CareTrust REIT CEO Greg Stapley

CareTrust REIT’s “operator first” investment philosophy proved valuable in guiding the San Clemente, CA-based healthcare real estate investment trust successfully through the COVID-19 pandemic, executives said Thursday.

“We are pleased to report that despite the ongoing COVID-19 pandemic, CareTrust was able to post solid growth and create additional shareholder value in 2020,” Greg Stapley, chairman and CEO, said during a fourth-quarter and year-end earnings call Thursday. “When the pandemic broke, we firmly believed that our outstanding operators would find a way to navigate through the challenge, which gave us the confidence to maintain both our dividend and guidance. The result, and the ongoing performance by our tenants under some of the most difficult circumstances imaginable, have provided once again the value of our ‘operator first’ investment philosophy.”

Stapley said 2020 turned out to be “a very busy year” for CareTrust, as it increased both assets and shareholder value “in the face of unprecedented headwinds.”

CareTrust collected 99.3% of contract rents in 2020 and experienced no rent leakage in connection with the one operator change made during the year. 

Dec. 1, five assisted living communities in Virginia operated by Twenty/20 Management were transferred to affiliates of Noble Senior Services, which moved to the healthcare REIT’s list of top 10 operators last quarter. CareTrust entered into a new triple-net master lease with Noble, which has a remaining initial term of 14 years, with two five-year renewal options. Initial annual cash rent under the new lease is about $3.2 million.

“Noble stepped into our existing Virginia senior housing assets under a new triple-net lease with no loss in rent,” President and COO Dave Sedgwick said. “They’ve done a great job with the assets they transitioned for us in 2019, and both we and they are excited about their prospects in the Virginia portfolio.”

In November, CareTrust sold its one remaining owned and operated 168-unit independent living community in Texas for $4.5 million. CareTrust recognized a gain of $20,000 with the sale.

Chief Investment Officer Mark Lamb said he has seen an uptick in deals in the market over the past two weeks and, based on conversations with brokerages, he anticipates increased activity as operators navigate out of the COVID-19 spike. 

“We expect 2021 to be an active year as more and more small operators look to exit the business as we get COVID further behind us,” Lamb said, adding that the REIT’s pipeline holds a mix of skilled nursing facilities and senior housing deals.

Occupancy in senior housing showed remarkable resiliency in the first two quarters, according to the REIT. Third-quarter occupancy was 82.5%, compared with 80.4% in the fourth quarter. Sedgwick said the increase is the result of the number of residents at each senior housing location decreasing by only 1.5 residents, on average.

Sedgwick named president

Tuesday, the CareTrust Board of Directors promoted Sedgwick to president and chief operating officer. He brings more than 20 years of experience in skilled nursing and seniors housing to his new role, where he will be responsible for leading the company’s investing, financing, asset management, portfolio management and investor relations activities. Before helping to launch CareTrust, he was chief human capital officer and president of corporate services at The Ensign Group.

“With his extensive management experience in both healthcare operations and real estate investments, Dave is well-equipped to help guide CareTrust to the next level,” Stapley said.
On Monday, CareTrust announced that Lauren Beale was promoted to senior vice president and controller and that real estate and healthcare attorney James Callister joined the company as general counsel and secretary.

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