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Medical Properties Trust (NYSE: MPW) announced that LifePoint Health will acquire a majority interest in Springstone Health Opco, LLC for an enterprise value of $250 million. MPT expects to be repaid approximately $200 million from a prior investment while retaining a minority equity interest in Springstone. This transaction reflects MPT's strength in underwriting hospital operations and is anticipated to enhance the financial performance of its combined portfolio. The closing of the deal is subject to customary conditions.
Positive
MPT set to receive approximately $200 million from repayment of prior loan, enhancing liquidity.
Retention of minority equity interest in Springstone allows continued participation in future value creation.
Extension of existing lease with LifePoint until 2041 strengthens operational alignment.
Negative
The successful closing of the transaction is not guaranteed, introducing uncertainty.
BIRMINGHAM, Ala.--(BUSINESS WIRE)--
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced that a subsidiary of LifePoint Health, Inc. (“LifePoint”) has agreed to acquire a majority interest in Springstone Health Opco, LLC (“Springstone”) from the current management group based on an enterprise value of $250 million.
In October 2021, MPT invested approximately $190 million, primarily in the form of a loan, and received a minority equity interest in Springstone in conjunction with its $760 million acquisition of 18 behavioral hospitals. Pursuant to the LifePoint transaction’s expected first half of 2023 closing, MPT expects to be paid approximately $200 million in full satisfaction of the loan and will retain its minority equity interest, providing continued opportunity for MPT shareholders to participate in further value creation. MPT will continue to own and lease Springstone’s behavioral hospitals. Furthermore, in order to align MPT more completely with its operations, LifePoint has agreed to extend by five years to 2041 the maturity of its existing master lease of eight general acute hospitals.
This anticipated transaction illustrates the distinct competitive advantage inherent in MPT’s ability to successfully underwrite hospital operations. It has again been demonstrated that:
MPT can competently and confidently execute “WholeCo” transactions in the interest of acquiring hospital real estate. This competitive advantage has often allowed MPT to acquire mission-critical infrastructure within platforms other investors are challenged to underwrite.
MPT can opportunistically divest “OpCo” investments to well-capitalized operators with significant scale advantages and promising growth strategies. Similar to the recent merger of Priory Group and MEDIAN, which created a leading comprehensive rehabilitation platform across the UK and Germany, LifePoint and Springstone will combine both clinical and financial resources to enhance care, financial performance and future growth potential. MPT expects this to bring long-term incremental support to its combined general acute and behavioral portfolio to be operated by LifePoint.
MPT can generate discretely profitable returns over “OpCo” investment holding periods. Similar to MPT’s historical investments in Ernest, MEDIAN, Capella, ATOS International and others, a highly accretive unlevered internal rate of return is expected to be realized upon the closing of the LifePoint transaction. On a standalone basis, the Company’s role in temporarily capitalizing talented operators has been and is expected to continue to be an occasional source of profit with limited downside.
The consummation of the transaction is subject to customary closing conditions. MPT cannot give assurances that the transactions will be successfully consummated as described above or at all.
Goodwin Procter and Baker Donelson PC are acting as legal advisors to both MPT and Springstone on this transaction, and Guggenheim Securities, LLC is acting as financial advisor to MPT. Bradley is also acting as legal advisor to Springstone.
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 447 facilities and approximately 46,000 licensed beds in ten countries and across four 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, 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 comply with applicable laws, rules and regulations in the operation of the 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 acquisition of a majority interest in Springstone by LifePoint does not occur; and (xvii) the risk that other property sales, loan repayments, and other capital recycling transactions do not occur.
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, 2021 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.
