CareTrust REIT (Nasdaq: CTRE), which has 158 skilled nursing facilities in its 223-asset portfolio, collected 100% of rent from its tenants in the second quarter. With an active deals pipeline that tilts heavily toward skilled nursing, the real estate investment trust (REIT) continued to be aggressive on the acquisition front in the second quarter, Chief Investment Officer Mark Lamb said on Friday’s earnings call.
“We have invested $184.1 million so far this year and we will continue to press forward on the acquisition front to hopefully finish off the year with the kind of external growth you are accustomed to seeing,” he said. “Our pipeline has been reloaded back to our historical range of $100 to $125 million.”
The deals CareTrust is pursuing currently are all “singles and doubles” — mostly consisting of single assets and smaller portfolios.
Greg Shapley, CareTrust’s chairman and CEO, indicated that pricing has pushed the REIT out of the market on some of the larger deals considering the financial distress that lingers across the industry.
“In the current environment it’s really tough to get to the pricing that some are willing to pay for the larger portfolios,” he said.
CareTrust acquired two skilled nursing facilities in the Austin, Texas metropolitan area earlier this month, the San Clemente-based REIT announced earlier this month. The Ensign Group will operate both facilities — a 119-bed facility in Austin and a 122-bed facility in Cedar Park.
The two facilities, both constructed in 2017, were purchased for $32.5 million using CareTrust’s $600 million unsecured revolving credit facility.
“Our skilled nursing providers have fared well as the government has provided significant funding. We’re hopeful that the industry will soon receive some or all of the remaining Provider Relief Funds,” Shapley said.
He added that CareTrust has collected 96.2% of its contracted rent collected thus far for July and believed it would collect.
Shapley felt CareTrust was “well-positioned” moving forward.
Occupancy recovery
CareTrust’s skilled nursing tenants are on the path to occupancy recovery as the expectation is that its operators could be back to pre-pandemic levels by early to mid next year, though there are still some variables that need to play out, such as the emergence of the delta variant.
According to its facility-level data through May, 18% of CareTrust’s SNFs and campuses are at or above 100% of their pre-COVID occupancy and are moving in the right direction.
“CareTrust’s occupancy has grown from January’s floor of around 67% to around 70% for a rate of recovery of about 60 bits per month,” Dave Sedgwick, CareTurst’s president and chief operating officer, said. “If that rate holds constant, we will be looking at approximately next April to May to return to our pre-pandemic occupancy levels of 77.7% but we expect it to fluctuate.”
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