CTRE - CareTrust REIT: Solid Operational Performance But I Don't Like The Capital Structure

2024-06-21 11:26:57 ET

Summary

• CareTrust REIT is a Sun Belt-focused triple net lease Healthcare REIT investing primarily in skilled nursing facilities.
• The company has outperformed broad US REIT benchmarks in 2024, taking its market implied cap rate to 6.1% and FFO multiple to 17.4.
• With rent indexation, investors are still looking at a high single-digit returns.
• Gearing is very conservative, at just 9% of enterprise value following recent acquisitions.
• Rent coverage metrics for tenants have consistently improved every year since 2020.

Introduction

CareTrust REIT ( CTRE ) has significantly outperformed the Vanguard Real Estate Index Fund ETF ( VNQ ) so far in 2024, with the shares delivering a low double-digit return against a ~5% drop for the benchmark ETF:

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