An infrastructure fund is snapping up a 50% interest in the real estate of eight Steward Health Care Massachusetts-based hospitals, the organizations announced Wednesday.
Macquarie Infrastructure Partners V plans to acquire a 50% interest in the hospital real estate from the real estate investment trust Medical Properties Trusts, which is valued at $1.78 billion. Medical Properties Trust plans to use the expected $1.3 billion in proceeds to repay debt and fund its recent Springstone inpatient behavioral health facility transactions.
Macquarie based its investment on a 5.6% capitalization rate—the property’s net operating income divided by the current market value.
“We quickly engaged with Macquarie on an exclusive basis given their understanding of hospitals. Not a lot of investors, until recently, had been focused on hospitals—sometimes there’s a steep learning curve,” said Steve Hamner, chief financial officer of Medical Properties Trust. “When we formed the company 18 years ago, there was very little, if any, sustained investment by REITs in hospital real estate. It has grown exponentially.”
Investor interest in healthcare real estate has especially grown in the U.S., Hamner added. Medical Properties Trust has announced more than $2 billion in hospital real estate transactions so far this year, which aligns with recent years. But more of the activity is in the states versus Europe, he said.
Steward accounted for 30% of Medical Property Trust’s revenue in 2020, down from 42% in 2019, according to SEC filings. Medical Property Trust purchased Steward’s hospital real estate five years ago in a sale-leaseback transaction, which has fueled its recent growth, said Dr. Sanjay Shetty, president of Steward Healthcare North America.
“The deal is a validation of Steward’s operating model in Massachusetts,” he said.
Steward is a for-profit chain with 35 hospitals, up from nine in 2016. A group of its physicians purchased a majority stake of the company last year from private-equity firm Cerberus Capital Management.