MEDICAL PROPERTIES TRUST INC (MPT) stock intrinsic value fair value estimate & owner earnings analysis

Medical Properties Trust owns hospital buildings and leases them to the companies that run them, mostly on long leases where the operator pays taxes, insurance and upkeep. At the end of 2025 it held 384 properties with 52 operators in 31 US states, seven European countries and Colombia. Just over half of its $972 million of 2025 revenue came from the US and $373 million came from the United Kingdom. The largest UK tenants are Circle Health, whose leases run to 2050, and Priory, whose leases run to 2046. Both have rents that rise with inflation. What happened. From 2016 to 2022 the company earned roughly $0.72 to $1.04 a share in cash for owners in most years, measured as operating cash flow minus stock pay and the capital spending needed to keep the properties as they are. That record was partly an illusion. Its two biggest US tenants, Steward Health Care and Prospect Medical, were building up unpaid rent and borrowing from the company. Steward went bankrupt in May 2024 and Prospect in January 2025. Owner cash earnings fell to $0.16 a share in 2024 and $0.17 in 2025, and the company wrote down billions of dollars of assets. We value the business as it stands after those bankruptcies. So our starting point is the 2024 to 2025 level of about $0.17 a share, not the older record, which described a different tenant base. Accounting choices. We count rent a tenant owed but did not pay as lost money in the year it went unpaid, rather than treating it as a timing difference that will reverse. At this company that rent was mostly never collected. We count routine capital additions to existing buildings (about $74 million in 2025) as an ongoing cost. We treat acquisitions, new construction and loans to operators as new investment. Write-downs and depreciation are non-cash, so they do not reduce our figures directly. The risk they represent sits in the cases below instead. $18 million of 2025 cash came from Vibra paying past-due amounts once, and we remove it from the base level. What moves earnings from here. (1) Rent is recovering at the former Steward hospitals. Six new operators lease 18 of them. They paid about $3 million of cash rent in the first quarter of 2025 and $26 million in the fourth quarter, at roughly 59% of contract rent. Their signed leases step up to 79% by mid-2026 and 100% from October 2026. At full contract rent these hospitals would bring in roughly $175 million a year, against the $53 million they paid in 2025. (2) The six Prospect hospitals in California were re-leased in December 2025 to NOR Healthcare on a 15-year lease, with rent ramping to $45 million a year by December 2026. (3) Most leases rise each year with inflation. (4) Against that, interest costs are rising. In 2025 the company refinanced by issuing $1.5 billion of secured notes at 8.5% and about $1.17 billion of euro notes at 7%. Older cheap debt comes due in turn: $587 million at 0.99% in October 2026, $1.4 billion at 5% in 2027, $808 million at 3.7% in 2028, $900 million at 4.6% in 2029, and $1.3 billion at 3.5% in 2031. Replacing it at today's rates costs roughly $130 to $255 million more a year by 2032. That largely cancels out the rent recovery. Debt was $9.8 billion at year-end 2025. In 2025 owner earnings grew about 9%. Our base case assumes about 55% growth in 2026. That is much faster, but it comes from the lease step-ups above, which are signed and dated. First-quarter 2026 revenue was already 13% higher than a year earlier. Base case, about $4.99 a share. The re-tenanted Steward hospitals reach about 85% of full contract rent over time, with some tenant attrition. NOR pays about 80% of its scheduled rent. Inflation increases add about $13 million a year after costs. Maturing debt is refinanced at about 7%. The base case also charges about $15 million a year for ongoing tenant credit losses, because this company has a repeated record of tenant failures. Owner earnings rise to about $0.28 a share in 2027. Refinancing then pulls them down to about $0.18 by 2032. After that, inflation increases lift them again until the main UK and US leases expire in the mid-2040s. We then cut them by a quarter, reflecting the lower rents the company accepted when it re-leased the Steward hospitals, and hold them flat. Hospital buildings stay useful for a long time and keep being re-leased, so we do not end the story at the lease expiries. Bear case, about -$0.44 a share. The new operators, who needed about $140 million of loans from the company to take over and several of whom are paid on a cash basis, collect only about half of the remaining rent step-up. NOR pays 40% of its scheduled rent. Another tenant loses about $30 million a year, as has happened repeatedly here. All maturing debt is refinanced at the 8.5% the company actually paid in 2025. In this case interest costs exceed the cash the properties produce by the end of the decade. The company would appear to owe slightly more than the business is worth to shareholders, roughly $250 million in total. In practice that would force asset sales and heavy share issuance. Bull case, about $9.84 a share. Every re-tenanted Steward hospital and NOR pay full contract rent. Inflation increases add about $20 million a year after costs. Maturing debt is refinanced at about 6.25%, close to the 2.25% spread over benchmark rates the company won on its bank facility in 2025. Owner earnings reach about $0.40 a share by 2027 and grow from there. What would make this wrong. The whole value depends on the new operators of the former Steward and Prospect hospitals paying full rent, and on refinancing more than $5 billion of cheap debt over 2026 to 2031 at rates that still leave cash for shareholders. The dividend, $0.36 a share a year at the current rate, is more than the company earned in owner cash in 2024 or 2025. It will not be covered unless the rent recovery arrives. Prospect's bankruptcy is still open, and the company may have to advance up to $70 million more. We could not tell from the filings how much of 2025 costs came from carrying the five former Steward properties that are still empty or being sold.