CareTrust Wraps Up $211M Acquisition of 12-Building Portfolio from BM Eagle

CareTrust REIT (Nasdaq: CTRE) on Tuesday announced the successful completion of a $211 million deal that saw 12 properties change hands and two operators expand their portfolios in the South.

The San Clemente, Calif.-based real estate investment trust (REIT) picked up seven skilled nursing facilities, along with an eighth SNF/assisted living campus, in Louisiana. Management of those properties was also transitioned to Priority Management Group, a Dallas-based operator with multiple principals who had previously operated the buildings.

 “We are delighted to be returning to these facilities with CareTrust, and even though the operations are already stable, we believe there is significant upside in both quality and financial performance to be captured here,” Doug Boulware, Priority Management’s CEO, said in a statement announcing the transaction.


In the second leg of the transaction, CareTrust acquired three SNFs and a continuing care retirement community (CCRC) in Texas, with the Plano, Texas-based Southwest LTC taking over as operator. Southwest LTC currently operates 27 properties across the Lone Star State, and the transaction marks its first partnership with CareTrust.

“We are extremely pleased to be expanding our relationship with Priority Management, and to be completing our inaugural deal with Southwest LTC,” CareTrust chief investment officer Mark Lamb said in a statement. “Both operators have excellent reputations for quality care and are highly successful, and both were instrumental in helping us complete an extremely complicated transaction,” he added.

The deal’s all-in price tag of $215 million includes $1.65 million in capital expenditure funds for Southwest LTC, to be deployed over the next two years, as well as transaction costs. Southwest’s first lease with CareTrust will run 15 years, with a pair of five-year renewal options and escalators based on the Consumer Price Index. Priority Management, meanwhile, amended its existing lease with CareTrust to add $15.6 million in annual cash rent payments over the remaining 12.5 years of the lease.


In both cases, the seller was an affiliate of BM Eagle Holdings, a joint venture involving affiliates of the New York City-based alternative asset management firm BlueMountain; BM Eagle is perhaps best known in the skilled nursing space for acquiring Kindred Healthcare’s entire SNF portfolio for $700 million in 2017.

For the REIT, the transaction will bring in a total of $19 million in annual revenue, and raise its total portfolio to 211 health care properties across 28 states. The deal also marks the latest milestone in an already busy year for CareTrust, which recently touted its $300 million skilled nursing pipeline for 2019: Earlier this year, the REIT picked up four SNFs in California for $49.3 million, and added an Illinois skilled nursing and supportive living campus for about $9 million.

In conversation with SNN back in February, Lamb said CareTrust “can’t get enough” skilled nursing assets, with supply serving as the only barrier to the company’s planned expansion.

“If you asked us what impedes us from putting up a big investment number, it’s not enough deal flow in states that we like,” Lamb said. “If we wanted to buy $500 million worth tomorrow, we could do that. But those aren’t necessarily in states that we like, or maybe the buildings aren’t in the condition that we like.”

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