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Medical Properties Trust in $2 billion real estate deal for 30 UK hospitals

par Thomas Dworetzky, Contributing Reporter | January 06, 2020
Business Affairs European News
Medical Properties Trust (MPT) has expanded its global reach, making a deal to buy the real estate of 30 acute care hospital facilities in the U.K. for approximately $2 billion.

“These hospitals represent a unique collection of facilities that are critical to the delivery of acute health services across the United Kingdom,” MPT’s chairman, president and CEO Edward K. Aldag Jr., said in a statement. “We are confident in the growing opportunities for private hospital operators in U.K. healthcare."

The facilities are leased to affiliates of BMI Healthcare under long-term inflation-protected net leases.

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BMI is the biggest private operator of such facilities in the U.K.

At the same time, Circle Health affiliates are entering into a deal to acquire BMI and take over running 53 of its U.K. facilities.

Circle runs U.K. acute hospitals and is an MPT tenant. It has pledged to make a multimillion-dollar investment in facility infrastructure, technology and people as part of the deal.

The lease arrangement “is expected to provide a GAAP-basis yield of 8.9 percent,” according to MPT.

The deal, underwritten by MPT, has the hospitals leased under a master lease guaranteed by Circle with an initial fixed term of 30 years, two 5-year extension options, and annual rent escalators linked to U.K. consumer price inflation.

MPT anticipates funding the buy with cash on hand, with the transaction set to close in Q1 2020.

The main advantages of the deal are that it will yield an immediate boost of per share income, an expansion of MPT's U.K. presence, and a reduction of its exposure to tenant concentration.

“The U.K. market is highly attractive for future growth with its appealing demographics and unwavering governmental and social commitment to providing healthcare to its population,” according to the company, adding that the deal will also result in total gross assets rising to roughly $16.2 billion and exposure to its largest tenant declining from 40 percent at the start of 2019 to just 25 percent post-deal.

MPT made other deal news in November, when it signed a definitive agreement with affiliates of U.S.-based acute care operator LifePoint Health to acquire the real estate assets of 10 acute care hospitals in six U.S. states for $700 million in a leaseback arrangement.

“This immediately and strongly accretive acquisition of well-run facilities from sophisticated operators and owners demonstrates the expanding market for hospital real estate,” Aldag said in a statement at the time, adding that the deal “is a strong indicator that interest in MPT’s sale and leaseback structure continues to grow not only in the U.S. but globally.”

And in July, MPT made a U.K. deal with Secure Income REIT to acquire freehold interests in eight private hospitals located in England for $434 million.

Ramsay Health Care operates the hospitals.

“Our acquisition of these outstanding hospitals demonstrates the strong near-term opportunities embedded in our robust global pipeline,” Aldag said “This transaction is particularly powerful as it initiates an important new relationship between MPT and Ramsay Health Care — an active, leading health care operator with a substantial global portfolio.”

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