Medical Properties Trust invests in local hospital group.

Medical Properties Trust Inc. has deepened its stake in the Los Angeles health care market, with a significant investment in a second local acute care hospital group.

The Birmingham, Ala.-based real estate investment trust last month made two first mortgage loans, with an initial value of $65 million, that refinances the debt of two of the three hospitals in the Centinela Freeman Health System.

The Inglewood-based system was created when an investor group lead by Los Angeles-based Westridge Capital acquired the facilities from Tenet Healthcare Corp. in 2004.

Hospitals involved in the refinance are 369-bed Centinela Campus in Inglewood and 166-bed Marina Campus in Marina Del Rey. A third property, the 358-bed Daniel Freeman Memorial Hospital now known as the Memorial Campus, was not included in the deal.

"With this refinancing we have the additional capital to complete our turnaround," said Westridge partner Brian Kaufman, who declined to provide details on how the money would be spent.

Terms of the loans are similar to the trust's other transactions, which are structured as long-term net leases or sale/leasebacks. The loans are payable interest only for a term of 15 years, with principal due at maturity and certain early payment options under specified conditions.

The loans also provide for opportunities for the trust to participate in any increases in the properties' fair value. Interest rates will increase annually by an inflationary rate.

"This allows (the owners) to take the money they had invested into the real estate and put it into new technology, expansion, new services, recruiting physicians like that," said Steven Hamner, the trust's chief financial officer. "It's a very efficient way for them to use their capital."

Medical Properties acquires, develops and leases healthcare facilities in nine states, specializing in those that provide state-of-the-art healthcare services and specialties.

Hamner said the trust was familiar with Centinela's nationally known sports medicine, orthopedic and cardiac programs, and kept an eye out for opportunities after the 2004 sale was announced. Discussions began earlier this year, facilitated by the hospital's broker, Poe Corn of C.B. Richard Ellis Group Inc.

Medical Properties last December facilitated the $20 million sale of Sherman Oaks Hospital, a struggling community hospital that is home to the Grossman Burn Center, to Prime Health Services Inc.

After Prime bought the hospital, the trust bought the real estate and leased it back to Prime. The trust also has several health care facility investments in northern California.