Medical Properties Secures New Lease for Six California Facilities

Medical Properties Trust, Inc. MPW recently announced a lease agreement for six California facilities with NOR Healthcare System Corp., following NOR’s successful bid for Prospect Medical Group’s California operations. Subject to approval by applicable regulatory agencies, the deal is expected to close in 2025.

The six facilities will be subject to a master lease with an initial annualized rent of $45 million, which is almost identical to Prospect’s previously scheduled rent for 2025, along with CPI-based annual rent escalators that will begin in 2026. All rent payments will be deferred for six months, and 50% of the rent will be further deferred for an additional six months. Following this, the total deferred rent will be paid throughout the remaining lease term.

MPT will finance up to $60 million for seismic improvements as California regulators require them over the next four years. This spending will add to the lease amount, leading to a higher rent at the prevailing lease yield.

Per Edward K. Aldag, Jr., chairman, president and CEO, “The additional $45 million of annual cash rent expected from these facilities adds to the more than $1 billion of pro rata annualized cash rent we expect from our current portfolio by the end of 2026. Significant competition among multiple capable operators to purchase the operations of these infrastructure-like facilities reflects their history of EBITDAR profitability.”

MPW: In a Snapshot

Medical Properties focuses on acquiring and developing healthcare facilities, which are subsequently leased to healthcare operating companies. The company’s diverse portfolio of healthcare real estate assets in the key markets of the United States and other countries is well-positioned to capitalize on the favorable industry fundamentals. The portfolio is expected to benefit from the aging population and the rising healthcare expenditures by senior citizens.

In the past three months, shares of this Zacks Rank #3 (Hold) company have declined 3.7% against the industry's growth of 1.4%.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Crown Castle CCI and W.P. Carey WPC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for CCI’s 2025 FFO per share has moved 3 cents northward to $4.21 over the past two months.

The Zacks Consensus Estimate for WPC’s 2025 FFO per share has moved 2 cents downward to $4.87 over the past month.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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