Medical Properties (MPW) Disposes of 7 Australian Hospitals
Medical Properties Trust, Inc. MPW — also known as MPT — recently concluded the disposition of seven Australian hospitals for AUD$730 million, in line with its capital-recycling strategy. The move marked the first (and larger) phase of the two-part sale of its Australian real estate investments.
The proceeds from the disposition were deployed to lower its Australian term loan. In addition, MPT settled the pro rata portion of its interest rate swap, resulting in a gain of AUD$20 million.
MPT’s Australian portfolio, valued at AUD$1.2 billion, has a cap rate of 5.7%, providing a strong read-through for similar assets in its U.S. and Western Europe portfolios.
In March 2023, the company entered into a definitive agreement to sell its Australia real estate investments operated by Healthscope to affiliates of HMC Capital — an Australia alternative asset manager focused on real estate strategies. The complete selloff is expected to take place by the end of 2023.
This real estate investment trust, engaged in the acquisition and development of healthcare facilities, has been making concerted efforts to improve portfolio diversification with respect to the operator. This reduces its exposure to troubled operators and enhances its scope for stable cashflow generation.
The company recently announced that affiliates of Prospect Medical Holdings (“Prospect”) have completed $375 million in new financings from third-party lenders. The proceeds generated from the same will be used to provide Prospect’s hospital operations with liquidity and capitalize its managed care business for continued growth and value creation in a vibrant market for such businesses.
MPT held $1.6 billion in total assets related to Prospect as of first-quarter 2023 end, which are expected to be reconstituted in time to come.
One such reconstitution includes MPT’s previously announced agreement in October 2022 to dispose of three Connecticut hospitals to Yale New Haven Health (“Yale”) for around $457 million. The transaction is expected to close in third-quarter 2023, subject to certain regulatory approvals and Yale's acquisition of the hospital operations from Prospect, the current lessee.
MPT’s investment is anticipated to be fully recovered through cash proceeds of $355 million at closing and equity interests in Prospect’s managed care business valued at $103 million.
Further, in February 2023, MPT announced that it will lease its entire Utah hospital portfolio to a wholly owned subsidiary of CommonSpirit Health — Catholic Health Initiatives Colorado (“CHIC”). This will come into effect after Steward Health Care System sells the operations of the Utah facilities to CHIC.
The move is a strategic fit for MPT as it will improve overall cashflows given CommonSpirit’s strong investment-grade credit ratings and make the latter one of MPT’s largest tenants.
Nonetheless, a high-interest rate environment and macroeconomic uncertainty raise concerns for the company.
MPW currently has a Zacks Rank #4 (Sell).
The company’s shares have lost 23.9% in the past three months compared with its industry’s fall of 8.9%.
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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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