1) Capital gains add to the REIT's income (per IRS) and thereby increase the minimum dividend payout (the 95%). Ultimately, the shareholders pay the tax. (Correct me if I am wrong, anyone.)
2) About half of MT's debt is at fixed rates, so the impact of higher market interest rates would be less drastic than your calculations show.
My opinion: You are looking at a company with a breakup value of about $12 per share. In other words, if MT took the next 2 years to sell off all of the properties and pay off all of the debt, that's what the shareholders will receive in liquidation. The chance of bankruptcy is remote, IMO. The dividend will probably be cut -- my guess is by 25% -- to conserve cash and improve refinancing prospects. Higher medicare payments will bolster operators and also improve prospects for financing healthcare facilities. Hotel supply/demand will come into balance -- the main risk here is that equilibrium is delayed by a recession -- something that no one (except Ed Yardeni) expects right now.
If we are not at the bottom, we are mighty close to it. (JMHO, but then again, I've been wrong on MT so far.)
If MT sold La Quinta it would receive 7.6 x EBIDTA based on Red Roofs recent selling price (see Frichards newswire story from a few days ago). The EBIDTA for the last 3 quarters has averaged %75 million, which annualizes to $300 million. 7.6 x $300 million = $2.28 billion.
If MT used the $2.28 billion to pay off its current debt, it would still owe approx. $350 million to the lenders.
The EBIDTA on the medical facilities is currently $280 million. Subtract out operating expenses of $25 million and interest payments of $35 million on the remaining $350 million of debt, and you're left with net income of $220 million.
At $12 per share, MT is worth $141 million x $12 = $1.7 billion.
Your assumption is that MT is only worth 7.7 x net income = 12.9% return on investment annually.
Real estate that provides a 12.9% net return on investment and in addition provides tax shelter through depreciation and appreciation is a steal.
As all of my shares under your assumptions have been purchased at prices that are a sreaming bargain but my bottom line is very painful as Wall Street ignores this fire sale situation due to what i considar unqualified Management!!!