MPT’s intentional choice to focus on the acute care sector has proven the secret to incredible growth, benefiting communities around the world—and benefiting MPT shareholders as well.
Guided by this singular mission, MPT has strategically read the healthcare landscape and ascended to its preeminent position on the world stage. The company is responding to a need for hospital financing, and that need is not going to wane. Hospitals are central to the delivery of healthcare in the communities they serve, wherever they are in the world. That’s why MPT’s 2019 investments in new markets such as Portugal, Switzerland and Australia, along with new relationships with innovative operators in the U.S., further position it for even greater growth.
Trends related to demographics, technology and healthcare best practices all support MPT’s mission and point toward rapid future growth. “The global market for hospital real estate is so large as to be almost immeasurable. And only a small fraction of it is presently financed by parties such as MPT,” says Edward K. Aldag, Jr., chairman, president and CEO of MPT and its primary founder. “We have many years of growth potential ahead of us.”
“You can hardly overestimate the general trend of the demographics in healthcare,” says Emmett E. McLean, chief operating officer at MPT, as he rattles off stats about baby boomers aging. For instance, on average, people ages 65-74 spend four times the number of days in hospitals as the under-65 population. And every single day in the U.S. alone, 10,000 people turn 65. It follows that those ages 75-84 and 85-plus use hospitals 6.4 times and 8.7 times the rate of the under-65 group, respectively.
These utilization statistics bode well for hospitals. The so-called “Silver Tsunami” of aging boomers is still breaking over the industry, so the need for acute care is urgent and ongoing. And the coming generations will require care eventually, too. In fact, in meetings with older investors, MPT talks about how hospitals are good for these investors for two reasons: 1) hospitals take care of them, and 2) they generate cash flows that allow MPT shareholders to receive a growing amount of dividends in their retirement years.
Use by older Americans also means that hospitals have a steady payment source due to Medicare reimbursement, providing revenue to help pay rent to MPT and dividends to its shareholders. As technology improves and people live longer, there will be a need for quality facilities, and MPT capital will help ensure hospitals are prepared to serve.
The improved technology helping patients enjoy longer lives also means that hospitals can now provide more frequent outpatient services. Indeed, many surgeries and procedures that once required an overnight stay now happen with same-day service, allowing hospitals to treat more patients more efficiently. “As a result, hospitals are helping additional people, doing more in their communities and reducing the overall cost of healthcare,” says Aldag.
Some hospital systems are even providing outpatient services via stand-alone ERs or clinics in suburban areas, boosting their roles in their communities. MPT is seeing a general rise in hospital revenues, and a percentage of that higher revenue is coming from non-overnight, outpatient care. MPT tenants are taking advantage of that trend, responding to interest in this type of same-day service.
In addition to MPT’s acquisitions of new European and Australian hospitals in 2019, its $700 million acquisition of 10 LifePoint Health hospitals illustrates how MPT has grown its presence in a broader range of U.S. markets.
Along with properties in large American cities, investors can now see MPT properties dotting cities and towns that may be a two-hour drive from large urban centers. Rosa Hooper, vice president and managing director, Asset Management and Underwriting, explains that MPT appreciates the critical role these hospitals play in their communities, serving residents looking for quality care without having to drive to larger cities. “We’re proud to own these properties—some of the top hospitals and strongest performers in their areas,” she says.
The newly acquired LifePoint facilities are just one way the company improved the geographic diversity of the MPT portfolio in 2019. And the capital solutions MPT provided these and other hospitals allow them to function better and meet more healthcare needs within their local populations.
Achieving that in more places in the U.S. and around the world is what MPT is all about.
Coming off a year of unprecedented growth, MPT’s 2019 accomplishments show just how far the company has come since it started in 2003.
MPT has catapulted into a new position on the world stage: It ended 2019 with an enterprise value of almost $19 billion—after growing from $10 billion at the start of the year. New leases with new operators in the U.S. and elsewhere have diversified the company’s holdings. An MPT office in Luxembourg positions it for more penetration in Europe. A new office in Sydney, Australia, will help it monitor new acquisitions with best-in-class operators “down under” and network on and around a third continent.
“We’re a global company. You can’t get farther away from Alabama than Australia,” says Chairman, President and CEO Edward K. Aldag, Jr. “There’s no geographic boundary on where we can go.”
One key reason for MPT’s past success emerges from the details of how the company runs its day-to-day operations. Aldag tells of one California hospital that MPT acquired after the operator grew frustrated with its previous landlord’s inability to relate to its needs. The landlord took six months to make a decision about a bed configuration change request. “We make those types of decisions in 30 minutes,” Aldag says.
He and the company’s underwriting staff have intimate knowledge of the healthcare industry that fuels every transaction MPT makes, every lease it signs and every relationship it maintains. And MPT’s healthcare industry insight foretells the company’s future success, no matter which direction on the globe it goes next. “There’s no one with our expertise,” Aldag adds. “We understand all facets of this business―finance, real estate and, most important, healthcare.”
When Aldag established MPT, the goal was to root the whole enterprise in healthcare expertise that focused exclusively on hospitals. “That was the whole intent,” says Emmett E. McLean, executive vice president and chief operating officer, “to hire people who came out of the healthcare industry so that we could literally operate any one of our hospitals if we had to.”
One of those individuals, Luke Savage, MPT vice president, International Acquisitions, sees the benefits of this philosophy play out just about every day. “We have many people who worked in healthcare or at hospitals before they came to MPT. So during the underwriting process, we’re asking key questions that show we understand hospital operations,” Savage says. “We’re able to connect with people who do hospital work, and we’re going to be an easy financing source to deal with because we know from experience that there are good days and bad days.”
It’s MPT’s healthcare know-how that allows it to maintain such strong relationships with its 389 facilities and 41 operators. It’s what helps the company draw new business, with essentially unlimited potential.
From its commanding position as leader of the world in hospital real estate finance, MPT has a vibrant pipeline of acquisition opportunities. Aldag says first-time transactions in Latin America are on the horizon and he looks forward to further transactions in Europe. MPT’s brand-new presence in Australia gives the company a foothold in a vast country in and of itself, but also in the Pacific Rim.
MPT takes great pride in helping hospitals unlock capital and put it to work to better serve their patients. They use it for renovations, new equipment, recapitalizations, new doctors and staff, and other needs. As more and more hospital systems see how well such a model works, the market will continue to grow.
Demonstrating that MPT has tapped just a fraction of America’s hospital real estate, Charles Lambert, MPT treasurer and managing director, Capital Markets, estimates there are about 5,000 hospitals in the U.S., and of them, MPT only has about 250 properties. Globally, he points to the many different types of operators in different countries with different healthcare systems. Across all of these geographies and hospital operators, a commonality is that MPT’s creativity in putting together real estate finance solutions can benefit a large portion of existing hospitals.
That strong potential is why private equity investors and shareholders alike continue to be attracted to MPT. There is a growing recognition that the company serves a vast and growing need in the hospital industry around the globe. And there is acknowledgment that MPT knows how to manage its growing portfolio with true expertise in the hospital industry.
In 2019, MPT saw a host of new relationships with new operators, but many were rooted in the past, stemming from interactions and transactions with operators and equity firms that have dealt with MPT and its management before. “They come to us for a reason,” McLean says. “We’ve helped fuel their growth.”
Becoming so sought-after portends a bright future for a fast-growing company that’s looking to extend its global reach to places where its model works. That means that during the next year and the next decade, MPT is looking to work with leading hospital operators and investors. It’s looking in the strongest markets. When an opportunity is identified and MPT’s executives decide to invest, the company moves rapidly.
“Where we go internationally depends on where the opportunities are, and MPT will gauge the situation to see if it makes sense,” McLean says. As of early in 2020, MPT’s portfolio was based approximately 66% in the U.S. and 34% internationally. In the future, the company expects to maintain a range between 60% and 70% allocated to the U.S., and this will fluctuate with the timing of opportunities in various markets.
“We look for very good opportunities,” McLean says. “We were the first ones doing what we’re doing, and now there are more opportunities than ever out there.”