Medical Properties Trust Sells 11 Colorado Facilities for $86 Million

Rhea-AI Summary

Medical Properties Trust (MPT) has sold 11 healthcare facilities in Colorado to University of Colorado Health (UCHealth) for $86 million. The facilities include freestanding emergency departments, primary care, imaging, and urgent care centers. MPT plans to use the proceeds to reduce debt and for general corporate purposes.

The facilities were originally constructed for Adeptus Health between 2015 and 2017 at a cost of $64 million. After Adeptus filed for bankruptcy in 2017, UCHealth leased the facilities from MPT. This sale marks the completion of the transaction, providing MPT with a significant return on its initial investment.

Positive

• Sale of 11 Colorado facilities for $86 million, representing a $22 million gain over the initial $64 million construction cost
• Proceeds to be used for debt reduction and general corporate purposes, potentially improving the company's financial position
• Successful transition of properties from a bankrupt tenant (Adeptus) to a strong credit quality tenant (UCHealth) and eventual sale

Negative

• Reduction in the company's real estate portfolio and potential future rental income from these properties

Insights

Financial Analyst

The sale of 11 Colorado facilities by Medical Properties Trust (MPT) for $86 million is a strategic move with mixed implications. On the positive side, the transaction represents a 34% premium over the initial $64 million investment, demonstrating MPT's ability to generate value from its real estate portfolio. The company's intention to use the proceeds for debt reduction is prudent, potentially improving its balance sheet and financial flexibility.

However, this divestment also means a loss of future rental income from these properties. The transition from Adeptus Health to UCHealth as the operator, while ensuring continuity of care, likely came with reduced rental rates. This sale might signal MPT's strategy to optimize its portfolio by divesting less profitable assets.

Investors should monitor MPT's debt levels and future acquisition plans to assess the long-term impact of this transaction on the company's growth and income-generating potential.

Healthcare Real Estate Expert

This transaction highlights the resilience and adaptability of Medical Properties Trust's business model in the face of operator challenges. The company successfully navigated Adeptus Health's bankruptcy in 2017, swiftly securing UCHealth as a replacement tenant. This move preserved the facilities' operational continuity and MPT's revenue stream, albeit at potentially lower rates.

The sale to UCHealth, a strong credit-quality operator, at a premium to initial investment, underscores MPT's ability to create value even in challenging situations. This deal may also indicate a trend towards health systems directly owning their facilities, which could present both opportunities and challenges for healthcare REITs like MPT.

Looking forward, MPT's ability to redeploy capital from this sale into higher-yielding assets or debt reduction will be important for maintaining investor confidence and supporting long-term growth prospects.

BIRMINGHAM, Ala.--(BUSINESS WIRE)-- Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced the completion of its sale of 11 freestanding emergency department (“FSED”), primary care, imaging and urgent care facilities in Colorado to University of Colorado Health (“UCHealth”) for $86 million. The Company intends to use the proceeds from the transaction to reduce debt and for general corporate purposes.

Construction of the eleven facilities was funded by MPT for their original operator, Adeptus Health (“Adeptus”), between 2015 and 2017 at a total initial cost of $64 million. Shortly after Adeptus filed for Chapter 11 bankruptcy protection in 2017, UCHealth leased the facilities from MPT without interruption to care and with a nominal rent concession reflective of UCHealth’s strong credit quality.

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 435 facilities and approximately 42,000 licensed beds in nine countries and across three continents as of June 30, 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, asset sales and other liquidity transactions (including the use of proceeds thereof), expected returns on investments and financial performance, expected trends and performance across our various markets, and expected outcomes from Steward’s restructuring process. 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, the Company’s largest tenant, 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 expected asset sales do not occur at the agreed upon terms or at all; (xviii) the risk that we are unable to monetize our investments in certain tenants 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 and our Form 10-Q, and 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/20240814542275/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

How much did Medical Properties Trust (MPW) sell its Colorado facilities for?

Medical Properties Trust sold 11 healthcare facilities in Colorado to University of Colorado Health for $86 million.

What types of facilities did MPW sell in Colorado?

MPW sold freestanding emergency departments, primary care, imaging, and urgent care facilities in Colorado.

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

MPW intends to use the proceeds from the sale to reduce debt and for general corporate purposes.

What was the original cost of the Colorado facilities sold by MPW?

The original construction cost of the 11 facilities was $64 million, funded by MPT between 2015 and 2017.

Who was the original operator of the Colorado facilities sold by MPW?

The original operator of the facilities was Adeptus Health, which filed for Chapter 11 bankruptcy protection in 2017.