CareTrust REIT acquired four former Marriott rental CCRCs in Southern California for a combined purchase price of $125.2 million, or $196,500 per unit. That just about equals the average price per unit for seniors housing properties in the 2020 M&A market, according to 26th Edition of The Senior Care Acquisition Report.
Originally developed by Marriott in 1999 and 2000, these communities total 360 assisted living units, 97 memory care units and 180 skilled nursing beds. They are all located in high-income markets in Camarillo, Carlsbad, Rancho Mirage and San Juan Capistrano. An institutional owner hired Evans Senior Investments to market and sell the portfolio.
CareTrust selected California-based Aspen Skilled Healthcare to operate the Camarillo and San Juan Capistrano properties under a new 15-year master lease. Another California company, Bayshire Senior Communities, will lease and operate the Rancho Mirage and Carlsbad properties under an amendment to its existing master lease with CareTrust. Both operators have already been managing the communities since February 1, 2021 under a contractual agreement with the seller and existing licensee, which is temporarily leasing the assets from CareTrust until the relicensure. Aspen’s and Bayshire’s leases will formally commence upon receipt of licensing approval. Their plan will then be to stabilize occupancy and improve on the operating margin.
Inclusive of capex commitments and transaction costs, CareTrust’s initial investment totaled approximately $126.1 million. Aggregate annual cash rent for the first year is approximately $8.6 million, increasing to $9.4 million in the second year with CPI-based annual escalators thereafter. CareTrust funded the deal with proceeds from its $600 million unsecured revolving credit facility.