Healthcare real estate investment trust Medical Properties Trust Inc. agreed to sell its equity investment in Ernest Health Inc. to affiliates of One Equity Partners for expected proceeds of $175 million, representing a roughly 13% unlevered internal rate of return on its original $96 million investment.
Medical Properties will use the proceeds to reduce borrowings under its revolving credit facility.
The transaction is expected to close during the second half of 2018, subject to customary conditions, according to a release. Certain Ernest management members also agreed to sell the remaining Ernest interests to One Equity.
The REIT will continue to own the real estate interests of 25 Ernest-operated post-acute hospitals with a total investment of about $500 million, including $115 million in mortgage loans secured by four hospitals.
Medical Properties granted Ernest the option to prepay the mortgage debt without penalty, while Ernest granted Medical Properties certain preferential rights to future real estate purchases.
