CareTrust REIT Just Hit My Watchlist — Here’s Why

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As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on July 7th, 2025. You can read it by clicking here.

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New members can start researching positions marked as Strong Buy and Buy while considering the corresponding risk ratings.

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CareTrust REIT Just Hit My Watchlist — Here’s Why

Important Note: We have analyzed several new potential investment opportunities, and CareTrust REIT (CTRE) is one that stood out following a recent M&A deal. While we like its business model, we are not ready to initiate a position at the current valuation.

That said, we may invest if its valuation becomes more attractive in the near future. In anticipation of that possibility, we are sharing our investment thesis today to help you prepare in advance.

Healthcare Real Estate Insights

CareTrust REIT: Investment Thesis

CareTrust REIT (CTRE) is a senior-focused real estate investment trust that primarily owns skilled nursing facilities (nursing homes) but also secondarily senior living communities offering varying degrees of assistance.

It owns 408 properties in the US and, after the recently closed acquisition of Care REIT plc, 137 care homes in the United Kingdom. Senior care facilities work a little differently in the UK, because care homes typically act like a hybrid of assisted living and skilled nursing facilities.

CTRE Presentation

(Note also that Care REIT's portfolio is of similarly high quality as that of CTRE. All properties are leased on a triple-net basis with inflation-based escalators and a weighted average remaining lease term of about 20 years.)

CTRE is paying roughly $600 million and assuming about $250 million of Care REIT's debt, which it expects to refinance in the near future.

This acquisition was completed at an estimated yield of about 8% and is expected to be accretive on a year-one basis to the tune of ~6% of normalized FFO per share.

To finance most of this deal, CTRE plans to secure a $500 million unsecured term loan during the second quarter. And just in time for that large debt raise, the REIT just earned its first ever investment grade credit rating of BBB- from Fitch.

To quote the upgrade report:

CTRE's ratings reflect its strong financial metrics, including very low leverage, above-average operator lease coverage and unsecured borrowing strategy. The ratings also reflect the issuer's moderately diversified portfolio of triple-net leased health care real-estate properties and long-lease maturity profile, which has become further diversified upon close of the Care REIT acquisition.

Upon closing of the acquisition, CTRE's management bumped up 2025 guidance, now estimating normalized FFO per share and FAD per share of $1.75 to $1.78.

That represents growth of about 15% from 2024's full-year FAD per share of $1.54, and analysts are projecting another low-double-digit increase in the bottom line in 2026 as well.

Fitch estimates that even after the financing of this acquisition, CTRE's debt to EBITDA ratio remains very low at 2.7x -- well below CTRE's own target leverage ratio of 4-5x. (CTRE estimates its pro forma net debt to EBITDA ratio post-transaction to be 2.4x.) That leaves significant room for further use of relatively low-cost debt to fund investments at huge spreads.

At a price of $30, CTRE is valued at 16.8x FAD, or about 15x estimated 2026 FAD.

That makes CTRE significantly cheaper than its larger and more senior housing focused peer, Welltower (WELL), which currently trades at an FFO multiple of about 30x and an AFFO multiple of about 33x.

Moreover, CTRE's dividend yield of 4.6% is about 3.5x higher than WELL's current dividend yield of 1.8%.

The two REITs have meaningful differences, to be sure. But importantly, while they have similar, double-digit growth rates, their valuations are worlds apart. We think the market over-appreciates WELL and under-appreciates CTRE right now.

With a skilled and shareholder-aligned management team, low-leveraged balance sheet, recent credit upgrade to investment grade status, peer-leading cost of capital, triple-net lease structure, best-in-class tenant-operator roster, disciplined underwriting standards, reasonable valuation, and unprecedently strong demographic tailwinds, CTRE is very attractive as a long-term buy-and-hold investment.

Let's dive deeper into the investment thesis for CTRE.

The Long-Term Case for CareTrust REIT