Medical Properties Trust (NYSE: MPW) has expanded rapidly over the years. In the last decade, the healthcare REIT (real estate investment trust) has grown its gross assets at an impressive 30% compound annual rate over the past 10 years. That expansion has paid big dividends for investors as the REIT has increased its payout in each of the last seven years, which has enabled it to outperform the market and other REITs over the previous three years.
That outperformance seems likely to continue over the next three years. Here's a look at what appears to be ahead for this healthcare REIT.
Where Medical Properties Trust is today
Medical Properties Trust ended the third quarter with about 385 properties leased to or mortgaged by 46 hospital operating companies across the U.S., Germany, U.K., Switzerland, Italy, Spain, Portugal, Australia, and Colombia. Its portfolio had a total asset value of $17.6 billion, including $14.3 billion of general acute-care hospitals, $2 billion of inpatient rehabilitation hospitals, and $300 million of long-term acute-care hospitals.
The company has significantly expanded that portfolio in 2020, closing nearly $2.9 billion of deals by the end of the third quarter. It had a few more in the pipeline, which has it on track to invest more than $3 billion this year.
Where Medical Properties Trust seems headed over the next three years
The healthcare REIT appears poised to continue growing its portfolio over the next several years. The upcoming year is already shaping up to be another one of healthy investments for the company. As CEO Edward Aldag Jr. stated in the third-quarter earnings release: "Early indications suggest that our 2021 investment pipeline is similar in both size and composition to several years in our recent history. We continue to move forward with several attractive smaller investments, and, as is typical, we are in various stages of progress on significant opportunities with timing that is difficult to estimate."
In the company's view, it has the funding sources available to grow its normalized FFO per share at a double-digit pace in 2021. That would continue its recent strong growth, as normalized FFO rocketed 24% year over year during the third quarter. Because of that, it seems likely Medical Properties Trust will be able to increase its dividend again next year, which would mark its eighth consecutive annual increase.
Looking further ahead, Medical Properties Trust should be able to continue expanding its portfolio, FFO, and dividend. One factor driving that is the massive amount of hospital real estate that's still owner-operated. For example, while the REIT is currently the second-largest hospital owner in the U.S., there are nearly 5,200 community hospitals in the country, according to the American Hospital Association. Meanwhile, the company estimates there's between $500 billion to $750 billion of operator-owned hospital real estate worldwide in markets it views as attractive from an investment standpoint. Given the company's current $17.3 billion asset base, it has significant growth potential as it continues to consolidate the hospital market through sales-leaseback transactions.
The company will likely continue to expand in its current markets and keep adding new ones over the next few years. It recently formed a joint venture (JV) to invest in international hospitals outside its current focus areas. That JV's first deal was a three-hospital portfolio in Colombia, marking its first South American investment.
Meanwhile, the company could diversify into other healthcare-related property types over the next three years. For example, some of its peers own senior living communities, medical office buildings, and life sciences centers in addition to hospitals. However, if the company makes nonhospital acquisitions, it would likely start with deals that leverage its existing hospital relationships by acquiring other types of properties leased to its current tenants.
Expect continued healthy growth for this REIT
Medical Properties Trust has a very well-defined growth strategy of acquiring hospitals, primarily in developed countries, so it's relatively easy to map out where it will be in three years. The REIT will likely have a much larger portfolio of hospital properties -- probably in more countries -- with the potential to diversify beyond hospitals if it can find the right deals. That growing portfolio should allow it to keep expanding its dividend over the next three years, which should enable it to continue delivering market-beating total returns.