Included among the three hospital facilities recently acquired by Medical Properties Trust from IASIS Healthcare is the 178-bed Mountain Vista Medical Center in Mesa, Ariz., as well as hospitals in Luisiana and Texas. (Photo courtesy of Medical Properties Trust)
REIT’s purchase is expected to generate more than $280 million for the system
By John B. Mugford
Medical Properties Trust Inc. (NYSE: MPW), a publicly traded real estate investment trust (REIT) that focuses on net-leased healthcare facilities, namely hospitals, recently announced that it will acquire the real estate assets of three major acute-care facilities operated by Franklin, Tenn.-based IASIS Healthcare LLC.
The Birmingham, Ala.-based REIT plans to pay $283.3 million for the real estate assets of the three hospitals, generating about $281.3 million in proceeds for IASIS; the sale is expected to close during the third quarter (Q3).
According to a statement from IASIS, the system plans to reinvest the proceeds in, among other things, “growth in existing markets and expansion into new markets.”
After the transaction, IASIS will continue to own and operate the business operations of the hospitals, leasing the land and the buildings from Medical Properties Trust (MPT) at what the healthcare provider calls “attractive, long-term lease rates.”
The hospitals involved in the sale-leaseback transaction are: the 268-bed Glenwood Regional Medical Center in West Monroe, La.; the 178-bed Mountain Vista Medical Center in Mesa, Ariz.; and the 224-bed Medical Center of Southeast Texas in Port Arthur, Texas.
In explaining its business model of acquiring the real estate assets and/or facilities of hospitals and other providers, MPT officials say the company “bridges the gap between the growing demand for high-quality healthcare and the ability to deliver it cost-effectively. Specializing in acute care, community and rehabilitation hospitals … (the REIT) provides operators access to capital for facility improvements, technology upgrades, staff additions and new construction through long-term net leases of real estate assets. By reinvesting non-earning assets into operations, MPT clients are able to participate in the growth of the largest sector of the U.S. economy.”
“The access to capital and low interest rates available currently to companies like ours is somewhat unprecedented and has created an exceptionally attractive financing opportunity that will allow us to transition capital currently locked up in our real estate to cash on hand, which we can put toward our mission of improving the quality of life for the communities we serve,” IASIS Healthcare President and CEO Carl Whitmer said in a statement.
“Consistent with the recently announced divestiture of our Florida operations, this asset management financing transaction will help position our company to take advantage of both current and future strategic growth opportunities.”
Mr. Whitmer added that there will be no changes for patients or doctors at the hospitals, adding, “we will have even greater ability to invest in new growth opportunities and to increase competition for the benefit of the patients we serve in these three thriving communities, as we proudly have been doing now for many years.”
IASIS and MPT say they anticipate opportunities for future expansion at each of the facilities.
The agreement includes a right-of-first refusal clause that gives the health system the opportunity to repurchase any and all assets, should MPT decide to sell, according to IASIS.
Subject to customary closing approvals and conditions, the transaction is expected to close prior to fiscal year end, IASIS says.
“We are excited about this significant expansion of our relationship with IASIS,” Edward K. Aldag Jr., MPT chairman, president and CEO said in a new release.
The MPT-IASIS relationship began in 2008, with the REIT’s acquisition of Pioneer Valley Hospital in West Valley City, Utah. As part of the most recent transaction, IASIS and MPT have also agreed to revise their agreement regarding the 139-bed Pioneer Valley acute care facility at 3460 S. Pioneer Parkway in West Valley City. They say they have agreed to adjust the rental rate, add $2 million of improvements funded by MPT and extend through 2028 maturity of the REIT’s existing lease, which had been set to expire in 2019.
IASIS, which focuses mostly on urban and suburban markets, has total annual net revenue of about $2.4 billion. It owns and operates 19 acute care hospitals, a behavioral health hospital, several outpatient facilities and more than 160 physician clinics.
According to its website, MPT had 55 percent of its capital allocated to acute care hospitals as of June 30, the most recent date for which data is available. Another 20 percent was invested in long-term acute care, 17 percent in inpatient rehabilitation hospitals and 8 percent in other capital assets.
The REIT’s largest holdings are in California and Texas.
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