Steward drives Medical Properties Trust's Q4 loss

The net losses for Medical Properties Trust, one of the world's largest hospital real estate owners, included around $772 million in nonrecurring write-offs and impairments in the fourth quarter of 2023, mostly led by Dallas-based Steward Health Care's financial difficulties, according to MPT's recent financial reports.

Here are nine other findings from the report:

1. MPT's cash basis portfolio with Steward is $3.5 billion. MPT has continued to work with Steward on a plan to strengthen the health system's liquidity, restore its balance sheet, optimize MPT's ability to recover unpaid rent, and reduce MPT's Steward exposure. 

2. MPT and some of Steward's asset-backed lenders are negotiating for each party to give Steward an initial $37.5 million based on the health system's achieved milestones that were established in January. MPT has already provided $20 million of the funds, with any subsequent loan funding to Steward contingent on its further achievements, which optimize both the recovery amount and timing for MPT and Steward's asset-backed lenders.

3. MPT will not provide a full-year 2024 net income or normalized funds from operations due to "uncertainty regarding its hospitals leased to Steward and the timing of liquidity transactions."

4. "With regard to Steward, we are encouraged by the amount of interest received to date from other hospital operators for these mission-critical facilities, and we expect this real estate portfolio will either resume its contributions to earnings or become additional sources of liquidity as the year progresses," Edward Aldag Jr., chair, president, and CEO of MPT, said in the report.

5. MPT's Americas portfolio is around $5 billion. In February, it offloaded five hospitals to Ontario, Calif.-based Prime Healthcare for $350 million in an agreement. The hospitals include Lynwood, Calif.-based Saint Francis Medical Center and four of MPT's hospitals in New Jersey. The agreement featured $250 million in immediate cash and a $100 million interest-bearing mortgage note that is due to MPT in nine months, representing around a $50 million gain on sale of real estate.

6. MPT and Prime agreed to merge three Michigan and Missouri hospitals, which were formerly subject to a lease maturing in early 2025, with a Newark, N.J.-based Prime facility to form a 20-year master lease with a double-digit prevailing cash rental yield and between 2% to 4% in inflation-based escalators. 

7. Prime also agreed to around $5 million of increased annual escalating cash rents. The lease would allow Prime to repurchase the facilities at any time for at least $260 million. Should Prime buy back the facilities, MPT would expect an additional gain on sale of real estate for around $95 million on its four remaining facilities leased to Prime.

8. "Over the last few years, Prime Healthcare has been actively purchasing the real estate back from Medical Properties Trust upon lease maturation dates," a spokesperson for Prime Healthcare said in a statement shared with Becker's. "Recently, those discussions have advanced to the point where there is agreement for Prime to repurchase certain real estate assets ahead of lease maturity. Transaction terms and timing of purchase are yet to be finalized."

9. MPT's net loss for the fourth quarter hit $663.6 million, a substantial drop from the $140.2 million loss reported in the same period in 2022. Overall for 2023, the company reported a $556.1 million net loss, compared to a $902.6 million net gain the previous year.

Editor's note: This story was updated on Feb. 22 at 4:18 pm CST.

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