CareTrust REIT executives painted an improving picture Friday during a third-quarter earnings call, but also shared startling details of an operator’s collapse, which has led to the sale of six facilities for $37 million.
The San Clemente, CA-based real estate investment trust posted a loss of $10.1 million, or 11 cents per share, but some numbers bettered experts’ predictions. Funds from operations, for example, came in at $33.6 million, or 35 cents per share.
Revenues during the quarter were $33.3 million, about three-fourths of what some analysts had expected.
CareTrust execs said they were shocked to learn that one tenant was simply refusing to pay $350,000 per month rent after it was notified it had accepted millions of dollars of improper Medicaid payments. Metron Integrated Health Services, which operated six nursing homes in Michigan, came under the CareTrust umbrella only in 2018.
“Shockingly, in the next breath, they told us of their intent to exit operations, and after initially assuring us that they would intend to pay the rent through the transition, they later said they would no longer be paying Metron’s contractual rent of roughly $350,000 a month until we replaced them,” CareTrust COO Dave Sedgwick said on the earnings call.
The REIT acted quickly to find a buyer and is waiting to finalize details on a $37 million deal for the six facilities in question over the next couple of months.
CareTrust CEO Greg Stapley said Metron would not be allowed to simply walk away from the relationship without penalty.
“That’s still an ongoing matter, but you shouldn’t assume that anything’s concluded there yet — other than our entry into that contract to sell the assets,” Stapley said.
Other moves during the quarter included the previously announced sale of three Ohio facilities owned by Trillium Healthcare Group for $28 million.
“The changes we made in this past quarter very substantially cleaned up this portfolio,” Stapley said. For more on the third-quarter numbers, go here.
For more coverage of the call, see sister brand McKnight’s Senior Living.