Owner of Crozer Health's real estate discloses plans for dealing with delinquent tenant

A class-action lawsuit has been filed against MPT alleging the company committed fraud and misled investors about the status of multiple hospital properties.

Owner of Crozer Health's real estate discloses plans for dealing with delinquent tenant

Medical Properties Trust has laid plans to work with Crozer Health, the parent company of Prospect Medical Holdings Inc. whose hospital properties are at center stage in a lawsuit against Birmingham-based MPT.

Fiyyaz Pirani, trustee of Imperium Irrevocable Trust has filed a lawsuit for a class action against MPT, alleging that the company committed fraud, and misled investors regarding the status of several hospital properties.

The lawsuit singles out Prospect Medical Holdings as one of MPT’s tenants.

California-based Prospect acquired Crozer in 2016, which operated Crozer Chester Medical Center, Taylor Hospital, in Ridley Park and Delaware County Memorial Hospital, in Drexel Hill, along with what has become a largely outpatient care campus and physician offices in Springfield. Delaware County Memorial closed its emergency room in November, following an order by the Pennsylvania Department of Health. It is not accepting patients, while the legal dispute over the plans to turn the hospital into a mental health medical center continues.

MPT (NYSE : MPW) purchased Crozer Health’s real estate from Prospect in 2019 as part of $1.55 billion deal that included California health care real property. Crozer Health's hospital buildings are now rented by MPT. However, they have fallen behind on their rent. According to MPT, the Delaware County health system has not made any rent payments in the first quarter 2023.

MPT's 10-K report for 2022 shows that it recorded an impairment charge of $283 million related to Prospect in the last year. This included a $171-million impairment on Pennsylvania real estate, and a reserve of $112-million on noncash rent.

Pirani's suit cites Viceroy Research LLC's report on MPT's financial situation, which the company has now sued Viceroy for. The report states that MPT engaged in billions in uncommercial transactions to mask a widespread revenue round-robin and/or theft.

MPT stated in its earnings release that researcher Fraser Perring was listed as a plaintiff in MPT’s lawsuit against Viceroy Research. Viceroy Research published multiple reports accusing MPT if fraud in relation to its Prospect properties. Fraser Perring has publicly acknowledged this case, but has not appeared in court. He has also filed motions to throw out MPT’s claims before the jury.

The company stated that it was looking forward to proving their claims and obtaining the documents, communications and other discoveries to which they are entitled under the law.

MPT announced its first-quarter earnings last week. It said that it had recently provided $50,000,000 to Prospect via a loan convertible into equity shares in Prospect's managed healthcare entity. The company stated that the deal was in anticipation of a bigger Prospect financing deal.

MPT told analysts during a call to discuss the first quarter's results that it planned to convert the lease of Crozer's building into a first lien mortgage, which could provide the company with more protection if the bankruptcy was filed.

MPT also said Prospect received a binding agreement from a third party lender, which will provide significant liquidity to Prospect's managed care and hospital businesses. This will "facilitate MPT’s conversion of certain current and future real property obligations of Prospect into managed care equity."