MPW – Steward Throws in the Towel

Author: Viceroy Research Published on: July 30, 2024 Published in: Medical Properties Trust NASDAQ:MPW

July 30, 2024 – Well folks there it is. On July 26, 2024, Steward Health Care threw in the towel and called time on Master Lease II over 8 MPW hospitals in Massachusetts.

These hospitals were contributed by MPW into the seemed-like-a-great-idea-at-the-time joint venture with Macquarie which the company touted as validating its absurd valuations. The irony of using a deal that helped drive its tenant into bankruptcy as an example of business sustainability is not lost on us.

No bidder was willing to assume Master Lease II under its current terms.
No bidder put in a bid for the entire enterprise (real estate included) that even came close to the value of the real estate implied by the lease.
Every bidder requested significant rent concessions or a significant discount to acquire the property.
No actionable bids were received for the Carney and Nashoba Valley hospitals.

Steward’s filing states base annual rent obligations of $114m at a current lease rate of 9.29%. Working backwards this results in a lease base of $1.23b, substantially less than what MPW valued the property at in its books.

It’s clear that MPW’s entire book must be impairment tested and is grossly overvalued. We believe the only reason the company appears to be refusing to offer rent concessions or discounts is that it would trigger a disastrous revaluation. As you can imagine we have very little faith in MPW’s auditors PWC who have presided over this mess since 2008. We hope this serves as an extremely late wake-up call. Investors should ask themselves how many other skeletons are hiding in the closets in Birmingham.

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