Steward Sues Landlord Medical Properties Trust For Allegedly Interfering In Hospital Sales
After reaching preliminary deals to sell six hospitals, Steward Health Care has accused its landlord of interfering with the sales.
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Steward filed a lawsuit against Medical Properties Trust Monday in Houston bankruptcy court, claiming the landlord directly spoke with bidders without notifying the hospital operator in a manner that violated a bankruptcy judge's order.
The hospital operator alleges that the healthcare REIT steered most of the value of potential bids to the real estate MPT controls, providing little to no value to Steward or its creditors, Bloomberg reported.
The process to sell Steward's hospital operations and avoid closures has become contentious because bidders aren't just negotiating with Steward on the deals but also with landlord MPT, which owns the land and real estate.
Steward claimed that the landlord engaged in “calculated efforts to undermine the debtors’ sales process by attempting to siphon all value from the debtors’ estates and hospitals into its own coffers.”
MPT filed an objection in response to the lawsuit, arguing that it is within its rights to negotiate the terms at which its property will sell. It also said Steward has prevented the sales from going forward, not MPT, because it is trying to extract value from the REIT's real estate.
“The Debtors’ proposal, if allowed to go forward, would be an abuse of the bankruptcy process and an affront to MPT’s property rights," the objection states.
An MPT spokesperson, in response to a request for comment, pointed Bisnow to the objection.
MPT's business model is based on buying hospital real estate from operators and leasing it back to them. In a 2016 deal, MPT bought properties from Steward for $1.25B as part of a sale-leaseback agreement. The REIT went on to help the healthcare system expand to include 31 hospitals in eight states, and it has also lent the operator money.
Steward filed for bankruptcy in May after being unable to pay at least $50M in rent, leading to hundreds of millions in losses for publicly traded MPT and putting hospitals at risk of closing in Massachusetts and across the country.
Earlier this month, MPT announced it and its partner Macquarie Infrastructure Partners were handing back the keys to eight Massachusetts properties to lender Apollo to better facilitate sales.
Two of the hospitals are slated to close after they were unable to draw qualified bidders, Steward announced late last month.
Massachusetts' officials helped strike deals for the six other Steward hospitals in the state. On Friday, Gov. Maura Healey announced the state is seizing control of Steward's flagship St. Elizabeth's Medical in Brighton as part of a process to transition it to Boston Medical Center, and it reached deals with healthcare groups to purchase the other five.
Boston Medical Center also agreed to acquire the Good Samaritan Hospital in Brockton. Lifespan Health System agreed to purchase Morton Hospital in Taunton as well as St. Anne's Hospital in Fall River, and Lawrence General Hospital is buying Holy Hospital's campuses in Haverhill and Methuen.
But these sales haven't been finalized, and the creditors that extended $575M in loans to Steward have said in bankruptcy filings they have the right to block its sales in Massachusetts and seven other states, The Boston Globe reported Tuesday.
The creditors say they have a right to block the sales because the assets they have invested in "have significant value" to buyers apart from the real estate, including hospital permits, vendor contracts, furniture and medical equipment, which they need payment on before the hospitals change hands.