With plenty of balance sheet flexibility, San Clemente, CA-based CareTrust appears ready to weather the pandemic successfully and continue growing in the near term, predict experts at Barron’s and Seeking Alpha.
The real estate investment trust, which focuses on skilled-nursing facilities but has a portfolio that also includes independent living, assisted living and memory care, has covered its interest payments more than three times over in the last quarter — versus one or two times for peers — and it has no debt maturities for years, experts noted. CareTrust executives also believe they likely will be able to issue the increased dividends and hit the guidance that they issued before the pandemic — a feat deemed “remarkable” in an industry where most companies are reducing their guidance and dividends. Raymond James analyst Jonathan Hughes told Barron’s that he considers CareTrust, which makes 85% of its revenue from skilled nursing facilities, to have one of the safest debt profiles.
Although overall occupancy in the firm’s communities has declined like its peers, the REIT collected 99.8% of May rents a week into the month, a strong sign that its tenants are sticking around, according to the reports. Many nursing homes have limited admission and visitation amid the COVID-19 outbreak, and some families have changed their minds about moving in after seeing headlines about infection rates. But the federal government issued guidelines in April for how the homes could admit new residents, and some states have eased restrictions. Further, the National Investment Center for Seniors Housing & Care is beginning to report improvements in move-ins.
“There certainly could be reputational issues” that keep people from moving to skilled nursing, Hughes told Barron’s. “But…you can only put that off for so long before you really put yourself in jeopardy by staying at home if you can’t take care of yourself.”
As of Dec. 31, CareTrust’s portfolio included 176 SNFs, 18 of which are located on campuses that also have assisted or independent living operations, as well as 38 assisted living facilities, some of which also contain independent living and memory care units.
This article appeared in the McKnight’s Business Daily, a joint effort of McKnight’s Senior Living and McKnight’s Long-Term Care News.
