CareTrust REIT (NYSE: CTRE) CEO David Sedgwick said he doesn’t want the REIT to box itself in with one particular asset class and would like to continue growing in all care settings, including skilled nursing.
CareTrust has holdings in seniors housing, U.K.-based care homes and, most recently, a partnership with real estate developer, LNT Care Developments.
Looking ahead to the next several years, Sedgwick sees similar risk-adjusted returns between skilled nursing and seniors housing in the U.S., along with care home strategies in the U.K.
“We love all of our kids the same,” Sedgwick said of skilled, seniors housing and care homes during the company’s third quarter earnings call on Friday. “We don’t have to choose between the two, or three or four [care settings]. We take it one deal at a time, case by case, and we try to get the best risk-adjusted returns we can get, and they’re all very similar based on our disciplined underwriting.”
About $740 million in investments were closed in 3Q with a blended stabilized yield of 8.3%; the rate of growth was due to having the right skilled nursing tenants and seniors housing management companies, Sedgwick said.
The largest of those investments was a $400 million deal for 20 skilled nursing facilities in the Southwest that was announced in September, which was sourced off-market and acquired through a JV with a repeat partner, said James Callister, chief investment officer for CareTrust. About $269 million went toward acquiring 16 U.K. care homes.
Underwriting new skilled nursing assets usually means sacrificing a little yield for higher tenant coverage, said Sedgwick. Skilled deals also rely heavily on relationships as a main driver, plus a tenant’s track record.
Future-proofed real estate in LNT relationship
CareTrust began a strategic relationship with the U.K. care home developer on Oct. 1, which is designed to deliver about 30 care homes per year and has built more than 250 care homes already.
The REIT reported the initial closing of 45 care homes from LNT for £1.1 billion, comprising 23 homes acquired Oct. 1 and the remaining 22 homes to be acquired on a rolling basis through 2027.
“No other developer in the U.K. comes close to that pace. Standardization, vertical integration and a talented and driven team are the special ingredients,” said Sedgwick.
Care homes in the U.K. fall somewhere between skilled nursing and assisted living in the US, with a mix of services from both care settings.
Once CareTrust’s ramp-up phase flips from triple-net to SHOP, the annual rate of return will be about 7% and grow to double digits in the years ahead. It’s the only portfolio of scale in the U.K. that’s new, high quality and an affordable private pay option all built with ensuite “wet rooms,” or a waterproofed bathroom design with a zero threshold open shower area.
Competitors in the U.K. market offer older buildings, often converted from another use and with roughly one third having ensuite wet rooms.
LNT provides CareTrust with “future-proofed real estate,” said Sedgwick. It’s a structure that will help develop or buy brand new properties well into the future. “One way to help predict the future is to build it. The LNT relationship does provide us an opportunity to answer that question for many years to come. If in fact we lock up LNT and that seemingly endless pipeline, that’s years and years of brand newly developed assets that you can bank on.”
CareTrust’s 2026 investments stand at about $2.9 billion year to date, Callister said, made up primarily of $1.1 billion in the U.K. and $1.1 billion between US skilled nursing and seniors housing. And the pipeline sits at just over $1.2 billion.
“We expect to keep growing the way we always have, underwriting with discipline, backing operators we trust for the long term, a committed focus on relationships, and structuring deals creatively and collaboratively so that both sides win,” said Callister. “This same approach opens the door to more off-market opportunities.”
The REIT reported net income for 3Q of $83.7 million, an increase compared to $74.9 million in net income 3Q 2025. Normalized funds from operations (FFO) were $129.2 million, an increase of 20% compared to normalized FFO in 3Q 2025 of $94.7 million.
CareTrust shares on Friday closed up 2.80%, or $1.04 to $38.22, but missed analyst expectations by a couple cents at 36 cents per share, compared to 38-cent earnings per share estimate.
Closer look at coverage and rates
Skilled nursing assets reported lease coverage of 2.62x and EBITDAR of 3.26x in 3Q, with all SNF real estate licensed and run by independent operators, giving operational control to tenants.
“One hundred percent of every dollar above our fixed rent is retained by the operator,” said Sedgwick. “Our operators have the financial capacity to both reinvest into their people and processes, and to adapt to an ever-changing operating environment.”
The REIT has replaced skilled nursing tenants whose rent coverage was slipping in the past, with new tenants brought in with the same rent but brought CareTrust better credit and improved stability.
“Just last month, we again proactively replaced a Midwest SNF operator with a longtime CareTrust tenant who is willing to increase rent by 6%,” said Sedgwick. “That’s an example of a replacement tenant leveraging their strong coverage that they have with us to facilitate their growth while improving rent for us.”
The REIT’s asset management team will continue to look for such portfolio repositioning options in the coming years.
Sedgwick touched briefly on challenging interest rates, especially this fall, touting the REIT’s strategy amid uncertainty with a well-positioned balance sheet and the ability to comfortably close on a robust pipeline of accretive investment opportunities.
“If you’ve ever wondered why we have maintained extremely low leverage and stockpiles of dry powder while simultaneously growing at a record pace, is precisely for a market like this,” said Sedgwick. “In times of rising rates and uncertainty, sellers prioritize the buyer who will close, and that’s us.”
CareTrust’s meteoric growth began because of the Fed’s aggressive rate hiking in 2022 and 2023, Sedgwick added. Bunker said that historically, rising rates, or environments where rates are higher for longer, CareTrust was able to capture more of the market share and deal flow. Pressure is more significant for capital providers, with the HUD market strictly tied to the U.S. Treasury.
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