CareTrust REIT, Inc. (NASDAQ:CTRE) Q4 2022 Earnings Call Transcript

Bill Wagner: Well, I’m guessing it’s was about 1.25% inclusive of the security deposit.

Juan Sanabria: What? Sorry.

Dave Sedgwick: 1.2%.

Juan Sanabria: Okay. And then just curious if you could talk a little bit more about the acquisition pipeline and where do you think cap rates have moved to or where they’re heading to for your kind of $100 million plus pipeline find that you talked about in your prepared remarks.

James Callister: Yeah. Hey, Juan, it’s James. I think that — if we talk about it in terms of lease yield we’re looking for, I think that’s definitely crept up a little bit. I think we’re testing, trying to put the money to work at ten or high nines for skilled nursing and maybe mid to low nines on seniors housing and working hard to find opportunities where that works. It’s just really dependent state by state right now. When you look at which states have been favorable with respect to the Medicaid rate and which states have access to labor and which don’t kind of drive what our basis is going to be and whether or not we can get that yield at a ten or high nine for the skilled nursing.

Juan Sanabria: And then just a question for Bill, any thoughts on the balance sheet on terming out some of the floating rate debt as we think about modeling out 2023?

Bill Wagner: Yeah, I would expect as a percent of total debt, variable rate debt will increase over the course of the year as we utilize the revolver to match fund deals as well as, but also keeping in mind, we’ll likely use the ATM to fund those investments.

Juan Sanabria: And then just last one, if you’d indulge me. Any update in terms of your conviction or maybe a lack thereof for kind of the three top ten tenants that have kind of meaningfully below one times coverage and covenant asset and tenant.

Dave Sedgwick: Yeah, I talked about them in my remarks. We’re confident that their hard work will pay off in a matter of time and we got good corporate credit behind them beyond the buildings that they have with us and so not much to share beyond that. I guess the one thing I would highlight is with Bayshire, their lease coverage all of last year was north of one times, and so because of the way we report, you’re not seeing their real performance reflected in those numbers yet. So we’ll see that continue to creep up and get out of the sub one times category soon.

Juan Sanabria: Okay, thank you.

Operator: Our final question comes from Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: Thanks for taking the follow-up. You guys might have implicitly answered this on Juan’s question about initial yields on future transactions, but I guess as you look at those future deals and think about sort of the recovery in operations in some of these various segments, how are you thinking about setting initial rent and any participation in upside as fundamentals recover?