Since I left the "street" I have been doing a lot of work within the healthcare supply industry. I have walked through hundreds of facilities, seen entire cities convert building after building to doctors offices, urgent care centers, and assisted living facilities. Unfortunately the baby boomers aren't getting any younger (sorry) and I came across this REIT that is involved in just that. I think it is a very interesting company.
Medical Properties Trust, Inc. (NYSE:MPW) ($13.25) operates as a real estate investment trust (REIT) in the United States. It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers. The company also provides mortgage loans to healthcare operators, as well as working capital and other term loans to its tenants/borrowers. As of February 24, 2011, its portfolio consisted of 58 properties, including 22 general acute care hospitals, 17 long-term acute care hospitals, 9 inpatient rehabilitation hospitals, 2 medical office buildings, and 6 wellness centers, as well as 2 non-owned general acute care facilities. So not only are they a management company, they also act as a lender to some of their tenants, which adds another revenue source.
Specializing in acute care, community and rehabilitation hospitals, this healthcare REIT provides operators access to capital for facility improvements, technology upgrades, staff additions and new construction through long-term triple net leases of real estate assets. By reinvesting non-earning assets into operations, MPT clients are able to participate in the growth of the largest sector of the U.S. economy. What makes MPT different is that they finance 100% to reduce the organizations overall cost of capital by unlocking the value of its real estate assets. The 7% dividend is very attractive as well. The stock has moved through its 50 and 200 day moving averages in the past month, but is still down 13% for the past 52 weeks. I was concerned about their $3 billion in debt compared to the $195 million they have in cash, but read this article from late March, they structured a great deal which will allow them to significantly pay down some debt, shoring up their balance sheet.
Here is what MPT offers its customers:
Acquisitions - from $10 Million to $1 Billion;
Sale-Leasebacks - of existing facilities (off-balance sheet financing), to reduce debt, increase cash reserves, realize equity in the form of cash, or redeploy capital to improve profitability;
New Developments - 100% financing for construction of new and/or replacement facilities to successful, well-established operators;
Expansions - 100% financing for expansion of existing facilities or new acquisitions, to help operators take advantage of market opportunities and grow their business.
MPT Can Fund Facilities Where Physicians Admit Patients:
Acute Care Hospitals, Long Term Acute Care Hospitals, Inpatient Rehabilitation Hospitals, Cancer Centers, Cardiovascular Specialty Hospitals, Streamlined Replacement Acute Care Hospitals, Outpatient Surgery Centers, 24-Hour Emergency Centers, and Other Specialty Hospitals Across the U.S.
Lend - up to 100% financing versus only 60 to 70% from most conventional lenders;
Help Put Assets To Best Use - by redeploying equity to operations with higher returns;
Improve Financial Position - through an off-balance sheet lease, to reduce liabilities, improve your debt-to-equity ratio, and increase both return-on-assets (ROA) and return-on-equity (ROE);
Free Up Cash - by turning non-liquid real estate assets into cash;
Reduce Monthly Payments - compared to the combined cost of capital under a traditional debt/equity structure, including principal amortization;
Reduce Taxes - because the entire lease payment is deductible;
Increase Operating Flexibility - allowing utilization of property for a defined period with the ability to extend.
Please review their 4th quarter 2015 earnings report:
- FFO per diluted share up 25% for the quarter
- FFO for the year was up 19%
- Total Gross Assets were up 50% to $6 billion in 2015
- Dropped their single tenant concentration by 10%
- Revenues up 41% for 2015, 60% for the 4th quarter
I really think this stock is poised for a strong move. Four Adeptus Health freestanding emergency facilities were completed and started paying rent in the fourth quarter; MPW is now receiving rent from 35 Adeptus facilities with eight more under construction. This will impact next quarters earnings as well. While there are no attractive option premiums, I am not so quick to want to get out. I think the stock trades to $15 in the near term, and that accompanied with the dividend, should give any investor an attractive annual return.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.