Steward Health Care System has reached a $1.25 billion deal with a real estate investment firm that the Boston-based hospital chain says will allow it to repay the private equity firm that launched it and also begin a national expansion drive.
Under a sale-leaseback transaction, Birmingham, Ala.-based Medical Properties Trust will buy the properties of Steward's nine hospitals for $1.2 billion. The firm will also invest an additional $50 million for a 5% equity stake in the for-profit company.
Steward CEO Dr. Ralph de la Torre said in a news release the investment “sets the stage for Steward's future.” He added, “We believe this investment is a strong validation of our business model and an endorsement of our ability to scale nationally.”
The system plans to open more facilities in additional states and expand the reach of its accountable care organization.
Steward did not respond immediately to a request for details regarding the expansion plans. De la Torre told the Boston Globe the system will seek partners with a focus on wellness and prevention services.
Another $100 million will be designated for capital investments at existing Steward facilities. The agreement also includes a commitment by Medical Properties to finance additional hospital acquisitions made by Steward for up to $1 billion.
Medical Properties owns, operates and manages healthcare facilities. The firm reported $441 million in revenue in 2015 and grew at a rate of 123% in three years.
The agreement is expected to close in the fourth quarter of 2016. Steward will maintain management control of all hospitals and other facilities.
Steward was formed in 2010 after Cerberus Capital Management paid $830 million for the assets of the Roman Catholic system Caritas Christi Health Care. Steward said the transaction with Medical Properties Trust would allow it to repay Cerberus for its investment in the company and also pay off its corporate debt.
Steward is the largest for-profit healthcare provider in Massachusetts. The company closed Quincy (Mass.) Medical Center in 2014 after it lost roughly $20 million a year on facility expenses.
The system has reported operating losses up until recently. In 2015, Steward achieved operating profit of $131 million on $2.2 billion in revenue, according the news release announcing the real estate deal. For fiscal 2013, it reported a $55 million operating loss on $2.1 billion in revenue.
Steward expects to report $2.3 billion in revenue at the end of 2016.