BTIG Keeps Medical Properties Trust (MPW) at 'Neutral' Amid Steward Investment; Says Questions Remain

September 27, 2016 6:29 AM EDT
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BTIG affirms Medical Properties Trust (NYSE: MPW) at Neutral amid plans to invest $1.25 billion in Steward Health Care System-operated acute care hospitals.

Analyst Mike Gorman commented, With an estimated cash yield of 8.2% and GAAP yield of 10.1%, the deal should be immediately accretive on a stabilized basis and provides diversification benefits. However, we are generally wary of health care REIT acquisitions from private equity sponsored entities. Moreover, depending on timing the deal could be dilutive to 2016, and MPW still needs to place a substantial amount of long-term debt.

While the transaction carries potential benefits, we have additional questions. To begin, does Steward/Cerberus intend to use the proceeds for reinvestment or is the deal partially a cash-out? What benefits come from structuring the deal as a 50/50 asset purchase and mortgage loan? How much income will MPW’s minority investment generate? What are Cerberus’ plans for its $150 million investment in MPW shares?

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