Issue link: https://maltatoday.uberflip.com/i/1492490
8 maltatoday | SUNDAY • 12 FEBRUARY 2023 NEWS CONTINUED FROM PAGE 1Ħ The intense speculation on Steward International's true ownership has been ongoing since May 2020, when the holding company that ran the Mal- tese concession carved out a new own- ership structure. At the time, Steward System an- nounced it had divested itself of its in- ternational arm in a $200 million with CEO Ralph De La Torre – for all in- tents and purposes, an employee – and Steward International was registered as a UK company. Then, Medical Properties Trust – Steward's landlord in the USA – ac- quired a 49% stake in an unspecified 'joint venture' with Steward Interna- tional's management, De La Torre, for $205 million. Steward International argued that this deal – a "collection of rights, in- tellectual property and subsidiaries" – was not connected to the Maltese concession. That concession, which is the operation of the hospitals – not ownership of land or buildings – at the time was valued at just $27 million with low ground rent for the Maltese gov- ernment. Steward International, now a company registered in Spain, had told MaltaToday it alone is the concession- aire, and was "fully independent" and unrelated to either the joint venture or Steward Systems in the USA. Viceroy's research shows the oppo- site, suggesting Medical Properties (MPT, but in stock exchange abbrevi- ations referred to as MPW) has over- paid on the joint venture transaction to provide Steward with cash so that its hospitals appear to be paying back its rents. "MPT appears to have overpaid by 640%," Viceroy's researchers insist. "MPT appears to have entirely fund- ed the joint venture with $205m, for which they received a minority stake of 49%. The joint venture acquires Stew- ard International for $200m, resulting in a $173m gain-on-sale to Steward… This is consistent with revenue round tripping. The only winner otherwise is Ralph De La Torre. The transaction is entirely uncommercial." Steward International ownership MPT has never disclosed the name of the joint venture entity with De La Torre. "This is an enormous red flag. Off-balance sheet entities create the potential for theft, round-tripping, or even hiding losses, and should be heav- ily scrutinised," Viceroy say. The researchers analysed Maltese, UK and Spanish company statements, to find that the parent company of Stew- ard International – registered now in Madrid – is Manolete Health Manage- ment LLC in Delaware. This company was created in April 2020 along with a series of other 'Mano- lete' companies – one of them is MPT's own subsidiary MPT Manolete Opco in Delaware. Even De La Torre had his own Manolete firm created in London, before immediately dissolving it. Viceroy believes MPT Manolete Opco holds the 49% stake in the joint venture that controls Steward International in Spain, while the remaining 51% is held by a Delaware company, also called 'Steward Health Care International In- vestors LLC', whose registered office is the same as that of Steward Systems. "Steward Malta crucially appears to share staff and offices with Steward Systems," Viceroy's researchers said, who also believe that both the circum- stances surrounding the joint venture and, what MPT paid "are completely fabricated and intentionally opaque. This behaviour is consistent with mon- ey laundering and revenue round-trip- AS explained by the Vice- roy research, a key strat- egy for any real estate investor such as MPT would be to bank on its high asset prices as a way of raising finance for its activities. MPT is a real estate in- vestment trust (REIT) that invests in healthcare providers like Steward, subject to net leases. It owns 438 facilities in the USA, the UK, Australia, Columbia, and Europe. At the time of their joint venture transaction, Steward Systems val- ued the Maltese conces- sion at $27 million; yet MPT paid $200 million to Steward Systems for a 49% stake in the joint venture run by Steward International's manage- ment. To Viceroy, such a discrepancy cannot go unnoticed. Such high asset prices should mean that, when needed, selling them off at a pinch will give MPT high returns. Addition- ally, MPT is self-regulat- ed – it alone determines the value of its real estate – and depending on that story, investors buy into the pool of hospital re- al estate MPT owns and rents out to medical ten- ants like Steward. In America, MPT spe- cialises in sale-leaseback deals. It works like this: a hospital is bought up by a private equity investor, which goes on to sell the land beneath that hospi- tal to MPT; MPT is now the corporate landlord, and the hospital has to pay high rents to contin- ue operating. But what happens when weakened hospitals – which have to pass on the high cost of rent to patients in fees – cannot pay the rents? What if they declare bankruptcy and leave MPT with sub- standard hospitals that are difficult to re-lease? MPT, which boasts a billion-dollar hospital portfolio, can raise cash on the market through bonds and stocks. Inves- tors see that its hospitals are not defaulting on rent, because MPT can lend the hospitals the cash they need through other vehicles – techni- cally, it is lending its own tenant the rent money, Behind Steward: how Medical Properties Trust cashes in on hospitals with sale-leasebacks Short sellers claim MPT and Steward created 'uncommercial' transactions Private financial investigators and short sellers believe Steward in America and Medical Properties Trust have created an opaque ownership structure that also inf lates real estate asset values, even of Malta hospitals