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In a deal valued at $146 million, CareTrust REIT Inc. has acquired a portfolio of skilled nursing facilities in the Pacific Northwest—bringing its annual investment total to about $1.1 billion.
The San Clemente-based real estate investor in healthcare centers, along with a joint venture partner, acquired the skilled nursing facilities earlier this month. The deal includes 10 facilities comprising 911 licensed beds located across Idaho, Oregon and Washington. The post-acute facilities are leased to two existing tenants.
“This acquisition further underscores the favorable investment environment we are seeing and highlights CareTrust’s unique ability to leverage its operator roots to grow our portfolio with high-quality tenants,” Senior Vice President of Investments Joe Callan said in a statement.
The deal is one of the highlights of the past month for the company.
On May 12th, it closed its purchase of Care REIT in London for $817 million in May, which marked CareTrust’s entry into the United Kingdom. It also increased its forecast by a penny to $1.36 to $1.40 a share. In April, it also increased its quarterly dividend from 29 cents a share to 33.5 cents a share.
The company announced on May 28 that Fitch Ratings upgraded the company’s issuer default rating and issue-level ratings to BBB- with a stable outlook.
“This investment grade rating from Fitch is a strong validation of the progress we’ve made in building resilience in our portfolio and balance sheet, all while deploying roughly $2.5 billion in capital over the past 18 months in attractive seniors housing, skilled nursing, and UK care home investments,” CareTrust Chief Executive Dave Sedgwick said in a statement.
“This recognition reinforces our commitment to financial discipline, and we’re grateful to our banking partners for their support in this endeavor. With the foundation of a strong credit profile, we are poised to build even more momentum as we keep pushing on the growth flywheel.”
The rating is investment grade, one level above non-investment, indicating CareTrust can obtain loans at lower rates from institutional investors. On June 2, CareTrust announced a new $500 million unsecured term loan to pay off its revolver balance of $475 million.
“The rating ‘BBB-’ is supported by long-term demographic tailwinds, low leverage below positive sensitivities, strong financial flexibility and liquidity, and strong portfolio-level lease coverage, as well as improving diversification,” Fitch said in its report.
Across the Pond
Spun off from San Juan Capistrano-based The Ensign Group Inc. in 2013, CareTrust has grown to become one of the nation’s largest operators of senior facilities, with 408 properties overseeing 43,017 beds across 34 states. The bulk of those facilities, 318, are skilled nursing facilities. Its two holdings in Orange County are skilled nursing facilities in San Juan Capistrano and Yorba Linda.
At the end of 2019, the company had 216 properties with 8,908 beds. During this five-year stretch, shares have almost doubled.
At press time, CareTrust shares were up year to date about 11% to $29.14 and a $5.6 billion market cap (NYSE: CTRE). The Ensign Group currently has an $8.7 billion market cap (Nasdaq: ENSG).
CareTrust is on the edge of multiple firsts as the company expands into the United Kingdom.
“We are thrilled to close on the acquisition of Care REIT, marking our first M&A deal, our first international investment, and the single largest transaction in our history,” Sedgwick said in May.
The $817 million deal added 132 care homes comprising roughly 7,500 beds and two healthcare facilities leased to the U.K.’s National Health Service, located throughout England, Scotland and Northern Ireland.
CareTrust’s previous record was a $500 million acquisition of almost 30 skilled nursing facilities in Tennessee and one in Alabama.
Sedgwick told the Business Journal at the time that CareTrust was not just acquiring Care REIT’s real estate but the whole company.
“They’re a small, but talented, London-based team that we intend to keep in some form or fashion,” he said.
CareTrust plans to use the purchase as a door to international expansion. Sedgwick noted that many of its new operators are helping the REIT explore additional investment opportunities.
“This strategic acquisition is transformative for our company, significantly diversifying our portfolio by operator, geography, payor source, and asset class,” Sedgwick added.
On May 1, CareTrust reported first-quarter revenue of $97 million, up 53% from a year ago. Its funds from operations (FFO), a key metric for REITS, were $77.8 million, up from $46.5 million in the same period a year ago.
Analysts are expecting annual sales to climb 35% in 2025 to $398.7 million.
“The conditions that made 2024 a historic year for us continue into 2025,” Sedgwick said on Q1 results. “The pipe continues to reload with opportunities to grow and diversify the portfolio in strategic ways.”