10/28/22 12:08 PM EDT

THE (DIS)TRUST SERIES | VOLUME XX | BACK TO THAT DRY HOLE IN TX... | 10.28.22 (MPW)

Rob Simone, CFA

@HedgeyeREITs

Takeaway: Mechanics liens piling up on work performed (but not paid for) at Wadley Texarkana development

Hedgeye Cartoon of the Day: Still Burning

Ticker: MPW

Company Name: Active Short Medical Properties (Dis)Trust

Subsector: NNN Hospitals

Headline: Focusing in on one interesting part of the 3Q22 call

Note: We will have our full review of the call on Sunday night, but we wanted to lead with this for now as it makes no sense and warrants scrutiny, in our view.

We would like to focus in on the following exchange (Figure 1 below) during the Q&A portion of the 3Q22 earnings call. We would suggest clients/subs listen to a replay of this exchange vs. just reading it. The response appeared very "guarded" and carefully worded to us, and at the same time did not address the critical question at hand: "Where did the money go?"
This deals with MPW's Wadley Regional Medical Center Texarkana development, which we previously wrote about HERE.
MPW has funded an incremental ~$50 million towards this project as of 3Q22 (Figure 2 below), over and above the ~$8.5 million allocated basis for the land from 3Q17.

Figure 1: 58.45 Min Mark of the Earnings Call

Source: FactSet

Figure 2: MPW's Wadley Regional Development Funding

Source: Company Reports

What's interesting to us is that, parallel to this, in the background Steward Health has signed contracts with vendors/contractors to perform work at the site but is racking up unpaid bills and now mechanic's liens totaling at least ~$1.4 million based solely on what we could find. Meanwhile the development site looks like Chernobyl (see Figure 3 below).
Excel Aircraft, LLC, doing business as Excel Mulching:

Unpaid Claim: $56,143.75
Labor furnished: Land clearing and site preparation
Date of Affidavit: 6.14.22

Hoar Construction, LLC:

Unpaid Claim: $899,080.00
Labor & material furnished: Site clearing, grubbing, installation of fencing, stormwater infrastructure installation, installation of temporary access roads and lay down areas, installation of temporary trailers and facilities for construction.
Date of Affidavit: 5.20.22

Hoar Construction, LLC:

Unpaid Claim: $471,503.14
Labor & material furnished: Site clearing, grubbing, installation of fencing, stormwater infrastructure installation, installation of temporary access roads and lay down areas, installation of temporary trailers and facilities for construction.
Date of Affidavit: 9.21.22

Figure 3: Current Look at Wadley Regional Devlp't Site - 10.20.22

Source: ksla.com, Hedgeye

Questions for MPW: What was the ~$50 million actually used for? What did Steward do with the money? What materials were procured, based on management's comments around "pre-funding?" Who procured them, and where are they? One thing is certain, the money was not used to pay the above contractors. Even if it had been, that leaves about ~$48.5 million unaccounted for. Meanwhile the site appears to be essentially untouched.
Our View: The "pre-funding" was really just an effort to pass additional liquidity to an insolvent Steward Health, and/or its affiliates. Fast forward and Steward's ABL facility is very likely maxed out, as Steward continues to burn ~$300 to $400 million per year. Prove us wrong.

Prior Notes:

10.25.22 - REITS DAILY BRIEF | THOUGHTS ON NXRT'S 3Q22 | 10.25.22 (NXRT)

10.25.22 - THE (DIS)TRUST SERIES | VOLUME XVIII | I'M THE CAPTAIN NOW... | (MPW)

10.25.22 - THE (DIS)TRUST SERIES | VOLUME XVII | THAT'S SOME EXPENSIVE GRASS! | (MPW)

10.23.22 - SUNDAY NIGHT REIT READ | LOT'S TO READ ON SFR | 10.23.22 (VRE, AMH, INVH, TCN, MPW, SBAC)

10.21.22 - REITS WEEKLY VALUATION HANDBOOK | 10.21.22

10.21.22 - REITS DAILY BRIEF | THC NEGATIVE READ ACROSS FOR STEWARD ET AL | 10.21.22 (MPW)

10.20.22 - REITS CLIENT ALERT | 10.20.22 (MPW)

10.20.22 - REITS DAILY BRIEF | 3Q22 EARNINGS NOTES | 10.20.22 (REXR, CCI)

10.19.22 - CLARIFICATION ON MAA PORTION OF PRIOR NOTE | 10.19.22 (MAA)

10.19.22 - REITS DAILY BRIEF | NOTES FROM PLD'S 3Q + SUDDEN MAA CHANGE | 10.19.22 (PLD, MAA, MPW)

10.17.22 - REITS DAILY BRIEF | ELS MISS + SFR CONSIDERATIONS AROUND QUARTERRA | 10.18.22 (ELS, AMH, INVH, TCN)