Baby Boomers Boosting Demand for New Hospital Space

http://www.reit.com Edward Aldag, Jr., chairman, president and chief executive officer of Medical Properties Trust (NYSE: MPW), sat down with REIT.com during REITWeek 2011: NAREIT's Investor Forum to discuss the state of the hospital segment of the health care real estate space.

Aldag said the company's management team all has experience owning and running hospitals, which gives them a deeper understanding of how to operate a hospital.

"We can take any hospital in our portfolio and begin operating it with our management team tomorrow," he said. "Our sole focus is on hospitals because that is what we know very well."

Health care expenses as a percentage of the average household expenditure remain the same as they were back in 1989, Aldag said. Where the change in demand is coming from is the overall amount of people (primarily baby boomers) that are requiring medical attention or hospital care.

"The average 65 year old uses a hospital eight times more than the average 18 year old," he said. "So clearly we are going to have as a country a lot more money being spent on health care and a lot more need for hospitals across the country."

The problem with meeting that growing demand, Aldag said, is that the hospital delivery system in the United States is antiquated and, as a result, very few new hospitals have been built over the past 50 years.

"So you are going to have a lot of hospitals that are going to need to be upgraded or built anew," he said. Aldag said the major teaching centers are not going to be replaced, but instead he expects more smaller-sized hospitals to be built in the suburbs where people live to help meet the demand.

Growth in any field requires access to capital, and Medical Properties Trust has done very well raising equity and debt capital, Aldag said. The company recently completed a $450 million bond issue, which was its first unsecured bond issuance, opening up another capital source for the company.

"Every time we go to the market we have been oversubscribed. The market has let us know we have done a very good job at what we've done, we have done what we've said we were going to do and they continue to support us through debt and equity," he said. "We feel very good where we are right now to take advantage of all the opportunities that are out there both on new development and acquisitions."

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