CareTrust has repositioned some of its staff to identify successful skilled nursing operators with which the real estate investment trust should forge new relationships, company officials said Friday as they outlined a series of fresh nursing home partnerships.
The move appears to be paying off with the second-quarter acquisition of 12 new facilities, including seven nursing homes and one skilled nursing/assisted living campus; six of those properties are being run by operators new to CareTrust.
“For CareTrust, the choice of operator has always been the most important consideration for new investments,” President and CEO Dave Sedgwick (pictured) said during an earnings call. “We are thrilled to welcome six new operators in the quarter. That deeper bench opens up new markets, new opportunities for investment. We are eager to help grow these relationships and continue to expand our existing operator relationships as well.”
Among the new operators is Links Healthcare Group, which is managing a four-property Southern California portfolio that CareTrust picked up in June. It includes 450 skilled nursing beds and 20 assisted living units.
Links, which operates 16 skilled nursing and senior housing communities, signed a 15-year master lease with two, five-year extension options. CareTrust said it expects to collect $6.8 million in rent from the operator in year one, $7.6 million in year two, and $8.9 million in year three.
More new operators could likely be called into deals, Sedgwick added later, noting that staff had been tasked with looking for off-market deals and additional “best-of-breed” operators.
Overall revenue was up $1.6 million to $47.7 million in the second quarter, and the REIT made about $200 million across seven property packages and a mortgage loan.
“Investing roughly $200 million at our historic yield across eight transactions with six new operators in one quarter represents some of the best work done in that short amount of time in our history,” Sedgwick said.
Sedgwick said the latest best of investments were strongly influenced by lending activity the REIT took last year, when there were fewer desirable acquisition opportunities. Of the roughly $200 million invested in the quarter, Sedgwick said $128 million was an indirect result of last year’s lending activity.
“The first half of the year was extremely busy,” Sedgwick said. “We are going into the second half of the year with ample dry powder to continue to grow the business and set up the company for a return to growth in 2024.”
Chief Investment Officer James Callister said the REIT had planned to put $215 million out this year, but leaders “don’t feel like we are done.”
“Overall deal flow remains strong, with a pace relatively unchanged from last quarter,” he said. ”We continue to opportunistically pursue deals where we feel our access to capital, low execution risk and reputation as a quality transaction partner make us a particularly attractive buyer.”
The investment pipeline includes about $150 million in additional skilled nursing options, CareTrust said in a statement announcing its financials.
Sedgwick also said the REIT had internally listed a delinquent operator that accounts for approximately $5 million in annual rent as “held-for-sale,” and is currently negotiating a sale of the properties.