Medical Properties Trust, Inc. to Invest $1.4 Billion in Ten Acute Care Hospitals and One Behavioral Health Facility
May 19 2017 - 8:40AM
Business Wire
Acquisitions Immediately Accretive to
Normalized FFO by Approximately $0.10 Per Share
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE:
MPW) today announced that it has signed definitive agreements to
acquire the real estate interests of ten acute care hospitals and
one behavioral health facility currently operated by IASIS
Healthcare (“IASIS”) and to be operated by Steward Health Care
System LLC (“Steward”) when the transaction is completed. The $1.4
billion real estate transaction will be immediately accretive to
normalized FFO per share by approximately $0.10 (and to net income
by $0.05 per share) in 2018 assuming all debt financing. Steward
and IASIS separately announced a simultaneous merger transaction,
completion of which is a condition of MPT’s investment.
Benefits to MPT’s Portfolio
- Increases Critical Mass. This
transaction increases MPT’s pro forma total gross assets by
approximately 20% to almost $9 billion. Further, it adds 11
outstanding hospitals and over 2,400 beds to MPT’s portfolio,
increasing the total number to 269 and 31,266, respectively.
- Attractive Markets.
Community-focused hospitals clustered primarily within large
metropolitan areas in high-growth urban and suburban markets in the
states of Utah, Arizona, Texas and Arkansas offer suitable payor
mixes.
- Increased Acute Care Percentage.
Acute care hospitals increase to 72.5% of MPT’s total portfolio and
84.0% of the U.S. portfolio, an increase from 66.9% and 79.9%,
respectively.
- Decreased LTACH Percentage.
Long-term acute care hospitals decrease to 4.2% of MPT’s total
portfolio and 5.0% of the U.S. portfolio, a decline from 5.0% and
6.3%, respectively.
- Single Largest Hospital
Exposure. The largest hospital in MPT’s pro forma portfolio
represents just 3.9% of MPT’s total real estate investments with
this transaction.
- Expands Steward Relationship.
MPT expands its relationship with an innovative, forward-thinking
operator in Steward, which will become the largest private,
for-profit hospital operator in the United States. With this
transaction, Steward will have nearly 7,500 patient beds in 36
hospitals across ten states. Steward’s integrated model, including
1,800 directly employed multi-specialty physicians and several
thousand aligned physicians, shifts healthcare delivery to a more
cost-effective, local coordinated approach emphasizing quality care
and wellness. The merging of the managed care operations of Steward
and IASIS will result in more than 1.1 million covered lives.
“We are very excited about this opportunity to grow with one of
the top hospital operators in the country,” said Edward K. Aldag,
Jr., MPT’s Chairman, President and Chief Executive Officer. “MPT
has grown its assets by approximately 31 percent annually since
2013, compared to 15 percent for our healthcare REIT peers, and
with this transaction, we eclipse our previous record 2016
acquisition total. This phenomenal growth, even as we sold almost
$800 million of assets in the first half of 2016 to reduce
leverage, has resulted in our normalized FFO per share growing over
10% annually compared to 6.7% for our peers for the period. Our
dividend growth of 4% annually has also outperformed while our
dividend payout ratio declined from 83% to 70% of normalized
FFO.
“Steward has similarly achieved remarkable success in growing
its company starting with the turnaround of a struggling
not-for-profit hospital system in eastern Massachusetts. As Steward
implemented its strategic plan to develop an integrated network
with various access points along the healthcare continuum, the
results were improved outcomes and reduced costs. The combined
capabilities of Steward and IASIS will create the largest private
for-profit hospital operator in the United States with projected
revenues of almost $8 billion in 2018, the first full year of
consolidated operations. Consolidation will continue in this
dynamic healthcare environment and Steward is in a good position to
capitalize on this trend,” added Aldag.
Transaction Summary
MPT’s interests in the hospitals to be acquired will be subject
to a master lease and mortgage loan arrangements with cross default
provisions and backed by a corporate guaranty. Nine hospitals will
be purchased for $700 million and leased back to Steward under the
master lease, which has an expiration date of October 31, 2031, and
includes three five-year extension terms, resulting in a GAAP yield
of 10.2%. The new mortgage loans, also aggregating $700 million,
have the same contractual terms as the leases. Additionally, MPT is
making an attractive $100 million preferred equity investment in
Steward, which will provide low risk equity-like returns.
MPT’s pro forma investment of $3.3 billion in Steward real
estate will include MPT’s existing investment in hospital real
estate leased to IASIS, and generate approximately $298 million in
annual revenue split 67% rental income and 33% interest income from
mortgages. Expected 2018 EBITDAR rent and interest coverage for all
Steward hospitals is 2.8 times.
The transaction is expected to close by September 30, 2017,
subject to customary approvals and consents. MPT expects to
finance the acquisitions with proceeds from a combination of a
fully committed $1.0 billion term loan with a term up to two years,
its revolving credit facility with present availability of
approximately $1.0 billion and the possible issuance of long-term
unsecured notes. The Company intends to maintain its prudent
leverage position and does not expect net debt to adjusted EBITDA
to exceed 5.7 times.
Investor Presentation
The Company has posted a presentation regarding the Steward
transaction, including a reconciliation of pro forma FFO per
diluted share to Net Income, the most comparable GAAP measure, on
the Investor Relations page of the Company’s website,
www.medicalpropertiestrust.com under Webcasts &
Presentations.
Medical Properties Trust, Inc. is a Birmingham, Alabama based
self-advised real estate investment trust formed to capitalize on
the changing trends in healthcare delivery by acquiring and
developing net-leased healthcare facilities. MPT’s financing model
allows hospitals and other healthcare facilities to unlock the
value of their underlying real estate in order to fund facility
improvements, technology upgrades, staff additions and new
construction. Facilities include acute care hospitals, inpatient
rehabilitation hospitals, long-term acute care hospitals, and other
medical and surgical facilities. For more information, please visit
the Company’s website at www.medicalpropertiestrust.com.
The statements in this press release that are forward looking
are based on current expectations and actual results or future
events may differ materially. Words such as “expects,” “believes,”
“anticipates,” “intends,” “will,” “should” and variations of such
words and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause the actual results of the Company or future events to differ
materially from those expressed in or underlying such
forward-looking statements, including without limitation: our
ability to successfully consummate the Steward/IASIS transactions
discussed in this press release; the satisfaction of all conditions
to, and the timely closing (if at all) of pending transactions; net
income per share; Normalized FFO per share; the amount of
acquisitions of healthcare real estate, if any; results from the
potential sales, if any, of assets; capital markets conditions;
estimated leverage metrics; the repayment of debt arrangements;
statements concerning the additional income to the Company as a
result of ownership interests in certain hospital operations and
the timing of such income; the payment of future dividends, if any;
completion of additional debt arrangements, and additional
investments; national and international economic, business, real
estate and other market conditions; the competitive environment in
which the Company operates; the execution of the Company’s business
plan; financing risks; the Company’s ability to maintain its status
as a REIT for income tax purposes; acquisition and development
risks; potential environmental and other liabilities; and other
factors affecting the real estate industry generally or healthcare
real estate in particular. For further discussion of the factors
that could affect outcomes, please refer to the “Risk factors”
section of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2016 and as updated by the Company’s
subsequently filed Quarterly Reports on Form 10-Q and other SEC
filings. Except as otherwise required by the federal securities
laws, the Company undertakes no obligation to update the
information in this press release.
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version on businesswire.com: http://www.businesswire.com/news/home/20170519005335/en/
Medical Properties Trust, Inc.Tim Berryman, 205-969-3755Director
– Investor Relationstberryman@medicalpropertiestrust.com
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