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Medical Properties (MPW) to Dispose of Healthscope Portfolio

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Medical Properties Trust, Inc. (MPW - Free Report) entered a definitive agreement to sell its Australia real estate investments operated by Healthscope to affiliates of HMC Capital — an Australia alternative asset manager focused on real estate strategies. The move is in line with the company’s capital-recycling strategy.

Reflecting positive sentiments, shares of MPW gained 2.24% on Mar 31 regular trading session on the NYSE.

The transaction is expected to close in the second half of 2023, subject to certain regulatory approvals.

The total consideration for MPW’s Healthscope portfolio is based in part on a lease capitalization rate of 5.7%. Consequently, the expected cash proceeds are sufficient to fully prepay the AUD$1.2-billion term loan used to acquire 11 hospitals leased to Healthscope in 2019.

Taking into account the 2022 end exchange rates, MPT’s financial statements reflected the term loan at a U.S. dollar equivalent of roughly $818 million. Considering the same exchange rate, the annualized GAAP rent in 2023 comes to nearly $54 million.

In a similar move, in October 2022, MPW entered definitive agreements to dispose of three Connecticut hospitals to Prospect Medical Holdings, the current lessee, for almost $457 million. The transaction is anticipated to be completed in 2023, subject to certain regulatory approvals.

The company intends to utilize the proceeds from the transaction for debt reduction, and fund select acquisitions and other investment opportunities.

This real estate investment trust engages in the acquisition and development of healthcare facilities, and leases the facilities to healthcare operating companies under long-term net leases.

In December 2022, it acquired additional six behavioral health facilities in the U.K. for around £233 million that are leased to Priory.

Also, the company’s capital-recycling efforts position it well to capitalize on long-term growth and add to its balance-sheet strength. As of Feb 17, 2023, the company had $1.2 billion of liquidity.

Nonetheless, increasing interest rates and macroeconomic uncertainty raise concerns for the company.

MPW currently has a Zacks Rank #4 (Sell).

The company’s shares have lost 30.6% over the past three months compared with its industry’s fall of 1.5%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Stocks to Consider

Some better-ranked stocks from the REIT sector are Alexandria Real Estate Equities (ARE - Free Report) and Terreno Realty (TRNO - Free Report) , each currently carrying a Zacks Rank #2 (Buy), and Service Properties Trust (SVC - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Alexandria Real Estate’s 2023 FFO per share is pegged at $8.95.

The Zacks Consensus Estimate for Terreno Realty’s current-year FFO per share is pinned at $2.17.

The Zacks Consensus Estimate for Service Properties Trust’s 2023 FFO per share is pegged at $1.89.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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