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As of December 2024, the company owned 173 properties in the United States and 223 internationally, for a total of 396 properties worth over $14 billion. Their international properties are located, in order of asset value, in the United Kingdom, Switzerland, Germany, Spain, Finland, Colombia, Italy, and Portugal. In addition to real estate, the company also owns equity interest in several healthcare systems. Its three largest tenants by value of assets were Circle Health Group, Priory Group, and Healthcare Systems of America.[1] Past investments have included Steward Health Care and Capella Healthcare.
Business model
MPT aims to purchase healthcare facilities, including hospitals, nursing homes, and medical office buildings, as investment properties. Its revenues come primarily in the form of rent payments, though it can also profit from lease financing, issuance of mortgage loans, occasional property sales, and noncontrolling investments in its tenants' businesses. Like other REITs, it benefits from net lease arrangements which absolve it from responsibility for costs such as maintenance, insurance, and property taxes; those expenses are paid by facility operators:
Our primary business strategy is to acquire and develop healthcare facilities and lease the facilities to healthcare operating companies under long-term net leases, which require the tenant to bear most of the costs associated with the property.
—Medical Properties Trust, in its 2024 annual report
While admitting to a certain level of risk from the lack of industry-level diversification that comes with focusing on a specific market like healthcare, MPT has expressed its aim to maintain diversification in other respects, such as geography and range of tenants.[1]
History
Formation, 2003–2004
The company was founded by Edward K. Aldag, Jr. and a group of other industry experts on August 27, 2003, as successor to a previous venture, Medical Properties Trust, LLC, which had formed in Maryland in December 2002.[2]
MPT has claimed to be the first REIT to focus exclusively on healthcare facilities.[3] However, at least one other healthcare-exclusive REIT, the similarly-named but distinct Windrose Medical Properties Trust, was formed prior to MPT in March 2002.[4]
In 2004 filings with the U.S. Securities and Exchange Commission (SEC), in which MPT sought classification as a REIT, they disclosed that they held twelve properties, nine of which were operating at the time and three of which were in development. It stated these properties were under lease terms of 11 to 16 years with annual escalation clauses allowing for consistent rent increases. Its largest tenant was Vibra Healthcare, which operated four rehabilitation hospitals and two long-term acute care hospitals owned by MPT across the country.[2]
In these filings, MPT cautioned potential investors of the risks of investing in portfolio as concentrated as theirs, but also sought to ease those concerns. MPT's business strategy held less risk, it claimed, given Bureau of Economic Analysis projections that the healthcare industry in the U.S. would grow significantly for the near future and healthcare spending with it (expected to almost double by 2012), especially given advances in medical technology and life expectancy, and Census Bureau estimates that the percentage of the population aged 60 and over would rise from 12.4% in 2000 to 19.6% in 2030. MPT further expressed belief that the industry was moving from a preference of ownership of real estate by operators toward one of long-term leases.[2]
MPT's ability to develop new hospitals was tested early. In late 2005, the first of their three new buildings was completed: Town & Country Hospital in Houston, Texas.[6][7] To purchase the land and develop the 99-bed hospital, MPT spent $65 million.[7] Within a year however, the hospital's operator, a new physician-run venture named Stealth, defaulted on its lease.[7][8] MPT arranged for Vibra to take over operations at the hospital on an interim basis while they sought a new tenant.[9] Ultimately, MPT sold the property in early 2007 to Memorial Hermann Health System for $70 million, marking a net profit for MPT's investors. MPT blamed Stealth's lease default on the hospital's failure to obtain necessary managed health contracts, complicated by a lack of capital to cover losses.[8] Memorial Hermann intended to close the hospital and reopen it the next year as a long-term acute care facility.[8][10]
The resolution of MPT's issues with Town & Country Hospital was lauded by Aldag:[10]
In 2006, not only did we continue to grow at very fast rates, increasing our investments by more than $213 million, but we also overcame our first real potential negative event. [. . .] We were able to turn that negative into a positive in about two months by selling the property in January 2007 for a gain exceeding $5.0 million.
—Edward K. Aldag, Jr., in a press release reporting MPT's 2006 fourth quarter results
Until 2008, Vibra Healthcare remained MPT's largest tenant both by number of facilities leased (eight as of March) and by representative revenue (31%).[11] Their portion of MPT's portfolio was surpassed for the first time by Prime Healthcare by March 2009, by which time Prime leased eleven properties from MPT and represented 33% of MPT's revenue.[12]
2010–2014
In 2012, MPT announced a $400 million deal to acquire a 49% stake in Albuquerque-based Ernest Health, as well as the underlying real estate of the health system's 16 rehabilitation and long-term acute care facilities across nine states. According to MPT, this deal increased the total value of its assets by 25% to over $2 billion across 78 properties in 24 states.[13][14][15][16] This deal allowed Ernest to overtake Prime as MPT's largest tenant by number of facilities, though Prime remained their largest by total asset value.[17]
In November 2013, MPT expanded beyond the United States for the first time with the real estate purchase of eleven rehabilitation hospitals in Germany, operated by RHM Klinik- und Altenheimbetriebe[de] (RHM). In filings, MPT described the German healthcare market as an attractive area for investment "because the German Social Code mandates universal access, coverage and a high standard of care, thereby creating a robust healthcare dynamic in the country."[18]
MPT's European expansion continued in 2014 with its first hospital acquisition in the United Kingdom, Circle Bath in Peasedown St John, obtained in a transaction valued at £28.3 million (about US$48 million). MPT said in filings that the UK was an attractive investment opportunity due both to their universal healthcare mandate combined with the recent Health and Social Care Act 2012, which opened the door for increased privatization of hospitals and other services while still being covered by the National Health Service, which allowed for a more competitive market.[19]
The firm's German operation further grew significantly that year and in 2015, with transactions bringing their number of properties in the country to 46. MEDIAN Kliniken, the lessee of all 46 facilities after its merger with MPT's only other tenant RHM, became MPT's largest tenant worldwide by number of properties, though Prime remained its largest by asset value. MPT also expanded into Spain and Italy.[20]
2015–2019
In 2015, MPT purchased Tennessee health system Capella Healthcare from private equity firm GTCR for $900 million–$300 million for a portion of its operations, and $600 million for its real estate in a leaseback arrangement.[21][22] One year later, it sold its equity share in Capella to Apollo Global Management for $390 million so that Apollo could merge Capella with its own health system, RegionalCare. MPT continued to hold the system's real estate.[23][24]
In October 2016 MPT finalized the leaseback of the properties of Steward Health Care, a health system in Massachusetts. Despite the deal covering only five facilities, Steward's asset value of $1.25 billion immediately made it MPT's most valuable, surpassing Prime's value of $1.144 billion and encompassing 17.5% of MPT's portfolio.[25] Their portion of the portfolio would only grow over the following years,[24] with Steward remaining its top position in value for the next eight years–eventually joining MPT's largest tenants by number of facilities[26] and at one point becoming the largest health system in the U.S.[27] In addition to properties, $50 million of the transaction bought MPT a 5% minority stake in Steward.[24][28]
As with certain of its other tenants, MPT and Steward maintained a close relationship in Steward's expansion. In 2017, Steward, utilizing freed capital from its deal with MPT the previous year, began an aggressive campaign of expansion beyond the borders of Massachusetts. Steward's first interstate acquisition came early that year, when it purchased eight hospitals from the heavily-indebted Community Health Systems in Ohio, Pennsylvania, and Florida for $304 million.[27] Not long after, MPT purchased the properties from Steward for $301 million, allowing Steward to recoup almost the entire price paid for both the properties and operations.[29]
The pace of Steward's expansion going forward largely relied on deals with MPT similar to this. In many cases, the bulk of Steward's payment for acquisitions were not long later recouped by the sale of the underlying property to MPT. Later the same year, Steward purchased eighteen hospitals, mostly in the Central United States, from the struggling health system IASIS Healthcare, and sold the properties of eleven of them to MPT for $1.4 billion, a return of 74% of the initial purchase price (MPT already owned the properties of three of the hospitals, which it had purchased from IASIS in 2013). This transaction also made Steward the largest private healthcare system in the United States by both number of facilities and total revenue.[27][24] It also solidified Steward's place as MPT's largest tenant, accounting for 36.5% of MPT's international portfolio (an increase from 22.5% in 2016, and more than double MPT's second tenant, MEDIAN in Germany, at 13%).[30] MPT further invested another $100 million in Steward, bringing its stake in the system to 9.9%.[24] By 2018, Steward represented 38% of MPT's real estate assets. Despite MPT's acknowledgement in filings about risk inherent in any single tenant encompassing a large portion of their portfolio, Aldag stated that Steward was different because of its geographically diverse market presence.[31]
MPT entered the Australian healthcare market in 2019 with the purchase of eleven hospitals–seven acute care and four behavioral health–in a leaseback arrangement with operator Healthscope for $860 million.[32][33]
Also in 2019, MPT purchased the real estate of fourteen facilities operated by the embattled Prospect Medical Holdings,[34] which used the money primarily for debt relief and investor dividends.[24]
2020–present
In 2020, MPT created a joint venture with Steward executives[24] "for the purpose of investing in the operations of international hospitals," in which it held a 49% stake. To this end, they borrowed $205 million for its formation, purchased unspecified rights and assets from Steward for $200 million (which Steward had valued at $27 million),[24] and provided $135 million in financing for the venture's purchase of three acute care hospitals in Colombia. While MPT didn't specify the other party to the venture in filings, the hospitals they owned in Colombia[35] coincided with hospitals operated by Steward's international venture.[36]
Steward Health Care began borrowing money from MPT in 2021 when MPT issued a loan of $335 million to allow the health system to complete its buyout from its previous owner, Cerberus Capital Management.[37] This loan made MPT Steward's largest creditor, in addition to being its lessor and minority owner.[24]
MPT's stock price hit its all-time peak on December 31, 2021, at $23.63 per share.[31] From 2017 to 2021, CEO Edward Aldag’s salary, bonuses and stock awards totaled around $70 million.[38]
In 2023, MPT sold its Australian portfolio to Sydney-based asset management company HMC Capital for $802 million, lower than its purchase price for the same facilities, marking the end of its presence in the country. MPT said it would use the proceeds primarily to settle debt.[33][42]
Steward, still MPT's biggest tenant at 19.2% of its assets, began to struggle with its rent payments in September of 2023. According to filings, Steward delayed part of its rent payments for September, and further paid only $16 million of its $70 million in rent and loan obligations to MPT for the fourth quarter:
According to Steward, its cash flows from operations have been impacted by challenges related to revenue cycle management and a backlog of accounts payable.
—Medical Properties Trust, in its 2023 annual report
Despite efforts by Steward to improve its financial situation, it expressed to MPT in December that its financial situation continued to worsen. Following consultation with advisors, in order to protect its business, MPT provided a $60 million bridge loan to Steward in January 2024 and contributed $37 million to another loan provided by a group of Steward's creditors in February. MPT also allowed Steward leeway to defer rent payments temporarily.[26] Steward filed for Chapter 11 bankruptcy in May 2024.[1]
Throughout the COVID-19 pandemic and Steward's decline, among other factors, by Steward's bankruptcy MPT's stock value fell 80% from its historic high of $23.63 in 2021–a loss in value of $11.5 billion according to The Boston Globe.[31][43]
MPT officially separated from Steward later that year. The bankruptcy court handling Steward's case allowed for the termination of Steward's master lease with MPT to allow for re-tenanting, and Steward's former Massachusetts facilities were taken over by Apollo Global Management, the mortgage lender for the venture between MPT and Macquarie.[1]
Criticism
By nature, REITs like MPT are legally intended to generate profit for investors, some of which according to MPT include retirement funds for firefighters and teachers. However, MPT has come under the spotlight at times in criticism of REITs, particularly in healthcare.
MPT has argued that their sale-leaseback strategy has allowed providers to avert bankruptcies and reinvest into operations, and thereby ensure continued care for their communities, which are often low-income or otherwise disadvantaged with more sparse access to healthcare.
Critics, largely part of the American health care reform movement, allege that some holding companies utilize leaseback arrangements with REITs to purchase struggling health facilities primarily with the intent to extract remaining liquidity for investor dividends, company expansion, and executive bonuses, and then close the facilities–after which MPT either re-tenants the facility resells the properties for further profit. The onus of rent, maintenance, and taxes are often placed on the facility itself rather than the parent company, which can lead to significant negative impact to long-term solvency. Studies of MPT's transactions with healthcare companies and those of other healthcare REITs have correlated the model with higher healthcare costs, lower operating capital, and poor patient outcomes.[40][44][45][46]
Journalism
A 2022 Wall Street Journal report claimed that the company engaged in risky acquisitions with tenants who were likely to default on rent payments later while the compensation of executives of the company was partially linked to the volume of acquisitions they could make. MPT responded that it does not directly compensate executives for acquisition volume, and that its compensation plan provides for reducing executive compensation if acquisitions do not increase the company's per-share value.[47]
In March 2024, Bethany McLean of Business Insider criticized the company, writing that "MPT's hospital investments represent a breathtaking scheme that has decimated healthcare in communities across America." This article mentioned MPT's founder and president Edward Aldag. Referring to him, the article states, "Top executives, including Aldag, received hefty bonuses based in part on the dollar volume of transactions they did — meaning the more hospitals they drove into debt, the better."[44]
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$995.5 million (2024)
$2.408 billion (2024)