Medical Properties Trust's stock drops to 14-year low as tenant falls $50 million behind on rent

By Steve Gelsi

KeyBanc downgrades stock to sector weight as it awaits 'better clarity' on REIT's earnings trajectory

Medical Properties Trust Inc.'s stock fell 29% on Friday after the real-estate investment trust said one of its tenants, Steward Health Care System, is $50 million behind in rent payments.

Medical Properties Trust's stock (MPW) closed at $3.55, down $1.45, its lowest level since since 2009.

The stock also drew at least one downgrade from an analyst on Friday.

The REIT said late Thursday that it's taking fourth-quarter noncash charges of about $350 million, including $225 million to write off consolidated straight-line rent receivables, as well as its $25 million share of straight-line rent receivables related to the unconsolidated Massachusetts partnership and consolidated unpaid rent receivables of approximately $100 million.

"No assurances can be provided that further impairment of real-estate and non-real-estate assets will not be taken with MPT's fourth-quarter 2023 reporting," the REIT said.

Medical Properties Trust is expected to report fourth-quarter results on Feb. 1.

The REIT said it will accelerate its efforts to recover uncollected rents and outstanding loan obligations from Steward, which recently informed MPT that its "liquidity has been negatively impacted by significant changes to vendors' payment terms," the company said.

The move by MPT comes about a month after Steward said it will close down New England Sinai Acute Long-Term Care and Rehabilitation Hospital in Stoughton, Mass.

Steward cited chronic low reimbursement rates for services paid to Medicare and Medicaid patients, according to a statement reported by Boston25 News.

"Nearly 75% of Steward hospital patients are public-pay, which chronically underpays, sometimes at rates less than the cost of delivering services," the statement said.

A spokesperson for Steward did not respond to an email from MarketWatch.

MPT has hired Alvarez & Marsal Securities LLC as its financial adviser to assist with options for recovering the rent.

MPT said it agreed to fund a new $60 million bridge loan that is "secured by all MPT's existing collateral" plus new second liens on Steward's managed-care business, subordinate only to Steward's asset-based lenders.

Meanwhile, KeyBanc downgraded MPT to sector weight from overweight due to "uncertainty and ongoing risks" to its tenant health that "remain an overhang."

"Management is pursuing steps to improve its balance sheet, which we view favorably, but pricing and execution remain uncertain," KeyBanc said.

Visibility into the company's earnings trajectory "remains low and we are moving to the sidelines until there is better clarity," KeyBanc said.

In the third quarter, Steward accounted for about $70.7 million, or roughly 23%, of MPT's total revenue of $306.58 million.

Prior to Friday's moves, MPT's stock had fallen 59.6% in the past year, compared with a 23% rise by the S&P 500 SPX.

Dallas-based Steward Health Care describes itself as the largest physician-led, minority-owned integrated healthcare system in the U.S.

Tomi Kilgore contributed.

-Steve Gelsi

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01-05-24 1625ET

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