MedicalProperties Trust Inc. agreed to acquire the real estate interestsof nine acute care hospitals in $1.25 billion in transactions that also includea $50 million equity investment in the properties' operator, Steward HealthCare System LLC.
Steward, the largest for-profit hospital system in theMassachusetts market, is owned by its management team and . Thepurchase includes a right of first refusal for the REIT to acquire futureSteward hospitals.
The company said it will fund the acquisition in part withan underwritten public offering of 33.5 million shares of its common stock, plusan additional 5,025,000 shares that the offering's underwriters will have theoption to purchase within 30 days.
Based on the company's closing share price of $14.99 onSept. 26 and including the underwriters' option, the offering would generategross proceeds of roughly $577.5 million.
A Cerberus affiliate agreed to invest $150 million inMedical Properties common stock in a private placement concurrent with or soonafter the property sale's closing.
The company said it expects per-share accretion of roughly10% from the Steward purchase, after consideration of roughly $800 million ofplanned dispositions and roughly $300 million of pending of German hospitals, pluspermanent financing of the transactions.
Medical Properties' interests in the hospitals will besubject to a master lease and mortgage loan arrangements with cross-defaultprovisions, and will be backed by a corporate guaranty. The roughly $600million master lease has a 15-year initial term and three five-year extensionterms, with a GAAP yield of 10.1%. The cross-defaulted mortgage loans, with asimilar aggregate value, have identical rates, including CPI-based escalations,generally within a 2% to 5% band.
Medical Properties' equity investment in Steward"provides certain protective rights concerning Steward's creditdecisions," the company said.
In a statement, Medical Properties Chairman, President andCEO Edward Aldag Jr. said Steward, like the REIT, is positioned for rapidgrowth.
Besides the Steward purchase, the company intends to useproceeds from the public stock offering to fund its acquisition of assets fromaffiliates of Median Kliniken S.à.r.l. The offering is not conditioned on thesuccessful completion of either purchase. Besides the two purchases, thecompany intends to invest the net proceeds in short-term interest-bearingsecurities.
Bank of America Merrill Lynch and Barclays will act as theoffering's joint book-running managers.