08.20.2024

Sleepy commission serves Wu a stinging rebuke | Harnessing the free market to build affordable housing | State Street, Vanguard, lose big in Steward debacle | The back story to the biggest health care scandal in years |

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Gold mine goes bust: Big investment firms from Boston and beyond lose hundreds of millions after betting big on the landlord for disgraced Steward Health Care

Back when Steward Health Care was riding high just a few years ago, buying stock in its landlord was the next best thing to owning a piece of the then fast-growing, for-profit hospital chain.

But oh how the script has flipped.

Bankrupt and mired in scandal, Steward is struggling to close deals to sell its five remaining Massachusetts hospitals, from Morton Hospital in Taunton to St. Elizabeth’s in Brighton.

And that’s bad news for investors in Medical Properties Trust, which include some of the biggest names in the business, such as Boston-based State Street Corp., which holds tens of millions of shares in the real estate operator.

Back in 2016, the Alabama-based real estate investment trust scooped up the land and real estate underneath Steward’s Massachusetts hospitals, all located in working class and low-income neighborhoods and cities.

Edward Aldag, Jr., MPT’s $17 million CEO, declared himself “delighted” after the deal was struck, calling Steward “one the most forward-thinking healthcare providers in the country."

And for a while, MPT made a killing for itself and major shareholders like State Street, Vanguard and BlackRock, all the while charging Steward lease payments of $100 million a year just for its Massachusetts hospitals alone.

At one point in 2022, Aldag, Medical Properties Trust’s CEO, had three Gulfstream corporate jets stationed at the airport in Birmingham, where MPT is headquartered, the Wall Street Journal reported at the time.

And yes, all that travel wasn’t for business. Flight records examined by the Journal noted 141 trips over a three year period between Birmingham and Fairhope, a town on Mobile Bay where Aldag, MPT’s CEO, president, and chairman, owned a waterfront home.

However, the health care gravy train began to go off the rails last year as Steward, headed by the now notorious Dr. Ralph de la Torre - he of the $40 million yacht - began to buckle under the weight of those lease payments.

Now Steward, buried under $9 billion in debt, is struggling to wriggle free of all those hospital real estate lease agreements with Medical Properties Trust.

In a federal bankruptcy court filing on Monday, Steward blasted MPT, alleging that its erstwhile landlord has been meddling behind the scenes in its efforts to sell off its hospitals in Massachusetts and other parts of the country as well, according to published reports.

Amid all the turmoil, major institutional investors have seen the value of their holdings in MPT slashed by hundreds of millions.

Boston-based State Street is MPT’s third largest institutional shareholder, at 5.4 percent, according to the latest federal regulatory filings reviewed by Contrarian Boston. State Street’s 32 million shares in the Alabama-based real estate investment trust have plunged in value from more than $420 million a couple years ago to just $150 million now.

Since January 2022, MPT’s stock price has dropped like a rock, from over $17 a share to just $4 a share today.

Rendering of MPT’s massive new headquarters in the Alabama woods

Ditto for both Vanguard and BlackRock. The two firms collectively hold more than 850 million shares in MPT. Once worth more than $12 billion, those shares are now worth just a quarter of that, or about $3.4 billion.

Two other local investment firms have also dabbled in MPT stock as well.

Famously secretive Wellington Management Group scooped up 30 million shares of Medical Properties Trust worth half a billion dollars at some point in early 2022, according to a company filing with federal securities regulators.

Instead of hanging on, though, Wellington at some point bailed on MPT, and the Boston-based firm is no longer listed as a major investor in the real estate investment trust.

Whether Wellington sold its MPT shares for a big gain - or a withering loss - is not clear.

Geode Capital Management, which is based in downtown Boston, owns nearly 11 million shares of Medical Properties Trust, now worth about $50 million.

Good luck with that.

Another missed wakeup call: Despite rejection by the sleepy zoning commission, Boston’s mayor plans to forge ahead with tough new rules on banning gas, other fossil fuels in new buildings

Talk about missing the message.

When was the last time you read a story about the Boston’s Zoning Commission? Any story, at all?

That’s what we thought.

Members of obscure zoning boards aren’t typically in the business of thwarting the wishes of mayors - especially if they have any desire to hold onto their seats.

So last week’s decision by the city’s Zoning Commission to push back against one of Mayor Michelle Wu’s pet climate initiatives spoke volumes.