This agreement should take some of the revenue pressure off of Medical Properties Trust thereby reducing the chance of a dividend reduction in the future. More will have to be learned when Medical Properties reports their earnings later in the month.
Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced that it has agreed to lease its entire Utah hospital portfolio to Catholic Health Initiatives Colorado (“CHIC”), a wholly owned subsidiary of CommonSpirit Health (“CommonSpirit”), subsequent to CHIC’s pending acquisition of the Utah hospital business currently operated by Steward Health Care System (“Steward”). Centura Health (“Centura”) will manage the facilities for CHIC.
The expected transaction will further MPT’s long-term efforts to improve portfolio diversification by property type, geography and, in this case, operator. The Company’s investment in its Utah real estate represents approximately 6% of its total gross assets, and Steward’s concentration will decline by this amount. Accordingly, CommonSpirit, recognized as one of the country’s largest and most respected not-for-profit healthcare providers, will become one of MPT’s largest tenants. Cash rental payments during the 15-year initial lease term are to begin at roughly 7.8% of MPT’s gross investment and increase by 3.0% annually. The overall cash flow profile of the lease is particularly attractive given the tenant’s strong investment grade credit. The lessee will have the option to purchase the facilities at the higher of fair market value or MPT’s gross investment at 5, 10 and 15 years.
The purchase price of CHIC’s acquisition of operations from Steward was not disclosed by the parties, but Steward expects to use the proceeds to reduce debt, including early prepayment of loans extended by MPT in the second quarter of 2022, and other liabilities.Medical Properties Trust