Relief Rally Boosts Medical Properties Trust Amid Tenant Woes

Medical Properties Trust Popped This Week

The medical properties REIT had a relief rally as a troubled customer may catch up on its back rent. Shares of hospital real estate investment trust (REIT) Medical Properties Trust (NYSE: MPW) rallied this week, appreciating 15.1% through 12:46 p.m. ET Thursday, according to data from S&P Global Market Intelligence.

Steward Care sells a division, and may pay up

The large tenant that had been delinquent on its rent was Steward Care, which at one point had previously accounted for 20% of Medical Properties' revenue. On Wednesday of this week, The Boston Globe reported that the troubled hospital network had struck a deal to sell its managed care business, Stewardship Health, to the Optum division of insurance giant United Health. Collaborative Care Holdings, a division of Optum, disclosed the pending sale to the Massachusetts Health Policy Commission late Tuesday.

• The sale may free up cash for Steward, whose main business is running its national network of 33 hospitals.
• And that cash would likely find its way to Medical Properties.

But don't break out the champagne just yet

It should be noted that even though Medical Properties spiked this week, the stock remains more than 50% below its 52-week highs.

1. While the sale of Steward's managed care business would no doubt be a positive, it is only a one-time event.
2. Going forward, there is likely to be more skepticism as to the sustainability of Medical Properties Trust's revenue stream.
3. Furthermore, even Collaborative Care Holdings' disclosure didn't specify a price for the deal, nor the timing of when it may close.
4. So overall, while this was a positive week for Medical Properties, investors shouldn't necessarily expect a full recovery. It will take more time and earned trust from Medical's clients for that to happen, even if this sale goes through.