Actions of Medical Estate Trust (NYSE: MPW) were up 16.8% in trading Thursday as of 12:45 p.m. Eastern Time.
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 cut its dividend nearly in half over the summer — the second 50% dividend cut in a year.
But with shares falling, news of a final legal settlement with Steward sent shares rallying today.
New operators replace Steward
The most important part of the settlement agreement for shareholders was that MPT reached new lease agreements with four hospital operators that will take over 15 of Steward's 23 troubled sites.
MPT will not charge rent to the new operators this year, but will begin receiving rent payments in the first quarter of 2025, then ramp up to a fully stabilized rent of $160 million annually by the fourth quarter of 2026. Notably, MPT said that would equal 95% of what it would have gotten from Steward in 2026 under the original lease agreement with Escalator.
Management also noted that it was in active discussions with other parties regarding two hospitals under construction and six other closed or troubled hospitals. MPT 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 of the other facilities. Steward sued MPT in August, accusing it of blocking Steward’s attempts to sell the hospitals. Notably, MPT actually owns the land for most of these facilities, while Steward owned the facilities themselves.
A demonstration of relief
These new operators are expected to outperform Steward, which ran into trouble after its former private equity owner saddled it with debt and high lease obligations.
With its current reduced dividend, Medical Properties stock yields around 5.8% Following today's protest, but as the company moves closer to putting the Steward Health fiasco behind it and new operators prepare to pay their rents next year, it is to be hoped that there will be no further cuts in payments.
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Why Medical Properties Trust Rallied Today Originally published by The Motley Fool