On the surface, one would think that owning shares of a trust that owns hospital real estate might be the kind of play that is not going anywhere for a long time. With over 45,000 beds in 10 countries, Medical Properties Trust (NYSE:MPW) looked like the exemplar of this concept. At least, it did until it hit a sinkhole and lost nearly 11% of its value at the time of writing.
The problem, in a nutshell, was that while Medical Properties was certainly diversified, it still had some tenants that were larger than others. And two of its largest—Prospect Medical Holdings and Steward Health Care—both brought in financial advisors to look into debt refinancing. It’s a safe bet that debt will not be refinanced in a fashion that benefits Medical Properties’ bottom line, either. But at least it will likely prevent an out-and-out bankruptcy, the worst case for Medical Properties.
Steward recently completed one credit deal that will keep until December 2023. But given that we’re in mid-May already, the matter will likely come back to haunt Steward before too much longer, and that means potential trouble for Medical Properties. Meanwhile, it’s a similar story at Prospect Medical, who brought in Houlihan Lokey to find some refinancing options. That, in turn, is prompting investors to pull back and see if Medical Properties can sort out its issues before buying in.
That caution is echoed somewhat by analysts. Currently, Medical Properties is rated a Moderate Buy, with six Buy ratings and five Holds. Further, with an average price target of $11.82, Medical Properties stock comes with 57.5% upside potential.
