CareTrust REIT’s Wisconsin senior care strategy

CareTrust REIT just doubled down on its Wisconsin senior care strategy. Almost a year after acquiring an assisted living community in West Allis, Wisconsin from Priority Life Care (and then leasing it back), CareTrust is acquiring two more memory care communities in the Milwaukee MSA for approximately $26.1 million, or $296,591 per unit. The communities were well occupied (both at 97%) and relatively recently built (one property was built in 1997 and 2011 and the other was in 2013). Added to a master lease with Premier Senior Living for the remaining initial term of 14 years (with two five-year renewal options and CPI-based rent escalators), the communities are expected to generate annual cash rent of $2.16 million, resulting in an initial cash yield of 8.3%. We estimated EBITDA to be around $2.6 million, resulting in a 10% cap rate. That is not too far off from the average for 2016, which we will discuss in this month’s issue of The SeniorCare Investor, hitting your desk soon.