CareTrust REIT (NYSE: CTRE) executives said Thursday that they have no plans to slow down dealmaking in 2025, noting that the fundamentals for skilled nursing remain strong. They anticipate no major disruptions from potential Medicaid or Medicare changes under the new administration, high interest rates, and exposure to PACS Group (NYSE: PACS) holdings.

“Financial markets, and the REIT sector in particular, faced serious challenges [over the last two years]. However, because we had driven down leverage and built up our dry powder, we were uniquely positioned to capitalize on a window of opportunity that opened,” CareTrust’s president and CEO Dave Sedgwick said during the company’s quarterly conference call. “The elevated rates drove many banks and investors to the sidelines and drove more and larger deal flow our way.”

Touting strong financial growth and a robust year for investments – with $1.5 billion in new acquisitions in 2024 – the company is on its way to have a strong 2025, he said.

“Our operators continue to post superior star ratings and quality measures compared to the industry at large and to their respective state averages as well … With this solid foundation, we are poised for another year of significant external growth if deal flow is even close to last year,” Sedgwick said. “I’ve never been more excited about our current trajectory and potential for growth. If you liked our story last year, I think you’re going to love chapter 2025.”

‘No bad debt’ from PACS 

Last year, CareTrust deepened its partnership with PACS, which has been under federal investigation for its billing practices. While Sedgwick said he wasn’t willing to go into details until PACS shared its own quarterly results and commented on the outcome of the ongoing investigation, he said he wasn’t worried about the situation’s impact on CareTrust.

“We don’t have a worst case scenario that we’re concerned about right now. We think that they’re going to be just fine, and we really don’t have much more to comment before they themselves are able to comment,” he said.

The total number of beds under CareTrust and PACS relationship consist of over 1,200 beds, including 210 skilled nursing beds and 24 assisted living units.

“No, there’s no bad debt at all in our guidance, and we certainly don’t expect any from PACs or any of our operators this year,” Sedgwick said. “With respect to PACS, it’s too early to really make any comments before they are able to release their results, so we’ll wait for that, and just point you to the exceptional lease coverage that we have in place with them.”

Investments

CareTrust has been able to manage the seasonality and macro uncertainty in the health care deal volume and investment pipeline, and its deal flow remains healthy and consistent, with deals coming in weekly, according to Chief Investment Officer James Callister.

CareTrust’s investment ranged in size from one facility to 46 facilities, from less than $5 million to over $450 million, and from real estate acquisitions to acquisition financing, with mezzanine lending and preferred equity investments, he said.

“We finished off the year with what is for us, an unprecedented quarter of investment activity, with every department in the company putting an impressive effort,” he said. “During the quarter, we added 81 triple net facilities to the portfolio, along with several new operators,” Callister said.

CareTrust executives noted a pipeline of around $325 million, which they are very confident in and expect to execute on. This pipeline represents deals they are actively pursuing and expect to close within the next 12 months.

The ‘burden’ of Medicaid cuts

Sedgwick also addressed concerns about cuts to Medicaid that House Republicans hope to pass, reiterating the view many industry leaders have also shared in recent weeks.

During the past Trump Administration, Republican lawmakers weren’t successful in passing Medicaid cuts and this time won’t be any different, Sedgwick said.

“They were unable to pass any of these types of approaches to chip away at the Medicaid rates, and now you have a fairly razor thin majority,” he said. “I think you’re going to have the same type of opposition with much less room for error … but also those Republican governors are not interested in taking on more of that burden. There’s just no room, really, to cut Medicaid for skilled nursing. And I think the states and the federal government are more aware of that today than they ever have been, based on what happened with the pandemic,” Sedgwick said.

In agreeing with the widely held view on the fate of the Biden Administration’s minimum staffing mandate, Sedgwick said that the mandate likely won’t survive.

“Of course, there’s some noise and speculation about what the new administration means for skilled nursing. It’s too early to be definitive, but our conversation with policy makers, lobbyists, and operators, all leads us to believe that the minimum staffing rule will be reversed and that Medicaid and Medicare will continue to be unchanged as the cornerstones of health care in general and skilled nursing in particular,” Sedgwick said.

Much like many leaders in the sector, Sedgwick also lauded the Trump administration’s historical backing of the sector.

“[Trump’] first administration was incredibly supportive to the skilled nursing space, and we expect that same type of understanding of the importance of Medicaid and the bipartisan support for it to continue,” he said.

During the fourth quarter, CareTrust posted a normalized FFO of $72.9 million, an increase of 68.1% year over year, and normalized FAD of $74.3 million, a jump of 63.7%. Going forward, the company expects FFO per share between $1.68 to $1.72 for 2025. 

Shares for the San Clemente, Calif.-based company closed Friday at $26.42, down 10 cents, or 0.38%.