EFTA Document EFTA01389039

Deutsche Bank Markets Research Rating Buy North America United States Financial REITs Company Medical Properties Trust nut:rm MPW N MPW UN NYS MPW Long-term hospital opportunity and attractive relative value: Initiate at Buy (,Wt: p."1)/ ;,. L i.i /RA11 inotilutionni lip We believe MPW represents an attractive long-term consolidation play in the hospital space, given its industry expertise, discounted relative value and healthy 6% dividend. We think the institutionalization of the hospital real estate market is poised to accelerate, driven by positive industry trends, increased comfort with the sale/leaseback model, not-for-profit to for-profit conversions, and managed care consolidation that could spur additional hospital consolidation activity. As the only pure play in the hospital space, we believe MPW stands to benefit the most from these positive trends. With a 15% total expected return, including a 6% dividend yield, we are initiating with a Buy. Long-term tailwinds and atti active relative value Our positive long-term bias is based on 1) the attractive long-term roll-up opportunity. 2) potential acceleration of acquisition activity, 3) highly stable and visible cash flows, 4) solid hospital industry trends, and 5) the potential for a re-rating of the shares as investors become more comfortable with the hospital sector overall. We fully recognize that the path to realizing MPW's embedded value will be difficult to measure quarter-to-quarter as acquisitions are difficult to project and lumpy by nature, but we see the potential for significant value creation overtime. Normalization of relative value drives our TP; dividend protects the downside MPW currently trades at wider-than-historical FFO and AFFO multiple discounts versus its smaller-cap Healthcare REIT peers. However, we think there are several reasons why MPW should, at a minimum, trade in line with historical relative valuations including: 1) prospective earnings upside from accretive acquisitions; 2) VTR's entry into the hospital space, which should drive greater price transparency and awareness; and 3) substantial improve- ments in the scale/diversification of MPW's business versus history. We see downside protection stemming from MPW's well-covered 6% dividend yield. Valuation and eisl:s Our TP of $17 per share equates to a 15% expected return including the 6% dividend yield. Our TP is based on a 14.3x our 2017 FAD estimate of $1.19. Our multiple assumption is rich by historical standards, but not relative to the record low rate environment, and is a 3.5x discount to peers, which is roughly in line with the five-year average. Key risks include: 1) interest rate sensitivity, 2) above-average government reimbursement risk, 3) above-average tenant concentration risk, 4) FX and geographic risk given MPW's European exposure, 5) less-robust disclosures vs peers, and 6) healthcare regulatory risks. Iron/442.1u And iianos Year End Dec 31 2015A 2016E 2017E 10 FFO 0.28 0.35A 20 FFO 0.29 0.32 30 FFO 0.32 0.30 40 FFO 0.35 0.32 FY FFO (USD) 1.24 1.30 1.32 PlFFO lal 10.5 12.1 11.9 Dividend Yield r/ln 6.7 5.8 5.9 Sown Onesol• au* mown conoinves. Date 22 July 2016 Initiation of Coverage Price at 21 Jul 2016 IUSD) Price Target 52-week range Research Anal t VUid (Pr cenika reiatlyn 15.69 17.00 15.69 - 9.86 V 111' i s1; tieb:pkOWItt‘w1 /4 ,1 'In 1/14 7/14 ins 7115 ine V.14.1P•OPHIS 1 SSP 50) WOE( Po boodi Performance 1%) Im 3m 12m Absolute 4.5 23.1 13.0 S&P 500 INDEX source ClailwA• Sint 4.0 3.9 2.5 Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 057/04/2016. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0093200 CONFIDENTIAL SDNY_GM_00239384 EFTA01389039