CareTrust REIT Completes $211 Million Acquisition

April 16, 2019

SAN CLEMENTE, CA–CareTrust REIT, Inc. (Nasdaq:CTRE) announced that it successfully completed a previously-disclosed $211 million multi-asset acquisition. The transaction grows CareTrust’s existing real estate holdings by 12 properties with 1,734 beds/units and adds over $19.0 million in new annual revenue to the company’s portfolio as of April 1, 2019.

The two-state transaction included seven skilled nursing facilities and one skilled nursing and assisted living campus in Louisiana, which were re-tenanted at closing with existing CareTrust tenant Priority Management Group, LLC. It also included three skilled nursing facilities and one continuing care retirement community in Texas, which were re-tenanted with Texas-based Southwest LTC, Ltd. under a new master lease with CareTrust.

“We are extremely pleased to be expanding our relationship with Priority Management, and to be completing our inaugural deal with Southwest LTC,” said Mark Lamb, CareTrust’s Chief Investment Officer. “Both operators have excellent reputations for quality care and are highly successful, and both were instrumental in helping us complete an extremely complicated transaction,” he added.

Lamb called the pairing of Priority Management with the eight Louisiana assets “a match made in heaven,” as two of Priority Management’s key principals operated the assets in the past when they were working with previous owners. “They know the properties and their markets especially well and are currently operating other properties in the same and nearby markets,” he said.

Doug Boulware, Chief Executive Officer of Priority Management, added, “We are delighted to be returning to these facilities with CareTrust, and even though the operations are already stable, we believe there is significant upside in both quality and financial performance to be captured here.”

Lamb also explained that Southwest LTC is “the perfect partner for the four Texas properties,” as it already operates facilities in some of the same markets and knows the properties and markets well. “The new buildings fit right in with Southwest LTC’s existing 27-property portfolio and allow them to strategically expand in these Texas markets where they have operated for almost two decades,” he said.

Ron Payne, Chief Executive Officer of Southwest LTC, added, “We believe these facilities and markets come with excellent long-term prospects, and the projected synergies with our existing operations will make it relatively easy for us to absorb and improve them.” He also noted that CareTrust had agreed to provide $1.65 million in capital expenditure funds over two years to allow Southwest LTC to address deferred maintenance and cosmetic needs at two of the facilities.

The aggregate purchase price for the acquisition was approximately $215.0 million inclusive of capex commitments and transaction costs. CareTrust and Priority Management amended their existing seven-facility master lease, which has approximately 12.5 years remaining on the term, to add the eight Louisiana assets and increase the annual cash rent due thereunder by approximately $15.6 million.

CareTrust and Southwest LTC entered into a new master lease for the four Texas assets, which carries an initial term of fifteen years with two five-year renewal options and CPI-based rent escalators. The acquisition was funded using a combination of cash on hand and CareTrust’s $600 million unsecured revolving credit facility. The Seller was an affiliate of BM Eagle Holdings LLC, which acquired the assets as part of a larger transaction and simultaneously sold to CareTrust 100% of its interest in the newly-formed single-purpose entity that held the twelve assets.

CareTrust REIT, Inc. is a self-administered, publicly-traded real estate investment trust engaged in the ownership, acquisition, development and leasing of seniors housing and healthcare-related properties.

Priority Management Group, LLC is a Louisiana- and Texas-based skilled nursing and assisted living operator with 14 facilities in Louisiana and seven facilities in Texas. Its principals, Doug Boulware, Bill Bauder and Steven Boulware, have a collective 65 years of experience in successfully operating skilled nursing and seniors housing in Louisiana and Texas. They also hold board seats on the Louisiana Healthcare Association and Texas Health Care Association.

Southwest LTC, Ltd. was founded in 2003 by industry veteran Ron Payne, and operates 31 skilled nursing and assisted living facilities in Texas and Oklahoma. Payne currently serves as the Chairman of the Board of the Texas Health Care Association, the industry trade group that represents and supports Texas’ skilled nursing operators, and also serves on the board of the Oklahoma Association of Healthcare Providers.