Below is a chart and excerpt from today's Early Look written by REITs analyst Rob Simone.
In January 2021 MPW financed the entire ~$1.4 billion acquisition of Priory Group by Waterland Private Equity Fund. It funded a ~$600 million sale-leaseback for the real estate plus an ~$800 million acquisition “bridge” loan, a portion of which was later converted into equity in Waterland. Perhaps more importantly, MPW struck a 25-year lease term with two 10-year tenant extension options.
MPW today aggressively books GAAP straight-line rent assuming the options are exercised, i.e. increases the amount of straight-line rent recognized in each quarter. Management cash bonuses are paid based on FFO performance, which receives the benefit of straight-line rent but bears no semblance to actual cash flow.