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Investor interest in hospitals is strong, Medical Properties execs say

Medical Properties Trust Inc. is considering opportunities to sell some of its hospitals or take on joint venture partners, and is encouraged by the potential valuations such transactions would carry, executives said.

CFO Steve Hamner said in an earnings conference call that there is a "high level of interest" from potential buyers of the company's acute-care hospitals, adding: "We believe we have the opportunity, if we elect to take advantage of it, to selectively sell what would even be some significantly sized individual properties."

The company is also considering joint ventures with partners including private equity firms, sovereign wealth funds and large institutional money managers that manage public and private pension funds, Hamner said, adding that private equity firms are the least likely partners.

Medical Properties executives are "satisfied, bordering on enthusiastic" about buyers' and investors' interest level, and any transactions would come at higher valuations than the company's book value for its properties, he said.

The real estate investment trust's share price fell sharply after Donald Trump was elected president, and still lags the broader REIT space, in part because of investors' concerns that hospitals could suffer from changes to government reimbursement policy in a repeal of the Affordable Care Act.

In opening remarks, Chairman, President and CEO Edward Aldag Jr. said the company has "watched in frustration the inability of Congress to bring certainty to healthcare issues," but added that its basic investment thesis, focusing on hospitals that are essential to their local communities, has not changed.

"There are three things that we are absolutely sure of: Reimbursement will change, and reimbursement in some form will always be here, and hospitals are not going away," Aldag said. "You cannot imagine, in our lifetime, any developed country without hospitals. We are confident that we have some of the world's very best operators, and as the rules of reimbursement change, our operators will change with them."