Medical Properties Trust, Inc. (MPW - Free Report) — also known as MPT — recently announced that it reached an agreement with Steward Health Care System, its secured lenders and the Unsecured Creditors Committee.
This agreement reinstates MPT’s control over its real estate and terminates its relationship with Steward. It also enables the immediate transition of operations at 15 hospitals in the country. The settlement agreement comprises 23 hospitals that were formerly operated by Steward.
The company has also collaborated with state regulators to establish structured transition plans aimed at preventing hospital closures, protecting jobs and ensuring the continuity of care for patients.
New Lease Agreement With Tenants
Medical Properties has secured new lease agreements with four tenants to operate 15 hospitals. Healthcare Systems of America will operate through five hospitals in Southeast Florida, two in East Texas and one in Louisiana. Honor Health will take over the operations of three hospitals in Arizona. Quorum Health will assume control of two hospitals in West Texas, and Insight Health will operate through two hospitals in Ohio.
Commencing from Sept. 11, 2024, these replacement tenants will be entitled to the operating revenue and will bear the responsibility for the expenses of the hospitals they manage on an interim basis for Steward until the purchase agreements regarding the operations can be finalized with Steward.
Based on the new lease agreements, MPT anticipates receiving nearly $160 million in total annualized cash rental payments on this portfolio’s approximate lease base of $2 billion upon reaching stabilization in the fourth quarter of 2026. This represents approximately 95% of the cash rent Steward would have owed for the same assets during that period. Moreover, the weighted average initial lease term is approximately 18 years.
The company will waive cash rent payments for all 15 properties for the remainder of 2024 in order to expedite the re-tenanting process and minimize any disruption to patient care. It is anticipated that cash rent payments will start in the first quarter of 2025, reaching approximately 50% of the total fully stabilized rent by the conclusion of 2025 and achieving complete stabilization by the fourth quarter of 2026.
Settlement Agreement
In accordance with the terms of the agreement, MPT agreed to sell three Florida hospitals to Orlando Health. A significant portion of the proceeds of that sale will be transferred to Steward. Consequently, Steward and its other stakeholders have relinquished all rights to any proceeds from future transactions related to any other hospitals that remain in the portfolio as of Sept. 11, 2024.
Hearing to Confirm Settlement
The Bankruptcy Court has set a hearing date on Sept. 17 to review and approve a final order that confirms the settlement. Additionally, the agreement is subject to the successful completion of Steward’s sales to the new operators and the necessary approvals from applicable state and local regulatory bodies.
MPW’s Transaction Conclusion
The replacement of Steward enhances the company’s ability to safeguard the essential operations of these facilities, thereby aiding their communities and preserving the value of its real estate for the benefit of shareholders.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 23.1% compared with the industry’s growth of 13.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the healthcare REIT sector are CareTrust REIT (CTRE - Free Report) and Sabra Healthcare REIT (SBRA - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CareTrust’s 2024 FFO per share stands at $1.48, indicating an increase of 5% from the year-ago reported figure.
The Zacks Consensus Estimate for Sabra’s 2024 FFO per share is pinned at $1.41, suggesting year-over-year growth of 6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
Medical Properties Trust, Inc. (MPW - Free Report) — also known as MPT — recently announced that it reached an agreement with Steward Health Care System, its secured lenders and the Unsecured Creditors Committee.
This agreement reinstates MPT’s control over its real estate and terminates its relationship with Steward. It also enables the immediate transition of operations at 15 hospitals in the country. The settlement agreement comprises 23 hospitals that were formerly operated by Steward.
The company has also collaborated with state regulators to establish structured transition plans aimed at preventing hospital closures, protecting jobs and ensuring the continuity of care for patients.
New Lease Agreement With Tenants
Medical Properties has secured new lease agreements with four tenants to operate 15 hospitals. Healthcare Systems of America will operate through five hospitals in Southeast Florida, two in East Texas and one in Louisiana. Honor Health will take over the operations of three hospitals in Arizona. Quorum Health will assume control of two hospitals in West Texas, and Insight Health will operate through two hospitals in Ohio.
Commencing from Sept. 11, 2024, these replacement tenants will be entitled to the operating revenue and will bear the responsibility for the expenses of the hospitals they manage on an interim basis for Steward until the purchase agreements regarding the operations can be finalized with Steward.
Based on the new lease agreements, MPT anticipates receiving nearly $160 million in total annualized cash rental payments on this portfolio’s approximate lease base of $2 billion upon reaching stabilization in the fourth quarter of 2026. This represents approximately 95% of the cash rent Steward would have owed for the same assets during that period. Moreover, the weighted average initial lease term is approximately 18 years.
The company will waive cash rent payments for all 15 properties for the remainder of 2024 in order to expedite the re-tenanting process and minimize any disruption to patient care. It is anticipated that cash rent payments will start in the first quarter of 2025, reaching approximately 50% of the total fully stabilized rent by the conclusion of 2025 and achieving complete stabilization by the fourth quarter of 2026.
Settlement Agreement
In accordance with the terms of the agreement, MPT agreed to sell three Florida hospitals to Orlando Health. A significant portion of the proceeds of that sale will be transferred to Steward. Consequently, Steward and its other stakeholders have relinquished all rights to any proceeds from future transactions related to any other hospitals that remain in the portfolio as of Sept. 11, 2024.
Hearing to Confirm Settlement
The Bankruptcy Court has set a hearing date on Sept. 17 to review and approve a final order that confirms the settlement. Additionally, the agreement is subject to the successful completion of Steward’s sales to the new operators and the necessary approvals from applicable state and local regulatory bodies.
MPW’s Transaction Conclusion
The replacement of Steward enhances the company’s ability to safeguard the essential operations of these facilities, thereby aiding their communities and preserving the value of its real estate for the benefit of shareholders.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 23.1% compared with the industry’s growth of 13.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the healthcare REIT sector are CareTrust REIT (CTRE - Free Report) and Sabra Healthcare REIT (SBRA - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CareTrust’s 2024 FFO per share stands at $1.48, indicating an increase of 5% from the year-ago reported figure.
The Zacks Consensus Estimate for Sabra’s 2024 FFO per share is pinned at $1.41, suggesting year-over-year growth of 6%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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