Shares of Confidence in medical properties (NYSE: MPW) rose 16.8% in trading at 12:45 p.m. ET on Thursday.
The medical real estate investment trust’s (REIT) stock price is low as rising interest rates and problems with its largest tenant, Steward Health Care, forced the company to nearly halve its dividend last summer, the second 50% dividend cut in a year.
But while the stock price was falling, news of a final legal settlement with Steward sent the stock price higher again today.
New operators take over from Steward
The most significant part of the settlement agreement for shareholders was that MPT entered into new lease agreements with four hospital operators, which will take over 15 of Steward’s 23 problem locations.
MPT will not collect rent from the new operators this year, but will begin receiving lease payments in the first quarter of 2025, ramping up to a fully stabilized rent of $160 million per year in the fourth quarter of 2026. MPT said this would amount to 95% of what it would have received from Steward in 2026 under the original escalator lease agreement.
Management also noted that it was in active discussions with other parties regarding two hospitals under construction and six other closed or impaired hospitals. MPT has agreed to sell three of the troubled Florida hospitals, with the majority of the proceeds going to Steward. But afterward, Steward will relinquish all rights to any claims on the value of the other facilities. Steward sued MPT in August, accusing it of blocking Steward’s attempt to sell the hospitals. Notably, MPT actually owns the land for most of these facilities, while Steward owned the facilities themselves.
A relief meeting
Hopefully these new operators will be better than Steward, which ran into trouble after its former private equity owner saddled the company with debt and high lease obligations.
With the current cut dividend, Medical Properties stock yields about 5.8% after today’s rally. But as the company inches closer to the end of the Steward Health debacle and new operators prepare to pay their leases next year, hopefully there won’t be any further cuts to the payout.
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Why Medical Properties Trust Rally Today was originally published by The Motley Fool
