Building on its active investment year, so far, CareTrust REIT announced a major loan origination in the form of a $260 million senior mortgage loan and a $43 million preferred equity investment in connection with the borrower’s acquisition of a 37-facility skilled nursing and seniors housing portfolio in the Pacific Northwest. The portfolio comprises 2,713 operating beds/units with 21 skilled nursing facilities and 16 seniors housing facilities located in Oregon, Washington, Alaska, Arizona, Idaho, California, Montana and Nevada.
The borrower, a joint venture between a large health care real estate owner and a subsidiary of PACS Group, acquired the 37 facilities, which will be operated by other PACS subsidiaries. The loan is secured by a first priority lien on the borrowers’ ownership interest in the real estate and carries a five-year maturity and a starting annual effective yield of 8.5%. CareTrust also funded a $43 million preferred equity investment in an uptier parent entity of the borrower. The preferred equity investment does not have a stated maturity date and has a contractual yield of 11%. Subject to very limited exceptions, the preferred equity investment has a minimum hold period of seven years.
This comes shortly after the announcement that subsidiaries of PACS would acquire the operations of 53 skilled nursing facilities and assisted living/independent living communities in Oregon (21), Washington (19), Idaho (6), Nevada (3) and one each in Alaska, Arizona, California and Montana. All are currently operated by Prestige Care or Prestige Senior Living and comprise 2,511 skilled nursing beds and 1,332 assisted living/independent living units. The transaction is subject to customary closing conditions.
The remaining 16 of the 53 properties will be leased from unaffiliated third-party landlords. PACS is leasing the facilities on a traditional triple net basis, so its up-front capital outlay to do the transaction primarily consists of the approximately $15 million that it will invest in the real estate joint venture for its 25% interest.
The REIT’s activity did not stop there, as CareTrust also announced the acquisition of two seniors housing communities in Illinois in a joint venture with Jaybird Senior Living. The Indigo at Bartlett comprises assisted living and memory care units in Bartlett. The Indigo at Elmhurst also features AL/MC units and is in Elmhurst. During the second quarter, CareTrust also expanded its existing relationship with Bayshire Senior Communities through the $61 million acquisition of three California campus properties.
Separately, CareTrust had previously announced in June its funding of $90 million of a $165 million senior mortgage term loan. KeyBank National Association participated in the remaining $75 million of the $165 million loan. On July 30th, CareTrust funded approximately $75 million in connection with the exercise of its right to call the participated loan. CareTrust now holds the entire senior mortgage loan with an outstanding principal balance of approximately $165 million at an interest rate of SOFR (floor 5.15%) + 4.25%.
As of August 1, CareTrust’s year-to-date investment total equaled approximately $765 million at an average yield of 9.5%, of which $378 million was closed in the previous week. And an additional approximately $270 million of near-term, actionable real estate acquisition opportunities are planned.
