In a significant development in the healthcare real estate market, Medical Properties Trust, Inc. (MPW - Snapshot Report) announced its definitive agreement to invest $1.25 billion to acquire the real estate stakes of nine acute care hospitals. These nine hospitals are operated by Steward Health Care System LLC, an affiliate of Cerberus Capital Management. The move seems a strategic fit since the buyout is immediately accretive and shall boost the company’s asset base to around $7 billion.
Specifically, the $1.25-billion investment comprises a $1.2-billion investment in hospital real estate and a $50-million equity investment in Steward. Notably, Medical Properties’ interest in the hospitals will be bounded by a master lease and mortgage loan arrangements, with cross default provisions as well as supported by a corporate guaranty. Denoting around $600 million in value, the master lease has a 15-year initial term, three five-year extension terms, and a GAAP yield of 10.1%.
Steward is one of the reputed hospital operators in New England. It boasts of the largest community-based network of physicians. The company delivers healthcare services to more than 150 communities across Eastern Massachusetts, Rhode Island and Southern New Hampshire.
Besides being immediately accretive and enhancing the asset base, this investment would improve Medical Properties Trust’s diversification, with the company now being represented in 30 states at the close of the deal. It also reduces the company’s tenant concentration and adds Steward to its group of 30 hospital operators.
In a separate press release, Medical Properties Trust declared a stock offering of 33.5 million shares. The company would use the proceeds for partly funding its acquisition of a portfolio of assets from Steward plus its prior announced purchase of assets from affiliates of Median Kliniken S.à.r.l. (“MEDIAN”).
Birmingham, AL-based, Medical Properties Trust is focused on acquiring and developing net-leased healthcare facilities. These include acute care hospitals, in-patient rehabilitation hospitals, long-term acute care hospitals, and other medical and surgical facilities. The company currently has a Zacks Rank #2 (Buy).
A better-ranked stock in the REIT industry is InfraREIT, Inc. (HIFR - Snapshot Report) with a long-term expected growth rate of 10% against the industry average of 5.8%. The stock sports a Zacks Rank #1 (Strong Buy). InfraREIT has You can see the complete list of today’s Zacks #1 Rank stocks here.
Also, investors can consider stocks like Mack-Cali Realty Corp. (CLI - Analyst Report) and Arbor Realty Trust Inc. (ABR - Snapshot Report) . Mack-Cali has been experiencing solid revisions in Q3 and full year 2016 estimates and currently holds a Zacks Rank #2. Arbor Realty is also a Zacks Rank #2 stock and has been a consistent performer, having beaten the Zacks Consensus Estimate in three out of the trailing four quarters, with an average surprise of 32.3%.
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