Aldag says the “phenomenal growth,” even as the company sold nearly $800 million of assets in the first half of '16 to reduce leverage, has resulted in normalized funds from operations per share “growing over 10% annually compared to 6.7% for our peers for the period. Our dividend growth of 4% annually has also outperformed while our dividend payout ratio declined from 83% to 70% of normalized FFO.”

He notes that Steward has “similarly achieved remarkable success in growing its company starting with the turnaround of a struggling not-for-profit hospital system in eastern Massachusetts. As Steward implemented its strategic plan to develop an integrated network with various access points along the healthcare continuum, the results were improved outcomes and reduced costs.”

The merger with IASIS will make Boston-based Steward the largest private for-profit hospital operator in the US. Its portfolio will run to 36 hospitals across 10 states, managed care operations in Arizona, Utah and Massachusetts and projected revenues of almost $8 billion in 2018, the first year of consolidated operations.

Currently, the company operates 18 hospitals and directly employs more than 1,300 multi-specialty physicians in locations across Massachusetts, Ohio, Florida and Pennsylvania. IASIS operates 17 hospitals and one behavioral health hospital in locations across Utah, Arizona, Colorado, Texas, Arkansas and Louisiana. Through this transaction, Steward will operate nearly 7,500 patient beds and employ more than 1,800 multi-specialty physicians directly, as well as several thousand aligned physicians.

BIRMINGHAM, AL—One portfolio sale, two billion-dollar transactions. Medical Properties Trust Inc., headquartered here, said Friday it had agreed to pay $1.4 billion for 10 acute care hospitals and one behavioral health facility now operated by IASIS Healthcare and to be operated by Steward Health Care System LLC when the transaction is completed. The sale is contingent upon the completion of a merger between IASIS and Steward, also announced Friday. Financial terms of the merger were not disclosed; however, Bloomberg Business and the Wall Street Journal put its value at about $2 billion.

In an investor presentation Friday, MPT noted that the IASIS deal—a $700-million sale-leaseback and a $700-million mortgage investment—increases acute care hospitals' share of its total portfolio to 72.5%, a level that rises to 84% for the REIT's US portfolio. At the same time, it increases the Steward-operated concentration in MPT's portfolio, following a $1.25-billion deal for nine acute care facilities in Seward's home state of Massachusetts this past fall.

To achieve more balance among its operators, the REIT may seek to make continued non-Steward purchases, according to the investor presentation. It may enter into joint ventures on the existing Steward assets, or on future Steward investments. The goal is to reduce the Steward concentration to less than 25% of the total; on a prom forma basis, it will comprise $3.3 billion of a nearly $9-billion portfolio when the latest deal closes.

With a concentration in high-growth urban and suburban markets in Utah, Arizona, Texas and Arkansas, the Steward deal announced Friday continues MPT's growth of assets by approximately 31% annually since 2013, “compared to 15 percent for our healthcare REIT peers,” says Edward K. Aldag Jr., MPT's chairman, president and CEO. “With this transaction, we eclipse our previous record 2016 acquisition total.”

Aldag says the “phenomenal growth,” even as the company sold nearly $800 million of assets in the first half of '16 to reduce leverage, has resulted in normalized funds from operations per share “growing over 10% annually compared to 6.7% for our peers for the period. Our dividend growth of 4% annually has also outperformed while our dividend payout ratio declined from 83% to 70% of normalized FFO.”

He notes that Steward has “similarly achieved remarkable success in growing its company starting with the turnaround of a struggling not-for-profit hospital system in eastern Massachusetts. As Steward implemented its strategic plan to develop an integrated network with various access points along the healthcare continuum, the results were improved outcomes and reduced costs.”

The merger with IASIS will make Boston-based Steward the largest private for-profit hospital operator in the US. Its portfolio will run to 36 hospitals across 10 states, managed care operations in Arizona, Utah and Massachusetts and projected revenues of almost $8 billion in 2018, the first year of consolidated operations.

Currently, the company operates 18 hospitals and directly employs more than 1,300 multi-specialty physicians in locations across Massachusetts, Ohio, Florida and Pennsylvania. IASIS operates 17 hospitals and one behavioral health hospital in locations across Utah, Arizona, Colorado, Texas, Arkansas and Louisiana. Through this transaction, Steward will operate nearly 7,500 patient beds and employ more than 1,800 multi-specialty physicians directly, as well as several thousand aligned physicians.