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Dive Transient:
Hospital landlord Medical Properties Belief posted a $736 million loss for the primary quarter Thursday, in comparison with an earnings of $33 million in the identical interval the 12 months prior. The outcomes come days after MPT’s largest tenant, Steward Well being Care, filed for Chapter 11 chapter.
MPT’s quarterly efficiency was dragged by $693 million in impairments associated to Steward and a world three way partnership shaped in 2020 — additionally tied to Steward by way of its CEO, Ralph de la Torre.
The corporate’s earnings had been additionally dinged by decrease than anticipated hire funds from Prospect Medical Holdings. Rosa Hooper, senior vice chairman of operations at MPT, mentioned on a Thursday earnings name that the for-profit hospital system has not paid hire for April or Might.
Dive Perception:
Whereas MPT has a portfolio of 436 properties, analysts had been targeted on the affect of Steward’s chapter submitting on the corporate.
“When an operator representing ~20% of income (4Q23) goes bankrupt, there may be not a lot else price specializing in,” wrote a Jeffries analyst it in a analysis be aware Thursday morning.
MPT holds long-term leases on 36 Steward-operated services, in line with its earnings submitting. Steward fell behind on hire funds final 12 months and filed for chapter Monday, disclosing $9 billion in debt.
MPT is solely backing Steward’s $75 million debtor-in-possession chapter financing, which has raised eyebrows. However MPT CEO Edward Aldag mentioned different lenders thought-about financing Steward.
“There completely had been others or different lenders concerned [in financing discussions], as you understand, however we’re not gonna get into the small print of these negotiations at this level,” mentioned Aldag.
The actual property funding belief has already lent Steward a whole lot of hundreds of thousands of {dollars} even because the loans have dragged down MPT’s personal revenues. Aldag, for instance, attributed a lot of the corporate’s quarterly loss to impairments associated to MPT’s 2021 mortgage to Steward for $360 million.
Steward did pay $9 million in hire to MPT this quarter. Nevertheless, that comes after MPT financed a $60 million bridge mortgage in January and a further $75 million asset-backed mortgage, in line with the earnings report.
Aldag declined to remark instantly on quite a lot of Steward issues, starting from whether or not some hospitals would possibly shut throughout chapter proceedings, to which particular corporations are in talks to take over Steward’s leases.
Hospital gross sales are a key issue transferring ahead for Steward. MPT mentioned it would give the hospital operator additional funding of as much as $225 million if it sells its hospitals this summer season — a timeline Steward’s authorized counsel referred to as “not possible” in a chapter listening to this week.
Aldag expressed confidence that the offers might get carried out, saying some hospital gross sales have been within the works for 5 or 6 months.
“We’re means down the street with many various folks,” Aldag mentioned.
Aldag mentioned MPT’s rental agreements weren’t what landed Steward in chapter proceedings as he struck out in opposition to “misinformation” about MPT’s enterprise mannequin.
“Hire isn’t talked about by Steward on the checklist of contributing elements to its monetary stress,” Aldag mentioned. “If Steward wasn’t paying hire, they’d be paying curiosity in principal repayments on some kind of financing for the services. As a result of as everyone knows, buildings aren’t free.”
Executives additionally gave updates on different tenants, together with Prospect Medical Holdings. MPT disclosed Thursday that Prospect solely paid $7 million in hire in the course of the quarter, and that the honest market worth of the well being system’s property declined by roughly $60 million.
Prospect has been struggling financially — this time final 12 months, the well being system took out a $375 million ABL mortgage to assist with liquidity.
Prospect has additionally been making an attempt to promote hospitals to Yale New Haven Well being since 2022. Nevertheless, Yale just lately sued to get out of the deal, citing Prospect’s “irresponsible monetary practices, extreme neglect and normal mismanagement” of services.
