Medical Properties Trust, Inc. has entered into a definitive agreement with affiliates of LifePoint Health, Inc. to acquire the real estate assets of 10 acute care hospitals in six U.S. states for $700 million in a sale and leaseback transaction.
Medical Properties Trust(MPT) will lease the facilities back to LifePoint. LifePoint is a portfolio company of certain funds managed by affiliates of Apollo Global Management, Inc., a global alternative investment manager.
“This immediately and strongly accretive acquisition of well-run facilities from sophisticated operators and owners demonstrates the expanding market for hospital real estate,” said Edward K. Aldag, Jr., MPT’s Chairman, President and CEO. “Importantly, the transaction further solidifies our relationship with LifePoint and Apollo and is a strong indicator that interest in MPT’s sale and leaseback structure continues to grow not only in the U.S. but globally,” added Aldag.
”The properties will be leased under a master lease agreement with an initial term of 20 years with two five-year extension options. The transaction is expected to achieve highly attractive cash and GAAP lease rates, well within the range that MPT has achieved for recent U.S. acquisitions taking into account annual CPI-based rent escalations subject to a 2% floor. These return yields, when considered with MPT’s blended cost of debt and equity capital, are expected to produce investment spreads of between 3.0% and 4.0%,” said MPT in a statement.
Medical Properties Trust expects the transaction to close in the fourth quarter of 2019 or the first quarter of 2020, subject to customary closing conditions.
The company intends to finance the acquisition through a new equity issuance, if market conditions warrant, cash balances, and borrowings under its credit facility.
”Subsequent to completion of permanent financing, MPT’s net debt to EBITDA ratio on a pro forma basis is expected to range between 5.0 and 5.5 times” said in the statement.
Upon closing of this transaction, MPT’s portfolio will include pro forma total gross assets of almost $14 billion representing approximately 40,000 beds in 34 U.S. states and in Germany, the United Kingdom, Switzerland, Italy, Spain and Australia.
