Medical Properties Trust and HCA Healthcare agree to 15-year head lease for hospitals representing $ 1.2 billion in MPT assets
BIRMINGHAM, Alabama – (COMMERCIAL THREAD) – Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced that it has entered into an agreement to lease substantially all of its Utah hospitals to HCA Healthcare (“HCA Healthcare”) (NYSE: HCA), following an agreement entered into by HCA Healthcare to purchase the operations of five Utah facilities from Steward Health Care System (“Steward”), for which the financial terms of the sale will remain confidential. MPT’s $ 1.2 billion purchase price for Utah hospitals represents approximately 5.0% of the Company’s total pro forma gross assets, which will place HCA Healthcare among the top five tenants in the world. MPT portfolio. Following this agreement with HCA Healthcare and the closing of other recently announced transactions, the percentage of MPT’s portfolio represented by Steward’s assets is expected to decline to approximately 17%.
Since acquiring the Utah hospitals in 2017, MPT has recorded more than $ 300 million in real estate rents and interest on these properties. Upon completion of the transaction between HCA Healthcare and Steward, MPT and HCA Healthcare will enter into a new 15-year head lease for the five Utah hospitals, with no change to the cash rent payable to MPT under the existing Steward head lease. The lease will include five extension options of five years each, and rents will increase annually at the CPI, subject to a floor of 2.0% and a ceiling of 5.0%. HCA Healthcare will have certain options to purchase the facilities from 2028, while MPT will have certain options to sell the facilities to HCA Healthcare. The purchase price in either option scenario will not be less than fair value.
“We are delighted to welcome HCA Healthcare to our family of world-class hospital operators, ”said Edward K. Aldag, Jr., Chairman, President and CEO of MPT. “HCA is a well-known industry leader with a proven track record in improving patient care by leveraging its capabilities as a learning healthcare system model. With this new head lease agreement, we are pleased to continue to play an important role in supporting best-in-class care for communities in Utah, while continuing to expand and diversify our portfolio of carrier relationships. . ”
Aldag continued: “These transactions confirm MPT’s underwriting expertise, which identifies critical community facilities, and supports healthcare operators in their efforts to improve healthcare delivery. Our $ 1.2 billion investment in Utah facilities was based in part on our confidence in Steward’s track record and ability to create sustainable cash flow to cover lease payments by at least 200%. . In the four years since the initial transactions, Steward has reported a steady increase in revenue and EBITDAR and has maintained attractive hedging levels. The resulting new 15-year lease with HCA Healthcare strongly validates our initial underwriting and the $ 1.2 billion purchase price for these properties.
The closing of the sale by Steward to HCA Healthcare and the completion of the main lease of HCA Healthcare is expected in the first half of 2022, subject to obtaining certain regulatory approvals and other customary conditions. There can be no assurance that such approvals will be obtained or that other conditions will be met.
About Medical Properties Trust, Inc.
Medical Properties Trust, Inc. is a self-advising real estate investment trust established in 2003 to acquire and develop net lease hospital facilities. Since its inception in Birmingham, Alabama, the company has grown to become one of the largest hospital owners in the world with approximately 440 facilities and 46,000 licensed beds (on a pro forma basis) in nine countries and on four continents. MPT’s funding model facilitates acquisitions and recapitalizations and allows hospital operators 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 contains 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”, “direction” or other similar terms, and include statements regarding our strategies, objectives, expansion activities and future development 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) economic, political and social impact and uncertainty related to the COVID-19 pandemic, including government assistance to hospitals and healthcare providers, including some of our tenants; (ii) the ability of our tenants, operators and borrowers to meet their obligations under their respective contractual agreements with us, in particular due to the adverse economic impact of the COVID-19 pandemic, and government regulation of hospitals and healthcare providers related to the same (as detailed in our current report on Form 8-K filed with the SEC on April 8, 2020); (iii) our expectations for net income at annual run rate and NFFOs per share; (iv) our success in implementing our business strategy and our ability to identify, underwrite, finance, complete and integrate acquisitions and investments; (v) the nature and extent of our current and future competition; (vi) macroeconomic conditions, such as disruption or lack of access to capital markets or fluctuations in exchange rates; (vii) our ability to obtain debt financing on attractive terms or not at all, which may have a negative impact on our ability to pursue acquisition and development opportunities and to repay, refinance, restructure or extend our debt as it becomes due; (viii) increases in our borrowing costs due to changes in interest rates and other factors, including the phase-out of LIBOR or other benchmark rates after 2021; (ix) economic, real estate and other conditions of the international, national and local market, which may have a negative impact, among other things, on the financial position 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 sector in general or the healthcare real estate sector in particular; (xi) our ability to maintain our REIT status for federal and state income tax purposes; (xii) federal and state health care and other regulatory requirements, as well as those of foreign jurisdictions in which we own properties; (xiii) the value of our real estate assets, which may limit our ability to sell assets at attractive prices or to 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 our properties, to provide high quality services, to attract and retain qualified personnel and to attract patients; (xv) environmental contingencies and other liabilities; (xvi) the closing of the scheduled repayment of the Priory operating loan, Springstone’s behavioral health sale and leaseback investments, and HCA’s sale and leaseback investment; and (xvii) the risk that the Steward Massachusetts partnership transaction and sales of unrelated properties, loan repayments and other capital laundering transactions do not occur.
The risks described above are not exhaustive and additional factors could have a negative impact on our business and financial performance, including the risk factors discussed in the section titled “Risk Factors” in our Annual Report on Form 10- K for the fiscal year ended December 31, 2020 and as updated in our quarterly reports on Form 10-Q. Forward-looking statements are inherently uncertain, and actual performance or results may differ materially from forward-looking statements and the assumptions on which such statements are based. Readers are cautioned not to place undue reliance on forward-looking statements as predictions of future events. We accept no responsibility for updating these forward-looking statements, which speak only as of the date on which they were made.