After Acadia Healthcare Company, Inc. (NASDAQ: ACHC) divested Priory Group, its U.K. behavioral health care business, for $1.47 billion, Priory Group is doing some unloading of its own. Now backed by Waterland Private Equity, Priory Group is selling a portfolio of approximately 40 select behavioral health facilities located in the United Kingdom to Medical Properties Trust, Inc. (NYSE: MPW). The Birmingham, Alabama-based REIT will pay approximately GBP 800 million, or $1.087 billion, plus customary stamp duty tax and other transaction costs.
The properties will be subject to long-term sale-leaseback agreements with Priory, which are expected to provide MPT a GAAP-basis yield of 8.6% and were underwritten based on initial lease payment coverage of approximately 2.0x EBITDAR. The leases will carry 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. The sale-leaseback transactions are expected to close during the first half of 2021.
Medical Properties Trust hasn’t announced a deal since December 2019 according to search results in our Healthcare Deal database, but that year it reported eight Hospital transactions (part of the surge of REIT Hospital deals in 2019), so we expected a slowdown or at least a brief pause. The largest deal was the purchase of the real estate assets of 30 BMI Healthcare acute care hospitals in the United Kingdom for GBP 1.5 billion, or $1.9 billion.
The acquisition of the Priory Group portfolio is Medical Properties Trust’s first deal in the behavioral health hospital market.