The crash in Medical Properties Trust's (MPW +0.58%) stock price continued in January. Shares of the hospital-focused real estate investment trust (REIT) cratered another 36.9% last month, according to data provided by S&P Global Market Intelligence. That was a continuation of its 55% plunge from 2023.
Like last year, the main factor weighing on the healthcare REIT's stock price was issues with a financially challenged tenant.
NYSE: MPW
Key Data Points
New year, same issues
Medical Properties Trust started 2024 off on a sour note by providing investors with an update on leading tenant Steward Health Care in early January. The REIT revealed that Steward hasn't been able to make its full monthly rental payments since September. The company had previously disclosed that Steward only made partial rental payments in September and October. However, despite selling its non-core lab business and obtaining additional working capital financing (which Medical Properties Trust helped provide), the hospital operator still wasn't able to make its full monthly rental payments.
The issue this time was that Steward's vendors made significant changes to their payment terms, which impacted its liquidity. Steward's continued issues led Medical Properties Trust to engage financial and legal advisors to help it work with Steward to recover uncollected rent and its outstanding loans. The company also intends to reduce its exposure to Steward by replacing it as a tenant at some facilities while selling others.
Steward isn't the REIT's only troubled tenant. Prospect Medical Holdings couldn't pay rent for most of last year. It was finally able to resume partial payments in September and will begin making full payments in March. Medical Properties Trust restructured its relationship with Prospect last year, taking a stake in its valuable managed care business in exchange for unpaid rent, returning some leased properties, and loan balances. It hopes to sell its stake in that entity and close the sale of some hospital properties leased to the company to help reduce its exposure to the troubled tenant.
Is Medical Properties Trust a buy after last month's plunge?
Medical Properties Trust has been working closely with Steward and Prospect to assist them through their challenges. The REIT is also working to reduce its exposure by selling assets linked to those tenants. While it's making progress, it has a lot of work to do. Because of that, it's a high-risk REIT right now that income-focused investors will likely want to avoid.
However, Medical Properties Trust has tremendous upside potential. If it can sell properties associated with those two tenants and monetize its stake in Prospect's managed care business, its shares could soar. That makes it a potentially intriguing option for those with a very high risk tolerance seeking a high-upside opportunity.
