The company reached a settlement with the troubled Steward Health and inked new lease agreements with new operators for most of its facilities.
Shares of Medical Properties Trust (MPW 16.18%) were rallying 16.8% in Thursday trading as of 12:45 p.m. ET.
The medical property real estate investment trust (REIT) has a depressed stock price, as rising interest rates and problems with its largest tenant, Steward Health Care, forced the company to slash its dividend nearly in half over the summer — the second 50% dividend cut in a year.
But with the stock beaten down, news of a final legal settlement with Steward sent the stock rebounding today.
New operators taking over for Steward
The most important part of the settlement agreement for shareholders was MPT reaching new lease deals with four hospital operators that will take over 15 of Steward’s 23 troubled sites.
MPT won’t collect rent from the new operators this year, but will start receiving lease payments in Q1 2025, then ramping up to fully stabilized rent of $160 million annually by Q4 2026. Of note, MPT said that would amount to 95% of what it would have gotten from Steward in 2026 based on the original lease deal with escalators.
Management also noted it was in active discussions with other parties regarding two under-construction hospitals and six other closed or impaired hospitals. MPT has agreed to sell three of the troubled hospitals in Florida, with most of the proceeds going to Steward. But after that, Steward will relinquish all rights to claims on any value from the other facilities. Steward sued MPT in August accusing it of blocking Steward’s attempted sales of the hospitals. Of note, MPT actually owns the land for most of these facilities, while Steward owned the facilities themselves.
A relief rally
Hopefully, these new operators will be superior to Steward, which got into trouble after its former private equity owner saddled it with debt and high lease obligations.
At its current reduced dividend, Medical Properties stock yields about 5.8% after today’s rally. But as the company gets closer to putting the Steward Health fiasco behind it and new operators get ready to pay their leases next year, hopefully there won’t be any more cuts to the payout.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
