BIRMINGHAM, AL—Medical Properties Trust Inc., headquartered here, said Monday afternoon that it had agreed to acquire the real estate interests of nine Boston-area acute care hospitals operated by Steward Health Care System LLC from Steward's management team and Cerberus Capital Management. The $1.25-billion deal includes a $1.2-billion investment in hospital real estate and a $50-million equity investment in Steward, the largest for-profit hospital system in the Massachusetts market. Separately, MPT announced a stock offering to partly fund the acquisition of the Steward properties, as well as its $900-million acquisition of 40 rehabilitation hospitals in Germany from Median Kliniken, originally announced in October of 2014.
“Since Steward's inception in 2011, they have achieved outstanding results and now rank as the second largest hospital operator in New England, with the largest community-based network of physicians,” says Edward K. Aldag Jr., the REITs chairman, president and CEO. “Dr. Ralph de la Torre, Steward's chairman and CEO, is recognized for his thought leadership in the healthcare industry, demonstrated by Steward's innovative model in delivering healthcare to over 150 communities across Eastern Massachusetts, Rhode Island and Southern New Hampshire. We are very excited about the opportunities this relationship creates for both of us.”
MPT's interests in the hospitals will be subject to a master lease and mortgage loan arrangements with cross default provisions and backed by a corporate guaranty. The master lease represents approximately $600 million and has a 15-year initial term and three five-year extension terms, and a GAAP yield of 10.1%; the cross-defaulted mortgage loans, with a similar aggregate value, have identical rates, including CPI-based escalations, generally within a band of 2% to 5%.
Alongside Cerberus and management, MPT is also investing $50 million in Steward. A Cerberus affiliate has agreed to invest $150 million in MPT's common stock in a private placement transaction timed to coincide with the closing on the deal, which also gives MPT right of first refusal on additional Steward properties.
In May, the REIT completed the merger of its investment in the operations of Capella Healthcare Inc. and RegionalCare Hospital Partners Inc., and the related prepayment of two mortgages on Capella hospital facilities. Net proceeds from the transactions, which created one of the largest healthcare operating companies in the US, were used to reduce MPT's borrowings by approximately $550 million.
“As a result of our strategic asset sales earlier this year, along with the opportunistic utilization of our ATM program and refinancing of long term debt, MPT has reduced our leverage to among the best in the industry at 5.0 times EBITDA,” says Aldag. “The successful execution of our strategy has made possible this new relationship with Steward, which represents tremendous opportunity for MPT, as Steward similarly positions itself for rapid growth.”
Among other benefits for MPT, the Steward deal improves MPT's exposure to its largest tenant from 20.8% to 17.8%, and its two largest tenants combined improve to 33.9% from 40.2%. It also improve the company's geographical diversification with MPT now being represented in 30 states at the close of the transaction. Acute care facilities as a percentage of MPT's US portfolio increase to 80%, up from 75% as of June 30.
MPT's stock offering, which it launched Monday, entails the sale of 33.5 million common shares. The company intends to grant the underwriters in the offering a 30-day option to purchase up to an additional 5,025,000 shares of its common stock. BofA Merrill Lynch and Barclays will act as joint book running managers for the offering.
BIRMINGHAM, AL—Medical Properties Trust Inc., headquartered here, said Monday afternoon that it had agreed to acquire the real estate interests of nine Boston-area acute care hospitals operated by Steward Health Care System LLC from Steward's management team and Cerberus Capital Management. The $1.25-billion deal includes a $1.2-billion investment in hospital real estate and a $50-million equity investment in Steward, the largest for-profit hospital system in the
“Since Steward's inception in 2011, they have achieved outstanding results and now rank as the second largest hospital operator in New England, with the largest community-based network of physicians,” says Edward K. Aldag Jr., the REITs chairman, president and CEO. “Dr. Ralph de la Torre, Steward's chairman and CEO, is recognized for his thought leadership in the healthcare industry, demonstrated by Steward's innovative model in delivering healthcare to over 150 communities across Eastern
MPT's interests in the hospitals will be subject to a master lease and mortgage loan arrangements with cross default provisions and backed by a corporate guaranty. The master lease represents approximately $600 million and has a 15-year initial term and three five-year extension terms, and a GAAP yield of 10.1%; the cross-defaulted mortgage loans, with a similar aggregate value, have identical rates, including CPI-based escalations, generally within a band of 2% to 5%.
Alongside Cerberus and management, MPT is also investing $50 million in Steward. A Cerberus affiliate has agreed to invest $150 million in MPT's common stock in a private placement transaction timed to coincide with the closing on the deal, which also gives MPT right of first refusal on additional Steward properties.
In May, the REIT completed the merger of its investment in the operations of Capella Healthcare Inc. and RegionalCare Hospital Partners Inc., and the related prepayment of two mortgages on Capella hospital facilities. Net proceeds from the transactions, which created one of the largest healthcare operating companies in the US, were used to reduce MPT's borrowings by approximately $550 million.
“As a result of our strategic asset sales earlier this year, along with the opportunistic utilization of our ATM program and refinancing of long term debt, MPT has reduced our leverage to among the best in the industry at 5.0 times EBITDA,” says Aldag. “The successful execution of our strategy has made possible this new relationship with Steward, which represents tremendous opportunity for MPT, as Steward similarly positions itself for rapid growth.”
Among other benefits for MPT, the Steward deal improves MPT's exposure to its largest tenant from 20.8% to 17.8%, and its two largest tenants combined improve to 33.9% from 40.2%. It also improve the company's geographical diversification with MPT now being represented in 30 states at the close of the transaction. Acute care facilities as a percentage of MPT's US portfolio increase to 80%, up from 75% as of June 30.
MPT's stock offering, which it launched Monday, entails the sale of 33.5 million common shares. The company intends to grant the underwriters in the offering a 30-day option to purchase up to an additional 5,025,000 shares of its common stock. BofA
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