Medical Properties Trust Completes $160 Million Sale of Eight Arizona Facilities

Rhea-AI Summary

Medical Properties Trust (NYSE: MPW) has sold eight healthcare facilities in Arizona to Dignity Health, a subsidiary of CommonSpirit Health, for $160 million. The sale includes the 50-bed Arizona General Hospital in Mesa and seven freestanding emergency departments in the Phoenix area. The transaction implies a capitalization rate of less than 7.5%.

MPT initially funded the construction of these facilities for Adeptus Health between 2015 and 2017 at a cost of $92 million. After Adeptus filed for bankruptcy in 2017, Dignity Health leased the facilities, recognizing their strategic value in the local healthcare ecosystem. MPT plans to use the proceeds to reduce debt and for general corporate purposes.

Positive

• Sale of eight Arizona facilities for $160 million, representing a 74% increase from the initial $92 million investment
• Capitalization rate of less than 7.5%, indicating a favorable valuation
• Proceeds to be used for debt reduction and general corporate purposes, potentially improving the company's financial position

Negative

• Divestiture of revenue-generating assets may impact future cash flows

Insights

Financial Analyst

Financial Perspective: The sale of eight Arizona facilities for $160 million offers significant insights into MPT's financial strategy. The transaction allows the company to leverage a $160 million infusion to reduce debt, which is important for improving their balance sheet and lowering interest expenses. The fact that the sale price and current cash rents imply a capitalization rate of less than 7.5 indicates a relatively high asset valuation, reflecting positively on the financial health of MPT. Additionally, the return on investment (ROI) is notable here. With an initial cost of $92 million for construction and a sale of $160 million, the transaction yields a gross profit of $68 million. This profit margin demonstrates efficient asset management and sale timing, potentially boosting investor confidence in MPT's strategic financial decisions.

Market Research Analyst

Market Impact: This transaction highlights a strategic realignment within the healthcare real estate sector. Selling to Dignity Health, a subsidiary of CommonSpirit Health, underscores the demand for healthcare facilities in growing metropolitan areas like Phoenix. Investors should recognize the strategic value in offloading assets in high-demand regions to prominent healthcare operators. Such moves can stabilize revenue streams and reduce risk exposure, especially relevant given Adeptus Health's prior financial distress. Moreover, this sale reaffirms MPT's ability to capitalize on lucrative exit opportunities, enhancing its market positioning and bolstering investor sentiment in the long-term potential of healthcare real estate investments.

Healthcare Analyst

Healthcare Industry Insight: The sale of these facilities to Dignity Health can be seen as a win-win for both parties. For MPT, the move to divest these properties post-2017 bankruptcy of Adeptus Health shows strategic acumen in asset management. For Dignity Health, acquiring these facilities ensures continuity in providing essential healthcare services in a growing and aging population. The strategic targeting of lower-acuity patients and the seamless transfer of operations without any disruption indicates a robust healthcare infrastructure. This transaction not only highlights the operational excellence of Dignity Health but also reinforces the importance of strategic real estate positioning in the healthcare sector.

BIRMINGHAM, Ala.--(BUSINESS WIRE)-- Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced the sale of the 50-bed Arizona General Hospital in Mesa, AZ and seven freestanding emergency department (“FSED”) facilities in the Phoenix metropolitan area to Dignity Health, a wholly-owned subsidiary of CommonSpirit Health, for $160 million. The sale price and current cash rents imply a capitalization rate of less than 7.5%. The Company intends to use the proceeds from the transaction to reduce debt and for general corporate purposes.

Construction of the eight facilities was funded by MPT for their original operator, Adeptus Health (“Adeptus”), between 2015 and 2017 at a total initial cost of $92 million. The specific locations for the hospital and surrounding FSEDs were chosen carefully in the underwriting process based on their strategic value in caring for lower-acuity patients closer to their homes and in diagnosing injuries and illnesses requiring advanced treatment at the system’s general acute facilities. Shortly after Adeptus filed for Chapter 11 bankruptcy protection in 2017, Dignity Health recognized the value of this footprint within a growing and aging local healthcare ecosystem and leased the facilities without interruption to care or any change to the rental rate.

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 436 facilities and approximately 43,000 licensed beds in nine countries and across three continents as of March 31, 2024. 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.

Forward-Looking Statements

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 and other liquidity transactions (including the use of proceeds thereof), 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 risk that the bankruptcy restructuring of Steward Health Care System, the Company’s largest tenant (“Steward”), does not result in MPT recovering deferred rent or its other investments in Steward at full value, within a reasonable time period or at all; (ii) macroeconomic conditions, including due to geopolitical conditions and instability, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries, rising inflation and movements in currency exchange rates; (iii) the risk that previously announced or contemplated property sales, loan repayments, and other capital recycling transactions do not occur as anticipated or at all; (iv) 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; (v) MPT’s ability to obtain debt financing on attractive terms or at all, as a result of changes in interest rates and other factors, which may adversely impact its ability to pay down, refinance, restructure or extend its indebtedness as it becomes due, or pursue acquisition and development opportunities; (vi) the ability of our tenants, operators and borrowers to satisfy their obligations under their respective contractual arrangements with us; (vii) the economic, political and social impact of, and uncertainty relating to, the potential impact from health crises (like COVID-19), which may adversely affect MPT’s and its tenants’ business, financial condition, results of operations and liquidity; (viii) our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate acquisitions and investments; (ix) the nature and extent of our current and future competition; (x) 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; (xi) factors affecting the real estate industry generally or the healthcare real estate industry in particular; (xii) our ability to maintain our status as a REIT for income tax purposes in the U.S. and U.K.; (xiii) federal and state healthcare and other regulatory requirements, as well as those in the foreign jurisdictions where we own properties; (xiv) 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; (xv) the ability of our tenants and operators to operate profitably and generate positive cash flow, remain solvent, 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; (xvi) potential environmental contingencies and other liabilities; (xvii) the risk that the expected sale of three Connecticut hospitals currently leased to Prospect does not occur at the agreed upon terms or at all; (xviii) the risk that MPT is unable to monetize its investment in Prospect at full value within a reasonable time period or at all; (xix) the cooperation of our joint venture partners, including adverse developments affecting the financial health of such joint venture partners or the joint venture itself; and (xx) the risks and uncertainties of litigation or other regulatory proceedings.

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 most recent Annual Report on Form 10-K, as may be updated in our other filings with the SEC. 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/20240723632815/en/

Drew Babin, CFA, CMA

Head of Financial Strategy and Investor Relations

Medical Properties Trust, Inc.

(646) 884-9809

dbabin@medicalpropertiestrust.com

Source: Medical Properties Trust, Inc.

FAQ

What assets did Medical Properties Trust (MPW) sell in Arizona?

Medical Properties Trust sold eight healthcare facilities in Arizona, including the 50-bed Arizona General Hospital in Mesa and seven freestanding emergency departments in the Phoenix metropolitan area.

How much did Medical Properties Trust (MPW) receive for the Arizona facility sale?

Medical Properties Trust received $160 million for the sale of the eight Arizona healthcare facilities to Dignity Health.

What was the original investment cost for MPW in the Arizona facilities?

Medical Properties Trust initially funded the construction of the eight Arizona facilities between 2015 and 2017 at a total cost of $92 million.

How does MPW plan to use the proceeds from the Arizona facility sale?

Medical Properties Trust intends to use the proceeds from the $160 million sale to reduce debt and for general corporate purposes.