CareTrust REIT Inc (CTRE) Q1 2025 Earnings Call Highlights: Record Growth and Strategic UK Expansion

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03-05-2025

Normalized FFO: Increased 67.4% to $77.8 million.
Normalized FAD: Increased 66% to $80.8 million.
Normalized FFO per Share: Increased $0.07 or 20% to $0.42 per share.
Normalized FAD per Share: Increased $0.06 or 16.2% to $0.43 per share.
Investment Total: Year-to-date investments totaled approximately $82 million at a yield of approximately 10%.
Cash Rental Revenues: Projected to be approximately $284 million for the year.
Interest Income: Approximately $90 million, with $76 million from the loan portfolio and $14 million from cash invested in money market funds.
Interest Expense: Approximately $24.3 million, including $4 million of amortization of deferred financing fees.
G&A Expense: Approximately $33 million to $37 million, including $11.7 million of deferred stock costs.
Leverage: Net debt to normalized EBITDA ratio of 0.5 times; expected to be below 2.5 times post-UK transaction.
Fixed Charge Coverage Ratio: 15.2 times.
Warning! GuruFocus has detected 6 Warning Signs with CTRE.
Release Date: May 02, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
CareTrust REIT Inc (NYSE:CTRE) announced the strategic acquisition of Care REIT, marking its entry into the UK market and the largest deal in its history.
The acquisition diversifies CTRE's business in terms of operator concentration, geography, payer sources, and asset classes.
CTRE completed three new investments totaling over $47 million at a yield of approximately 10% during the first quarter.
Normalized FFO increased 67.4% over the prior year quarter to $77.8 million, and normalized FAD increased by 66% to $80.8 million.
CTRE's liquidity remains strong with a net debt to normalized EBITDA ratio of 0.5 times and a fixed charge coverage ratio of 15.2 times.
The acquisition of Care REIT involves assuming existing debt of approximately $259 million, which CTRE plans to refinance.
There is uncertainty regarding potential Medicaid cuts, which could impact CTRE's portfolio.
The UK acquisition pipeline is still developing, and it may take time to mature to the level of the US pipeline.
Interest expense increased due to the line draw for the escrow account related to the UK transaction.
CTRE's guidance assumes no additional investments or further debt or equity issuances this year, which could limit growth opportunities.
Q: Can you comment on the potential impacts of policy and provider taxes on your portfolio? A: David Sedgwick, President and CEO, stated that there is no change in their outlook on potential Medicaid cuts. They are monitoring the process, and there is bipartisan support for Medicaid, especially for seniors in nursing homes.
Q: What conditions lead you to choose debt investments over property acquisitions? A: David Sedgwick explained that acquisitions are prioritized, but debt investments are considered strategic if they can build relationships with key operators, potentially leading to future acquisitions.
Q: Are there any changes to the earnings or FAD accretion from the Care REIT transaction? A: David Sedgwick mentioned that they will provide detailed answers regarding the transaction's financial impact once the deal is officially announced.
Q: What is the expected investment pipeline volume for the UK market, and what yields are you seeing? A: David Sedgwick noted that the UK pipeline will take time to mature. They are currently looking at various deals with cap rates ranging from 7% to 9%, depending on the specifics.
Q: How are the properties performing relative to initial underwriting, and what is the outlook for PAC? A: David Sedgwick stated that they have no updates on PAC beyond the data and coverage ratios provided, and they are awaiting further disclosures.
Q: Does the UK acquisition put you on the map for new relationships, and will you start lending there? A: David Sedgwick confirmed that the acquisition has generated significant interest from operators in the UK, but they are not currently looking to lend in that market.
Q: How is the US skilled nursing facility (SNF) market changing, and is there less capital available? A: James Callister, Chief Investment Officer, stated that the market remains unchanged with consistent deal flow and competitive landscape, with no significant shifts in capital availability.
Q: What is the status of the term loan related to the UK acquisition, and what are the expected costs? A: William Wagner, CFO, explained that the term loan will be an amendment to their existing credit facility, with pricing just inside their revolver, and it will not be in pounds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.