Medical Properties Trust, Inc. (the “Company” or “MPT”) (MPW) today announced that its Board of Directors has adopted an updated capital allocation strategy designed to significantly strengthen its balance sheet, lower its cost of capital, and position MPT for long-term shareholder value creation.
- Adjusts Quarterly Dividend to Better Align with the Company’s Cash Flow Profile Following Asset Divestitures
- Announces Actions to Strengthen Balance Sheet and Accelerate Deleveraging
This refreshed strategy prioritizes actions to expedite debt reduction, while continuing to return substantial cash to shareholders. MPT’s Board and management team believe this prudent capital allocation approach will result in sustainable improvements to long-term unsecured borrowing costs.
Over the past eighteen months, MPT has completed several transactions that have resulted in lower adjusted funds from operations (“AFFO”), including its partnership with Macquarie Asset Management for eight Massachusetts hospitals, Prime Healthcare’s repurchase of 14 facilities, and the sale of seven Australian hospitals. The Company has also announced several transactions expected to close in the second half of 2023, including the sale of its Connecticut hospitals to Yale New Haven Health for approximately $355 million and the remainder of its Australian portfolio for approximately $300 million. In aggregate these transactions, while profitable, reduce the Company’s leased assets by approximately $2.5 billion.
To better align with the revised cash flow profile resulting from these transactions and facilitate accelerated debt reduction, the Company is taking the following actions:
- Declaring a quarterly cash dividend of $0.15 per diluted share, which will be paid on October 12 to shareholders of record as of September 14. In setting this new dividend level, the Board has carefully considered the dilutive effects of recent and pending dispositions and recapitalization transactions, while targeting an initial payout of projected near-term AFFO of less than 60%. Importantly, only anticipated cash rent scheduled to be paid on Prospect’s California leased hospitals is included in this estimate.
- Pursuing selective additional transactions that reinforce underwritten asset values. MPT will continue exploring refinancing, sales, and joint-venture opportunities that enable repayment of debt, while maintaining a diversified portfolio in terms of geography, asset type, and tenant mix. In addition, the Company has identified certain non-leased and non-real estate assets to be sold.
- Reducing costs. MPT plans to scale back discretionary operating expenses and other costs for better alignment with the reduction of both its asset base and its near-term acquisition activities.
“With this refreshed capital allocation framework, we believe MPT will be even better positioned to deliver long-term value through our profitable investments in hospital real estate,” said Edward K. Aldag, Jr., Chairman, President and CEO. “As we made clear during our recent quarterly earnings update, our focus is squarely on reducing leverage and improving our long-term cost of debt and equity capital. Our Board is confident these decisive steps will facilitate achievement of our target leverage ratios and create significant strategic and financial flexibility.”