Shares of Medical Properties Belief (NYSE: MPW) rallied 35.8% in February, in accordance with knowledge supplied by S&P International Market Intelligence. The hospital-focused actual property funding belief (REIT) rebounded after crashing in January. The primary driver was reporting progress on its asset sale plan final month.
Making progress
Medical Properties Belief stumbled into 2024. The healthcare REIT disclosed in early January that its high tenant, Steward Well being Care, wasn’t capable of resume making full rental funds attributable to liquidity points. That induced issues that the REIT would possibly want to chop its dividend once more.
The corporate had far more constructive information to report in February when it launched its fourth-quarter and full-year outcomes for 2023. The spotlight was that it accelerated its divestiture technique, which is able to increase its liquidity by $480 million. Medical Properties Belief bought 5 hospitals again to Prime Healthcare for $350 million. It additionally bought its remaining non-operated curiosity in a tenant and two under-leased hospitals for an additional $17 million. On high of that, it bought its syndicated time period mortgage funding in Median for $115 million. These gross sales are a part of a plan to generate no less than $2 billion of incremental liquidity this 12 months to deal with upcoming debt maturities.
The corporate additionally famous that it has acquired encouraging curiosity from different hospital operators about amenities at the moment leased to Steward. The REIT is evaluating choices to retenant or promote among the amenities it at the moment leases to Steward. These offers would both allow these amenities to renew contributing to its earnings or grow to be extra sources of liquidity. They’d additionally assist scale back its publicity to Steward.
Is Medical Properties Belief a purchase after final month’s rally?
Medical Properties Belief’s divestiture program is off to a wonderful begin. It is almost 1 / 4 of the way in which to its objective. Executing that technique would give it the liquidity to repay debt because it matures.
In the meantime, there’s upside to that plan as a result of it would not embody the sale of three amenities in Connecticut at the moment leased to Prospect Medical Holdings that it agreed to promote to Yale New Haven for $457 million in complete worth, which incorporates $103 million of extra fairness curiosity in Prospect’s managed care enterprise. The REIT additionally hopes to monetize its 49% curiosity in that enterprise, which was price almost $700 million on the finish of final 12 months.
These gross sales would give the REIT the money to repay debt and fund new investments in income-producing hospitals. That might assist shore up its steadiness sheet and portfolio, placing the corporate able to start out rising once more. Whereas it has a variety of work remaining, it has super upside potential if it will probably full its deliberate asset gross sales at robust costs. That upside makes it an attractive alternative today for buyers with a excessive danger tolerance.
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Matt DiLallo has positions in Medical Properties Belief. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
Why Medical Properties Belief Inventory Skyrocketed 35.8% in February was initially printed by The Motley Idiot
