Medical Properties Trust Takes Control of Real Estate from Steward Health Care

New lease agreements concluded with four high-quality replacement operators

Safe and orderly transitions of operations completed in 15 hospitals

BIRMINGHAM, Alabama, September 11, 2024–(BUSINESS WIRE)–Medical Properties Trust, Inc. (the “Company” or “MPT”) (NYSE: MPW) today announced that it has reached a global settlement agreement with Steward Health Care System (“Steward”), its secured lenders (“the Lenders”) and the Unsecured Creditors Committee (“UCC”) that restores MPT control over its real estate, severing its relationship with Steward and facilitating the immediate transition of operations to high-quality replacement operators at 15 hospitals across the country.

Regarding the settlement, the company issued the following statement:

“From our initial financing of these properties, MPT has strongly believed in the mission-critical nature of these hospitals and their cash flow potential with proper management.

Throughout Steward’s lengthy restructuring process, our focus has been on supporting efforts to bring quality replacement operators into each of these facilities. That’s why we agreed to have Steward market our properties alongside its operations as part of the bankruptcy sale process. And that’s why we’ve been working day and night over the past several weeks to achieve a consensual resolution following Steward’s motion to reject our lease.

We worked tirelessly to identify replacement operators and negotiate new lease terms, and we were encouraged by the enthusiasm and eagerness of several operators to operate these important facilities despite the decline in Steward’s business during the restructuring process. As a result, we were able to quickly reach agreements with several new tenants. We also worked closely with state regulators to develop orderly transition plans that would prevent hospital closures, protect jobs and ensure continuity of care for patients.

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.”

The settlement agreement covers 23 hospitals previously operated by Steward that will remain after the anticipated “Space Coast” transaction described later in this press release. MPT has already reached definitive agreements with four tenants to immediately lease and operate 15 hospitals in Arizona, Florida, Louisiana, Ohio and Texas, as summarized in the following table:

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From September 11, 2024, these replacement operators will be the beneficiaries of the operating income and will be responsible for the expenses of the hospitals they will manage for Steward on an interim basis, until purchase agreements can be concluded with Steward in relation to the activities.

Based on the new lease agreements already in place, MPT expects to receive aggregate annual cash rent payments of approximately $160 million on the approximately $2.0 billion lease base of this portfolio upon stabilization in the fourth quarter of 2026, including the impact of each lease’s contractual minimum annual escalator. This represents approximately 95% of the cash rent that would have been contractually due to Steward for the same assets in the fourth quarter of 2026, based on minimum rent escalators. The weighted average initial term of the leases is approximately 18 years.

To expedite the re-leasing process and minimize disruption to patient care as new operators set up, all 15 properties will have no cash rent payments for the remainder of 2024. Cash rent payments are expected to generally begin in the first quarter of 2025, reach approximately 50% of total fully stabilized rent by the end of 2025, and be fully stabilized by the fourth quarter of 2026.

In addition, MPT is in active discussions regarding resolutions related to ongoing construction projects in Norwood, Massachusetts and Texarkana, Texas, and, separately, four hospitals that closed long before Steward’s bankruptcy and two that recently closed or otherwise became subject to uncertainty during the restructuring process. These six facilities have an aggregate lease base of approximately $300 million.

Under the terms of the agreement, MPT has agreed to sell three “Space Coast” Florida hospitals to Orlando Health, with a substantial portion of the proceeds transferred to Steward. In turn, Steward and its other stakeholders have waived all rights to further allocation of value from transactions with respect to any other hospital remaining in the portfolio as of September 11, 2024. Further, upon completion of the transition process for the hospitals, the parties have agreed to mutually waive claims against each other and to exchange broad general releases, including for MPT’s loans and deferred rent.

The bankruptcy court has scheduled a hearing for Tuesday, Sept. 17, for consideration and approval of a final order confirming the settlement. The agreement also remains subject to the completion of Steward’s sales to the replacement operators and approval by relevant state and local regulators.

Information about Medical Properties Trust, Inc.

Medical Properties Trust, Inc. is a self-advised real estate investment trust established in 2003 to acquire and develop net-lease hospital facilities. Since its inception in Birmingham, Alabama, the company has grown to become one of the world’s largest owners of hospital real estate with 435 facilities and approximately 42,000 licensed beds in nine countries and on three continents as of June 30, 2024. MPT’s financing model facilitates acquisitions and recapitalizations and enables hospital operators to unlock the value of their real estate assets to fund facility improvements, technology upgrades and other operational investments. For more information, visit the company’s website at www.medicalpropertiestrust.com.

Forward-looking statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “should,” “could,” “expect,” “intend,” “plan,” “estimate,” “goal,” “anticipate,” “believe,” “objectives,” “outlook,” “guidance” or other similar words, and include statements regarding our strategies, objectives, asset sales and other liquidity transactions (including the use of proceeds therefrom), expected re-leasing of vacant facilities and any related regulatory approvals, and expected outcomes of Steward’s Chapter 11 restructuring process, including the terms of the agreement described in this press release. Forward-looking statements involve known and unknown risks and uncertainties that could cause our actual results or future events to differ materially from those expressed in or underlying such forward-looking statements, including, but not limited to: (i) the risk that the outcome and terms of Steward’s bankruptcy restructuring will not be as anticipated by the Company; (ii) the risk that the Company will be unable to successfully re-lease the hospitals in Steward’s portfolio on the terms described herein or at all; (iii) the risk that previously announced or contemplated real estate sales, loan repayments and other capital recycling transactions will not occur as expected or at all; (iv) the risk that MPT will be unable to achieve its leverage, liquidity and cost of capital objectives within a reasonable period of time or at all; (v) MPT’s ability to obtain debt financing on attractive terms or at all, as a result of changes in interest rates and other factors, which could adversely affect its ability to service, refinance, restructure or extend its debt as it becomes due or to pursue acquisition and development opportunities; (vi) the ability of our tenants, operators and borrowers to meet their obligations under their respective contractual arrangements with us; (vii) the ability of our tenants and operators to operate profitably and generate positive cash flow, remain solvent, comply with applicable laws, rules and regulations in the operation of our properties, provide high-quality services, attract and retain qualified personnel and attract patients; (viii) the risk that we may not be able to realize our investments in certain tenants at their full value within a reasonable period of time or at all; (ix) our success in implementing our business strategy and our ability to identify, underwrite, finance, complete and integrate acquisitions and investments; and (x) the risks and uncertainties of litigation or other regulatory proceedings.

The risks described above are not exhaustive and additional factors could adversely affect our business and financial performance, including the risk factors discussed under the section captioned “Risk Factors” in our most recent Annual Report on Form 10-K and our Form 10-Q, and as may be updated in our other filings with the SEC. Forward-looking statements are inherently uncertain and actual performance or outcomes may differ materially from any forward-looking statements and the assumptions on which such statements are based. Readers are cautioned not to place undue reliance on forward-looking statements as predictions of future events. We disclaim any responsibility to update any such forward-looking statements, which speak only as of the date they are made.

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Contacts

Drew Babin, CFA, CMA
Head of Financial Strategy and Investor Relations
Medical Properties Trust, Inc.
(646) 884-9809
dbabin@medicalpropertiestrust.com