Shares of Medical Properties Trust (MPW -1.10%) rallied 35.8% in February, according to data provided by S&P Global Market Intelligence. The hospital-focused real estate investment trust (REIT) rebounded after crashing in January. The main driver was reporting progress on its asset sale plan last month.
Making progress
Medical Properties Trust stumbled into 2024. The healthcare REIT disclosed in early January that its top tenant, Steward Health Care, wasn't able to resume making full rental payments due to liquidity issues. That caused concerns that the REIT might need to cut its dividend again.
The company had much more positive news to report in February when it released its fourth-quarter and full-year results for 2023. The highlight was that it accelerated its divestiture strategy, which will boost its liquidity by $480 million. Medical Properties Trust sold five hospitals back to Prime Healthcare for $350 million. It also sold its remaining non-operated interest in a tenant and two under-leased hospitals for another $17 million. On top of that, it sold its syndicated term loan investment in Median for $115 million. These sales are part of a plan to generate at least $2 billion of incremental liquidity this year to address upcoming debt maturities.
The company also noted that it has received encouraging interest from other hospital operators about facilities currently leased to Steward. The REIT is evaluating options to retenant or sell some of the facilities it currently leases to Steward. Those deals would either enable those facilities to resume contributing to its earnings or become additional sources of liquidity. They'd also help reduce its exposure to Steward.
Is Medical Properties Trust a buy after last month's rally?
Medical Properties Trust's divestiture program is off to an excellent start. It's nearly a quarter of the way to its goal. Executing that strategy would give it the liquidity to pay off debt as it matures.
Meanwhile, there's upside to that plan because it doesn't include the sale of three facilities in Connecticut currently leased to Prospect Medical Holdings that it agreed to sell to Yale New Haven for $457 million in total value, which includes $103 million of additional equity interest in Prospect's managed care business. The REIT also hopes to monetize its 49% interest in that business, which was worth nearly $700 million at the end of last year.
These sales would give the REIT the cash to repay debt and fund new investments in income-producing hospitals. That would help shore up its balance sheet and portfolio, putting the company in a position to start growing again. While it has a lot of work remaining, it has tremendous upside potential if it can complete its planned asset sales at strong prices. That upside makes it an enticing opportunity these days for investors with a high risk tolerance.
