CareTrust REIT Funds $378 Million in New Investments; Announces Replenished Investment Pipeline of $270 Million

Rhea-AI Summary

CareTrust REIT (NYSE:CTRE) has announced $378 million in new investments, including a $260 million senior mortgage loan and a $43 million preferred equity investment for a 37-facility skilled nursing and seniors housing portfolio in the Pacific Northwest. The portfolio comprises 2,713 operating beds/units across eight states. The loan has a five-year maturity and 8.5% starting annual yield, while the preferred equity investment has an 11% contractual yield with a minimum seven-year hold period.

Additionally, CareTrust funded $75 million to acquire the remaining portion of a previously announced $165 million senior mortgage term loan. The company's year-to-date investments total $765 million at an average yield of 9.5%. CareTrust also revealed a replenished investment pipeline of $270 million in near-term real estate acquisition opportunities.

Positive

• Funded $378 million in new investments, expanding portfolio
• Senior mortgage loan with 8.5% starting annual yield
• Preferred equity investment with 11% contractual yield
• Year-to-date investments total $765 million at 9.5% average yield
• Replenished investment pipeline of $270 million

Negative

• None.

Financial Analyst

CareTrust REIT's recent $378 million investment spree marks a significant expansion of their portfolio and financial strategy. The company's decision to fund a $260 million senior mortgage loan and a $43 million preferred equity investment in a 37-facility skilled nursing and seniors housing portfolio is a bold move that diversifies their revenue streams.

The loan's 8.5% starting annual effective yield and the preferred equity's 11% contractual yield are particularly noteworthy in the current interest rate environment. These high yields suggest that CareTrust is taking on some additional risk, but also positioning itself for potentially substantial returns. The seven-year minimum hold period for the preferred equity investment indicates a long-term commitment to this strategy.

Furthermore, CareTrust's acquisition of the entire $165 million senior mortgage term loan at SOFR (floor 5.15%) + 4.25% demonstrates their confidence in the underlying assets and their appetite for larger investments. With a year-to-date investment total of $765 million at an average yield of 9.5%, CareTrust is aggressively expanding its portfolio, which could lead to significant revenue growth in the coming years.

The announcement of a $270 million pipeline of near-term, actionable real estate acquisition opportunities suggests that this growth trajectory is set to continue. Investors should monitor how effectively CareTrust manages this rapid expansion and whether the high yields translate into sustainable long-term returns.

Healthcare Real Estate Expert

CareTrust's strategic investment in the 37-facility portfolio across eight states is a significant move in the healthcare real estate sector. The diverse geographic spread of these facilities - spanning the Pacific Northwest and beyond - helps mitigate regional risks and positions CareTrust to benefit from various local healthcare markets.

The portfolio's mix of 21 skilled nursing facilities and 16 seniors housing facilities is particularly interesting. This blend allows CareTrust to tap into both the high-acuity care market (skilled nursing) and the growing demand for seniors housing, driven by demographic trends. The total of 2,713 operating beds/units represents a substantial increase in CareTrust's operational footprint.

The partnership with PACS Group, described as "one of the industry's most elite operators," is a important aspect of this deal. In the healthcare real estate sector, the quality of the operator can significantly impact the success of the investment. PACS Group's reputation suggests that these facilities are likely to be well-managed, potentially leading to stable occupancy rates and consistent revenue streams.

CareTrust's approach of combining loan financing with preferred equity investments in the same deal is an innovative strategy in the healthcare REIT space. This structure allows them to benefit from both steady interest income and potential upside from equity appreciation, while also developing relationships that could lead to future real estate acquisitions.

SAN CLEMENTE, Calif.--(BUSINESS WIRE)-- CareTrust REIT, Inc. (NYSE:CTRE) announced today that it has funded approximately $378 Million in new investments this week, including the funding of a $260 million senior mortgage loan and a $43 million preferred equity investment in connection with the borrower’s acquisition of a 37-facility skilled nursing and seniors housing portfolio located in the Pacific Northwest. The $378 million in investments was funded using cash on hand.

The portfolio consists of 2,713 operating beds/units with 21 skilled nursing facilities and 16 seniors housing facilities located in Oregon, Washington, Alaska, Arizona, Idaho, California, Montana, and Nevada. The borrower, which is a joint venture between a large health care real estate owner and a subsidiary of PACS Group, Inc., acquired the 37 facilities, which will be operated by other PACS subsidiaries. The loan is secured by a first priority lien on the borrowers’ ownership interest in the real estate and carries a five-year maturity and a starting annual effective yield of 8.5%. CareTrust also funded a $43 million preferred equity investment in an uptier parent entity of the borrower. The preferred equity investment does not have a stated maturity date and has a contractual yield of 11%. Subject to very limited exceptions, the preferred equity investment has a minimum hold period of seven (7) years.

CareTrust’s Chief Investment Officer, James Callister, stated that “We are excited to be a part of such a significant investment opportunity where high-quality assets are being matched with one of the industry’s most elite operators in the PACS Group.” Mr. Callister went on to remark that, “The combination of loan dollars with the longer duration of the preferred equity investment further builds on our commitment to lend with the purpose of developing additional real estate equity investment opportunities.”

“Not only are we and our operating subsidiaries thrilled to welcome these great facilities to the PACS family,” said Derick Apt, CFO of PACS Group, Inc., “we’re also excited to once again work alongside our great partners at CareTrust. We look forward to the respective growth stories of CareTrust and PACS continuing to intersect through this and future transaction opportunities.”

Separately, CareTrust had previously announced in June its funding of $90 million of a $165 million senior mortgage term loan. KeyBank National Association participated the remaining $75 million of the $165 million loan. On July 30^th, CareTrust funded approximately $75 million in connection with the exercise of its right to call the participated loan. CareTrust now holds the entire senior mortgage loan with an outstanding principal balance of approximately $165 million at an interest rate of SOFR (floor 5.15%) + 4.25%.

Dave Sedgwick, CareTrust’s Chief Executive Officer, said, “As of today, our year-to-date investment total equals approximately $765 million at an average yield of 9.5%. The investments announced today are the realization of our consistent messaging that this year would be a unique one in CareTrust’s 10-year history. And we are not done yet.” Mr. Sedgwick also announced a replenished investment pipeline of approximately $270 million of near-term, actionable real estate acquisition opportunities.

About CareTrust™

CareTrust REIT, Inc. is a self-administered, publicly-traded real estate investment trust engaged in the ownership, acquisition, development and leasing of skilled nursing, seniors housing and other healthcare-related properties. With a nationwide portfolio of long-term net-leased properties, and a growing portfolio of quality operators leasing them, CareTrust REIT is pursuing both external and organic growth opportunities across the United States. More information about CareTrust REIT is available at www.caretrustreit.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical statements of fact and statements regarding the Company’s intent, belief or expectations, including, but not limited to, statements regarding the following: industry and demographic conditions, the investment environment, the Company’s investment pipeline, and financing strategy.

Words such as “anticipate,” “believe,” “could,” “expect,” “estimate,” “intend,” “may,” “plan,” “seek,” “should,” “will,” “would,” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements, though not all forward-looking statements contain these identifying words. The Company’s forward-looking statements are based on management’s current expectations and beliefs, and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although the Company believes that the assumptions underlying these forward-looking statements are reasonable, they are not guarantees and the Company can give no assurance that its expectations will be attained. Factors which could have a material adverse effect on the Company’s operations and future prospects or which could cause actual results to differ materially from expectations include, but are not limited to: (i) the ability and willingness of our tenants to meet and/or perform their obligations under the triple-net leases we have entered into with them, including without limitation, their respective obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities; (ii) the risk that we may have to incur additional impairment charges related to our assets held for sale if we are unable to sell such assets at the prices we expect; (iii) the impact of healthcare reform legislation, including minimum staffing level requirements, on the operating results and financial conditions of our tenants; (iv) the ability of our tenants to comply with applicable laws, rules and regulations in the operation of the properties we lease to them; (v) the ability and willingness of our tenants to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, as well as any obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant; (vi) the availability of and the ability to identify (a) tenants who meet our credit and operating standards, and (b) suitable acquisition opportunities and the ability to acquire and lease the respective properties to such tenants on favorable terms; (vii) the ability to generate sufficient cash flows to service our outstanding indebtedness; (viii) access to debt and equity capital markets; (ix) fluctuating interest rates; (x) the impact of public health crises, including significant COVID-19 outbreaks as well as other pandemics or epidemics; (xi) the ability to retain our key management personnel; (xii) the ability to maintain our status as a real estate investment trust (“REIT”); (xiii) changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; (xiv) other risks inherent in the real estate business, including potential liability relating to environmental matters and illiquidity of real estate investments; and (xv) any additional factors included in our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, including in the section entitled “Risk Factors” in Item 1A of such reports, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801081850/en/

CareTrust REIT, Inc.

(949) 542-3130

ir@caretrustreit.com

Source: CareTrust REIT, Inc.

FAQ

What is the total value of CareTrust REIT's new investments announced in July 2023?

CareTrust REIT (NYSE:CTRE) announced $378 million in new investments, including a $260 million senior mortgage loan and a $43 million preferred equity investment for a 37-facility skilled nursing and seniors housing portfolio.

What is the yield on CareTrust REIT's new senior mortgage loan investment?

The senior mortgage loan has a starting annual effective yield of 8.5% with a five-year maturity.

How much has CareTrust REIT (CTRE) invested year-to-date in 2023?

CareTrust REIT's year-to-date investment total equals approximately $765 million at an average yield of 9.5%.

What is the value of CareTrust REIT's (CTRE) replenished investment pipeline?

CareTrust REIT announced a replenished investment pipeline of approximately $270 million in near-term, actionable real estate acquisition opportunities.