CareTrust REIT Inc. (NYSE: CTRE) announced that it recently concluded two separate transactions on the West Coast, totaling an initial investment amount of approximately $45.2 million, involving the purchase of a skilled nursing facility and the provision of a mortgage loan secured by a California-based skilled nursing, assisted living, and independent living campus.
On June 30, 2023, CareTrust acquired a 99-bed skilled nursing facility on the West Coast for an initial investment of approximately $19.2 million, including transaction costs. This acquisition completes a four-property transaction mentioned that commenced in June. The newly acquired facility was added to the existing master lease with Links Healthcare Group, which will be responsible for its operation.
“We are excited to begin our relationship with CareTrust and to continue the legacy of high-quality care and operations the seller has provided over the years,” Links Healthcare Group Co-Founder Curt Rodriguez said in a press release upon the initial acquisitions. “The Links and CareTrust teams have worked extremely well together throughout this process and we are confident that this will continue to be a successful, collaborative relationship.”
Effective June 30, 2023, CareTrust also provided a first priority mortgage loan of approximately $26.0 million to a regional owner of skilled nursing facilities. The loan carries an initial rate of 9.0% and has a term of 10 years.
The loan proceeds were utilized by the borrower to acquire an 83-bed skilled nursing, 46-unit assisted living, and 99-unit independent living campus known as Linda Valley Care Center, located in Loma Linda, California. The skilled nursing and assisted living facilities will be operated by affiliates of The Providence Group, while the independent living facility will be operated by an affiliate of Chancellor Health Care, all under new master lease agreements.
The mortgage loan arrangement is in preparation for the possibility of CareTrust and the borrower entering into a joint venture, through which the mortgage loan would be replaced by the company acquiring a common equity and a preferred equity interest in the entities that own the campus facilities.
“These investments reflect our continued focus on an operator-first, relationship-based investment approach,” James Callister, CareTrust’s Chief Investment Officer, said in a press release. “We are excited by the opportunity to further our relationship with some of the country’s top tenants by matching them with facilities that complement their operating strengths.”
Funding for the investments was sourced from the Company’s $600 million unsecured revolving credit facility, as well as available cash. As of June 30, 2023, the outstanding balance on the unsecured revolving credit facility stood at $280 million.
“Links has done a tremendous job transitioning into these facilities and we are thrilled to add another facility to our relationship with them,” said CareTrust CEO Dave Sedgwick, in the press release. “Extending a loan on facilities operated by talented operators like Providence and Chancellor furthers our strategy of using loans primarily as a tool to strengthen relationships with operators we admire with an eye towards future investments.”
CareTrust in April entered the Kansas market for the first time, and the REIT’s leaders are focused on growth after a period of divestment in 2022.
“Given the current lending environment, we continue to opportunistically pursue actionable deals where we feel our access to capital, low execution risk, and reputation as a quality transactions partner make us a particularly attractive buyer,” Callister said during the company’s Q1 2023 earnings call in May.
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