Medical Properties Trust (NYSE: MPW), a leading hospital real estate investment trust, has announced a significant development regarding its tenant Prospect Health Systems. Prospect has entered into a binding agreement to sell the majority of its managed care platform to Astrana Health for approximately $745 million, resolving MPW's issues with the struggling healthcare operator.
Under the terms of the deal, MPW expects to receive around $200 million in cash proceeds after satisfying Prospect's obligations to its senior creditor and other liabilities. The majority of this cash, estimated at $150 million, is expected to be received in the first half of 2025, with the remaining $50 million expected by 2027.
The sale of Prospect's managed care business to Astrana Health marks a significant step for MPW in its efforts to disentangle itself from Prospect, which has faced liquidity challenges and delayed rent payments to MPW in recent months. The transaction remains subject to regulatory approval and other closing conditions, with an anticipated closing in mid-2025.
In addition to the Prospect deal, MPW has been actively working to re-tenant properties previously leased to Steward Health Care following Steward's bankruptcy. The company successfully re-tenanted 17 properties with a lease base of approximately $2.1 billion and expects to gradually resume receipt of cash rents on this portfolio, ramping up to an annualized rent of approximately $160 million by the end of 2026.
While MPW reported a GAAP net loss of $1.34 per share for the third quarter of 2024, primarily due to impairments related to the Steward settlement, its normalized funds from operations (FFO) stood at $0.16 per share. With the re-tenanted properties beginning to contribute to cash flow and the resolution of the Prospect situation, MPW is well-positioned to enhance its financial flexibility and create long-term value for shareholders.
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