CareTrust REIT Inc. is eyeing the U.K. for expansion.
The San Clemente real estate investor in healthcare facilities announced plans to pay $817 million to acquire Care REIT, a senior care real estate investment trust (REIT) in the U.K.
Chief Executive Dave Sedgwick said they’ve been evaluating the market there for several years now.
“What we liked about the U.K. is they have strong underlying fundamentals for the care home business,” Sedgwick told the Business Journal. “You have a growing aging baby boomer population and a somewhat constrained supply of care homes to take care of them.”
The acquisition, announced last Tuesday, is expected to close in the second quarter of 2025.
Shares in CareTrust rose 3.6% to $27.01 in the trading session following the announcement to a $5.2 billion market cap (NYSE: CTRE). The shares have doubled since the pandemic began in March 2020.
Last month, CareTrust also announced fourth quarter revenue rose 45% to $86.9 million, surpassing the $84.1 million expected by analysts. Its funds from operations (FFO), a key metric for REITS, was $73 million, up from $43.4 million in the same period a year ago.
For 2024, the company reported revenue rose 36% to $296.3 million and FFO increased 56% to $232.9 million. Five analysts covering the company are expecting sales to climb another 16% this year to $344 million.
Aging Population in the U.K.
Sedgwick said that CareTrust is not just acquiring the real estate, but the whole company.
“They’re a small, but talented, London-based team that we intend to keep in some form or fashion,” he said.
Care REIT’s portfolio includes 137 care homes with approximately 7,500 operating beds leased to 15 operators across England, Scotland and Northern Ireland.
Similar to the U.S. and Japan, the older population is getting larger in the U.K. Sedgwick said.
The number of people aged 65 or over in the U.K. is projected to nearly double from 12.7 million to 22.1 million, according to the Office of National Statistics.
Sedgewick said there are no plans to expand elsewhere in Europe. He noted that the company previously looked at Canada but “just have not found the right entry point there” yet.
CareTrust was spun off from San Juan Capistrano-based The Ensign Group Inc. in 2013.
It has grown to become one of the nation’s largest operators of senior facilities, overseeing 42,670 beds across 34 states.
Closes on $500M Purchase of 31 Nursing Homes
CareTrust’s acquisition of Care REIT is now its largest ever purchase to date.
Last October, CareTrust and an undisclosed joint venture partner agreed to pay $500 million to acquire 30 skilled nursing facilities in Tennessee and one in Alabama.
Plans have since changed and the company in its earnings call said it completed its acquisition of the 28th and final facility in Tennessee.
Twelve of the Tennessee facilities were originally set to be operated by PACS Group Inc., a nursing home operator that leases some of the CareTrust’s facilities.
PACS, which manages about 315 nursing facilities across 17 states that serve over 31,000 patients daily, last year was the target of fraud accusations by activist short-trading firm Hindenburg Research. In the report, Hindenburg accused PACS of knowingly making false claims for Medicare coverage.
Hindenburg’s report sent shares in PACS down 28% to $30.85, its worst trading day at the time since going public in April (NYSE: PACS). Shares have continued to fall another 62%, hitting a 52-week low of $11.69 on March 11.
Initially scheduled for last Nov. 7, PACS delayed reporting third quarter earnings amid ongoing Audit Committee investigation.
Sedwick had no comment on the matter, saying that they’re still waiting for the company to release earnings. He previously told the Business Journal that it’s “not unusual for very successful healthcare companies to get targeted by short traders.”
