Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE:
MPW) today announced plans to accelerate its efforts to recover
uncollected rents and outstanding loan obligations from Steward
Health Care System (“Steward”) and related processes designed to
significantly reduce its exposure to Steward.
As disclosed in the Company’s third quarter 2023 Form 10-Q,
Steward delayed paying a portion of its September and October rent
to MPT. Despite its obtaining additional working capital financing
and selling its non-core laboratory business in the fourth quarter
of 2023, Steward recently informed MPT that its liquidity has been
negatively impacted by significant changes to vendors’ payment
terms. As a result, Steward has continued to make partial monthly
rent payments, and total unpaid rent under its consolidated master
lease with MPT is approximately $50 million as of December 31, 2023
(exclusive of approximately $50 million that was previously
deferred and not currently payable related to the Norwood Hospital,
which is under reconstruction).
MPT has engaged Alvarez & Marsal Securities, LLC (“A&M”)
as its financial advisor and KTBS Law, LLP and Baker, Donelson,
Bearman, Caldwell & Berkowitz, PC as legal advisors to advise
the Company on its options to enable the recovery of uncollected
rent and outstanding loans. MPT’s management team and advisors have
worked closely with Steward and its own advisors to develop an
action plan which, if successful, is designed to strengthen
Steward’s liquidity and restore its balance sheet, optimize MPT’s
ability to recover unpaid rent, and ultimately reduce MPT’s
exposure to Steward.
As part of this plan, Steward is pursuing several strategic
transactions, including the potential sale or re-tenanting of
certain hospital operations as well as the divestiture of non-core
operations. Further, Steward has committed to seeking a third-party
capital partner for its managed care business, net proceeds from
which will be used in part to repay all outstanding obligations to
MPT. Steward has also intensified measures to improve collections
and overall governance, including establishment of a transformation
committee comprised of newly appointed independent directors and
submission of periodic cash activity and asset sale progress
reports to MPT and its ABL lenders.
To protect the value of MPT’s assets and hospital operations
while Steward executes on its strategic plan, MPT has agreed to
fund a new $60 million bridge loan secured by all MPT’s existing
collateral plus new second liens on Steward’s managed care
business, subordinate only to Steward’s ABL lenders. A portion of
MPT’s existing approximately $215 million of transaction-specific
and working capital loans to Steward will now also be secured by
these same second liens on the managed care platform. The Company
has also consented to the deferral of unpaid rent under the
consolidated master lease as of December 31, 2023, as well as a
limited and tapering deferral of approximately $55 million of 2024
rents, until the earlier of June 30, 2024 or the completion of
anticipated asset sales. Partial cash rent payments are expected to
recommence in February, including approximately $9 million in the
first quarter and approximately $44 million in the second quarter
of 2024.
There can be no assurance that Steward will successfully execute
its plans or that the Company will recover all of its deferred rent
and loans outstanding to Steward. As a result, MPT cannot be
assured that Steward will make all scheduled lease payments
throughout the remaining approximate 22-year fully extended term of
its master lease. Accordingly, pursuant to generally accepted
accounting principles, the Company expects to record a non-cash
charge in the fourth quarter of 2023 to write off consolidated
straight-line rent receivables of approximately $225 million, its
approximately $25 million share of straight-line rent receivables
related to the unconsolidated Massachusetts partnership and
consolidated unpaid rent receivables of approximately $100 million
(which includes the previously referenced $50 million related to
the Norwood development). Furthermore, MPT routinely evaluates for
indications of impairments to its real estate and other
investments, including those related to Steward. Such evaluations
are ongoing as of December 31, 2023, and no assurances can be
provided that further impairment of real estate and non-real estate
assets will not be taken with MPT’s fourth quarter 2023
reporting.
Importantly, MPT’s non-Steward portfolio continues to generate
robust revenue as demonstrated in the table below, which separates
Steward’s third quarter 2023 GAAP revenue from the remainder of the
Company’s portfolio:
Q3 2023 Consolidated Revenue Attribution (GAAP) ($ amounts in
thousands)
Steward
Non-Steward
Total
Rent billed
$
52,0511
$
177,255
$
229,3061
Straight-line rent
8,973
12,538
21,511
Income from financing leases
-
26,0662
26,0662
Interest and other income
9,640
20,053
29,693
Total revenues
$
70,664
$
235,912
$
306,576
1 Includes approximately $4 million of
non-cash deferred rent related to the Norwood Hospital
redevelopment
2 Includes approximately $13 million of
contractually owed rent and interest revenue from the non-cash
receipt of an investment in PHP Holdings
The complete removal of all contributions from Steward-related
investments, including that from the Massachusetts partnership,
would have negatively impacted third quarter 2023 reported adjusted
funds from operations (AFFO) by approximately $67 million ($0.11
per diluted share), resulting in a reported AFFO payout ratio in
the high-70% range. A description of AFFO and a reconciliation of
net income to AFFO for Q3 2023 is provided in the Company’s
earnings release for Q3 2023, available under the “News” tab of the
Company’s website.
About Medical Properties Trust, Inc.
Medical Properties Trust, Inc. is a self-advised real estate
investment trust formed in 2003 to acquire and develop net-leased
hospital facilities. From its inception in Birmingham, Alabama, the
Company has grown to become one of the world’s largest owners of
hospital real estate with 441 facilities and approximately 44,000
licensed beds as of September 30, 2023. Since the end of the third
quarter, the Company has sold four facilities and now owns
approximately 43,000 licensed beds in nine countries across three
continents. MPT’s financing model facilitates acquisitions and
recapitalizations and allows operators of hospitals to unlock the
value of their real estate assets to fund facility improvements,
technology upgrades and other investments in operations. For more
information, please visit the Company’s website at
www.medicalpropertiestrust.com.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements can generally be identified by
the use of forward-looking words such as “may”, “will”, “would”,
“could”, “expect”, “intend”, “plan”, “estimate”, “target”,
“anticipate”, “believe”, “objectives”, “outlook”, “guidance” or
other similar words, and include statements regarding our
strategies, objectives, future expansion and development
activities, asset sales, expected returns on investments and
expected financial performance. Forward-looking statements involve
known and unknown risks and uncertainties that may cause our actual
results or future events to differ materially from those expressed
in or underlying such forward-looking statements, including, but
not limited to: (i) the economic, political and social impact of,
and uncertainty relating to, potential impact from health crises
(like COVID-19); (ii) the ability of our tenants, operators and
borrowers to satisfy their obligations under their respective
contractual arrangements with us, especially as a result of the
adverse economic impact of the COVID-19 pandemic, and government
regulation of hospitals and healthcare providers in connection with
same (as further detailed in our Current Report on Form 8-K filed
with the SEC on April 8, 2020); (iii) our expectations regarding
annual guidance for net income and NFFO per share; (iv) our success
in implementing our business strategy and our ability to identify,
underwrite, finance, consummate and integrate acquisitions and
investments; (v) the nature and extent of our current and future
competition; (vi) macroeconomic conditions, such as a disruption of
or lack of access to the capital markets or movements in currency
exchange rates; (vii) our ability to obtain debt financing on
attractive terms or at all, which may adversely impact our ability
to pursue acquisition and development opportunities and pay down,
refinance, restructure or extend our indebtedness as it becomes
due; (viii) increases in our borrowing costs as a result of changes
in interest rates and other factors; (ix) international, national
and local economic, real estate and other market conditions, which
may negatively impact, among other things, the financial condition
of our tenants, lenders and institutions that hold our cash
balances, and may expose us to increased risks of default by these
parties; (x) factors affecting the real estate industry generally
or the healthcare real estate industry in particular; (xi) our
ability to maintain our status as a REIT for federal and state
income tax purposes; (xii) federal and state healthcare and other
regulatory requirements, as well as those in the foreign
jurisdictions where we own properties; (xiii) the value of our real
estate assets, which may limit our ability to dispose of assets at
attractive prices or obtain or maintain equity or debt financing
secured by our properties or on an unsecured basis; (xiv) the
ability of our tenants and operators to operate profitably and
generate positive cash flow, comply with applicable laws, rules and
regulations in the operation of our properties, to deliver
high-quality services, to attract and retain qualified personnel
and to attract patients; (xv) potential environmental contingencies
and other liabilities; (xvi) the risk that the expected sale of
three Connecticut hospitals currently leased to Prospect does not
occur; (xvii) the risk that MPT is unable to monetize its
investment in PHP at full value within a reasonable time period or
at all; (xviii) the risk that other property sales, loan
repayments, and other capital recycling transactions do not occur;
(xix) the risk that MPT is not able to attain its leverage,
liquidity and cost of capital objectives within a reasonable time
period or at all; (xx) the risk that MPT is not able to recover
deferred rent or its other investments in Steward at full value
within a reasonable time period or at all; and (xxi) the risks and
uncertainties of litigation.
The risks described above are not exhaustive and additional
factors could adversely affect our business and financial
performance, including the risk factors discussed under the section
captioned “Risk Factors” in our Annual Report on Form 10-K for the
year ended December 31, 2022 and as updated in our quarterly
reports on Form 10-Q. Forward-looking statements are inherently
uncertain and actual performance or outcomes may vary materially
from any forward-looking statements and the assumptions on which
those statements are based. Readers are cautioned to not place
undue reliance on forward-looking statements as predictions of
future events. We disclaim any responsibility to update such
forward-looking statements, which speak only as of the date on
which they were made.
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version on businesswire.com: https://www.businesswire.com/news/home/20240104928323/en/
Drew Babin, CFA, CMA Senior Managing Director of Corporate
Communications Medical Properties Trust, Inc. (646) 884-9809
dbabin@medicalpropertiestrust.com
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