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MPT unloads Springstone operating business

Aug 29, 2022
Animated GIF of two hospitals merging, with a dollar sign appearing in between them

Illustration: Sarah Grillo/Axios

LifePoint Health acquired a majority stake in the operating company of psychiatric hospital organization Springstone from REIT Medical Properties Trust for $250 million, MPT announced.

Why it's the BFD: Unlike with most REIT transactions, MPT took on the underwriting risk when it acquired all of Louisville-based Springstone back in 2021 — and today's transaction proves the utility of that strategy.

💭 Our thought bubble: This strategy of temporarily capitalizing operators presumably gives MPT an edge over other REITs competing for assets while adding another avenue for ROI.

  • This playbook is not unlike MPT's prior investments in Ernest, Median, Capella, and ATOS International.
  • "They controlled their own destiny," one source says, "rather than get treated like a financing source."

Details: MPT now expects to receive approximately $200 million for the operating business, retaining a minority interest that enables it to capture potential future upside.

  • MPT continues to own a majority of Springstone's real estate locations and has extended its lease with LifePoint by five years to 2041.
  • Guggenheim Securities advised MPT, while Barclays and Goldman Sachs advised LifePoint.
  • There was no formal auction, but the operating entity post MPT's October acquisition received inbound interest, one source notes.

Catch up fast: It was only 10 months ago that the REIT acquired from Welsh, Carson, Anderson & Stowe (WCAS) both Springstone's management entity and real estate associated with the behavioral health hospital organization.

  • The transaction was valued at a combined $950 million — $760 million for the real estate alongside a $190 million investment in the OpCo via a loan.
  • That deal concluded a Centerview Partners- and Moelis-run process, providing an exit for WCAS.

Flashback: WCAS injected $100 million into Springstone in 2010, taking a majority interest in the new entity, which had just one newly constructed behavioral hospital and outpatient location, in Evansville, Indiana.

Of note: To date, Springstone has been an entirely organic growth story under WCAS, with every facility built from the ground up, a model that takes both time and CapEx.

Zoom in: From LifePoint's POV, the deal underscores its devotion to building out its behavioral health services, an end market that has witnessed a growing imbalance of supply and demand, particularly in the wake of the pandemic.

  • Springstone caregivers provide psychiatric and mental health services via 18 behavioral health hospitals and 35 outpatient locations in nine states.
  • That network will join LifePoint's existing mental health services footprint, which today supports 30-plus behavioral health units in various community hospitals and three inpatient behavioral health facilities.
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