Medical Properties Trust Agrees to Purchase 9 Acute Care Hospitals for $1.25 Billion

Birmingham, Alabama-based real estate investment trust (REIT) Medical Properties Trust Inc. (NYSE: MPW) recently agreed to purchase the real estate interests of nine acute care hospitals in Massachusetts with 1,768 total beds for $1.25 billion, CoStar Group reported.

The price includes a $50 million equity investment in Steward Health Care System LLC, which operates the acute care hospitals, and a $1.2 billion investment in hospital real estate. Steward is the largest for-profit hospital system in the Massachusetts market, and is owned by its management team and Cerberus Capital Management, a private equity firm.

Source: CoStar Group

Source: CoStar Group

The transaction is scheduled to close in the fourth quarter of 2016. As part of the deal, a Cerberus affiliate is set to invest $150 million in Medical Properties Trust’s common stock in a private placement, CoStar reported.

The investment by Medical Properties Trust lays the foundation for Steward to expand nationally and return the initial investment made in Steward by Cerberus six years ago, according to CoStar. The deal also includes a right of first refusal for Medical Properties Trust to take part in up to the next $1 billion of Steward’s hospital purchases.

“This investment, along with Cerberus’ continued commitment, sets the stage for Steward’s future,” Steward Health Care System founder, Chairman and CEO Ralph de la Torre said in a prepared statement. “The Medical Properties Trust investment will provide Steward a second source of capital funding. This ensures Steward will continue to provide high quality health care at an affordable cost in New England, and enables us to grow our proven quality model nationally.”

Medical Properties Trust’s interests in the Massachusetts hospitals will be subject to a master lease and mortgage loan arrangements, according to CoStar. The master lease represents $600 million and features a 15-year initial term, as well as three five-year extension terms.

Written by Mary Kate Nelson