What happened
Shares of Medical Properties Trust (MPW -1.51%) were sliding 5.4% lower as of 10:58 a.m. on Wednesday. The company announced several senior leadership promotions, but those weren't the reason behind the stock's drop. Instead, Medical Properties' share price fell as a result of the broader market sell-off related to concerns about the banking sector.
So what
As a real estate investment trust (REIT), Medical Properties Trust has close interactions with multiple banks. But there doesn't appear to be any cause for investors to be concerned about the underlying business because of the banking sector turmoil.
On the other hand, Medical Properties Trust does face real challenges that could be worrisome for investors. Several of the healthcare REIT's top tenants have had financial issues. Pipeline Health System filed for bankruptcy in October 2022; Prospect Medical didn't pay its full rent in the previous two months.
Medical Properties Trust's guidance for 2023 includes a worst-case scenario that assumes Prospect won't pay any rent this year.
Now what
There are two key things to watch with Medical Properties Trust. Most importantly, investors should closely monitor the situation with Prospect Medical. The REIT thinks that it will ultimately recover all of its investments in Prospect, including deferred rents.
The other big variable for the REIT is interest rates. The Federal Reserve warned recently that it could make more aggressive rate hikes. But it's possible that the banking sector issues could cause the Fed to hold off. The lower that interest rates are, the better off Medical Properties Trust will be, because it will reduce the company's borrowing costs.
