Hospital operator Steward Health Care System has reached a settlement agreement with its largest landlord, Medical Properties Trust, releasing Steward of billions of dollars of owed rent amid the healthcare company's ongoing bankruptcy proceedings.
The agreement, approved by Medical Properties Trust, Steward, secured lenders and the unsecured creditors committee, is subject to bankruptcy court approval in its Chapter 11 case before it can be finalized. A hearing is scheduled for Tuesday.
Upon approval, 15 hospitals previously operated by Steward will transition to four new operators in Arizona, Florida, Louisiana, Ohio and Texas.
Medical Properties Trust, a real estate investment trust, said in a statement it has been "working tirelessly to identify replacement operators and negotiate new lease terms" at the facilities "despite declines in Steward’s operations during its restructuring process."
The new leases come on the heels of Steward Health exiting its operations at six Massachusetts hospitals that sold in deals totaling about $343 million. Medical Properties Trust also consented to the sale of three Florida hospitals to Orlando Health in a $439 million deal with a "substantial portion of the proceeds" being transferred to Steward in exchange for it relinquishing all rights to further allocation of value tied to the remaining hospitals in its portfolio, the REIT said.
In the agreement, Steward and the REIT mutually agreed to dismiss claims against each other including the landlord's loans and deferred rent. Steward and Medical Properties Trust did not return media requests from CoStar News seeking additional comments.
Steward told stakeholders in late August the two entities had come to an agreement, saying the landlord had agreed to dismiss all claims including "billions of dollars" of secured lease obligations.
Medical Properties Trust doesn't plan on charging rent through the remainder of the year to help facilitate the re-tenanting process at the hospitals, according to the REIT. Operators are expected to begin paying rent in early 2025, the REIT said, with annualized rent payments stabilizing in aggregate at $160 million in the fourth quarter of 2026.
The average weighted initial term of the leases is about 18 years.
The REIT is also in active discussions tied to its construction projects in Norwood, Massachusetts, and Texarkana, Texas, as well as six facilities that are either closed or subject to uncertainty through Steward's restructuring process, the company said. In total, the six facilities have an aggregate lease base of about $300 million.