US healthcare property specialist Medical Properties (MPT) has agreed to acquire a portfolio of health facilities located in the UK for £800 mln (€890 mln), plus transaction costs.
The facilities are currently owned and operated by UK behavioral health provider Priory Group on an initial fixed term of 25 years, two 10-year extension options, and annual rent escalators linked to UK inflation and subject to a 2% floor.
In a related transaction, Waterland Private Equity Investments will acquire the operations of Priory from Acadia Healthcare following a competitive process.
Waterland is the parent of MPT’s German post-acute tenant Median Kliniken and plans to combine the Priory and Median platforms to create Europe’s largest comprehensive medical and behavioral rehabilitation services provider.
The sale-leaseback agreements are expected to provide MPT a GAAP-basis yield of 8.6% and were underwritten based on initial lease payment coverage of approximately 2.0 times EBITDAR.
The deal is expected to close during the first half of 2021.
MPT expects to fund the deal using cash on hand, borrowings under its revolving credit facility and/or with funds from additional financing arrangements. The sources of financing actually used will depend upon a variety of factors, including market conditions.
‘We are elated to rapidly expand both our presence in the UK and our exposure to the increasingly critical behavioral health hospital segment at what we believe to be a very strong return to MPT,’ said Edward K. Aldag, Jr., MPT’s chairman, president, and Chief Executive Officer. ‘Our unique understanding of healthcare operations and real estate, successful track record investing in Europe, leadership position in the UK healthcare real estate financing market, and proven ability to execute complicated, multi-national transactions were critical in securing this competitive transaction despite obvious complexities related to the pandemic and a changing trade landscape between the UK and European Union.’
The deal is expected to be immediately earnings accretive for MPT, while contributing to increase its tenant diversification as well as the lease length of the portfolio.
