Medical Properties Trust, Inc. to invest $1.4 billion in ten acute care hospitals and one behavioral health facility

Medical Properties Trust  announced that it has signed definitive agreements to acquire the real estate interests of ten acute care hospitals and one behavioral health facility currently operated by IASIS Healthcare (“IASIS”) and to be operated by Steward Health Care System LLC(“Steward”) when the transaction is completed. The $1.4 billion real estate transaction will be immediately accretive to normalized FFO per share by approximately $0.10 (and to net income by $0.05 per share) in 2018 assuming all debt financing. Steward and IASIS separately announced a simultaneous merger transaction, completion of which is a condition of MPT’s investment.

Benefits to MPT’s Portfolio

  • Increases Critical Mass. This transaction increases MPT’s pro forma total gross assets by approximately 20% to almost $9 billion. Further, it adds 11 outstanding hospitals and over 2,400 beds to MPT’s portfolio, increasing the total number to 269 and 31,266, respectively.
  • Attractive Markets. Community-focused hospitals clustered primarily within large metropolitan areas in high-growth urban and suburban markets in the states of Utah, Arizona, Texas and Arkansas offer suitable payor mixes.
  • Increased Acute Care Percentage. Acute care hospitals increase to 72.5% of MPT’s total portfolio and 84.0% of the U.S. portfolio, an increase from 66.9% and 79.9%, respectively.
  • Decreased LTACH Percentage. Long-term acute care hospitals decrease to 4.2% of MPT’s total portfolio and 5.0% of the U.S. portfolio, a decline from 5.0% and 6.3%, respectively.
  • Single Largest Hospital Exposure. The largest hospital in MPT’s pro forma portfolio represents just 3.9% of MPT’s total real estate investments with this transaction.
  • Expands Steward Relationship. MPT expands its relationship with an innovative, forward-thinking operator in Steward, which will become the largest private, for-profit hospital operator in the United States. With this transaction, Steward will have nearly 7,500 patient beds in 36 hospitals across ten states. Steward’s integrated model, including 1,800 directly employed multi-specialty physicians and several thousand aligned physicians, shifts healthcare delivery to a more cost-effective, local coordinated approach emphasizing quality care and wellness. The merging of the managed care operations of Steward and IASIS will result in more than 1.1 million covered lives.

“We are very excited about this opportunity to grow with one of the top hospital operators in the country,” said Edward K. Aldag, Jr., MPT’s Chairman, President and Chief Executive Officer. “MPT has grown its assets by approximately 31 percent annually since 2013, compared to 15 percent for our healthcare REIT peers, and with this transaction, we eclipse our previous record 2016 acquisition total. This phenomenal growth, even as we sold almost $800 million of assets in the first half of 2016 to reduce leverage, has resulted in our normalized FFO per share growing over 10% annually compared to 6.7% for our peers for the period. Our dividend growth of 4% annually has also outperformed while our dividend payout ratio declined from 83% to 70% of normalized FFO.

“Steward has similarly achieved remarkable success in growing its company starting with the turnaround of a struggling not-for-profit hospital system in eastern Massachusetts. As Steward implemented its strategic plan to develop an integrated network with various access points along the healthcare continuum, the results were improved outcomes and reduced costs. The combined capabilities of Steward and IASIS will create the largest private for-profit hospital operator in the United States with projected revenues of almost $8 billion in 2018, the first full year of consolidated operations. Consolidation will continue in this dynamic healthcare environment and Steward is in a good position to capitalize on this trend,” added Aldag.

Source: Medical Properties Trust

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