Medical Properties Trust To Sell Majority Stake In 5 Hospitals, Generating Over $1B
Medical Properties Trust, the largest hospital landlord in the U.S., sold its majority stake in five Utah hospitals as it looks to shore up its financial footing.
An undisclosed investment fund paid $886M for a 75% stake in the five hospitals, forming a joint venture with Medical Properties Trust, which will maintain a 25% interest in the properties, according to a release. The newly formed venture added new debt on the properties that the REIT said would provide it with $190M in additional cash.
The two transactions will give MPT around $1.1B in immediate cash proceeds that the company said will be used to reduce outstanding debt.
The financial troubles of Steward Health Care, one of MPT’s largest tenants, has weighed down the REIT and led to $50M in unpaid rent and around $772M in write-offs and impairment charges in the fourth quarter.
“Our primary focus remains on accelerating our capital allocation strategy, and we are now confident that we will exceed our initial target of $2.0 billion in liquidity transactions in 2024 based on the valuations achieved on recent transactions and the terms we are actively negotiating for additional transactions,” MPT’s CEO Edward Aldag Jr. said in a statement.
The transaction brings the REIT’s year-to-date transaction volume to $1.6B, 80% of the firm’s fiscal year 2024 target.
MPT reached a deal in February to sell five hospitals in California and New Jersey to tenant Prime Healthcare for $350M in a deal that also closed this month.
Proceeds from the Utah hospital sales, which was announced Friday, will be used to repay a $300M Australian term loan due in 2024 and to repay debt in the REIT's revolving credit facility, according to the release.
The specific properties and investment fund that acquired the hospitals was not disclosed, and a spokesperson for MPT didn’t respond to Bisnow’s request for comment. The investor is described in the release as being affiliated with “a leading multi-strategy, multi-billion dollar institutional asset manager with a proven track record in real estate investments.”
An affiliate of CommonSpirit Health leases all five of the Utah properties and has an option to buy the properties at the fifth and 10th anniversaries of its 2023 master lease commencement, according to the release.
Eastdil Secured, Goodwin Proctor and Baker Donelson advised MPT in the transaction.
The sale was announced after markets closed Friday, but the stock was up in extended trading and has climbed more than 19% from its Friday close as of 1:45 p.m. ET Monday.
MPT’s fortunes have been tied in part to Steward Health Care, which is the tenant at roughly a fifth of the REIT's properties. The medical provider lost $800M between 2017 and 2020, and the REIT lent Steward $60M earlier this year and brought in consulting firm AlixPartners to help Steward deal with its financial troubles.
MPT paid Steward's then-owner, private equity firm Cerberus Capital Management, $1.25B in 2016 for its Massachusetts real estate, a deal that has since come under scrutiny from state and federal lawmakers for putting the hospital chain's financial health in jeopardy.
The troubles have weighed on Medical Properties Trust’s stock, which remains down 46% from a year earlier.
