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Medical Properties on Buyout Spree, Acquires 30 UK Hospitals

Zacks Equity Research

Medical Properties Trust, Inc. MPW, also called MPT, recently completed the purchase of real estate interests in 30 U.K. acute care hospital facilities. The deal, announced on Dec 23, 2019, involved an approximate investment of £1.5 billion ($2 billion).

At the time of announcement, the company had planned to fund the transaction with cash in hand, including capital raised from the U.S. dollar equity offering along with sterling-denominated bond offerings and amounts borrowed under an unsecured sterling-denominated term loan facility.

Buyout Rationale

The transaction is likely to prove immediately accretive to the funds from operation (FFO) per share. The properties, which are leased under long-term net leases to affiliates of a renowned private operator of acute hospitals, BMI Healthcare, are likely to provide a yield of 8.9% on a GAAP basis.

Moreover, the buyout will increase MPT’s total gross assets to nearly $16.2 billion, thus, lowering the company’s tenant concentration drastically. Given the rising senior citizen population, the U.K. is witnessing growing demand for healthcare properties. Driven by such favorable factors, the healthcare REIT’s deal to expand its footprint in the country seems strategic.

Conclusion

MPT’s continuous efforts to diversify its presence in the U.S. and U.K. markets well position it to benefit from the demographic trends in the regions. In line with the efforts, the REIT is on a buyout-spree, investing significant amounts in acute care hospitals.

In November 2019, MPT announced an agreement to take over 10 acute care hospitals in six U.S. states from the affiliates of LifePoint Health, Inc. for $700 million. The deal is likely to close in the current quarter.

Last August, the company closed two more deals. These added eight U.K. hospitals operated by Ramsay Health Care and 16 operated by Prospect Medical Holdings, Inc.

Shares of this Zacks Rank #2 (Buy) company have rallied 27.6% in the past year, outperforming the industry’s rise of 17%.

Other Key Picks

Boston Properties, Inc. BXP currently carries a Zacks Rank of 2 and has gained 12.9% in the past year. The company’s FFO per share estimates for 2020 have been revised marginally upward to $7.53 in two months’ time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CyrusOne Inc’s CONE Zacks Consensus Estimate for 2020 FFO per share has moved slightly north to $3.92 in the past two months. It carries a Zacks Rank of 2 at present. Moreover, the stock has rallied 26.2% over the trailing 12-month period.

Lamar Advertising Company’s LAMR Zacks Consensus Estimate for 2020 FFO per share has moved nominally upward to $6.15 over the past 60 days time. Currently, it carries a Zacks Rank of 2. Also, it has gained 23.4% in the past year.

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.

Note- £1 = $1.31

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Click to get this free report Lamar Advertising Company (LAMR) : Free Stock Analysis Report Boston Properties, Inc. (BXP) : Free Stock Analysis Report CyrusOne Inc (CONE) : Free Stock Analysis Report Medical Properties Trust, Inc. (MPW) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research