CareTrust REIT, Inc. acquired a 46-facility, 3,820-bed/unit senior care portfolio in the Midwest for a total investment amount of approximately $97 million (inclusive of transaction costs), or $25,000 per bed/unit. Seven of the 46 facilities are skilled nursing and assisted living campuses and an additional seven are assisted living communities. The transaction also commences a new relationship with a skilled nursing investor and operator.
In connection with the acquisition, the company entered into a triple-net master lease with a large skilled nursing investor and operator that will sublease the portfolio to several licensed subtenant operators. The new master lease has an initial term of 15 years with two, five-year extension options and provides for a year one contractual lease yield of 11% (inclusive of transaction costs). The master lease provides for some deferral of base rent in lease years one and two resulting in a cash rent yield of 9.0% in year-one and 10.5% in year-two. Annual CPI-based rent escalators begin in year four and continue each remaining year of the lease term.
The acquisition was completed in coordination with the bankruptcy and sale of all assets of the debtor/seller. The master tenant has been granted purchase options of each sub-portfolio, with most purchase options opening in lease years four and five. With the exercise of each purchase option, additional rent payments to CareTrust may be triggered up to an aggregate, annual 12.5% yield on CareTrust’s investment amount.
CareTrust also announced that, as anticipated in connection with the large Tennessee portfolio transaction announced October 29, it has closed on its initial acquisition of 14 of the 31 facilities (30 in Tennessee and one in Alabama, with a total of 3,290 licensed beds). The seller is American Health Partners. Evans Senior Investments handled the transaction. The initial acquisition was, as previously announced, completed through a joint venture arrangement entered into between CareTrust and a large third-party healthcare real estate owner.
At closing, CareTrust provided a combined common equity and preferred equity investment totaling approximately $245 million at an initial contractual yield on its combined preferred and common equity investments in the joint venture of approximately 9.0%. The acquisition was funded using cash on hand. The company expects to complete its acquisition of the remaining facilities by year end. The closing of these transactions brings the company’s annual investment total to over $1.3 billion.
