“There are plenty of assisted living and memory care deals out there right now, but most don’t fit with our or our operators’ objectives. So meaningful opportunities for us in that asset class have been fewer and farther between,” CareTrust REIT Chief Investment Officer Mark Lamb said Friday during the company’s fourth-quarter and full-year 2019 earnings call.
In and since the fourth quarter, however, the REIT has closed on $48.5 million in new investments, including some in senior living.
CareTrust acquired a 72-unit assisted living facility campus in Sacramento for $14.2 million that then was leased to San Jose, CA-based Kalesta Healthcare. The REIT also acquired Barton Creek Assisted Living, a 62-unit memory care facility on the campus of Lakeview Hospital in Bountiful, UT, which then was leased to San Diego-based Bayshire Senior Communities. CareTrust’s total investment was approximately $7.4 million, including transaction costs.
The Utah community “is a class A brand new build that is attracting a different type of customer,” Lamb said, adding that the community is “a little bit more affordable” with a “great physical plant, great location with respect to amenities and the ancillary services, and allows our operator … to grow his footprint up into Utah.”
Bayshire CEO Scott Kirby grew up in the Salt Lake City area, according to CareTrust. Barton Creek is Bayshire’s sixth assisted living community and second with CareTrust. All of the company’s other communities are in California.
2019 was a record year for CareTrust, with more than $340 million in acquisitions across asset classes, President and CEO Greg Stapley said. The REIT’s pipeline now is approximately $150 million, according to Lamb.
Also in the fourth quarter, on Nov. 1, CareTrust replaced former tenant Priority Life Care in a portfolio of seven assisted living communities in Florida, Maryland, Indiana and Wisconsin. The new operator is Noble Health Services. “It’s still early, but we’re encouraged by some of the improvements we’ve seen to occupancy out of the gate,” Chief Operating Officer Dave Sedgwick said.
New corporate responsibility policy statements
CareTrust on Thursday published a new tenant code of conduct and corporate responsibility that Stapley believes is the first of its kind for a REIT that has an all triple-net-lease portfolio.
“It creates a model for a new kind of responsible partnership between triple-net landlords and tenants,” Stapley said on the earnings call. “Our hope is that this partnership approach will allow us and our triple-net tenants to make cooperatively the kinds of positive changes that landlords who have full control over their properties can make unilaterally. We also hope that it may actually distinguish us as a more attractive capital partner for prospective tenants in the future.”
The tenant code was part of a package of policy statements covering corporate responsibility that were released Thursday by the REIT. Many of the statements simply formalize existing core values, the CEO said.
“While our first priority will always be the creation of long-term value for shareholders, we believe that sustainable development practices and consistent attention to social and governance priorities can help enhance that value over time,” Stapley said. The package also includes an internal code of conduct and business ethics and a vendor code of business ethics.
“We likewise have memorialized our positions or policies on human rights, human capital, and environmental responsibility,” he said.
‘Three areas of interest’
The Centers for Medicare & Medicaid Services’ Medicaid Fiscal Accountability Rule and its potential effect on “deal flow” are two of three broader areas of interest for CareTrust and the operators in the company’s portfolio, Sedgwick said. (The third area is the Patient Driven Payment Model.)
Under MFAR, states would have to repeal the exemptions from the nursing home provider bed tax that currently apply to continuing care retirement communities, if they offer them, 27 members of the House told Centers for Medicare & Medicaid Services Administrator Seema Verma. LeadingAge and other organizations oppose the regulation, saying that CCRCs might have to pass the cost on to residents via higher entrance fees and/or monthly fees or even close their skilled nursing units.
“We believe that recent comments by CMS reassuring the industry that they have no plans to cut Medicaid payments or otherwise pull the rug out from under those states with supplemental payment systems should effectively allay fears of a significant impact in the near term,” Sedgwick said. “We don’t expect the conversation to go away, however, and we’ll be tracking the discussion as it affects the states where we have assets.”
For more news from this earnings call, see our sister publication, McKnight’s Long-Term Care News.
