CareTrust REIT Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2026

Key Takeaways

  • Positive Sentiment: Closed approximately $1.1 billion of investments year-to-date (Q1 + post-quarter) at a blended stabilized yield of ~8.9%, with a current pipeline of ~$360 million heavily weighted to U.K. care homes and SHOP opportunities.
  • Positive Sentiment: Strong operating results and guidance lift — normalized FFO rose 38% YoY to $107.4 million (FFO per share +14%), the dividend was raised 16.4%, and full-year 2026 FFO per share guidance was increased to $2.00–$2.04 (midpoint ~+14.8% vs. 2025).
  • Positive Sentiment: Balance sheet and liquidity remain robust — Moody's upgraded CareTrust to investment grade, net debt/EBITDA was just 0.6x, no debt maturities before 2028, ~$850 million revolver availability, ~$879 million ATM capacity and meaningful settled forward equity proceeds YTD (~$493 million).
  • Positive Sentiment: Tenant and portfolio quality supports cash flow stability — CareTrust reports superior CMS outcomes for its skilled nursing tenants vs. sector averages, 100% collection of contractual rent and interest in Q1, and strong rent coverage (EBITDAR ~2.25x; EBITDARM ~2.79x).
  • Negative Sentiment: SHOP market is highly competitive with cap-rate compression (management cited ~50 bps compression in ~6 months) and a low hit rate on marketed deals, which could pressure returns and slow SHOP portfolio growth despite the company’s disciplined approach.
AI Generated. May Contain Errors.
Earnings Conference Call
CareTrust REIT Q1 2026
00:00 / 00:00

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Operator

Hello, everyone. Thank you for joining us, and welcome to the CareTrust Q12026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Lauren Beale, CareTrust's Chief Accounting Officer. Lauren, please go ahead.

Lauren Beale
Lauren Beale
Chief Accounting Officer at CareTrust REIT

Thank you. Welcome to CareTrust REIT's Q1 2026 earnings call. We will make forward-looking statements today based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies, and growth prospects. These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations. These risks are discussed in CareTrust REIT's most recent Form 10-Q filing with the SEC.

Lauren Beale
Lauren Beale
Chief Accounting Officer at CareTrust REIT

We do not undertake a duty to update or revise these statements except as required by law. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAD. A reconciliation of these measures to the most comparable GAAP financial measures is available in our earnings press release and Q1 2026 financial supplement that are available on the investor relations section of CareTrust website at www.caretrustreit.com.

Lauren Beale
Lauren Beale
Chief Accounting Officer at CareTrust REIT

A replay of this call will also be available on the website for a limited period. On the call this morning are Dave Sedgwick, President and Chief Executive Officer, James Callister, Chief Investment Officer, and Derek Bunker, Chief Financial Officer. I'll now turn the call over to Dave.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Thank you, Lauren. Good morning, everybody. Thanks for joining us. The Q1 was a strong start to the year and a continuation of the momentum we've been generating over the past several years. We closed approximately $245 million of investments in the Q1. The pace only accelerated from there. Since the start of April, we have closed 12 separate transactions for approximately $865 million.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Just last Friday, on May 1st, we closed 3 of those 12 deals that we have not yet had a chance to announce, including our second SHOP investment. James will provide color on some of the deals we've closed year to date and on the reloaded pipeline of $360 million. Our investments team continues to perform at a phenomenal level. What else can you say?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

I'll just reinforce that SHOP is an important part of our growth story, and you should expect to see us continue to build that part of the portfolio with the same discipline and operator-centered approach we're known for. Deal flow continues to be active and interesting across SHOP, skilled nursing, and U.K. care homes. A quick acknowledgement to some of our unsung heroes here. Our accounting team proves every day to be the best pound-for-pound accounting team around.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

They have shouldered an enormous load, onboarding a massive number of new properties and operators across the U.S. and U.K. while continuing to support the next wave of growth. Our asset management group continues to do great work curating a strong portfolio and de-risking it as we go.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Every other function across the company, legal, tax, finance, operations, data analytics, shows up in a way that allows us to keep executing at a very high level and transforms a growing portfolio into a compounding portfolio. The results of the hard work and sacrifice of an extraordinary team produced year-over-year FFO per share growth of 14%, a 16.4% increase to the dividend, an upgrade to investment grade by Moody's, and a raise to our FFO per share guidance for the year that at the midpoint would be 14.8% higher than 2025.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

I think you can tell how I feel about my team. Let me talk for a second about our operators. Many of you know I'm a recovering nursing home administrator. Several of us here have many years of experience inside the buildings.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

We have always hoped that our operating history and DNA would differentiate us in how, where, and with whom we build this portfolio. Our tenants continue to deliver for their employees, residents, patients, and communities. We've recently begun a meaningful study of publicly reported CMS outcomes in our skilled nursing portfolio compared to the rest of the sector. The preliminary findings show that skilled nursing operators who lease from CareTrust deliver care that is measurably better than the sector averages.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

With respect to the CareTrust facilities included in our analysis, we limited it to those facilities that have been under lease for at least 4 years to give adequate time for star ratings to adjust to the new licensed operators. We are specifically pleased to observe in our initial findings that compared to all for-profit operators, our tenants achieve higher overall CMS star ratings and higher health inspection star ratings.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Compared to all operators, for-profit and nonprofit, our tenants achieve higher quality measure star ratings, lower rehospitalization rates, and higher successful discharge rates. Now let's take a look at how that commitment to quality care translates to the financial health of our operators. Our overall EBITDAR rent coverage in our stabilized triple-net portfolio remains very strong at 2.25x and EBITDARM coverage at 2.79x, with broad-based improvements throughout the portfolio.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

We collected 100% of contractual rent and interest in the Q1, which speaks to the caliber of our tenants and borrowers. Putting it all together, we are in another extraordinary and busy period full of external growth and internal development as we continue to refine our processes that enable a bigger and better CareTrust portfolio.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

As we continue to position ourselves with urgency to keep the flywheel going, we see steady deal flow across our 3 growth engines, and the team is firing on all cylinders. We could not be more excited about where we sit today or about what is still in front of us. With that, I'll hand it off to James for a report on investment activity and the acquisition landscape. James?

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Thanks, Dave. Good morning, everyone. During the Q1, we completed approximately $245 million of investments at a blended stabilized yield of 8.8%. Q1 activity was anchored by a sale-leaseback of a six-property skilled nursing portfolio in the Mid-Atlantic, leased to one of our quality operators at a yield of approximately 9%. Q1 also included a meaningful tranche of U.K. care home investments and a small relationship-driven loan secured by a skilled nursing facility operated by one of our existing operators.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Since the start of April, we have closed an additional 12 transactions for approximately $865 million at a blended stabilized yield of approximately 8.9%. Activity was weighted toward U.S. skilled nursing with a meaningful portion of that volume from an opportunistic transaction with a new operating relationship.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

The deal came together on a very compressed timeline, and the fact we got it closed is a real testament to the team's solutions-oriented approach and the deep relationships we've cultivated over many years. Beyond that anchor transaction, the period included, 1, additional skilled nursing and senior housing triple net investments with quality tenants across multiple geographies. two, a number of new and incremental loans either to existing operators or borrowers we've admired and desire to work with.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Three, our second SHOP investment to bring our total portfolio to four communities. four, lastly, additional U.K. care home activity. We're particularly encouraged by the pace and size of our U.K. care home pipeline. Since the beginning of the year, we've continued to build momentum and have closed on investments in 10 care homes across the pond to add to our consistently growing portfolio.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Putting Q1 and post-quarter activity together, year to date, we have closed approximately $1.1 billion of investments at a blended stabilized yield of approximately 8.9%. Of that total, approximately $705 million has been U.S. skilled nursing or senior housing triple net. Roughly $225 million has been U.S. loans, primarily secured by skilled nursing facilities and either closed concurrently with asset acquisitions or in anticipation of such.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Approximately $160 million has been U.K. care homes, and the remainder is SHOP. Our investment pipeline today sits at approximately $360 million.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

The composition is heavily U.K. care homes, which represents over half of the quoted pipe, with another approximately 20% comprised of SHOP opportunities, and the remainder consisting of triple net, both skilled nursing and seniors housing, and a small amount of loan activity. As always, please remember that when we quote our pipeline, we only include deals that we have a reasonable level of confidence we can lock up and close within the next 12 months, and it does not always include larger portfolios that we are reviewing.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

A quick note on the current transaction environment. The skilled nursing market remains active, supported by both brokered and proprietary opportunities. Current skilled nursing deal flow is more heavily weighted towards off-market opportunities. Thanks to our deep operator relationships and the strength of our existing portfolio, we are well-positioned to continue pursuing skilled nursing transactions aggressively but with discipline.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

In the U.K., our pipeline is ahead of schedule and growing. We're very pleased with how our London-based team continues to establish the CareTrust culture of by operators, for operators that has expanded our ability to do more deals, meet new operators, and source opportunities through broker-marketed processes and direct relationships.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

We see meaningful upside there over time. In SHOP, while the market remains highly competitive and cap rates keep compressing, we are an active player and continue to see significant opportunity to grow that portfolio over the next several years with the right operators and the right assets. Our disciplined underwriting framework, combined with a strong focus on long-term operator relationships and a commitment to creative, collaborative transaction structuring, will continue to drive sustainable growth across the skilled nursing, senior housing, and U.K. care home sectors.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

With that, I'll turn it over to Derek to review our quarterly financial results.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Thanks, James. For the quarter, normalized FFO increased 38% over the prior year quarter to $107.4 million, and normalized FAD increased 33% to $107.6 million. On a per-share basis, normalized FFO was $0.48, an increase of 14% over the prior year quarter, and normalized FAD was also $0.48, an increase of 12% over the same period.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Turning to the balance sheet and capital markets activity, during the Q1, we settled $129.5 million of gross proceeds under our ATM forward program. Subsequent to quarter end, we settled the remaining outstanding forwards, totaling $363.6 million of forward equity contracts outstanding at March 31st.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Bringing our year-to-date total settled forwards to roughly $493 million of gross proceeds in support of our recent investment activity. As of May seventh, we had $350 million drawn on our $1.2 billion unsecured revolving credit facility and approximately $70 million in cash on hand. We continue to have no scheduled debt maturities prior to 2028.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

As Dave mentioned, subsequent to quarter end, we also received an investment grade rating upgrade from Moody's. This recognition of our balance sheet strength and disciplined approach to capital structure further expands our access to debt capital and supports our ability to fund continued growth on attractive terms.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

In yesterday's press release, we raised our 2026 full year guidance, projecting full year normalized FFO per share of $2.00-$2.04, and normalized FAD per share of $1.98-$2.02. The midpoints of our updated normalized FFO and normalized FAD guidance represent increases of 14.8% and 13.6% respectively over 2025 results, and increases of 4.9% and 3.9% respectively compared to the initial 2026 guidance ranges we issued in February.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

The updated guidance is based on a weighted average diluted share count of 234 million shares and includes the following key assumptions. First, no new investments, loans, or dispositions beyond those made year-to-date. Second, no new debt or equity issuances beyond those made year-to-date.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Third, 2.5% inflation-based rent escalators under our long-term triple net leases. Fourth, $145 million of loans to be fully repaid throughout the remainder of the year. Fifth, no material change in the sterling to dollar spot exchange rate. Additional guidance measures are detailed in the press release yesterday. Lastly, our liquidity continues to remain strong.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

As I mentioned, we have approximately $70 million of cash on hand, $850 million of availability under our revolving credit facility, and roughly $879 million of capacity on our ATM program. Net debt to annualized normalized run rate EBITDA was 0.6x at quarter end, well below our long-term target leverage range of 4 to 5x, and net debt to enterprise value was approximately 3.6%.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Aided by an investment grade credit profile, we have ample dry powder and multiple levers across our capital toolkit to continue funding our recent pace of investment activity. With that, I'll turn it back to Dave.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Thanks, Derek. Well, we hope that the report's been helpful. We appreciate all the interest and support. We'd be happy to take your questions at this time.

Operator

Your first question comes from Farrell Granath with Bank of America. Please go ahead.

Farrell Granath
Farrell Granath
Analyst at Bank of America

Hello. Thank you for taking my question. I wanted to dig in a little bit deeper on your comments about larger portfolio considerations that is not currently contemplated in guidance. Can you give a little details on maybe some larger portfolios you were evaluating year to date that potentially you passed on and maybe why that would have happened?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

When we quote our pipe, as you know, we have the custom of not including larger portfolios that we're pursuing because even though we may have a strong interest in them, sometimes they're fishing expeditions by the sellers. They may not be real. It's a lower probability of landing those. You know, a prime example is what just happened with this large deal in California.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

That was something that actually materialized very quickly that couldn't have been included in our previously quoted pipe. That's just our practice to not get too ahead of things. Sometimes the deals, either we decide to pass on them or, you know, they decide to go a different direction.

Farrell Granath
Farrell Granath
Analyst at Bank of America

Okay. Thank you. I will say that in some of the previous earning calls of peers, we've heard added commentary of increasing competition also in the SNF market that it's been difficult to transact, less product is coming to the market, and also this larger increase in private capital. I'm curious if you can add a little bit more color on the skilled nursing side, how you're able to source so many deals, and maybe where you're sourcing those.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Sure. Farrell, this is James. I mean, I would say that the SNF market is at this point of predominantly off market, you know, market, if you will. I think that it has for a little while been predominantly relationship driven. It's a little bit more unpredictable because you're not getting a, you know, constant flow of broker deals like you are in maybe SHOP. I think that, you know, it has been like that for a while. I think that the track record we have shows that relationships are just super important.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

You know, I don't think you're gonna typically find, you know, bread and butter sale lease back at a 9.5 with, you know, no creativity needed, you know, like you may have five years ago. That's been the case for a while now. I think it just takes increased creativity, it takes relationship based deals, and you really have to rely on the off market relationships in the SNF market today. I think our track record shows that we've been doing that successfully.

Farrell Granath
Farrell Granath
Analyst at Bank of America

Great. Thank you so much.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Thanks, Farrell.

Operator

Your next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt
Austin Wurschmidt
Analyst at KeyBanc Capital Markets

Hi, good morning, everybody. Dave or Derek, I guess with the dual investment grade rating and just kind of continued improvement in your long term cost of capital, I mean, how do you think of the benefit of achieving this goal and then, you know, utilizing that for maybe some strategic opportunities or even, you know, the flexibility it gives for, you know, your ability to source even some of the larger portfolios from time to time?

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Yeah. Hey, Austin. It's Derek. I think you kind of hit it in your question there. We've been fortunate to have strong access and support from capital markets to really underwrite and pursue a lot of our investment activity. We feel like with just the added benefit of the upgrade from Moody's recently that it only gives us more optionality and expands our access,

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

I think, deeper if we do decide to do an inaugural issuance in the high grade market, that's certainly on our radar there, especially as we grow and we start to pad out the balance sheet a little bit. We're excited about it. We're thrilled. We really like what we see in the pipeline and beyond just for the next several years.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Having that option, we're really excited about it.

Austin Wurschmidt
Austin Wurschmidt
Analyst at KeyBanc Capital Markets

Maybe Dave or James, within SHOP, you know, you've talked a lot about just and others for that matter, the competition of the investment landscape. I mean, what's been your hit rate on, you know, deals that you've bid on? I'm just curious if off market opportunities as you continue to develop even more relationships similar to what you referenced in skilled as being sort of the best way to grow that portfolio. What's kind of the current process and strategy to continue to, you know, build that out within just that segment within the overall portfolio?

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Yeah. I mean, I think, Austin, this is James, you make a really good point, which is that, look, if in SHOP right now, given the amount of competition, if we do get an off market deal or some other in or unique, you know, relationship on a deal that comes through, we're gonna prioritize that and gonna look at if that works and make a more heavy run at it.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

I think that's definitely the case given the amount of competition right now. I mean, as far as hit rate, I mean, you know, it's a small percentage of deals that we see come across the desk that we decide to bid on. It's a smaller percentage that we decide to really push and start to stretch a little bit.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Of the deals that we really push and stretch, I don't know what the exact hit rate is. I mean, it's a competitive market right now. I think that given the cost of capital we have and the access to capital, you know, if we really decide we want the deal, that it fits for us, and we're gonna stretch, you know, it's a pretty good chance we're gonna be in the last one or two and hopefully get it.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Overall, it's a pretty low hit rate just given the number of deals that are coming across right now. Much of that, you know, low hit rate is based on the fact that we don't elect to pursue most of what comes across the desk.

Austin Wurschmidt
Austin Wurschmidt
Analyst at KeyBanc Capital Markets

Just lastly, how much would you say cap rates have compressed, you know, since you really, you know, started to evaluate transactions?

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

You know, in SHOP, if we're talking about rate compression, I mean, it's hard to put an exact nose on it. There's a range in SHOP, Austin, as you know, between where you're in a primary market if you're a Class A or where you fit in the range from, you know, the best building or 2 in a primary market to, you know, the best few buildings in a secondary or tertiary.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

I would say right now it feels like Class A in a primary market is gonna have a 5 handle on it, and you're gonna go up the range from there. It's hard to say in there, but I would say in the last 6 months, cap rates have probably compressed 50 pips or more.

Austin Wurschmidt
Austin Wurschmidt
Analyst at KeyBanc Capital Markets

Thanks for taking the question.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

Thanks, Austin.

Operator

Your next question comes from Juan Sanabria with BMO Capital Markets. Please go ahead.

Juan Sanabria
Juan Sanabria
Managing Director at BMO Capital Markets

Hi. Good morning. Just hoping you could talk a little bit about the loan book. It's grown as a preponderance of the transactions that you did in the Q1, when including the financing receivables. Just curious on how big you're comfortable with that getting and any sort of color you can give on some of the loans you did. Any options for the operators to buy back the real estate we should be thinking about, or just generally more color on those investments. Thank you.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Well, I'll start with that, Juan. This is Dave. You know, I think our strategy with respect to lending was really established a few years ago and has been a key determinant for the explosive growth that we've had. The key feature of that strategy is that we'll only do loans really if it includes real estate acquisitions or we're confident that it will lead to real estate acquisitions.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

The activity that you've seen recently, you know, checks those boxes. The real estate that we've acquired came with some loans that were necessary to get the deals done. Even on the financing receivable side, it's a little bit misleading because it's more of an accounting rule that causes what we consider a sale leaseback to be accounted for as a financing receivable because of the purchase options.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Because those purchase options are so far out, you know, nine, ten years, we view that much more as a sale leaseback. Technically it'll look like the loan book has grown more than it really will feel like it for the next ten years.

Juan Sanabria
Juan Sanabria
Managing Director at BMO Capital Markets

Great. Just curious on seniors housing on the SHOP side, how are you thinking about what markets you're looking to target? You kind of mentioned cap rates in the primary markets and with the 5 handle and/or the type of assets, whether they're core plus value add, kind of where do you think there's the best opportunity for the company?

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

I think that we would This is James. We're still pretty agnostic in the market. I mean, we want, you know, primary, secondary, some tertiary, we're really gonna look at it on a deal-by-deal basis, we're gonna pursue it opportunistically. We view that we want to underwrite to an IRR of low double digits, we see a lot of paths to get there, not every deal is gonna get the same path to get there. We don't have 1 box it has to fit.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

We're gonna look at each deal. We're gonna be opportunistic, we're gonna say, "What's this deal's path to a low double digit IRR? Do we have confidence in that path? If we do, we're gonna make a run at it.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

If we don't, we're gonna pass. You know, that path is really different if you're in a primary market than if you're in secondary or tertiary. I think typically we want to be in one of the one or two, maybe 3 best facilities in a market. We want an operator that is a regional sharpshooter with experience in that area, that has reporting capabilities to help us on the SHOP side, but has a proven track record in that market of success. That's kind of the parameters around where we're pursuing deals in SHOP right now.

Juan Sanabria
Juan Sanabria
Managing Director at BMO Capital Markets

Thank you.

Operator

Your next question comes from Michael Carroll with RBC Capital Markets. Please go ahead.

Michael Carroll
Michael Carroll
Managing Director at RBC Capital Markets

Yep. Thanks. James, I kind of wanted to talk a little bit more about the valuations just across the portfolio. I know historic, it's the SHOP cap rates have kind of come in. What about the skilled nursing facility in the .U.K. Care homes? I mean, have those markets been any more competitive over the past few quarters? I mean, how are you thinking about the competitive, the competitive landscape and those property types?

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Thanks, Michael. I think if we do something this year, and we're exploring that option pretty deeply and heavily, you'll see it denominated in USD.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

We're conscious and aware of our exposure to the pound sterling, we really like our current program. It's going very well. Paired with the pipeline, which has been growing very consistently, and I think exceeding our expectations a bit due to the team there, where we feel like we're sort of naturally hedged a little bit in terms of buying pounds and being short dollars. I think given the pricing differential there, we'll continue to put things on our balance sheet here and keep it denominated in USD as we explore it.

Operator

Your next,

Michael Carroll
Michael Carroll
Managing Director at RBC Capital Markets

Appreciate it.

Operator

Your next question comes from Michael Goldsmith with UBS. Please go ahead.

Justin Haas
Justin Haas
Analyst at UBS

Yeah. Thanks. This is Justin Haas speaking for Michael Goldsmith. Thanks for taking the question. I noticed that occupancy in your skilled nursing portfolio was up in 4Q 2025. Is that primarily due to recently acquired properties? Maybe, you know, can you talk about how you feel occupancy will trend this year? You know, if pre-COVID SNF occupancy was, you know, 80% roughly, you know, does the demographic tailwind push that number up significantly over the coming years?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Yeah. skilled nursing has been kind of on a steady, modest, incline really since the It bottomed out in 2021. It's difficult to say Q1 versus the other of what exactly happened across the portfolio of our size, but the direction of travel, we believe, will continue to be what it has been. The difference being, I think, in the coming years, it's gonna start ramping up significantly.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

The demographics are inevitable and of course, that's what has been kind of the basis for the SHOP and the skilled nursing excitement and investment by institutional investors. Yeah, I think while we're in the low 80s as an industry and around 80% in our portfolio, 5-7 years from now, I think it's gonna be dramatically different.

Justin Haas
Justin Haas
Analyst at UBS

Great. Last one from me. Can you walk through the increase in the guidance for G&A, the changes in interest income and interest expense as well?

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Yeah. Thanks, Justin. The increase in G&A is almost entirely due to just hitting key KPIs for STI, given our performance and kind of guide for FFO and investment spend to date. We kind of started with a nice accrual there. We're just sort of catching up. We're also continuing to build out the team a little bit just to support overall growth, not just SHOP, but just generally across the organization.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Really just sort of rounding out the team at the moment, coming off a couple years of growth there. Interest income and expense is really just moving around in part because of us drawing down the revolver, this quarter to date to fund the acquisitions and not anticipating or not incorporating the pipeline or future acquisitions into guidance.

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

We're just sort of taking a snapshot there and running out the interest income and interest expense.

Justin Haas
Justin Haas
Analyst at UBS

Great. Thank you.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Thanks, Justin.

Operator

Your next question comes from Richard Anderson with Cantor Fitzgerald. Please go ahead.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Hey, thanks. Good morning. My first question is are you finding that building and buying or building out your SHOP platform is proving to be more challenging than perhaps you thought going into it? I recall back in Dallas, Nareit, you know, you've made your first SHOP deal, and everyone's like, "Okay, here comes your CareTrust." You know? You know, it's been a little bit slow. Perhaps to your credit, you know, you're not growing for the sake of growth.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Do you find yourself a little bit surprised by how tough it is to move the needle on in building the SHOP platform, while some of your peers in the REIT space are, you know, certainly pacing themselves at a faster clip than you at this point? Just curious your thoughts there.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Yeah. On some level it's been a little bit surprising. Not so much that, it's been competitive, 'cause we know and knew as we were entering it that it's a very competitive scene. I think one of the surprises has just been to see how aggressive some of our competitors' underwriting has been. Even for the deals that, like James talked about, that we really like, that we stretch for, we sometimes get beat by folks that don't nearly have the cost of capital that we do.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

You know, I think it may speak a little bit, Rich, to us really being agnostic across three growth engines. The reality is we haven't, in essence, painted ourselves in a corner with respect-

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

to having to do SHOP or feeling compelled to put money to work there. I think that that really is our advantage because we have the freedom to maintain the discipline that we've built the CareTrust portfolio on. I think we're pleased with what we've done so far. I think we'll continue to grow it. Over time, it will become meaningful, and I think our confidence in the deals that we do get is very high.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Okay. Great. second, when you talk about larger portfolio deals not included in the $360 million pipeline, are there any larger SHOP deals in that portfolio of potential deals?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

No, I don't think so. I think what the chunkier deals right now that we're evaluating are in the U.K. and U.S. SNF.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Okay. Quickly from me, OHI has talked about applying RIDEA to their U.K. business. Is that at all on the table for you guys at this point, or are you too new there at this juncture?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Yeah, I think we'll, there will be a time when that opportunity presents itself for us, so we should be ready to do that.

Richard Anderson
Richard Anderson
Analyst at Cantor Fitzgerald

Okay. Fair enough. Thanks very much.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Thanks, Rich.

Operator

Your next question comes from Michael Stroyeck with Green Street. Please go ahead.

Michael Stroyeck
Michael Stroyeck
Head of Health Care at Green Street

Thanks, and good morning. Now that there's been some time since the original Care REIT acquisition, how is that portfolio performing relative to expectations, and where does EBITDA coverage on that initial deal sit today?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Well, it's a, it's an appropriate question for today, 'cause today marks the one-year anniversary of us closing that deal, so thank you for that. I would say in most cases, it is ahead of schedule. I'd say that importantly, the team that we inherited there, we're very pleased with the quality of that team and their openness and acceptance and adoption of us and becoming truly a CareTrust arm in the U.K.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

That's important because all the success that we have throughout the organization is really based on the culture and the people that we have in the company. That's, that's what's produced the results.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

I thought if we could do in, you know, 2026 $200 million of new investments in the U.K., that would be great. Remember when we acquired Care REIT, their pipeline was basically starting from a standing start because they had a real restriction to access to capital before we acquired them. To see the amount of acquisitions that we've done and the pipeline continue to build as it has, is really good. With respect to lease coverage, it continues to be phenomenally high, particularly when you think about what these assets are.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

These are really senior housing assets that in the U.S., if you have a triple net business, back when we started 10, 11 years ago, when triple net work was still getting done, those lease coverages for senior housing would be about 1.1x or somewhere around there. We're much higher than that. I don't have it actually right in front of me, it's, you know, closer to 1.75, 1.8x, north of 2x on an EBITDARM basis. To have that type of security on senior housing properties is a really strong foundation from which to grow.

Michael Stroyeck
Michael Stroyeck
Head of Health Care at Green Street

Understood. Then maybe going back to the debt discussion, with that investment grade rating from Moody's, what sort of rate do you think you could issue at today?

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

Yeah, I mean, thank you. I'd like to signal to all the investors exactly what it would be and give you a, you know, big hope. No, we're probably looking at, if we're doing like a 10-year, probably looking at 130, 140 basis point spread there.

Michael Stroyeck
Michael Stroyeck
Head of Health Care at Green Street

Great. Thanks for the time.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Thanks, Michael.

Operator

Your next question comes from Wes Golladay with Baird. Please go ahead.

Wes Golladay
Wes Golladay
Analyst at Baird

Hey, yeah, good morning everyone. I wanna go back to that comment about the better CMS outcomes, and I imagine, you know, that's driven, you know, partly by the background, helps you work with the operators, but there's also probably a component of, you know who a good operator is out the gate. How transferable is that skill set to the U.K. and to U.S. SHOP?

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Well, the skill I think of identifying, vetting, and selecting quality operators is definitely transferable. Although I'm not sure that that skill set needs to be transferred to the team there because they evidently already had that skill set, as evidenced by the very strong lease coverage and the quality operators that we were able to inherit. We're really pleased by and large with the operators that they've selected there before we got there, and we feel like we're definitely in sync as we evaluate new operators for the U.K.

Wes Golladay
Wes Golladay
Analyst at Baird

Okay. Thank you.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Thanks, Wes.

Operator

Your next question comes from Vikram Malhotra with Mizuho. Please go ahead.

Analyst at Mizuho

Hi, thank you. This is Jodi on behalf of Vikram. The new operator you have, the sale-leaseback transaction, is there an opportunity to grow that relationship by the Genesis assets? The second question I had is, what's your view on sustained double-digit FAD growth here on? Thank you.

James Callister
James Callister
Chief Investment Officer at CareTrust REIT

I'll take the first part of that, Jodi. You know, the Genesis bankruptcy doesn't have much of any real estate in it really. I don't know if it's probably yet to be determined, you know, if we grow with that operator at all based on those assets. I mean, there's certainly nothing in the discussion at the current time. I think we'll definitely look to grow with them in other asset bases and other deals that we bring them or they bring us. We really like them, so we look forward to growing with them moving forward. Could you repeat the second half of your question? You cut out a little.

Analyst at Mizuho

I was just wondering what's your view on the sustained double-digit FAD growth here on?

Derek Bunker
Derek Bunker
CFO at CareTrust REIT

I'll take that one, it's Derek. I think we're really pleased and excited about both the progress we've made on an investment center integration as well as the outlook. I think that, you know, as Dave mentioned in the press release and I think in his prepared remarks, we don't plan on slowing down. We're still extremely bullish about all three of our growth segments, and I think it's really just up to us to execute on that.

Analyst at Mizuho

Thank you.

Operator

There are no further questions at this time. I will now turn the call back to Dave Sedgwick, CEO, for closing remarks.

Dave Sedgwick
Dave Sedgwick
President and CEO at CareTrust REIT

Well, I just really appreciate everybody's time and questions and interest. Appreciate our board, our shareholders, especially our team here and the operators who make it all happen. Really appreciate it all and, if you have further questions, you know where to find us. Have a great weekend.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

Executives
    • Dave Sedgwick
      Dave Sedgwick
      President and CEO
    • Derek Bunker
      Derek Bunker
      CFO
    • James Callister
      James Callister
      Chief Investment Officer
    • Lauren Beale
      Lauren Beale
      Chief Accounting Officer
Analysts
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