Medical Properties Trust Announces That Pipeline Health Will Assume the Existing Terms of Its Los Angeles Hospital Master Lease

Rhea-AI Summary

Medical Properties Trust, Inc. (NYSE: MPW) announced the approval of its master lease by Pipeline Health, allowing Pipeline to exit bankruptcy while maintaining unchanged lease terms for four Los Angeles area hospitals and two medical office buildings. MPT will collect 100% of rent accrued during bankruptcy and defer $5.6 million of 2023 cash rent to 2024 with interest. This arrangement highlights the resilience of hospital real estate, as MPT expects no adverse impact on its long-term cash rent trajectory from Pipeline's financial challenges.

Positive

• MPT retains full collection of accrued rent during Pipeline's bankruptcy.
• Master lease terms remain unchanged, ensuring revenue stability.
• Pipeline's focus on Los Angeles enhances operational prospects.
• Agreement to fund a behavioral facility expansion at Coast Plaza Hospital.

Negative

• None.

Lease Rate and Escalator Unchanged; MPT to Collect 100% of Rent Accrued During Bankruptcy

MPT Facilities and Related Capital Additions Vital to Go-Forward Operator Strategy

BIRMINGHAM, Ala.--(BUSINESS WIRE)-- Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced that the assumption of its master lease of four Los Angeles area hospitals and two medical office buildings by Pipeline Health (“Pipeline”) has been approved as part of Pipeline’s successful confirmation of its plan of reorganization (the “Plan”), which provides for Pipeline’s exit from bankruptcy proceedings. The pre-bankruptcy lease rate, annual escalator, remaining term of approximately 18 years and other material lease provisions remain unchanged. The Court-approved Plan reconfirms the characterization of the master lease as a true operating lease rather than a financing arrangement.

Following the December sale of its Illinois hospitals, Pipeline is primarily focusing its post-bankruptcy business plan on opportunities within its attractive Los Angeles footprint. On the effective date of the Plan, MPT will be paid all rent that accrued through the first half of January 2023, and it has agreed to defer approximately $5.6 million, or approximately 30%, of 2023 cash rent into 2024 when it will be collected with interest. MPT and Pipeline also agreed to complete Pipeline’s pre-bankruptcy plans to add a behavioral facility within Coast Plaza Hospital. MPT will fund the capital addition, which will be joined to the master lease and earn rent at the lease rate upon completion.

“This outcome with Pipeline demonstrates that well-underwritten hospital real estate subject to carefully crafted master lease agreements offers strong protection from operator financial challenges,” said Edward K. Aldag, Jr., President, Chairman and Chief Executive Officer. “We have long invested in hospitals with true infrastructure characteristics that provide an inherently favorable local setup for operator profitability, and it is no accident that our expected long-term cash rent trajectory will not be impacted by Pipeline’s bankruptcy process.”

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 roughly 435 facilities and 44,000 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 operate profitably and generate positive cash flow, 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; (xvii) the risk that the expected sale of three Connecticut hospitals currently leased to Prospect does not occur; (xviii) the risk that Pipeline does not exit from bankruptcy under the conditions currently expected; and (xix) 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230113005440/en/

Drew Babin, CFA, CMA

Senior Managing Director – Corporate Communications

Medical Properties Trust, Inc.

(646) 884-9809

dbabin@medicalpropertiestrust.com

Source: Medical Properties Trust, Inc.

FAQ

What was announced in Medical Properties Trust's press release regarding Pipeline Health?

Medical Properties Trust announced the approval of its master lease with Pipeline Health, allowing Pipeline to exit bankruptcy while keeping the lease terms unchanged.

What are the financial implications of Pipeline Health's bankruptcy for Medical Properties Trust?

MPT will collect 100% of rent accrued during the bankruptcy and has agreed to defer a portion of 2023 cash rent to 2024.

How does the master lease agreement protect Medical Properties Trust during Pipeline Health's financial challenges?

The lease is characterized as a true operating lease, ensuring consistent revenue and protection from operator financial challenges.

What future plans does Pipeline Health have post-bankruptcy that involve Medical Properties Trust?

Pipeline plans to complete the expansion of a behavioral facility at Coast Plaza Hospital, funded by MPT.

What is the ticker symbol for Medical Properties Trust?

The ticker symbol for Medical Properties Trust is MPW.