CareTrust REIT Reportedly Mulling Strategic Options, Including Sale

CareTrust REIT (Nasdaq: CTRE) is reportedly examining a range of strategic options that might include a sale of the company.

The San Clemente, California-based real estate investment trust (REIT) has engaged an advisor to explore interest in a potential sale, including from other senior housing companies or real estate investment firms, according to a report on Bloomberg, citing unnamed sources familiar with the situation.

The report noted that CareTrust leadership has not yet come to a final decision, and the company could well end up remaining publicly traded.

As of Sept. 30, CareTrust’s senior housing portfolio included 40 senior living communities and 160 skilled nursing communities along with 24 “multi-service” campuses. Some of CareTrust’s tenants include The Ensign Group and spinoff The Pennant Group, Bayshire Senior Communities and Aspen Senior Living.

CareTrust was established through a spin-off from Ensign in 2014.

Talk of a sale came as a surprise to BMO Capital Markets analysts Juan Sanabria and John Kim, who mentioned CareTrust’s “strong cost of capital, respected management, and acquisition growth opportunity” in a note to investors Monday.

Of the different players in the senior housing and care space that might be equipped to handle such a transaction, Sanabria and Kim see Omega Healthcare Investors (NYSE: OHI) as the deal’s most likely suitor, as it is “the only large-cap pure-play SNF REIT.”

“We don’t believe SBRA has the cost of capital, and management has noted it would prefer to reduce its SNF exposure over time,” the Dec. 6 BMO note reads. “We view WELL as unlikely given there isn’t an apartment discount to replacement cost. VTR could be a dark horse, but we also view participation as unlikely.”

Many of the REIT’s skilled nursing properties had made good progress rebounding from pandemic occupancy losses as of the third quarter of 2021. The company had in recent months encountered lofty prices for acquiring skilled nursing communities.

“Pricing for skilled nursing has surprisingly spiked just when you thought there might be a perfect discount,” CareTrust Chief Investment Officer Mark Lamb said during the REIT’s third-quarter earnings call. “In fact, on a price-per-bed basis, SNFs have been trading at all-time highs, including many assets with little to no cash flow.”

CareTrust’s share value rose 7.33% to land at $22.25 by the time financial markets closed on Monday.

CareTrust did not immediately respond to a request for more information from Senior Housing News as of Monday afternoon.

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.

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