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Medical Property Trust (MPW -29.00%) Friday stock crater. The NAV of real estate investment trusts (REITs) ended the day down 29%, according to data from S&P Global Market Intelligence.
News broke today that Medical Properties is taking steps to collect unpaid rent from tenant Steward Healthcare System. Steward is the company’s largest tenant, and signs of ongoing payment issues suggest the REIT’s business could be significantly destabilized.
Is Medical Properties Trust stock a buy after today’s massive sell-off?
Steward advised Medical Property Trust that its financial position has deteriorated significantly and its access to funds has been “adversely affected by significant changes in vendor payment terms.” Due to the hospital operator’s deteriorating financial situation, it is unclear whether MPT will be able to pay the rent that Steward is already owed, pay off the extended lease term of approximately 22 years, and make loan payments on time.
MPT will write off approximately $225 million of consolidated fixed-rate rent receivables, approximately $25 million of fixed-rate rent receivables related to unconsolidated Massachusetts partnerships, and approximately $100 of consolidated unconsolidated rent receivables in its upcoming fourth quarter report. I predict that it will.” a million. “This signals a major setback for REITs.
MPT has hired financial and legal advisors and is working to recover unpaid rent and unpaid loans. Medical Properties Trust may be able to recoup some of these potential losses through payments from stewards or litigation, but it is set to suffer a major setback.
While the stock may look pretty cheap after today’s steep decline, there is too much uncertainty surrounding the REIT’s earnings outlook at this point. Given that REITs are likely to record large write-offs in the short term and may need to go through lengthy legal proceedings to recoup some of their potential losses, they are an attractive investment right now. I can’t say that.
Keith Noonan has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
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