Shares of Medical Properties Trust (MPW +4.00%) were crashing 29.7% lower as of 10:20 a.m. ET on Friday. The steep decline came after the company provided an update following the market close on Thursday about its tenant, Steward Health Care System.
Steward recently told Medical Properties Trust that "its liquidity has been negatively impacted by significant changes to vendors' payment terms." Because of this, Steward's total unpaid rent rose to around $50 million as of the end of 2023. The hospital operator is also continuing to make only partial monthly rent payments.
Medical Properties Trust said that it has engaged a financial advisor and a law firm to advise it on options to collect the money that Steward owes. The real estate investment trust (REIT) has agreed to fund a $60 million bridge loan to Steward and defer unpaid rent. It also plans to write off around $225 million in rent in the fourth quarter of 2023.
NYSE: MPW
Key Data Points
Just how bad is Medical Properties Trust's news?
Make no mistake about it, Steward's ongoing financial difficulties are bad for Medical Properties Trust. But just how bad? Steward is the REIT's top tenant, accounting for 19.98% of its total assets and 23% of its total revenue in the third quarter of 2023. Medical Properties Trust also has made a sizable investment in the hospital operator.
It's possible that Steward's outlook could improve, though. The hospital chain hopes to either sell or find new tenants for some of its facilities as well as divest some noncore operations. It's also taking steps to improve its collections process.
Is Medical Properties Trust stock a buy on the pullback?
I genuinely thought that the worst was over for Medical Properties Trust as 2023 came to a close. The REIT's Q3 update in October gave some reasons to be cautiously optimistic. However, the latest news about Steward's troubles changes my perspective considerably.
My view is that buying Medical Properties Trust stock on the pullback is not a good move at this point. Investors will be better off waiting to see what happens with the Steward situation.
