Standard & Poor's Affirms Meditrust Corp.'s Ratings Following Acquisition of La Quinta Inns Inc.

Strategic Insights -

Standard & Poor's, a leading credit rating agency, has affirmed its ratings of Meditrust Corp. after the company announced its intention to acquire La Quinta Inns Inc. Additionally, Standard & Poor's assigned ratings to Meditrust Cos. and Meditrust Operating Co. The acquisition is expected to provide Meditrust with significant growth opportunities, leveraging its newly acquired paired-share structure to expand its real estate investments.

Meditrust Corp.'s strong financial performance and diversified portfolio have contributed to its stable outlook. The company's core health care real estate investments have grown at a 20% compound annual growth rate over the past five years, reaching $2.6 billion in sale/leaseback, mortgage, or construction investments. Meditrust's diversified portfolio, which includes interests in the Santa Anita Race Track, shopping centers, and office properties, has also reduced its operator concentrations to 21.5% from 27% and 53.5% from 69% in 1992.

The Santa Anita transaction has allowed Meditrust to both own and operate real estate while qualifying as a REIT, enabling the company to pursue significant acquisition activity. The acquisition of La Quinta Inns Inc. is Meditrust's first investment using its newly acquired paired-share structure, with a $2.955 billion acquisition price and an expected debt to capitalization ratio of 40% (book value) and 30% (market value).

Key Takeaways:

  • Meditrust Corp. has maintained a stable outlook due to its diversified portfolio and strong financial performance.
  • The company's core health care real estate investments have grown at a 20% compound annual growth rate over the past five years, reaching $2.6 billion in sale/leaseback, mortgage, or construction investments.
  • Meditrust's acquisition of La Quinta Inns Inc. is the company's first investment using its newly acquired paired-share structure, with a $2.955 billion acquisition price.
  • The Santa Anita transaction has enabled Meditrust to both own and operate real estate while qualifying as a REIT.
  • The combined entity is expected to operate at coverage levels higher than those of like-rated pure health care REITs to provide appropriate coverage for the more volatile lodging cash flow.

Statistics:

  • Meditrust's core health care real estate investments have grown at a 20% compound annual growth rate over the past five years.
  • The company's portfolio includes 491 health care facilities and $2.6 billion in sale/leaseback, mortgage, or construction investments.
  • The Santa Anita transaction has reduced Meditrust's operator concentrations to 21.5% from 27% and 53.5% from 69% in 1992.
  • The debt to capitalization ratio of the combined entity is expected to remain in the 40% range (book value) and 30% range (market value).

Sources:

  • Standard & Poor's
  • CreditWire
  • PR Newswire