While it may not have been CareTrust REIT’s best quarter, there do not seem to be many problems with its tenants. The REIT collected 97.5% of contractual rent, up from 96.7% in the previous quarter. It helps when The Ensign Group is your major tenant.
Lease coverage ratios are important when most of your business is triple net leases. For CareTrust, it is the envy of the industry. For the 12 months ended June 30, 2023 (REITs and their leases are always three months behind in reporting), CareTrust’s top 10 tenants had a combined EBITDARM coverage ratio of 2.87x, up from 2.71x for the previous 12-month period. And this excludes any use of HHS Relief Funds. Within this group, Ensign was tops with 4.12x followed by Providence Group at 3.21x.
All the other tenants combined had a 1.72x EBITDARM lease coverage ratio, up from 1.39x, and the entire portfolio was at 2.75x. When you are a REIT with mostly skilled nursing facilities, you can’t do much better than this, especially in this environment.
CareTrust sold one seniors housing property in October, and has two other ones, one SNF and a portfolio of 11 SNFs that are held for sale. Their investment pipeline today is about $175 million, excluding larger portfolio deals they are always looking at. And the share price? Near its 52-week high.
