Medical Properties Trust Acquires 30 UK Hospitals for £1.5 Billion, Files Prospectus

VCBeat (WeChat ID: vcbeat) learned from foreign media that on December 23, 2019, local time, Medical Properties Trust acquired the real estate assets of 30 emergency hospital facilities across the United Kingdom for a total price of approximately £1.5 billion.

Medical Properties Trust, Inc., established in 2003 and headquartered in the southern United States, is a healthcare real estate investment trust (REIT) specializing in acute care, community, and rehabilitation hospitals. It provides capital to operators through long-term net leases of real estate assets, supporting facility improvements, technology upgrades, staff augmentation, and expansion.

It is reported that these hospital facilities are leased to a subsidiary of BMI Healthcare, the UK’s largest private operator of acute hospitals, under net lease agreements. In a related transaction, an affiliate of Circle Health, a healthcare service provider offering diagnostic and therapeutic services, acquired BMI and assumed operations of its 52 facilities in the UK. As another tenant of MPT, Circle has committed to investing millions of pounds in infrastructure, technology, and personnel as part of the deal.

This acquisition is underwritten by MPT, with an initial lease payment coverage ratio of approximately 2x the recent EBITDAR, which is expected to expand as Circle implements its strategic and operational plans. These hospitals will be leased under a master lease structure guaranteed by Circle, featuring an initial fixed term of 30 years, two five-year extension options, and annual rent escalators linked to UK Consumer Price Index (CPI) inflation.

MPT expects to fund the acquisition with cash on hand, including proceeds from its recent U.S. dollar equity and sterling-denominated bond offerings, as well as borrowings under a sterling-denominated unsecured term loan facility. Subject to customary closing conditions, the transaction is expected to be completed in the first quarter of 2020.

Edward K. Aldag, Jr., Chairman, President and Chief Executive Officer of MPT, stated: “These hospitals represent a unique portfolio of facilities that are critical to emergency services across the United Kingdom. We are confident in the growth opportunities for private hospital operators within the UK healthcare sector. We look forward to strengthening our relationships with UK operators to contribute to improved facility efficiency, care quality, and health outcomes for patients in hospitals throughout the country.”

This transaction will bring strong cash flow and GAAP earnings to MPT, which, combined with MPT’s highly attractive cost of capital, will immediately improve net income per share and funds from operations. The deal will expand MPT’s presence across the United Kingdom, increasing its total investment in the country to $2.5 billion. It will also significantly reduce MPT’s tenant concentration. MPT’s total gross assets will rise to approximately $16.2 billion, while its exposure to its largest tenant will decline from nearly 40% in early 2019 to 25%.