Medical Properties To Buy 40 Rehabilitation Hospitals In Germany For $900 Mln

(RTTNews) - Real estate investment trust Medical Properties Trust Inc. (MPW) said Monday that it has agreed to acquire 40 rehabilitation hospitals in Germany from privately-held Median Kliniken Group, Germany's largest private provider of post-acute and acute rehabilitation services, for about 705 million euros, or $900 million. The company has also agreed to lease back substantially all of these assets to Median Kliniken.

Edward Aldag, Jr., Chairman, President and CEO of Medical Properties Trust. "This is an important transaction because it significantly increases our asset base to approximately $4.5 billion, and builds on our recent entry into the attractive Western European market. The acquisition of the MEDIAN real estate is a very compelling and unique opportunity for MPT and is fully aligned with our strategy to diversify our market-leading hospital portfolio across geography, operator and facility type."

Under the terms of the sale/leaseback agreement, Medical Properties will acquire and leaseback to Median the real estate assets of 38 rehabilitation and 2 acute care hospitals in Germany pursuant to a 27 year master lease.

Medical Properties noted that the master lease provides an initial lease rate well within its target range of 8.0 percent to 11.0 percent, with annual escalators at the greater of one percent or 70 percent of German CPI.

Further, Medical Properties announced about $155 million in recent, previously undisclosed commitments and investments, including $74 million in U.S. investments.

These hospital assets include three acute facilities in the U.S., located in Alabama, Texas and West Virginia, with an aggregate value of about $74 million, and three additional German rehabilitation hospitals with an aggregate value of about $81 million.

Medical Properties will lease the three German hospitals to RHM Kliniken, a current tenant of the company's assets in Germany and owned by affiliates of Netherlands-based Waterland Private Equity, the expected future majority owner of Median.

The new U.S. hospital facilities, as well as those included in the new commitment with RHM Kliniken, will be leased back to the operators under long-term net leases with a weighted average initial cash lease rate of about 9.3 percent and consumer price index-based escalators, Medical Properties said.

Medical Properties noted that with these transactions, it has committed to investments totaling about $1.4 billion year-to-date, the highest amount of investments it has made in a single year in its history.

Medical Properties expects to consummate the Median transaction through a two-step process.

In the first step, an affiliate of Waterland Private Equity will acquire a 94.9 percent equity interest in Median. Medical Properties will acquire the remaining 5.1 percent stake and will provide loans to Waterland and Median for up to the €705 million purchase price of the sale/leaseback real estate.

In step two, the loans will be offset against the purchase prices of each real estate acquisition.

Closing of the sale/leaseback transactions is conditioned on the acquisition of Median's equity in step one, which is subject to approval by the German merger control authorities. The transactions are expected to be completed during the first quarter of 2015.

Medical Properties has also amended its credit facility to increase the aggregate commitment to $1.15 billion and provide a new additional $400 million accordion feature. Further, the company has amended certain other provisions to ensure that its purchase obligations may be fully funded under the credit facility.

In addition, Medical Properties has commitments for a new $225 million one-year senior unsecured term loan. The company plans to refinance the Median transaction as market conditions warrant, with a combination of new secured or unsecured debt and equity.

Medical Properties expects the transactions to be accretive to its normalized funds from operations or FFO by between $0.09 and $0.12 per share, or by between 8.0 percent and 11.0 percent for the 12 months following the completion of permanent financing, taking the company's normalized FFO run rate to $1.19 to $1.26 per share. The company previously estimates a normalized FFO run rate of $1.10 to $1.14 per share.

MPW closed Monday's trading at $13.49, up $0.27 or 2.04 percent on a volume of 875,847 shares. In after-hours, the stock further gained $0.14 or 1.04 percent to $13.63.