Dive Brief:
- Hospital landlord Medical Properties Trust posted a $736 million loss for the first quarter Thursday, compared to an income of $33 million in the same period the year prior. The results come days after MPT’s largest tenant, Steward Health Care, filed for Chapter 11 bankruptcy.
- MPT’s quarterly performance was dragged by $693 million in impairments related to Steward and an international joint venture formed in 2020 — also tied to Steward through its CEO, Ralph de la Torre.
- The company’s earnings were also dinged by lower than expected rent payments from Prospect Medical Holdings. Rosa Hooper, senior vice president of operations at MPT, said on a Thursday earnings call that the for-profit hospital system has not paid rent for April or May.
Dive Insight:
While MPT has a portfolio of 436 properties, analysts were focused on the impact of Steward’s bankruptcy filing on the company.
“When an operator representing ~20% of revenue (4Q23) goes bankrupt, there is not much else worth focusing on,” wrote a Jeffries analyst it in a research note Thursday morning.
MPT holds long-term leases on 36 Steward-operated facilities, according to its earnings filing. Steward fell behind on rent payments last year and filed for bankruptcy Monday, disclosing $9 billion in debt.
MPT is solely backing Steward’s $75 million debtor-in-possession bankruptcy financing, which has raised eyebrows. But MPT CEO Edward Aldag said other lenders considered financing Steward.
“There absolutely were others or other lenders involved [in financing discussions], as you know, but we're not gonna get into the details of those negotiations at this point,” said Aldag.
The real estate investment trust has already lent Steward hundreds of millions of dollars even as the loans have dragged down MPT’s own revenues. Aldag, for example, attributed much of the company’s quarterly loss to impairments related to MPT’s 2021 loan to Steward for $360 million.
Steward did pay $9 million in rent to MPT this quarter. However, that comes after MPT financed a $60 million bridge loan in January and an additional $75 million asset-backed loan, according to the earnings report.
Aldag declined to comment directly on a variety of Steward matters, ranging from whether some hospitals might close during bankruptcy proceedings, to which specific companies are in talks to take over Steward’s leases.
Hospital sales are a key factor moving forward for Steward. MPT said it might give the hospital operator further funding of up to $225 million if it sells its hospitals this summer — a timeline Steward’s legal counsel called “not feasible” in a bankruptcy hearing this week.
Aldag expressed confidence that the deals could get done, saying some hospital sales have been in the works for five or six months.
“We’re way down the road with many different people,” Aldag said.
Aldag said MPT’s rental agreements were not what landed Steward in bankruptcy proceedings as he struck out against “misinformation” about MPT’s business model.
“Rent is never mentioned by Steward on the list of contributing factors to its financial stress,” Aldag said. “If Steward wasn't paying rent, they'd be paying interest in principal repayments on some type of financing for the facilities. Because as we all know, buildings are not free.”
Executives also gave updates on other tenants, including Prospect Medical Holdings. MPT disclosed Thursday that Prospect only paid $7 million in rent during the quarter, and that the fair market value of the health system’s assets declined by approximately $60 million.
Prospect has been struggling financially — this time last year, the health system took out a $375 million ABL loan to help with liquidity.
Prospect has also been attempting to sell hospitals to Yale New Haven Health since 2022. However, Yale recently sued to get out of the deal, citing Prospect’s “irresponsible financial practices, severe neglect and general mismanagement” of facilities.
