CareTrust REIT (NYSE: CTRE) added one skilled nursing facility in Texas and one in Kansas to its portfolio underlining the company’s keenness to expand into new markets.
“We are focused on not just adding buildings to existing tenant relationships, but also on identifying and working with operators that are new, or are new to us, and that we feel we can confidently grow with in the future,” James Callister, CareTrust’s chief investment officer told Skilled Nursing News.
Callister also said that these acquisitions demonstrated the company’s strategy to balance the tough lending environment with its strengths.
“Given the current lending environment, (we are) being opportunistic on pursuing actionable deals where we feel our access to capital and low execution risk make us a particularly attractive buyer,” Callister said, adding that CareTrust will continue to pursue opportunities to add “new quality operators to our pool of operating tenants and…expand into new markets.”
Earlier, Callister said that deal making in the nursing home industry was being driven by Medicaid rebasing, with larger portfolios being up for grabs in states where the Medicaid rate remains very low, and other REITs and private equity owners are disposing assets.
In announcing these latest acquisitions on Monday, CareTrust also said that this marks the real estate investment trust’s entry into the Kansas market.
The SNF located in Kansas is AdventHealth Care Center Overland Park, a 102-bed facility. The facility in Texas is AdventHealth Care Center Burleson, a 178-bed facility that will be operated by Momentum Skilled Services.
“We are excited to expand our relationship with Momentum,” Callister said. “They are a top-quality operator that we hope to continue to grow with.”
CareTrust’s initial investment in the facilities, inclusive of capex commitments and transaction costs, was approximately $17.2 million. Initial annual cash rent for the facilities will be approximately $1.63 million, the company said.
The California-based REIT has a nationwide portfolio of long-term net-leased properties, and a growing portfolio of operators leasing them. The company said that it is pursuing both “external and organic growth opportunities across the United States.”
The acquisition of the Burleson facility will be a “tack-on” to CareTrust’s existing lease with Austin, Texas-based operator Momentum, which will replace the outgoing operator, the company said. The Burleson acquisition increases CareTrust’s relationship with Momentum to two facilities.
Meanwhile, for the Overland Park facility, CareTrust said that it had entered into a new tenant relationship with an affiliate of Summit Healthcare Management, LLC, a new Kansas-based nursing home operator owned by Ben Bryant, an experienced operator of skilled nursing and seniors housing facilities in the Midwest.
The initial term of Momentum’s master lease with CareTrust was also extended by four years in connection with the transaction. The lease with Summit Healthcare provides for an initial term of fifteen years with two, five-year renewal options and includes annual, CPI-based escalators. The acquisition was funded using cash-on-hand.
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