Medical Properties Trust, Inc. MPW shares are trading higher on Thursday, after the medical REIT disclosed a global settlement with tenant Steward Health Care System, its secured lenders, and the Unsecured Creditors Committee.
The settlement, announced on Wednesday, covers 23 hospitals previously managed by Steward, with 15 hospitals in Arizona, Florida, Louisiana, Ohio, and Texas already leased to new tenants.
The agreement restores the company’s control over its real estate, ends its relationship with Steward, and allows for the immediate transition of operations at 15 hospitals to new, high-quality operators.
Effective Sept. 11, the new operators will assume responsibility for operating revenue and expenses at the hospitals, managing them for Steward on an interim basis until purchase agreements are finalized.
Medical Properties Trust anticipates receiving annual cash rental payments of about $160 million from the new leases, based on a $2 billion lease base, once stabilized by Q4 2026.
The amount represents roughly 95% of the rent Steward would have owed, including minimum annual escalators. The leases have a weighted average initial term of about 18 years.
The company stated that no cash rent payments will be required for the 15 properties for the rest of 2024 to facilitate the re-tenanting and minimize patient care disruption.
Also Read: European Central Bank Cuts Key Interest Rates As Inflation Cools
Payments are expected to start in Q1 2025, reach about 50% of fully stabilized rent by the end of 2025, and achieve full stabilization by Q4 2026.
Medical Properties Trust stated, “We believe this global settlement is a positive outcome for all stakeholders. By replacing Steward, we are better positioned to protect the critical function of these facilities for the benefit of their communities and the value of our real estate for the benefit of our shareholders.”
Apart from this, the company is also negotiating solutions for its Norwood, Massachusetts and Texarkana, Texas construction projects, as well as four hospitals closed before Steward’s bankruptcy and two recently closed or uncertain facilities. These six properties have an aggregate lease base of about $300 million.
As per the agreement, Medical Properties Trust has agreed to sell three “Space Coast” Florida hospitals to Orlando Health, with proceeds mainly going to Steward.
Steward will forfeit claims on other hospitals in the portfolio as of Sept.11.
A Bankruptcy Court hearing on Sept. 17 will consider final approval, pending completion of Steward’s sales and regulatory approvals.
Notably, in May, Steward Health Care plunged into Chapter 11 bankruptcy, posing significant financial risks for hospitals across eight states and Medical Properties Trust approved the funding of $75 million in debtor-in-possession financing to the company.
As of June 30, Medical Properties Trust’s cash and cash equivalent stood at $606.6 million.
Price Action: MPW shares are up 8.7% at $5.24 at last check Thursday.
Read Next:
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Dolores M. Harvey/Shutterstock.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
