recorded costs may not be recoverable. Intangible Assets: The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill and other intangible assets with indefinite lives are no longer subject to periodic amortization but are instead reviewed annually or more frequently if impairment indicators arise. These reviews require the Company to estimate the fair value of its identified reporting units and compare those estimates against the related carrying values. Identifiable assets and liabilities acquired in connection with business combinations accounted for under the purchase method are recorded at their respective fair values. For each of the reporting units, the estimated net realizable value is determined using current transaction information and the present value of future cash flows of the units. Management has allocated the intangible assets between identifiable intangibles and goodwill. Intangible assets, other than goodwill, consist of values assigned to certificates of need ("CONs") and licenses. The useful life of each class of intangible assets is as follows: Goodwill.................................................... Indefinite Certificates of Need/Licenses............................... Indefinite
Deferred Financing and Lease Costs: Costs and fees incurred in connection with the MPT loans and leases have been deferred and are being amortized over the 15 year term of the loans and leases using the straight-line method, which approximates the effective interest method. Amortization expense was $47,000 for the period from inception through December 31, 2004. Insurance Risk Programs: Under the Company's insurance programs, the Company is liable for a portion of its losses. The Company estimates its liability for losses based on historical trends that will be incurred in a respective accounting period and accrues that estimated liability. These programs are monitored quarterly and estimates are revised as necessary to take into account additional information. At December 31, 2004, the Company has accrued $1,441,516 related to these programs. Deposits for workers' compensation claims consist of cash provided to Vibra's insurance carrier to fund workers' compensation claims. In February 2005, Vibra used $1,375,000 of its borrowing base on the Merrill Lynch loan (see Note 11) to collateralize a letter of credit for the claims and the cash deposit was refunded. Deferred Rent: The excess of straight line rent expense over each rent paid is credited to deferred rent on a monthly basis. For the period from inception through December 31, 2004, rent expense exceeded the rent paid in cash by $2,460,308. Revenue Recognition: Net patient service revenue consists primarily of charges to patients and are recognized as services are rendered. Net patient service revenue is reported net of provisions for contractual allowances from third-party payors and patients. The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established rates. The differences between the estimated program reimbursement rates and the standard billing rates are F-30

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 accounted for as contractual adjustments, which are deducted from gross revenues to arrive at net patient service revenues. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges and per diem payments. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Patient accounts receivable resulting from such payment arrangements are recorded net of contractual allowances. A significant portion of the Company's net patient service revenues are generated directly from the Medicare and Medicaid programs. Net patient service revenues generated directly from the Medicare and Medicaid programs represented approximately 63% and 13%, respectively, of the Company's consolidated net patient service revenues for the period from inception through December 31, 2004. Approximately 46% and 21% of the Company's gross patient accounts receivable at December 31, 2004, are from Medicare and Medicaid, respectively. As a provider of services to these programs, the Company is subject to extensive regulations. The inability of a hospital to comply with regulations can result in changes in that hospital's net patient service revenues generated from these programs. Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash balances and patient accounts receivables. The Company deposits its cash with large banks. The Company grants unsecured credit to its patients, most of whom reside in the service area of the Company's facilities and are insured under third-party payor agreements. Because of the geographic diversity of the Company's facilities and non-governmental third-party payors, Medicare and Medicaid represent the Company's primary concentration of credit risk. Fair Value of Financial Instruments: The Company has various assets and liabilities that are considered financial instruments. The Company estimates that the carrying value of its current assets, current liabilities and long-term debt approximates their fair value. Income Taxes: Vibra and its subsidiaries have elected to be a LLC for federal and state income tax purposes. In lieu of corporate income taxes, the member of a LLC is taxed on their proportionate share of the Company's taxable income or loss. Therefore, no provision or liability for federal or state income taxes has been provided for in the consolidated balance sheet or consolidated statement of operations. 2. ACQUISITIONS In July and August 2004, Vibra entered into agreements with Medical Properties Trust, Inc. (MPT) to acquire the operations of six specialty hospitals. MPT, a healthcare real estate investment trust based in Birmingham, Alabama, acquired the real estate for approximately $127.4 million and assigned to Vibra its rights to acquire the operations of the hospitals from Care One Realty of Hackensack, New Jersey for approximately $38.1 million net of cash acquired and $7.5 million of liabilities assumed which was financed by MPT. The assignment of the LLC interests to Vibra transferred the operations, assets and liabilities of each LLC. The purchase price of the operations may be adjusted either upward or downward pursuant to a post-closing working capital adjustment with the seller. The purchase price of the operations has been allocated to net assets acquired, and liabilities assumed based on valuation studies subject to purchase price adjustments. The excess of the amount of purchase price over the net asset value, including identifiable intangible assets, was allocated to goodwill. The purchase price was negotiated based on management's evaluation of future operational performance of the hospitals as a group under Vibra. The results of operations of the hospitals acquired have been included in the Company's consolidated financial F-31

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 statements since the date of acquisition. The following table summarizes the acquisition date and other relevant information regarding each hospital:

LOCATION TYPE BEDS ACQUISITION DATE - -------- ----- ---- ---------------- Marlton, NJ........................................ IRF 46(1) July 1, 2004 Bowling Green, KY.................................. IRF 60 July 1, 2004 Fresno, CA......................................... IRF 62 July 1, 2004 Kentfield, CA...................................... LTACH 60 July 1, 2004 New Bedford, MA.................................... LTACH 90 August 17, 2004 Thornton, CO....................................... IRF 117(2) August 17, 2004
- --------------- (1) Vibra subleases a floor of the Marlton building to an unaffiliated provider which operates 30 pediatric rehabilitation beds which are in addition to the 46 beds operated by Vibra. (2) Includes beds licensed as skilled nursing and beds licensed as psychiatric. Information with respect to the businesses acquired in purchase transactions is as follows: Notes issued, net of cash acquired.......................... $ 38,093,842 Liabilities assumed......................................... 7,477,988 ------------ 45,571,830 Fair value of assets acquired: Accounts receivable....................................... (13,640,825) Property and equipment.................................... (2,749,840) CONs/Licenses............................................. (4,260,000) Other..................................................... (410,869) ------------ Cost in excess of fair value of net assets acquired (goodwill)................................................ $ 24,510,296 ============
3. PROPERTY AND EQUIPMENT Property and equipment at December 31, 2004, consists of the following: Leasehold improvements...................................... $ 48,055 Furniture and equipment..................................... 2,869,685 ---------- 2,917,740 Less: accumulated depreciation and amortization............. 255,194 ---------- Total....................................................... $2,662,546 ==========
Depreciation expense was $255,194 for the period from inception through December 31, 2004. F-32

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 4. DEPOSITS The facility lease agreements with MPT require deposits equal to three months rent. The funds are on deposit with MPT in non-interest bearing accounts. Deposits at December 31, 2004, consist of the following:

MPT lease deposits.......................................... $3,296,365 Other deposits.............................................. 189,022 ---------- Total....................................................... $3,485,387 ==========
5. INTANGIBLE ASSETS The Company adopted SFAS No. 142. Under SFAS No. 142, goodwill and other intangible assets with indefinite lives are not subject to periodic amortization but are instead reviewed annually as of April 30, or more frequently if impairment indicators arise. These reviews require the Company to estimate the fair value of its identified reporting units and compare those estimates against the related carrying values. For each of the reporting units, the estimated net realizable value is determined using current transaction information and the present value of future cash flows of the units. Goodwill in the amount of $24,510,296 and CONs/Licenses of $4,260,000 have been recorded in connection with the acquisition of the six hospitals, and have not been amortized as both have indefinite lives. 6. NOTES PAYABLE As of December 31, 2004, MPT had advanced $49,141,945 to Vibra under four notes for the hospital acquisition and working capital. The notes bear interest at 10.25%. Three notes totaling $7,725,958 are interest only, with a balloon payment due on March 31, 2005. The remaining note for $41,415,988 is payable interest only for the first 36 months and then amortized over the next 12 years with a final maturity in 2019. Vibra may prepay the notes at any time without penalty. Maturities for the next five years are:
(IN THOUSANDS) -------------- December 31, 2005........................................... $ -- 2006........................................................ -- 2007........................................................ 902 2008........................................................ 9,675 2009........................................................ 2,158 Thereafter.................................................. 36,407 ------- $49,142 =======
Substantially all of the assets of Vibra and its subsidiaries, as well as Vibra's membership interests in its subsidiaries, secure the loans. In addition the sole member of Vibra, an affiliated company owned by the sole member and Vibra Management, LLC have jointly and severally guaranteed the notes payable to MPT, although the obligation of the sole member is limited to $5 million and his membership interest in Vibra. A default in any of the MPT lease terms will also constitute a default under the notes. As discussed in Note 11, Vibra used a portion of the proceeds of a long-term revolving credit facility from Merrill Lynch Capital to repay the MPT notes due March 31, 2005. As a result of this refinancing, F-33

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 the notes due MPT have been classified as long-term at December 31, 2004 in the accompanying consolidated balance sheet. 7. RELATED PARTY TRANSACTIONS The Company has entered into agreements with Vibra Management, LLC (a company affiliated through common ownership) to provide management services to each hospital. The services include information system support, legal counsel, accounting/tax, human resources, program development, quality management and marketing oversight. The agreements call for a management fee equal to 2% of net patient service revenue, and are for an initial term of five years with automatic one-year renewals. Management fee expense amounted to $982,668 for the period from inception through December 31, 2004. At December 31, 2004, $164,007 was payable to Vibra Management, LLC and is included accounts payable -- related party in the accompanying consolidated balance sheet. The spouse of the sole member of the Company provided legal consulting services to the Company on the hospital acquisition and on various operational licensing and financing matters. During the period from inception through December 31, 2004, legal consulting services from this person totaled $176,187, of which $98,137 was payable at December 31, 2004. 8. COMMITMENTS AND CONTINGENCIES LEASES Vibra entered into triple-net long-term real estate operating leases with MPT at each hospital. Each lease is for an initial term of 15 years and contains renewal options at Vibra's option for three additional five-year terms. Vibra has the option to purchase the leased property at the end of the lease term, including any extension periods, for the greater of the fair market value of the leased property, or the purchase price increased by 2.5% per annum from the commencement date. The base rate at commencement is calculated at 10.25% of MPT's adjusted purchase price of the real estate ("APP"). The base rate increases to 12.23% of APP effective July 1, 2005. Beginning January 1, 2006, and each January 1, thereafter, the base rate increases by an inflator of 2.5% (i.e. base rate becomes 12.54% of APP on January 1, 2006). Each lease also contains a percentage rent provision ("Percentage Rent"). Beginning January 1, 2005, if the aggregate monthly net patient service revenues of the six hospitals exceed an annualized net patient service revenue run rate of $110,000,000, additional rent equal to 2% of monthly net patient service revenue is triggered. The percentage rent is payable within ten days after the end of the applicable quarter. The percentage rent declines from 2% to 1% on a pro rata basis as Vibra repays the $49.142 million in notes to MPT. Commencing on July 1, 2005, Vibra must make quarterly deposits to a capital improvement reserve at the rate of $375 per quarter per bed or $652,500 on an annual basis for all hospitals leased from MPT. The reserve may be used to fund capital improvements and repairs as agreed to by the parties. The MPT leases are subject to various financial covenants including limitations on total debt to 100% of the total capitalization of the guarantors (as defined) or 4.5 times the 12 month total EBITDAR of the guarantors, whichever is greater, coverage ratios of 125% of debt service and 150% of rent (as defined), and maintenance of average daily patient census. As of December 31, 2004, Vibra was not in compliance with the debt service and rent coverage covenants. The MPT lease agreements were subsequently amended to delay the initial measurement date with respect to these financial covenants (Note 11). A default in F-34

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 any of the loan terms will also constitute a default under the leases. All of the MPT leases are cross defaulted. Vibra has entered into operating leases for six outpatient clinics which expire on various dates through 2008. Minimum future lease obligations on the leases are as follows (in thousands):

MPT RENT OUTPATIENT OBLIGATION CLINICS TOTAL --------------- ---------- -------- December 31, 2005................................. $ 14,344 $205 $ 14,549 2006.............................................. 16,082 122 16,204 2007.............................................. 16,485 84 16,569 2008.............................................. 16,897 55 16,952 2009.............................................. 17,319 -- 17,319 Thereafter........................................ 188,465 -- 188,465 -------- ---- -------- $269,592 $466 $270,058 ======== ==== ========
Substantially, all of the assets of Vibra and its subsidiaries, as well as Vibra's membership interests in its subsidiaries, secure the MPT leases. In addition the sole member of Vibra, an affiliated Company owned by the sole member, and Vibra Management LLC have joint and severally guaranteed the leases to MPT, although the obligation of the sole member is limited to $5 million and his membership interest in Vibra. The Company has sublet a floor of its Marlton, NJ, hospital to an independent pediatric rehabilitation provider. Three other hospitals have entered into numerous sublease arrangements. These subleases generated rental income of $884,913 for the period from inception through December 31, 2004 and is included in non-operating revenue in the accompanying consolidated statement of operations. The following table summarizes amounts due under sub leases (in thousands): December 31, 2005........................................... $ 1,119 2006........................................................ 1,144 2007........................................................ 1,170 2008........................................................ 1,197 2009........................................................ 1,223 Thereafter.................................................. 4,614 ------- $10,467 =======
LITIGATION The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated (including claims against the hospitals under prior ownership). In the opinion of management, the outcome of these actions will not have a material effect on the financial position or results of operations of the Company. CALIFORNIA MEDICAID The Company is in the process of fulfilling change of ownership requirements imposed by Medi-Cal, the California Medicaid administrator that date back to the prior owners' acquisition of the California F-35

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 hospitals. Amounts receivable at December 31, 2004, include $1,015,959 due from Medi-Cal, including $657,000 prior to the acquisition. Management is continuing to negotiate with Medi-Cal. The amount that will ultimately be received cannot be determined at this time. CALIFORNIA SEISMIC UPGRADE For earthquake protection California requires hospitals to receive an approved Structural Performance Category 2 (SPC-2) by January 1, 2008, to maintain its license. Hospitals may request a five year implementation extension. The Fresno, CA, hospital is expected to meet the SPC-2 standard by January 1, 2008, with capital outlays that are not material to the consolidated financial statements. The Kentfield, CA, hospital has applied for a three year extension to meet the requirement. Management is in preliminary consultations with consulting architects and engineers to develop a plan for Kentfield to meet the requirements. The capital outlay required to meet the standards at Kentfield cannot be determined at this time. 9. RETIREMENT SAVINGS PLAN In November 2004, the Company began sponsorship of a defined contribution retirement savings plan for substantially all of its employees. Employees may elect to defer up to 15% of their salary. The Company matches 25% of the first 3% of compensation employees contribute to the plan. The employees vest in the employer contributions over a five-year period beginning on the employee's hire date. The expense incurred by the Company related to this plan was $21,310 for the period from inception through December 31, 2004. 10. SEGMENT INFORMATION SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information", establishes standards for reporting information about operating segments and related disclosures about products and services, geographic areas and major customers. The Company's segments consist of (i) IRFs and (ii) LTACHs. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance of the segments based on loss from operations. The following table summarizes selected financial data for the Company's reportable segments:

FOR THE PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 ------------------------------------------------------ IRF LTACH OTHER TOTAL ------------ ------------ --------- ------------ Net patient service revenue........ $24,741,573 $23,524,446 $ -- $48,266,019 Net operating loss................. (3,649,867) (1,395,339) (63,205) (5,108,411) Interest expense................... 1,493,279 800,123 -- 2,293,402 Depreciation and amortization...... 185,746 116,448 -- 302,194 Deferred rent...................... 1,833,216 627,092 -- 2,460,308 Total assets....................... 32,175,207 26,702,535 143,108 59,020,850 Purchases of property and equipment........................ 75,582 92,318 -- 167,900 Goodwill........................... 16,664,491 7,845,805 -- 24,510,296
F-36

VIBRA HEALTHCARE, LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIOD FROM INCEPTION (MAY 14, 2004) THROUGH DECEMBER 31, 2004 11. SUBSEQUENT EVENT On February 9, 2005, Vibra closed on a revolving credit facility (the "Revolver") with Merrill Lynch Capital secured by a first position in the Company's accounts receivable through an intercreditor agreement with MPT. Up to $14 million can be borrowed based on a formula of qualifying accounts receivable. The terms of the Revolver are interest only for three years at 30 day LIBOR plus 3% with a balloon maturity on February 8, 2008. The proceeds were used to repay $7,725,958 of notes payable to MPT and for general corporate purposes. On March 31, 2005, MPT and Vibra amended the hospital leases for no consideration. The amendments included delaying the initial measurement date with respect to limitations on total debt and coverage ratios until the quarter ending September 30, 2006, aggregating the six hospitals financial results in calculating the financial covenants, establishing an escrow for property taxes and insurance, and certain other terms. F-37

------------------------------------------------------ ------------------------------------------------------ NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR THE UNDERWRITERS. THE STATEMENTS IN THIS PROSPECTUS ARE MADE AS OF THE DATE HEREOF, UNLESS ANOTHER DATE IS SPECIFIED, AND NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH HEREIN SINCE THE DATE HEREOF. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL. TABLE OF CONTENTS

Summary............................... 1 Risk Factors.......................... 16 A Warning About Forward Looking Statements.......................... 38 Use of Proceeds....................... 39 Capitalization........................ 40 Dilution.............................. 41 Distribution Policy................... 43 Selected Financial Information........ 44 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 46 Our Business.......................... 54 Our Portfolio......................... 69 Management............................ 91 Compensation Committee Interlocks and Insider Participation............... 102 Institutional Trading of Our Common Stock............................... 102 Principal Stockholders................ 103 Selling Stockholders.................. 104 Registration Rights and Lock-up Agreements.......................... 104 Certain Relationships and Related Transactions........................ 107 Investment Policies and Policies with Respect to Certain Activities....... 109 Description of Capital Stock.......... 113 Material Provisions of Maryland Law and of our Charter and Bylaws....... 117 Partnership Agreement................. 122 United States Federal Income Tax Considerations...................... 126 Underwriting.......................... 146 Legal Matters......................... 149 Experts............................... 150 Where You Can Find More Information... 150 Index to Financial Statements and Financial Statement Schedules....... F-1
UNTIL , 2005, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ SHARES (MEDICAL PROPERTIES TRUST LOGO) COMMON STOCK ------------------------- PROSPECTUS ------------------------- FRIEDMAN BILLINGS RAMSEY JPMORGAN , 2005 - ------------------------------------------------------ - ------------------------------------------------------

PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the costs and expenses payable by the Registrant in connection with the issuance and distribution of common stock being registered. All amounts except the SEC registration fee and NASD fee are estimates.

AMOUNT TO BE PAID ----------------- SEC registration fee........................................ 31,675 NASD Fee.................................................... 25,500 NYSE Listing Fees........................................... * Transfer agent and registrar fees........................... * Legal fees and expenses..................................... * Accounting fees and expenses................................ * Printing and mailing fees................................... * Miscellaneous............................................... * Total....................................................... *
- --------------- * To be filed by amendment. ITEM 32. SALES TO SPECIAL PARTIES. Not applicable. ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES. On April 6, 2004 and April 7, 2004, we sold in a private placement 21,857,329 shares of common stock to Friedman, Billings, Ramsey & Co., Inc., as initial purchaser, pursuant to the exemptions from registration provided in Section 4(2) of the Securities Act of 1933, as amended , or the Securities Act, and Rule 506 of Regulation D thereunder. Friedman, Billings, Ramsey & Co., Inc. promptly resold 20,244,426 of these shares to qualified institutional buyers in accordance the resale exemption provided in Rule 144A under the Securities Act and to non-U.S. persons in accordance with the exemption provided in Regulation S under the Securities Act. Friedman, Billings, Ramsey & Co., Inc. paid us a purchase price of $9.30 per share for the shares it purchased and resold the shares that it resold for a price of $10.00 per share. Also on April 7, 2004, the Company sold in a concurrent private placement 3,442,671 shares of common stock directly to institutional and individual accredited investors pursuant to the exemptions from registration provided in Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder. These shares were sold for $10.00 per share; however, Friedman, Billings, Ramsey & Co., Inc., which acted as placement agent, received a placement agent fee of $0.70 per share. In addition, we issued 260,954 shares of our common stock on April 7, 2004, to Friedman, Billings, Ramsey & Co., Inc. in a private placement under Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder as payment for financial advisory services. Each of the private placements that we made in reliance on the exemptions from registration provided under Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder, as described in the two proceeding paragraphs, did not involve any public offering of the common stock. In addition, each purchaser of privately placed shares provided us with written representations that it was an accredited investor within the meaning of Rule 501(e) of Regulation D, that it was a sophisticated investor and that it had the knowledge and experience necessary to evaluate the risks and merits of the investment in our II-1

common stock. In addition, each purchaser of our common stock in the private placements and resales that occurred on April 6 and April 7, 2004 was solicited on a private and confidential basis in a manner not involving any general solicitation or advertising in compliance with Regulation D. Pursuant to our 2004 Equity Incentive Plan, we have granted options to purchase a total of 160,000 shares of common stock, and awarded 20,000 deferred stock units, to our current or former independent directors. In granting these options to purchase common stock and deferred stock units, we relied upon exemptions from registration set forth in Section 4(2) of the Securities Act and Rule 701 under the Securities Act. In August and September 2003, Mr. Aldag, Mr. McLean, Mr. McKenzie and Mr. Hamner, or our founders, were collectively issued 1,630,435 shares of our common stock in exchange for nominal cash consideration. Upon completion of our private placement in April 2004, 1,108,527 shares of common stock held by our senior management were redeemed for nominal value and they now collectively hold 557,908 shares of our common stock, including shares purchased in our April 2004 private placement. We relied upon Section 4(2) of the Securities Act in issuing these shares of common stock to our founders. ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS. We maintain a directors and officers liability insurance policy. Our charter limits the personal liability of our directors and officers for monetary damages to the fullest extent permitted under current Maryland law, and our charter and bylaws provide that a director or officer shall be indemnified to the fullest extent required or permitted by Maryland law from and against any claim or liability to which such director or officer may become subject by reason of his or her status as a director or officer of our company. Maryland law allows directors and officers to be indemnified against judgments, penalties, fines, settlements, and expenses actually incurred in a proceeding unless the following can be established: - the act or omission of the director or officer was material to the cause of action adjudicated in the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty; - the director or officer actually received an improper personal benefit in money, property or services; or - with respect to any criminal proceeding, the director or officer had reasonable cause to believe his or her act or omission was unlawful. Our stockholders have no personal liability for indemnification payments or other obligations under any indemnification agreements or arrangements. However, indemnification could reduce the legal remedies available to us and our stockholders against the indemnified individuals. This provision for indemnification of our directors and officers does not limit a stockholder's ability to obtain injunctive relief or other equitable remedies for a violation of a director's or an officer's duties to us or to our stockholders, although these equitable remedies may not be effective in some circumstances. In addition to any indemnification to which our directors and officers are entitled pursuant to our charter and bylaws and the MGCL, our charter and bylaws provide that we may indemnify other employees and agents to the fullest extent permitted under Maryland law, whether they are serving us or, at our request, any other entity. We have entered into indemnification agreements with each of our directors and executive officers, which we refer to in this context as indemnitees. The indemnification agreements provide that we will, to the fullest extent permitted by Maryland law, indemnify and defend each indemnitee against all losses and expenses incurred as a result of his current or past service as our director or officer, or incurred by reason of the fact that, while he was our director or officer, he was serving at our request as a director, officer, partners, trustee, employee or agent of a corporation, partnership, joint venture, trust, other enterprise or employee benefit plan. We have agreed to pay expenses incurred by an indemnitee before the final disposition of a claim provided that he provides us with a written affirmation that he has met the standard of conduct required for indemnification and a written undertaking to repay the amount we pay or II-2

reimburse if it is ultimately determined that he has not met the standard of conduct required for indemnification. We are to pay expenses within 20 days of receiving the indemnitee's written request for such an advance. Indemnitees are entitled to select counsel to defend against indemnifiable claims. The general effect to investors of any arrangement under which any person who controls us or any of our directors, officers or agents is insured or indemnified against liability is a potential reduction in distributions to our stockholders resulting from our payment of premiums associated with liability insurance. ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED. None of the proceeds will be credited to an account other than the appropriate capital share account. ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements. See page F-1 for an index of the financial statements included in the Registration Statement. (b) Exhibits. The following exhibits are filed as part of this registration statement on Form S-11.

EXHIBIT NUMBER EXHIBIT TITLE - ------- ------------- 1.1* Form of Underwriting Agreement 3.1** Registrant's Second Articles of Amendment and Restatement 3.2** Registrant's Amended and Restated Bylaws 4.1* Form of Common Stock Certificate 5.1* Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. with respect to the legality of the shares being registered 8.1* Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. with respect to certain tax matters 10.1* First Amended and Restated Agreement of Limited Partnership of MPT Operating Partnership, L.P. 10.2* Amended and Restated 2004 Equity Incentive Plan 10.3** Employment Agreement between the Registrant and Edward K. Aldag, Jr., dated September 10, 2003 10.4** First Amendment to Employment Agreement between the Registrant and Edward K. Aldag, Jr., dated March 8, 2004 10.5** Employment Agreement between the Registrant and Emmett E. McLean, dated September 10, 2003 10.6** Employment Agreement between the Registrant and R. Steven Hamner, dated September 10, 2003 10.7** Amended and Restated Employment Agreement between the Registrant and William G. McKenzie, dated September 10, 2003 10.8** Lease Agreement between MPT West Houston MOB, L.P. and Stealth L.P., dated June 17, 2004. 10.9** Lease Agreement between MPT West Houston Hospital, L.P. and Stealth L.P., dated June 17, 2004. 10.10** Third Amended and Restated Lease Agreement between 1300 Campbell Lane, LLC and 1300 Campbell Lane Operating Company, LLC, dated December 20, 2004. 10.11** First Amendment to Third Amended and Restated Lease Agreement between 1300 Campbell Lane, LLC and 1300 Campbell Lane Operating Company, LLC, dated December 31, 2004. 10.12** Second Amended and Restated Lease Agreement between 92 Brick Road, LLC and 92 Brick Road, Operating Company, LLC, dated December 20, 2004.
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EXHIBIT NUMBER EXHIBIT TITLE - ------- ------------- 10.13** First Amendment to Second Amended and Restated Lease Agreement between 92 Brick Road, LLC and 92 Brick Road, Operating Company, LLC, dated December 31, 2004. 10.14** Third Amended and Restated Lease Agreement between San Joaquin Health Care Associates Limited Partnership and 7173 North Sharon Avenue Operating Company, LLC, dated December 20, 2004. 10.15** First Amendment to Third Amended and Restated Lease Agreement between San Joaquin Health Care Associates Limited Partnership and 7173 North Sharon Avenue Operating Company, LLC, dated December 31, 2004. 10.16** Second Amended and Restated Lease Agreement between 8451 Pearl Street, LLC and 8451 Pearl Street Operating Company, LLC, dated December 20, 2004. 10.17** First Amendment Second Amended and Restated Lease Agreement between 8451 Pearl Street, LLC and 8451 Pearl Street Operating Company, LLC, dated December 31, 2004. 10.18** Second Amended and Restated Lease Agreement between 4499 Acushnet Avenue, LLC and 4499 Acushnet Avenue Operating Company, LLC, dated December 20, 2004. 10.19** First Amendment to Second Amended and Restated Lease Agreement between 4499 Acushnet Avenue, LLC and 4499 Acushnet Avenue Operating Company, LLC, dated December 31, 2004. 10.20** Third Amended and Restated Lease Agreement between Kentfield THCI Holding Company, LLC and 1125 Sir Francis Drake Boulevard Operating Company, LLC, dated December 20, 2004. 10.21** First Amendment to Third Amended and Restated Lease Agreement between Kentfield THCI Holding Company, LLC and 1125 Sir Francis Drake Boulevard Operating Company, LLC, dated December 31, 2004. 10.22** Loan Agreement between Colonial Bank, N.A., and MPT West Houston MOB, L.P., dated December 17, 2004. 10.23** Loan Agreement between Colonial Bank, N.A., and MPT West Houston Hospital, L.P., dated December 17, 2004. 10.24 Loan Agreement between Merrill Lynch Capital and 4499 Acushnet Avenue, LLC, 8451 Pearl Street, LLC, 92 Brick Road, LLC, 1300 Campbell Lane, LLC, Kentfield THCI Holding Company, LLC and San Joaquin Health Care Associates, LP, dated December 31, 2004. 10.25 Payment Guaranty made by the Registrant and MPT Operating Partnership, L.P. in favor of Merrill Lynch Capital, dated December 31, 2004. 10.26 Purchase Agreement among THCI Company, LLC, THCI of California, LLC, THCI of Massachusetts, LLC, THCI Mortgage Holding Company, LLC and MPT Operating Partnership, L.P., dated May 20, 2004. 10.27 Purchase and Sale Agreement among MPT Partnership, L.P., MPT of Victorville, LLC, Prime A Investments, L.L.C., Desert Valley Health System, Inc., Desert Valley Hospital, Inc. and Desert Valley Medical Group, Inc., dated February 28, 2005. 10.28 Lease Agreement between MPT of Victorville, LLC and Desert Valley Hospital, Inc., dated February 28, 2005. 10.29 Purchase and Sale Agreement among MPT Operating Partnership, L.P., MPT of Bucks County Hospital, L.P., Bucks County Oncoplastic Institute, LLC, Jerome S. Tannenbaum, M.D., M. Stephen Harrison and DSI Facility Development, LLC, dated March 3, 2005. 10.30 Employment Agreement between the Registrant and Michael G. Stewart, dated October 25, 2004. 10.31 Letter of Commitment between MPT Operating Partnership, L.P. and Monroe Hospital Operating Hospital, dated February 28, 2005. 10.32 Letter of Commitment between MPT Operating Partnership, L.P., Covington Healthcare Properties, LLC and Denham Springs Healthcare Properties, LLC, dated March 14, 2005. 10.33 Letter of Commitment between MPT Operating Partnership, L.P. and North Cypress Medical Center Operating Partnership, Ltd., dated March 16, 2005. 10.34 Letter of Commitment between MPT Operating Partnership, L.P., Hammond Healthcare Properties, LLC and Hammond Rehabilitation Hospital, LLC, dated April 1, 2005.
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EXHIBIT NUMBER EXHIBIT TITLE - ------- ------------- 10.35 Letter of Commitment between MPT Operating Partnership, L.P. and Diversified Specialty Institutes, Inc., dated March 3, 2005. 10.36 Amendment to Letter of Commitment between MPT Operating Partnership, L.P. and Diversified Specialty Institutes, Inc., dated March 31, 2005. 10.37 Letter of Commitment between MPT Operating Partnership, L.P., MPT of Victorville, LLC and Desert Valley Hospital, Inc. dated February 28, 2005. 21.1* Subsidiaries of the Registrant 23.1 Consent of KPMG LLP 23.2 Consent of Parente Randolph, LLC 23.3* Consent of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. (included in Exhibits 5.1 and 8.1) 24.1 Power of Attorney, included on signature page of the Registrant's Form S-11 filed with the Commission on October 26, 2004. 24.2* Power of Attorney (included on signature page of this registration statement)
- --------------- * To be filed by amendment. ** Previously filed. ITEM 37. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue. (c) The undersigned Registrant hereby further undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this registration statement in reliance under Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5

SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Birmingham, Alabama on April 7, 2005. MEDICAL PROPERTIES TRUST, INC. By: /s/ R. STEVEN HAMNER ------------------------------------ R. Steven Hamner Executive Vice President, Chief Financial Officer and Director Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board, President April 7, 2005 - -------------------------------------- and Chief Executive Officer Edward K. Aldag, Jr. /s/ R. STEVEN HAMNER Executive Vice President, Chief April 7, 2005 - -------------------------------------- Financial Officer and Director R. Steven Hamner * April 7, 2005 - -------------------------------------- Director G. Steven Dawson * April 7, 2005 - -------------------------------------- Director Robert E. Holmes, Ph.D. * April 7, 2005 - -------------------------------------- Vice Chairman of the Board William G. McKenzie - --------------- *By: /s/ R. STEVEN HAMNER April 7, 2005 ------------------------------ R. Steven Hamner Attorney-in-Fact
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POWER OF ATTORNEY Each of the directors of Medical Properties Trust, Inc. whose signature appears below hereby appoints Edward K. Aldag, Jr. and R. Steven Hamner and each of them as his attorney-in-fact to sign in his or her name and behalf, in any and all capacities stated below and to file with the Securities and Exchange Commission, any and all amendments, including post-effective amendments to this registration statement, making such changes in the registration statement as appropriate, file a 462(b) registration statement and generally to do all such things in their behalf in their capacities as officers to enable Medical Properties Trust, Inc. to comply with the provisions of the Securities Act of 1933, as amended, and all requirements of the Securities Exchange Commission. Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates listed.

SIGNATURE TITLE DATE --------- ----- ---- April , 2005 - -------------------------------------- Director Virginia A. Clarke April , 2005 - -------------------------------------- Director Bryan L. Goolsby April , 2005 - -------------------------------------- Director L. Glenn Orr, Jr.
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EXHIBIT NUMBER EXHIBIT TITLE - ------- ------------- 1.1* Form of Underwriting Agreement 3.1** Registrant's Second Articles of Amendment and Restatement 3.2** Registrant's Amended and Restated Bylaws 4.1* Form of Common Stock Certificate 5.1* Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. with respect to the legality of the shares being registered 8.1* Opinion of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. with respect to certain tax matters 10.1* First Amended and Restated Agreement of Limited Partnership of MPT Operating Partnership, L.P. 10.2* Amended and Restated 2004 Equity Incentive Plan 10.3** Employment Agreement between the Registrant and Edward K. Aldag, Jr., dated September 10, 2003 10.4** First Amendment to Employment Agreement between the Registrant and Edward K. Aldag, Jr., dated March 8, 2004 10.5** Employment Agreement between the Registrant and Emmett E. McLean, dated September 10, 2003 10.6** Employment Agreement between the Registrant and R. Steven Hamner, dated September 10, 2003 10.7** Amended and Restated Employment Agreement between the Registrant and William G. McKenzie, dated September 10, 2003 10.8** Lease Agreement between MPT West Houston MOB, L.P. and Stealth L.P., dated June 17, 2004. 10.9** Lease Agreement between MPT West Houston Hospital, L.P. and Stealth L.P., dated June 17, 2004. 10.10** Third Amended and Restated Lease Agreement between 1300 Campbell Lane, LLC and 1300 Campbell Lane Operating Company, LLC, dated December 20, 2004. 10.11** First Amendment to Third Amended and Restated Lease Agreement between 1300 Campbell Lane, LLC and 1300 Campbell Lane Operating Company, LLC, dated December 31, 2004. 10.12** Second Amended and Restated Lease Agreement between 92 Brick Road, LLC and 92 Brick Road, Operating Company, LLC, dated December 20, 2004. 10.13** First Amendment to Second Amended and Restated Lease Agreement between 92 Brick Road, LLC and 92 Brick Road, Operating Company, LLC, dated December 31, 2004. 10.14** Third Amended and Restated Lease Agreement between San Joaquin Health Care Associates Limited Partnership and 7173 North Sharon Avenue Operating Company, LLC, dated December 20, 2004. 10.15** First Amendment to Third Amended and Restated Lease Agreement between San Joaquin Health Care Associates Limited Partnership and 7173 North Sharon Avenue Operating Company, LLC, dated December 31, 2004. 10.16** Second Amended and Restated Lease Agreement between 8451 Pearl Street, LLC and 8451 Pearl Street Operating Company, LLC, dated December 20, 2004. 10.17** First Amendment to Second Amended and Restated Lease Agreement between 8451 Pearl Street, LLC and 8451 Pearl Street Operating Company, LLC, dated December 31, 2004. 10.18** Second Amended and Restated Lease Agreement between 4499 Acushnet Avenue, LLC and 4499 Acushnet Avenue Operating Company, LLC, dated December 20, 2004. 10.19** First Amendment to Second Amended and Restated Lease Agreement between 4499 Acushnet Avenue, LLC and 4499 Acushnet Avenue Operating Company, LLC, dated December 31, 2004. 10.20** Third Amended and Restated Lease Agreement between Kentfield THCI Holding Company, LLC and 1125 Sir Francis Drake Boulevard Operating Company, LLC, dated December 20, 2004.
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EXHIBIT NUMBER EXHIBIT TITLE - ------- ------------- 10.21** First Amendment to Third Amended and Restated Lease Agreement between Kentfield THCI Holding Company, LLC and 1125 Sir Francis Drake Boulevard Operating Company, LLC, dated December 31, 2004. 10.22** Loan Agreement between Colonial Bank, N.A., and MPT West Houston MOB, L.P., dated December 17, 2004. 10.23** Loan Agreement between Colonial Bank, N.A., and MPT West Houston Hospital, L.P., dated December 17, 2004. 10.24 Loan Agreement between Merrill Lynch Capital and 4499 Acushnet Avenue, LLC, 8451 Pearl Street, LLC, 92 Brick Road, LLC, 1300 Campbell Lane, LLC, Kentfield THCI Holding Company, LLC and San Joaquin Health Care Associates, LP, dated December 31, 2004. 10.25 Payment Guaranty made by the Registrant and MPT Operating Partnership, L.P. in favor of Merrill Lynch Capital, dated December 31, 2004. 10.26 Purchase Agreement among THCI Company, LLC, THCI of California, LLC, THCI of Massachusetts, LLC, THCI Mortgage Holding Company, LLC and MPT Operating Partnership, L.P., dated May 20, 2004. 10.27 Purchase and Sale Agreement among MPT Partnership, L.P., MPT of Victorville, LLC, Prime A Investments, L.L.C., Desert Valley Health System, Inc., Desert Valley Hospital, Inc. and Desert Valley Medical Group, Inc., dated February 28, 2005. 10.28 Lease Agreement between MPT of Victorville, LLC and Desert Valley Hospital, Inc., dated February 28, 2005. 10.29 Purchase and Sale Agreement among MPT Operating Partnership, L.P., MPT of Bucks County Hospital, L.P., Bucks County Oncoplastic Institute, LLC, Jerome S. Tannenbaum, M.D., M. Stephen Harrison and DSI Facility Development, LLC, dated March 3, 2005. 10.30 Employment Agreement between the Registrant and Michael G. Stewart, dated October 25, 2004. 10.31 Letter of Commitment between MPT Operating Partnership, L.P. and Monroe Hospital Operating Hospital, dated February 28, 2005. 10.32 Letter of Commitment between MPT Operating Partnership, L.P., Covington Healthcare Properties, LLC and Denham Springs Healthcare Properties, LLC, dated March 14, 2005. 10.33 Letter of Commitment between MPT Operating Partnership, L.P. and North Cypress Medical Center Operating Partnership, Ltd., dated March 16, 2005. 10.34 Letter of Commitment between MPT Operating Partnership, L.P., Hammond Healthcare Properties, LLC and Hammond Rehabilitation Hospital, LLC, dated April 1, 2005. 10.35 Letter of Commitment between MPT Operating Partnership, L.P. and Diversified Specialty Institutes, Inc., dated March 3, 2005. 10.36 Amendment to Letter of Commitment between MPT Operating Partnership, L.P. and Diversified Specialty Institutes, Inc., dated March 31, 2005. 10.37 Letter of Commitment between MPT Operating Partnership, L.P., MPT of Victorville, LLC and Desert Valley Hospital, Inc. dated February 28, 2005. 21.1* Subsidiaries of the Registrant 23.1 Consent of KPMG LLP 23.2 Consent of Parente Randolph, LLC 23.3* Consent of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. (included in Exhibits 5.1 and 8.1) 24.1 Power of Attorney, included on signature page of the Registrant's Form S-11 filed with the Commission on October 26, 2004. 24.2* Power of Attorney (included on signature page of this registration statement)
- --------------- * To be filed by amendment. ** Previously filed. II-9

EXHIBIT 10.24 (MERRILL LYNCH LOGO) LOAN AGREEMENT FOR A LOAN IN THE AMOUNT OF $75,000,000.00 MADE BY AND AMONG 4499 ACUSHNET AVENUE, LLC, 8451 PEARL STREET, LLC, 92 BRICK ROAD, LLC, AND 1300 CAMPBELL LANE, LLC, KENTFIELD THCI HOLDING COMPANY LLC, EACH A DELAWARE LIMITED LIABILITY COMPANY, AND SAN JOAQUIN HEALTH CARE ASSOCIATES, LP, A DELAWARE LIMITED PARTNERSHIP AS "BORROWERS" AND MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC., A DELAWARE CORPORATION 222 NORTH LASALLE STREET - 18TH FLOOR CHICAGO, ILLINOIS 60601 AS "LENDER" PROJECT LOCATIONS: NEW BEDFORD REHABILITATION HOSPITAL, 4499 ACUSHNET AVENUE, NEW BEDFORD, MA; NORTH VALLEY REHABILITATION HOSPITAL, 8451 PEARL STREET, THORNTON, CO; MARLTON REHABILITATION HOSPITAL, 92 BRICK ROAD, MARLTON, NJ; SOUTHERN KENTUCKY REHABILITATION HOSPITAL, 1300 CAMPBELL LANE, BOWLING GREEN, KY; KENTFIELD REHABILITATION HOSPITAL, KENTFIELD, CA SAN JOAQUIN VALLEY REHABILITATION HOSPITAL, FRESNO, CA DATED AS OF DECEMBER 31, 2004

TABLE OF CONTENTS Page ---- ARTICLE 1 INCORPORATION OF RECITALS, EXHIBITS AND SCHEDULES.............. 2 1.1 Incorporation of Recitals....................................... 2 1.2 Incorporation of Exhibits and Schedule.......................... 2 1.3 Definitional Provisions......................................... 2 ARTICLE 2 LOAN AND LOAN DOCUMENTS........................................ 2 2.1 [INTENTIONALLY OMITTED.]........................................ 2 2.2 Loan Documents.................................................. 2 2.3 Disbursements................................................... 2 2.4 Term of the Loan................................................ 3 2.5 Prepayments..................................................... 3 2.6 Interest........................................................ 3 2.7 Monthly Payments................................................ 3 2.8 Exit Fee........................................................ 3 2.9 Default Interest and Late Charge................................ 3 2.10 Collections, Cash Management and Clearing Accounts.............. 4 2.11 Marlton, New Jersey Property.................................... 4 ARTICLE 3 FINANCIAL REPORTING COVENANTS.................................. 5 3.1 Financial Information Reporting................................. 5 3.2 Financial Information Form and Examination...................... 7 ARTICLE 4 OPERATIONAL AND OTHER LEASE COVENANTS.......................... 7 4.1 Leasing and Operational Covenants............................... 7 4.2 Other Borrower Covenants........................................ 11 4.3 Authorized Representative....................................... 18 4.4 Health Care Matters............................................. 18 4.5 Financial Covenants............................................. 19 ARTICLE 5 BORROWERS' REPRESENTATIONS AND WARRANTIES...................... 19 5.1 Borrowers' Representations and Warranties....................... 19 ARTICLE 6 ENVIRONMENTAL MATTERS.......................................... 23 6.1 Environmental Representations and Warranties.................... 23 6.2 Environmental Covenants......................................... 24 6.3 Right of Entry and Disclosure of Environmental Reports.......... 25 6.4 Environmental Indemnitors' Remedial Work........................ 26 6.5 Environmental Indemnity......................................... 26 6.6 Remedies Upon an Environmental Default.......................... 27 6.7 Unconditional Environmental Obligations......................... 27 6.8 Assignment of Environmental Obligations Prohibited.............. 28 6.9 Indemnification Separate from the Loan.......................... 28 6.10 Further Security................................................ 29 -i-

TABLE OF CONTENTS (continued) Page ---- ARTICLE 7 CASUALTIES AND CONDEMNATION................................... 29 7.1 Lender's Election to Apply Insurance Proceeds on Indebtedness... 29 7.2 Borrowers' Obligation to Rebuild and Use of Insurance Proceeds Therefor............................................ 30 ARTICLE 8 EVENTS OF DEFAULT AND REMEDIES................................ 30 8.1 Events of Default............................................... 30 8.2 Remedies Conferred Upon Lender.................................. 32 ARTICLE 9 LOAN EXPENSE, COSTS AND ADVANCES.............................. 33 9.1 Loan and Administration Expenses................................ 33 9.2 Right of Lender to Make Advances to Cure Borrowers' Defaults.... 34 9.3 Increased Costs................................................. 34 9.4 Borrower Withholding............................................ 34 9.5 Document and Recording Tax Indemnification...................... 34 ARTICLE 10 ASSIGNMENTS BY LENDER AND DISCLOSURE.......................... 35 10.1 Assignments and Participations.................................. 35 10.2 Disclosure of Information....................................... 35 ARTICLE 11 GENERAL PROVISIONS............................................ 35 11.1 Captions........................................................ 35 11.2 Waiver of Jury Trial............................................ 35 11.3 Jurisdiction.................................................... 36 11.4 Governing Law................................................... 36 11.5 Lawful Rate of Interest......................................... 36 11.6 Modification; Consent........................................... 37 11.7 Waivers; Acquiescence or Forbearance Not to Constitute Waiver of Lender's Requirements................................. 37 11.8 California Waiver Provision..................................... 38 11.9 Disclaimer by Lender............................................ 39 11.10 Partial Invalidity; Severability................................ 39 11.11 Definitions Include Amendments.................................. 40 11.12 Execution in Counterparts....................................... 40 11.13 Entire Agreement................................................ 40 11.14 Waiver of Damages............................................... 40 11.15 Claims Against Lender........................................... 40 11.16 Set-Offs........................................................ 40 11.17 Relationship.................................................... 41 11.18 Agents.......................................................... 41 11.19 Interpretation.................................................. 41 11.20 Successors and Assigns.......................................... 41 11.21 Time is of the Essence.......................................... 41 11.22 Notices......................................................... 41 11.23 Joint and Several Liability..................................... 43 ARTICLE 12 PARTIAL RELEASE............................................... 44 12.1 Partial Release................................................. 44 -ii-

LIST OF EXHIBITS AND SCHEDULES TO LOAN AGREEMENT Appendix A - ---------- Exhibits A 1-4 The Projects Exhibit B INTENTIONALLY OMITTED Exhibit C INTENTIONALLY OMITTED Exhibit D Litigation Exhibit E Insurance Requirements Exhibit F Environmental Documents Exhibit G INTENTIONALLY OMITTED Exhibit H Intellectual Property Exhibit I Permitted Exceptions Schedule I Definitions Schedule II List of Project Lessees Schedule 5.1(c) Ownership Structure Schedule 5.1(m) Project Leases Schedule 12.1 Release Prices -iii-

LOAN AGREEMENT THIS LOAN AGREEMENT ("AGREEMENT") is made as of December 31, 2004, by and among 4499 ACUSHNET AVENUE, LLC, 8451 PEARL STREET, LLC, 92 BRICK ROAD, LLC, 1300 CAMPBELL LANE, LLC, and KENTFIELD THCI HOLDING COMPANY LLC, each a Delaware limited liability company, and SAN JOAQUIN HEALTH CARE ASSOCIATES, LP, a Delaware limited partnership (each a "BORROWER" and collectively, the "BORROWERS"), and MERRILL LYNCH CAPITAL, a Division of Merrill Lynch Business Financial Services Inc., a Delaware corporation (collectively, with its successors and assigns, "LENDER"). RECITALS A. Each Borrower is the owner in fee simple (or in the case of Exhibit A-3 the ground lessee) of its land described on Exhibit A-1 through A-6, respectively (the "LAND"). Each described parcel of Land contains improvements generally consisting of (i) a rehabilitation hospital or an acute care facility containing the number of licensed beds and units described on Exhibits A-1 through A-6 and (ii) approximately the number of parking spaces described on Exhibit A-1 through A-6 (collectively, the "IMPROVEMENTS"). B. Borrowers have applied to Lender for certain loans (collectively, the "LOAN") in the aggregate principal amount of Seventy-Five Million and No/100ths Dollars ($75,000,000.00) (the "LOAN AMOUNT") to refinance certain indebtedness of Borrowers and to pay certain other costs relating to the Projects, and Lender is willing to make the Loan on the terms and conditions hereinafter set forth. The Loan is evidenced by (i) that certain promissory note of even date herewith made by Borrowers to the order of Lender in the original principal amount of $15,974,000.00 and (ii) that certain promissory note of even date herewith made by Borrowers to the order of Lender in the original principal amount of $59,026,000.00 (said promissory notes and all amendments thereto and substitutions therefor are hereinafter collectively referred to as the "NOTE"). The terms and provisions of the Note are hereby incorporated by reference in this Agreement. A portion of the indebtedness evidenced by the Note is also evidenced by a certain Colorado Deed of Trust Note, dated as of the date hereof (the "COLORADO NOTE"), in the principal amount of $6,364,100.00, the terms and conditions of which are hereby incorporated by reference, it being expressly understood that, notwithstanding the execution and delivery of the Colorado Note, the aggregate indebtedness of Borrower to Lender is in the principal amount of the Note. C. Borrowers' obligations under the Loan will be secured by, among other items, a first priority mortgage, assignment of leases and rents, security agreement and fixture filing of even date herewith or a first priority deed of trust, assignment of leases and rents, security agreement and fixture filing of even date herewith and, except for the property in Thornton, Colorado described in Exhibit A-2 attached hereto, a second priority mortgage, assignment of leases and rents, security agreement and fixture filing of even date herewith or a second priority deed of trust, assignment of leases and rents, security agreement and fixture filing of even date herewith (each, a "MORTGAGE" and collectively, the "MORTGAGES") each encumbering a Project,. This Agreement, the Note, the Mortgages, and any other documents

evidencing or securing the Loan or executed in connection therewith, and any modifications, renewals and extensions thereof, are referred to herein collectively as the "LOAN DOCUMENTS." NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE 1 INCORPORATION OF RECITALS, EXHIBITS AND SCHEDULES 1.1 Incorporation of Recitals. The foregoing preambles and all other recitals set forth herein are made a part hereof by this reference. 1.2 Incorporation of Exhibits and Schedule. Exhibits A through I, Schedule I, Schedule II, Schedule 5.1(c), Schedule 5.1(m), Schedule 12.1, and Appendix A to this Agreement, attached hereto are incorporated in this Agreement and expressly made a part hereof by this reference. 1.3 Definitional Provisions. All terms defined in Schedule I of this Agreement or otherwise in this Agreement shall, unless otherwise defined therein, have the same meanings when used in the Note, Mortgages, Security Agreements, any other Loan Documents, or any certificate or other document made or delivered pursuant hereto. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement. The word "include(s)" when used in this Agreement and the other Loan Documents means "include(s), without limitation," and the word "including" means "including, but not limited to." ARTICLE 2 LOAN AND LOAN DOCUMENTS 2.1 [INTENTIONALLY OMITTED.] 2.2 Loan Documents. Each Borrower agrees that it will, on or before the Closing Date, execute and deliver or cause to be executed and delivered to Lender this Agreement and the other Loan Documents in form and substance acceptable to Lender. In addition, each Borrower shall deliver such other documents, instruments or certificates as Lender and its counsel may reasonably require, including such documents as are necessary or appropriate to effectuate the terms and conditions of this Agreement and the other Loan Documents, and to materially comply with the laws of the State of Illinois and the laws of the state where the Project that such Borrower owns is located. Furthermore, Borrowers acknowledge that they are obligated to cause their counsel and counsel for each Guarantor, Baker, Donelson, Bearman, Caldwell, & Berkowitz, PC and local counsel as requested by Lender, to issue a legal opinion (in form and substance reasonably satisfactory to Lender) for the benefit of Lender; provided, however, Borrower shall be permitted to cause opinions of local counsel to be issued within thirty (30) days after the Closing Date. 2.3 Disbursements. Subject to the terms, provisions and conditions of this Agreement and the other Loan Documents, on the Closing Date, Borrowers agree to borrow from Lender and Lender shall disburse to Borrowers the entire Loan Amount. -2-

2.4 Term of the Loan. Unless due and payable sooner pursuant to Section 2.7 or Article 8, all principal, interest and other sums due under the Loan Documents shall be due and payable in full on December 31, 2007 (the "MATURITY DATE"). 2.5 Prepayments. Borrowers shall have the right to make prepayments of the Loan, in whole or in part, at any time provided Borrowers (a) give Lender at least seven (7) days' prior written notice, (b) pay all accrued and unpaid interest, (c) pay the Exit Fee, if any, due under Section 2.8 hereof and (d) pay all other reasonable fees and costs then due from Borrower to Lender including any reasonable attorneys' fees and disbursements incurred by Lender as a result of the prepayment. In the event Lender declares the Loan immediately due and payable following the occurrence of an Event of Default and at a time when an Exit Fee would be due, such Exit Fee shall be paid upon any tender of payment at any time or upon foreclosure of the Mortgage. 2.6 Interest. Provided that no Event of Default has occurred and is continuing, the principal amount of the Loan outstanding from time to time shall bear interest until paid at a rate equal to a floating rate per annum equal to three percent (3.00%) per annum plus the Base Rate (the aggregate rate referred to as the "INTEREST RATE"). Interest shall be calculated based on a three hundred sixty (360) day year and charged for the actual number of days elapsed. 2.7 Monthly Payments. (a) Commencing on February 1, 2005, and on the first (1st) day of each calendar month thereafter, Borrower shall pay (i) interest computed on the outstanding principal balance of the Loan at the Interest Rate, monthly in arrears plus (ii) a fixed monthly principal amortization payment of Three Hundred Twelve Thousand Five Hundred Dollars ($312,500). (b) Monthly payments of interest and amortization due to Lender as described in this Section 2.7 shall be paid to Lender by Automated Clearing House debit of immediately available funds from the financial institution account designated by Borrowers in the Automated Clearing House debit authorization executed by Borrowers in connection with this Agreement; and shall be effective upon receipt. Borrowers shall execute any and all forms and documentation reasonably necessary from time to time to effectuate such automatic debiting. 2.8 Exit Fee. In the event that, at any time prior to the date that is eighteen (18) months after the Closing Date, (i) the principal amount outstanding under of the Loan for any reason shall be less than $40,000,000, (ii) the Loan shall have been accelerated following the occurrence of an Event of Default, or (iii) an Event of Default shall exist under Section 8.1(g) of this Agreement, Borrowers will pay to Lender on the date that any such event occurs, an exit fee equal to one percent (1%) of the Loan Amount (i.e. $750,000) (the "EXIT FEE"). The Exit Fee shall be deemed to be earned in its entirety upon the execution of this Agreement. 2.9 Default Interest and Late Charge. (a) So long as an Event of Default is continuing, interest shall accrue at a rate per annum equal to three percentage points (300 basis points) in excess of the Interest -3-

Rate otherwise applicable on the outstanding Loan Amount, but shall not at any time exceed the highest rate permitted by law (the "DEFAULT RATE"). (b) If payments of principal, interest due on the Loan, or any other amounts due hereunder, under the Note or under the other Loan Documents are not timely made and remain overdue for a period of ten (10) days (subject to any other applicable notice, grace, or cure periods), Borrowers, without notice or demand by Lender, promptly shall pay an amount (the "LATE CHARGE") equal to the lesser of (i) two percent (2%) of each delinquent payment or (ii) Twelve Thousand Five Hundred Dollars ($12,500) as liquidated damages to compensate Lender for the costs that Lender will be required to incur by reason of Borrowers' permitting such payment to become past due. 2.10 Collections, Cash Management and Clearing Accounts. Borrowers shall instruct all Project Lessees to pay all rents and other payments due to Borrowers under any Project Lease directly to Lender's Concentration Account. Borrowers shall not accept from any Project Lessee any payment of rent or other sums due under an Project Lease, and any payments so received by any Borrower shall be held in trust for the benefit of Lender, shall be paid over to Lender promptly upon receipt and shall not be commingled with any other monies of any Borrower. Lender shall apply amounts deposited into the Concentration Account by any Project Lessee to payment of the monthly payments of principal, interest, escrows and reserves and other sums then due under this Agreement or the other Loan Documents or to become due within the following thirty (30) day period (based on twelve 30-day months). Any balance remaining in the Concentration Account after payment of such portion of the Obligations then due under this Agreement or the other Loan Documents shall be applied as follows: (a) provided no Default or Event of Default exists, any such balance shall be deposited in the account of Borrowers designated by the Authorized Representative by written notice to Lender; and (b) during the continuation of an Event of Default, Lender shall be permitted to retain such balance as additional collateral security for the Obligations or apply such balance to the Obligations in such order and manner as Lender shall elect. If, pursuant to the preceding sentence, a balance is to be remitted to Borrowers, then, provided all payments of monthly sums due under this Agreement and the other Loan Documents are received in the Concentration Account in good and sufficient funds by no later than the tenth (10th) day of each calendar month, Lender shall remit such balance as directed by the Authorized Representative within two Business Days following Lender's application of the funds to the Obligations. 2.11 Marlton, New Jersey Property. On the Closing Date, Lender shall advance the principal sum of $56,000,000, and the Mortgages encumbering the Marlton, New Jersey property shall not be recorded. The remaining $19,000,000 of the principal amount of the Loan shall not be advanced until such time as the following conditions have been satisfied: (i) Lender shall have either (A) received a ground lessor estoppel certificate, in the form previously requested by Lender, which provides that Lender, and its -4-

successors and assigns, shall have the right to receive a new lease if the ground lease is terminated for any reason or (B) accepted a ground lessor estoppel certificate in a different form together with such additional assurances from Borrowers and Guarantors as shall have been approved by Borrowers, Guarantors and Lender; (ii) Lender shall have received an opinion of local New Jersey counsel, in form and substance reasonably satisfactory to Lender; (iii) Lender, the Marlton, the New Jersey Borrower and the Marlton, New Jersey Project Lessee shall have executed and delivered a Subordination and Attornment Agreement, in form and substance substantially identical to those executed by the other Borrowers and other Project Lessees on the Closing Date; and (iv) the Mortgages on the Marlton, New Jersey property shall have been executed, delivered and recorded and mortgagee title insurance, in form and substance reasonably satisfactory to Lender shall have been issued; (v) Borrower shall have paid to Lender all of Lender's Expenses in connection with the supplemental transaction and otherwise then owed under the Loan Documents. In the event that the conditions described above shall not have been satisfied by January 31, 2005, Lender shall have no further obligation to advance the balance of the Loan, and at the request and expense of Borrowers, Lender and Borrowers shall execute such documents as are necessary to eliminate 92 Brick Road, LLC as a Borrower and the Marlton, New Jersey property as part of the collateral for the Loan. If such property is so eliminated, the monthly principal payment required under Section 2.7(a) hereof shall be reduced to Two Hundred Thirty-Three Thousand Three Hundred Thirty-Three Dollars ($233,333) from and after the first day of the first calendar month after such elimination. ARTICLE 3 FINANCIAL REPORTING COVENANTS 3.1 Financial Information Reporting. (a) Monthly Information. Within thirty (30) days following the end of each month, each Borrower shall deliver to Lender the following: (i) monthly unaudited operating cash flow statements for such Borrower's Project, certified as complete and correct in all material respects by such Borrower and showing actual sources and uses of cash during the preceding month and such Borrower's fiscal year-to-date, in comparison to the same month and year-to-date for the prior fiscal year of such Borrower. (ii) a current rent roll/census report (including monthly delinquency reports and a monthly schedule of delinquency receipts and payments) and a summary of all leasing/admissions activity then taking place with respect to each Project; and -5-

(iii) internally prepared monthly financial statements (including income statements and balance sheets) for each Project. (b) Quarterly Information. Borrower shall cause the REIT to deliver to Lender within forty-five (45) days after the end of each calendar quarter unaudited consolidated and consolidating quarterly financial statements (including a balance sheet, an income statement and a statement of cash flows) of the REIT and its subsidiaries (including the Borrowers), in comparison to the same quarter and year-to-date for the prior fiscal year, and certified by an authorized signatory of the REIT. (c) Annual Information. (i) Not later than thirty (30) days before the end of each fiscal year of each Borrower, each Borrower shall deliver to Lender its Project's updated annual operating budget for the following fiscal year; (ii) Not later than ninety (90) days after the end of each fiscal year of the REIT, the REIT shall deliver to Lender audited annual financial statements (including, balance sheet, an income statement and a statement of cash flows) of the REIT and its subsidiaries on a consolidated basis. (iii) Within fifteen (15) days after timely filing thereof, the REIT and each Borrower shall deliver to Lender a copy of its annual federal income tax returns with all schedules and exhibits thereto. (d) Defined Period Reports. For purposes of the financial covenants listed in APPENDIX A attached hereto, within thirty (30) days after the end of each Defined Period, each Borrower shall deliver to Lender such financial reports and information as Lender shall reasonably require evidencing compliance with the applicable financial covenants, and, if reasonably requested by Lender, back-up documentation (including, without limitation, invoices, receipts and other evidence of costs incurred during such quarter as Lender shall reasonably require) evidencing the propriety of the deductions from revenues in determining such compliance. (e) Other Documents: (i) Each Borrower shall deliver to Lender, promptly upon receipt thereof, copies of any material reports by the independent accountants in connection with any interim audit and copies of each management control letter provided by independent accountants; (ii) Each Borrower shall deliver to Lender, promptly upon receipt thereof, copies of all material reports and financial information received from Project Lessees. Borrower shall, at all times, enforce the material obligations of the Project Lessees to deliver financial and other information required to be delivered under the terms of the applicable Project Lease. -6-

3.2 Financial Information Form and Examination. All financial statements to be provided to Lender as described herein shall be in a format approved in writing by Lender in Lender's reasonable discretion, in accordance with GAAP (and with respect to annual financial statements, such statements shall be audited by KPMG or such other independent certified public accountant reasonably acceptable to Lender), which fairly present the financial condition(s) as of the date(s) indicated, except for the absence of footnotes and subject to normal year-end adjustments which, in the aggregate, are not material. Each financial statement shall be certified as complete and correct, in all material respects, by its preparer and by a Borrower or, in the case of the REIT's financial statements, by an authorized signatory of the REIT. Borrowers and Guarantor shall provide such additional financial information as Lender reasonably requires. Borrowers shall, during regular business hours following reasonable written notice from Lender, permit (subject to the terms of the Project Leases) Lender or any of Lender's representatives (including an independent firm of certified public accountants) to have reasonable access to and examine all of the books and records regarding Borrowers and the development and operation of any Project in possession of Borrower. The reasonable costs and expenses of the examination shall be paid by Borrowers if (i) the examination discloses, with respect to any individual Project, a monetary variance in any financial information or computation submitted by Borrower equal to or greater than the greater of: (A) five percent (5%) or (B) $100,000.00 or (ii) such inspection is done as the result of a failure to provide Lender with the financial statements and reporting required herein within thirty (30) days of Lender's written request therefor. Each Borrower shall within ten (10) days after Lender's reasonable request, furnish Lender with a written statement, duly acknowledged, setting forth the sums owing under the Loan Documents according to such Borrower's books and records and any right of set-off, counterclaim or other defense that exists against such sums and such Borrower's obligations under the Loan Documents. ARTICLE 4 OPERATIONAL AND OTHER LEASE COVENANTS 4.1 Leasing and Operational Covenants. (a) Project Leases; Other Leases. Each Borrower covenants that it shall not execute any lease, license, occupancy agreement or similar document for possession or occupancy of any portion of such Borrower's Project, except for the execution of applicable Project Lease and as otherwise permitted under the applicable Project Lease other than Material Matters (defined below), which shall require Lender consent, in Lender's sole discretion, and shall at all times promptly and faithfully perform, or cause to be performed in all material respects, all of the covenants, conditions and agreements contained in the Project Lease on the part of the landlord thereunder to be kept and performed. Prior to Closing, Borrower shall have delivered to Lender a true, correct and complete copy of each Project Lease. Borrowers shall not do or suffer to be done any act that would reasonably be expected to result in a default by the landlord under the Project Leases or allow the Project Lessees thereunder to withhold payment of rent and, shall not further assign any Project Lease (except upon substitution of a new Project Lessee with Lender's consent following a default under a Project Lease by the existing Project Lessee) or accept any advance payment of any rents or payments due under any Project Lease without the prior written consent of Lender in each instance. Each Borrower, at no cost or expense to Lender, shall enforce, short of termination, the performance and observance of each -7-

and every material condition and covenant of each of the parties under such Borrower's Project Lease. Each Borrower agrees that it shall not, (i) without the prior written consent of Lender in each instance, which consent may be granted or withheld by Lender, in Lender's sole discretion, enter into any modification of such Borrower's Project Lease which (A) reduces the rent, (B) reduces the term, (C) modifies or affects any Project Lessee's obligations regarding the payment of taxes, insurance premiums or reserves for capital expenditures, (D) affects the certificate of need or any license or consent under the Healthcare Laws or Borrower's reversionary rights, if any, with respect thereto, (E) affects the Primary Intended Use or otherwise adversely affects the ability of the Premises to be used as a healthcare facility, or (F) materially decreases the rights of the landlord or the obligations of the tenant (collectively, "Material Matters"), or (ii) without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned, or delayed, enter into any other material modification of the provisions of such Borrower's Project Lease. Each Borrower further agrees that it will not terminate or accept the surrender of such Borrower's Project Lease, or waive or release any other party from the performance or observance of any material obligation or condition under such Project Lease. Each Borrower agrees that it shall not permit the prepayment of any rents under such Borrower's Project Lease for more than one (1) month prior to the due date thereof. Borrower shall diligently enforce all obligations of each Project Lessee under any Project Lease. Each Borrower shall instruct each Project Lessee to pay all base or "Base Rent" and all "Percentage Rent" (as such terms are defined in such Borrower's Project Lease) directly to Lender and, in the event any such Base Rent or Percentage Rent is paid to such Borrower, such Borrower shall hold such rent in trust for Lender and remit such rent to Lender as promptly as possible, but not later than two (2) Business Days after receipt thereof. As a condition to the Closing of the Loan, Lender shall have received a Subordination, Nondisturbance and Attornment Agreement from each Project Lessee. In the event there shall be any successor lessee of a Project, the applicable Borrower shall instruct such successor lessee to execute a Subordination and Attornment Agreement in form and substance reasonably acceptable to Lender. Without limiting the foregoing, each Borrower agrees that it shall not, without the prior written consent of Lender in each instance (which consent shall not be unreasonably withheld, conditioned, or delayed): (i) accept any offer by any Person to purchase such Borrower's Project, except that a Borrower may accept an offer by a Project Lessee pursuant to its purchase option under the applicable Project Lease so long as Borrower or the Project Lessee complies or causes compliance with Article 12 of this Agreement with respect to the release of the applicable Project from the lien of the Mortgages; (ii) accept any offer to substitute properties as provided in the Project Lease or otherwise; (iii) agree to finance any "Capital Additions" (as defined in the Project Leases) pursuant to Article X of the Project Leases or otherwise; or (iv) consent to any pledge or assignment of any rights of Project Lessee under or in respect of a Project Lease except to the extent that Borrower is required to consent to a pledge or assignment under the terms of the applicable Project Lease (it being expressly understood that Borrowers may not grant any discretionary consent to a pledge or assignment under a Project Lease unless Lender shall have consented thereto in writing). (b) Defaults Under Leases. No Borrower will suffer or permit any material breach or default to occur in any of such Borrower's obligations under any Project Lease or suffer or permit the same to terminate by reason of any failure of such Borrower to meet any requirement of any Project Lease. Each Borrower shall notify Lender promptly in writing in the event the Project Lessee commits a material default under such Borrower's Project Lease and -8-

shall deliver to Lender a copy of each notice of default sent or received under any Project Lease, within five (5) Business Days after the sending or receipt thereof, as the case may be. (c) Management Contracts. No Borrower shall change or permit any Project Lessee to change the manager of its Project or enter into, modify, amend, terminate or cancel any management contracts for its Project except (i) in accordance with the applicable Project Lease, or (ii) for non-material modifications that do not increase the fees or other amounts payable to the manager or reduce the applicable Borrower's rights or the manager's obligations under such management contract. (d) Furnishing Notices. Borrowers shall provide Lender with copies of all material notices pertaining to any Borrower or a Project received by any Borrower from any Borrower, Project Lessee, Tenant, Guarantor, any Governmental Authority or insurance company promptly after such notice is received, including any survey results or inspection reports from any Governmental Authority. In addition, each Borrower shall promptly provide Lender with written notice of any material litigation, arbitration, or other material proceeding or governmental investigation pending or, to any Borrower's Knowledge, threatened against or relating to any Borrower, or any Guarantor, any Project Lessee, or any Project. Furthermore, each Borrower shall promptly provide Lender with prior written notice of any capital or other equity contributions to such Borrower. (e) Alterations. Without the prior written consent of Lender in each instance (which consent shall not be unreasonably withheld, conditioned, or delayed), no Borrower shall make or permit any Project Lessee (other than as may be permitted under the applicable Project Lease without Borrower's consent) or any other Person to make, any material alterations to its Project. (f) Intentionally omitted. (g) Replacement Reserve. At the time of and in addition to the monthly installments of interest, and if applicable, principal due under the Note and this Agreement, Borrowers shall pay to Lender an amount equal to the product of (i) One Hundred Twenty-Five Dollars ($125.00) and (ii) the aggregate number of beds in the Projects (the "REPLACEMENT RESERVE"). Funds in the Replacement Reserve will be held by a depository institution insured by the Federal Deposit Insurance Corporation (which institution may be an Affiliate of Lender) in an interest-bearing account, may be commingled with the general funds of Lender, and these sums shall not be deemed to be held in trust for the benefit of Borrowers. Interest shall accrue on the Replacement Reserve at the rate paid by such depository institution for such deposits. Any interest accruing and paid on such funds shall be deemed to be part of the Replacement Reserve and shall be applied in accordance with this Section 4.2(g). On the Maturity Date, the monies then remaining on deposit with Lender shall, at Lender's option, be applied against the Indebtedness or if no Event of Default is continuing, returned to Borrowers. So long as there is no continuing Event of Default, Borrowers may request Lender to disburse funds from the Replacement Reserve (which request will include (i) a reasonably detailed description of the capital expenditures at a Project which a Borrower intends to pay for with such funds and (ii) the written consent of the applicable Project Lessee, which request shall not be unreasonably denied by Lender. If requested by Lender, each disbursement request will be -9-

accompanied by copies of invoices, lien waivers and other evidence reasonably required by Lender. Borrowers hereby grant Lender a first priority security interest in such funds, including all interest accruing thereon, and all such funds are pledged as additional collateral for the Loan and Borrowers shall execute any other documents and take any other actions necessary to provide Lender with such a perfected security interest in such funds; provided, however, that if such funds are the deposited by one or more Project Lessees, Borrowers hereby assign to Lender Borrowers' security interest in such funds, including all interest accruing thereon, as additional collateral for the Loan and Borrowers shall execute any other documents and take any other actions necessary to provide Lender with an assignment of Borrower's security interest in such funds. Upon the Maturity Date or at any time following an Event of Default, the moneys then remaining on deposit with Lender or its agent shall, at Lender's option, be applied against the Indebtedness. The provisions of this Section 4.1(g) shall be deemed satisfied to the extent that the Project Lessees deposit with Lender, for application in the manner specified in this Section 4.1(g), the replacement reserve deposits required to be made under the Project Leases. (h) Compliance With Laws. Borrowers and the Projects shall comply with all applicable requirements (including applicable Laws) of any Governmental Authority having jurisdiction over any Borrower or any Project including all building, zoning, density, land use, covenants, conditions and restrictions, subdivision requirements (including parcel maps and environmental impact and other environmental requirements), whether now existing or later to be enacted or promulgated and whether foreseen or unforeseen; provided, however, that other than prompt and diligent enforcement of the terms of the Project Leases and the obligations of the Project Lessees thereunder, Borrowers shall not be obligated to cause the Projects to comply with healthcare-related laws to the extent that the obligation to so comply is the obligation of a Project Lessee under a Project Lease. (i) Use of Projects. Unless required by applicable Law, Borrowers shall not permit material changes in the use of any Project from that of the time this Agreement was executed. Borrowers shall neither initiate nor acquiesce in a material change in the plat of subdivision, or zoning classification or use of any Project without Lender's prior written consent (which consent shall not be unreasonably withheld, conditioned, or delayed) nor shall it grant any encumbrances or easements burdening any Project without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed. (j) Separate Accounts. Each Borrower shall maintain separate accounts, which may be book entry accounts, with regard to its Project, and such accounts shall separate its funds from those relating to any other Project. (k) Maintenance and Preservation of the Projects. Borrowers shall enforce their rights under the Project Leases with respect to the Project Lessees' obligations to keep the Projects in good condition and repair (ordinary wear and tear excepted) and, if all or part of any Project becomes damaged or destroyed, Borrowers shall promptly exercise their rights under the Project Leases with respect to such repair and/or restoration of such Project promptly following Lender's disbursement of the Insurance Proceeds or other sums to pay costs of the work of repair or reconstruction pursuant to Article 7 hereof. Subject to Borrowers' rights under the Project Leases, Borrowers shall not commit or allow material waste or permit impairment or deterioration of any Project. Subject to Borrowers' rights under the Project -10-

Leases, Borrowers shall perform such acts as are necessary in the exercise of prudent business judgment to preserve the value of the Projects and no Borrower shall abandon its Project. (l) Purchase Options; Substitution Rights. If any Project Lessee shall have or acquire any right or option of any nature whatsoever to purchase any Project or Projects or any portion of or any interest in the Premises or the Property, or to substitute any properties for any Project or any portion of the Premises, such substitution rights (but not any such purchase options) shall, at all times, be subordinated to the rights of Lender under the Loan Documents and Lender shall have no obligation to release the lien of the Mortgage against the Property or any portion thereof in connection with the exercise by any Project Lessee of any such right or option unless, in connection with the exercise of any such purchase option by a Project Lessee, Borrower shall comply with Article 12 of this Agreement with respect to the release of the applicable Project from the lien of the Mortgages. 4.2 Other Borrower Covenants. Borrowers further covenant and agree as follows: (a) Loan Closing. All material conditions precedent to the closing of the Loan shall be complied with in all material respects on or prior to the Closing Date. If such conditions are not complied with as of the Closing Date, Lender may terminate Lender's obligation to fund the Loan by written notice to Borrowers. (b) Prohibition of Assignments and Transfers by any Borrower. (i) Generally. No Borrower shall assign or attempt to assign its rights under this Agreement and any purported assignment shall be void. Except as expressly permitted in Article 12 of this Agreement, without the prior written consent of Lender, which consent may be withheld in Lender's sole discretion, no Borrower shall suffer or permit (a) any change in the management of any Project, except as permitted under the applicable Project Lease or (b) any Transfer other than a Permitted Transfer. Notwithstanding the foregoing, so long as the REIT is a real estate investment trust, transfers of direct or indirect ownership interests in the REIT shall be permitted without notice to or consent by Lender. Lender agrees that it will not unreasonably withhold, delay or condition consent to a Transfer which is not a Permitted Transfer, so long as after giving effect to such Transfer, the REIT (A) owns, directly or indirectly not less than 51% of the beneficial ownership interests in each Borrower and (B) Controls all Borrowers. (ii) Transfers Prohibited by ERISA. In addition to the prohibitions set forth in Section 4.2(b)(i), above, no Borrower shall engage in or permit a Transfer that would reasonably be expected to constitute or result in the occurrence of one or more non-exempt prohibited transactions under ERISA or the Internal Revenue Code. To the extent possible, each Borrower shall unwind any such Transfer within a reasonable period of time following its receipt of notice from Lender describing such Transfer and describing the prohibited transaction in reasonable detail. Alternatively, at Lender's option, each Borrower shall assist Lender in obtaining such prohibited transaction exemption(s) from the United States Pension and Welfare Benefits Administration with respect to such Transfer as are necessary to remedy such prohibited transactions. In addition to its general obligation to indemnify Lender -11-

under Section 4.2(k), Borrowers shall reimburse Lender for any Expenses incurred by Lender to obtain any such prohibited transaction exemptions. Each Borrower's obligations under this Section 4.2(b)(ii) shall survive the expiration of this Agreement and the other Loan Documents. (c) Mechanics' Liens and Contest Thereof. Borrowers will not suffer or permit any mechanics' lien claims to be filed or otherwise asserted against any Project (other than such liens that automatically attach prior to payment being due to the lienholder so long as such liens do not remain in effect after payment is due to the lienholder) and will promptly discharge the same in case of the filing of any claims for lien or proceedings for the enforcement thereof, provided, however, that Borrowers shall have the right to contest, or permit a Project Lessee to contest, in accordance with the Project Lease and in good faith and with reasonable diligence, the validity of any such lien or claim, provided that the applicable Borrower or Project Lessee notifies Lender of its desire to do so in writing, and posts a statutory lien bond that removes such lien from title to the applicable Project, or provides other security reasonably satisfactory of payment or bonding of such lien, to Lender, within twenty (20) days after the earlier of (i) the date any Borrower obtains Knowledge of the existence of such lien or (ii) written notice by Lender to Borrowers of the existence of the lien. In the event Borrowers shall fail to discharge any such lien or fails to prosecute such contest as set forth above, Lender may, at its election in its sole discretion, cause such lien to be satisfied and released or otherwise provide security to the Title Insurer to indemnify over such lien, and any reasonable amounts so expended by Lender, including premiums paid or security furnished in connection with the issuance of any surety company bonds, shall be reimbursed by Borrowers within three (3) days after deemed by Lender, together with interest at the Default Rate. In settling, compromising or discharging any claims for lien, Lender shall not be required to inquire into the validity or amount of any such claim. (d) Renewal of Insurance. Borrowers shall (i) maintain in full force, until full payment of the Loan, such insurance coverages on the Projects as are described on the attached Exhibit E, (ii) maintain such coverages through the applicable insurance carriers (or such other reasonably acceptable substitute carriers selected by Borrowers) for the respective coverages (or substantially equivalent replacement coverages) listed on the attached Exhibit E, and (iii) name Lender as an additional insured thereunder and provide at least thirty (30) days prior written notice to Lender of cancellation, non-renewal or material change of the insurance policies maintained by the Borrower pursuant hereto. Borrowers shall not bring or keep any article on any Project or cause or allow any condition to exist on it, if that would reasonably be expected to invalidate or would be prohibited by any insurance coverage required to be maintained by Borrowers on the Projects. Unless Borrowers provide Lender with appropriate evidence of the insurance coverage required by this Agreement, Lender may, following ten (10) days written notice to Borrower of Borrowers' failure to provide the same (or upon lesser notice or without notice if any required insurance has lapsed or is at risk of lapsing), purchase insurance at Borrowers' expense to protect Lender's interests in the Projects and to maintain the insurance required by this Agreement. Borrowers may later cancel any insurance purchased by Lender, but only after providing Lender with appropriate evidence that Borrowers have obtained insurance as required by this Agreement. If, in accordance with this Section, Lender purchases insurance for any Project or insurance otherwise required by this Agreement, Borrowers will be responsible for the costs of that insurance and other charges imposed by Lender in connection with the placement of the insurance until the effective date of the cancellation or expiration of the -12-

insurance. The costs of the insurance may be added to the Indebtedness effective as of the date Lender purchases such insurance and such costs may be more than the cost of insurance Borrowers are able to obtain on their own. The effective date of coverage may be the date the prior coverage lapsed or the date on which Borrowers failed to provide Lender proof of coverage. (e) Payment of Taxes. Borrowers shall, subject to the terms of Section 4.2(f) below, pay or enforce their rights under the Project Leases with respect to the timely payment by the Project Lessees of, all real estate taxes and assessments and charges of every kind upon the Projects before the same become delinquent, provided, however, that Borrowers and the Project Lessees shall have the right to pay such tax under protest or to otherwise contest any such tax or assessment in accordance with the Project Leases. If Borrower or a Project Lessee fails to commence such contest or, having commenced to contest the same, shall thereafter fail to prosecute such contest in accordance with the applicable Project Leases, or, upon adverse conclusion of any such contest, Project Lessee or Borrower shall fail to pay such tax, assessment or charge, Lender may, at its election (but shall not be required to), pay and discharge any such tax, assessment or charge, and any interest or penalty thereon, and any amounts so expended by Lender shall be deemed to constitute disbursements of the Loan proceeds hereunder (even if the total amount of disbursements would exceed the face amount of the Note). Borrowers shall, unless Lender has paid such taxes directly on a Project Lessee's behalf, furnish to Lender evidence that taxes are paid at least five business (5) days prior to the last date for payment of such taxes and before imposition of any penalty or accrual of interest. (f) Funds for Insurance and Taxes. Borrowers shall pay to Lender, at the time of and in addition to the monthly installments of principal and/or interest due under the Note, a sum equal to 1/12 of the amount estimated by Lender to be sufficient to enable Lender to pay at least sixty (60) days before they become due and payable, all taxes, assessments and other similar charges levied against the Projects and all insurance premiums relating to Borrowers and the Projects as determined by Lender (the "PROPERTY TAX AND INSURANCE DEPOSIT"). So long as no Event of Default exists hereunder and provided that Borrowers shall have delivered to Lender a copy of the tax bill or insurance premium bill, as the case may be, and sufficient funds on deposit from Borrowers for the purpose of paying such tax bill and/or insurance premium bill, Lender shall apply the sums to pay such real estate tax items and/or insurance premiums, as the case may be. These sums will be held by a depository institution insured by the Federal Deposit Insurance Corporation (which institution may be an Affiliate of Lender) in an interest-bearing account, may be commingled with the general funds of Lender at such institution, and shall not be deemed to be held in trust for the benefit of Borrowers. Interest shall accrue on the Property Tax and Insurance Deposit at the rate paid by such depository institution for such deposits. Any interest accruing and paid on such funds shall be deemed to be part of the Property Tax and Insurance Deposit and shall be applied in accordance with this Section 4.2(f). If such amount on deposit with Lender is insufficient to fully pay such tax items and/or insurance premiums, as the case may be, Borrowers shall, within ten (10) days following notice at any time from Lender, deposit such additional sum as may be required for the full payment of such tax items and/or insurance premiums, as the case may be. Borrowers hereby grant Lender a first priority security interest in such funds, including all interest accruing thereon, and all such funds are pledged as additional collateral for the Loan and Borrowers shall execute any other documents and take any other actions necessary to provide Lender with such a perfected security interest in such funds. -13-

Upon the Maturity Date or at any time following an Event of Default, the moneys then remaining on deposit with Lender or its agent shall, at Lender's option, be applied against the Indebtedness. The obligation of Borrowers to pay such tax items and/or insurance premiums is not affected or modified by the provisions of this paragraph. The provisions of this Section 4.2(f) shall be deemed satisfied to the extent that the Project Lessees deposit with Lender, for application in the manner specified in this Section 4.2(f), the property tax and insurance reserve deposits required to be made under the Project Leases. (g) Personal Property. All of each Borrower's personal property, fixtures, attachments and equipment delivered upon, attached to, used or required to be used in connection with the operation of the Project (collectively, the "PERSONAL PROPERTY") shall always be located at such Borrower's Project and shall be kept free and clear of all liens, encumbrances and security interests. Except as expressly permitted in Article 12 of this Agreement, no Borrower shall (nor, except to the extent required to do so under the Project Leases, shall it permit any Project Lessee to), without the prior written consent of Lender (which consent shall not be unreasonably withheld, conditioned, or delayed), sell, assign, transfer, encumber, remove or permit to be removed from its Project any of the Personal Property other than as provided in the Project Leases. So long as no Event of Default exists and is continuing, a Borrower may sell or otherwise dispose of its Personal Property when obsolete, worn out, inadequate, unserviceable or unnecessary for use in the operation of its Project, but only upon replacing the same with other Personal Property at least equal in value and utility to the Personal Property that is disposed. (h) Appraisals. Lender shall have the right to obtain a new or updated Appraisal of a Project from time to time upon the occurrence of any event which materially affects the value of such Project or if required by any rules or regulations of any Governmental Authority applicable to Lender. Borrowers shall cooperate with Lender in this regard. If the Appraisal is obtained to comply with this Agreement or any applicable law or regulatory requirement, or if an Event of Default shall exist at the time any Appraisal is ordered, Borrowers shall pay for any such Appraisal upon Lender's request. (i) Loss of Note or other Loan Documents. Upon notice from Lender of the loss, theft, or destruction of the Note and upon receipt of an affidavit of lost note and an indemnity reasonably satisfactory to Borrowers from Lender, or in the case of mutilation of the Note, upon surrender of the mutilated Note, Borrowers shall make and deliver a new note of like tenor in lieu of the then to be superseded Note. If any of the other Loan Documents were lost or mutilated, Borrowers agree to execute and deliver replacement Loan Documents in the same form of such Loan Document(s) that were lost or mutilated. (j) Publicity. Lender reserves the right to publicize the making of the Loan and, in such publicity, may include a brief description of the Projects and the Loan, subject to Borrowers' prior written approval of the same, which approval shall not be unreasonably withheld, delayed or conditioned. (k) Indemnification. Each Borrower shall indemnify Lender, including each party owning an interest in the Loan and their respective successors, assigns, officers, directors, employees and consultants (each, an "INDEMNIFIED PARTY") and defend and hold each Indemnified Party harmless from and against all claims, injury, damage, liability, -14-

criminal and civil penalties, excise taxes and Expenses of any and every kind to any persons or property by reason of (i) the operation or maintenance of the Projects; (ii) any breach of representation or warranty by Borrower, Guarantor or any Affiliate of Borrower or Guarantor, or the occurrence of any Event of Default hereunder or under any of the other Loan Documents; (iii) any claims or suits brought by any Project Lessee or other tenant; or (iv) any other matter arising in connection with any Borrower, any Guarantor, any Project Lease or any Project Lessee, or any Project, provided, however, that no Indemnified Party shall be entitled to be indemnified with regard to any Indemnified Party's gross negligence or willful misconduct. Upon written request by an Indemnified Party, each Borrower will undertake, at its own costs and expense, on behalf of such Indemnified Party, using counsel reasonably satisfactory to the Indemnified Party, the defense of any legal action or proceeding whether or not such Indemnified Party shall be a party and for which such Indemnified Party is entitled to be indemnified pursuant to this section. At Lender's option, Lender may, at Borrowers' expense, prosecute or defend any action involving the priority, validity or enforceability of any of the Loan Documents. (l) No Additional Debt. Except for the Loan, no Borrower shall (i) incur any indebtedness (whether personal or nonrecourse, secured or unsecured) for borrowed money, liabilities under guaranties, or reimbursement obligations of lessee under capital or operating leases, and (ii) permit there to be any encumbrances against any Project except the Permitted Exceptions. No Borrower shall default on the payment of any indebtedness that is not cured within the time, if any, specified therefor in any agreement governing the same. (m) Organizational Documents. No Borrower shall, without the prior written consent of Lender, permit or suffer (i) a material amendment or modification of its Organizational Documents, (ii) any change of ownership (other than Permitted Transfers and as otherwise expressly permitted and subject to Section 4.2(b)) or Control of such Borrower (except that there shall be no restriction on any transfer of ownership interests in the REIT), (iii) any dissolution or termination of its existence, or (iv) change in its state of formation or incorporation. (n) Single Purpose Entity. Each Borrower at all times shall remain a Single Purpose Entity until after the Indebtedness has been repaid in full. (o) Furnishing Reports. Upon Lender's request, each Borrower shall promptly provide Lender with copies of all inspections, reports, test results and other information received by such Borrower, which in any way relate to a Project or any part thereof. Without limiting the preceding sentence, all Borrowers shall promptly provide Lender with copies of all of the foregoing received from any Governmental Agency. (p) Affiliate Transactions. Prior to entering into any agreement with an Affiliate pertaining to any Project, a Borrower shall deliver to Lender a copy of such agreement, which shall be satisfactory to Lender in its sole discretion. If requested by Lender, such agreement shall provide Lender the right to terminate it upon Lender's (or its designee's) taking possession of such Project or acquisition of such Project through foreclosure, a deed in lieu of foreclosure, UCC sale or otherwise. In any event, no agreement between Borrower and -15-

any Affiliate which relates to any Project shall be on terms materially more favorable than would apply to an arms' length arrangement with an unaffiliated third party. (q) Site Visits, Observation and Testing. Lender and its agents and representatives shall have the right (subject to the terms of the applicable Project Lease) at any reasonable time during normal business hours and following reasonable written notice to Borrower to enter and visit the Projects for the purpose of performing appraisals, observing the Projects, taking and removing soil or groundwater samples, and conducting tests on any part of the Projects as authorized hereunder. Lender has no duty, however, to visit or observe the Projects or to conduct tests, and no site visit, observation or testing by Lender, its agents or representatives shall impose any liability on any of Lender, its agents or representatives. Neither Borrowers nor any other party is entitled to rely on any site visit, observation or testing by any of Lender, its agents or representatives except to the extent due to the acts of Lender, its agents or representatives. Neither Lender nor its agents or representatives owe any duty of care to protect Borrowers or any other party against, or to inform Borrower or any other party of any other adverse condition affecting the Projects other than such conditions resulting from or arising out of the acts of the Lender, its agents or representatives. Lender shall give Borrowers reasonable written notice before entering a Project. Lender shall avoid interfering with a Borrower's use of its Project in exercising any rights provided in this Section 4.2(q). In addition to all other amounts payable by Borrowers hereunder or under the other Loan Documents, Borrowers shall pay to Lender all reasonable direct costs and expenses incurred by Lender in connection with any activities of Lender under this Section 4.2(q). (r) Compliance With Anti-Terrorism Orders. Borrowers will not Knowingly permit the transfer of any interest in a Borrower to any person or entity (or any beneficial owner of such entity) who is listed on the specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of Office of Foreign Asset Control, Department of the Treasury or pursuant to any other applicable Executive Orders (such lists are collectively referred to as the "OFAC LISTS"). Borrowers will not Knowingly enter into a Project Lease or other agreement affecting any Project with any party who is listed on the OFAC Lists. Borrowers shall promptly notify Lender if a Borrower has Knowledge that any Guarantor or any member or beneficial owner of a Borrower is listed on the OFAC Lists or (A) is indicted on or (B) arraigned and held over on charges involving money laundering or predicate crimes to money laundering. Borrowers shall promptly notify Lender if a Borrower knows that any Tenant is listed on the OFAC Lists or (A) is convicted on, (B) pleads nolo contendere to, (C) is indicted on or (D) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. (s) Notice of Change. Each Borrower shall give Lender prior written notice of any change in: (i) the location of its place of business or its chief executive office if it has more than one place of business; (ii) the location of any material portion of its Personal Property, including such Borrower's books and records; and (iii) such Borrower's name or business structure. Unless otherwise approved by Lender in writing, all material Personal Property will be located at the Projects or at a Borrower's place of business or chief executive office if such Borrower has more than one place of business. -16-

(t) No Use of Merrill Lynch Name. Borrowers shall not directly or indirectly publish, disclose or otherwise use in any advertising or promotional material, or press release or interview, the name, logo or any trademark of Lender, Merrill Lynch & Co., Inc. or any of their affiliates. Nothing contained herein shall prohibit Borrowers or the REIT from making disclosures in filings with the Securities and Exchange Commission to the extent necessary to disclose the transactions evidenced by the Loan Documents. (u) Bank Accounts; Notices to Account Debtors. Each Borrower will cause all revenue arising from its Project or belonging to Borrower (other than security deposits, to the extent addressed by Section 4.2(w) below) to be deposited into the Concentration Account. Each Borrower shall give notices to all current and future account debtors doing business with such Borrower or such Borrower's Project who pay such Borrower by direct deposit or wire transfer to make or wire payments to the Concentration Account. (v) Vibra Promissory Note. Following an Event of Default, Borrowers shall cause Vibra Healthcare, LLC, f/k/a Highmark Healthcare, LLC ("Vibra") and the holders of the promissory notes dated July 1, 2004, as amended (the "Vibra Notes") made by Vibra and payable to the order of MPT Development Services, Inc. to remit all payments due and payable under such promissory notes directly to Lender until such time as such Event of Default has been cured. Borrowers represent and warrant that no property that is granted as security for the Vibra Notes is granted by any Project Lessee to any Borrower as security for the obligations of the Project Lessees under the Project Leases. (w) Security Deposit Reserve. On the Closing Date, all security deposits of the Project Lessees under the Project Leases shall be transferred by Borrowers to Lender and deposited by Lender into a reserve to be held by Lender as additional collateral for the payment and performance of Borrowers' obligations under the Loan Documents (the "SECURITY DEPOSIT RESERVE"). Borrowers shall deposit into the Security Deposit Reserve all additional security deposits made by any Project Lessee under any Project Lease. Funds in the Security Deposit Reserve will be held by a depository institution insured by the Federal Deposit Insurance Corporation (which institution may be an Affiliate of Lender) in an interest-bearing account, may be commingled with the general funds of Lender at such institution, and shall not be deemed to be held in trust for the benefit of Borrowers. Interest shall accrue on amounts in the Security Deposit Reserve at the rate paid by such depository institution for such deposits. Any interest accruing and paid on such funds shall be deemed to be part of the Security Deposit Reserve and shall be applied in accordance with this Section 4.2(w). Borrowers hereby grant Lender a first priority security interest in such funds, including all interest accruing thereon, and all such funds are pledged as additional collateral for the Loan and Borrowers shall execute any other documents and take any other actions necessary to provide Lender with such a perfected security interest in such funds. So long as no default shall exist under any Project Lease, funds in the Security Deposit Reserve shall be release upon delivery by Borrowers to Lender of evidence reasonably satisfactory to Lender that the Project Lessee is entitled to a refund of its security deposit. Upon the occurrence and during the continuation of an Event of Default, amounts in the Security Deposit Reserve that may be retained or applied by the landlord under any Project Lease shall, at Lender's option, be applied against the Indebtedness. -17-

4.3 Authorized Representative. Each Borrower hereby appoints each of Edward K. Aldag, Jr. and R. Steven Hamner as their "AUTHORIZED REPRESENTATIVE" for purposes of dealing with Lender on behalf of such Borrower in respect of any and all matters in connection with this Agreement, the other Loan Documents, and the Loan. Subject to the terms of Section 4.2(b) above (concerning transfers by any Borrower), each Authorized Representative shall have the power, in his discretion, to give and receive all notices, monies, approvals, and other documents and instruments, and to take any other action on behalf of such Borrower. All actions by an Authorized Representative shall be final and binding on such Borrower. Lender may rely on the authority given to each Authorized Representative until actual receipt by Lender of a duly authorized resolution of such Borrower substituting a different person as the Authorized Representative of such Borrower. 4.4 Health Care Matters. If required under applicable Healthcare Laws, each Borrower has and shall maintain in full force and effect a valid certificate of need ("CON") or similar certificate, license, or approval issued by the applicable Government Authority for the requisite number of beds and units in the Projects. If Borrower has authorized or permitted a Project Lessee to apply for or maintain the CON, Borrower shall enforce all rights, if any, under the Project Leases to seek to prevent the Project Lessee from taking any action that would reasonably be expected to cause or permit such CON to be pledged, transferred or hypothecated. (a) The CON shall continue in full force and effect throughout the term of the Loan and shall be free from restrictions or known conflicts which would materially impair the use or operation of each Project for its current use, and shall not be provisional, probationary or restricted in any way. (b) Subject to, and to the extent of, the Borrowers' rights under the Project Leases and the applicable licenses, no Borrower shall do (or suffer to be done by a Borrower or any Affiliate of a Borrower) any of the following without Lender's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed: (i) Replace or transfer all or any part of any Project's units or beds to another site or location (ii) Transfer any CON or other Governmental Approval or rights thereunder to any Person (other than Lender) or to any location other than the Project to which such CON or Governmental Approval pertains; or (iii) Pledge or hypothecate any CON or other Governmental Approval as collateral security for any indebtedness other than indebtedness to Lender. (c) Borrower hereby represents and warrants that no Borrower is a participant in any federal, state, or local program whereby any federal, state, or local government or quasi-governmental body, or any intermediary, agency, board, or other authority or entity may have the right to recover funds by reason of the advance of federal, state, or local funds, including, without limitation, those authorized under the Hill-Burton Act (42 U.S.C. Section 291, et seq.), other than the Medicare and Medicaid programs. -18-

(d) Borrower shall use its reasonable good faith efforts to cause the Projects to be operated by licensed healthcare providers in accordance with applicable laws; provided, however, in the event a Project Lessee loses its license to operate a Project, Borrowers shall act in good faith to promptly replace such Project Lessee or assist such Project Lessee to reinstate such license in accordance with the terms of the applicable Project Lease. Borrower shall not become the licensed operator for any Project in contravention of any law, rules or regulations applicable to real estate investment trusts, nor shall Borrower or any Affiliate of Borrower render any regulated healthcare service at any Project in connection with or in the furtherance of the operation of the Project as a rehabilitation hospital or long-term acute care hospital, as applicable, in contravention of any law, rules or regulations applicable to real estate investment trusts. 4.5 Financial Covenants. Borrowers shall comply with and shall not breach any of the financial covenants set forth in APPENDIX A. ARTICLE 5 BORROWERS' REPRESENTATIONS AND WARRANTIES 5.1 Borrowers' Representations and Warranties. To induce Lender to execute this Agreement and perform its obligations hereunder, Borrowers hereby represent and warrant to Lender as follows: (a) Each Borrower lawfully possesses and holds fee simple title to its Project (except for 92 Brick Road, LLC, which holds leasehold title to its Project), free and clear of all liens, claims, encumbrances, covenants, conditions and restrictions, security interest and claims of others, except only the Permitted Exceptions. Each Borrower is a Single Purpose Entity. (b) Except as set forth in Exhibit D, there is no litigation or proceedings pending, or to Borrower's Knowledge threatened, against any Project, Borrower, or Guarantor, which would reasonably be expected to, if adversely determined, cause a Material Adverse Change with respect to any Borrower, Guarantor or any Project. There are no Environmental Proceedings and no Borrower has Knowledge of any threatened Environmental Proceedings. (c) Each Borrower is a duly formed and validly existing limited liability company and is in good standing under the laws of the State of Delaware, with its principal place of business at 1001 Urban Center Drive, Suite 501, Birmingham, Alabama 35242. Each Borrower has full power and authority to execute, deliver and perform all Loan Documents to which such Borrower is a party, and such execution, delivery and performance have been duly authorized by all requisite action on the part of such Borrower. The Loan Documents have each been duly executed and delivered and each constitutes the duly authorized, valid and legally binding obligation of Borrowers and the Guarantors, as the case may be, enforceable against Borrowers and the Guarantors, as the case may be, in accordance with their respective terms. Borrower does not uses any trade names other than its actual names set forth herein. The direct and indirect ownership interests in each Borrower and Guarantor are shown on Schedule 5.1(c) attached hereto. -19-

(d) The REIT is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, with its principal place of business at 1001 Urban Center Drive, Suite 501, Birmingham, Alabama 35242. MPT Operating Partnership, L.P. is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, with its principal place of business at 1001 Urban Center Drive, Suite 501, Birmingham, Alabama 35242. Each Guarantor has full right, power and authority to execute the Loan Documents on its own behalf. (e) A true and complete copy the articles of incorporation and by-laws, articles of organization/certificate of formation and limited liability company operating agreement or certificate of limited partnership and partnership agreement, as the case may be, creating each Borrower and Guarantor, and all other documents creating and governing each Borrower and Guarantor and any and all amendments thereto (collectively, the "ORGANIZATIONAL DOCUMENTS") has been furnished to Lender. There are no other material agreements, oral or written, among any of the partners or members of any Borrower or any Guarantor relating to Borrower or Guarantor, as the case may be. The Organizational Documents were duly executed and delivered, are in full force and effect, and binding upon and enforceable against each Borrower and Guarantor, as applicable, in accordance with their terms. The Organizational Documents constitute the entire understanding among the shareholders, partners, members of each Borrower, and Guarantor. No breach exists under the Organizational Documents and no act has occurred and no condition exists which, with the giving of notice or the passage of time would reasonably be expected to constitute a breach under the Organizational Documents. (f) No consent, approval or authorization of or declaration, registration or filing with any Governmental Authority or nongovernmental person or entity, including any creditor, partner, or member of any Borrower or Guarantor, is required in connection with the execution, delivery and performance of this Agreement or any of the other Loan Documents by Borrower other than the recordation of the Mortgages and the filing of UCC Financing Statements, except for such consents, approvals or authorizations of or declarations or filings with any Governmental Authority or non-governmental person or entity where the failure to so obtain would not have a material adverse effect on any Borrower or Guarantor or which have been obtained as of any date on which this representation is made or remade. None of the Borrowers or Guarantors is insolvent and there has been no: (i) assignment made for the benefit of the creditors of any of them; (ii) appointment of a receiver for any of them or for the property of any of them; or (iii) bankruptcy, reorganization, or liquidation proceeding instituted by or against any of them. (g) There is no Default under this Agreement or the other Loan Documents, nor any condition, which, after notice or the passage of time or both, would reasonably be expected to constitute a Default or an Event of Default under, said documents. In addition, no Borrower is in default under any material contract, agreement or commitment to which it is a party. The execution, delivery and compliance by each Borrower with the terms and provisions of this Agreement and the other Loan Documents will not (i) to such Borrower's Knowledge, violate any provisions of law or any applicable regulation, order or other decree of any court or governmental entity, or (ii) materially conflict or be materially inconsistent with, or result in any material default under, any contract, agreement or commitment to which such Borrower is bound. Borrowers have delivered to Lender copies of any material agreements -20-

between any Borrower and any Affiliate of any Borrower or Guarantor related in any way to any Project. (h) To each Borrowers' Knowledge, (1) no condemnation of any portion of any Project, (2) no condemnation or relocation of any roadways abutting any Project, and (3) no proceeding to deny access to any Project from any point or planned point of access to any Project, has commenced or is contemplated by any Governmental Authority. (i) To Borrowers' Knowledge, the use of each Project for its Primary Intended Use (as defined in the applicable Project Lease), including the present and contemplated accessory uses do not materially violate (i) any Laws (including subdivision, zoning, building, environmental protection and wetland protection Laws), or (ii) any building permits, covenants, conditions and restrictions of record affecting any Project or any part thereof. Except as shown in the Title Policies and the surveys of the Projects, to Borrowers' Knowledge, no building or other improvement encroaches upon any property line, building line, set back line, side yard line or any recorded or visible easement (or other easement of which a Borrower is aware) with respect to any Project. Except as shown in the Title Policies and the surveys of the Projects, to Borrowers' Knowledge, no Project is situated in an area designated as having special flood hazards as defined by the Flood Disaster Protection Act of 1973, as amended, or as a wetland by any governmental entity having jurisdiction over a Project. To Borrowers' Knowledge, all Governmental Approvals required for the operation of the Projects have been obtained, except where the failure to so obtain would not reasonably be expected to have a material adverse effect on the Project. To Borrowers' Knowledge, all Laws relating to the operation of the Improvements have been materially complied with and all material permits and licenses required for the operation of the Projects have been obtained. To Borrowers' Knowledge, each Project is accessible through fully improved and dedicated roads, accepted for maintenance and public use by public authority having jurisdiction. To Borrowers' Knowledge, each Project has adequate water, gas and electrical supply, storm and sanitary sewerage facilities, other required public utilities, and means of access between the Project and public highways; none of the foregoing will be foreseeably delayed or impeded by virtue of any requirements To each Borrower's Knowledge, there are no, nor are there any alleged or asserted, violations of Law, regulations, ordinances, codes, permits, licenses, declarations, covenants, conditions or restrictions of record, or other agreements relating to any Project, or any part thereof. (j) No brokerage fees or commissions are payable by or to any person in connection with this Agreement or the Loan to be disbursed hereunder with whom any Borrower or Guarantor has dealt other than to L.J. Melody & Company. (k) All financial statements previously furnished by any Borrower or Guarantor to Lender in connection with the Loan are complete and correct in all material respects and fairly present the financial conditions of the subjects thereof as of the respective dates thereof (except for the absence of footnotes and subject to normal year-end adjustments which, in the aggregate, are not material), and no Material Adverse Change with respect to any Borrower or Guarantor or any Project has occurred since the most-recent financial statement furnished to Lender with respect to such Borrower or Guarantor. None of the Borrowers nor any Guarantor has any material liability, contingent or otherwise, not disclosed in such financial statements if such disclosure would be required pursuant to GAAP. -21-

(l) Each Project is taxed separately without regard to any other real property and for all purposes each Project may be mortgaged, conveyed and otherwise dealt with as an independent parcel. There are no unpaid or outstanding real estate or other taxes or assessments on or against the Projects or any part thereof, except general real estate taxes for the current tax year not yet due or payable. To any Borrower's Knowledge, there is no pending or contemplated action pursuant to which any special assessment may be levied against any portion of the Projects. (m) Each of the Borrowers represents and warrants that (i) it is a party to a Project Lease, as listed on Schedule 5(m) attached hereto, (ii) a true, correct and complete copy of each Project Lease has been delivered to Lender, (iii) except for the subject Project Lease (and as permitted thereunder), there are no leases or subleases affecting such Borrower's Project or any portion of the Property, (iv) no Borrowers have issued or received any notice of default under any Project Lease, (v) no Borrowers and, to each Borrower's Knowledge, no Project Lessee is in material default under the terms of any Project Lease, (vi) each Project Lease materially complies with all applicable laws, (vii) no rent payment under any Project Lease has been paid more than thirty (30) days in advance, (viii) no rents or charges under any Project Lease have been waived, released or otherwise discharged or compromised and (ix) except as provided in the Project Leases, there are no outstanding options or rights of first offer or refusal to purchase all or any portion of the Projects or Borrowers' interest therein or any portion thereof. (n) The proceeds of the Loan shall be used for proper business purposes. The Loan is not being made for the purpose of purchasing or carrying "margin stock" within the meaning of Regulation T, U or X issued by the Board of Governors of the Federal Reserve System and no portion of the proceeds of the Loan shall be used in any matter that would violate such Regulations or otherwise violate the Securities Act of 1933 or the Securities Exchange Act of 1934, and Borrowers agree to execute all instruments necessary to comply with all the requirements of Regulation U of the Federal Reserve System. (o) No Borrower is a party in interest to any plan defined or regulated under ERISA, and no assets of any Borrower are "plan assets" of any employee benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code. (p) No Borrower is or will be, and no legal or beneficial interest of a partner or member in Borrower is or will be held directly or (other than by reason of transfers of ownership interests in the REIT) indirectly by a "foreign corporation", "foreign partnership", "foreign trust", "foreign estate", "foreign person", "affiliate" of a "foreign person" or a "United States intermediary" of a "foreign person" within the meaning of the Internal Revenue Code Sections 897, 1445 or 7701, the Foreign Investments in Real Property Tax Act of 1980, the International Foreign Investment Survey Act of 1976, the Agricultural Foreign Investment Disclosure Act of 1978, or the regulations promulgated pursuant to such Acts or any amendments to such Acts. (q) Borrowers and Guarantors have furnished Lender with a true and complete copy of all material documents relating to Projects. -22-

(r) No Borrower nor Guarantor, nor any beneficial owner of any Borrower, is currently listed on the OFAC Lists. (s) All statements set forth in the Recitals are true and correct in all material respects. (t) To Borrowers' Knowledge, there has been no material damage or destruction of any part of any Project by fire or other casualty that has not been repaired. Except as part of routine maintenance, there are presently no existing material defects in the Projects and no repairs or alterations thereof are reasonably necessary or appropriate. (u) To each Borrower's Knowledge, there are no strikes, boycotts, or labor disputes which would reasonably be anticipated to have a material adverse effect on the operation of any Project. (v) No Borrower has any employees. (w) Except as set forth on Exhibit H, no Borrower has any interest in any trademarks, copyrights, patents or other intellectual property with respect to the Projects. Borrowers agree that all of the representations and warranties set forth above and elsewhere in this Agreement are true in all material respects as of the date hereof. It shall be a condition precedent to the Closing Date and each subsequent disbursement, if any, that each of said representations and warranties is true and correct in all material respects as of the date of such requested disbursement. Each disbursement from any escrows or reserves held by or on behalf of Lender shall be deemed to be a reaffirmation by Borrowers that each of the representations and warranties is true and correct in all material respects as of the date of such disbursement except as otherwise disclosed by Borrowers in writing and approved by Lender in connection with such disbursement. In addition, at Lender's request, Borrowers shall reaffirm such representations and warranties in writing prior to each such disbursement. ARTICLE 6 ENVIRONMENTAL MATTERS 6.1 Environmental Representations and Warranties. Each Borrower hereby represents and warrants to Lender that, except as specifically disclosed in the documents listed in Exhibit F attached hereto (the "ENVIRONMENTAL DOCUMENTS") and in any Environmental Report, (a) to each Borrower's Knowledge, (i) each Project is in a clean, safe and healthful condition and, except for materials used in the ordinary course of maintenance and operation (and in material compliance with all Laws) of such Project, has been and is free of all Hazardous Material, and (ii) no release of any Hazardous Material has occurred on, onto or about the Projects; (b) no Borrower nor, to each Borrower's Knowledge, any other person or entity, has ever caused or permitted any Hazardous Material to be placed, held, located or disposed of on, under, at or in a manner to affect any Project, or any part thereof, and no Project has ever been used (whether by a Borrower or, to each Borrower's Knowledge, by any other person or entity) for any activities involving, directly or indirectly, the use, generation, treatment, storage, transportation, or disposal of any Hazardous Material, except as permitted under the Project -23-

Leases and for materials used in the ordinary course of maintenance and operation (and in material compliance with all Laws) of the Projects; (c) to each Borrower's Knowledge, the Project currently complies, and will comply based on its anticipated use, with all Laws relating to Hazardous Material; (d) to each Borrower's Knowledge in connection with the ownership, operation, and use of the Project, all necessary notices have been filed and all required permits, licenses and other authorizations have been obtained relating to the generation, treatment, storage, disposal or use of Hazardous Material; (e) to each Borrower's Knowledge, there is no present, past or threatened investigation, inquiry or proceeding relating to the environmental condition of, or to events on or about, the Project; (f) to each Borrower's Knowledge, neither the Project nor any Borrower is subject to any remedial obligations under any Laws relating to Hazardous Material, health or the environment; (g) to each Borrower's Knowledge, there are no underground tanks, vessels, or similar facilities for the storage, containment or accumulation of Hazardous Materials of any sort on, under or affecting any Project; and (h) it has not, nor will it, release or waive the liability of any previous owner, lessee or operator of any Project or any party who may be potentially responsible for the presence of or removal of Hazardous Material from any Project, nor has it made promises of indemnification regarding Hazardous Material on any Project to any party, except as contained herein and in the Loan Documents. 6.2 Environmental Covenants. Environmental Indemnitors shall: (a) materially comply, and enforce their rights under the Project Leases with respect to each Project Lessee's compliance, with all Laws relating to Hazardous Material; (b) not install, use, generate, manufacture, store, treat, release or dispose of, nor permit the installation, use, generation, storage, treatment, release or disposal of, Hazardous Material on, under or about any Project, except for materials used in the ordinary course of maintenance and operation (and in material compliance with all Laws) of the Projects; (c) following Borrowers' Knowledge thereof, promptly advise Lender in writing of: (i) any and all Environmental Proceedings; (ii) the presence of any Hazardous Material on, under or about any Project of which Lender has not previously been advised in writing (other than Hazardous Materials permitted by applicable law and (A) permitted under the Project Leases or (B) used in the ordinary course of maintenance and operation of the Projects); (iii) any remedial action taken by, or on behalf of, any Environmental Indemnitor in response to any Hazardous Material on, under or about any Project or to any Environmental Proceedings of which Lender has not previously been advised in writing and (iv) receipt of written notice by any Environmental Indemnitor of any occurrence or condition on any real property adjoining or in the vicinity of any Project that could cause any Project or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of such Project under any Laws relating to Hazardous Materials; (d) provide Lender with copies of all material reports, analyses, notices, licenses, approvals, orders, correspondences or other written materials in its possession or control relating to the environmental condition of each Project or real property or bodies of water adjoining or in the vicinity of each Project or Environmental Proceedings promptly upon receipt, completion or delivery of such materials; -24-

(e) not install or allow to be installed any tanks on, at or under any Project for the purpose of storing Hazardous Materials (other than as permitted under the Project Leases or materials used in the ordinary course of maintenance and operation); (f) not create or permit to continue in existence any lien (whether or not such lien has priority over the lien created by the Mortgage) upon any Project imposed pursuant to any Laws relating to Hazardous Material; and (g) not materially change or alter the present use as a healthcare facility of any Project (except as permitted under the terms of a Project Lease) unless Borrowers shall have notified Lender thereof in writing and Lender shall have determined, in its reasonable discretion, that such change or modification will not result in the presence of Hazardous Material on the Project in question in such a level that would increase the potential liability for Environmental Proceedings. 6.3 Right of Entry and Disclosure of Environmental Reports. Subject to any applicable restrictions under the Project Leases, each Borrower hereby grants to Lender its agents, employees, consultants and contractors, an irrevocable license and authorization to enter upon and inspect such Borrower's Project at reasonable times and upon reasonable advance written notice and without disturbing the business of the Project Lessees, and conduct such reasonable environmental audits and tests, including, without limitation, subsurface testing, soils and groundwater testing, and other tests which may physically invade the Project. With respect to invasive testing, such as soil borings, Lender shall consult with Borrowers in advance of such tests. Lender agrees, however, that it shall not conduct any such audits or tests, unless an Event of Default exists and is continuing under the Loan Documents at the time in question or Lender has reason to believe that such audit or test may disclose the presence or release of Hazardous Material or unless an environmental audit deems further testing necessary. All reasonable out-of-pocket costs and expenses incurred by Lender in connection with any inspection, audit or testing conducted in accordance with this Section 6.3 shall be paid by Borrowers. The results of all investigations and reports prepared by Lender shall be and at all times remain the property of Lender and, if no Event of Default shall have occurred and be continuing, upon request by a Borrower, Lender shall provide to Borrowers a copy of the written report with respect to any inspection, audit or testing for which any Borrower has paid hereunder. Lender hereby reserves the right, and Borrowers hereby expressly authorize Lender to make available to any party in connection with a sale of any Project any and all environmental reports, whether prepared by Lender or prepared by any Borrower and provided to Lender (collectively, the "ENVIRONMENTAL REPORTS"), which Lender may have with respect to the Project. Borrower consents to Lender notifying any party under such circumstances of the availability of any or all of the Environmental Reports and the information contained therein. Each Environmental Indemnitor further agrees that Lender may disclose such Environmental Reports to any governmental agency or authority if they reasonably believe that they are required to disclose any matter contained therein to such agency or authority; provided that Lender shall give Borrowers at least ten (10) days' prior written notice (or such shorter time as shall be necessary to permit Lender to comply with the requirements of any applicable Governmental Authority) before so doing. Each Environmental Indemnitor acknowledges that Lender cannot control or otherwise assure the truthfulness or accuracy of the Environmental Reports, and that the release of the Environmental Reports, or any information contained therein, to prospective bidders at any foreclosure sale of -25-

any Project may have a material and adverse effect upon the amount, which a party may bid at such sale. Each Environmental Indemnitor agrees that Lender shall not have any liability whatsoever as a result of delivering any or all of the Environmental Reports or any information contained therein to any third party, and each Environmental Indemnitor hereby releases and forever discharges Lender from any and all claims, damages, or causes of action arising out of connected with or incidental to the Environmental Reports or the delivery thereof. 6.4 Environmental Indemnitors' Remedial Work. Environmental Indemnitors shall promptly perform any and all necessary remedial work ("REMEDIAL WORK") in response to any Environmental Proceedings or the presence, storage, use, disposal, transportation, discharge or release of any Hazardous Material on, under or about any of the Projects; provided, however, that Environmental Indemnitors shall perform or cause to be performed such Remedial Work so as to minimize any impairment to Lender's security under the Loan Documents. All Remedial Work shall be conducted: (a) in a diligent and timely fashion by licensed contractors acting under the supervision of a consulting environmental engineer; (b) pursuant to a detailed written plan for the Remedial Work approved by any public or private agencies or persons with a legal or contractual right to such approval; (c) with such insurance coverage pertaining to liabilities arising out of the Remedial Work as is then customarily maintained with respect to such activities; and (d) only following receipt of any required permits, licenses or approvals. The selection of the Remedial Work contractors and consulting environmental engineer, the contracts entered into with such parties, any disclosures to or agreements with any public or private agencies or parties relating to Remedial Work and the written plan for the Remedial Work (and any changes thereto) shall each be subject to Lender's prior written approval, which shall not be unreasonably withheld, conditioned, or delayed. In addition, Environmental Indemnitors shall submit to Lender, promptly upon receipt or preparation, copies of any and all material reports, studies, analyses, correspondence, governmental comments or approvals, proposed removal or other Remedial Work contracts and similar information prepared or received by Environmental Indemnitors in connection with any Remedial Work, or Hazardous Material relating to a Project. All costs and expenses of such Remedial Work shall be paid by Environmental Indemnitors, including, without limitation, the charges of the Remedial Work contractors and the consulting environmental engineer, any taxes or penalties assessed in connection with the Remedial Work and Lender's reasonable fees and out-of-pocket costs incurred in connection with monitoring or review of such Remedial Work. Lender shall have the right but not the obligation to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Environmental Proceedings. 6.5 Environmental Indemnity. Environmental Indemnitors shall protect, indemnify, defend and hold Lender and any successors to Lender's interest in the Projects, and any other party who acquires any portion of any Project at the first foreclosure sale or otherwise in the first transfer of ownership through the exercise of Lender's rights and remedies under the Loan Documents, and all directors, officers, employees and agents of all of the aforementioned indemnified parties, harmless from and against any and all claims, liabilities, damages, and Expenses which arise out of or relate in any way to any breach of any representation, warranty or covenant contained in this Article 6, or any Environmental Proceedings or any use, handling, production, transportation, disposal, release or storage of any Hazardous Material in, under or on -26-

any Project, whether by any Environmental Indemnitor or any other person (except to the extent attributable to Lender's gross negligence or willful misconduct), including, without limitation: (a) all foreseeable and unforeseeable Expenses (including any loss of principal and interest due and owing on the Loan) arising out of: (i) Environmental Proceedings or the use, generation, storage, discharge or disposal of Hazardous Material by Environmental Indemnitors, any prior owner or operator of any Project or any person on or about any Project; (ii) any residual contamination affecting any natural resource or the environment; or (iii) any exercise by Lender of any of its rights and remedies hereunder; and (b) the reasonable costs of any required or necessary investigation, assessment, testing, remediation, repair, cleanup, or detoxification of any Project and the preparation of any closure or other required plans. Environmental Indemnitors' liability to the aforementioned indemnified parties shall arise upon the earlier to occur of (1) discovery of any Hazardous Material on, under or about any Project, or (2) the institution of any Environmental Proceedings, and not upon the realization of loss or damage, and Environmental Indemnitors shall pay to Lender from time to time, promptly upon request, an amount equal to such Expenses, as reasonably determined by Lender. The foregoing indemnity shall not include Expenses arising solely from Hazardous Material which first exists on any Project following the date on which the Lender takes title to such Project, whether by foreclosure of the applicable Mortgage, deed-in-lieu thereof or otherwise. 6.6 Remedies Upon an Environmental Default. Upon the occurrence of an Event of Default under Section 8.1(j) of this Agreement or under any other Loan Documents relating to environmental compliance, Lender may exercise any and all remedies provided for herein or therein, and/or do or cause to be done whatever is reasonably necessary to cause the Projects to comply with all Laws relating to Hazardous Material and other applicable Laws, rules, regulations or orders and the cost thereof shall constitute an Expense hereunder and shall become immediately due and payable following written notice from Lender of the amount of such Expense and with interest thereon at the Default Rate until paid. Environmental Indemnitors shall give to Lender and its agents and employees access to the Projects for the purpose of effecting such compliance and hereby specifically grant to Lender a license, effective upon expiration of the applicable period as described above, if any, to do whatever is necessary to cause the Projects to so comply, including, without limitation, to enter the Projects and remove therefrom any Hazardous Material or otherwise comply with any Laws relating to Hazardous Material. 6.7 Unconditional Environmental Obligations. Notwithstanding any term or provision contained herein or in the other Loan Documents, the covenants and obligations of the Environmental Indemnitors under this Article 6 (the "ENVIRONMENTAL OBLIGATIONS") are unconditional. Environmental Indemnitors shall be fully, personally, jointly and severally liable for the Environmental Obligations, and such liability shall not be limited to the original principal amount of the Loan. The Environmental Obligations shall be enforceable by Lender, its Affiliates, and its successors and assigns. The Environmental Obligations shall survive the repayment of the Loan and any foreclosure, deed-in-lieu or transfer in lieu of foreclosure or -27-

similar proceedings or any transfer of title to the Projects or any portion thereof. The Environmental Obligations are independent obligations that are not secured by the Project. 6.8 Assignment of Environmental Obligations Prohibited. The Environmental Obligations may not be assigned or transferred, in whole or in part, by Environmental Indemnitors and any purported assignment by Environmental Indemnitors of the Environmental Obligations shall be void ab initio and of no force or effect. 6.9 Indemnification Separate from the Loan. (a) The Environmental Indemnitors agree that the Environmental Obligations are separate, independent of and in addition to the undertakings of the Environmental Indemnitors, as applicable, pursuant to the Loan, the Note, the other provisions of this Agreement and the other Loan Documents. With respect to the Projects located in the State of California, the provisions of this Article Six are intended to be supplemental, and not in derogation of, Lender's rights under California Civil Code Section 2929.5 and California Code of Civil Procedure Sections 564, 726.5 and 736 and any successor sections thereof. A separate action may be brought to enforce the provisions of this Article 6, which shall in no way be deemed to be an action on the Note, whether or not the Loan has been repaid and whether or not Lender would be entitled to a deficiency judgment following a judicial foreclosure, trustee's sale or UCC sale. The Environmental Obligations shall not be affected by any exculpatory provisions contained in the Note, this Agreement or any of the other Loan Documents. All rights and obligations of this Article 6 shall survive performance and repayment of the obligations evidenced by and arising under the Loan Documents, surrender of the Note, reconveyance of the Mortgages, release of other security provided in connection with the Loan, trustee's sale or foreclosure under the Mortgages and/or any of the other Loan Documents (whether by deed or other assignment in lieu of foreclosure, or otherwise, acquisition of any Project by Lender, any other transfer of any Project, and transfer of all of Lender's rights in the Loan, the Loan Documents, and the Projects. (b) The Environmental Indemnitors may not assign or delegate their covenants, agreements and obligations hereunder without the prior written consent of Lender, in Lender's sole discretion. The covenants, agreements and obligations of the Environmental Indemnitors hereunder shall be binding upon the Environmental Indemnitors, their heirs, administrators, legal representatives, successors and assigns. The rights, remedies and benefits of Lender hereunder shall inure to the benefit of Lender, its legal representatives and the successors and assigns of its interest under any or all of the Loan Documents and its Affiliates, it being the intention hereof that the covenants and indemnities of the Environmental Indemnitors shall, without limitation, further extend to any person or entity who holds an interest in the Note without in any way terminating, limiting or diminishing the benefits to any previous or existing beneficiary of this Article 6. (c) Environmental Indemnitors waive all rights to require Lender to (i) proceed against or exhaust any security for the Loan or (ii) pursue any remedy in Lender's power whatsoever. -28-

6.10 Further Security. As further security for the Environmental Obligations, Environmental Indemnitors do hereby assign to Lender, to the extent assignable, all of Environmental Indemnitors' rights and benefits under any right of indemnification or right to contribution to which Environmental Indemnitors may be entitled (whether under Hazardous Materials law, by contract or otherwise) with respect to any Hazardous Materials or environmental condition (collectively, the "Indemnification Rights") and Environmental Indemnitors hereby covenant to take such further actions and to execute such further instruments as are necessary to transfer to Lender all rights and benefits accruing in favor of Environmental Indemnitors under any of the Indemnification Rights. Notwithstanding the foregoing, Environmental Indemnitors shall continue to fully perform all of their respective covenants and obligations under such Indemnification Rights and shall continue to enforce the terms of the Indemnification Rights, and Lender shall have no liabilities or obligations under the Indemnification Rights or for enforcement of the Indemnification Rights by reason of the foregoing assignment. The assignment and covenants in this Section 6.10 shall survive in perpetuity. ARTICLE 7 CASUALTIES AND CONDEMNATION 7.1 Lender's Election to Apply Insurance Proceeds on Indebtedness. (a) Subject to the provisions of Section 7.1(b) below and the Project Leases, Lender may elect to collect, retain and apply upon the Indebtedness of Borrower under this Agreement or any of the other Loan Documents all proceeds of insurance resulting from any loss at any Project or condemnation or other taking of any Project or a portion thereof (individually and collectively referred to as "INSURANCE PROCEEDS") after deduction of all reasonable expenses of collection and settlement, including reasonable attorneys' and adjusters' fees and charges. Any proceeds remaining after repayment of the Indebtedness shall be paid by Lender to the Borrower which owns such Project. (b) Notwithstanding anything in Section 7.1(a) to the contrary, except as otherwise expressly agreed by Lender, a Borrower and a Project Lessee in a Subordination and Attornment Agreement, in the event of any casualty to any Improvements or any condemnation of part of any Project, Lender agrees to make available the Insurance Proceeds to restoration of such Improvements if (i) no Event of Default exists and is continuing, (ii) all Insurance Proceeds are deposited with Lender, (iii) in Lender's reasonable judgment, the amount of Insurance Proceeds available for restoration of the Improvements is sufficient to pay the full and complete costs of such restoration or that Borrowers have adequate reserves therefor, (iv) the applicable Project Lease will not be terminated as a result of such casualty or condemnation, (v) the applicable Borrower shall have provided Lender with reasonable evidence that the census of the applicable Project and the Project Lessee's income will be restored to the levels that existed as of the Closing Date prior to the earlier to occur of (i) one year after the date of the casualty or condemnation or (ii) the date that any applicable rental loss/business interruption insurance will expire, (vi) the cost of restoration does not exceed twenty-five percent (25%) of the Loan Amount, (vii) in Lender's reasonable determination after completion of restoration, the Loan Amount allocated to the affected Project will not exceed sixty percent (60%) of the fair market value of affected Project, (viii) in Lender's reasonable determination, such Project can be -29-

restored to an architecturally and economically viable project in compliance with applicable Laws, (ix) Guarantor reaffirms its guaranty, in writing, and (x) in Lender's reasonable determination, such restoration is likely to be completed not later than six (6) months prior to the Maturity Date. 7.2 Borrowers' Obligation to Rebuild and Use of Insurance Proceeds Therefor. In case Lender does not elect to apply or does not have the right to apply the Insurance Proceeds to the Indebtedness, as provided in Section 7.1 above, Borrowers shall: (a) Proceed with diligence to make settlement with insurers or the appropriate governmental authorities and cause the Insurance Proceeds to be deposited with Lender; (b) In the event the Insurance Proceeds and the available proceeds of the Loan are insufficient to assure Lender that the all contemplated repairs or construction will be completed and Borrowers promptly deposit with Lender any amount necessary to assure that such contemplated repairs or construction will be completed or provide Lender evidence, satisfactory to Lender in Lender's sole discretion, of Borrowers' adequate reserves to pay the costs of such repairs or construction; and (c) Promptly proceed with the assumption of construction of the Improvements, including the repair of all damage resulting from such fire, condemnation or other cause and restoration to its former condition. Except as otherwise expressly agreed by Lender, a Borrower and a Project Lessee in a Subordination and Attornment Agreement, any disbursement by Lender of Insurance Proceeds and funds deposited by a Borrower shall be conditioned upon Borrowers' compliance with and satisfaction of the Loan as are determined by Lender and as are customarily imposed by institutional Lenders for construction or restoration of similar properties. ARTICLE 8 EVENTS OF DEFAULT AND REMEDIES 8.1 Events of Default. The occurrence of any one or more of the following shall constitute an "EVENT OF DEFAULT" as said term is used herein: (a) Failure of Borrowers to pay the outstanding principal amount, all interest thereon and all other amounts owing hereunder or under any the other Loan Documents (the "INDEBTEDNESS") on the Maturity Date or the failure to pay, within five (5) days of the due date, any other scheduled payment obligations of Borrowers to Lender, including any payments of interest, principal amortization or Exit Fee due pursuant to this Agreement; (b) Failure of Borrowers to pay any amounts due and owing to Lender under the Loan Documents (other than as described in Section 8.1(a) above), including, without limitation, insurance premiums payable under Section 4.2(d), as the same become due in accordance with the terms of the Loan Documents and the continuation of such failure for a period of ten (10) days following written notice thereof from Lender to Borrower; -30-

(c) Failure of Borrowers to strictly comply with the provisions of Section 4.2(b) (transfers), Section 4.2(l) (no additional debt), Section 4.2(m) (organizational documents), or Section 4.2(n) (single purpose entity); (d) Failure of Borrowers for a period of thirty (30) days after written notice from Lender, to observe or perform any non-monetary covenant or condition contained in this Agreement or any other Loan Documents not set forth in the subsections above; provided, however, that if any such failure concerning a non-monetary covenant or condition is susceptible to cure and cannot reasonably be cured within said thirty (30) day period, then Borrowers shall have an additional sixty (60) day period to cure such failure and no Event of Default shall be deemed to exist hereunder so long as (Y) Borrowers commences such cure within the initial thirty (30) day period and diligently and in good faith pursues such cure to completion within such resulting ninety (90) day period from the date of Lender's notice, and (Z) the existence of such default will not result in any Project Lessee having the right to terminate its Project Lease due to such default; and provided further that if a different notice or grace period is specified under any other subsection of this Section 8.1 with respect to a particular breach, or if another subsection of this Section 8.1 applies to a particular breach and does not expressly provide for a notice or grace period, the specific provision shall control; (e) Any material default by a Borrower, as lessor, under the terms of any Project Lease following the expiration of any applicable notice, grace, and cure period, provided that if the Project Lease does not provide a notice, grace, and cure period, then the notice, grace, and cure periods provided in subsections (a) and (b) above, as applicable, will apply to any such monetary default, and the notice and cure period provided in subsection (d) above will apply to any such non-monetary default (which respective periods shall commence upon written notice of default from Lender or the applicable Project Lessee, whichever occurs first); (f) If any warranty or representation made now or hereafter by any Borrower or Guarantor under any Loan Document is untrue or incorrect in any material respect at the time made or delivered, provided that if such breach is reasonably susceptible of cure, then no Event of Default shall exist so long as the applicable party cures said breach (i) by the due date provided in subsection (a) or (b) above, as applicable, for a breach that can be cured by the payment of money, or (ii) within the notice and cure period provided in subsection (d) above for any other breach; (g) A petition under any Chapter of Title 11 of the United States Code or any similar law or regulation is filed by or against any Borrower or Guarantor (and in the case of an involuntary petition in bankruptcy, such petition is not discharged within sixty (60) days of its filing), or a custodian, receiver or trustee for any Project or any portion thereof is appointed, or any Borrower or Guarantor makes an assignment for the benefit of creditors, or any of them are adjudged insolvent by any state or federal court of competent jurisdiction, or any of them admit their insolvency or inability to pay their debts as they become due or an attachment or execution is levied against any Project or any portion thereof; (h) if at any time the REIT shall cease to (i) except as specifically consented to by Lender (pursuant to Section 4.2(b) or otherwise) own directly or indirectly, 65% -31-

of the ownership interest in each Borrower and (ii) Control (A) the day to day management and operation of each Borrower's business and (B) all material business decisions (including a sale or refinance) for each Borrower during the term of the Loan; (i) Borrowers shall fail to cause any of the financial covenants set forth in Appendix A to be complied with; (j) if Environmental Indemnitors fail to comply with the provisions of Article 6 within the earlier to occur of (i) thirty (30) days after written notice from Lender referring to Article 6 and specifying the default thereunder or (B) the cure period, if any, permitted under any applicable law, rule, regulation or order; or (k) The occurrence of any other event or circumstance specified to be an Event of Default herein or under any of the other Loan Documents and the expiration of any applicable notice, grace or cure periods, if any, specified for such Event of Default herein or therein, as the case may be. 8.2 Remedies Conferred Upon Lender. Lender's rights, remedies and powers, as provided herein and the other Loan Documents, are cumulative and concurrent, and may be pursued singly, successively or together against any Borrower, any guarantor of the Loan, the security described in the Loan Documents, and any other security given at any time to secure the payment hereof, all at the sole discretion of Lender. Additionally, Lender may resort to every other right or remedy available at law or in equity without first exhausting the rights and remedies contained herein, all in Lender's sole discretion. Failure of Lender, for any period of time or on more than one occasion, to exercise its option to accelerate the Maturity Date shall not constitute a waiver of the right to exercise the same at any time during the continued existence of any Event of Default or any subsequent Event of Default. Upon the occurrence of any Event of Default, Lender may pursue any one or more of the following remedies concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any other: (a) Take possession of any Project and do anything that is necessary or appropriate in its sole judgment to fulfill the obligations of Borrowers under this Agreement and the other Loan Documents. Without restricting the generality of the foregoing and for the purposes aforesaid, each Borrower hereby appoints and constitutes Lender its lawful attorney-in-fact with full power of substitution in the Projects to use unadvanced funds remaining under the Note or which may be reserved, escrowed or set aside for any purposes hereunder at any time, or to advance funds in excess of the face amount of the Note, to pay, settle or compromise all existing bills and claims, which may be liens or security interests, or to avoid such bills and claims becoming liens against any Project; to execute all applications and certificates in the name of a Borrower prosecute and defend all actions or proceedings in connection with any of the Improvements or Projects; and to do any and every act which a Borrower might do in its own behalf; it being understood and agreed that this power of attorney shall be a power coupled with an interest and cannot be revoked; (b) Declare the Note or the Indebtedness to be immediately due and payable; -32-

(c) Use and apply any monies or letters of credit deposited by Borrowers with Lender, including all escrows and reserves, regardless of the purposes for which the same was deposited, to cure any such default or to apply on account of any Indebtedness under this Agreement which is due and owing to Lender; (d) Exercise or pursue any other remedy or cause of action permitted under this Agreement or any other Loan Documents, or conferred upon Lender by operation of Law. Notwithstanding the foregoing, upon the occurrence of any Event of Default under Section 8.1(f) all amounts evidenced by the Note shall automatically become due and payable, without any presentment, demand, protest or notice of any kind to Borrowers. ARTICLE 9 LOAN EXPENSE, COSTS AND ADVANCES 9.1 Loan and Administration Expenses. Whether or not the Loan is made (unless the Loan is not made due to a default by the Lender), each Borrower unconditionally agrees to pay all Expenses of the Loan, including all amounts payable pursuant to Sections 2.7, 2.8 and 9.2 and any and all other fees owing to Lender pursuant to the Loan Documents, and also including all reasonable documentation, modification, or workout costs relating to the Loan, recording, filing and registration fees and charges, mortgage or documentary taxes, UCC searches, title and survey charges, all reasonable fees and disbursements of Lender's consultants, any costs involved in the disbursement, syndication and administration of the Loan, any reasonable repair or maintenance costs or payments made to remove or protect against liens, all reasonable costs and expenses incurred by Lender in connection with the determination of whether or not Borrowers have performed the obligations undertaken by Borrowers hereunder or has satisfied any conditions precedent to the obligations of Lender hereunder and, if any Event of Default occurs hereunder or under any of the Loan Documents or if the Loan or Note or any portion thereof is not paid in full when and as due (subject to any applicable notice, grace, or cure periods, if any), all reasonable costs and expenses of Lender incurred in attempting to enforce or collect payment of the Loan or enforce any rights of Lender or any Borrower's obligations hereunder and reasonable expenses of Lender incurred (including reasonable expenses relating to documentary and expert evidence, publication costs) in attempting to realize, after an Event of Default has occurred, on any security or incurred in connection with the sale, disposition (or preparation for sale or disposition) or liquidation of any security for the Loan (including any foreclosure sale, deed in lieu transaction or reasonable costs incurred in connection with any litigation or bankruptcy or administrative hearing and any appeals therefrom and any post-judgment enforcement action including, without limitation, supplementary proceedings in connection with the enforcement of this Agreement). All such Expenses incurred or advances or payments made by Lender shall also include court costs, reasonable legal fees and disbursements relating thereto and shall be included as additional Indebtedness evidenced by the Note and secured by the Mortgages and the other Loan Documents bearing interest at the Default Rate set forth in the Note until paid. Borrowers agree to pay all brokerage, finder or similar fees or commissions payable in connection with the transactions contemplated hereby and shall indemnify, defend and hold Lender harmless against all claims, liabilities, and Expenses arising in relation to any claim by broker, finder or similar person. Lender may require the payment of -33-

Lender's reasonable outstanding fees and expenses as a condition to any disbursement of the Loan. Lender is hereby authorized to make disbursements from time to time in payment of or to reimburse Lender for all reasonable Loan expenses and fees pursuant to this Section 9.1. 9.2 Right of Lender to Make Advances to Cure Borrowers' Defaults. In the event that Borrowers fail to perform any of Borrowers' covenants, agreements or obligations contained in this Agreement or any of the other Loan Documents (after the expiration of applicable notice, grace or cure periods, if any, except in the event of an emergency), Lender may (but shall not be required to) perform any of such covenants, agreements and obligations, and any amounts expended by Lender in so doing shall constitute additional Indebtedness evidenced by the Note and secured by the Mortgages and the other Loan Documents and shall bear interest at a rate per annum equal to the Interest Rate (or Default Rate following an Event of Default). 9.3 Increased Costs. Borrowers agree to pay Lender additional amounts to compensate Lender for any increase in its actual costs incurred in maintaining the Loan or any portion thereof outstanding or for the reduction of any amounts received or receivable from any Borrower as a result of any change after the date hereof in any applicable Law, regulation or treaty, or in the interpretation or administration thereof, or by any domestic or foreign court, changing the basis of taxation of payments under this Agreement to Lender (other than taxes imposed on or measured by the net income or receipts of Lender or any franchise tax imposed on Lender). Any amount payable by Borrowers under this Article 9 shall be paid within five (5) days of receipt by Borrowers of a notice by Lender setting forth the amount due and the basis for the determination of such amount, which statement shall be conclusive and binding upon Borrowers, absent manifest error. Failure on the part of Lender to demand payment from Borrowers for any such amount attributable to any particular period shall not constitute a waiver of Lender's right to demand payment of such amount for any subsequent or prior period. 9.4 Borrower Withholding. If by reason of a change in any applicable Laws occurring after the date hereof, any Borrower is required by Law to make any deduction or withholding in respect of any taxes (other than taxes imposed on or measured by the net income of or receipts of Lender or any franchise tax imposed on Lender), duties or other charges from any payment due under the Note, the sum due from Borrowers in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Lender receives and retains a net sum equal to the sum which it would have received had no such deduction or withholding been required to be made. 9.5 Document and Recording Tax Indemnification. Borrowers agree to indemnify, defend and hold harmless Lender from and against any claim that any documentary or mortgage tax is due and payable in connection with the Loan or the execution, delivery or recording of the Loan Documents to pay such taxes and Expenses incurred by Lender in connection therewith. Borrowers may contest any determination that any such taxes are due, but shall pay any such taxes (including penalties and interest) when legally required. This paragraph shall survive repayment of the Loan. -34-

ARTICLE 10 ASSIGNMENTS BY LENDER AND DISCLOSURE 10.1 Assignments and Participations. Lender may from time to time, without the consent of Borrowers, sell, transfer, pledge, assign and convey the Loan and the Loan Documents (or any interest therein) and may grant participations in the Loan. Borrowers agree to cooperate with Lender's efforts to do any of the foregoing and to execute all documents reasonably required by Lender in connection therewith which do not adversely affect Borrowers' rights or unreasonably expand Borrower's obligations under the Loan Documents. 10.2 Disclosure of Information. To the extent not prohibited from doing so by applicable law, Lender shall have the right (but shall be under no obligation) to make available to any party for the purpose of granting participations in or selling, transferring, assigning or conveying all or any part of the Loan (including any governmental agency or authority and any prospective bidder at any foreclosure sale of any Project) any and all information that Lender may have with respect to the Projects and Borrowers, whether provided by Borrowers, Guarantors, or any third party or obtained as a result of any environmental assessments. Borrowers and Guarantors agree that Lender shall have no liability whatsoever as a result of delivering any such information to any third party, and Borrowers and Guarantors, on behalf of themselves and their successors and assigns, hereby release and discharge Lender from any and all liability, claims, damages, or causes of action, arising out of, connected with or incidental to the delivery of any such information to any third party. ARTICLE 11 GENERAL PROVISIONS 11.1 Captions. The captions and headings of various Articles, Sections and subsections of this Agreement and the other Loan Documents and the Exhibits and Schedules pertaining thereto are for convenience only and are not to be considered as defining or limiting in any way the scope or intent of the provisions hereof or thereof. 11.2 Waiver of Jury Trial. BORROWERS AND LENDER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY CLAIM, CONTROVERSY DISPUTE, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING WITHOUT LIMITATION ANY ACTIONS OR PROCEEDINGS FOR ENFORCEMENT OF THE LOAN DOCUMENTS) AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. BORROWERS AND LENDER EACH ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THEM HAS RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWERS AND LENDER EACH WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS. -35-

11.3 Jurisdiction. TO THE GREATEST EXTENT PERMITTED BY LAW, EACH BORROWER AND EACH GUARANTOR HEREBY WAIVES ANY AND ALL RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A "PROCEEDING"), BORROWER AND EACH GUARANTOR IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF CHICAGO, COUNTY OF COOK AND STATE OF ILLINOIS, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. EACH BORROWER AND EACH GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY ILLINOIS STATE OR UNITED STATES COURT SITTING IN THE CITY OF CHICAGO AND COUNTY OF COOK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO EACH BORROWER AND/OR EACH GUARANTOR, AS APPLICABLE, AT THE ADDRESS INDICATED BELOW OR AT THE ADDRESS SET FORTH IN THE GUARANTY, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF A BORROWER OR A GUARANTOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED. 11.4 Governing Law. Irrespective of the place of execution and/or delivery, this Agreement and the other Loan Documents shall be governed by, and shall be construed in accordance with, the internal laws of the State of Illinois, without regard to conflicts of law principles except as provided in the Mortgages. 11.5 Lawful Rate of Interest. In no event whatsoever shall the amount of interest paid or agreed to be paid to Lender pursuant to this Loan Agreement, the Note or any of the Loan Documents exceed the highest lawful rate of interest permissible under applicable law. If, from any circumstances whatsoever, fulfillment of any provision of this Loan Agreement, the Note and the other Loan Documents shall involve exceeding the lawful rate of interest which a court of competent jurisdiction may deem applicable hereto ("EXCESS INTEREST"), then ipso facto, the obligation to be fulfilled shall be reduced to the highest lawful rate of interest permissible under such law and if, for any reason whatsoever, Lender shall receive, as interest, an amount which would be deemed unlawful under such applicable law, such interest shall be applied to the Loan (whether or not due and payable), and not to the payment of interest, or refunded to Borrowers if such Loan has been paid in full. No Borrower, guarantor, endorser or surety nor -36-

their heirs, legal representatives, successors or assigns shall have any action against Lender for any damages whatsoever arising out of the payment or collection of any such Excess Interest. 11.6 Modification; Consent. No modification, waiver, amendment or discharge of this Agreement or any other Loan Document shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver, amendment or discharge is sought. Consent by Lender to any act or omission by Borrowers shall not be construed as a consent to any other or subsequent act or omission or to waive the requirement for Lender's consent to be obtained in any future or other instance. 11.7 Waivers; Acquiescence or Forbearance Not to Constitute Waiver of Lender's Requirements. (a) Except for any notice, grace, or cure periods expressly set forth in the Loan Documents, each Borrower (i) waives presentment for payment, demand, notice of nonpayment or dishonor, protest of any dishonor, protest and notice of protest and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of the Loan; (ii) waives and renounces all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption, appraisement, or exemption and homestead laws now provided, or which may hereafter be provided, by the laws of the United States and of any state thereof against the enforcement and collection of the obligations evidenced by the Note or this Loan Agreement or as a bar to the enforcement of the lien created by any of the Loan Documents. (b) Each Borrower (i) consents to any indulgences and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the payment or other provisions of this Loan Agreement, the Note, and to any substitution, exchange or release of the collateral, or any part thereof, with or without substitution, and agrees to the addition or release of any Borrowers, whether primarily or secondarily liable, without notice to Borrowers and without affecting its liability hereunder; (ii) agrees that its liability shall be unconditional and without regard to the liability of any other tax; and (iii) expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. (c) Each and every covenant and condition for the benefit of Lender contained in this Agreement and the other Loan Documents may be waived by Lender, provided, however, that to the extent that Lender may have acquiesced in any noncompliance with any requirements or conditions precedent to the closing of the Loan or to any subsequent disbursement of Loan proceeds, such acquiescence shall not be deemed to constitute a waiver by Lender of such requirements with respect to any future disbursements of Loan proceeds and Lender may at any time after such acquiescence require Borrower to comply with all such requirements. Any forbearance by Lender in exercising any right or remedy under any of the Loan Documents, or otherwise afforded by applicable law, including any failure to accelerate the Maturity Date shall not be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of the Note or as a reinstatement of the Loan or a waiver of such right of acceleration or the right to insist upon strict compliance of the terms of the Loan Documents. Lender's acceptance of payment of any sum secured by any of the Loan Documents after the due -37-

date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the Loan, nor shall Lender's receipt of any awards, proceeds, or damages under Article 7 of this Agreement operate to cure or waive any Borrower's or Guarantor's default in payment of sums secured by any of the Loan Documents. 11.8 California Waiver Provision. EXCEPT AS OTHERWISE EXPRESSLY PERMITTED IN THE NOTE OR THIS AGREEMENT, EACH BORROWER HEREBY EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER LAW, PURSUANT TO CALIFORNIA CIVIL CODE SECTION 2954.10 OR OTHERWISE, TO PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON ACCELERATION OF THE MATURITY DATE, AND (B) AGREES THAT IF, FOR ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THIS NOTE IS MADE INCLUDING, WITHOUT LIMITATION, UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER ON ACCOUNT OF ANY DEFAULT BY BORROWERS, INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION OR FURTHER ENCUMBRANCE PROHIBITED OR RESTRICTED BY THE DEED OF TRUST OR OTHER LOAN DOCUMENTS, THEN BORROWERS SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH PREPAYMENT THE EXIT FEE AND ANY OTHER PREPAYMENT CHARGE OR PREMIUM TO THE EXTENT REQUIRED UNDER THIS LOAN AGREEMENT, THE NOTE OR UNDER ANY OTHER LOAN DOCUMENT. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, EACH BORROWER HEREBY DECLARES THAT (1) EACH OF THE FACTUAL MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT IN ALL MATERIAL RESPECTS, (2) LENDER'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE AND FOR THE TERM SET FORTH HEREIN CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT, AND HAS BEEN GIVEN INDIVIDUAL WEIGHT BY BORROWERS AND LENDER, (3) EACH BORROWER IS A SOPHISTICATED AND KNOWLEDGEABLE REAL ESTATE INVESTOR WITH COMPETENT AND INDEPENDENT LEGAL COUNSEL, AND (4) EACH BORROWER FULLY UNDERSTANDS THE EFFECT OF THIS WAIVER. -38-

4499 ACUSHNET AVENUE, LLC 8451 PEARL STREET, LLC - ------------------------------------- ---------------------------------------- Initials Initials 92 BRICK ROAD, LLC 1300 CAMPBELL LANE, LLC - ------------------------------------- ---------------------------------------- Initials Initials KENTFIELD THCI HOLDING COMPANY LLC MPT OPERATING PARTNERSHIP, L.P. - ------------------------------------- ---------------------------------------- Initials Initials SAN JOAQUIN HEALTH CARE ASSOCIATES, LP - ------------------------------------- Initials 11.9 Disclaimer by Lender. This Agreement and the other Loan Documents are made for the sole benefit of Borrowers and Lender, and no other person or persons shall have any benefits, rights or remedies under or by reason of this Agreement or the other Loan Documents, or by reason of any actions taken by Lender pursuant to this Agreement or the other Loan Documents. Lender shall not be liable to any contractors, subcontractors, supplier, architect, engineer, Tenant or other party for labor or services performed or materials supplied in connection with the Project. Lender shall not be liable for any debts or claims accruing in favor of any such parties against any Borrower or others or against the Project. Lender neither undertakes nor assumes any responsibility or duty to any Borrower to select, review, inspect, supervise, pass judgment upon or inform Borrowers of any matter in connection with the Projects. Borrowers shall rely entirely upon their own judgment with respect to such matters, and any review, inspection, supervision, exercise of judgment or supply of information to Borrowers by Lender in connection with such matters is for the protection of Lender only, and no Borrower nor any third party is entitled to rely thereon. 11.10 Partial Invalidity; Severability. If any of the provisions of this Agreement or the other Loan Documents, or the application thereof to any person, party or circumstances, shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the other Loan Documents, or the application of such provision or provisions to persons, parties or -39-

circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law and to this end, the provisions of this Agreement and all the other Loan Documents are declared to be severable. All covenants and agreements of Borrowers shall be joint and several. 11.11 Definitions Include Amendments. Definitions contained in this Agreement which identify documents, including, but not limited to, the Loan Documents, shall be deemed to include all amendments and supplements to such documents from the date hereof, and all future amendments, modifications, and supplements thereto entered into from time to time to satisfy the requirements of this Agreement or otherwise with the consent of Lender. Reference to this Agreement contained in any of the foregoing documents shall be deemed to include all amendments and supplements to this Agreement. 11.12 Execution in Counterparts. This Agreement and the other Loan Documents may be executed in any number of counterparts and by different parties hereto or thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 11.13 Entire Agreement. This Agreement, taken together with all of the other Loan Documents and all certificates and other documents delivered by Borrowers or Guarantors to Lender, embody the entire agreement and supersede all prior commitments, agreements, representations, and understandings, written or oral, relating to the subject matter hereof, and may not be contradicted or varied by evidence of prior, contemporaneous, or subsequent oral agreements or discussions of the parties hereto. 11.14 Waiver of Damages. In no event shall Lender be liable to any other party for punitive, exemplary or consequential damages, including, without limitation, lost profits, whatever the nature of a breach by Lender of its obligations under this Agreement or any of the Loan Documents, and each Borrower, for itself and Guarantors, waives all claims for punitive, exemplary or consequential damages. 11.15 Claims Against Lender. Lender shall not be in default under this Agreement, or under any other Loan Documents, unless a written notice specifically setting forth the claim of Borrowers shall have been given to Lender within three (3) months after any Borrower first had Knowledge of the occurrence of the event which Borrowers allege gave rise to such claim and Lender does not remedy or cure the default, if any there be, promptly thereafter. Each Borrower waives any claim, set-off or defense against Lender arising by reason of any alleged default by Lender as to which Borrowers do not give such notice timely as aforesaid. Borrowers acknowledge that such waiver is or may be essential to Lender's ability to enforce its remedies without delay and that such waiver therefore constitutes a substantial part of the bargain between Lender and Borrowers with regard to the Loan. No Guarantor or Tenant is intended to have any rights as a third-party beneficiary of the provisions of this Section 11.15 11.16 Set-Offs. During the continuance of an Event of Default, each Borrower hereby irrevocably authorizes and directs Lender from time to time to charge any Borrower's accounts and deposits with Lender (or its Affiliates), and to pay over to Lender an amount equal -40-

to any amounts from time to time due and payable to Lender hereunder, under the Note or under any other Loan Document. Each Borrower hereby grants to Lender a security interest in and to all such accounts and deposits maintained by any Borrower with Lender (or its Affiliates). 11.17 Relationship. The relationship between Lender and Borrowers shall be that of creditor-debtor only. No term in this Agreement or in the other Loan Documents and no course of dealing between the parties shall be deemed to create any relationship of agency, partnership or joint venture or any fiduciary duty by Lender to Borrowers or any other party. 11.18 Agents. In exercising any rights under the Loan Documents or taking any actions provided for therein, Lender may act through its employees, agents or independent contractors as authorized by Lender. 11.19 Interpretation. With respect to all Loan Documents, whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The word "obligations" is used in its broadest and most comprehensive sense, and includes all primary, secondary, direct, indirect, fixed and contingent obligations. It further includes all principal, interest, prepayment charges, late charges, loan fees and any other fees and charges accruing or assessed at any time, as well as all obligations to perform acts or satisfy conditions. No listing of specific instances, items or matters in any way limits the scope or generality of any language in the Loan Documents. This Agreement and all of the other Loan Documents shall not be construed more strictly against one party than against the other, merely by virtue of the fact that it may have been prepared primarily by counsel for one of the parties. 11.20 Successors and Assigns. Subject to the restrictions in Section 4.2(b) on transfer and assignment contained in this Agreement, this Agreement and the other Loan Documents shall inure to the benefit of and shall be binding on Lender, Borrowers, and Guarantors and their respective heirs, successors and permitted assigns. 11.21 Time is of the Essence. Borrowers agrees that time is of the essence under this Agreement and the other Loan Documents and the performance of each of the covenants and agreement contained herein and therein. 11.22 Notices. Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and shall be deemed to have been properly given (a) if hand delivered, when delivered; (b) if mailed by United States Certified Mail (postage prepaid, return receipt requested), three (3) Business Days after mailing (c) if by Federal Express or other reliable overnight courier service, on the next Business Day after delivered to such courier service or (d) if by telecopier on the day of transmission if before 3:00 p.m. (Chicago time) on a Business Day so long as copy is sent on the same day by overnight courier as set forth below: -41-

If to Borrowers: 1001 Urban Center Drive Suite 501 Birmingham, Alabama 35242 Attention: Michael Stewart, Esq. Telephone: 205-969-3755 Facsimile: 205-969-3756 With a copy to: Baker, Donelson, Bearman, Caldwell, & Berkowitz, PC 1600 SouthTrust Tower 420 Twentieth Street North Birmingham, Alabama 35203-5202 Attention: Thomas O. Kolb, Esq. Telephone: 205-328-0480 Facsimile: 205-322-8007 If to Lender: Merrill Lynch Capital, a Division of Merrill Lynch Business Financial Services Inc. 222 North LaSalle Street - 18th Floor Chicago, Illinois 60601 Attention: Vice President, Portfolio Project Lessee Telephone: 312-499-3128 Facsimile: 312-499-3026 With a copy to: Merrill Lynch Capital, a Division of Merrill Lynch Business Financial Services Inc. 222 North LaSalle Street - 18th Floor Chicago, Illinois 60601 Attention: Healthcare Legal Telephone: 312-499-3140 Facsimile: 312-499-3026 or at such other address as the party to be served with notice may have furnished in writing to the party seeking or desiring to serve notice as a place for the service of notice. Any notice or demand delivered to the person or entity named above to accept notices and demands for such party shall constitute notice or demand duly delivered to such party, even if delivery is refused. -42-

11.23 Joint and Several Liability. (a) The Indebtedness and all other obligations of Borrowers under the Loan Documents (collectively, the "OBLIGATIONS") shall be the joint and several obligations and liabilities of Borrowers. Hence, each Borrower shall be primarily and directly liable for repayment of the Indebtedness and all other Obligations. (b) Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the liability of each Borrower for the Obligations and the liens and security interests granted by Borrowers to secure the Obligations, not constitute a "Fraudulent Conveyance" (as defined below). Consequently, Lender and each Borrower agree that if the liability of a Borrower for the Obligations, or any liens or security interests granted by such Borrower securing the Obligations would, but for the application of this sentence, constitute a Fraudulent Conveyance, the liability of such Borrower and the liens and security interests securing such liability shall be valid and enforceable only to the maximum extent that would not cause such liability or such lien or security interest to constitute a Fraudulent Conveyance, and the liability of such Borrower and this Agreement shall automatically be deemed to have been amended accordingly. For purposes hereof, "FRAUDULENT CONVEYANCE" means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the United States Code (11 U.S.C. Section 101, et seq.), as amended (the "BANKRUPTCY CODE") or a fraudulent conveyance or fraudulent transfer under the applicable provisions of any fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time. (c) Lender is hereby authorized, without notice or demand and without affecting the liability of any Borrower hereunder, to, at any time and from time to time, (i) renew, extend or otherwise increase the time for payment of the Obligations; (ii) with the written agreement of any Borrower accelerate or otherwise change the terms relating to the Obligations or otherwise modify, amend or change the terms of any promissory note or other agreement, document or instrument now or hereafter executed by any Borrower and delivered to Lender; (iii) accept partial payments of the Obligations; (iv) take and hold security or collateral for the payment of the Obligations or for the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such security or collateral; (v) apply such security or collateral and direct the order or manner of sale thereof Lender, in its sole discretion, may determine; and (vi) settle, release, compromise, collect or otherwise liquidate the Obligations and any security or collateral therefor in any manner, without affecting or impairing the obligations of any Borrower. Except as specifically provided in this Agreement or any of the other Loan Documents, Lender shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from any Borrower or any other source, and such determination shall be binding on all Borrowers. All such payments and credits may be applied, reversed and reapplied, in whole or