Medical Properties Trust (MPW +2.28%) stock cratered Friday. The real estate investment trust's (REIT's) unit price ended the day down 29%, according to data from S&P Global Market Intelligence.
News hit today that Medical Properties was taking steps to collect unpaid rent from its tenant Steward Health Care System. Steward is the company's largest tenant, and indications that payment issues are ongoing suggest that the REIT's business could see major destabilization.
NYSE: MPW
Key Data Points
Is Medical Properties Trust stock a buy after today's massive sell-off?
Steward has seen its financial condition deteriorate significantly, and it reported to Medical Properties Trust that its access to funds had been "negatively impacted by significant changes to vendors' payment terms." Due to the hospital operator's worsening financial position, MPT is uncertain whether Steward will make payments on rent that's already due, make good on its roughly 22-year extended lease term, and deliver loan payments on time.
With its upcoming fourth-quarter report, MPT expects "to write off consolidated straight-line rent receivables of approximately $225 million, its approximately $25 million share of straight-line rent receivables related to the unconsolidated Massachusetts partnership and consolidated unpaid rent receivables of approximately $100 million." That suggests a massive setback for the REIT.
MPT has hired financial and legal advisors to shape pursuits to enable the collection of uncollected rents and outstanding loans. While Medical Properties Trust may be able to recoup some of these potential losses, either through payments from Steward or legal action, it's on track to suffer massive setbacks.
While the stock may be looking much cheaper on the heels of a huge sell-off today, the REIT's performance outlook comes with too much uncertainty right now. With the REIT likely to record massive write-offs in the near term and given the possibility that it will need to go through lengthy litigation procedures to recoup some amount of potential losses, it's not an attractive investment right now.
