Medical Properties Trust, Inc. (MPW) Misled Investors Regarding its Portfolio Assets

A shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired Medical Properties Trust, Inc. (NYSE: MPW) common stock between July 15, 2019 and February 22, 2023, for violations of the Securities Exchange Act of 1934. Medical Properties operates as a real estate investment trust (“REIT”) that leases its facilities under long-term leases to providers of healthcare services, such as operators of general acute care hospitals, behavioral health facilities, inpatient physical rehabilitation facilities, long-term acute care hospitals, and freestanding ER/urgent care facilities. 

According to the complaint, on July 15, 2019, Medical Properties announced that its operating entity, MPT, had entered into an agreement through which certain subsidiaries would invest approximately $1.55 billion in 14 acute care hospitals and two behavioral health facilities owned and operated by Prospect Medical Holdings, Inc. (“Prospect”), after which the Company would own the properties in the Prospect portfolio and lease them back to Prospect. Among the properties, were four located in Pennsylvania.

Defendants allegedly engaged in a widespread and multifaceted scheme to conceal from investors that, contrary to the Company’s public representations, its portfolio of assets were severely distressed and non-performing such that they could not make their rent payments. Defendants employed a number of “uncommercial transactions” to prop up its non-performing assets in the short term and thereby avoid recording impairment charges. 

Specifically, defendants failed to disclose, inter alia, that: (i) the Company masked the distressed state of its tenants through sale-leaseback arrangements which were essentially round-robin transactions in that they allowed debt-saddled tenants to meet their obligations in the short-term; (ii) the Company fraudulently transferred hundreds of millions of dollars in what amounted to a bailout of financially distressed tenants; (iii) the Company concealed its fraudulent transfers with fake construction projects with purportedly high capital expenses, despite the fact that the Company entered into “triple-net leases,” which meant that its tenants were obligated to pay a significant portion of expenses, such as real estate taxes, insurance, and maintenance; and (iv) as a result, the Company’s public statements, including those with respect to the Pennsylvania properties, were materially false and misleading at the time they were made.

On February 23, 2023, Medical Properties announced its fourth quarter and full year 2023 financial results, disclosing an impairment of about $171 million on the Pennsylvania properties leased to Prospect as well as a write off of about $112 million in unbilled rent for the same client.  On this news, the Company’s stock price fell $0.80, or 8.7%, to close at $11.14 per share on February 23, 2023, thereby injuring investors.

What Now: Similarly situated shareholders may be eligible to participate in the class action against Medical Properties. Shareholders who want to act as lead plaintiff for the class must file their papers by June 12, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.  You do not have to participate in the case to be eligible for a recovery.

All representation is on a contingency fee basis. Shareholders pay no fees or expenses.