Medical Properties Trust Sells Majority Interest in Utah Hospitals

Rhea-AI Summary

Medical Properties Trust (MPW) sells majority interest in Utah hospitals, generating $1.1 billion in cash proceeds. The total liquidity transactions year-to-date reach $1.6 billion, 80% of the initial FY 2024 target. The sale involves a joint venture with an investment fund, with MPT retaining a 25% interest. The Fund purchases a 75% interest for $886 million, validating MPT's underwritten lease base of $1.2 billion. The transactions provide immediate cash proceeds to MPT, expected to be used for debt reduction and general corporate purposes.

Positive

• Sale of Utah hospitals generates $1.1 billion in cash proceeds for MPT.
• Total liquidity transactions for the year reach $1.6 billion, 80% of the initial FY 2024 target.
• MPT retains a 25% interest in the joint venture with an investment fund purchasing a 75% interest for $886 million.
• Underwritten lease base of $1.2 billion is validated through the sale transactions.
• Proceeds expected to be used for debt reduction and general corporate purposes.
• MPT's capital allocation strategy is on track to exceed the initial $2.0 billion target in liquidity transactions by 2024.

Negative

• None.

Insights

Financial Analyst

The transaction of Medical Properties Trust divesting the majority interest in Utah hospitals represents a significant liquidity event, netting a substantial $1.1 billion. This development profoundly impacts the company’s balance sheet, reducing leverage through the planned payoff of a $300 million Australian term loan and other credit facilities. Key financial ratios such as debt-to-equity will likely improve post-transaction, potentially leading to a more favorable credit rating and lower borrowing costs. However, investors should monitor whether the dilution of earnings from the sale could impact future dividends.

Real Estate Investment Analyst

By retaining a 25% stake in the new joint venture, Medical Properties Trust maintains exposure to the underlying real estate assets, which could be beneficial if the properties appreciate in value. However, the transaction terms with the institutional asset manager underline the importance of due diligence in real estate investments. The $886 million sale price corroborates MPT’s valuation, but the structure of the deal, including the lessee's purchase option and limited preferences granted to the Fund, introduces a complexity that requires a closer examination of future revenue streams and potential exit strategies for MPT.

Market Strategist

The strategic move by MPT to accelerate capital allocation indicates an aggressive approach to managing its asset portfolio, which could be interpreted positively by the market as a proactive management decision. However, there may be concerns regarding the sustainability of growth if significant portions of assets are divested. Investors should consider the implications of such liquidity transactions on the long-term asset base and revenue generation capabilities of MPT, especially in the evolving healthcare real estate market where asset values and lease terms could fluctuate.

Generates Approximately $1.1 Billion of Total Cash Proceeds to MPT

Brings Total Liquidity Transactions Year-to-Date to $1.6 Billion, or 80% of MPT’s Initial FY 2024 Target

BIRMINGHAM, Ala.--(BUSINESS WIRE)-- Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced that it has sold its interests in five Utah hospitals to a newly formed joint venture (the “Venture”) with an investment fund (the “Fund”) affiliated with a leading multi-strategy, multi-billion dollar institutional asset manager with a proven track record in real estate investments. MPT has retained an approximate 25% interest in the Venture and the Fund purchased an approximate 75% interest for $886 million, fully validating MPT’s underwritten lease base of approximately $1.2 billion. Simultaneous with the closing of this sale transaction, the Venture placed new non-recourse secured financing, providing $190 million of additional cash to MPT based on its share of the proceeds and further confirming underwritten asset values.

Together, the two transactions delivered approximately $1.1 billion of immediate cash proceeds to MPT, before costs and reserves. The proceeds are expected to be used to reduce outstanding debt – including payment in full of the approximate $300 million Australian term loan due 2024 and repayment of borrowings under its revolving credit facility – and for general corporate purposes.

Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer said, “MPT’s approach to underwriting hospital real estate has once again been validated by highly sophisticated third-party participants in a broadening private market for real hospital assets. Our primary focus remains on accelerating our capital allocation strategy, and we are now confident that we will exceed our initial target of $2.0 billion in liquidity transactions in 2024 based on the valuations achieved on recent transactions and the terms we are actively negotiating for additional transactions.”

As previously reported, the Utah lessee (an affiliate of CommonSpirit Health) may acquire the leased real estate at a price equal to the greater of fair market value and the approximate $1.2 billion lease base at the fifth or tenth anniversary of the 2023 master lease commencement. MPT granted certain limited and conditional preferences to the Fund based on the possible exercise price of the lessee’s purchase option.

Eastdil Secured, L.L.C. acted as exclusive financial adviser, and Goodwin Procter LLP and Baker Donelson PC acted as legal advisers for MPT.

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 439 facilities and approximately 43,000 licensed beds in nine countries and across three continents as of December 31, 2023. 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 and other liquidity transactions, 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) 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; (ii) 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; (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; (xviii) the risk that MPT is unable to monetize its investment in Prospect Medical Holdings, Inc. at full value within a reasonable time period or at all; and (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/20240412552958/en/

Drew Babin, CFA, CMA

Senior Managing Director of Corporate Communications

Medical Properties Trust, Inc.

(646) 884-9809

dbabin@medicalpropertiestrust.com

Source: Medical Properties Trust, Inc.

FAQ

How much cash proceeds did Medical Properties Trust generate from selling its interests in Utah hospitals?

Medical Properties Trust generated approximately $1.1 billion in cash proceeds from selling its interests in Utah hospitals.

What percentage of MPT's initial FY 2024 target have the total liquidity transactions year-to-date reached?

The total liquidity transactions year-to-date have reached 80% of MPT's initial FY 2024 target.

What percentage of interest did MPT retain in the joint venture formed with the investment fund?

MPT retained an approximate 25% interest in the joint venture formed with the investment fund.

How much did the investment fund pay for the 75% interest in the joint venture?

The investment fund paid approximately $886 million for the 75% interest in the joint venture.

What is the expected use of the proceeds generated from the sale transactions?

The proceeds are expected to be used for debt reduction and general corporate purposes.