Dive Brief:
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Medical Properties Trust has sold five hospitals in New Jersey and California to Prime Healthcare for $350 million, the hospital landlord said Tuesday.
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Prime will pay $250 million in cash immediately and provide a $100 million interest-bearing mortgage note in nine months, according to the news release.
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MPT first teased a Prime sale during an earnings call in February. MPT’s Chief Financial Officer Steven Hamner said sale proceeds would go toward paying down MPT’s $900 million in bank debt and $550 million in unsecured notes due in 2025.
Dive Insight:
Medical Properties Trust has $18.3 billion of assets in its portfolio, the majority of which are acute care hospitals. The company turns a profit by investing in healthcare facility sales and leasebacks, according to its website.
The hospitals included in the Prime sale include Lynwood, California-based St. Francis Medical Center and four New Jersey-based St. Clare’s Health facilities, according to MPT’s fourth quarter earnings report.
MPT will also combine four leases at hospitals in Michigan and Missouri into a 20-year master lease with inflation-based escalators collared between 2% and 4%.
Most of MPT’s leases are long-term leases with annual inflation-based escalators, according to MPT annual reports. The REIT has been criticized for locking tenants into rental agreements they cannot pay by watchdog groups, including the Private Equity Stakeholder Project.
Two of MPT’s assets — Steward Health Care and Prospect Medical Holdings — have recently fallen behind on rent payments, creating shortfall for MPT, according to Moody’s Ratings. The credit ratings agency downgraded MPT’s credit outlook to negative in December in light of its tenants’ struggles.
The credit agency suggested that asset sales, such as hospital sales, could be a viable source of capital for MPT as it seeks to fund its upcoming debt payments.
The REIT reported a net loss of $664 million during its fourth quarter driven in large part by $772 million in write-off and other charges to its largest tenant, Steward. MPT reported a net loss of $556 million for the full fiscal year.
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