Medical Properties Trust to invest $1.4 billion in 11 facilities
Staff Writer |
Medical Properties Trust 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 and to be operated by Steward Health Care System when the transaction is completed.
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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.
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. ■