Acquisitions Immediately Accretive to Normalized FFO by
Approximately $0.10 Per Share
BIRMINGHAM, Ala.--(BUSINESS WIRE)--May 19, 2017--
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW)
today 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.
Transaction Summary
MPT’s interests in the hospitals to be acquired will be subject to a
master lease and mortgage loan arrangements with cross default
provisions and backed by a corporate guaranty. Nine hospitals will be
purchased for $700 million and leased back to Steward under the master
lease, which has an expiration date of October 31, 2031, and includes
three five-year extension terms, resulting in a GAAP yield of 10.2%. The
new mortgage loans, also aggregating $700 million, have the same
contractual terms as the leases. Additionally, MPT is making an
attractive $100 million preferred equity investment in Steward, which
will provide low risk equity-like returns.
MPT’s pro forma investment of $3.3 billion in Steward real estate will
include MPT’s existing investment in hospital real estate leased to
IASIS, and generate approximately $298 million in annual revenue split
67% rental income and 33% interest income from mortgages. Expected 2018
EBITDAR rent and interest coverage for all Steward hospitals is 2.8
times.
The transaction is expected to close by September 30, 2017, subject to
customary approvals and consents. MPT expects to finance the
acquisitions with proceeds from a combination of a fully committed $1.0
billion term loan with a term up to two years, its revolving credit
facility with present availability of approximately $1.0 billion and the
possible issuance of long-term unsecured notes. The Company intends to
maintain its prudent leverage position and does not expect net debt to
adjusted EBITDA to exceed 5.7 times.
Investor Presentation
The Company has posted a presentation regarding the Steward transaction,
including a reconciliation of pro forma FFO per diluted share to Net
Income, the most comparable GAAP measure, on the Investor Relations page
of the Company’s website, www.medicalpropertiestrust.com
under Webcasts & Presentations.
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: our ability to successfully consummate the Steward/IASIS
transactions discussed in this press release; the satisfaction of all
conditions to, and the timely closing (if at all) of pending
transactions; net income per share; Normalized FFO per share; the amount
of acquisitions of healthcare real estate, if any; results from the
potential sales, if any, of assets; capital markets conditions;
estimated leverage metrics; 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; completion of
additional debt arrangements, and additional investments; 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; financing risks; the
Company’s ability to maintain its status as a REIT for 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, 2016 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170519005335/en/
Source: Medical Properties Trust, Inc.
Medical Properties Trust, Inc.
Tim Berryman, 205-969-3755
Director
– Investor Relations
tberryman@medicalpropertiestrust.com