CareTrust REIT to Enter UK Market with $817 Million Acquisition
CareTrust REIT has announced its plans to enter the UK market by acquiring Care REIT plc for a total of $817 million. This move comes after a period of careful consideration, with CareTrust President and CEO Dave Sedgwick expressing excitement about the opportunity presented by the Care REIT platform. The acquisition, which has received unanimous approval from both companies’ boards, is set to close in the second quarter.
The terms of the deal include the acquisition of a Care REIT market capitalization of $577 million and the assumption of approximately $240 million in net debt. This represents a significant premium to Care REIT’s recent share prices, indicating CareTrust’s confidence in the value and potential of the UK-based real estate investment trust.
Care REIT currently owns a portfolio of 137 care homes with a total of around 7,500 operating beds leased to 15 operators in England, Scotland, and Northern Ireland. These properties are subject to long-term, triple-net leases with favorable rental escalators based on annual inflation rates. The weighted average remaining lease term is 20 years, providing stability and predictability for CareTrust’s investment.
According to CareTrust REIT, the UK care homes are a blend of assisted living, memory care, and skilled nursing facilities, offering a unique opportunity for growth and diversification. The annual contractual rent for these properties amounts to approximately $66 million, yielding an initial return of 8.1% for CareTrust. Additionally, Care REIT has shown strong financial performance, with a portfolio EBITDARM coverage of 2.2x for the trailing 12 months.
CareTrust sees significant potential in the UK care home market, driven by favorable demographic trends and supply-demand dynamics. The aging population, coupled with limited new construction and capital availability, is expected to create opportunities for care home operators to thrive. The company aims to leverage Care REIT’s existing relationships and expertise to capitalize on this market opportunity and drive growth in the UK.
With an established team of professionals in London, CareTrust is well-positioned to navigate the complexities of the UK healthcare landscape. The company intends to support existing development projects, expand its investment pipeline, and strengthen relationships with operators to maximize the value of the acquisition. Sedgwick emphasized the importance of local expertise in healthcare operations, highlighting the London-based team’s knowledge and relationships as a key asset for CareTrust’s expansion into the UK market.
Overall, the acquisition of Care REIT represents a strategic move for CareTrust REIT to establish a presence in the UK healthcare sector and capitalize on the growth opportunities presented by the country’s evolving care home market. By combining their resources and expertise, both companies aim to create value for their stakeholders and enhance the quality of care services provided to residents across the UK.