Medical Properties Trust (NYSE: MPW) is at it again. The hospital-focused healthcare REIT (real estate investment trust) is making another acquisition. This time it's buying 18 inpatient behavioral hospital facilities and a stake in their operator for $950 million. That brings its year-to-date investment total above $2.5 billion.
This year's shopping spree follows the $3.6 billion of new investments it made last year. Those deals helped boost its normalized FFO per share by a sector-leading 21%. With more acquisitions lined up this year, Medical Properties should continue growing at a healthy clip.
A look at the latest acquisition
Medical Properties Trust is buying 18 inpatient behavioral health hospital facilities and an interest in the operations of Springstone from Welsh, Carson, Anderson & Stowe. It's paying $760 million for the purpose-built inpatient facilities in a sale-leaseback transaction. It's also investing $190 million for the stake in Springstone, a leading U.S. provider of behavioral healthcare.
The company expects the acquisition to be immediately accretive to its FFO. The healthcare REIT was already on track to grow its normalized FFO by about 11% this year. As such, it could grow even faster in 2021 thanks to this deal. That should enable the company to continue increasing its 5.3%-yielding dividend, which it has now raised in each of the last eight years.
Meanwhile, the deal will diversify its portfolio by growing its behavioral healthcare platform and reducing its largest individual property investment to only 2.6% of its total gross assets, down from 3% earlier this year. On top of that, its Springstone investment comes with embedded growth via development and expansion projects it could complete in the future. The direct ownership interest in Springstone also gives the REIT further upside as the behavioral healthcare company expands its operations. Those last two factors could set it up for even more dividend growth in the future.
Why behavioral healthcare?
This transaction is the company's second in the behavioral healthcare sector this year. In January, Medical Properties Trust agreed to acquire a portfolio of behavioral healthcare facilities in the U.K. for about $1.1 billion. It purchased those properties as part of a sale-leaseback agreement with leading U.K. behavioral healthcare provider Priory Group.
The company sees behavioral healthcare as an increasingly critical segment. CEO Edward Aldag commented in the acquisition press release that the behavioral healthcare market "has been underserved in our society despite importance on the same level as acute and post-acute care hospitals."
However, it's now growing fast as companies like Springstone and Priory Group focus on providing high-quality behavioral services. Springstone has already helped tens of thousands of people struggling with mental health and addiction challenges and can now assist even more communities with the investment by Medical Properties Trust. With the pandemic accelerating demand for behavioral healthcare services and governments joining other healthcare payers in acknowledging the need for more behavioral healthcare funding, Medical Properties Trust should be able to grow this vital platform.
Continuing to move the needle
Medical Properties Trust has done an excellent job growing shareholder value over the years by acquiring hospital-related properties. Its latest deal will further boost its FFO while giving it an expandable platform in the U.S. that should drive additional future growth. That will provide the REIT with even more cash flow to support and increase its dividend. Because of that, this deal makes it an even more compelling healthcare REIT to buy this month.