Largest U.S. Hospital Landlord Reports $664M Loss, Plans To Sell Assets

The nation’s largest hospital landlord, Medical Properties Trust, on Wednesday revealed its losses from struggling tenant Steward Health Care are deeper than previously reported, and it is lending the operator more money as it tries to right the ship.

The REIT recorded $772M in write-offs and impairment charges primarily linked to Steward, it said in its fourth-quarter earnings release, and it said it agreed to provide another $37.5M in loans to Steward to keep its largest tenant operating. 

That comes after MPT said in January it recorded $350M in write-offs related to Steward, lent the operator $60M and hired a restructuring specialist, an announcement that ignited concerns over MPT’s financial health and business practices.

MPT is working to shore up its finances and pay off its debts by generating $2B of liquidity this year, including by selling hospitals. It said in the earnings release it reached a deal this month to generate $305M by selling five hospitals to one of its operators, Prime Healthcare.

Steward has come under fire for its financial troubles that have risked the closure of multiple hospitals, especially in Massachusetts, where the governor and lawmakers have spoken out. MPT has been trying to distance itself from the healthcare company by working to transition hospitals to new operators.

"We are confident in our ability to find competent replacement operators as needed and continue to execute sales that achieve our objectives," MPT CEO Edward Aldag said on the Wednesday earnings call.

The healthcare REIT reported a net loss of $664M in the fourth quarter, driven by the Steward-related losses. The company's full-year revenue of $872M was down from $1.5B in 2022. 

The write-offs and impairment charges it reported include $154M in Steward rent receivables, $224M in Steward's straight-line rent, $171M in impairments not related to real estate and $30M for the rent on properties held in a Massachusetts joint venture.

MPT said it is negotiating with Steward's asset-backed lenders to fund a new bridge loan for the operator, for which each party would fund an additional $37.5M. MPT said it has already funded $20M.

Aldag said the latest bridge loan will be the last of the REIT's efforts to help Steward until significant changes have been made.

"Any additional funding is entirely dependent on Steward's achieving significant milestones towards optimizing the amount and timing of MPT's recoveries," Aldag said.

"We are encouraged by the early progress," he added. "As this plan is executed, Steward needs access to liquidity to continue to operate as critical hospital facilities." 

Steward owes MPT $50M in unpaid rent, and MPT deferred some rent payments it owes in 2024. As of the fourth quarter, Steward had paid back 25% of the rent and interest it owed MPT, Aldag said.

MPT's other troubled tenant, Prospect Healthcare, was up to date on rent payments and interest through January, Aldag said. However, there was no update on the potential sales of Prospect's three Connecticut hospitals to Yale New Haven Health.

The REIT made several transactions in 2023, including the sale of its four remaining Australian facilities for $305M, and it generated another $480M in liquidity from another handful of transactions.

The hospitals it agreed to sell to Prime Healthcare this month are in California and New Jersey, MPT said.

The REIT also agreed to combine three leases at hospitals in Michigan and Missouri into a 20-year master lease with Prime. MPT also gave Prime the option to repurchase the Michigan and Missouri facilities at any time for $260M.

"These are all attractive hospitals," MPT Chief Financial Officer Steven Hamner said. "But the geographic location of these hospitals is not necessarily the best in our portfolio. ... This speaks very strongly of continued investor interest and confidence in well-underwritten hospitals."

MPT Chief Accounting Officer Kevin Hanna said the recent sales will immediately reduce two loans maturing in 2024. The sales will also help pay down the $900M in bank debt and $550M in unsecured notes due in 2025.

"We expect our planned sales and secured financing transactions will provide more than sufficient proceeds to satisfy these maturities," Hanna said.

Despite the losses and concerns over its largest tenant, MPT's stock was up 2% Wednesday morning after its earnings report beat analyst expectations.

As Steward deals financial blows to MPT, the operator also faces pressure from officials and regulators in Massachusetts worried about the possibility of its nine hospitals in the state closing. 

"One of the keys to our underwriting over the years has been that we own hospitals that nobody wants to see closed," Hamner said. 

At the beginning of February, Steward said it received funding to keep the hospitals open until it could find new operators, the Boston Globe reported. 

On Tuesday, Gov. Maura Healey demanded Steward CEO Ralph de la Torre provide financial records, the Globe reported.

"We don’t have enough to know what they’ve done, whether it’s criminal or illegal, but to me, it really smells. It raises a lot of questions," Healey said of Steward, according to the Globe. 

The next day, U.S. Rep. Stephen Lynch toured a Steward hospital in Brockton and a construction site for a Steward hospital in Norwood where work had come to a standstill, CBS reported. 

When asked by analysts about its efforts to bring in new operators to take over hospitals from Steward, Aldag said there has been interest from prospective tenants. 

"The real answer to that question for us is that we've been extremely pleased with the amount of interest we've gotten in almost all of the facilities and in almost all of the buildings," Aldag said. "We've got more than one party who is interested in the facilities."

UPDATE, FEB. 22, 10 A.M. ET: This story has been updated with additional financial figures from MPT's earnings release.