Beaten-down specialty real estate investment trust (REIT) Medical Properties Trust (MPW 0.41%) has lately dived to near all-time lows. And that's saying something for a stock that's been on the market since 2005.

Debt wrangling, tenant struggles, and outside factors such as persistently high interest rates are putting the squeeze on MPT. Might the stock go lower, or has it landed in attractive bargain territory for discount hunters?

Feeling the pain

Let's put a number on this. We'll rewind to those sunny days before the coronavirus pandemic, as that global health emergency sent many medical and medical-related stocks higher. MPT is a REIT that specializes in hospitals and other healthcare facilities, and it was one of these.

On Oct. 7, 2019, MPT stock traded for $19.77 a share, so a spend of $10,000 would have nabbed a buyer 505 shares with a bit of change left over. The current market value of that holding is $4,197, for a loss of 58%. An investor would have been far better off putting money in an S&P 500 index fund, for example, as the classic equity market indicator has risen by nearly 40% over that time.

Several factors, both external and internal, have contributed to MPT's slide.

To name one, REITs that concentrate on business properties, like offices and healthcare facilities, have to contend with the work-from-home and hybrid work models that gained popularity during the pandemic.

With a chunk of the workforce able to perform their tasks remotely (assuming they have willing employers), demand for centralized workspaces falls commensurately. Certain aspects of medical billing, for example, can theoretically be done using only a PC, laptop, or even a smart device hooked into a company's network. 

The rising interest rates that kicked in last year to battle inflation are also no friend of REITs. Their business is founded on real estate, and real estate assets tend to be large and costly. The vast bulk of REITs depend, therefore, on debt financing to build and expand their portfolios. Pricier borrowing doesn't do them any favors.

Tenant tribulations

Furthermore, the struggles of several important MPT rent payers, such as Prospect Medical Holdings, compound those macro issues. The privately held company has faced particular difficulties with four hospitals it runs in Pennsylvania, to the point where MPT recently booked $283 million in impairment charges related to those properties. Uncomfortably, Prospect is MPT's second-largest tenant.

The REIT's largest tenant, Steward Health Care System, is another source of headaches. In February, Steward agreed to sell its Utah operations, five hospitals owned by MPT; over the course of this anticipated change in ownership, the facilities' book value will drop from $1.2 billion to roughly $900 million. The REIT chalks this up to the amortization of an intangible asset, but $300 million is hardly chump change. 

All this is happening at a time when MPT will soon have to cough up a chunk of money to pay down debt.

It has over $483 million of borrowings facing repayment this year. That's sizable given the scale of the company's operations, which in 2022 brought in less than $1.55 billion in total revenue. A cash pile of $236 million will help, as will a $457 million deal on the table for three Connecticut hospitals currently operated by Prospect; still, that nearly $500 million is imposing. 

High yield, high risk?

MPT has certainly faced tough times before and has come up smiling. Its current headwinds are kind of stiff, though, with major tenants experiencing problems and the debt monster stomping toward the gate.

Meanwhile, its all-important normalized funds from operations -- considered the best profitability metric for REITs -- is expected to wither to between $1.50 and $1.65 this year after 2022's $1.82. The latter number, meanwhile, was only 4% higher than the 2021 tally.

A substantially weakened share price means a higher dividend yield, and many investors are being tempted by MPT's nearly 14% figure. That tops the numbers of peers/rivals National Health Investors, with its 7.2%, and Sabra's nearly 11%. Both of those stocks, by the way, have also suffered recent share price tumbles.

But no matter its yield, and its previous successes and resiliency, there are several dark clouds hanging over MPT just now. It might be wisest to wait for them to, hopefully, dissolve at least a bit.