CareTrust REIT Inc. (Nasdaq: CTRE) is considering a sale, among other strategic options, according to unnamed sources cited by Bloomberg.

The San Clemente, Calif-based real estate investment trust (REIT) is working with an advisor to gauge interest from potential suitors, including competitors in the skilled nursing space and other real estate-focused investment firms, as reported by Bloomberg on Monday.

The potential move is “surprising,” BMO Capital Markets analyst Juan Sanabria said in a note, given CareTrust’s “strong cost of capital, respected management, and acquisition growth opportunity.” 

Still, a strategic buyer could be motivated by the “global thirst for yield,” as well as the availability of cheap capital and the potential value of the CareTrust platform, he wrote.

Omega Healthcare Investors Inc. (NYSE: OHI) is the likeliest suitor, given its stance as a “large-cap pure-play [skilled nursing facility, SNF] REIT,” Sanabria added. Sabra Health Care REIT Inc. (Nasdaq: SBRA) has noted its preference to reduce its SNF portfolio over time. Sanabria views Ventas, Inc. (NYSE: VTR) as the “dark horse” in this scenario, but participation is unlikely. Welltower (NYSE: WELL) is less likely, without a more significant discount to replacement cost.

CareTrust’s portfolio consisted of 160 skilled nursing facilities — the majority of its assets — followed by 40 seniors housing buildings and 24 multi-service campuses, as of Sept. 30, 2021.

With 95 properties, the Ensign Group (Nasdaq: ENSG) is CareTrust’s largest tenant. Ensign in October announced plans to form its own captive REIT in the coming months. CareTrust itself was spun out from Ensign in 2014.

Priority Management Group and Cascadia Healthcare are among other CareTrust tenants.

CareTrust beat analyst estimates on revenue by $17 million, coming in at $48.6 million for the quarter ending Sept. 30, according to SeekingAlpha. CareTrust executives did cite labor pressures as constraining occupancy growth on the company’s Q3 2021 earnings call.

Bloomberg’s sources on the matter said they preferred to remain anonymous since discussions are still private. CareTrust did not respond to inquiries from Skilled Nursing News regarding sale discussions.

CareTrust has not made a final decision on its strategic options and could choose to remain independent and publicly traded, Bloomberg said in its report.

CareTrust shares were up 7.33% at the end of regular trading on Monday, at $22.25 per share.

REIT acquisition and merger activity has been robust in 2021, hitting $108 billion in transaction volume as of the end of September, according to a recent JLL report. This broke a record set in 2006.

In the senior housing space, one notable deal was the $2.3 billion acquisition of New Senior by Chicago-based Ventas (NYSE: VTR) in June 2021.