MISSION VIEJO, CA—Another new name has entered the ever-growing list of companies, pension and equity funds, and real estate investment trusts (REITs) looking to acquire healthcare properties.

This one enters the fray with a somewhat small portfolio already under its belt, as CareTrust REIT Inc. (Nasdaq: CTRE), which began trading on the Nasdaq exchange on June 1, is a spinoff of a veteran senior housing owner and operator, Ensign Group Inc. (Nasdaq: ENSG) of Mission Viejo.

Officials with the new REIT say they not only plan to expand the company's geographic footprint from primarily western states to the rest of the country, but that they also have designs on acquiring property types other than just seniors facilities; that would including medical office buildings (MOBs).

Ensign, which went public in 2007, provides a variety of services through 119 facilities, seven hospice companies, nine home health businesses and five urgent care clinics in the West and Midwest.

Prior to the completion of the spin-off, Ensign owned a vast majority of the properties that have been transferred to CareTrust, whose initial portfolio consists of 97 properties comprising 80 skilled nursing facilities (SNFs), 11 assisted living (AL) facilities, and four independent living (IL) facilities.

For the time being, CareTrust is receiving a vast majority of its rental income from Ensign, which occupies the facilities through triple-net leases. Having just one rent-paying tenant, CareTrust REIT officials acknowledge, could be considered risky, especially in light of the fact that Ensign receives 72.2 percent of its revenue from government payers, primarily Medicare and Medicaid.

That's why, in a letter to the REIT's new shareholders, who received one share of CareTrust stock for each share of Ensign stock they owned, President and CEO Greg Stapley wrote: “We expect to diversify our tenant base in the future by acquiring additional properties and leasing them to other local, regional and national healthcare providers. We also expect to grow and diversify our portfolio through the acquisition of properties in new geographic markets as well as in different asset classes.”

As for what types of properties it plans to pursue, the company, in a Form 10 filing with the U.S. Securities and Exchange Commission (SEC), wrote: “CareTrust is expected to acquire not only skilled nursing and assisted living properties but also diversify into different property categories, such as medical office buildings, long-term acute care hospitals and inpatient rehabilitation facilities, and expand its portfolio of independent living properties. CareTrust may also engage in an expanded range of real estate related business activities, such as the provision of mortgage financing.”

Bill Wagner, CareTrust's CFO, recently reported that as of June 30, CareTrust had about $80.3 million of cash and borrowings of $84.2 million available under its $150 million senior secured revolving credit facility. He noted, however, that a yet-to-be-determined portion of the cash on hand will be earmarked for the company's upcoming earnings and profits purging distribution, which is required for the company to qualify as a REIT.

John B. Mugford is the Editor of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.