MPT to Acquire 40 Rehabilitation Hospitals in Germany for $900 Million
Approximately $155 Million in Additional Transactions, including $74
Million in U.S. Investments
Expected to be Accretive to Normalized FFO by $0.09 – $0.12 Per Share
BIRMINGHAM, Ala.--(BUSINESS WIRE)--Oct. 20, 2014--
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW)
today announced that it has entered into definitive agreements pursuant
to which it will acquire and lease back substantially all of the real
estate assets of privately-held MEDIAN Kliniken Group (“MEDIAN”), the
largest private provider of post-acute and acute rehabilitation services
in Germany. The aggregate purchase price for the real estate assets is
expected to be approximately €705 million, or $900 million based on
current exchange rates.
“This transaction further demonstrates MPT’s success in leveraging its
deep understanding of the healthcare markets and continues its track
record of completing highly accretive investments across diverse
geographies,” said Edward K. Aldag, Jr., Chairman, President and CEO of
Medical Properties Trust. “This is an important transaction because it
significantly increases our asset base to approximately $4.5 billion,
and builds on our recent entry into the attractive Western European
market. The acquisition of the MEDIAN real estate is a very compelling
and unique opportunity for MPT and is fully aligned with our strategy to
diversify our market-leading hospital portfolio across geography,
operator and facility type.”
Under the terms of the sale/leaseback agreement, MPT will acquire from
and leaseback to MEDIAN the real estate assets of 38 rehabilitation and
2 acute care hospitals throughout Germany pursuant to a 27 year master
lease that provides an initial lease rate well within MPT’s 8.0% to
11.0% target range, with annual escalators at the greater of one percent
or 70% of German CPI. Aggregate earnings before interest, taxes,
depreciation, amortization and rent for the 40 hospitals are also
expected to approximate MPT’s historical underwriting targets for
post-acute hospitals.
In addition to the MEDIAN acquisitions, MPT also announced today
approximately $155 million in recent, previously undisclosed commitments
and investments. These hospital assets include three acute facilities in
the United States (located in Alabama, Texas and West Virginia) with an
aggregate value of approximately $74 million and three additional German
rehabilitation hospitals with an aggregate value of approximately $81
million (based on agreed pricing of €64 million) to be leased to RHM
Kliniken, a current tenant of the Company’s assets in Germany, and owned
by affiliates of Waterland Private Equity, the expected future majority
owner of MEDIAN. With these transactions, MPT has committed to
investments totaling approximately $1.4 billion year-to-date, the
highest amount of investments the Company has made in a single year in
its history.
Consistent with MPT’s standard agreements, the new U.S. hospital
facilities, as well as those included in the new commitment with RHM
Kliniken, will be leased back to the operators under long-term net
leases with a weighted average initial cash lease rate of approximately
9.3% and consumer price index-based escalators.
MPT expects to consummate the MEDIAN transaction through a two-step
process. In the first step, an affiliate of Netherlands-based Waterland
Private Equity will acquire a 94.9% equity interest in MEDIAN. MPT will
acquire the remaining 5.1% stake and will provide loans to Waterland and
MEDIAN for up to the €705 million purchase price of the sale/leaseback
real estate. In step two the loans will be offset against the purchase
prices of each real estate acquisition. Closing of the sale/leaseback
transactions is conditioned on the acquisition of MEDIAN’s equity in
step one, which is subject to approval by the German merger control
authorities. The closing of each hospital sale/leaseback transaction is
also subject to, among other things, the rights of local governments to
pre-emptively acquire the real estate instead of MPT. The transactions
are expected to be completed during the first quarter of 2015.
MPT has amended its credit facility to increase the aggregate commitment
to $1.15 billion (and provide a new additional $400 million accordion
feature), and amend certain other provisions to ensure that MPT’s
purchase obligations may be fully funded under the credit facility; the
Company also has commitments for a new $225 million one-year senior
unsecured term loan. MPT intends to refinance the MEDIAN transaction as
market conditions warrant with a combination of new secured or unsecured
debt and equity.
Benefits of the Transactions
-
Accretive to normalized FFO. Based on MPT’s recent share price,
estimated interest costs of 3.5% and 5.0% for secured and unsecured
long-term debt, respectively, and maintenance of MPT’s target leverage
of approximately 45% of total assets, the transactions are expected to
be accretive to normalized FFO by between $0.09 and $0.12 per share,
or by between 8.0% and 11.0% for the 12 months following the
completion of permanent financing, taking MPT’s normalized FFO run
rate to $1.19 to $1.26 per share. MPT’s previous run rate estimate was
$1.10 to $1.14 per share.
-
Expands MPT’s global scale. The transactions will significantly
expand MPT’s asset base by approximately 30 percent to $4.5 billion,
grow the total number of properties in its portfolio by approximately
39 percent to 165 and increase its number of beds by approximately 98
percent to nearly 20,000.
-
Impact on long term cost of capital. MPT believes that its
enhanced scale has the potential to lower its cost of capital and
further enhance shareholder value. Compared to similar measures taken
in March 2012 when the Company’s credit ratings were last adjusted,
assets will have increased by $2.3 billion (150 percent) and market
capitalization has increased by approximately $1 billion (84 percent).
In addition, the dividend payout ratio has continued to improve from
more than 100% to between approximately 66% and 71%, substantially
better than the Company’s target range of 75% to 80%.
-
Builds on MPT’s strategy to increase diversification, scale and
presence in international markets. MPT remains committed to
executing its stated strategy to leverage its U.S. hospital expertise
to diversify its portfolio and enhance its scale and presence in
Western Europe. On a pro forma basis, MEDIAN will represent
approximately 20 percent of the pro forma portfolio. Following the
close of the transactions, MPT’s largest facility will represent just
2.6% of the Company’s pro forma portfolio.
-
Further increases MPT’s exposure to favorable market trends in
Western Europe. As one of the strongest global economies, with low
unemployment rates and universal healthcare coverage and payment
policies, MPT believes Germany remains a dynamic market in which to
invest. The public and private sectors are making considerable
investments in the healthcare industry in Germany, and MPT expects to
realize significant value and long-term stability through its
increased exposure in the region. On a pro forma basis, approximately
28 percent of MPT’s portfolio, or a total of 55 facilities, will be
located in Western Europe.
-
German transactions allow MPT to further leverage its operating
infrastructure and access a built-in acquisition pipeline. As a
well-capitalized operator with extensive expertise in healthcare
markets and German hospitals, MPT will be able to leverage its
corporate infrastructure to seamlessly integrate and manage new
investment opportunities. The transactions also expand MPT’s platform
in the attractive German market which provides a competitive advantage
in pursuing highly selective European acquisition opportunities.
Mr. Aldag concluded, “As we increase our exposure to the positive
European market dynamics, we will also maintain our core investment
focus on the United States. With our pioneering and industry-leading
investment track record, we believe MPT is uniquely well-positioned to
take advantage of abundant opportunities both in the U.S. and abroad. We
will continue to extend our leadership in the U.S. market and build upon
our new track record in Western Europe by selectively pursuing the most
attractive opportunities with the goal of leveraging our strong
investment capabilities for the benefit of our shareholders.”
MPT will host a conference call to discuss its third quarter financial
results and the aforementioned transactions in further detail on
Thursday, October 30, 2014.
About Medical Properties Trust, Inc.
Medical Properties Trust, Inc. is a Birmingham, Alabama based
self-advised real estate investment trust formed to capitalize on the
changing trends in healthcare delivery by acquiring and developing
net-leased healthcare facilities. MPT’s financing model allows hospitals
and other healthcare facilities to unlock the value of their underlying
real estate in order to fund facility improvements, technology upgrades,
staff additions and new construction. Facilities include acute care
hospitals, inpatient rehabilitation hospitals, long-term acute care
hospitals, and other medical and surgical facilities. For more
information, please visit the Company’s website at www.medicalpropertiestrust.com.
The statements in this press release that are forward looking are
based on current expectations and actual results or future events may
differ materially. Words such as "expects," "believes," "anticipates,"
"intends," "will," "should” and variations of such words and similar
expressions are intended to identify such forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results of the
Company or future events to differ materially from those expressed in or
underlying such forward-looking statements, including without
limitation: the satisfaction of all conditions to, and the timely
closing (if at all) of, the Median acquisition and sale-leaseback
transactions described herein; the Company’s financing of the
transactions described herein; the capacity of the Company’s tenants to
meet the terms of their agreements; Normalized FFO per share; expected
payout ratio, the amount of acquisitions of healthcare real estate, if
any; capital markets conditions, the repayment of debt arrangements;
statements concerning the additional income to the Company as a result
of ownership interests in certain hospital operations and the timing of
such income; the payment of future dividends, if any; national
and international economic, business, real estate and other market
conditions; the competitive environment in which the Company operates;
the execution of the Company's business plan; the Company's ability to
maintain its status as a REIT for federal income tax purposes;
acquisition and development risks; potential environmental and other
liabilities; and other factors affecting the real estate industry
generally or healthcare real estate in particular. For further
discussion of the factors that could affect outcomes, please refer to
the "Risk factors" section of the Company's Annual Report on Form 10-K
for the year ended December 31, 2013, and as updated by the Company’s
subsequently filed Quarterly Reports on Form 10-Q and other SEC filings.
Except as otherwise required by the federal securities laws, the Company
undertakes no obligation to update the information in this press release.
Source: Medical Properties Trust, Inc.
Medical Properties Trust, Inc.
Tim Berryman, 205-397-8589
Director
– Investor Relations
tberryman@medicalpropertiestrust.com