Nation’s Biggest Hospital Landlord Suffers New Losses
The Wall Street Journal
Medical Properties Trust, the country’s largest hospital landlord, said it would record about $350 million of write-downs related to its largest tenant, which had fallen behind on its rent, and hired a well-known restructuring adviser.
MPT, which had long supported Dallas-based Steward Health Care System, said more write-downs are possible. The news, released Thursday after the market closed, sent shares of MPT down 30% to $3.46 in early trading. The stock is down by 70% over the past year.
MPT said Steward was $50 million behind on its rent at year-end. MPT said it had agreed to fund a new $60 million loan to Steward and to defer portions of rent owed for 2024.
MPT also said it had hired Alvarez & Marsal as a financial adviser. The firm is known for its restructuring-advisory services, but an MPT spokesman, Drew Babin, said the scope of its services “is strictly limited to supporting MPT’s efforts to recover uncollected rents and outstanding loans from Steward.”
MPT grew quickly during the years of ultralow interest rates. The Birmingham, Ala.-based real-estate investment trust made $23 billion of acquisitions over two decades, mainly of hospital properties. MPT buys the bricks and mortar, and leases the buildings back to hospital operators.
Now, with interest rates higher and money tighter, MPT has been shrinking. MPT has been extending financial support to some of its most-troubled tenants, including Steward and Los Angeles-based Prospect Medical Holdings. Steward accounted for $3.8 billion, or almost 20%, of MPT’s assets as of Sept. 30 and is MPT’s largest tenant. Prospect accounted for $1.7 billion, or 9%, of MPT’s assets. Earlier this year, MPT slashed its quarterly dividend by almost half.
MPT played a crucial role in private-equity firms’ push into healthcare facilities. It used cheap, plentiful financing to buy more than 400 hospitals, in some cases enriching private-equity firms that sold to MPT at high prices and paid themselves large dividends. Now some of the deals have soured. Hospital chains that are MPT’s tenants, including Steward and Prospect, have closed facilities and cut services, reducing healthcare options in some communities.
MPT in its disclosure Thursday didn’t provide an update on Prospect, its third-largest tenant. MPT’s earnings for 2022 were hit by $283 million of impairment charges related to Prospect. MPT owns hospital properties operated by Prospect in Connecticut and southern California, and it is the mortgage lender for a handful of Pennsylvania hospitals that MPT last year sold back to Prospect, including two hospitals near Philadelphia that Prospect had closed.
MPT has pledged to lower its $10.2 billion of debt and boost liquidity through a series of deals for its properties.
In October 2022, Yale New Haven Health announced plans to buy Prospect’s Connecticut operations, part of a three-way deal involving MPT and the two companies. That deal has been on hold, and Yale New Haven has sought to reduce its purchase price, citing deteriorating conditions at Prospect’s operations in the state. MPT in its most recent quarterly report said it expected to receive $355 million of cash from the planned sale to Yale New Haven to help fund its short-term liquidity needs.
In a note Thursday, JPMorgan analysts said “the reality for the stock is that it is essentially another multi-quarter work-out being added to the mix on top of MPW’s deleveraging plans (potentially spanning multiple years) and the evolving Prospect situation.”
Prospect and Steward both are closely held and don’t disclose consolidated financial statements publicly. During a conference call with analysts in August, MPT’s chief financial officer, Steven Hamner, said MPT planned to file Steward’s financial 2022 financial statements once the company received them.
He said MPT would be doing so at the request of the Securities and Exchange Commission, and he pointed to SEC rules requiring such disclosures if a single tenant represents a significant portion of a company’s assets. To date, MPT hasn’t disclosed Steward’s 2022 financial statements. Babin, the MPT spokesman, said the company still hasn’t received them.
Write to Jonathan Weil at jonathan.weil@wsj.com
Medical Properties Trust, the country’s largest hospital landlord, said it would record about $350 million of write-downs related to its largest tenant, which had fallen behind on its rent, and hired a well-known restructuring adviser.
MPT, which had long supported Dallas-based Steward Health Care System, said more write-downs are possible. The news, released Thursday after the market closed, sent shares of MPT down 30% to $3.46 in early trading. The stock is down by 70% over the past year.
MPT said Steward was $50 million behind on its rent at year-end. MPT said it had agreed to fund a new $60 million loan to Steward and to defer portions of rent owed for 2024.
MPT also said it had hired Alvarez & Marsal as a financial adviser. The firm is known for its restructuring-advisory services, but an MPT spokesman, Drew Babin, said the scope of its services “is strictly limited to supporting MPT’s efforts to recover uncollected rents and outstanding loans from Steward.”
MPT grew quickly during the years of ultralow interest rates. The Birmingham, Ala.-based real-estate investment trust made $23 billion of acquisitions over two decades, mainly of hospital properties. MPT buys the bricks and mortar, and leases the buildings back to hospital operators.
Now, with interest rates higher and money tighter, MPT has been shrinking. MPT has been extending financial support to some of its most-troubled tenants, including Steward and Los Angeles-based Prospect Medical Holdings. Steward accounted for $3.8 billion, or almost 20%, of MPT’s assets as of Sept. 30 and is MPT’s largest tenant. Prospect accounted for $1.7 billion, or 9%, of MPT’s assets. Earlier this year, MPT slashed its quarterly dividend by almost half.
MPT played a crucial role in private-equity firms’ push into healthcare facilities. It used cheap, plentiful financing to buy more than 400 hospitals, in some cases enriching private-equity firms that sold to MPT at high prices and paid themselves large dividends. Now some of the deals have soured. Hospital chains that are MPT’s tenants, including Steward and Prospect, have closed facilities and cut services, reducing healthcare options in some communities.
MPT in its disclosure Thursday didn’t provide an update on Prospect, its third-largest tenant. MPT’s earnings for 2022 were hit by $283 million of impairment charges related to Prospect. MPT owns hospital properties operated by Prospect in Connecticut and southern California, and it is the mortgage lender for a handful of Pennsylvania hospitals that MPT last year sold back to Prospect, including two hospitals near Philadelphia that Prospect had closed.
MPT has pledged to lower its $10.2 billion of debt and boost liquidity through a series of deals for its properties.
In October 2022, Yale New Haven Health announced plans to buy Prospect’s Connecticut operations, part of a three-way deal involving MPT and the two companies. That deal has been on hold, and Yale New Haven has sought to reduce its purchase price, citing deteriorating conditions at Prospect’s operations in the state. MPT in its most recent quarterly report said it expected to receive $355 million of cash from the planned sale to Yale New Haven to help fund its short-term liquidity needs.
In a note Thursday, JPMorgan analysts said “the reality for the stock is that it is essentially another multi-quarter work-out being added to the mix on top of MPW’s deleveraging plans (potentially spanning multiple years) and the evolving Prospect situation.”
Prospect and Steward both are closely held and don’t disclose consolidated financial statements publicly. During a conference call with analysts in August, MPT’s chief financial officer, Steven Hamner, said MPT planned to file Steward’s financial 2022 financial statements once the company received them.
He said MPT would be doing so at the request of the Securities and Exchange Commission, and he pointed to SEC rules requiring such disclosures if a single tenant represents a significant portion of a company’s assets. To date, MPT hasn’t disclosed Steward’s 2022 financial statements. Babin, the MPT spokesman, said the company still hasn’t received them.
Write to Jonathan Weil at jonathan.weil@wsj.com
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