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Medical Properties Trust (NYSE:MPW) stock gapped up 7.4% in Thursday morning trading after reaching a settlement deal with Steward Health Care System, the bankrupt tenant of MPT, that restores MPT’s control over its real estate, severs its relationship with Steward and facilitates the immediate transition of operations to quality replacement operators at 15 hospitals around the country.
The deal involves 23 hospitals previously operated by Steward. MPT (MPW) has already reached definitive agreements with four tenants to immediately lease and operate 15 hospitals in Arizona, Florida, Louisiana, Ohio and Texas, it said in a Wednesday statement. Starting Sept. 11, 2024, these replacement operators will be the beneficiaries of operating revenue and have responsibility for the expenses of the hospitals.
MPT (MPW) expects to receive aggregate annualized cash rental payments of about $160M on this portfolio’s ~$2.0B lease base upon stabilization in Q4 2026, including the impact of each lease’s contractual minimum annual escalator. The weighted average initial term of the leases is about 18 years.
Cash rent payments are generally expected to begin in Q1 2025, reach ~50% of aggregate fully stabilized rent by the end of 2025 and achieve full stabilization in Q4 2026. Cash rent payments will not be due for the remainder of 2024 for all 15 properties.
The trust also noted it is in active talks regarding solutions related to its ongoing Norwood, Massachusetts and Texarkana, Texas construction projects, as well as, separately, four hospitals closed well 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 $300M.
As part of the settlement, MPT (MPW) agreed to offload three Florida hospitals to Orlando Health. A large portion of those proceeds will go to Steward, which, in turn, has relinquished all rights to proceeds from future transactions related to the hospitals that remain in the portfolio.
The bankruptcy court has scheduled a hearing for Sept. 17, 2024, for consideration and approval of a final order confirming the settlement. The settlement deal between Medical Properties (MPW) and Steward received an interim approval Wednesday from bankruptcy court judge Christopher Lopez.
