A New York private equity firm quadrupled its money, making around an $800 million profit from its initial investment to buy six struggling hospitals, Bloomberg reported May 27.
In 2010, Cerberus Capital Management paid $246 million in cash to purchase the six-hospital Caritas Christi Health Care in Massachusetts. The buyout created Steward Health Care, which has since become one of the largest for-profit hospital chains with 34 hospitals in nine states. Its headquarters is in Dallas.
When Cerberus purchased the Massachusetts hospitals in 2010, they were in a precarious financial condition and had substantial pension obligations, according to the report.
However, despite purchasing hospitals that were struggling, the buyout giant made some clever financial moves and ended up quadrupling its money over a decade, according to Bloomberg, which cited recent company financial documents.
In particular, Cerberus made a lot of its money through a series of transactions involving Birmingham, Ala.-based Medical Properties Trust. In 2016, most of Cerberus' money was made by selling hospital property to the trust, which then leased it back to the hospitals. The deal allowed Cerberus to extract hundreds of millions for its investors. Medical Properties Trust now also owns about 10 percent of Steward.
Cerberus told Bloomberg that its involvement with Steward enabled the organization to invest hundreds of millions into infrastructure, technology and top personnel, which helped restructure and transform failing hospitals.
Cerberus has since exited its investment in Steward, selling its ownership to a group of Steward physicians.